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Attachment 1 578 Capital Fund Needs 579 Annually staff and the City Council review the 20-year Capital Improvements Program(CIP)to 580 ensure sufficient funds are set aside to pay for capital expenditures to replace equipment, vehicles, 581 and facilities. The City has traditionally ensured that enough funds were on-hand to pay for the 582 capital purchases. With increasing costs for many capital items, the City Council and staff have 583 begun looking at issuing debt for bigger capital expenditures tospread out the costs over time. As 584 part of the 2026 budget, the City will begin paying new debt service in the amount $334,753 for 585 the new electric fire engine. Issuing debt for larger capital items is an approach that will continue 586 to be looked at in future budget cycles. The Finance Director and I have begun looking at possible 587 capital items for which debt issuance may be warranted as part of the 2027 budget. 588 589 In everybudget cycle, the amount of tax levy going towards the capital fundsis looked at and 590 often reallocation of existing levy occurs and/or new tax levy is added to strengthen each capital 591 fund balances. Given the existing pressure on the tax levy, staff has run some scenarios on how 592 franchise fees can be utilized to strengthen capital funds and provide an ability to reallocate 593 existing levy that will be freed up by the franchise fees to other capital funds and to help limit the 594 needed levy increase for the operational budget. 595 596 As part of the 2026 budget review, we have determined that the following capital funds need 597 assistance. 598 599 Pavement Management Fund (Negative in 2036)* 600 Street Lighting Fund (Negative in 2029) 601 Pathways and Parking Lot Fund (Negative in 2028) 602 Public Works Vehicle and Equipment Fund (Negative in 2028) 603 Police Vehicle and Equipment Fund (Negative in 2027) 604 Fire Vehicle and Equipment Fund (Negative in 2035)* 605 Parks Vehicle and Equipment Fund (Negative in 2028) 606 Parks Improvement Fund (Negative in 2033)* 607 608 *Certain capital expenditures in this fund could be considered for debt issuance in the future 609 610 With using Option 1 of the franchise fees and repurposing the existing tax levy already going to 611 the capital funds, we would be able to put franchise fees in the amount $2.1 million towards the 612 Street Replacement Fund, the Street Light Fund, the Pathway and Parking Lot Fund, and the 613 Public Works Vehicle and Equipment Fund. This would allow us to reallocate $1.6 million of 614 existing tax levy to capital funds ($645,000) and towards the operations budget ($986,000) as 615 shown in the table below. 616 17 Qbhf!4:!pg!49: