Good afternoon, everyone. Welcome to the Financial Task Force of the Special Bond Committee. It's
4.05, and we're going to go through a presentation that basically addresses several things that
we asked for two weeks ago. And, Dave, I'll turn it over to you.
Good afternoon, committee. Thank you for being here. Excited to go through the financials
with you. Before we get into the financial presentation, we just have had some updates
to our project costs that we want to go over with you all. Since we're going to be talking
through finances, we'll be going through the same presentation with the entire group
at 6 o'clock. But because we'll be talking through finances, we thought it was important
to bring this to this group first since this meeting only because this meeting was prior
to the 6 o'clock meeting. But we'll be going over the same information with the rest of
the committee at 6 o'clock. Dave, a real quick question. Ma'am, could
you introduce yourself? I'm Laura Alexander with Hilltop Securities.
Adam was here last time, but he's still coming. We're with Simper.
Great. Thank you. And our bond counsel, Greg Shaker, will be
here later as well. I imagine he's probably dealing with the same trap as coming up here.
So we wanted to touch base with the committee. Our public safety facility is just up to today.
We've gotten revised cost estimates for our police renovation project and police substation
project. The reason these numbers came back to us is because we engaged in an estimating
firm just to true up our numbers to make sure that we were accurate with all the projections
we have thus far with our project cost. This estimating firm would be the fourth that have
looked at those project costs, including obviously our initial estimates from city staff before
we even got really started with architects on what the cost might be. Then we consulted
with our project architects, obviously. They're in schematic design to get their estimates,
the architects used in estimating firm for their numbers, and those numbers really are
all driving that initial project cost. We engaged this firm for a peak program value.
They've done a number of cities throughout the country. They've also worked with Louisville
quite a bit, currently working with Richardson on their police facility. And their numbers
have increased quite a bit on both the police renovation and the police substation projects.
In total, $21.4 million increase over our initial project cost, and that amount would
be included in any bond issue for those projects. So I want to touch on what that increase really
entailed. The construction cost increase is only $5 million, so that's not really driving
that full $21 million. There were some increases, obviously, just in straight construction costs.
The biggest increases from the new estimator were contingency and inflation. The previous
estimates were fairly low on contingency and didn't have much inflation based on an expedited
schedule. But the new estimators came in, and they've really added some weight to those
numbers in the inflation, looking at a three-year timeline, knowing the market. Obviously, there
are -- there's been a number of months since the last estimates, so that plays a factor
in there. But also, there's just some methodology on what kind of contingencies you need in
those budgets.
So could I just interrupt for a moment?
Sure.
I guess I had understood -- and just for clarity purposes -- that we had, in the numbers we
got originally, that we had about an 80% contingency and inflation factor in those numbers. But
you're saying that was not what was the case here?
I think you might be referring to on the streets projects, where we really got into the weeds
of those numbers and we showed the contingency and inflation. For each of those streets projects,
we did that. And those numbers have all been -- the street projects have all been estimated
internally. So the original estimates did have a contingency amount, but in comparison
to what the new estimator that came in, it's obviously significantly less than what the
new estimators who come in say that it really -- you need to have in your budgets for these
type of facilities.
So we went through the same process that we've used with the roads. However, this firm that
we brought in has recently completed a fire station in Lewisville, and they're completing
a police station right now in Richardson. So I asked them to take another look and talk
to both their managers and asked them to take a look at the -- and they were happy with
the firm, so I asked them to take a look at our numbers, make sure that they were in agreement
with the architect's numbers. I think the construction costs, they were. There's only
about $5 million difference between the construction costs. They're not comfortable with the inflationary
assumptions and the cost of labor over the next three years, and that's where you're
seeing that delta. So just did not want to get into a situation where we have the previous
road program where we get out there and fall short of money. So we asked them to double
check all the other estimator's numbers based on what they're seeing.
>> Do we feel the need to double check those numbers on the street projects?
>> No. Todd has taken -- Todd has actually taken this approach on the street projects.
He's built in not only inflationary present value estimates grossing up those numbers,
he's also using actual bid amounts that we're seeing and grossing those up over the next
few years in addition to building in pretty sizable contingencies. So we're in good shape
with the road projects. I just wanted to be sure that we took that same approach with
the buildings and not get caught flat footed, and it appears we may have done that had we
not gone for this exercise. >> Yeah, we don't have a lot of recent cost
data on PD renovation or substation. You do have recent cost data for roads because you're
doing that all the time. >> Right.
>> So just real quick, and obviously we can answer any additional questions, but wanted
to touch on the second biggest piece of the increase of the 16 million after that 10 million
that's really contingency and cost inflation was a 2 to 3 million increase in IT systems,
security systems, and AP systems. These amounts were included in the original estimates, but
the estimators come in and has had a lot of experience with similar projects recently,
has said we need to bump those up significantly for what's needed. A lot of that is at the
substation of brand new building where you have to install that infrastructure up front,
but even with the renovation of the police station, really need an upgrade to that equipment,
and during the renovation, you're going to have to get a lot of that new AV and IT equipment.
And obviously, specifically the IT and the security are so important at a police station,
so I think that different methodology at looking at those numbers has driven a lot of the increases.
The other ones are obviously somewhat less significant in dollar amounts than the previous
increases mentioned, but design and engineering costs were increased, some professional services
such as material testing and commissioning hadn't been included in the original estimates,
and then some increases on what you really need for those furnitures and fixtures. So,
we just got these numbers in the past couple of days, wanted to get this to the committee
as soon as possible, especially as we start heading into really the meat of the discussions
on prioritizations and where that line is that we're going to move forward with to
the voters.
David, is the three-year timeline, is that the same timeline estimate as the original
cost estimate or had that changed as well?
It hasn't changed significantly. I mean, there's been some fluctuation in the months. I think
the ultimate target's changed. I will say if you go back and look from February till
now, there have been shifts in that, even shifts in when does the substation come on
versus when does the station, so there has been variation. I don't think that alone hasn't
been significant enough to drive the increase. I think it really is a methodology difference
in how they looked at it.
And we have also been working on the financing plan, trying to make sure that these were
the first projects we would get in the pipeline in order to cut that timeline down as well.
You know, it's a risk. We had a conversation with Chief Dixon yesterday, and his position
is look, that renovation project needs to get done. If there's something that needs
to be put on the back, the substation is his choice. We can go back out in a few years
if the committee is uncomfortable about the dollars right now. He thinks it's incredibly
important that it get done in the next few years, but that's kind of where we are at
at this point. They're both major priorities to him, the renovation project has to get
done. I know the question could come up, well, why wouldn't we look at a new facility, the
same exact methodology on the new facilities. You're tearing down, you're acquiring even
more property, and those prices are somewhere in the $60 to $70 million range, so it's not
even close to the same cost to build the new facility, plus you're left with City Hall
East, which is half empty at that point.
So how do you think the council feels about adding another $21 million to what was our
charge at $2.10 is kind of a high end?
I think the council, well, they don't have this information. David was actually putting
the final touches on this about 45 minutes ago. I think from their perspective, if you
came back and said, look, we are willing to move forward, we think all these things are
so important, we're willing to move forward, we'd like you to consider adjusting the cap
that we go out for, they would consider it. They hadn't seen the growth numbers that we're
looking at or the interest rate numbers we're looking at as well, and I think they're going
to be very curious to see what your opinion is.
I can move on with the finance presentation, and we obviously answer any questions on this
as we go through. This will obviously be brought back. This is the same exact presentation,
this piece of the presentation at 6 o'clock as well. So can I answer questions on this
throughout the process, or I could go ahead and shift now to the finance presentation,
if that makes sense.
Let's go ahead and do that.
So a few of the objectives of this presentation. Obviously, this is a follow-up to the meeting
a couple of weeks ago, the finance meeting a couple of weeks ago, with some takeaways
from that meeting and some scenarios that the committee asked to see, and also talking
through the language requirements and how we're affected or not affected by the new legislation.
So this is the same slide that we saw last time at the set the stage. Here are some of
those financial assumptions that we've made going into all of our scenarios and our analysis of the
impact of the new debt issuances and the bond program, closing out the 2014 bond program
next year, and then that $5 million in COs that we budgeted in each of the future years.
Our interest rates at 3.75 next year and then assuming a 4.5 interest rate in the
following years. We're also utilizing that fund balance over those first few years
to work with what the tax rate impact will be in those first couple of years,
$3.6 million use of fund balance. This is a similar chart to what we saw last time I did
for the assessed value history. I've included a couple previous years based on this conversation,
just to, there were some comments that say, "Hey, can we see what it will look like during the last
recession?" So have included back to 2008, so you can see, you know, we had the dip there,
but then since 2011, have seen those increases and obviously the past few years, the increases have
been significant. We do have updated numbers. We get those preliminary values from the appraisal
district each Friday. We just got our last preliminary value last Friday, so those numbers
are now updated. All of our scenarios have the updated preliminary values. We'll get our two
weeks from Friday, from last Friday, we'll get our final certified values. Where we are now is we're
at 8.07%, right at 8% in total AV growth. We're at 7.3%, an increase of our non-frozen values,
which as we move forward from a city perspective, that non-frozen value is really going to become
the primary driver of our revenue, since those frozen values really are not something we can
control or can really anticipate moving forward. So that 7.3% is really what's been driving a lot
of the increases that you'll see in our, in our scenarios moving forward. Sure. Go ahead Randy.
I'm just going to ask, do we know in the 8.07%, is that existing assessment ideas or is that
new property? That includes both new and existing. You know what the breakdown is? Yeah, existing is
around 430 to 440 million and then the remainder of the close to 11 billion is existing values.
I want to say 10 point, I think it's close, when we look at the non-frozen it's you know closer to
the 10 billion in the total. Say that again please. Sure. So it's around, I'll just use kind of big,
big numbers and not, sure. So around 400 million, 400 million in new value and around 11 billion in
total, total assessed value. So you know half a percent. The, was the, was the freeze passed in 17
and did it then go into effect in 18? Correct. 18 was our first year of the freeze.
That's reflected in that percentage drop. This, these percentages include, these are absent of
the freeze. These are just our total values in the, in the actual bar charts for comparison sake.
This does not include the freeze. This is just what our AV would be in total if we didn't have
the freeze. So we're apples to apples. So it's apples to apples. If we did, if we didn't include
that, that you know the increase wouldn't be as high and it wouldn't be a good comparison.
That's why we just made that note here that though we're showing 8 percent in total,
the actual increase in non-frozen values is 7.3 percent. And David is my understanding correct
that as the timeline gets longer since someone's taxes was frozen, you would expect that impact to
grow as far as city impact? Yeah. I mean as long as they, if AVs are growing and that, because that's
actually the property tax they're paying to us is frozen, correct. As AVs grow, the impact to us
will increase assuming that those, you know, that everyone stays in their home. Obviously there's
going to be some change with people urban out and people applying for the over 65 in latter years.
But as far as the population of people who have it now, that will happen as AVs grow. Until you get
to sort of a stable state where people who have the exemption are an average or a median number
of age, for instance, until the age stops rising. Yeah and I think, you know, especially since we're
only in the second year, I think that's true. As we get to years five, six, seven, it'll all kind of
be apples to apples and we'll be able to know what to expect. I think if you look at the budgets of
cities who've had the freeze for quite a few years, they don't spend as much time kind of going through
the nuances of it. But because, you know, it's important to look at the history, we have to make
sure we call that out the differences. So our actual increase in taxable appraised value is 7.3%,
is that right? In taxable appraised value, that's right. I think that's an important distinction.
The way that it gets kind of confusing is it's 7.3% on the non-frozen values.
So we look at that in separately from, we are also still getting property tax revenue from those
frozen values, but it's just set. So the way that we've begun looking at it is that's just kind of a
separate source of revenue that's coming in versus what we're actually getting from
people who are paying taxes on the AV as it changes. But for our purposes of assumed growth,
I would-- the 7-- this-- the 7.3% is the number that's most comparable to what our assumed growth
should be in future years. So here's a high level of the forecasted scenarios that the committee
asked us to bring back were assessed value assumptions at 4%, 5%, and 6%. And really the numbers
tied out very right at these max debt service tax rate increases at $0.05 for 4%, $0.04 on the debt
service side for 5% and $0.03 for 6%. As you'll see as we go through those, we kind of get up to
that number in the latter years of the program as the debt starts to get to that point. We've
included here on the right column the impact on $100,000 assessed value. This number wasn't just
picked at random. This is the language that will be included in future bond elections based on the
new legislation to have that comparison on $100,000 assessed value. And you can see it's fairly
simple math to come up with, you know, at 5% increase would be $50, 4% increase would be $40.
Now that increase would only occur in that year that we get up to that max as we're getting up.
It wouldn't be $40 in that 5% every year. It would just be that year that we hit the max debt
service tax rate. Again, this is a 6-year implementation that we have for all of our
scenarios and for the debt program. Did you want to make note? An estimate about $14 million--as
we increase about $14 million from this point forward would equal about another cent on the
debt service tax rate side. So the other $21 million would be a penny and a half. Correct, yeah.
As we go, we're talking about the legislation and the language here in a few slides,
but do you want to just make note that this debt service tax rate increase is not something that's
included in, you know, in the election ordinance or in the official language, but it is something
that we included in our bond booklets and have always included to give that reference to voters
as they head to the polls. Can I just ask one more question? Do we know what the average assessed
home value is in debt? What's the average value of a home? So last year it was $233,000 and this
is on homesteaded, kind of average taxable, so this would be after exemptions. $233,000 last year.
This year it's looking closer to around $250,000. We don't have an exact number on that yet.
Because the $100,000 gives us a round number, but it doesn't really tell you the
impact on the average person. So I'll just skip over to this real quick.
On all of these slides, and this is the same kind of format that we did last time, obviously a lot
of numbers, but it helps to kind of pinpoint some of that information. So when you see the average
tax bill here for FY19, that's based strictly on our approved tax rate and that $233,000 in average
taxable value. And in the future years on this, with each scenario, I've assumed that the taxable
value will grow at the same percentages assessed value. That doesn't tie out exactly in real terms,
but for purpose of the scenarios have just tied those numbers together. So when you see the average
tax bill here, that's after saying the taxable values have increased 4% over these couple of
years times what this total tax rate is. The only purpose is shown at the $100,000 is because that's
kind of the new language and showing that manner. So with the 4% growth, I can go through these
fairly quickly because we've seen a lot of the same information as far as the 3.5% rollback and
the effective rates, but this does show we're at that 5 cent increase here in 2025 as we go
from our current tax rate of 21.5 cents getting up to that 26.5 cents on the 4% growth.
And then we're going to see similar things as we go through these slides of getting up to
25.5 cents on the 5 cent growth, which is a 4 cent increase on the debt service tax rate.
And then at the 6%, we're getting up to that 24.5 cents where it's that 3 cent increase.
I think as you go, and I'll just skip back to the 4%, you can see one of the, as we spoke,
as we went into this process with city council, one of the goals was to stay below our total tax
rate each year of the program. So while our debt service tax rate is increasing those 3 to 5 cents,
our total tax rate is remaining below the current tax rate. And that's because as the AV increases
that debt service first M&O trade off is going on.
So are those M&O rates assuming at least from 2021 on, are those assuming effective M&O rate?
They are effective M&O rates every year from 21 on. And this 20 number is just an estimate.
We don't have any, we're not at a point where we have our proposed M&O rate, but put that in there
for planning purposes. Any discussion on any of this? We kind of honed in on 5% as one assumption
and 6% was kind of the high end of the sensitivity analysis.
So another request from the committee was to come back and bring some of the language that would be
in the new legislation. So this is obviously changing and trying to get the true interpretation
of what the legislation is and when it goes into effect after consulting with our bond council.
The September 1st is the date that the legislation goes into effect,
but because we will be calling the election before August 19th, the new legislation will
not apply to this bond election. Despite the election occurring in November, because we're
calling it before September 1st, the new legislation will not be required. What we have brought forward
to the committee for consideration and something that we'll talk through with city council as we
move forward is how can we, despite not having the legislation be required, how can we do
things in the spirit of the legislation, understanding what the intent of the legislation
is and try to take those actions to show that while we're not required, we're going to do
everything we can to present information in the manner of the city the legislation requires.
Some of that gets a little bit difficult because there are different definitions in
our current language that we're required to do as far as what the debt is, what our outstanding debt
is versus what the new legislation requires, but I think we can work through a lot of that to go
as far as we can to be in the spirit of the legislation. So some of these following slides
you'll see that we've drafted some of the language that would be included in a new legislation.
So the most significant change, and there's quite a few language changes, but one of the most
significant changes in the new legislation is a new document called the voter information
document which has a table of a lot of information pertaining to the bonds and some of the assumptions
which we've drafted what that voter document would look like at our various four, five and six percent
AB scenarios that we can go through with the committee in the following slides. I do want
to just continue to point out the legislation is still pending. We're still waiting on some opinions
on exactly, for instance, on our outstanding debt. Is that outstanding debt like it currently is at
the beginning of the fiscal year, October 1st, or is it outstanding debt as of the day the election's
called? So there's still some of those nuances that that we need to get opinions on, but we've
moved forward with our assumptions for what that might look like. And we've also handed out to
everyone a draft of what our election ordinance would look like based on our current requirements
and some of the information that we've added to try to meet that spirit of the new legislation.
So here's an example of that voter information table that we would suggest moving forward with
to be in the spirit of the new legislation where we list our total debt and interest of the bond
program. So total debt service to be paid for the life of the bond program, which we've got right
now our estimate is about $316 million based on all the assumptions that we have so far on interest
rates and when we would sell the bonds. And then we also list our outstanding debt paid specifically
from property tax. So this is a property tax supported debt. If you, as you just when you,
when you actually, when you look through the ordinance, this is one of those pieces where
there's different numbers. If you go to section 16 of the ordinance, our current requirements are
that we have to list all of our outstanding debt. So this number is quite a bit different in the,
in section 16 of the ordinance versus what we're showing here, where the new requirement is you
only have to show your debt, your tax supported debt. So this is one of those that it actually,
it's a more accurate picture where it is more appropriate to look at what our property
tax paying versus especially, especially since we're, since we're a full service city, we have
electric, water, wastewater, solid waste. We have obviously quite a bit of debt as we talked about
last time. That's, that's supported by other revenues. But you can see the way we list each
of those assumptions in this, in this form, we show that estimated maximum annual increase
that we saw earlier, which are going to be at $50, $40 and $30 in each of those scenarios.
What percentage of the current debt drops off each year?
I don't have a percentage. I do have this slide that we looked at last time.
But we can get that. We can kind of get an average percentage, but you can see that's
showing 25 million. That's debt service payment. So that's a little different than,
than the actual debt. Right. Yeah. The other one was total,
essentially our total debt service payments that we would make over 20 years are outstanding.
This is just how much that debt service payment is made each year.
And that's all that. That's not just this is just property tax. So back on the other page,
would, would it be correct to say that basically by issuing this bond we're doubling, doubling our,
we don't have to show them a total box. I think that's one of the limitations
of the way that it's presented here is it gives that appearance and that can, that can,
obviously that's a takeaway when you look at this, you see, but I think the important piece is
this slide, like it's not doubling in the sense that as this debt, as our debt service is falling
off in each of these years, we're just adding more debt service. So some of that increase is
negated by debt service falling off. And that's not taken into impact.
Right. It's not really shown there in that, in a clear manner.
Well, this isn't, is this going to be on the ballot or in the information?
The voter information document, is it an exhibit with the ballot?
Not with the ballot, but in the election order?
In the election order.
Sorry, our bond counsel, Grace Shaker.
But it's not, but if you're, but if you're,
if you're standing there in the ballot box, you're not seeing all of this.
No. It will be in the ballot.
It will not be in the, in the ballot. The ballot will just be the, the three line,
right? Summary of the proposition. So it'll be, or it can be attached to the election ordinance,
or you can create it as a separate standalone document, but the voter information document,
whether it's part of the election order or separate, is posted at each polling location
by state law, it's posted on the website, and it's also posted in Republican locations in the city.
So we've drafted this for informational purposes as we go through the process. I think
we can decide how, you know, what we want to show, whatever we require to show and go through that
process. Looks like a lot, like a truth and lending disclosure.
So a lot of these numbers aren't really, aren't going to change too much other than that,
that highlighted amount that we showed earlier on the $40 as that maximum increase on $100,000
valuation at 5% and some of those different lengths, just the assessed value change.
And the same with the 6%.
Would that chart also be in the voter information, the graph on the next page?
It's not required, although, and I don't know if you want to pull up to the table.
It's not required, although, and I'll stand to be corrected,
we can include additional information if we would like to. So I'll ask
Greg to kind of tell us where we would include that additional information.
That David is, is correct. I think he's showing what's the minimum that's required under the new
statute, but the statute even specifically says you can add whatever information the city deems
important or relevant with respect to this. So you can certainly add information like the chart.
I think that's going to be pretty important. If somebody can tie it together.
It's connecting the dots is going to be the challenge.
Yeah, you got to figure out how to do that.
Okay. What are you calling the dots? Let me just, let me.
Yeah, so how do you- Who's connecting the dots here?
So go to the next slide. The average citizen.
Yeah, the average citizen. So how do you, how's the average citizen connect
the numbers in that previous chart to the debt falling off and understanding that
you're essentially going to try and keep the debt level fairly flat because of that drop off?
I would say information that might be good to kind of, to just add some context to this would just be
how much is that debt service that you're actually paying per year increase where a takeaway from
this could be our debt that we're paying each year is doubling, where that's not true as our
debt service is falling off. Obviously it is, ultimately it's going to be above this 25 million
dollar number because we need that additional tax rate to pay for it, but it's not going to be
double what our current debt service is. If I were doing the chart, I would say you
need a third color that says, okay, this is what's dropping off. This is what we're adding on to that
over time. I think that when we start
facing sort of these realities, this is too much work for most voters. The connecting the dots is
too much work. So that it's what are the benefits and these are the benefits of this tax increase
and additional debt and the other side of that is that the argument will be
we're going to double our debt load and what that's going to mean is that for every citizen in Denton
and they'll lump in at that point also the non-property tax debt and they'll say every
citizen of Denton, if this passes, owes this much money and that will be those will be the things
that we have to overcome because those are the simple messages and it's a simple message that's
going to be critical on this. Yeah and if somebody were not privy to the information that we're privy
to and saw this they would say you're doubling more than doubling the amount of debt with this
bond offering. So I think a third box might be information. You know this also goes back to
where we might be one of the first cities to actually start to draft something like this.
So it will be interesting as you know next year when those those bond elections go out to see how
cities tackle this and what additional information they add to the voter information. So with the
six-year implementation of this bond program I'm just like your point you're adding $210 million
over six years though it's not all one day one and so how much will you have paid off over that six
years and sort of a pro forma snapshot in your fiscal 2026 when you're done. That might be helpful.
You're paying off significant principal every year you want to pay off 210 million obviously
but it'll be meaningful I think to look at it more in that regard so there's a thought. Yeah
that'll be an important piece because the average citizen I think would think we're issuing 209 all
at once. Yeah everyone's coming to this this is a mortgage I get a signed mortgage I get all the
money up front and I pay that down. Yeah it's not. It's not like that at all. That's not how any of this works.
But that's how they're going to think about it. That's how they're going to think about it and that would be
natural because that's what most people have done. We'll prove this up but roughly Adam's thinking
we'll pay off 98 million by the time the full 210 million is issued but keep in mind too once you
some of that is starting to get paid off too so you'll never really have the new 210 million all
outstanding at one time because some of it will start to be paid in year one you know the first
bond issue starts to amortize the very next year but we can run that exit pro forma to see what the
debt would look like in 2026 but that would be what 35 40 percent of existing debt would be paid
off by the end of the year. So one of the I think things we owe the full committee that was discussed
at the last meeting is bringing a recommendation to the full committee of what we think
should be the AB and subsequently the impact assuming I think we're all solid on the 210 is a
starting point. Is that a fair statement? But now with the cost estimate changes does something drop
off then or? Yeah I think that's a I think that's a conversation of the group is to say either you
make the bag bigger or you what do you cut and I don't think that's our purview in this group.
I think we've been operating 210 everybody has up to this point so I'd stick to that as far as
looking at our growth and impact from tax breaks and all that. I mean we just as we come out of this
we literally just added another variable to the equation today. Yes so that variable could significantly
impact the 50 40 and 30 dollars. Or we state that we stick with 210 and we just cut on the bottom.
You were gonna say something. Yeah I mean because I think we have to start talking about 230.
Are we comfortable with 230 or not and if we're not then we go to 210 and how do we get to 210?
I think those are the okay. So what are y'all's thoughts about say 230?
No I don't either. I mean I think we can we can look at the impact
and growth assumptions both 210 and 230 and let the committee decide.
No I like that yeah. It's a penny and a half. It's a penny and a half so they can see. 6.5, 5.5, 4.5 cents.
Yeah if the committee if you're not you are still where you were last time and we're in 5% AV is
kind of where we want it up as far as assumptions then we would say we start with that four cents
at 210 and then 230 we just kind of roughly say that would be five and a half cents.
Okay.
So is there a sense of where we are in terms of AV? I would just say this that a nickel scares
the hell out of me. That asking the voters to approve a nickel is I mean we're gonna have to
make a hell of a case because that that looks like a lot.
But the danger of going higher is that it could be perceived that we didn't tell them the truth
when growth doesn't hit that higher. Well I think our our our responsibility is to assess
what we think is is a good number. I mean we can't we can't take a doomsday scenario unless we just
simply want to operate in in this uh in a worst case scenario. In a worst case scenario then what
I would say is we're gonna do that we're gonna go we're gonna have to ask for less than 210.
We're gonna have to start cutting things because I don't think we ought to be going to the voters
asking for six and a half cents and that's in essence if we went to 230. So we're now down to
210 at a nickel and and a nickel is is a pretty is still a pretty steep hill to climb in terms of
asking the voters to approve a nickel. If we if we decide we're going to take a worst case scenario.
So when your mind is asking for a nickel like saying the car costs ten thousand dollars and
you'd rather say it's nine hundred nine thousand nine hundred ninety nine.
Because now that we've added those other three years our average is back down to six percent.
The 7.3 caught my attention today. Yeah yeah so six is way too risky.
Okay but but that but that brings us back to this question of
and and it's it's one of those of at 210 at 210 if we did five percent we're talking about four cents
is 210 still a good number.
No I mean I just I think I think that's I think we have I think we have to be we have to be asking
the question whether or not we feel like we can sell the voters 210 with a with a four cent tax
increase or do we want to sell the voters 210 with a five cent tax increase or do we want to
tell the voters we're going to do 180 million and it's going to be a three percent. I think I think
those are the scenarios we've got to be painting for the whole committee is is that we can't simply
say we're at 210 because what we know is our costs have gone up and and what are we prepared to ask
what what do we think we can sell the voters on this and and and I think we're I think we're
pushing the limits and we did say we were going to bring back scenarios not scenario
which I think is important to the whole committee but we haven't had any conversations about
scenarios below 210 we have we have worked off of a 210 assumption. Colby Eric any thoughts on this
you guys have been quiet?
Oh I don't I mean I think probably they do were to address that concern that
that Tim has raised in there is to first deal with the committee as a whole and then with the
citizens and I'm not saying not to worry about how you present this to the citizens because
obviously ultimately that's the goal but first and foremost I think we should probably address
you know how we're going to do that as a committee but that's just really more of a
kind of a how to handle it ourselves that's really not my thought I have on I mean
if we need more money if you know it needs to be more than you know costs go up we should bring in
a scenario of 230 is a two weeks ago 230 was not a plausible reality today it is right yeah but I
mean that's just the nature of these and that's no money for land or street lighting those other
things that were about 210. Well you could possibly cut to 70 million for street repair.
Yeah there is a lot of street repair but there are shock absorbers in the 210 program it's just how
much do we want to shock use those shock absorbers. So I think I'm I want to make sure I'm interpreting
this right when we're talking about an extra penny and a half to go approximately to go from
the 210 to the 230 and that sort of thing on these various scenarios the the rollback three
and a half percent rollback difference in the final rate looks to me like it's a little bit less than
a penny and a half is that correct it is but the rollback would not be if this would be only on the
debt service side yeah so I understand legally that you you could continue to I mean the current
projections show the M&O rate staying at the effective rate anyway right the rollback legally
in my understanding of the new law is that it's just prevent or setting an upper limit that's a
little bit lower of how much the M&O rate could increase if you weren't going to take it to the
effective rate right over the effect over yeah and so so I'm just trying to wrap my head around if
if you add an extra penny and a half I don't know how the voters will interpret saying that
it's going to be a you know $40 increase but then realizing that their taxes are are effectively
going up more than that three and a half percent that they thought sure right I guess I would
address that by saying the debt service tax rate is always will be driven by this election so by
by the voters voting for the election in that case they would be voting for that increase
whereas the rollback is specifically on the M&O side so to go above the one and a half you know
the one and a half cents estimate now and over that three and a half percent rollback would
require a separate election so I think they're just two different paths so to conflate them gets a
little yeah so I guess then my question is are the 30 40 50 dollar per hundred thousand valuation is
that just the amount for the debt service not including the M&O rate at all correct and I'll
use that to to say also you know the 210 million dollar number came from the discussions with city
council of looking at the total tax rate of okay 210 million dollars keeps us below our total tax
rate throughout but whenever as we go through the bond process the shift the focus just shifts in
language to the debt service side because that's what's really impacted so we say here's how much
the debt service rate could increase but we really focus a lot on that total tax rate so that's where
it gets a little yes I think that's where I'm coming from is just that from from the numbers
it looks like if you were to take on the 230 million then in order to keep the total tax rate from
sorry in order to keep the the total effective tax rate if you will right from rising more than
three and a half percent per year including the M&O and the debt service the M&O rate would have
to decline so that it was actually below the effective rate is that accurate yes in certain
scenarios but I would you know that's not something that um that we look the effective rate isn't
calculated that way I understand I guess I'm speaking more from the purview of what you were
saying that the council was originally looking at what could the bond support that would that would
keep the the total tax rate from rising right beyond a certain amount okay yeah and that else
I'll tell you here we bet I think that was the 100 million dollar number initially that yeah that
we were estimating so that's where I think was Councilmember Meltzer asked to look at use that as
sort of the bottom of the floor you know we very early on recommended starting to plan for bond
election because we had a feeling that the state was going to cap us and put us in this position
anyway so it's like well why not play by the new rules but you're right it gets down to where's
where is that M&O rate and that service rate going to be when that cap goes into place so had we not
taken this approach that we further eroded the M&O rate and we've got probably another six or nine
for instance firefighters were trying to get put on this this next year it would have completely
taken our ability away to do that and delayed opening station aid so you're right and how you're
interpreting it and I just wanted to share with you that's kind of how we found our way through
getting out to the voters because we we just simply couldn't continue driving that rate down
knowing that we're going to get tax cap this year okay so so I'd I'd like to just we were saying
it's not our purview to talk about about cutting but I think we've got to we've got to paint some
scenarios that that said that say here's a scenario that is at I'm just using this arbitrarily 180
million and and to get to 180 million would involve this and and and this is what you need
to understand is the committee as a whole at 210 this is what this looks like and this new
number of 230 this is what this looks like and and but but I think we've got to I don't think
we should just be walking in saying it's 210 or 230 no no but I but I but I think we I think we
have to ask the question in here well how do you get to that lesser number and that's where
I think the whole community should be yeah I don't believe we can say
from Ryan well but here's but here's but here is here is one way to get there I think otherwise
it'll be chaos if we're if we're trying to cut in a group of 25 if we're trying to figure out
how to get there in a group of 25 I think it'll be chaotic I think if we were to say this is one
scenario that is a start a thought starter and that from the thought starter then people would
say well I'd like to see this instead of that if we're going into that range it may be the
committee's going to say let's go for the two full full 230 and six and a half cents
but I but I think we have to see I think we have to see that in terms of what are
what are the options and the scenarios of of something that is lesser
okay so that's a proposal to we could just grab a number out of the air
so let me ask my question was is where did 180 come from in your mind is that
it's why not 190 it's because it's less than 200,000 that's a terrible answer so that's true
we I think it would be a good idea to give them a number less than 210 but I don't think that
as a group here we should be picking and choosing which ones would go in there we would say okay
here's 180 what can we do at that level as a whole group well but I but I think I think the
question I guess the question I would want to ask is in order to get to that number
what is it that that we would be pulling from we've got 70 million and in road reconstruction
and is that the only place that happens or do we talk about some other project that we
defer and what is the impact of deferring that project and that's something the whole committee
well but I think I think we can get that ball rolling oh we can prime the pump
and this was I'm just gonna throw out a couple ideas that I had bounced off of David is you know
70 million was for road reconstruction was based on you know x oci factor I think
everything 10 and below the pretty close
what's that 25 okay so maybe we say well we're only going to tackle pick a number 15 and below
so that was one when I say shock was over that there's not a hard requirement like a
renovation of the police station you know it's a level of service number does that track with you
we're going to have this x level of service the other area we could have
where we there's some flexes do we is ryan road do you go with the you know the big ryan road or
the little line ryan road or no ryan or no ryan road because there's some other things in the
bond package higher up that address some of those concerns so I mean if if you're going going back
to your point I think if you were to say hey we're going to a plausible scenario would be say we're
going to go from funding everything that's 25 oci and below to 15 oci below I don't know what that
number is but I guarantee you it's probably going to get you below 200 million dollars
and to me that's a starting point to have a conversation which is what I think what you're
trying to get right right and and so remind me a penny and a half is 14 14 million our penny is
14 million right so if we so if we were at 196 we we're talking about reducing this by a penny
at 196 uh it's it's I felt comfortable saying 14 million is a penny to increase um and that's
that's still contingent on when you when you time the increase as we decrease it's a little more
complicated because that's kind of impacted by debt service falling off um I would imagine that's
a little tougher to estimate but for argument's sake you could kind of talk through those scenarios
but we could get the detail on it on any of those so and and I and and I'd love to know what that
number is because if you're at 182 is that two pennies and and then that's that's that impacts
some of what we're talking about here and by the way let me just say I'm not necessarily saying
that that we need to reduce but I am saying that I think we need to have some some options
of understanding the impact of of a lesser amount on on what the tax rate might be
what the debt load is going to be and how how our community is going to respond to that
Dave I see guys lined up in the hallway are we starting at six or
we're starting at six okay they're just they're just excited to be here
okay works off
so so we need to put a bow on this conversation I'll just say you know at the last meeting we
did bring those kind of hundred million dollar 150 million dollar 200 million 210 dollar scenario
so we could they haven't been updated uh based on the feedback from the last meeting we could bring
you know 180 million dollar scenario to get the exact numbers or at least kind of send that out
to the group um that would be no no problem it'd be easy to come up with the same analysis at 180
million and send it out to everyone does that sound randy yeah so I'm assuming we we are we
agreeing on five percent growth in the ad in this group I think there's I think there's pretty
strong consensus on that unless someone would have y'all see otherwise yeah I mean I think that
sorry but my understanding is that that's that purely drives the information in the
informational content I forget the term used for the that piece of paper that would be posted
it drives that but it also drives the bond booklet which is um a number that's referred
to quite a bit and then as we get as we the bond oversight committee as it's formed they do take
note of that that increase as we plan for future bond year choices so we we are tied to it to some
I mean it's not a number that we wouldn't we go over in the future years but it is it is the case
that the voters are authorizing up to x amount of an increase so that they that that percentage
number of four cents that the ballot language would say that that the voters are authorizing
up to four cent tax increase to do this right it's not they don't actually it's in the booklet but
it's not in any official language but I'll defer to yeah right that the voters are simply approving
up to a principal amount of bonds but um it's not they're not voting on a tax limitation in
fact we try to make that clear in the information that that they're not doing that um because the
when bonds are issued there's a pledge of taxes and the city's committing itself to levy taxes
sufficient to pay that debt service on the bonds okay yeah i mean i think in the uh the example
uh resolution here it's the language it uses is and shall uh city council be authorized to levy
and cause to be assessed and collected annual ad valorem taxes in the amount sufficient to pay
the annual interest on said public securities but i but i would have in turn but from a from an
actual staff perspective we would not go we would not increase more than that amount um without
talking with bottom second without talking to city council it would be something you know that we
would abide by obviously we haven't had to deal with that with the most recent with the packages
recently because av has exceeded those expectations but um we would not just go over say we said we're
going to go four cents we would not just go over four cents without having um you know those serious
discussions so you're saying that if you if it looked like you were going to run into that
situation you might slow down the issuance i think we would yes that was most likely no matter what
we would have the conversation with the bond oversight committee and city council before
we would do anything okay randy you were going to make a comment i thought no i just um well
you know i think we we've just started or i don't know if we've gotten it all back yet though we've
asked all the members to write projects right we're going to get that today we got it at 401
okay and you move it out and we'll have those results today we had 15 members over the 19
respond to that and i think you know the way we've done it in the past is we've had kind of here's the
here is the assumed growth here's what the tax potential tax increase is tax rate increase is
if the line comes across it's it's 180 it's 190 and whatever it is and you start ranking projects
and when you get 190 that's it and so ultimately that's what we're going to get to right right but
i think you know we can we can get there real easy if we assume a 10 percent growth perfect
right but we don't want to do that we want to be something reasonable so and i'm getting less and
less comfortable with the five because when we take that downturn period in we're at six that's pretty
there is going to be another downturn there always is all your pessimists i think uh just
the discussion you are having that was one of the reasons we wanted to make sure we
touched on the police the public facility changes before you had this discussion
so you weren't all just good with the 210 knowing that there is that significant variable out there
now so is is that going to be into put into the a new uh spreadsheet of this is what these
projects are going to cost that will be presented to the to the committee yeah well we presenting
this um just here in an hour or so where we kind of um a lot of power points
kind of show the differences obviously a lot of numbers but to just kind of show this is what
we've been working on so far um and then here's just if you compare these two where we're looking
at 217 to 252 in the options from up to that 238 but you can see the increase really is just that
and then prop one going from 45.5 to the 66.9
and showing you this banner to kind of just get to that point of
we either i think the options are you go over that 210 like as you've been discussing or you
just kind of look at the reprioritization of projects um to get to the level that the committee
would like to be out and and and what about lighting in open space i mean it's now
correct me if i'm wrong you did say dmne is looking at some of the street lighting or we
could do some funding through yeah we're doing we're doing a number of small projects right now
prioritizing those basically through the dme operating fund but there's other ways that you
can you could certainly have dme you know do the projects and charge the city back there's lots of
ways you can get there for some of these smaller projects if they if they want you know that would
be our next round of utilizing any one-time dollars that would be fine in future budgets but
that's basically how we'd have to tackle that and the right now in the dme forecast for future
budgets there's going to be five million allocated just for going out and increasing street lights
um a lot of the local and city streets
well it's going to be an interesting meeting at six o'clock
do you do you want to have another um finance meeting next week prior to that
i do y'all might get some feedback from the total group from what they think about the total
look at the look at the priorities just feedback on what the total package is all both props are
and then we might be before the next meeting just to okay look again and say okay if they say figure
out what is going to how much needs to be or there's a landing to draw on to get to this point yeah i
i think that's prudent i think we need to give the committee some more input into what we're
looking at because i feel like they're starting to say who's driving the trailer yeah yeah we
had built in another another meeting or so we're not meeting with the council until the first of
august so we'd built in another meeting or so just to give ourselves a little bit of flexibility and
based on what we just learned with the two pd projects it's quite wise we take that the last
time we want anybody feel like we're pushing them into a corner so we need to make sure they're as
comfortable as possible with whatever they're recommending and and during the six o'clock
presentation my plan would be to show this slide to the entire committee at the summary level
obviously if more people in the community want to get in the more in the detail the other ones we
can bring this whole presentation up but i think this might set the stage for some of that conversation
tod i don't want you to take this the wrong way but are there any more surprises coming
i'm not taking it the right way or wrong way i can remember being here a month and
in getting my ears chewed off by you and randy and everybody out of the bond committee about how
how can we be this short of money so i've got to never let that happen again i i don't think so
i think tod and pretem i have i have grilled them and grilled them to go back two and three
different times looking at the uh the road numbers the contingencies you know are we
are we being way too conservative just in fear of not being wrong and i think they both feel very
comfortable uh given the bids that they're receiving what they're how they're seeing the
projects escalate and uh and really what what our existing bids are coming in at to base it off
that's really all you've got in a hot economy is what are your bids coming in now um i think with
the two i've been more nervous about the vertical construction because almost every project we've
seen in this city the last since i've been here we have been way off on the numbers you know we'll
get a planning number and these these little buildings are doubling in price on us so that's
why we went out and hired this firm that has been working with lewisville and richardson and
richardson's just finished checking up an 80 million dollar police facility and they basically
came back and said your numbers are not taking proper inflationary numbers into account and you
need to adjust them so i'm glad we did it i don't like getting this news this late but i think we're
okay um in terms of the street lighting and open space honestly the open space is just a guess that
target is moving constantly as we as we superheat in the economy here and the price we're looking at
80 000 dollars an acre today which is probably double what it was five or ten years ago so i feel
comfortable with the roads and i feel much more comfortable with the buildings now but you know
the worst thing that we could have done to put you in a position of going out and selling a bond
package and then coming up 60 percent of the money and said oh boy i mean we just had to go back to
the council last year and asked for 35 million to make the local roads whole so and and i and i just
want to say i appreciate that it's it's just it's a little shocking i know well i was on vacation
last week and baby got a hold of me and uh you know i i if you've ever heard you could imagine
somebody trembling while they're writing an email you know i can hear his voice cracking going we've
got a problem here so but you know we just have to deal with it move on i mean it's just it's the
economy we're in and it's the labor shortage we're in and i'm sorry to keep asking questions and or
making comments but on the ryan road with that big gap the 210 is a fully funded 19 million on
ryan road that's actually right just kind of cutting the and someone in the middle at 8.6
million i hope right now so um and to be honest that that number i we've had the conversation
with todd and pretam about um ryan road yesterday i think no matter where we end up as the four
million is going to be kind of the basic basic road and as you incrementally go up it just you
get more that goes with the road more capacity on the road all the way up to the 19 million so
you can't pick a number in there there's going to be a varying level of service and uh that goes
along with the road for now to be honest that 8.69 that was really put everything else in there and
that's what we had left over so we put that into the ryan road for the again that's just the staff
recommendation column is just there for um discussion purposes i think we have ranked
these projects from a staff level and our priority um you can see the police renovation and fire
station eight then substation and fire range being last and then the roadways are all ranked by
priority um but as far as the 8.6 i think that's a conversation that committee should have and one
thing on these road projects ryan robinson uh jim crystal that's that's all in design money but
one of the exercises we recently went through and had all of our water and wastewater impact fees
assessed and we found that we were collecting about half of what we needed to based upon our
projections of when the next treatment plan expansion was the street this the street impact
fees are even worse shape so they're probably collected somewhere between 10 and 20 percent of
what it's actually costing us to build roads it's been so long since they've been properly updated
and there's the formula is a little bit strange so we've hired um kimley horn to come in and help
us update that so we're going to be going to council sometime in the next few months
talking to them about the street impact fees and what what should the development community be
pitching in so we can address roads like ryan and robinson in the future with with impact fees that
are more reflective of today's costs so even if some of these end up getting cut we're still going
to be building up those impact fee dollars trying to address these roads eventually putting them
together probably with co funding down the road there's just not going to be much of a choice
you know bonnie bray and hickory creek especially bonnie bray is just if there's one that's
untouchable it's probably that one because of the high school opening up the need to get off that
road eventually especially before they start that construction on i-35 north but beyond that i mean
we will figure this out um based on wherever your comfort level is
so one thing would be um a little helpful for us and you guys may or may not have an
opinion on this but i'm actually going to get to be a teacher for a second so we're not getting to the full five cents
right away right so there's some capacity to do things a little faster which means you can
probably afford a little bit more within the same five cents right what you're telling people
and where i'm seeing that and obviously we don't want the total tax rate to go up right we're
sensitive to that but you know for example here the total tax is stopping one cent but we still
haven't hit near the five cents so we can take that one cent and use it i guess which means we're
paying out that faster and i'm not saying that's a solution but if there's a we can't live with more
than five cents or whatever that is we can structure around that a little bit more right now we're using
numbers and timing based on what's given us um so it's like roughly 90 of the 210 leg is sold within
the first 10 years then it kind of tapered off so it's a little bit wondering why did we do it that
way you could back into how much could you afford every year sort of maxing it out right i'm saying
next thing i mean the total constraints that your total texture doesn't go up and that we're not
going to bust the five cents and whatever makes sense you're just going to use a different forcing
function to yeah i mean we can but that's one thought to maybe you got a little bit more within
the same constraints that everybody's talking about i mean it a lot of people don't really think about
how do i want that tax rate to look um or how palatable is it for it to you know doesn't really
need that many like you said this school don't really differentiate between that sort of no no
they're looking at the total tax rate so this is already a communication challenge with um voters
no doubt but knowing that if we're mindful of the several tax rate and how this ultimately gets
implemented you're probably still you know ease up the debt service tax rate a little bit faster
within like so not reaching that estimated maximum tax rate that's being communicated that's important
great thank you and i briefly showed the bond sale you know this this is kind of this is what
was driving those numbers but that these are just estimates but i think to that point you know
how we how we actually sell the bonds is going to have that impact that's that variable on the
rate that will be each year you know and i think that goes back to the av growth as well
you say five percent every year but maybe in 21 22 at seven percent and then it drops off that
kind of how we looked at that variable rate last time um so there's going to be those considerations
as we go through that's going to really change the target and also using the old numbers not the
middle oh yeah this is this was this was the old one that's why i kind of have this slide hidden
behind the question um this is going to that's going to be a consideration obviously we're going
to need more dollars here in 21 is keep on the schedule and that's going to have an impact on
what we sell the rest of the day okay so just uh for for clarification um have another meeting next
week at four four again possibly and bring back some 180 million dollar scenarios or kind of see
how the discussion goes at six p.m and then go from there i think that's what we need to do is
just say what does the committee feel is a what are the you know bring three scenarios get feedback
in those three scenarios and then based on that conversation say yeah we need to meet or no we
don't that's great does that make sense yeah okay pull back in there all right thank you thank you
break adjourn i think you can move to pardon me think i need a motion to adjourn i'll move to
adjourn i'll second all right all in favor say aye aye opposed same sign we're