Budget Review Commission - March 19, 2025

to the uh budget review commission
meeting of March 19 and I will ask for
someone to do a roll call.
Chair David Smith,
present. Vice Chair Daniel Schwiker,
present. Commissioner Carla
here. Commissioner Brad Newman here.
Commissioner Jim Ransco here.
Commissioner Sharon Sites here. And
Commissioner Mark Stevens
here. Uh we will begin the agenda in a
moment. But the uh in terms of public
comment, I would remind everyone that
citizens may address the budget review
commission regarding any non-aggendaized
items during this public comment
period. And the rules are that Arizona
State Law prohibits the commission from
discussing or taking action on an item
that is not on the proposed agenda. and
citizens uh can complete a card over
here, a blue card if they want to talk
during this period of time. Public
testimony is limited to three minutes
per speaker. Normally, we don't have
anyone, but tonight we do have someone
who wishes to address us and that's Miss
Patty
Badnock. So, come to the microphone and
tell us what's on your mind, Patty.
Good afternoon, Chairman Smith. You
asked me repeatedly to come with a lot
of questions. So I took you as your word
and I did some studying of the 27page
report that was given last time and I
did about eight pages and out of that I
came up with 12 questions which I have
submitted to you. So this is what I want
to say. Who are we? Where do we wish to
go? What do we wish to become? How can
we achieve our goals? When can this be
achieved? Under what circumstances? Now
is the time. The rationale of leadership
to insist that these approved high-rise
facilities have to be built knowing the
downside devastations that will occur is
preposterous. They will be the takeovers
and destroy our quality of life.
Question.
How can this budget committee review
ascertain the goals to bring the
population to a level that preserves our
quality of life? Thank you.
Thank you, Matt.
Patty.
Um, next on the agenda is uh called the
chair's report. I guess that's where I
uh talk. I do have a couple of questions
to or a couple of comments to make. Um,
First is to uh the staff welcoming back
uh Jerry Scott as our legal counsel.
Appreciate you being back with us. Uh
second which is a question to staff
reading through the minutes of some of
the prior meetings. I realize we have a
lot of questions that come up where the
answer is, you know, I'll get back to
you or I'll provide something on
that and I don't know whether there is
some system by which we keep track of
those items and maybe you could talk to
that Sonia. Yes, Chair Smith,
commissioners, we are compiling
responses to all those questions and
they will be provided as an attachment
to the chair report in the next meeting
as we um have those ready. So, we're
hoping to have that ready for the March
27th meeting. Um it does takes take us
some time to compile those responses as
we're also busy working on getting the
budget ready.
Thank you for that. I mostly just wanted
to be sure somebody besides me had that
responsibility. So you'll you'll take
it. And also to be sure that we have the
answers uh available for the public as
well. And they will be of course if
they're agendaized. That's good.
Uh the second comment has to do with the
question of
um questions that may arise in any one
of our seven minds here as a question
that we'd like to take to council or a
proposal we'd like to take to council um
just as an individual, not as a group.
How do we accumulate those to one day
look at the aggregate number of
suggestions and and vote among
ourselves? Yes, collectively we'll all
agree to take this comment to council
and no, we don't want to agree to take
that one.
Um, I can I can see us at a work study
having the deliberation, but I'm not
sure how we get a piece of paper that
actually has all of those topics on it.
And should they all submit those topics
to me or would that be a violation of
um the open meeting law or how how would
you recommend we accumulate those
comments?
Um Commissioner Smith and Commissioners,
let let us think about that and uh put a
process together for you to accomplish
that. Okay. Uh we'll get that back to
you. Undoubtedly, everybody has some
questions in their minds now and may
have more in the future. Uh, with that
said, let's go to the first item, which
is the approval of the minutes. Um, and
we'll do them individually, and
Commissioner Carla would like to talk
before we do that perhaps. No.
Ah, sorry. Um, no. I have two
corrections for the February 27th
minutes if we're there. Okay. Why don't
you go ahead and give the corrections as
you're as you've noted them. Okay. Um,
on the February 27th minutes, uh, page
two, second line down, it says Chair
Stevens, and that should read
Commissioner
Stevens. And then on page
six again, second line down, um, Chair
Smith commented on the food tax and at
the end it says the city is urged to
eliminate it if it is not eliminated by
the state legislature. To be accurate, I
think that should change to he thinks
the city should be urged to eliminate
it. So it doesn't appear that the group
has already discussed it, which we
haven't as a group.
Thank you.
Point well taken. And perhaps this is an
example of where one or the other is one
of us may be opining on something, but
eventually we have to decide whether
it's a group report or a group
initiative or just an individual person.
Yes. Sounding off. Does anyone have any
other changes to uh suggest to the
February 27 minutes?
Seeing none, then I'll entertain a
motion to approve the men minutes as
drafted.
I approve or I make a motion we approve
the minutes as uh corrected.
Commissioner Schwager made the motion.
Who seconded it? I
second. Motion made and seconded to
accept the February 27 draft minutes as
stated. So find your button to press
yes, no, or
maybe. And Commissioner Carla, I think
you need to press a button. Oh, sorry.
And Mr. Stevens, Commissioner Stevens,
uh, are we on the 28th? February 27.
You're you're I'm gonna hit my button by
accident.
Wh I've got something on the 28th.
So you're uh you're just pressing a
button right now for yes, no, or maybe.
Okay, it has been uh it has been
unanimously approved. And now we'll look
at the February 28th draft minutes and
take comments if any from
anyone. And now, Commissioner Stevens.
Uh, yes. I have two items. Uh, one of
them is on page seven at the bottom of
the 28th minutes, the very last
paragraph. There's a sentence that says
the 5.5% projected payroll growth used
by actuaries was not realistic because
actual payroll was only growing at about
2%. And then here's where the problem is
in my mind. It says and thus
underfunding the plan. If you provide
the actuary understated projected
payrolls, it would result in an
overfunding the plan. So I think that's
not a correct statement. So I would
propose that you strike the words and
thus underfunded the plan.
So, I don't know if you want to think
about that for a second. Now, I didn't
go back and listen to the tape for this
one part to see if that's what was
actually said, but I don't believe
that's a correct
statement. I'll have staff respond to
that. it it may in fact be correct that
if you uh if they're assessing you a
charge assuming that your payroll growth
in the future is going to be 5 and a
half% and it turns out to be not that um
they may not may not have assessed you
enough but I'm out of my I'm out of my
element here I will defer to staff on
that statement the the way the funding
works as I understand it is you project
salary increases and if you have a
higher than re real increase the present
value ends up being higher than if the
real number happens. That would make the
projected benefit obligation higher than
it's actually going to be, thereby
driving you towards lower
funding. It it's just I hate to be an
accountant on you guys like this, but it
I I just bothered me seeing something I
thought was factually
incorrect. And again, I didn't listen to
the tape to see if those were the words
that were said. Now, I guess it's the
word those are the words that were said
in the tape. Uh I guess that's what was
said and it stays.
Um, Commissioner Stevens, why don't you
let us research that and get back to you
on that? I think I understand what
you're uh referencing and referring to.
Let us do a little bit of um additional
uh look into that and respond back.
Okay, let me with withdraw that. I guess
we can approve them. I've got one other
change. Uh then I don't know if we can
approve the minutes and then go back and
correct them later or something. I tell
me how you do that. I think um I think
we can just strike there and thus
undefending the plan and just leave it
at that and those five words go out that
solves my concern. Yeah, we can just
strike that and then we can research
that uh issue and respond back to the
whole commission. Okay. And my second
one was on uh section six, page 8. Uh
it's where I refer to uh it says uh when
I'm talking about the how staff should
review the uh unfilled positions. The
minutes said that uh I said you should
review the unfilled for 8 to 12 months.
Uh but if you go to the 2hour and 10
minute mark of the tape, you'll find
that what I actually said was unfilled
for all eight months and unfilled for
four of the eight months. And that's
just an important distinction because if
you're actually going to do that, the
thought would be what was open all eight
months through February 25th. You should
challenge those about whether or not
those are necessary or there can be some
restructuring to combine positions and
save cost. And the other one was what
was unfilled for four of the eight
months, meaning half of the time it was
unfilled. Someone else is doing the
work. And so that whole point was just
something about uh looking at unfilled
positions to challenge whether or not
the unfilled positions are necessary.
And I understand the theory of unfilled
positions. But if they've been unfilled
for that long and you're getting by and
it's not hurting anything too bad, maybe
there's a way to restructure certain
roles and eliminate some of the
positions, but not all certainly. So
anyway, the change would be strike
unfilled for 8 to 12 months and insert
unfilled for all eight months and
unfilled for four of the eight
months. And I did verify that with the
tape. So I guess that would be the only
change. Then if there are no other
changes, I move that the minutes be uh
Oh no, she made the two changes. the
striking of the un unfunded the plan.
Okay. Uh I uh propose that I move that
the minutes for the 28th be accepted as
amended. Anyone else have comments on
the February 28th draft
minutes? Seeing none, I will entertain a
motion to approve them with the
amendments as suggested by Commissioner
Stevens.
Did you I I made the mot I actually made
Okay the motion then we've got a second
from uh Commissioner Swiker and we can
go ahead and vote yes no or
maybe the minutes are approved as
submitted with the changes unanimously.
Item two on our agenda then is to look
at fund
reserve balances, fund balances,
reserves, and contingencies. And um
Sonia, I will turn the platform over to
you. Thank you. So the uh terms fund,
balance, reserves, and contingencies can
be confusing. So I hope to explain what
they are and why we need them with this
presentation. So next
slide. Um there are various reasons that
cities maintain fund balance reserves
and contingencies. Cities provide a very
wide range of public services through
multiple departments and operations.
Some operations are very large and
complex. So it is prudent to have a
cushion for unexpected needs. We also
have rainy day funds to make sure we can
continue services and protect our
residents if we have an unexpected
downturn or sudden loss of
revenues. Another important reason to
have fund balance and reserves is to
maintain our AAA bond rating. Uh rating
agencies consider fund balance and
reserves of utmost importance for a
financially sound and strong city. And
finally, sometimes we have planned uh
set aside of funds for future use or
simply carry forward or carryover funds
um that we didn't spend in the prior
year that we have plans for in the
future years. So when we say fund
balance, reserves and contingencies, we
are referring to funds set aside for all
all of these
reasons. Next slide.
The term fund balance um reserves and
cons contingencies can sometimes be used
in interchangeably but they really have
different meanings and they really refer
to different things. So first of all
fund balance consists of reserves
contingencies restricted fund balance
and what we call assigned and unassigned
fund balance. um the first three
categories reserves, contingencies, and
restricted fund balance I will go over
in more details in the rest of the
presentation. But for the assigned fund
balance, what those are are funds that
we set aside for very specific purposes.
For example, we enter into uh agreements
where we know we have a large cash
outlay in the next few years, so we may
earmark that amount um today. So, we set
aside those funds um when the payment is
due to make sure we don't disrupt
operations to make the payment. Another
example might be we sell a piece of land
and council would like to earmark the
land sale proceeds for a specific
project instead of using it for
operations. So, we assign or earmark
that fund balance um to you know specify
that for its specific use. Assigned fund
balances are shown in the budget as a
line item in the fund balance of each
fund. Unassigned fund balance is really
carry forward funds that can be used the
following year. Unassigned fund balance
is also shown in the budget as a
separate line
item. An unassigned fund balance a lot
of times is carry forward funds that we
didn't uh use in the previous year from
a timing standpoint or maybe certain
expenditures take several years uh to uh
complete and spend or certain
expenditures are earmarked for spending
in the future. So basically fund balance
the term fund balance that we use really
refers to reserves, contingencies,
um assigned fund balance and unassigned
fund balance as as well as restricted
fund balance. All of those are
components of fund
balance. Is that more confusing?
Hopefully not. Next slide. So let's talk
about reserves. I'm sorry. I do have a
question from Commissioner Stevens at
this point. Sure. Ju just to help me on
that. I went through your slides in
advance and I'm trying to un I
understand your contingency and reserve
line and you've got specific lines in
the budget for that. Uh those lines add
up in total more than you've got for
contingency to reserve in your
presentation. So does that also include
fund balance, the part that's in the
operating budget? Because I'm not really
sure where fund balance shows in your
budgeting process.
Fund balance is
reserves plus contingencies plus any
restricted fund balance plus any
assigned fund balance plus any
unassigned fund balance. So those five
components make up fund balance. So fund
balance in and of itself is all of those
categories. I I kind of understand the
concept of fund balance as it comes to a
balance sheet and excess of asset over
liabilities, but I notice you show a lot
of the reserves and contingencies and
expenditure in the budget. I'm just
trying to understand if I I like the
idea of seeing what the pieces of a fund
balance and reserves and contingencies
are, but I don't know where that's at in
your budget book or does that show
somewhere or is it just how you you do
it differently here? Yeah, Commissioner
Stevens, each fund has a set of fund
balances that's made up of these. So,
you're absolutely right. Assets minus
liabilities is your fund balance. And we
break up the fund balance into each of
these components and it's shown in the
budget as each of these components. Now
some funds only have reserves and
contingencies. Some funds have reserve
contingencies restricted fund balance.
Some funds have all five
components. So each fund has a fund
balance that's made up of either one or
all of these components. And all of
these components added together is what
we call fund balance. Okay. Then I'll
I'll make a final comment for everyone
to think about as we go through this
description. I I'm wonder I was
wondering in preparation whether it
would be a value for us to see a roll
forward of the contingencies and fund
balance from the start of the year till
now so we could understand maybe 80% of
what went in and out of it. So just park
the idea as you hear about this whole
thing. Is there a need for this
commission to see what is being added to
or how it's being consumed to see if
there's things that are going through
that because they weren't budgeted that
would be of uh relevant to us and I
don't necessarily know the answer to
that but I want you to think about that
as she finishes her presentation. Okay.
Thank you.
Okay. Um now I have a question from
Commissioner Carla.
simply in response to that for us to
also think about as she goes forward is
how much movement there actually is
because that for me would guide whether
or not we actually do what you ask.
So, okay. Okay. Next
slide. Okay. So, I'm going to dive into
reserves operating in e reser reserves.
Emergency reserves are in place to
protect our residents and citizens from
the city having to stop or disrupt
services to respond to a significant
emergency or unexpected need. So
basically reserves are rainy day funds
used for extraordinary events that are
not part of the normal operations.
um revenue stabilization reserves are
used if the fund is supported mainly by
a volatile stream of revenues and
there's no other stream of revenues. So
you'll see as we produce the budget our
uh 0.15 park and preserve tax from the
prop 490 all those operations are
supported by just that one tax. And so
you know with the volatility of sales
tax we do set aside a revenue
stabilization reserve. Whereas in other
funds where there are other revenue
sources in addition to sales tax, we
probably or may not have a revenue
stabilization reserve, but we would have
the emergency or operating
reserve. Uh debt reserves. These are
reserves to ensure that we can make our
debt payments without having to take
funds from operations if an event occurs
when there is a temporary or permanent
loss of revenues. So if we have either a
uh significant economic downturn whether
it's a two threeyear temporary loss of
revenues or whether uh something happens
at the state and we lose our revenues
either temporarily or permanently uh we
can still make our debt service payments
by with these reserves without having to
take the funds from operations and
disrupt services for our
citizens. Sometimes uh debt service
reserves are also required when we issue
debt. So when we issue debt, our uh
covenants for issuing debt may require
us to carry these
reserves. We already talked about asset
replacement and future capital reserves
at length in our previous meetings when
the commission um discussed the need for
setting aside funds for major repair
replacements. So I'm not going to spend
much time on that one. And then the city
is self-insured for employee health and
dental and also for workers comp and
general and property property liability.
And as you know being self-insured
requires reserves for unexpected claims
that we have to pay. An unexpected claim
can be substantial and a healthy reserve
balance is needed in order to be
self-insured. So basically, we don't
want to have to pull funds if we have a
significant claim, whether it's workers
comp or whether it's a liability claim.
We don't want to have to pull funds from
our operations and disrupt operations.
We want to have to pay those claims with
our self- insurance reserves. The
reserves in our self- insurance funds
are also determined actuarially by our
actuaries. They calculate our required
reserve levels based on our um insurance
claim experience and what they forecast
for us as a city. Any questions on that?
Commission. Yes. Commissioner Carla has
a question. Uh yes, Sonia. I'm not sure
exactly where this fits, but the
question is if, god forbid, we have a
catastrophic fire in the preserve and we
have to address a major reveation effort
and possibly rebuilding a access area
that's burned down. Is that coming
from emergency
reserves, contingency, you know, the set
aside that you do in the preserve
budget, which won't be big enough to
cover all of that, or does it come from
the preserve tax that is slowly
acrewing? I mean, where would that money
come from?
Um, Commissioner Carla, commissioners,
um, that's a great question. So if that
uh if a situation where we have a major
event in the preserve from a maintenance
standpoint, we would first look to the
funds that provide for specifically for
maintenance in the preserve. So we would
look to that point uh the the allocation
from the 0.15 preserve tax that's for
preserve maintenance and I believe that
when you see the budget for that fund
there will be some reserve for major
repair and maintenance set aside for any
catastrophic event. If that fund is not
enough we will look to other funds
primarily the the general fund for for
emergency reserves. Okay. Thank you.
Okay. Um, next
slide. So, here's some examples for use
of reserves. Again, reserves are rainy
day funds for extraordinary events. Um,
so major economic downturn or major loss
of revenues. Um and sometimes when we
have a major loss of revenues, if it's
if it's a permanent loss of revenues, it
takes some time for us to realign our
operations to adjust to the new level of
revenues. We can't just, you know, uh
stop operations just halfway through the
year and sometimes we don't know if the
revenue loss is permanent or temporary.
So we would want to, you know, um
continue operations until we have more
clarity. So that's what reserves are for
as well. Um natural disaster or
catastrophic events where emergency
funds are needed to help us get through
the spike in expense and minimize
disruption of service to our citizens.
Uh something could be like a cyber
security event where even if we have
insurance, insurance funds may not be
available immediately and we might have
a cash significant cash outlay for for
example if we have a cyber security
event and we wouldn't want to have to
take that significant cash outlay from
any of our operations. We would want to
be able to have reserves for that.
You may have um let me ask you a
question. You may have covered this when
we talked about the financial policies
and I'm having a memory lapse but um
these are examples of how we would use
the reserves. Do we have guidance in
terms of how we rebuild the reserves or
you know some financial policy that
might say for example if we have bonanza
income as opposed to um a downturn in
income that the bonanza income is put
into reserves or something's done with
it other than distributed through the
organization.
Um Chair Smith, thank you for that
question. Our policy does require that
whenever we use those reserves that the
fund or the department or the operation
that uses those reserves um we have to
work to rep re replenish those reserves
to the level required in our policy
within two years. So that means
adjustments will need to be made to the
operations in order to replenish those
reserves. And our policy currently
allows for a two-year window if those
reserves are um used.
And so maybe that's asking answering a
question uh one shade different than I
was asking it. That would talk about how
you replenish reserves that are
used. Um, and I'm talking about is there
a financial policy that
says if again if we have a bonanza year
and we find ourselves with $10 million
sitting in the middle of the table
unspent, is there a financial policy
that guides how that will be added to
reserves or what will be done with that?
Um, Chair Smith and Commissioners, no,
we do not have a policy uh to um
basically require us to use excess funds
for reserves. We have policies
that provide for using excess funds for
one-time expenditure needs like capital
projects or um other one-time um needs.
So, if we have a you know banner year
and we get all this extra money. They do
not go to reserves. They go to one-time
operating or capital needs for the
following year. Correct. For the
following year. The reserve and I have a
slide that will show
uh maybe a few slides down what our
policy reserve levels are. We have
established policy reserve levels and
those are the reserve levels that we do
maintain in each of the funds and we
don't just increase the reserve levels
because we have excess cash.
Commissioner Stevens has a question or
comment. Just help me on understanding
how you allocate things to fund balance
and reserve. I'm guessing from what I
discerned once you have a variance from
budget and you get to the end of the
year a lot of times you do have an
excess because it's a very well you know
budgeted managed city is at that time
then does council or does the city
manager propose the allocation of those
excesses to decide what remains in a
fund balance which is unrestricted and
what will be allocated to reserve funds.
So how do you how do you deal with that?
Yes, Commissioner Stevens. So, as far as
operating in emergency reserves, debt
service reserves, contingencies,
um, let's see, those reserves are
established in our policy that council
approved. So, as you'll see in a few
slides, actually, maybe we should go to
that slide. So, it's uh, if you flip to
slide
um,
nine. Oops.
This might help 10.
So I I apologize that it's really small
on the screen, but as you can see, these
are the fund funds that have policy
reserves, our general fund,
transportation fund, and so on so forth.
In our council adopted policy, we
are establishing these levels of
reserves. So basically what we have is
council approved levels of reserve and
when what you know throughout the year
we establish these levels of reserve.
The percentages are percentages of
operating expenditures excluding debt
service and excluding transfers out. So
we maintain these levels of reserves
throughout the year at the beginning of
the year and at the end of the year. And
if you go to the next slide, these are
all the reserves that we have in our
2425 budget. And as you can see the
first column, general fund, that's 94.1
um million, that is our 25%. And so for
the budget that's coming up, it'll still
be
25% of the um operating
budget. And then the rest of them are
similar uh where we have the debt
service reserve for the preserve tax,
the different um reserves that we hold
in our um funds. So the ones that we
bring forward to council, it will be
through the budget process. is not a
separate council um uh approval. So it
would be through the budget process when
we put the budget together. We put the
budget following the policies that
council approved. Council approved those
levels of reserve. So we establish those
levels of reserves through our budget
process. we know what our debt reserve
requirements are. Um, and the future
capital reserves. That usually is a
collaborative effort with the department
as we put the budget together. And if
there were any other reserves that we
would want to set aside funds for or
assign earmark funds for, we work with
the city managers operations departments
and we present that as through the
budget process for council approval.
Commissioner Stevens, I'm almost done.
One more thing then. So, as I understand
it, these are basically board or council
designated funds. They're kind of cast
in stone. They don't change unless
council decides to change them. So, the
only flexible money, so to speak, would
be the unrestricted fund balance. So
maybe that's the only thing that might
be of interest to us when we look at the
budget is what's the unrestricted fund
balance in each of the funds because
that would be pure cushion that council
could use to meet other things beyond
what the reserves and contingencies are.
So if you go back to pretty much but let
me clarify one one point. If you go back
to slide
three. So I'll wait for that to pull
up. So um reserves are set in stone in
terms of the percentage that we have
council approved through our policy.
Contingencies are established based on
operating need. So as a budget review
commission, you could say you're not
carrying enough contingency here or
you're carrying too much contingency
here, you you need to reduce those or
you're not carrying enough contingency
here, you need to increase those. So
there is some flexibility for for the
commission to recommend. Restricted fund
balance are uh externally ex imposed
restrictions though it's pretty much you
know set in stone. Assigned fund
balances are amounts that we earmark for
specific needs and that that is also
there's could be if it's an agreement
for example if it's a developer
agreement where we have already agreed
to pay a certain amount then that is
pretty much set in stone but if it's an
assigned fund balance earmarked for
something that the um city uh would like
to do then the commission can also
recommend reducing or increasing those
assigned fund balances. is if that if
that helps.
Um, yeah. So, if so, I'm wondering if
when you present all the budget items,
all we should really be thinking about
what's in contingencies, assigned fund
balances, and unassigned because those
would be the dollars that could move
around at council's direction.
That is correct. Within the fund. Within
that fund. Yes. Okay. So, just consider
whether that's something we want to see
when we start looking at the operating
budgets for each of those sections.
Okay. Um, okay. Let's go back to slide.
If you can figure out where you left
off, why go back there?
Um, I think we left off on slide
[Music]
seven. So, I wanted to talk about this
because this is I think pretty important
is our reserves are needed to maintain
our AAA bond rating. Um the rating
agencies we use Fitch ratings, Moody's
and um
S&P score score our reserves separately
from other um financial metrics or
categories that they look at because
they consider reserves as uh important
to um uh rating. And um we we recently
uh received a rating um opinion from
Fitch where they very specifically uh
said that a decline in available general
fund reserve levels sustained below 20%
of spending could lead to a downgrade or
negative rating action. And this is sort
of the uh table that they follow.
Scottsdale is considered to have a low
mid-range budget flexibility. Meaning
that, you know, if there was a
significant downturn, we have um we
don't have high flexibility in um
eliminating our expenses in the general
fund or not uh spending in our general
fund because our general fund is
primarily public safety and uh services
that we uh deliver to the citizens to uh
public services. So with that um uh
limitation uh we need to maintain
greater than or equal to 20%
um in the general fund to maintain our
AAA bond rating. So this is from Fitch
and Moody's and S&P has similar you know
similar types of
um scales and metrics where they uh
consider what AAA uh bond rating
requirements are for fund balance and
that's why we established our general
fund policy at 25% for reserves because
at a minimum we're saying that the
operating and emergency reserves need to
be at this level and then the assigned
or unassigned fund balance could be
maybe a little bit more flexible, but
the reserves need to meet this AAA
rating
requirement. Next slide. I think before
you leave that slide, I just want to
make a comment. But um because I played
this game for several years of paying
attention to our AAA rating, but I think
it behooves us to uh be mindful that
even as the words say up there, uh one
rating agency says that a decline in the
levels could lead to a downgrade. There
are many other factors that they look at
in determining a AAA rating for any
city. And I think um it also has to be
put in context
of what are we willing to do as a city
to maintain a AAA rating. Um and I'm not
saying we shouldn't, but I am saying
that we shouldn't maintain or shouldn't
strive to maintain a particular rating
without having a if you will a robust
discussion of what that implies.
um because it's uh you know we're to the
point where we're really not issuing any
um not issuing significant new debt like
we did before. Although I guess I have
to admit we approved $120 million last
night in MPC debt. But the point is
this.
Um, I I wouldn't want to see us always
hide behind the, you know, we can't do
this because the AAA rating and whatever
without, as I said, having an
understanding of what are the
implications if we had a double A rating
like many other cities do and and is the
council willing to take that um take
that risk? It just needs to be a
discussion rather than a statement of
fact. Uh, Commissioner Newman,
along those lines, I was, as you were
speaking, I was thinking about this um
because there's an incremental cost to
maintain a AAA bond rating. So, there's
an incremental tax that has to be levied
to maintain a 20% reserve, but then
there's also an incremental cost if on
debt that you would issue in terms of
the rate you would get at a double A
versus a AAA. And it seems like those
two ought to be about equal. I don't
know what this is here versus what we
actually need there and what we actually
save that. because I to the your point
we we say hey it sounds great to have
AAA but that also comes with a tax that
goes with it and so it seems like an
analysis around that would be
appropriate not I'm going to be clear
don't do it we can talk about but it
seems like we ought to think about that
right there and not just as as as
commissioner Smith said is is just to
say we need a we have to have a AAA I
don't necessarily subscribe to that
certainly want to be certainly want to
be credible and and solvent but it it
comes up
what our history is and our payment
history also that are factors in that
but there's an incremental cost to it
and I agree with Commissioner Smith.
City manager wants to weigh in on this
topic as well. Thank you, Mr. Chair.
That triggered a thought. I agree with
the comment and the term I may also use
is an opportunity cost. I don't know in
my mind that a taxation is equal but the
opportunity Well said. Thank you. Um and
then just let me add a few more things.
is this statement is not a statement
from me. It is a direct quote from the
uh opinion letter that we received from
Fitch rating. So it is definitely um
something that they shared with us and
you're absolutely right. There are other
factors they look at not just reserves.
They look at our economy if our economy
is a robust growing economy, our
property tax base, our assess values. So
there's a lot of factors they look at in
order in order to assign a rating. They
also look at um they also compare us to
a portfolio of like cities with AAA
ratings. So when we look at all the AAA
rated cities in the valley which is
Chandler, Tempe, Gilbert,
um Peoria,
uh there um I think every every city
except Peoria has a higher level of uh
um fund balance in the general fund than
the city of Scottsdale does. So I just
wanted to, you know, share that
information. But you're absolutely
right. I think a maybe a larger
discussion need to be had as to what
level of reserves we should maintain. Um
it's just that the um communication we
have from at least one rating agency is
that we should maintain above a 20%.
Commissioner Schwicker.
So, just as we're talking about these
things, uh, just for a frame of
reference for us, ballpark, like what's
the point spread between a AAA and a
double A bond?
Commission.
Uh, Vice Chair Schweer, I do not have
that information. Um, I do want to point
we can look for that information if if
it's available, we could try to find
that. I think that that information may
um you know vary depending on market the
market sometimes. So it might not be a
fixed point spread. Um the other
important thing to keep in mind also is
uh you
know it's not just the point spread in
terms of uh the importance of a rating
agency. Rating is not just to save the
city interests. Um rating agencies are
the only independent
um agency that gives a city um a rating
on our financial performance and
financial uh credibility. Uh we do not
get that sort of opinion from an audit.
An audit is just looking at whether the
financial statements are put together um
you know in terms of the numbers whe
that they're fairly um accurate whereas
a rating agency looks at the financial
policies the financial management of the
city and the financial uh strength of
the city and it's the only independent
um um scoring and evaluation of the
city. So, it's really important to um to
us that we have this independent source
of um assessment for the city and if we
want to not be aa city, I think we need
to make sure we fully understand what
that means.
probably enough said on this, but I
think you can gather a sense of uh that
some of us at least think we need, as I
said, a more robust discussion of what
is the cost of the AAA. We may still
decide to recommend that we make every
effort to maintain that, but
um it's it's hard to make that
recommendation without some
understanding of what are the pros and
cons.
Commissioner Stevens, this will be
quick. Uh, Commissioner Newman's got me
really thinking about uh what when when
you would do something like that. And my
gut reaction is maybe that's something
you just hold in your hip pocket because
when something catastrophic happens,
that's when you maybe dick into your dig
into your reserves and then the way you
get out of it is by taking a higher rate
on debt issued for the future. So, I
kind of like that cushion being there,
but it's an interesting observation.
Thank you.
Commissioner Ransco,
I think we're ready for you to proceed.
Okay, next
slide. So, we did not um only establish
our level of reserves based on uh bond
rating requirements. We actually follow
the GFOA uh riskbased analysis in
determining our reserve requirements and
this has nothing really to do with bond
ratings but rather the government
finance offices association's best
practice recommendation. So the
riskbased scoring looks at all these
categories of risk and basically um
based on that assessment if the total
score is within in that little box
you'll see within certain ranges then
the GFO recommends reserve levels within
those percentages. uh the preliminary
score that we have is 23 and so we would
fall within the 17 to 25%
um category in terms of what's
recommended by GFOA and since we're on
the higher end of the total score range
uh that 25% is also where we where we
have our reserve
levels. Next slide. We have already gone
through this slide. So I'm going to skip
the next slide as well and skip this
slide. So now I will talk about
contingencies. Next slide
where ex uh let me let me if I can have
you back up uh two slides to the the one
the budget reserves that has all the
dollar that one right there that's on
the screen.
Um and I will just observe that the the
line actually it consumes three lines
but the line called asset replacement
slash future capital
reserves this is the
um the one that we've talked about at
some length in prior discussions about
having some kind of I don't know whether
it's a reserve or at least a recognition
of future obligations for asset
maintenance and repair. And I'm I can't
help but notice that we have nothing on
that line. And I maybe that's the
current status. Maybe you're leaving it
blank so we can have a discussion of
that. But uh to my mind that's that's
where some provision would be made for
the future maintenance of the collection
of assets that we have.
The other question I have about this
slide is that I'm aware that somewhere
we have 140 and some odd million dollars
of reserves or contingencies. I don't
know what label you have on it, but it's
the money that you set aside to
hopefully one day pay down the pension
uh liability. Is that does that figure
into this slide or those are not
reserves, Chair Smith. Those are just
assigned
funds. Those are assigned fund balances.
They're not reserves.
Very good. Thank you.
I see no other questions. So, go back to
uh whatever the slide after this one is
on contingencies. I
guess now I do have a question.
Commissioner Newman, can you go back to
that slide? Just a clarification because
I I think asset replacement future
capital reserves that's one line 63
million you said there was nothing there
but there's 63 million
there correct
if I may assist I believe what the chair
was referencing was the general fund.
And if you look I think that 63 million
comes from the uh the columns to the
left of it is the aggregate number of
right
but there is some there because I I
think the statement was that there was
nothing there and we needed to allocate
something but there is money there. I I
just meant there's nothing under the
general fund. Ah okay sorry I'm thanks
for the clarification.
Just ignore us up here. We're carrying
on private
conversation. Go ahead.
All right, let's go to slide 12. Um, so
as we talked about, reserves are for
extraordinary events that are not part
of ongoing operations or not part of
normal operations. Contingencies are uh
set aside or sometimes folks use the
term reserves or contingencies. That's
why it's so confusing. But contingencies
are amounts set aside for unplanned and
unavoidable expenditures that occur in
the ordinary course of doing business.
Uh larger than expected storm damage,
unexpected purchases that cannot be
delayed, such and such. Uh next slide.
Here are some other examples. I think
um
sometimes there are also opportunities
that provide benefits to our citizens
that was unanticipated and not budgeted
for. An example I have is we recently
had a storm damage where we had to go in
and do some storm damage cleanup and
reconstruct certain infrastructure and
we noticed that while we're doing that
we could make some improvements as well
since it's already all torn up. We might
as well make some improvements. It's not
part of the storm damage but it's an
opportunity to provide benefits to our
citizens. So that could be a use of
contingencies as well.
Next slide. So for our 2425 budget,
these are the contingency amounts that's
in our separate funds. As you can
see, the contingencies in each of the
funds vary. They are uh larger in some
funds and um smaller in some funds. The
largest level of contingency we carry is
in our grants fund. And again, I
apologize for how small this is on the
slide, but you can see somewhere in the
middle of the table, it says grants. And
we carry um 10 million in contingencies
for our grant fund. And that's because
there could be significant grants that
we don't anticipate that we get a um you
know, awarded during the year. And in
order to spend those funds, we would
have to move the budget authority from
contingency to a line item. If we if we
say let's say we got a $5 million grant
for something, we are not able to spend
that money unless we have budget
authority and so we will move the budget
authority from the contingency line in
order to spend those grant funds. So
that's why we carry a lot higher
contingency in our grant um fund. For
our tourism fund, we carry a higher
level of contingency because we do have
a contract for our destination marketing
and our contract is based on the actual
uh bed tax that we collect. So, we
collect significantly more bed tax based
on our contract. We would have to pay
the uh vendor for you know based on our
contract. So we would be we would have
to be able to move that funds and budget
authority from contingency in order to
meet that contract
requirement. Um if you have no questions
on contingencies I'll move to the next
slide and actually I do have a question
from Commissioner Stevens. I'm sorry
just trying to understand your budget.
Help me understand one thing if you
would. The oper general fund budget for
contingency and reserves in the fiscal
book is 245 million. You present here 94
million and 20 million which is 114.
Does that mean you used over 100 million
of those reserves and contingencies or
is that line not fully ex uh described?
So if we go back to slide three.
So it's more than just contingencies and
reserve and that 45.
So there are different categories of
fund balance. So the 94 is just the
operating and reserve contingency that
our policy requires which is 25%. 5%
emergency and 20% operating. So when you
look at the budget, you'll see an
emergency reserve that's 5% in the
general fund and you'll see a operating
reserve that's 20%. And that's based on
policy. I'm good. You can you can stop.
I'll go offline if I can't understand it
later. Okay. I'm sorry. I I'll just add
one more because I think uh the other
fund balances are
assigned and restricted funds and mainly
assigned funds. So like the
PSPRS amount the um I think there's a
cabin amount I think there's some other
amounts in the general fund. Those are
assigned fund balances. Okay.
Okay. Um so we go to the
um Slide 16. And that is my last
slide. So slide 16 shows all the funds
that have restricted revenues. So all of
these funds, the revenues are restricted
for specific uses within those funds. So
the fund balance that's in those funds
whether they are reserves or
contingencies or assigned or unassigned
are restricted fund balances because we
cannot move them transfer them or sweep
them into the general fund or move them
into another fund because another fund
is short of money. So I just wanted to
point out that all of these funds are um
restricted funds. the capital project
funds. If we have a bond proceeds, those
are restricted for the um capital
projects for which we issued bonds.
Impact fees, we collect water and
wastewater impact fees, those are
restricted for capital projects in our
water and wastewater um capital plans,
grants, transportation uh tax, and any
other restricted
revenues. That's really all I have in
terms of those.
And that's my last slide and I can
answer any other questions you might
have.
I'll ask my fellow commissioners if any
of them have questions on this subject
before we move on to the next topic.
Speak now or forever hold your peace.
Seeing none, we'll um go into topic or
agenda item number three, which is an
overview of
the proposed 5-year capital improvement
plan for next year. And Sonia, you're up
again.
Um I'm actually going to have our budget
director, Scott Selene, um do the
presentation on this.
Good afternoon, Mr. Chairman, members of
the commission. uh for the benefit of
those listening, Scott Seline, city
budget director. I'm very pleased to be
here today to discuss agenda item number
three, uh which is a high level overview
of our proposed uh
FY2526 capital budget and our 5-year
capital improvement plan or CIP as it's
often referred to. Can we go to the next
slide? So, combined together, the
proposed 2526 capital budget is just
over a billion dollars. What you're
looking at here is the split of that uh
proposed roughly billion dollar budget
in FY2526 between individual programs. I
apologize that some of the text may be
difficult to view against the color. Um
you'll see that water management and
transportation encompass about
60% and service facilities, community
facilities and public safety combined
together take about 35%. Preservation
and drainage make up the remaining 5% of
the 2526 proposed capital budget.
Can we go to the next
slide? This slide shows the different
funding sources for the 2526 proposed
capital budget. Just a couple things to
call out on this slide. I won't go
through all of the uh slices of the pie,
but about 18% comes from the general
fund. We have about a quarter, a little
bit more, 28% coming from rates and
fees. There's about 20% coming from
debt. As part of that, we use uh general
obligation debt, which is paid by
property taxes. And we also use MPC debt
which is secured by excise tax
revenues. Could we go to the next slide?
Before you leave this slide, let me ask
um first of all just make a comment for
whoever may be in the audience or
watching. I mean this is a billion
dollar pie chart we're looking at here.
Um and this is $1 billion of capital
budget
items to be approved just for next year.
Um, and with that frame of reference,
um, I do have some questions about the,
um, the funding sources that you shown
on this most recent slide here. You say
the transportation sales tax, is that
both the 2 and the
0.1, the 0 2 being the transportation
sale tax, the 0.1 being the temporary
tax for alternative life cycle products.
Mr. chairman, members of the commission.
That is our understanding. Yes. Does it
also include the HERF money or where
would the HERF money distribution from
the state? Where would that be in the
spy chart?
Uh Mr. chairman um members of the
commission that would be included in
other
is that also where the preserve dollar
tax receipts would be in that little
wedge called
other the preserve tax being the 0.15
Mr. Chairman, members of the commission,
Sonia is nodding. So the answer is
yes. I think the um you know for anybody
for this to be an instructive slide,
maybe it needs to say more rather than
less.
Um because I'm I'm um if I don't know
the answer, I'm pretty sure nobody on TV
land knows the answer.
Can you tell me also on the wedge that's
called the general fund, $180 million,
18% of the total billion dollar
program? How is this $180 million
determined? What What is the uh tax
bucket that creates this contribution
from the general fund?
Can you you repeat that question? I'm
sorry. Did you say repeated? Uh looking
at the pie chart piece that's the
general fund $180
million. My question was simply what in
the general fund is the algorithm or the
mathematics or the percentage or what is
the determination that the general fund
will will contribute 180 million next
year? Okay. So um this is not what the
180 million does not represent the
2526 contribution from the general fund
because a significant portion of our
projects are carried forward from
previous years that aren't completed yet
or haven't started yet. So the general
fund based on
policy provides a portion of
construction sales tax, interest
earnings, and any excess funds that we
transfer every year to cover capital
projects that don't have a dedicated
funding source. So over the last three
years we have contributed you know I
think over the last three years between
the land sale proceeds and the excess
revenues we collected from sales tax and
interest and construction sales tax we
did send over uh overund and something
million in the last three years from the
general fund for a variety of projects
and then for this fiscal year
2526 we are I don't have that number in
front of me But it's I'll get that
number for you or you'll see that number
when we propose when we show you the
proposed operating budget. It will be uh
25% of the construction sales tax uh the
interest earnings as we have in our
policy and about 33 million of excess
funds. Those are the amounts that we're
transferring in fiscal year 2526.
This represents the amounts that's
carried forward that we will spend in
2526 because over the last three years
if we as we have transferred these funds
to the capital projects some of these
capital projects are either not started
yet or are in progress and haven't spent
all the money yet. So that's what this
180 represents the spending of uh
capital expenditures that we anticipate
over the last uh few years to carry
forward and this
year and I was aware of the mathematical
requirement that in the general fund uh
whatever 25% of construction sales tax
has to go to capital and that interest
has to go to capital. These of course
are because of financial policies
adopted by the council. Um I I just
wasn't aware and maybe still am confused
about what the discretionary monies
sent. I know we have to send them those
two buckets. Um but I don't know what
the discretion and my reason the root
cause of my question or the root purpose
of my question is that when the general
fund sends money to the capital
program to complete new projects, old
projects, whatever overruns, underruns,
uh when it moves money over there for
that purpose, it is apparently moving
money that would otherwise be available
to be spent within the general fund or
within the transportation fund. And then
it begs the question of what are we
giving
up in the general fund portfolio of
services? What are we s what are we
sacrificing in order to move these
discretionary general fund dollars to
capital?
Does that at all make sense? It it does.
Thank you uh Chair Smith for that
question. It's a huge balancing act that
goes on between the city managers
operations and uh with our executive
team and our budget team. We look at
both operating needs and capital needs
that require general fund. There is a
huge long list of capital projects that
require general fund money from public
safety to municipal facilities to uh
technology improvements to uh just
facility upgrades and improvements
including this building that requires
some upgrade and improvements. So we
look at that list and we literally have
an above the line and below the line um
uh you
know method of uh deciding and balancing
what is needed in the operations versus
what we can afford to um uh spend on
capital. what are the critical needs on
the capital side that we may need to
fund um and forego certain operating
expenses because these capital needs are
just too critical. So that balancing act
is as you described what we actually go
through through the budget process with
the city manager's office and the
executive leadership team where we
decide is this going to be above the
line or below the line. It is that
critical and it has to be funded. We
will have to take general fund money to
fund that fund it because there's no
other source of money and maybe we have
to give up um you know something in the
general fund maybe some expenditure
program expenditure in the general fund
in order to fund the capital project and
likewise if the operating funds have
these requests that line shifts up we
can't fund as much so it is definitely a
balancing act is definitely a
prioritization
And it's definitely um you know a
challenge as we typically have more
needs than there are resources for. I
don't know if um city manager Greg
Kaitton would like to add to that. I'd
be happy to. Thank thank you chairman
and members of the commission. I think
Sonia said it quite well. There's uh
constant pressure on the operating side
with increases in costs on the the
contractual
um other types of regular operation
expenditures including wages. There's
been a huge amount of pressure for wage
increase and so uh and labor costs in
general and other costs. So you have
this operating side uh and quite frankly
balancing that with revenues and
revenues uh you have we've had some very
good years but when you start to put it
on the trend of 5 to 10 years and
balancing with some of those
inflationary measures such as labor
costs and you start to get a little
stressed o over that those two trend
lines. And then as this commission has
had extensive discussions about the
expansive capital needs, about the
replacement needs, the maintenance
needs, that's the other side that you
have with the capital projects. And so
those two are conflicting. So uh my
budget philosophy I would say is to
constantly put downward pressure on the
operating side because that uh allows
flexibility or additional funding on the
capital side because those are your two
levers that you're constantly looking
at. However, it's not as easy just to
say uh I didn't use the word the cut but
downward pressure efficiencies mod uh
innovation things of that nature because
you have constant demands for more
service for more on that operating side
but yet you still have constant
deteriorating assets capital things on
on the other side of the balance sheet.
So that's the prioritization that Sonia
referenced. Additionally, as I get into
a few slides here in a minute that I
have talking about what creates a
capital project and then what are we
also putting in the operating side and
operating side where we may be
projecting out five and 10 years on
certain types of replacements. uh some
telecommunications uh radio systems for
first responders, things of that nature,
some PPE for first responders where uh
if you don't plan for those on a regular
basis, then they become a significant
expense. Uh oftent times put in a
capital and they're not really a capital
item. And so we've talked briefly about
that where I uh loosely refer to that as
kind of operating capital. And the good
news is you're really planning for it be
and and over a 5 to 10 year span versus
just some multi-million dollar we have
to replace PPE or or radios for first
responder if you didn't plan for that.
So, um, I'll pause there. I just it it
is a constant struggle and you'll you'll
see as we get in to the capital. Uh,
there's more there's always more needs
than resources and we had uh we present
the balanced budget and we had to draw
the line somewhere. Uh, again, keeping
in in mind the significant pressures
that we have on the operating side and
how the two uh interplay. Thank you, Mr.
Chair.
I won't have you repeat that for
everybody, but uh I think in a synopsis
you're saying and I agree it's it's a
difficult job of
prioritization. I just want to be sure
that we're that we and the council and
the public are aware that there is this
um coming not comingling but this
competing needs uh which are both
capital and operating and given a finite
source of money in the general fund. If
we send something to the capital
program, it's going to deplete what we
might otherwise send to the operating
program and vice versa. Um, it's not
always clear that the two are as
integrated as they really are in the
prioritization.
Mr. Chair, I concur. I might also point
out that it's interesting uh at the
dedicated revenue sources and how uh
every community is different in that
regard. Uh thankfully here I'll just use
the transportation sales tax. That's uh
quite an opportunity where we say okay
our needs are met through that dedicated
revenue
source. That sounds good in theory. The
other thing I might point out is how is
that number arrived at? How is that
percentage and does it actually equal
what you have on the need side? There's
an assumption that it balances. I think
that's an assumption that may or may not
be the case when you start to take a
look at these. Um oftent times uh where
I come from some of these percentages
are what's palatable to the community.
It's not necessarily based upon your
needs list. And so that's just something
to keep in mind that even when we have
these wonderful opportunities of
dedicated revenue sources might not
exactly meet the the needs on the
expenditure side.
I've hoged the microphone here for a few
minutes. Does anybody have any other
questions on this slide before we let
them go on to slide number
four? Seeing
none. Okay. Can we advance to the next
slide,
please? So, uh, the slide you're looking
at right now splits up the proposed
five-year CIP into existing projects on
one row and new projects onto another
row. You'll see in the first column we
show that we have 341 total projects
only 46 of which are new projects. The
next five columns show the proposed
expenditures for the five years of the
CIP split into existing projects and new
projects with a total on the end. Let me
interrupt you and have uh let
Commissioner Stevens ask a question
here.
I could wait till the end of the slide.
I do have a question on the current
year. Do you want me to wait till the
end of the slide? Uh, no. Go ahead.
Okay. Okay. Uh, you uh I I uh I like the
way it was laid out. Let me ask you
something. Existing projects of 295 with
a planned expenditure of 966 million. If
I look at this same chart from the prior
budget book, there was a planned
expenditure of 530 million in fiscal
year
2526. So I thought existing projects
were ones that were there at the start
of the year. And but for that to go up
400 million, it's got to be a
combination of cost increases. But have
you also added projects added during the
year to this? So I'm wondering if a
better presentation might not have been
projects existing at
712025, which would be what was in last
year's budget book. So I could see how
much you're planning on spending on that
projects added during the year because
I'm assuming you're added projects in
the year. and then new projects being
what I guess you're proposing through
the budget process. And I'm trying to
understand how you add projects because
part of it's what we're doing this year
and part of it's going to be what do I
what do we need to be doing in the
future. So just kind of go over how that
works maybe if you understand what I'm
saying. I I do I might have to ask Sonia
if she could respond to that to some
extent.
Sorry we were sidebarring here. So, uh,
what we were sidebarring are on, excuse
me, is I have a few slides, uh, in a
minute that talk about how we add a
project that might, uh, be helpful, uh,
to the discussion. Okay. But eventually,
I'd like someone to tell me what the
$400 million difference is, whether
that's projects added cost increase or
what what what are each. And maybe
that's something you just need to get
back to me later.
I'm sorry. Can you uh repeat that? What?
Okay. If you look at last year's
uh capital appropriation budget when it
has the dollar amount you it has a
dollar amount you expected to spend in
2425 than it had on those same projects
that you planned last year for the
budget year what you planned to spend in
2526. That number was 530
million. Okay. So, I just took what you
said you were going to spend on those
projects at the start of the year and
compared it to what you're saying on
what I thought were existing projects
and it's now 966. So, there's a $400
million difference. So, that's either
cost growth on contracts you knew you
were doing at the beginning of the year
or it's also contracts that you added
somehow during the year that weren't
foreseen. And I'm wondering if a better
presentation for us might not be
projects in the start of last year,
projects added, and then I thought new
projects was going to be new projects
since last year's budget book, but it
sounds like new projects might be just
what you're adding through the budget
process. So, help us understand what
those things are. Yeah. Okay. Thank you.
Um, so projects, uh, the existing
projects that are in your 2425, there's
a lot of moving pieces. Some of them
have been completed, so they're not
showing up here as existing projects
anymore because they're done. Some of
them existing projects may have been
just the design costs in 2425 and now
it's the construction costs. So the
design cost may have been a fraction of
the total project cost, but it's it's an
existing project. is not a new project.
We also carry forward what's unspent
from the
2425. So that's there's you know several
reasons why you can't just simply do the
math. We have over
340 projects and there's projects uh
rolling off because they are done and
complete. There are projects in various
stages. Some of them are in construction
where phase one of the construction may
be only uh let's just say um you know uh
two million but then fiscal year 2526 is
the second phase of construction and it
may be 10 million that's in the budget
but they're an existing project. So
there's a lot of different um um
possibilities from for why we have last
year uh 500 million. It's not just 500
million minus um you know projects
completed plus cost increases. It it
just depends each project is different.
It just depends on where that project is
and what that next um schedule funding
is. All the projects are approved
through the um capital improvement
budgeting process. I don't know if that
helps, but if you want us to show you
and split out a reconciliation of
existing projects that's been completed,
existing projects that have a second
phase in fiscal year
2526 that was in last year's second
year, we can uh try to do that for you
so you can actually see how the adopted
budget from 2425 rolls to the 900 and
something amount for 2526 is definitely
carry forward amounts that we have
budgeted in there. Okay. Well, I also
noticed you had several projects when I
compared the book you just handed out
with last year's book that were just
rolled into this year like cactus pools
and some other things. None of it
happened last year. You just rolled it
all into this year. So, that's going to
be some of the increases because of the
way you time projects. And I guess for
for you all as commissioners, I'm
struggling. What I'm really struggling
with is how do we add value to this
whole process. And so, uh, I don't want
them doing work for me just
to guess what I'm trying to get at. And
when I look at how do we add value, we
either add value by looking at projects
to see if we can find ways to lower cost
or we've heard that there's been a lot
of surprises in the uh, project process.
Should we be looking at the project
management process and look for best
practices in order to minimize surprises
that come out of it? So, I'm just really
struggling with how we add value.
Uh so back back to your question on this
uh I I guess if it wouldn't be too much
work it would be more helpful to see
projects that were at seven in the 7125
book that portion going out projects
added during the year and then what are
what are I don't know what new projects
are if those are projects you're
proposing through this process that
council hasn't seen yet that might be a
little more helpful to tell us where to
look or otherwise proposal
alternatively
uh I guess help us understand what we
should be looking at to add value here.
I I I I want to venture to say that a
lot of projects like our transportation
ALCP projects and our water sewer
projects, those are primarily the bulk
of our capital improvement projects.
Bond 2019 really those three programs, a
lot of them may have moved from design
and engineering to the construction
phase and there may be that that
increase but we can do that
reconciliation for you. It might just
take us a little bit of time because it
may have be it's probably a manual
process. We probably don't have a report
that we can um generate from our system
that easily shows you that. So we may
have to manually add up the um the
change for each project in order to show
you that to satisfy your um your
interest in understanding the the
difference.
Okay, let let me drop that for now and
we'll decide maybe we want to talk about
that offline or uh you you all did a
great job for Dan and I uh starting to
get us up to speed a little bit. Maybe
we need to do something like that again
to help the group.
If I can jump in. I think um what
Commissioner Stevens is driving at
certainly
what's if we look at the if we look at
this slide right now it would tell us if
we were trying to predict in
2627 what the spend was going to be it
would suggest it was going to be $47
million but when we see this piece of
paper next year that 407 will have
magically changed to probably something
like eight or 900 million dollars
And for those of us that try to
reconcile things, we don't know how to
get from that old number to the new
number. And to just accept that the new
spend is $966 million this
year requires some reconciliation to
where it was last year, what came in,
what went out, and not down to the
penny, but but certainly an order of
magnitude appreciation for it. A lot of
it is carry forward because the city is
really not cutting a million a billion
dollars in checks next year. So, a lot
of it is carry
forward, but we can
certainly reconcile it and show you
maybe the components to help you go from
uh 24 25 to 256 to see what is carry
forward. Actually, hang on a sec. And
the importance for the public generally
is to if anyone were paying attention
and trying to think, well, all right,
take what we're doing this year. Next
year we're going to only spend 400
million. Well, we'll be back here in 12
months. And the answer will be it's not
400 million, it's 800 million for
reasons yet to be explained. So, some
reconciliation, but uh Commissioner
Newman.
Okay.
on this. I'm just wondering if you look
at this from a longitudinal standpoint
of cash flow because you're talking
about the carry forward and it's really
projects. Some go faster, some have
delays and so there's the planned
amount. So you got your capital plan
which I would say the new project line
is your capital plan right now for new
projects but because the existing
projects
have cash flow delays and things like
that mixed in with with existing
projects. So, I don't know if you look
at this longitudinally because we really
don't have a $500 million budget. We
have a billion dollar budget. It's just
there's a there's a three or4 hundred
million dollars a year that rolls
because we're we're kind of planning
ahead of what the actual cash flow is
going to be. It seems like we ought
there there's a there's it's an
iterative process. It's not easy, but
you got to go through that and do that.
But it seems like we ought to have more
of a longitudinal picture of cash flow
and say here's how much is new projects
that we're going to spend year 1 year 2
3 4 and then here's the projects that
are ongoing 1 2 3 4 and then here's the
carry forward from things that were kind
of unexpected in the current year that's
going to end up next year and and that
adds up to your total budget because all
we get is a vertical snapshot here and
in reality it's it's a five once you
start a project you're committing for
four years on a water plant or a road or
whatever. ever and so there's a certain
profile of cash flow that goes with that
and it seems to me and it might be
better to look at it that way in terms
of planning. Yes, thank you. So yes,
internally that's exactly what we do.
Internally we budget and plan and and
make sure we have sufficient funding
using a cash flow model for each of our
funds and each of our capital
improvement programs. This is just a
highlevel slide basically. It wasn't
meant to answer all these questions so I
apologize. This is just a highlevel
snapshot of what is in our five-year
capital improvement plan and it wasn't a
slide to meant to try to show you all
these all this information that you're
interested in and we can certainly work
with you to provide that. But we do look
at our capital improvement plan and what
we can fund, what we can afford from a
cash flow standpoint. We do project the
cash flow, the cash revenues resources
that we will have, the expenditures that
we need from a cash flow standpoint.
Now, keep in mind that every single
project in the existing project line has
been approved by council, whether it's
through the budget process or whether
it's during the year. There are more
projects that are approved through the
budget process than there are new
projects approved during the year. A lot
of it is carry forward because as as
construction projects go, it's hard to
know what the timing is. It's hard to
know, you know,
um how to budget exactly. We're going to
spend exactly this this year and exactly
that the other year, another year or
next year. So, we tend to be more
conservative and assume that we will
spend more in the this first year. And a
lot of it gets carried forward. A lot of
our projects also move from design and
engineering to construction. So the
second year, third year budget may be
larger. We've also experienced a lot of
inflationary increases where we've had
to uh come back and ask council for an
increase in the budget for the project.
So all of these are the various multiple
factors that layer into these numbers.
But you're absolutely right. you know,
we should be able to reconcile for you
the
2024 to 20 2425 to 2526 to show you how
those numbers work. It will be a manual
process for us. There is no system
report that can just spit out to show
that and um you're absolutely right. We
do look at all of this from a cash flow
standpoint. This was just a snapshot of
what the um budget proposed budget. If
you think about your history here, would
you say that there's generally a three
to $500 million carryover every year?
There's generally more than that. So,
our carryover this year, um, Scott just
shared with me is 556 million is our
carry forward this year.
Okay. Commissioner Ransco,
I think a little clarity would come and
this is a question if we change the word
plan to whip.
This this is more work in progress than
it is a budget or a forecast or a plan.
This is this is work in prog This is not
the budget for the next five years. This
is work in progress that is obviously
bleeding out as it gets completed
because we're obviously going to spend
more than
$195 million in year 2930 on projects.
But so I I think this is a whip forecast
and and as opposed to a plan.
Uh you all can answer that but I think
the for the outy years it is indeed a
number that will change in the future
with the addition of new projects every
subsequent year. Um, and really all
we're focusing on is the all the
highlighted area, the 25 26 and and
trying to understand with some
reconciliation how it got from where it
is to where it is or where it was to
where it is. So if you think you can do
that, um, all power to you.
Well, we can. Mr. Carly, you had a
question. Maybe you've withdrawn it. No,
I will save it for future agenda items
now. Thank you. Then Commissioner
Stevens, you have another comment you'd
like to make. Yeah, let me expand on
that. I I thought that the outy years
were just the runout of existing
projects. So I not a projection of what
the spend will be in that year. What's
interesting is if you look at the same
page from last year, the the four 2425
column was 1,91 close to that 1 billion
91 close to that column. The five-year
total was within $4 million of the
total. So, what you don't know is I can
see 500 million moved into this next
year, but I don't know whether I had a
whole bunch of projects completed and
they fell out, whether I hold a whole
bunch of projects deferred, which
doesn't necessarily concern me, or
whether I had some huge overruns that
may or may not have still come in here.
So, one of the things that maybe is more
relevant for us to be looking at here, I
still might want to see that roll
forward is what's the change in the
projected costs that are happening and
that does relate to an agenda item we've
proposed for the future. So, maybe
that'll have our answers because we
talked about show us what contracts have
changed by more than uh the 10% and $1
million. And again, I'm just trying to
get my heads around what should we be
looking at so we're not so we're using
our time
effectively. Uh so I guess I'm back to
that still could be a value if we could
ballpark what are the projects uh out of
that increase of four or 500 million
it's probably a couple hundred million
that are deferrals that doesn't concern
me it could be a couple hundred million
of cost increases oh that's not quite as
good maybe or do I not necessarily look
at that and I simply separately look at
what are the cost increases so maybe
that would be more important for us us
to look at to decide what are what's
symptomatic ao cost increases and what
needs to happen for for that to get
better if possible.
Commissioner Newman closing comments.
Yeah.
Okay. As I think about when I asked the
question about how much float will there
be has there been on an ongoing basis,
the number was much bigger than I
thought. Um, I can understand a 10 or
20% a year role, you know, and and and I
I understand the inflexibility because
of where revenues come from, things like
that. So, that may be a factor, but I I
are we are we taking a look at how much
how we're planning our cash flow versus
how we're managing it because it that
that says to me that we're being really
conservative saying, let's put the money
up front so we make sure we have the
money and then we know we underperform
on it and then we get this bump in the
rug that moves back every year. it makes
it very hard to really plan and make
decisions uh on on budget strategy and
things like that if if we're doing that.
So, it's to me there may be a really an
a really good answer that I don't know
about, but it seems like a question
needs to be asked.
Um, you know, I I think I'm going to try
to um speak to one thing quickly, but I
I think what I would recommend is maybe
we um come back to this conversation
with better information for you and
additional information
um regarding, you know, the kind of the
confusion around some of the some of
this uh this topic. But I, you know,
that carry forward um we have to cut it
off somewhere. So I'll cut off is
February because we have to put a budget
together. And so when we cut it off in
at in February, there's definitely going
to be some of that carry forward that
will be spent in this fiscal year that
we don't need. So we do track that
because when we look at what the budget
is approved for, we look at it from a
project by project basis. So for
example, if this project is approved for
10 million and we have a cut off of
February just to do the budget, we might
carry forward a million. But if you
spent the whole million, your project is
still only 10 million. You didn't get 11
million. So I don't know if that makes
sense or not, but what I I think what I
would suggest at this time is because we
do have quite a lot of presentations
that we still need to go over between
today and Friday. Um and uh so I I would
suggest that maybe we we you know work
on some of these questions and some of
this confusion and bring that back to
you at some point or maybe um use the
strategy of meeting with a couple of you
like we did and and go through that.
That that's fair. It's just if you have
a continual carry forward of that
magnitude, it doesn't matter when you
cut it off. That means we always have
that amount. Yeah. That's doesn't matter
where you draw the line. July, February,
wherever. It says to me that we're we're
being conservative on the planning part
of that and committing the funds up
front, but then they're not really going
to be using. We can probably take a
little more risk and and and be able to
manage our projects. So, yep, I I
understand what you mean and I agree.
So, we can look at that. Yes.
Page
five. Okay. Can we advance the slide?
So over the next three meetings, we're
going to have the various departments
discuss some of their major projects
that are in the five-year CIP and give
you a bit of information about those
projects. Uh we'll first talk about
capital projects with dedicated funding
sources. That will cover transportation,
the ALCP program, water and wastewater,
drainage, flood control, the preserve,
and park and recreation projects. Only
the first two are on the agenda for
today. The rest are scheduled to be
covered in Friday's meeting.
Can we go to the
next? The next group of projects that
we'll take a look at are those capital
projects funded by bonds, the general
fund, and other funding sources. In that
grouping, we'll hear from parks and
recreation, public safety, enterprise
operations, community facilities, and uh
IT projects.
Next, finally, we'll cover the
categories of cost estimates included in
the capital budget. We'll get into some
detail about the reasons for changes in
cost estimates and then we'll have a
discussion about projects that have seen
cost increases of greater than $1
million and 10% which m Mr. Stevens
alluded to. Um with that um I think Mr.
Kaitton will be covering the next few
slides.
Thank you. And if it uh pleases the
chair and the commission, I'd like to
pull an audible and skip my three uh
slides that were u going to just provide
an overview. Just in the spirit of time,
we have subject matter experts that were
designated to come today. And with our
limited time, they may not be available
given schedules at future meetings. Uh
you get to see me uh every meeting. And
so we could circle back uh to my portion
uh if that pleases the chair and the
commission.
Everybody's fine with that. I think no
see no comment cards or comment
requests.
Okay, with that, could you advance a
few? There's one more slide I need to
cover, then I'll be done.
That one. Thank you. So as we move
forward with the department
presentations, each each project that
they discuss will have this table to
provide some basic uniform details about
each project. First we have the project
start date and the expected completion
date. Uh pretty self-explanatory. The
initial total budget line is the total
project budget when the project was
initially
approved. Next is the currently current
approved total budget. It shows the
current total project budget inclusive
of any changes that were approved by the
council.
Next is the proposed total budget
change. That is the amount of any
proposed adjustment to the project
budget in the CIP that we're looking
at. The next line is the total proposed
project budget, which is the total
proposed project budget in the CIP. It's
a it's the sum of the previous two
lines. Incurred to date is how much has
been spent on the project to date. Um,
as Sonia mentioned, the cutoff is uh the
end of February.
And then the proposed budget for 2526 is
how much of the remaining project budget
is scheduled for 2526. This does not
include any project expenditures that
are scheduled for years 2 through five
of the CIP. And then finally, importance
of project is a brief summary of what
the project is providing to the
citizens. I'm sure the departments will
go into more depth as they present and
tell the story of their
projects. With that, I believe that's
that's I do have a comment or question
from Commissioner Sites.
Thank you. I'm very interested in the
importance of project discussion. Um,
you talked about prioritizing as you go
through Oh, can you hear me
now? You talked about the prioritization
as you go through the pro process with
the city manager and the staff, etc.
Um, I don't see importance or
prioritization in the book. you're going
to present them according to this slide.
Is that a priority setting uh relative
to other projects or is it just a
statement of how important it is to the
community or to the city? Help me. I I'm
just very interested in what motivates a
project to continue going. Not not just
about the dollars and cents and
available funds, but how important it is
to continue it or to start it, stop it.
Thank you. Um, thank you, Commissioner
Sites. Um, so as far as prioritization,
if you go back to the uh slide that
shows the uh funding sources. So for the
projects that have dedicated funding,
it's so for example, the
transportation.2% tax or the um um you
know preserve tax or whatever. uh we
prioritize that through within that
department along with whether it's the
transportation uh commission or the
preserve commission. So each of the
departments because it's within the
funding source, it's not competing with
other projects. So uh that project may
be prioritized based on the
transportation plan or based on the
regional arterial life cycle um you know
strategies or plans or based on some
other uh prioritization and also they
are and the departments can speak to
that more and so but what we asked them
to do is not what we didn't ask them to
select their top priority projects to
present what we asked them for is all
the projects over 25 million, basically
the large projects, and select uh you
know, one or two projects that they
would like to highlight because they
felt that it was important for the
community and for the commission to see
this project. But we didn't we didn't
ask them to um to showcase or highlight
the most important project necessarily.
However, that set probably the 25
million and asking them to highlight may
probably be the most important project,
but the uh prioritization process is
kind of within the funds. The
prioritization process I talked about
earlier where we work closely with the
city manager and figure out what general
fund monies are, whether it's operating
or whether it's capital, you know, that
that balance. those are only uh projects
that do not have dedicated funding
sources and uh require general fund
monies. I don't know if that helps
answer that question. Uh but we can
certainly um explain more as you hear
from each of the departments how they
prioritize their projects. Thank you.
I'm sure there'll be more on that as we
go through this.
Seeing no further questions from the DS,
I think we can move on to item four on
our agenda, which is the transportation
capital improvement projects and related
maintenance
needs. Nathan
Good afternoon, Chair uh Smith and
Budget Review Commission. I am Nathan
Doi, transportation planning manager. I
will
be serenating you guys for the next two
items on both the two the 2% sales tax
as well as our HERF funding for our
general transportation projects. Then
item five being our ALCP and our 0.1%
match on our major roadway
reconstruction projects. So starting
with item four, I wanted to go over a
brief overview of what our department
is, how we kind of are organized, and
what kind of roles each one of our
individual um sections of our department
run. Then pulling that into
a cycle of life of how we establish our
projects. that going into as Sonia
described are two uh examples of
projects for this funding source. So,
next slide, please. So, this is showing
the same uh description that that Scott
had to show our existing projects and
our new projects for this funding
source. We only have we've established
that we're going to ask for four new
projects coming forward with the 2%
sales tax in the proposed. that is a
signalized uh improvement to Goldwater
and Camelback. We have already acquired
federal funding for a safety improvement
at that intersection. Uh so it is a very
small amount of our local match to use
those federal funds. That's a I guess
that's a good segue
into and um Greg will definitely talk
more about this, but we have lots of
reasons why we put a project onto our
prioritization list that we're
requesting city council to approve. Two
of the main reasons we would ask for
something or why it goes up on the list
of prioritization is us utilizing
federal and regional funds and and using
those additional sources. So, so
matching those funds and and being able
to allocate that as appropriate. And
then also any kind of uh I wouldn't say
emergency maintenance needs, but but
maintenance in the transportation
network that seems to be coming up um
and really needs a new um a complete
rehabilitation of that asset to to
extend its life. Those are two of the
major reasons why something would shoot
up of our list of why we're asking for
prioritization.
So, uh, safety would be another one of
those big concerns. So, Goldwater and
Camelback was a safety as well as a, um,
using the federal funds. Then we have a
digital messaging sign upgrade uh,
project that we're proposing. We have,
this is the use of existing assets. If
you see around the city, we have digital
messaging signs that have um, gone into
disrepair and are no longer uh,
activated. We would look to reactivate
those. Um, McCormack Ranch shared use
path is on the the list as well to um,
this is a project that we are looking to
do a preliminary investigation, a
conceptual design to see how much it
would cost. But we've seen movement
along the Indie Ben wash at McCormack
Ranch where the the pedestrians and the
bikes are crossing midblock rather than
at the intersection where they are
designated to. So, our traffic
engineering has evaluated that and has
determined that we need a pedestrian
crossing along McCormack Parkway to
facilitate better safety of movement.
Um, that will move them towards the
southern portion of the road and we
would like to expand that sidewalk to
possibly uh accommodate that new level
of traffic. And then the final one is
the 64th Street canal wall. It's we did
an engineering assessment of it. There's
some level of of
of rehab that needs to happen on that
wall. So more of an emergency need to go
and fix that and make sure that it
doesn't deteriorate any further and that
we keep that that that canal wall up and
and lasting. So those are our four
existing projects for that sorry our
four new projects for that 1.8 million
in fiscal year 2526 and the 4.3 in the
upcoming years. If I can stop you there
but ask a question just to reconcile in
my mind a couple of numbers on an
earlier slide in someone else's
presentation. the the pie chart piece uh
labeled transportation sales
tax which I believe included these two
components the point 2 transportation
sales tax as well as the hurf money the
piece of that pie chart was
$128.5 million
and would that be comparable to the
column you have
uh the third column in proposed budget
for next year $16 million
And if so, what would the difference be?
So I was told that HERF is not in that
pie chart. So So that would be one of
the differences. And then also um that
pie chart had the 2% the 0 2 and the
0.1. So I guess that would be where any
discrepancies would be and so we could
reconcile that and make those pie charts
look like these numbers. But the there
would be three sources that are kind of
working in tandem. Thank you for that
explanation. Also, I guess um we do have
federal and regional funding um that
goes into all of our accounts. So, that
pie chart would just show our local uh
contributions. Anything that I'll be
showing has both regional, federal,
storm water, flood control. So, we get
from lots of different pots when it
comes to projects, especially the
ALCP. So, going into our our overview,
so we have five general departments. Um
I've separated out into transportation
and then street operations. So right now
I'm showing we have traffic engineering,
transportation planning and then
transit. Um all of us do a various
degrees of of of effort on the capital
side. Transportation planning and
traffic engineering.
Um we collaborate into uh deciding what
the scope of a project should be
especially the engineers looking at at
what safety improvements need to happen
on there uh as well as their development
reviews. Um but these are the two uh
departments that are working together to
create that list of prioritization for
capital projects in tandem. We use and
work with our street operations and our
pavement preservation group to talk
about the maintenance of the projects
moving forward. So once we complete a
capital project um we talk to street ops
before and after to make sure that we
are um they
are introducing adding that back into
their their
um their uh models for when maintenance
needs to happen and occur. So they have
their five-year plans for for when
maintenance happens. um our street
operations, they they pave they
um maintain 131 miles of our unpaved
roads. I just wanted to highlight that
they go out there and we have 131
unpaved roads up in the north area.
They're constantly going out there
putting down um some treatments on there
so that it preserves and maintains those
unpaved roads as well as our pavement
reservation. I'll be going into that a
lot more in depth. One of the
highlighted projects is the pavement
preservation overlay project. Um when we
do a pres pavement preservation project
uh ADA it we're required to improve the
ADA ramps if they're out of compliance
with any pavement project we do. That's
a federal requirement. So they will go
out there and when they do a micro seal
or an overlay pavement project, they
will uh address the ADA ramps as they go
out there. Uh last year they did about
100 ADA ramps um as well as a a million
square miles of a micro seal in the
year. Uh the cycle of life. I'm not
going to go I can um Yeah, I have a
question from Commissioner Carla. Please
go back to the previous slide.
Yes, thank you. I I just have an
overarching question which is how do you
determine if you're building more than
you can care for?
You know, Yeah. because because
maintenance has been a big thing amongst
this commission and you know I know that
you're chasing the cars and and you you
know feel you have to build the roads
etc and everything but at what point do
you determine if you're building more
than you can adequately care for and
keep safe? So a lot of times when we're
talking about these major roadway
projects we're not adding substantially
more pavement than we had before. Um so
every time we do that we will send it
over to street ops they will add it to
the amount of payment that they are
preserving and then um as I go into I'll
show you that they have a modeling
program that shows
uh how and where we should go and
preserve. So they they run models over
the pavement to find out what the
pavement condition index is. So on all
of our roads they find out what the the
condition is. then that they will run
through and figure out what is the
treatment necessary for that roadway to
increase its its um abilities. Now I'm
getting to the the point of the question
is we will use a a a goal of what we
want our PCI to be and then work
backwards to figure out how much funding
we need to achieve that PCI. So I have a
graph to show how that works. But if we
want a certain level of a PCI in the
city, we can establish that kind of
goal, figure out how much funding we
would need to maintain that level and
then um they will work in their model to
figure out which roads would need to be
treated throughout their 5-year plan in
order for us to accomplish that that
level. Um when we add new roads, there's
a federal project right now to add 2.8
miles of new paving. we will tell them
that that's being added and they will
add that to their model and make sure
that they are maintaining that to the
best of their ability.
Thanks. So it is this group on the right
hand column, the pavement
preservation. This is the group that
determines what the
um what work we need to repair and
maintain the roads. That is that group.
Yeah. Um they have the manager and and
the staff to to run the model. they have
consultants to that come in and run the
model for them for their five-year
plan. Um, so I'll skip over this very
quickly now. Um, but just to to
establish what our cycle of life of a
project is. So we go through steps of
scoping out a project, understanding
what needs to happen. This is an example
of Pinnacle Peak to Happy Valley, uh,
Puma Road, Pinnacle Peak to Happy
Valley, one of the ALCP projects that
will be uh, talked about in the item
five. But so as we go through the
planning, we look at what the traffic
volumes are, what the needs are to
create a roadway to both the current
standards as well as the ultimate
configuration just establishing what is
the need for the project. Then we keep
working with our our capital project
management team as well as uh
transportation to work through the the
design um to make sure that what we
needed on that project is still
established and see what other obstacles
come out during the project. Inevitably,
whenever we're doing a major roadway
reconstruction project, we come into
things that are in the existing
condition that um challenge us. And so
we work through all of those and get the
roadways done. And that's through design
and construction. And then like I said,
we pass that over to the maintenance
crews to make sure that they have that
in their model and make sure that
they're maintaining
it. So going into the two projects that
um are our examples. So I I've pulled
drinkwater Scottsdale intersection
improvement. This was approved um last
fiscal year. We've just started the
preliminary designs and alternative
analysis of this. What the project is
looking to accomplish is if you can look
on the aerial
um as you come off of drinkwater and
turn left onto Scottsdale Road, there is
no signal there. We've seen that through
the traffic counts that as the couplets
were designed, they were intended to
carry more traffic going north than
coming south. But what we've seen is
there is a even distribution of traffic
going north and south off of drink
water. So, the need is to establish a a
better turning movement coming off of
drinkwater onto Scottsdale since there's
no um signal there, but high volumes on
Scottsdale. It it bogs people up a
little bit when they're trying to make
that left-hand turn. So looking at
alternatives right now to figure out
what's the optimal solution to making
that turning movement better and then
also going out to the public really soon
to show those alternatives and then
moving forward with a preliminary design
and a a cost estimate based on on the
needs of the project based on that 15%
design to understand what we need to
accomplish after we do the alternatives.
So right now I have the total budget
it's at 6.2 too. That's around what
we've seen our signals coming in as um
dependent on right-of-way needs, utility
relocations, but that's a that's a
healthy budget that would allow us to to
uh change and reconfigure this
intersection. And then let me stop let
me stop you there and uh um turn it over
to Commissioner Sites who whose business
is probably a stones throw away from
this intersection. So, she may be keenly
interested. Well, yes, it is. But my
questions are more about what I was
asking before, the importance of the
project relative to important other
projects. Um, I think you talked a
little bit about it, but are you looking
at, you know, are there accidents there
because there's no left turn signal?
It's just a lot more traffic than you
originally designed for that corner. I'm
I'm trying to gauge how it's prioritized
among others more than pick on that
project. Yeah. Yeah. We definitely have
a safety concern here, but it's it's
mostly backing up and and capacity or
congestion. So, those are the two
balancing things that we look at every
time we're doing a roadway project,
right? Is safety collisions and and then
capacity and efficiency of the roadway.
So, it's a mix of both here. We haven't
had overwhelmingly uh bad accidents
here. Um, so I would say it leans more
on the efficiency side, but but with a
turning movement like this with a high
volume going down Scottsdale, that
concern would be there for that. Yeah, I
don't like that corner personally, but
um the second part of my question, um I
believe that maybe the design included
traffic signals and things like that. My
question is how and if and I mean how do
you anticipate the impact to the
operating budget for the completion of a
project like this that very well could
impact that operating budget? Are those
funds then considered in your in your
projections? They are and and we do have
a group that goes out and maintains our
signals. So So we have a whole operating
side uh that is managing all of our
assets. whenever we finish a project,
they're aware that um like I said, we're
at the alternative stage now. So, I'm
not we're not too sure what um would go
in here. Once we find a preferred
alternative, we would uh assess what the
maintenance need is for our signal crews
and then and make them keenly aware that
that would be going in that they have a
new um intersection that they need to
maintain. Maybe I should step back in
time and say projects that are completed
in this budget. Is the operating budget
impact considered because that project
has completed and now has an impact on
the operating budget?
We could probably look to putting
operating um costs into the budget
moving forward rather than relying on
our five-year plans or just telling
street ops that a new asset is there and
that they need to maintain in their
operating budget. So, we can work
towards making sure that that gets
incorporated into the
budget. Okay.
The next one is the pavement overlay
program. So right here I've shown 104th
Street. This was a a micro seal that was
just done last year. Um we started the
yearly account with $1.5 million in
fiscal year
1112. That was uh the established
budget. So we've been doing this for a
long for about 15 years now. The the way
this works is
it's a yearly account that we know how
much we're spending and we we look to
spend all of that yearly account. So as
you talked about um things carrying over
these ones we do not carry over. We look
to spend it in the the year account. So
as you can see it says Y L. How we've
done this previous years is uh the
second
letter
um indicates which year it was
established and once we spend down this
account it will drop off and then a new
YM would be established or YN as it
moves forward. So we are it keeps
rolling over to be a new account that we
need to spend down within two years but
approved yearly. So on our budget
prioritization or the list that we send
over to Greg, we have all of our Y
accounts on there. They get approved
every year, every budget cycle that
would show that we intend to spend this
amount of money over the next two years
to maintain various assets we have.
Payment being one of them. Currently,
what we're looking at is a significant
increase to the pavement overlay program
this next fiscal year to go out there
and accomplish more pavement and and
really work to get that PCI up to a
level. So over the five years we have
budgeted out $und00 million for next
fiscal year. We're looking at $26
million. Last year we had a Y account of
about 14 million. So going from 26 to 14
million for the the yearly spend. Um you
said it was 14 million last year. This
year it was 14 million. Or this year's
um you have a frame of reference even
further back than that. I mean how many
Yeah. We used to spend 20 million and
dropped off or what's the history? It's
it's always been increasing. So it
started at 1.5 million and it's just
steadily been increasing and then got to
14 million last year and now we've had a
pretty sizable increase to 26 this year.
So it our need for pavement it keeps
growing and and we have a lot of miles
of pavement that that are out there.
Yeah. Commissioner Stevens.
Yeah. This is one of the contracts I
help me with a little bit more. Um and
and uh Scott and Sonia, this wasn't
included in the list we looked at
before, probably because it hadn't been
a proposed change yet, but I'm guessing
this one would show up in the 10%
million dollar change based upon this
change that's happening. And then uh
help help me. Okay. Right now what
happened is we've gone through the
entire year on this project eight months
or so and now in the new budget year
we're proposing a $20 million increase.
Tell us more about the nature of that
increase. And is that something that's
not a surprise? Could have been
unforeseen. And what I'm getting after
is if councils had a lot of
surprises, is there something they
should have known about this? because um
like some things are reasonably foreseen
and or was this something that was a
surprise once you started doing some of
the digging?
I would say that it's not necessarily a
$26 million increase or $21 million
increase. We like I said every year we
put in the yearly counts. So we would
would have requested 14 million again.
So I would say it is a increase from 14
million to 26 million not $26 million
increase but that would be the increase.
So just just the numbers alone we always
request the the yearly account. So the
increase would have been from the 14
million previous year to 26 not the 26
million increase but sorry. Yeah I would
just add I uh Mr. chair and members of
the commission. I think this is a great
example of a program that addresses what
the commission has been talking about
which is I'll call it replacement but in
this term for street uh I'll call it
preservation. So this is how we we call
it potholes. There you go. So uh and
what happens a little bit back to some
of the earlier questions about adding
for growth. So I'll just quickly quickly
kind of take it through my mind. We have
a growing community in some areas. We
add that and at some we add pavement and
at some point you reach a point where
you had to add more staff because you've
added lane miles. We do lane miles. So
we've got to restripe it. We have to or
contractual. So we add to the contract
is we outsource a lot of our our work.
Then over a period of time those roads
deteriorate. And so we have I'll call it
a level of service. We have a level of
service for intersections and
transportation is expanded to maintain
or increase a level of service and if
you don't then you decrease level of
service to community and then we also
have kind of a a level of service as a
part of that asset. We characterize it
here as pavement condition index and the
community sets kind of a standard for
that quality of what they want for for
that assessment. what we and we have
outsourced this where they come in and
do our roads and look at it uh and give
an assessment for the condition. Uh and
then what we do is apply different types
of treatments to maintain or elevate and
as you add more roadways we'll need to
increase the annual replacement. So this
is not just one project. This is uh the
preservation system preserving the
system which were this street will will
take uh fog seal. This one will take uh
a pavement overlay. This one will do a
recon and that probably reconstruct be a
separate more significant but the the
lighter measures are included here. Uh
and and all of that comes together as
the PE pavement preservation project,
but it's multiple lane miles. It's
multiple areas throughout our community.
And as we grow, this number has gone
from 1.5 to 26 million. And then we'll
do a pavement condition index and say
we're at some number and do we like that
number which creates potholes, cracks,
etc. or do you want a higher pavement
condition index which is a higher
quality and then what is that number or
investment to get that asset up to that
level that is uh of a community
value uh commissioner vice chair has a
question
we all know that pavement has been
deteriorating and everything. So, is
this an example of something that was
underfunded for many years and now
you're having to play catchup when
you're going from like 10 million to 14
million because because I think that we
all hear the complaints about potholes
being bad and everything and
um one of my questions is is this
something where we could improve by
actually bringing more things inhouse
rather than outsourcing them because my
understanding is that we We don't even
do our own crack sealing. Yeah.
Ourselves. And is there a way that we
could do more with the same amount of
money? Uh, Mr. Chair and Commissioner,
I'll take the last question first. And I
I think that's an opportunity to look at
outsourcing versus in-house work. And
after we get done with this budget,
should there be interest in taking um
areas of of interest by staff, you could
be that sounding board, this commission,
should that be of interest to you and
council to bring something forward. And
I'll just use your example. It's a great
example. And say, we can outsource this
work and is charged this amount of money
and side by side. what would it take to
do crack fill fog seal some of those
other lighter treatments inhouse staff
equipment so on so forth and present
that and get feedback on how we should
move forward because those are clearly
uh two different approaches I will tell
you uh newer to this organization we
outsource out outsource much more than
I'm used to and familiar with and so
that's something of consideration to
your first question I I think I would
answer it by my perspective accumulation
of a number of factors. The asphalt is
deteriorating at a level and I will tell
you that one thing I would like to
consider uh this commission thinking
about is not just the 26 but we have a
project that is Thomas road and from
about 56 to 73 73 and that is 19 million
dollars as I understand and it's a
failed road waste. We will have to do a
total reconstruction and I would submit
that if we delay that that is going to
be more next year but it's only
inflation.
There are some streets that I would
refer to on the bubble and I speaking of
opportunity cost just lose that 19
million that we could invest in a
lighter treatment in our system that
will save us additional dollars in the
future. set another way and don't take
this literal, but I think if we swapped
that 19 million and spend it, if we
don't do it at it'll cost us 30 or more
million on those streets that are
failing that we're not getting to next
year. We can have further discussion
about that. That's a concept that we're
still exploring internally. Admittedly,
has varying sides of that argument, but
that's the trade-off. That's an
opportunity cost. That's a trade-off
when you get to a roadway that has
failed because it's failed today and
it's going to be failed next year. There
are good number of roads that I think
with the surge, I'll use that term,
surge and investment will save us money
down the road because they're on the
bubble from potentially getting to an
extremely expensive treatment measure.
And we can show those on the light end
of the spectrum. A fog seal, a crack
fill, and a fog seal all the way up to a
rec total reconstruction. That cost is
astronomical on the the gap there.
Commissioner Stevens, I'm sorry. I just
don't understand what this what is this
for? It's $100 million over the next
five years. So, what's this project? or
is this like, hey, we're going to spend
$100 million on roads because we know we
need it or is there specific these roads
during these years? So, um, yes and no.
So, it's a program. So, it is it is
roads that that come out of our model
that need uh some level of treatment.
Our pavement preservation group right
now is is we just finished the previous
five-year plan. They are coming up with
the next five-year plan which would have
the roads that would need treatments. So
they are they are using through our
vendor they're working on that list of
five years worth of of pavement
treatments which is a pretty lengthy
list of roads to be put on. But that's
so this project is really the result of
a periodic assessment you did of overall
road conditions in Scottsdale and what
needs to be attended to over the next
five years. Yes. To keep your get your
PCI up to the level you want it at? Yes.
Okay. So this change you would consider
more of a
um a scope increase I guess because this
really couldn't have been foreseen or if
it could have been foreseen should we be
budgeting more for this kind of stuff? I
would say we have 910 miles of lane
miles of of asphalt and so
we could always use more money in the
asphalt stuff. So it's a scope increase,
but pavement preservation and
maintaining the roadways, it's as far as
you want the dollar to stretch. So I can
go over to the the next slide to show
that it's really a matter of
establishing what PCI you like Greg said
what PCI you want to be at and then
establishing the budget on that. So this
is something that was done at the first
five years ago. They're creating a new
chart. So I would say that these numbers
are out of date per what I'll show in
the in item five of the inflation costs
we've been dealing with. But drawing a
line of how much we will need to spend
in order to rise raise raise the level
of PCI. If we establish a goal of a
certain level of PCI, this chart would
show that on the bottom uh axis how much
annual budget we would need to maintain
that that's not talking about getting us
up to that level, but what level of
investment we would need to maintain
that level of PCI. Currently, our staff
is looking at modeling what needs to be
done to achieve a 70, a 73, a 75, and a
77 to give us a budget estimate of what
that number would need to be in order
for us to achieve that. So, to answer
the question, it's really how high do we
want to go up in the PCI and what do we
want to invest in and and put our
investment into.
So, we always need to maintain the
pavement on the road. It's always
deteriorating out there. It's constantly
deteriorating. So, it's what do we want
to get to and how fast do we want to get
to it.
I have a comment or question from
Commissioner Newman.
Just want to comment. I 100% support
this because the costs are going to go
up 5x. Instead of spending 100 million,
be spending 500 million to replace roads
and and to avoid the base failures that
are inevitable. uh this is the only way
to get there and and to be aggressive
about it. I I applaud the effort. So I
totally support that. Now the question
is is you know is it based on 70 7375
cost as a function but also how many
calls do you get from people? Yeah. You
know empirically derived I guess but I
totally support it. And so going back
one slide back is it's kind of a balance
like Greg said about how do we achieve
preservation versus reconstruction
versus overlay. So this is a chart to
show kind of the level of PCI and the
level of treatment that would be needed
if we reach a certain PCI on a certain
roadway. So um as we show here
preservation we can extend life if we
maintain things in that preservation
threshold. Yeah I come from Chicago so
you know PCI of 12 was considered a
victory. So,
uh, I have a question or comment from
Vice Chair Swiker.
Yeah. And just for my fellow
commissioners, for a frame of reference,
uh, Paradise Valley went from 77 down to
73 and they're now putting together a
plan to get back to 77 because they're
not satisfied with the 73.
Uh, and I have a couple of questions and
then Commissioner Stevens has questions,
too. this PCI of 62 that we're estimated
to be at
now. Can you give us a historical number
of where we were uh five years, 10 years
ago or whatever? Um five years ago about
65. Um before that varying degrees of of
70 possibly. So, um,
it's we can find those numbers for you,
but it was around 65. 62 is is is low
for us. So, we're playing a little bit
of catch up. Yeah. Another question.
Um, there is a obviously a a handicap in
using average numbers because they can
hide problem childs. Um, and what I mean
by that is if you uh I don't know how
many lane miles we have of roads in
Scottsdale that you're in charge of
maintaining. You probably know that
number, but um but some of them are
brand new and they'll have a PCI of 100,
if such a thing is possible. Yes. Yeah.
And others will be uh ancient by the
city standards and have a deteriorated
number that may be down in the 45 or
whatever. Can you give us a distribution
of what makes up this average? Because I
know there's some roads that are a lot
worse than 62. Yeah. No, we have that
for every roadway and over the course of
the last couple years, we've been
prioritizing um the arterials and the
collectors for the volume of road of of
vehicles on there. So, the decrease is
because we have such a massive volume of
local roads. So we were trying to I
guess get our bang for our buck based on
on number of vehicles using that
roadway. Um but certainly to get the PCI
up we would need to transition to
looking more at the local roads again
and and prioritizing that as we move
forward. Um but I can we have a
breakdown of every roadway. Their model
I've seen it. It's interactive. You can
d you can dive into any of the roadways
and see what the PCI was recorded at for
that road.
I think it would be somehow informative
if we said we have a thousand lane miles
of roads in the city and you know 300 of
them are in the 80 to 90 category and
600 of them are in the whatever
category. Yeah, we have we have a
breakdown via pie chart of what's in
good condition, what's in fair
condition, and about um off the top of
my head, I think it was 35% were in in
uh 65 and up, but don't quote me on
that, anybody, because uh I would have
to relook at that pie chart.
um see if you can come up with something
like that for a future meeting as a
piece of information for us because I do
believe it would add a sense of urgency
to the problem that you're facing um
that some of them you know 62 overall
may be masking some real problems
underneath. No, of course we already
have that produced so it's just a matter
of bringing the right material over as
well as we have breakdown by local and
our major roadways.
Thank you. and Commissioner Stevens.
Okay. I understand you're just going to
be authorizing the 2526 amounts and the
future forecast numbers uh are subject
to future authorization if I understand
this right, but
what what do you do from an estimation
standpoint to try to get the 2526
numbers as close as you can? What do you
use in your estimation? Do you have
contracts bid out or are you are you
using estimation tools or what do you
do? And then what do you do for the outy
years which are maybe not as important
but still kind of important to get
ballpark close. Yeah. So for the outy
years we'd be using our five-year plan
to establish the budget moving forward.
So what what our groups able to
accomplish in those next couple years.
And if we increase it over uh what that
five-year plan would say, we could
easily just incorporate more roads in it
based on the capacity of our pavement
preservation team. Um and then for this
budget and and how it got increased, we
have several on call contracts with with
contractors that go out and do it. So,
it's not a matter of of based on their
contract, but if if we ask them to go
out and do more roads, they would
schedule it and be able to accommodate
us to to put it out. So, if we increase
the budget, that's just going to they'll
be able to generate that work and and
work for us on our on call contract. So,
the on call contracts, are those the
ones that are like 5 million and below
or something like uh I think council had
a bunch of those they had to approve on
the agenda last night. Those are those
are not the ones. Um, we have separate
ones for the paving. It's like that, but
it's like that. Okay. So, is your So, do
you have like sketched out here's the
roads we think we're going to do in
2526 and either I have contracts or
reason to believe if I bid these out,
this is what it's going to be on the on
call people. And then you use something
a little rougher for the outy years. No,
we would have
a five-year plan. So we have a spring
and fall schedule of of at least on our
end looking at the restriping of those
pavement things. So they will send it
over to planning and engineering to look
at the restriping. When we go and we do
a pavement, we have to restripe it based
on our current standards. So So they
will send out a list of all of the
pavement treatments they're going to do
over the next various months in the
spring and the fall throughout the whole
year. So they will send that big list.
That list is is
compiled working with their on call
consult uh contractor to figure out what
their capabilities are, how many roads
they can accomplish in that time frame.
That all spans or stems from the
five-year plan where we have it laid out
each fiscal year, what we plan to
accomplish. If we can't get to all of
them, they'll roll over to the next
year, but we generally try and plan to
get all of them accomplished. I guess we
do have a big list of all the roadways
for each fiscal year. If the budget
increase, we'll add more. It'll roll up
and we'll add more from the the next
fiscal year onto that fiscal year and
just add more to the back end if that
makes
sense. Let me let me go with that for
now. you've got a very clear picture in
your head and I'm trying to grab it. But
uh I guess I guess our roads are always
deteriorating. So there's always going
to be more roads that are can be put on
that list. So if they didn't meet the
need for the five-year plan, uh we'll
just go down the next list. But we have
the list of every road in the city.
There's a cut off for that five-year
plan of what we can accomplish. If we
get more funding, it will just go
further down that list and accomplish
more roadways. So, you kind of view this
as an authorization to spend $100
million over the next five years and do
as many of the roads you can and get the
PCI up. Yes. Is that kind of what this
is? That's what it is. Okay. Would So,
what would be a reason why this might go
up another 20 million next year or is
this one going to be done and you're on
to something else?
Um, it's probably going to stay at I
can't say what. So, we approve it every
year. So next year based on the needs of
of payment that year, we can increase it
or decrease it, but we work off of what
the previous fiscal year is. So we would
probably start with the 26 million, see
what roads can be accomplished, and if
we want to increase the number of roads,
we'll increase the budget. Let me have
this let me have the city manager chime
in here on this. Yeah. Thank Thank you,
Mr. Chair. I would just add he's saying
it extremely well but just to support my
colleague there this study that should
be done in it feels like a monthish of
evaluating our roads as they are now and
we will get an updated number of PCI and
then we have uh a discussion as a
community as council as what is
acceptable and what do we want and then
as articulated there is whatever number
you're at there is a financial
contribution that you need to make to
maintain that and then every single
year. So, it's a little bit of a
misnomer calling this a project. It's
multiple projects and it there's pros
and cons to whe wherever this goes in
the budget, but it's an ongoing
continual and there's again back to what
we set the value at. Let's just use the
62 heard some other numbers. I'm
familiar with other numbers and let's
just say a value is 70 that we we want
to have 70. There are benefits to a
higher number. one, you start treat to
the charts. You treat them at uh a
cheaper rate, not as not as expensive.
You have less calls for potholes. You
have things of that nature. And so then
that takes an investment. And the $26
million, it will take more than $26
million to increase that number. That is
so uh a nonp estimate of it so that it
doesn't slip. And so then we say we are
able to invest 30, we're able to invest
40. What does it take to get us to 68?
What does it take us to get to 70? What
does it take us to get even higher? And
so on and so forth. And then so that's
the surge amount should there be support
for that to get up to a higher level,
whatever we feel comfortable with. And
then there's a an amount every single
year to maintain that new number which
is going to be higher than the 26
million highly likely. So that's where
we're headed. And then should they get
some good bids, what I've seen is you do
an extra strip, you do an extra street,
something comes in line where uh
something's deteriorating faster through
the year. And so then you or through the
five-year plan and then you're able to
be nimble and adapt to address those so
that you don't get into a more costly uh
investment in some areas. So is this
broadly a PCI improvement plan over five
years?
I
would I would call I don't I wouldn't
I'm struggling with the improvement to
be honest with you. It's a pavement
preservation and at a certain number
you're not preserving at the previous
year's PCI. You're actually a pavement
deterioration plan if you don't invest
enough. And what we will submit for
policy makers to consider is a pavement
improvement PCI plan. Absolutely. And
that would at least take 26.4 million uh
over next year and likely more uh to
increase that PCI.
Commissioner Ransco, I suspect in a
month you'll have a plan and in a month
after that we'll have a PCI vote and
then you can write a 50-year plan
because you'll have the PCI number,
you'll have you already know your
streets and you can tell us for the next
50 years when each street is going to
get treated and I mean it can almost get
that intelligent.
I'm not sure where we left you off, but
if you can find out where you are,
resume. I'm at questions now. So, if
there's any more questions, then you may
have uh you may have exhausted all the
questions up here for now. I do have a
question for the staff and the fellow
commissioners. Uh we have one item left
on the agenda. We've probably worn out
our welcome here.
Um should we move that to the first item
on Friday? Is that possible uh with
whoever the presenters are? And what do
my fellow commissioners say to that?
Commissioner Carl. Well, to use one of
your favorite terms, then we're just
kicking the can down the road. So, my
question
is, how long do you think the next will
take? I mean, could we get through it in
an expedient fashion or do the fellow
commissioners have a lot of, you know,
questions that they think they're going
to be asking because they did read this
ahead of time? We're going to be talking
a lot about inflation. So,
um, major roadway projects and and
inflation. So, it could take some time.
And okay, that that's that's okay. That
that is important. I'm happy to stay
here. I'm happy to come back on Friday.
Um well the question is to Sonia then is
what on Friday I'll get bumped.
Any other commissioners want to weigh in
on this question or shall we just charge
ahead with item four?
Vice Chair Schwiker. Yeah I think if
we're going to be getting into inflation
which is one of those topics which I
think is going to be pretty weighty and
everything. I don't think we want to
rush through that one. So, at least from
my point of view, if possible, I'd like
to do it first thing
Friday.
Um, show of hands. Yay or nays? Uh,
what's the
for for whether we go whether we go
ahead with item four here? My my my only
note I had in my advanced reading was
whether or not certain of the contracts
that are being bumped up are going to be
part of the 10% uh $1 million and that
was the only question I had.
So we can skip it if you want.
I go back to my question which is then
realistically looking at Friday what's
going to get bumped off of Friday? Uh
that would be up to the commission. I
mean, we have an agenda for Friday for
various items and the commission can
decide what what they want to hear and
what will be bumped or whether we can
hear all of it on
Friday. Okay. Well, m maybe we take
number this one off now because it is so
important. It's inflation. We add it to
the beginning of Friday, but just as we
move through Friday, we try and be a
little bit
more expedient.
Why don't we do this? Why don't we have
you go through item five? We will try to
restrain
ourselves, tough as that may be, uh, in
our questions and whatever, and if we
have additional questions that look like
they're going to take a long time, we'll
carry the some of those questions over.
In other words, make yourself available
on Friday as well if you can um for
further questions that may come to mind
as in the next 48 hours. That's no
problem. I work right across the road.
So then we are moving into the
transportation arterial life cycle
program and the associated onetenth of
1% transportation sales tax and Nathan
is going to walk us through that. Yep.
So, I'm going to talk briefly about the
program as a whole, where we've
progressed so far as a city in doing
these arterial life cycle projects and
then uh open up to the projects that
remain in the budget that are over $25
million and the breakdown as Scott had
of each one of those.
So, so going into the existing projects
versus new projects, we're coming on the
tailor end of the Prop 400 ALCP. Prop
400 was passed in 2004. It had a list of
projects for us to do. Um, so we are at
the tailor end of that. So, no new
projects, just the existing projects and
just working our way down to funding
them, completing them, and finishing
them off.
So, Prop 400, the arterial life cycle
project is arterial roadway uh
construction as well as uh capacity
increases. These are these projects I
have on the screen right now. One of our
our earlier prop 400 ALCB projects that
was completed. This was the the very
southern end of North Puma that t that
tied in to the loop 101. It was a
complete reconstruction of an arterial
roadway as you can see from the before
and after bending it uh more to the east
and adding capacity uh to the
neighborhoods in the northern area of
Scottsdale. So the arterial life cycle
project is defined as arterial projects
to be funded through December of 2025.
The biggest portion of that is the
regional sales tax is the majority of
funding for these projects. So, the
region contributes 70% of the funding of
these projects. Um, it's a 20-year sales
tax. It was extended from the previous
Prop 300, Prop 400. Um, it expires
coming up at the end of this year and
it's administrated by the Maricopa
Association of Governments, which we are
part of, and we collaborate with them
closely on these projects. Our local uh
responsibility is to manage the
projects, get the reimbursements, but
most importantly provide the 30% local
match for these projects. They provide
70%, we provide 30%. And how we've done
that since 2019 is the Scottsdale voters
approved the 0.1% sales tax to provide
that match for these arterial life cycle
projects. On the bottom you can see the
as of the fall recently create finished
finished um Miller Hayden bridge that
crosses over the Rahad wash a
a another arterial expansion rather than
uh upgrade. Um the goals of the arterial
life cycle project program is to widen
existing streets to their ultimate need.
um improve intersections, construct new
arterial segments, um and then bring
most importantly bring existing streets
to their current standards and ultimate
configurations. So that's adding
medians, curb, gutter, um storm water
improvements, uh signal improvements,
everything that goes into a street. So a
full upgrade and completion of these pro
these roadways. This one showing the
Puma on the south end next to Indian
Bend going from a two-lane kind of a
three-lane road to its ultimate
configuration being um a multi-use path
on one side medians curb gutter and
sidewalk on the SRPMic side. So just to
give an example as to what these
projects are accomplishing as they are
getting done. We started in 2005 and in
yeah 2005 with 12 projects mostly
focusing on the north south arterial. So
Scottsdale and Puma being the priority
the primary routes. We had a loop 101 uh
interchanges currently under
construction right now. The intersection
the interchanges themselves are an ALCP
project. The widening of the loop 101 is
a u an AOT uh funded project. Then we
have signals and uh signals and uh
intersections on Shay. We've done a
complete or a rehab of several roads in
the air park area including Rainree
which we'll talk about a little later on
and then Happy Valley being a little
spur coming off of Puma. So the majority
of it being that Scottsdale and Puma
route up north and finishing off those
roadways. As of spring of 24 we have
comp. So, as we were accomplishing these
projects, we split them into 39 smaller
projects. It's a massive stretch and
it's a massive roadway reconstruction.
So, splitting them off into smaller
projects, more bite-sized, helped us
accomplish it. So far, we have completed
as of spring of 24, we completed 18.
We've just as the fall of 24 completed
three more. Um, so three of those under
construction have now been completed.
So, we have two under construction. um
three that were nearing construction
have now started construction and then
we have the five remaining in design and
then waiting for development based on
developer uh needs. We would uh require
the development next to those roadways
to fund those projects. So so far by the
end of 2024 we've completed 74% of the
ALCP and by 2026 we will have completed
83% of it. um nearing completion. So, we
have completed Puma Happy Valley. I'm
gonna just skip this slide for brevity
because we're going to go into all of
these later on in the the ones. But the
101 is um still under construction. It
is going to be done in the winter of 25
as well as we will be starting or
started the other two at the bottom
there. Jox Dixeletta and Vinda De Mcdell
SRPMIC is leading that. So you don't see
that as one of the $25 million
investments in our ALCP because the
majority of the funding is coming from
SRPMIC, but that is a $80 million
roadway project going from Vinda down to
Mcdal managed and run by SRPMIC that we
are contributing to. Five remaining
projects is going to be Puma stage coach
to Cave Creek, Puma Los Pedrris to
Dynamite to Los Pedrris, uh Carefree
Cave Creek to Scottsdale Road,
Scottsdale Road, Dixaletta to Carefree,
and Hap and Puma Happy Valley to Joe.
I'll be talking about the four top ones
later. Happy Valley Puma. Um, Puma Happy
Valley to Joeax is just a basically a
continuation what was just completed
between Pinnacle Peak and Joeax. Just a
um not adding an additional third lane
but keeping it to two lanes curb gutter
medians. So just a continuation of that
project. I wanted to start the next
series of of
topics with the the projects by starting
with what we've seen with cost increases
over the last four years. We've seen a
historic surge in construction costs um
particularly on
on roadway projects. This is coming from
MAG sourced by ADOT. So they gave a
presentation on this showing several
other examples of ALCB projects across
the region. They have seen similar
increases that we have seen um to to the
budgets but earthwork being 230% from
2020 to 2024. Uh asphalt being 105% of
an increase, concrete pavement 13 53%,
drainage 75%, structural concrete 126%
and reinforced steel a 24% increase. All
of those are things that go and compile
into our roadway projects adding to this
this surge in cost that have been really
hitting us hard especially on the
ALCP. So going into the ALCP itself um
tasked with showing all the projects
that are 25 million or over. So starting
with Rainree Scottsdale Road to Hayden
Road. This was just completed as of
November of 24. Um the initial budget as
approved by us in MAG was 19.3 million.
Um at the end we got to 27 million. So
the total approved budget was got to
sorry 39 million 37 million. The total
approved budget was $ 39 million. We had
about $2 million left over. We currently
have it in the budget to transfer that
over to another ALCP project. when we're
talking about the one the 0.1% sales tax
and the regional uh sales tax uh those
are dedicated to just these ALCP
projects. So if we have any cost
savings, we will roll those over to
future ALCP projects as um any of the
prop 400 projects for the 1% sales tax
um as well as the regional. So uh the
importance of this project as well as
all the other projects are going to be
that regional arterial that re that um
regional significant arterial the
another purpose of the ALCP is so that
there's consistency not just in our
community but across the jurisdictional
boundaries. So if you're going to Tempi,
if you're going to Carefree or Cave
Creek or Paradise Valley, there's
consistency of the roadways in terms of
those art those major arterials. So I
can pause to talk about this project if
you want or I can just continue through
all of them.
Um the cost increase as I showed on the
previous slide was due to those
inflation costs but the other factors
that come up in all of these projects
that will be I will repeat on them is
rightway costs have gone up as you've
seen from housing values and property
values. we have to pay those if we're
going to acquire rightway and then storm
water impacts and improvements have have
definitely gone up as well as you've
seen in the inflation but adding those
and elevating the road have gone up
significantly as well. So those three
factors have gone to driving the cost of
our projects up
and going to Pinnacle Peak to Happy
Valley Puma Road Pinnacle Peak to Happy
Valley. This was also completed in
November of 2022. This was going from
$22 million to $50 million.
Um that was not all ALCP and 1% sales
tax. What um if you see in the picture
that big drainage channel that was a
necessary improvement to the road based
on the the massive amount of of flows
going through that area when it rained.
So, we did acquire a lot of flood
control district money as well as our
storm water fees to uh accomplish that
that surge in cost. So when a surge in
cost comes up, we don't just come
straight to get to the sales tax or or
come to just look we will look for
additional revenue sources including
being storm water fees or storm water or
flood control district money to try and
and balance out that out because storm
water especially in the northern portion
and those roadways up north storm water
is the biggest or one of the biggest
components too when we're doing these
roadways. So that was about I would say
$13 million of it was was storm water
funding that came into it and then the
rest of it was still our transportation
regional and local sales
tax. Um Happy Valley P road to to Alma
school very similar situation very
similar um uh scenario. So uh going from
12 million to 37 million based on
inflation storm water and then rightway
costs um to to finish that. It was
finished up in November of 24
and we have now finished both Puma and
Happy Valley. U probably alleviating
those residents up there with the
construction that we've had going on for
a while. But some significant
improvements for the capacity up in that
region. Scottsdale to Dixletta. This is
under construction right now going from
23 million to 43 million. There's
several other things that I can note to
that increase that wasn't that not just
the same three that I've been talking
about. Those still apply here with the
inflation rightaway costs and the storm
water impacts. But we also found utility
constraints. Uh APS has some pretty uh
massive electrical wires underground
here. when we were putting in our
coverts, they came into contact and APS
has prior rights here, which means that
we would have to pay for the we're
making the conflict point. So, we would
have to make the we'd have to pay for
the relocation of their their wire. That
was several million dollars to to
relocate 69 KVs. So, pretty pretty high
level voltage going on through there. So
that that compounded with both the
inflation right ofway and then also the
storm water came to that increase. So
we're looking to get this done by
December of
2026 and like I said under construction
right
now. Carefree Highway Cave Creek Road to
Scottsdale Road. This is under design
right now. We're finishing up design
relatively soon. Um this budget is also
increased based on storm water. Um less
so about right ofway on this one. Uh
we've tried to limit the right of way
take. We have Carefree bordering us
right on the the northern end and
they're
um
not very interested in us acquiring
right away. So we're trying to mitigate
that as much as possible which adds a
little bit of improvement to uh a little
bit of cost to the storm water as we as
we combat that. But storm water and then
and then uh the inflation are the
factors that are are coming into this
one. And then Scottsdale Dixleta Drive
to Carefree Highway. I will talk with
about this one as well as um Puma Los
Pedri to Stage Coach. These are the two
last remaining ones um that are both
Scottsdale and and Puma, the very
northern ends, the longest stretches as
well. And so we are currently in a
conceptual design phase. We've got two
consultants on board to look at these.
I've said over the past five or six
projects that we've come across the same
issue again and again and again that's
increased the budget. We're looking to
understand and evaluate that now before
we we start seeing constant increases.
So we've seen the inflation, we've seen
the ride ofway, we've seen the
utilities, and we've seen the um storm
water. So, as our two consultants go in
to evaluate that, they're looking
primarily at those to give us a clearer
picture of what's needed uh moving
forward. So, we're going to get those
assessments back, do an estimate based
on those assessments, and have a clearer
picture of that. Um,
NAG Carefree has an ALCP project that
goes from Stage Coach to Cave Creek
Road. they couldn't get somebody to uh
bid on their design. So, they asked us
if we could tag team a preliminary
design to um evaluate the road all the
way from Cave Creek Road all the way
down to Los
Pedrris. We said we would and MAG has
pitched in the funding to do that study.
So, they have put in $250,000 to do that
preliminary design evaluation for that
roadway. But so those are the two
projects that are are left outstanding
about 2030 is what's happening. I know
that earlier in this slide I said that
the funding stops in 2025. We have been
at our regularly scheduled MAG meetings
and they have talked about um while the
funding stops being collected. We are
allowed to move forward with that
funding and with the projects moving
forward past the 2025 mark. So they are
extending prop 400 to to be completed
for all the projects in Prop 400 to be
completed. So that's the status of those
two projects. This one PMA road dynamite
to Los Pedrris has had an increase as
well. That is and the picture will show
that is a large portion to storm water.
This is right at the Rawhead Wash, the
starting point on Puma and we are we
have a consultant on board looking at
alternatives for how
we elevate the road to make sure that we
keep a dry crossing going through that
area. Hopefully not elevating it too
much for noise mitigation around the
neighbors. So, it's a very it's a very
dicey situation when it comes to the the
Rahide Wash right there. As you can see,
as the the modeling of the flows go,
it's going right into the Dixletta and
Puma
um intersection, which makes it even
more complicated. So, we've got one of
our best storm water uh consultants on
the team to to try and give us some
reasonable alternatives to mitigate that
problem. So, that's that's the biggest
thing going on here. We're at the design
phase right now. We've got about 60%
design and they're they're looking at
that problem happening right there.
We've got the preserve on the east side.
We've got neighborhoods on the west side
and then we've got the wash going
straight through the middle. So
definitely a lot of things converging at
one point to make uh a challenging
situation for
us. Um and so that is my rundown of all
of our final ALCP prop 400 projects as
they're nearing completion. That was a a
speedy presentation. Thank you very
much. And I think uh I'm going to ask
two or three questions and we can carry
the questions over to the next meeting
if they're um complicated or necessary
in in the interest of time. But on these
projects, and I don't have any question
about a specific project, but just
generally on these ALCP projects, are we
in charge of the project? Are we the
ones that actually design and hire the
labor and services and whatever? Do we
do the whole thing and then just send
the county a bill for their 70% share of
the cost? Yes. And they willingly pay
that without regard to whatever they
want us to get these projects done. They
they they have allocated the money for
these RTL projects at the start of Prop
400 and now Prop 479.
it dedicated these specific projects. So
when we send in the reimbursement,
they're more than happy to to send back
the money. Um because and obviously my
my question is they didn't sign up for
this level of cost. Uh they signed up
for the project, but obviously when the
costs go up um I wanted to know who's
responsible for answering the questions
and I guess to that as I said at the
beginning this is not just something
that's happening to us. It is across the
region. MAG as they presented they fully
understand all of the cities are talking
to them about these cost increases. It
is every city that is in the ALCV
program is seeing the same uh thing. So
MAG is fully aware and accommodating of
these concerns. And I would say that um
while you had a chart that talked about
inflation, I'm I'm not convinced that
you know all of these projects are the
result of that inflation. I mean, many
of them went up 100% 200% and um you
know, you only have two lines on there
that have gone up over 100%. So, I'm I'm
curious to know, is there something else
going on here other than inflation or uh
I just don't want us to hide behind the
excuse, you know, that well, inflation
did it to us. And then third and you
know hold the question to see what
others have but the third question I
have a curiosity about is where will we
stand on the collections against the
0.1 ALCP tax by the time it is scheduled
to expire? Will it have generated all
the matching money that we need for all
these projects or will it have done more
or less or whatever? Yeah, so far it
looks like it'll do a little bit more,
but um we definitely have the need for
it and then as Prop 400, Prop 479 comes
in, we could still push that towards
more ALCP projects.
Commissioner,
thank you. Just a question. Um a
clarification question. I didn't see Rio
Verity Drive East up there, and I know
there's a lot of work going on there now
with fire hydrants, things like that,
but you can see that they're obviously
going to widen the road at some point.
Is that a project that's below 25
million or is it off the horizon,
planning horizon or is Maropa County
doing it? Uh that's developers are doing
that for us. We've asked them to do it
and so it's not an ALCP project. Okay.
Is in as far as a future project. Is the
future widening of that road going to be
a Scottsdale project or is that Maricopa
County? It is a Scottsdale project, but
it's off the planning horizon. Very in
the long term. Yeah. Okay. Okay. Okay.
That that that answers a question. But
it but it is our jurisdiction to to
widen that road. Um so okay just at
least to our border. Right. Right. So um
thinking about the conversation we had
on the last slide deck and this slide
deck what's coming in into focus for me
and and I think this may if there's
recommendations that come out of the
budget commission to the council. It
seems you know you there's there's some
limited discretionary things that we can
do. You know how quickly you fund
pensions how quickly you pay off debt
roads. After seeing this presentation, I
feel like gosh, the risk of not doing
this is really high. I know you're gonna
have a report very soon, but I I almost
think of this as a basil bololis
program. You know, you've got a the ba
basil of uh catch up on PCI there. I
there's there's the PCI catchup. There's
the arterial projects that you want to
get done, and then there's a few base
failure projects that need to get done.
But it seems like over a fiveyear
period, if that's a top priority to get
that done, now you're down to just PCI
maintenance over time and and that
becomes like 20 million a year, 30
million a year, whatever that is to
maintain whatever how many road miles
you have. But it's very predictable
then. Right now, it's not so predictable
because you've got roads that are
failing faster than maybe we're
maintaining them. It sounds like I mean,
I don't know, but it just sounds like
we're not putting enough into that
maintenance part to keep up with it. So,
it seems like this has to be a really
high priority because then you start
having to take away from other
discretionary priorities to to fund base
failures and things. So, it seems to me
like we're we're on the edge of kind of
slipping into a a bottomless pit of
spending here because the calls are
going to be coming in and everybody here
working really hard is going to be
taking phone calls rather than fixing
roads and things like that. So, I just
think if there's a priority, uh,
Commissioner Smith, there's a priority
that comes out of this, I would right
now where I'm thinking is that roads
becomes a pretty high priority to on the
catch-up part of this, uh, to get
Scottsdale where it needs to be over
over the next 5 years and and as far as
understanding the budget. So, that's
just my comments. So, and to that, the
ALCP, um, those roadways that are part
of that have never been fully designed,
right? They don't have their curbon
gutter, they don't have their meetings.
So to your point, if we don't do those,
then they they still have their their
wet crossings. They're not to their
ultimate configuration or to their or to
current modern standards to be what we
would find as an appropriate roadway
going forward. I live up there. I kind
of like the the rural nature of it, but
Oh, sorry. A nicer road would be nice.
Commissioner Stevens,
I just want to thank you for answering
my only question. if you incorporated
storm water and right away into the
earlier stage project. So, thank you for
the lesson learned. And with that, I
move that we adjourn the meeting. Uh,
Commissioner Carla may have you uh she
may want to do that ahead of you. I
tried.
Um, I just have a very quick followup to
what Commissioner Newman asked about Rio
Drive. Um, we've been waiting on a
critical preserve project related to it
for 20 years and Friday that project's
going to come up. So, you might get
asked specifically um when it's going to
happen or when it's in transportation's
timeline. So, just we may need that
answer by Friday. Which one is this? Rio
Verie Drive, the ultimate widening to
four lanes. Okay. Yeah. I mean, thank
you. It's there's no timeline for it
yet. It's just in the plan as a
long-term uh improvement, but there is
there is no timeline right now for it.
I had a motion from Commissioner Stevens
to adjourn the meeting. Do I have a
second?
Carla seconds. Oh.
Oh, Carla wants to say something else.
Future agenda.
Yes. I'm sorry. We We do have an item
six on the agenda, which is to identify
and approve possible future agenda
items. Um, so I will ask if anybody has
an item that they would like to request
and we don't talk about it, we don't
discuss it, we don't debate it, we just
vote on whether to include it or not.
Uh, Commissioner Carla would now like to
Yes. two quick things. Um, last meeting
or so, uh, Commissioner Stevens brought
up the whole issue of addressing FTEES
and, you know, possibly looking at
cutting some. And that's a great
conversation, but I've been thinking
about it and talking to departments and
could we add two other items to that
discussion, which is the issue of
overtime and then also the issue of
staff burnout because I don't see how
you discussed cutting FTEEs without
looking at, you know, getting the jobs
done versus what services won't be
provided. and those are related to
overtime and um staff burnout. And then
the second one is also uh Commissioner
Stevens brought this up today where he's
struggling with what we're accomplishing
and where we're getting which I agree
with. And what I would like to suggest
is to the agenda. We have three meetings
the second week in April and maybe on
one of them we put an agenda item which
is basically a gut check of where we are
and everybody can communicate to the
chair what they're looking at because
the reality is most of what we've talked
about is going to be pushed to the next
cycle because it's a much more in-depth
discussion than making a recommendation
now. But I would just ask if we can
consider doing a midweek gut check to
see how we're going to then actually
produce something because we've learned
a lot. The public's learned a lot, but
if we're going to actually produce some
recommendations, maybe we need to do
that gut check. Thank you.
And let me ask staff uh to Carla's first
question on FTEES overtime, all the
issues involved in that. You I think you
have a
presentation focused on that collection
of questions, don't you?
We haven't put the agenda together for
April yet, but that could be in the
operating budget presentations. Yes.
Um we can vote on that uh question or we
can just leave it to you to make it
happen. Um because I think collectively
we're probably all interested in that
topic all that it embraces. Are you uh
Commissioner Carler, are you comfortable
with
um yes, you know, as long as the two
things are addressed and as long as
Commissioner Stevens doesn't have a
problem with that being incorporated
into the discussion.
I I I actually had a draft item. I was
going to put it as an agenda item. I was
going to wait till Friday and it
actually added overtime. So, I kind of
want to think about that again. If
that'll wait for two days, let me
reddraft it. And uh maybe I could send
it to Carla
only and then uh present it to the
commission. Yeah. As long as you address
the issue of staff burnout also because
there was an article last month. Real
delicate balance. Yeah. Yeah. About a
police officer who is the crisis in you
know incident leader and she had the
most overtime of anyone. And my first
thought wasn't how much money it was. It
was are we going to burn out a good
officer? So, I think that has to be
incorporated in it. I hope so. I would
look forward to seeing it Friday. Yeah.
And if I can tip my hand a little bit on
that, I'm talking a lot about the FTEs,
which makes you think I'm just trying to
crash and burn and cut things. It really
is trying to look for things that can be
merged and smarter. And I have looked at
a lot of the overtime things and I'm
extremely concerned particularly about
police officers and fire people working
50% overtime because their level of
performance and the way they can put
themselves at risk is like that. So let
me think about how to blend all that
together. And to your other uh question
which was how do we deal with the open
items that all of us may want to submit.
Is there uh I guess to uh the city
attorney, Miss Scott, is there a problem
with them submitting those questions
saying I would like to address the
council when we meet with them on this
topic or this topic and send those to me
um and I not communicate them broadly to
everybody else just so we have a
collection point to uh agenda to sort of
orient our discussion on April 22 with
the council.
Chair Smith, thank you. It it would be
best under the open meeting law if those
types of communication simply came to
staff if if they ca were addressed to
Sonia and let the staff review those,
consider how those are best placed
forward on an agenda or put it back on
um a discussion for a vote of the
commission. Uh that would be
best. That's what I would recommend.
We can do that. I don't uh intend to say
yes or no or maybe to anybody's request,
but uh we can send them all to staff and
they can put it all on a work study
agenda and take it from there.
Commissioner Stevens, did you have a
motion to make?
I move that we uh uh call the meeting to
a close
and somebody will second that, I'm sure.
So
second vice chair swer seconds Look at
that.