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25 This staff report will describe the components that make up the 2026 budget and the resulting tax levy 26 increase. The first section will provide information on the “base budget” that was presented by the City 27 Manager on August 25. The base budget does not include the addition of the 22 public safety positions 28 nor the imposition of franchise fees. The following section will then provide information on three levy 29 scenarios that include additional public safety employees and considers the use and non-use of 30 franchise fees to provide additional capital spending and help lower the overall tax levy increase. As 31 franchise fees need to be adopted to allow Scenarios 2 and 3 to occur, the final section will review the 32 use of franchise fees to assist in the 2026 budget and levy. 33 34 Base Budget 35 The base budget covers a variety of existing programs and services. These include providing the basic 36 services of a city (police, fire, parks, streets, utilities, zoning and building code enforcement, etc.) and 37 addressing priorities that the community has identified (sustainability, focus on equity, a range of 38 housing options, volunteer management, multi-modal transportation options, etc.). Beyond those 39 demands, there are administrative functions that need to be in place to ensure that bills are paid and 40 collected, that there are the appropriate personnel in place to carry out city functions, and that 41 information about the city is available in various forms for taxpayers to access. 42 43 To ensure the City effectively provides services and programs that meet community priorities, annual 44 budget investments are necessary. Rising costs of supplies, materials, equipment, personnel, and new 45 mandates from county, state, and federal partners will increase the City's expenses each year. 46 47 This budget, like previous ones, reviews existing programs to find cost-saving changes. Although staff 48 achieve cost reductions annually, they are often offset by increases in other areas. Without halting 49 programs and reducing staff, these savings won't outpace the rising costs needed to sustain city 50 operations. However, this exercise is crucial as any savings help minimize levy increases. 51 52 An additional pressure is the expiration of grants or one-time funds that previously covered costs for 53 certain positions in the 2025 budget. Examples include embedded social workers and housing navigator 54 positions, and the use of Public Safety Aid to assist in funding the Police Department Commander 55 position, the Fire Department cadets, funding for Tubman, and the cost increases from the 2024 union 56 contracts. 57 58 Below is a table showing the dollar amounts in major categories proposed for the 2026 base budget and 59 the change from the 2025 budget. 60 61 62 Base Budget Levy Impact 63 The Base Budget as originally presented in August was proposed to collect $33,135,726 in property 64 taxes (City and EDA) resulting in a levy increase of 7.87% or an increase of $2,418,267 from the 2025 65 budget. 66 67 The increase to the levy amount reflects the higher costs to provide those current programs and services 68 with the existing employee base. It should be noted that the base budget does not include any new 69 personnel. On the following page is a summary of the levy impacts as part of the base budget. 70 Page 2 of 10 Qbhf!6!pg!472