City Council Special Meeting - 3.23.26

001Call to order this special meeting of the city council, city of Minnesota, March 23rd. Have remarks of visitors. Dia Copelan Dia Copeland 1000 Grime Street in episode, Texas. Mayor and City Council. A couple of items on the um special meeting that I just want to briefly address. And the number three, the annual audit report was not online, so I wasn't able to read it. However, uh what I would like to see is that we would not change item number five, the purchasing policies, until all of the audit issues are corrected, whatever they are in the report. There were some from the last report until we and until we've had two years of clear audits. You know, we're changing things, but maybe we need to clear up some things first. Then the real item I the

002not the real item but the next item I want to talk about is item number four the cons uh the compensation study report and recommendations. The um consultants pulled 20 people or 20 cities. There were uh 17 returned surveys excluding the counties. Five of those cities were within one hour of Navasota. So yeah, they probably are competitors. 12 of those cities were not. They were 2 and 1/2 hours away with one city even being 5 hours away. So, how are these 12 cities competitors for Navasota if they're 2 and a half and 5 hours away? Perhaps competing for leadership, I don't know. But general service employees usually don't move great distances for jobs. Page eight mentions jobs where the city has experienced high turnover or retention issues. There was no data to support that in

003that report. So where are the statistics for Navasota? You know, we we do have a good leadership team here. They've been here a long time. So it's rare that we have upper level turnover, but I still think we need to see what the actual turnover is. We need to see the employee exit survey results as well. Are people leaving for relocation? Are they being terminated? Are they leaving for money? Or are they leaving because of leadership issues? Uh I do agree with the step plan that was recently approved. I think that's a great thing to have in our uh our wheelhouse. However, in view of the very tight budget for the city of Navasota, I think we should look at the last 3 to 5 years of turnover data. We should also look at those

004exit surveys and the the data that shows why people are leaving and then decide on on a benchmark or a benchmark range for that turnover, an acceptable benchmark, and then focus on where those turnover areas are. If they're related to money, make adjustments to those salaries, but not to salaries in general across the board. Thank you. I appreciate your time. >> Item three, discussion on annual audit report for fiscal year 2425. Mr. Himinger, >> Mr. Mayor, u if you don't mind, we're going to take if we can take them out of order. The uh the auditor is still on his way. >> Okay. >> So, he he has sent everything and you've got it all in front of you. We just uh um >> item four the disc discussion and comp discussion on compensation study

005report and recommendations. Yes, sir. Mayor and council, we do have uh connected online to the uh to the meeting is Annette Hoffer with Logic Compensation um the consultant that did the uh salary survey and hopefully if everything goes as tested, we will be able to hear her and see the presentation and she will be able to hear us. >> Thank you, Robert. I can hear you. Can uh you see me? >> We we hear you. We cannot see you. >> Okay. >> I think it's more important that we see the presentation. If you want to share your screen, we'll see if that's working. >> Okay. We will go ahead and do that. Let please let me know what you see. >> And mayor and council, if you don't want to have to turn around, if

006the presentation that she's going to go through is in your packet. So, um, Lupe and I tested this last week and it is not coming up the way we had planned. Let me try something different. Try one more time. There we go. Give me one second here. Okay. Are you able to see the screen? >> Yes, we see that. If you can maximize it so it'll fill up the screen. Maybe that'll There we go. >> Okay. Give me one second here. And are you able to see the complete presentation? How was that? >> Yep. >> Terrific. Thank you so much. I appreciate your your tolerance and getting that ready. So, we'll cover these seven areas in our discussion today. And as we work through the materials, please do not hesitate to ask any questions. I

007cannot see the room uh the way the presentation is uh sharing. So, please talk loudly and let me know if you have any questions. My name is Annette Hayer and I'm a principal consultant with the Logic Compensation Group. And before we we begin today's presentation, I'd like to take a moment to share some information about the team that conducted and guided this important study. Andrea Gilmore, one of our consultants, and I had the privilege of conducting the study with the city. I personally bring over 30 years of experience in the public sector classification and compensation consulting to the study. Our team at Logic Comp Group has served more than 250 public sector clients nationwide with many located in Texas. Uh we had worked previously with Robert in conducting a similar study at Iowa Colony. Throughout

008this process, we collaborated closely with the city's study team as shown here, uh, meeting weekly or bi-weekly to discuss the study's progress and make key decisions on survey design and updates to the city's adopted compensation system. I'd like to walk you through the overall study process. The major objective of this study was transitioning the city's current adopted pay structure to better align with the market. To do this, we collected updated compensation data through a survey process and performed a detailed analysis to determine how each of the city's positions compares to that labor market. The study itself was conducted over a 5-month period beginning in November 2025 and running through today. And finally, the city plans to implement the rec recommended compensation updates soon, ensuring that the structures are in place in time to support upcoming

009budget planning. Let's take a look at the key activities and outcomes that guided the study from start to finish. This slide summarizes the major components of our work. Starting with the pay strategy. During this phase, we defined the city's desired market position, identified the labor market organizations for comparison with the study team, established benchmark jobs, and finalized the sur specifications. This step provided the foundation for the rest of the study. From there, we moved to the market survey itself. We developed and conducted a comprehensive pay survey, verified the accuracy of that submitted data, and analyze the results to understand the city's current competitive position. This phase helped us clearly identify where the city's aligned with the market and where adjustments are needed. With that information in hand, we turned to updating the pay plan, which

010included transitioning from the city's current adopted system to one that is aligned with the selected market and ensured internal alignment job to job. Next, we evaluated the cost associated with that implementation. And the goal of the study team was a consistent and fiscally responsible approach that treats all employees equitably while u minimizing compression issues in a s system. So the implementation options and associated cost estimates were developed based on some of those strategies. Finally, we planned um we outlined a plan to maintain the system going forward. For the rest of the presentation, we'll walk through each of these areas so you can see how they fit together. During the study initiation phase, we made two key decisions that shaped the direction of the study. The first decision uh involved determining the city's pay target, which

011is spec specifically is how we measure market alignment. The city selected the median of the market's pay range minimums as the target. A median or average of the market is a very very common approach for public sector entities to adopt. So this approach ensures that competitiveness at the entry level recognizing that employees will continue to grow within the range over time. We also took into account differences in pay range width and maximums across these organizations to ensure an understanding of how the city compares to the market. The second key decision involved identifying the labor market organizations to include in the study. Uh a list of comparators was developed to reflect the city's competitive landscape and we'll see those organizations on the next slide. On this slide, we outline the 20 organizations that were surveyed and

012selected by your study team. Uh they represent the labor market both in terms of competition for talent and geographic relevance as well as some size factors. And I want to draw your attention to the participation results. You'll see that nearly all organizations completed the survey. We did have one organization that did not respond but because the remaining participants completed the survey uh that me that impact was minimal. So this strong level of participation gives us confidence in the accuracy and defensibility of the market findings we'll discuss soon. Benchmark jobs are positions that are well- definfined and commonly found across many organizations as well as have reliable market data available. Um, we used we kept these things in mind and selected benchmark jobs in your organization that allowed us to create these accurate comparisons. You'll notice

013that the benchmark set includes positions from each of your departments. In this broad cross-section also ensures that we fully capture the full picture of how the city aligns with the external labor market across all job families and types. By collecting and analyzing market data for these 43 jobs, we were able to um establish reliable pay comparisons, identifying where the city is well aligned and pinpoint areas that may need some adjustment. First of all, all survey data was collected with an effective date of January 1st of 2026, providing a common point of reference. Once these data were received, we conducted a thorough verification and validation process, which included following up with organizations to clarify missing or questionable data, and asking for job descriptions and or charts as needed, ensuring that every data point used in the

014analysis was accurate. In addition, our team performed data quality checks to identify any values that fell significantly outside normal ranges, ensuring that the final data set reflects typical market conditions for the labor market you selected. Finally, once the data was validated, we calculated the difference between the markets median actual salaries and pay ranges in those of the city. So this allows us to clearly see how aligned with the market each job or pay structure might be. So before we review the summary data, we'd like to outline a best practices approach for evaluating the competitiveness of the city's pay compared to the market. On this slide, you'll see the ranges that define different levels of market alignment. So when a job or pay range is within plus or minus 5% of the market, we consider that

015highly aligned. And this small margin accounts for the normal differences in job duties and the fact that really perfect or apples to apples job matches are rare. Um the difference between five and 10% above or below the market is still considered a line but suggests that the city may need to monitor more closely. Once we get into a difference of 10 to 15% it's categorized as misaligned indicating that compensation is beginning to fall behind or exceed typical market practices. And finally, once a job uh varies by 15% more from the market, it is considered misaligned. Uh this means that the city definitely needs to pay closer attention to these problem areas. So as we review the study findings, please keep these thresholds in mind. So, let's take a look at how the city's current pay

016ranges compare to the market. This slide summarizes the differences between the city's minimums and maximums and that market median pay range minimums and maximums. Remember that the pay target for all jobs is the median of the markets range minimums. So that comparison tells us how well the city aligns with the target. So starting with the general job group, we found that the minimums are 20.1% below the markets and the maximum are 26.4%. And these fall into the category of being significantly misaligned. For executive positions, the city is 14.2% 2% below the market at the minimum and 11.5% below the market at the maximum. These results indicate that these ranges are misaligned not as dramatically as a general group. However, the police structure shows the greatest gaps with minimums 33.4% below the market and maximums 28.6%

017below the market. Again, clearly significantly misaligned. For the fire group, the minimums are 19% below the market and the maximums are 31.2% below the market. These also fall in the significantly misaligned category. And across all jobs, we are also significantly misaligned. 17.7% at the minimum and 20.1% at the maximum. So these gaps illustrate the need for structural updates. The ranges are in place um today. they don't reflect the these current market conditions based on that selected market group. Meaning that some adjustments are needed to bring the city's pay structures into alignment with the one that the city has currently adopted. On this slide, we'll shift from looking at pay ranges to evaluating the city's actual salaries compared with the market. Here you'll see the percentage difference between the current actual salaries and the market's actual

018salaries group by job category. Again, um this this is a comparison of what people are actually paid. In all cases, significant misalignment is also found. When we look across all job groups, the city's actual overall actual salaries are 18% 18.8% below the market median. >> So, Robert, I'll let you set the stage for the next part of our discussion. >> Yeah, thanks Annette. Um, so mayor and council, what we talked about uh as as a committee and with the consultants was, you know, the likelihood that the city can't eat the apple in one bite. You know, the reality is we we do have some adjustments to make, but we have to also be um aware that we don't have an unlimited budget. And so what we looked at was a way to do this um

019hopefully in a two-step process where as we discussed when we adopted our budget uh last September, uh we talked about doing the salary survey, making adjustments to the to the structure and then doing what we could to implement that structure come somewhere around April, about the middle of the fiscal year. Um and and then if there if we couldn't do it all in April, then we would try to incorporate the rest into the October. And so that's kind of the approach going forward is uh we took as much as we felt like the the the budget would allow. Um using, you know, current real time data as to what vacancy rates with our current uh employment. uh our employee base h has given us some um money available to make adjustments that'll carry us through

020the end of the fiscal year uh and then roll the rest of the adjustment into uh the the October one new fiscal year that we will be talking about in the coming months. Uh and so that is the that is the path forward. We decided to take a a first step in April, get the structure implemented, get every employee onto one of the steps in the pre in the defined uh step plan. Uh and then the uh the process that we chose was to leave a 5% delta uh or a 5% adjustment to make um in October that would include both the this year's cost of living as well as the rest of the salary survey implementation that would catch all positions up to uh up to market at the October 1st. And so two

021steps, first one being in April. Um, and she's going to go through the costs of how that breaks down in in the plan going forward. And then the the second part would be uh to incorporate a 5% adjustment to the whole structure um in in the October pay um budget. Sorry. Did I leave anything out in it? >> I think you did a great job, Robert. Thank you. >> Okay. Well, let's let's see how we developed these proposed structures. Um, we're going to we're going to start with the general structure. So, to begin, the up the the updated structure includes a 2% difference between each step. So, this helps us create a conservative, consistent, and predictable progression for employees as they move through the pay their pay range. A second the overall instruct overall structure

022was increased by 16.2% when compared to the city's currently adopted step pay structure. Specifically, we base this adjustment on the more conservative of the two market differences at minimum we observe uh with the general group at -20.1% and the executive group at 14.2%. So then we added a 2% market adjustment to that 14.2% as of January 1st to ensure that the structures align with the start of that new fiscal year in October of 20 um October 1st of 2026. So this allows the city to maintain its competitiveness while accounting for some market movement impacts that occur each year. As part of the market alignment analysis, we also identified two positions that would require a grade change in order to match the market more accurately even after the overall pay structure adjustments. Those two jobs are

023the municipal court administrator which moved up one pay grade and the IT systems manager again recommended for a movement of one pay grade. So overall these refinements help bring this general structure uh closer to market alignment. So just like the general plan, the executive structure also includes 2% differences between each step. The same overall structure uh increase of 16.2% was applied. And one specific job adjustment was needed within this plan. And that was that the minimum of the assistant city manager pay grade was increased um to be above uh 15% above the the pay grade um which just represents and preserves uh the pay relationships and appropriate separation between senior executive roles in this structure. Now let's move into the police pay plan. So similar to other pay structures, the updated police plan uses that

0242% difference between each step for the position of police officer, sergeant, and lieutenant. We aligned each of these roles to the market minimum and then apply that 2% market adjustment. We also made a structural adjustment for the police cadet role which was previously aligned with your general pay structure grade G15. So now this position has been placed into its own dedicated pay grade which is set at 12% below the police officer range. So to support a more financially feasible career progression um and hopefully affordability, the police corporal and investigator employees will now receive a 1 or $1.50 per hour stipen in addition to their police officer steps. So meaning that if a police officer is promoted into the corporal or investigator role, they will receive that $1.50 stipen. If they decide that they no longer

025want to be a police corporal or investigator, that 100 that $1.50 50 per hour stipen comes away from their pay and their pay rolls back into the police officer steps. Finally, the police lieutenant was expanded um to step H. So this will align it with the number of steps for both the police sergeant and the fire cap captain which we will see shortly and ensures internal um consistency across the public safety pay plans. Just like the other uh pay structures, this fire plan includes a 2% difference for the firefighter position. The pay range minimum has been aligned with the market minimum and that 2% market adjustment applied bringing that structure forward to October 1st of 2026. And the fire captain pay range minimum has been set at 21% above the fire fighter minimum which maintains

026the separation between the front line and supervisory duties within the department. The fire captain is also aligned with the number of steps in both the police sergeant and lieutenant paygrades. So before we look at these actual cost numbers, it's important to understand the criteria and assumptions we made behind the implementation model. First, these cost estimates reflect the city's current employee information, meaning the calculations are based on actual incumbents and their current placement within your adopted pay structure. So a key principle of this implementation is that no employee will be paid below the new salary range minimum and importantly no employees pay will be decreased as a result of moving to updated structures. Employees must also be placed on step. And in order to um cretail a little bit of compression, employees with three or more

027years of experience in their current role will be placed at step A in their new structure to reduce that compression. Longertermed employees will be placed on the appropriate step based on the previously described criteria. One thing that's also important to understand here is that these cost estimates that you will see in just a second are shown only reflective of base pay. So they do not include any benefits burden, overtime or other forms of compensation. So let's look at these estimated costs associated with moving people into the updated pay plans. This slide shows the approximate cost of implementation from April to October of 2026 and that's based on current information. So each structures cost is outlined here. Um just an aside, there are no seasonal employee costs reflected here because no incumbents were included in those

028positions at the time of the analysis. So if we combine all groups, the overall cost of implementation for partial year period is approximately um $232,000, which equals about 8% of total payroll. So and finally, we'd like to highlight options that will help the city maintain its compensation system going forward. Um, first we recommend considering making annual adjustments to pay structures to ensure that they remain externally competitive. This may include monitoring sources such as your labor market organizations, looking at regional economic indicators like the CPI or using broader compensation research um that um are provided by groups like World of Work. uh consider making smaller incremental adjustments as you need to each year. If something's not working, don't be afraid to make changes. And these proactive approaches will help minimize the need for any significant pay

029jumps in the future and allow you to maintain a more um stable and predictable strategy. We also recommend that the city conduct a comprehensive salary survey each every 3 to four years. Um, these regular survey cycles also help prevent large and unexpected market gaps from forming over time. So, in summary, um, we'd like to express our appreciation for the partnership with the city study team throughout this process. Thank you for your time and attention today. We hope this presentation's helped to clarify the study findings and the recommendations. And at this point, I am happy to answer any questions you might have. Any questions? >> Uh, yes. Can you explain the steps? I think you got like step A, B, C, D, E. Uh, know you just been throwing out uh steps, but you hadn't explained

030what the steps are. Sure. This the step is a predictable way of moving people through the range. They're 2% between each step. So as long as your employees are performing, employees would move that 2% step each year. Robert, do you have any other plans for use of the steps at this moment or at this time? >> No, no, that was accurate. All I was going to add was it just just to clarify and what you said right there at the end or to expand on it, the uh the the steps are tied to the uh the employees annual performance evaluation. So as long as they meet the the criteria that we establish as the um standard for um satisfactory performance, they move up to the next step. So that AC across the course of someone's

031career here they move laterally up their pay grade um towards the top end of that as they master uh the requirements of their job which would be identified as a part of their annual performance evaluations. So it's it's not automatic. >> It is not automatic. It's based on satisfactory performance. >> Okay. >> Can you explain uh page 21 of the uh market comparison summary? >> Let me go back. um within the report. >> Uh you didn't give it to us on the screen, but it's in the packet here. >> Yeah, that would be the report, Annette. >> Okay, if you can give me one second, let me go to the report. Uh this is a detail of the data that was collected from each survey. Um we're we're looking at the the general screen on

032page 21. Um >> where are we at right now with our sorry what what line are we at now? It says under Navasota dated data. It's the gray heading. That's is your current data >> from uh what our employees are getting right now. Is that the average salary? >> Average salary. Yes, sir. >> Yes. >> If there's one incumbent, it would be that person's salary. If there's two, it would be the average of the two. >> And then what you're proposing is to the right. to the right is what the market data is what the market is showing us. It's the calculation of the median of in this case if you look at the actual salary and if we look at the 911 telecommunicator and I'm going to hopefully let me see if I can

033share this here one second here. >> Can you see that? Can you see that screen now? >> It has It hasn't come up. >> Okay, >> maybe. Yeah, I think we're moving now. Here we go. >> There it is. >> Okay, terrific. Okay, so let's just look at the um 911 telecommunicator. It says benchmark ID. We'll we'll just talk through this. So, >> hey Annette, just so just so you know that that's really hard to see on their screen here. Um Okay. Council has the luxury of having it printed in front of them, but not everyone. Yeah, that's a little better. >> Okay. Well, we'll try to move through this as much as poss. Thank you, Robert. I appreciate that. So the first few columns it where it says number of orgs FL LSA number

034of coverage average tip which is time and position. This is the data that we collected from the market. We asked some questions um about is your job exempt or non-exempt? How many incumbents do you have in your match job? and then how much time uh have the incumbents in your job spent in that particular job. So in this case the market's telling us that on average the 911 telecomators have on average about seven years in that job. The gray column headed columns with the dark gray gray where it says Navasota is dated that is all your data. So your average salary is 44,792 and then um your range minimum and maximum are also shown. If we scroll a bit here we will see the actual salary information. The column says market 50th percentile that's the

035same as the median. That's telling us that the market median salary is 49,193. That represents a difference of 9.8%. Your data is 9.8% below that market in terms of the actual average salary. and and it works the same way through the minimum and range maximum. You'll also see the range spread information. So this is the how wide those ranges are. In this case, your current ranges are 37 about 38% wide. The market's average width between minimum and maximum is about 34% wide. And you get your data here from the uh towns that you showed to us previously, right? >> Yes. Yes. >> Okay. You do know most of those towns are much larger than Navasota, much larger tax base. And uh we uh we don't have a big turnover in administration. So we can't say

036that we've uh trying to compete with surrounding towns. >> Well, when we define um a labor market and um Robert, please feel free to chime in. Um when we define a labor market, we're looking at not only size, we are also looking at geographic area. Who do you lose people to? Who might you gain people from? Um, and not and those decisions kind of form the basis for what organizations we might want to consider in the labor market. Um the city's study team um had some had some thoughts about who they'd want to include in that labor market and I'll ask Robert to um go into that in a little more detail. >> Yeah, thanks Annette. So, mayor and council um a couple as as Annette mentioned the uh geographic proximity you know we look

037at obviously that that is who we we commonly uh are competing with directly for uh for employment even firstline employment whether that's police officers or public works employees those cities immediately around us and honestly yes some of those are much larger than us and much larger tax bases and it's difficult for us to to simply compete with them. The other thing that that I have seen um in the time that I've been um helping uh with these types of evaluations is cities usually balance close proximity with looking at census data and trying to pick uh what they refer to as comparator cities that are close in uh population. So, uh, if I remember correctly, nine or 10 of the, um, 18 cities that we chose were chosen because they were between 10 and 15,000 in

038population or 8, I'm sorry, 8 and 12,000. I was thinking of previous city that I was in. 8 and 12,000 in population, which kind of landed us close in size to our city, which usually helps to make sure that you're looking at the the labor market of a a comparable tax base and and size of operation. Um, I I heard earlier that that they were referred to as competitor cities. That is not what the survey refers to them as. They are used at they are called comparator cities. And the the best practices that I've seen used over the years is you use both a combination of cities that are close in geographic proximity to you and those that are close in population uh to you. And so we looked at the census data uh and

039picked cities intentionally, not necessarily that were close to us, but that were close in uh population size so that we try. And then that kind of leads us to why the um survey instrument would use the median of those uh comparator responses and not the average or mean because when you have larger cities that pay substantially higher, you can you can unfairly shift the average higher and it would look like we were even further behind market. So when you look at the median, and we intentionally said for this first survey, let's just shoot for the 50% median, be right in the middle of all these comparator cities. We want to try to be the middle um number in that uh range. And and so it's not we're not using the average. So if one is

040$50,000 uh higher, they're not artificially raising the average salary. were looking truly at trying to be the middle number in that uh array of cities. And and so I I I think they did a pretty good job of of of coming up with uh reasonable comparator cities and coming up with with the proposal. Um, but you know that that's that's just my experience and so certainly open to whatever thoughts or questions or concerns that you all have >> with the channel employee from the the uh boots on the ground. >> Yes, sir. >> What are if this come reality what percentage will they get? Um the it's the the range the the pay range for the general employees was I believe 14% plus the 2% adjustment factor to get us up to October. So in

041total come October it would be 16%. Um that doesn't necessarily mean every employee is getting a 16% because they're going to get slotted into the pay but their range then did increase. So if they didn't get that full pay uh that increase today, they would have likely more steps before they would get topped out in their career so that they would have more career earnings potential uh because of the fact that we have implemented this um more market labor um driven system. >> I'm taking it that you're not really answering my question. Okay. uh don't want administration to get the biggest raise. >> Okay. They're not >> the boots on the ground. >> The biggest raises. Yes. Yes, sir. The the biggest raises are um as we saw from the um salary, our biggest are

042are in public safety. Our police and fire um are are both behind and and both have been have lost employees recently to some of those surrounding cities um and agencies. And the the I would say I I don't have the the specific exact for every single employee uh in front of me, but I would say the average of general um employees nonpublic safety in April is anything from 1 to 10% because it just depends on where they were in their structure and in their in their lifespan of their career. Um, and all employees would if if we move forward this, the plan would be to have all employees receive 5% in October on top of whatever they get in April. The two biggest turnovers that we have is public work and the police department. Is

043that correct? >> Probably. >> And from the chart she just showed us, those are the two biggest one that's behind on pay. >> Uh, police definitely is. Yeah. >> And the general. >> Pardon? >> You said the general and the police department was the two largest. >> Police, fire, and general are all all three. Yes. >> Yes. >> So, Robert, I may be asking the question way uh way ahead of myself, but I'm thinking ahead. I was as I'm looking at through this this past weekend. some employees going to get a pretty big raise. What effect will that have us when budget time come of raising taxes or not providing some services? Well, I I think the the reality is we have to we have to come to a decision of where we either pay

044our employees a rate that we feel like is fair and is uh competitive within the market or we risk losing the talented employees that we have and have difficulty retaining uh top qu top top quality employees serving the citizens. And I think that has been somewhat a reality. Maybe not in every position, in every instance. Um, but but I do think we've had uh even in the short time that I've been here some difficulty in recruiting uh what what I would refer to as highquality talent. Um just because we know our our pay system is is behind market. Just what he's kind of saying, what he's kind of getting at is do you see these do you see these numbers that are proposed being workable for the >> Absolutely. Yes. >> as as an amendment

045to the current budget and to the next budget. >> Yeah. Yes, sir. So the the short answer is yes. the the the numbers that we are implementing or proposing to implement in April um I I am absolutely comfortable with and then that will be the work of myself and and the department directors to really get into uh when we get into the the budget process um to to ensure that we can sustain getting this fully implemented that additional 5% um to to get us up to market and and and and evaluate. Okay. Well, does that what does that extra what extra does that mean that we don't get in this year's budget that we might have otherwise tried to get? Um and and frankly that might be a lot of the discussions that we have

046in this year's budget workshops uh to get your feedback as to uh your priorities and okay, you know, if we do this, this is what that means we might not be able to do and and to evaluate those things and prioritize them because as as with every single budget year in every city, we can't afford to do everything. And so it all comes down to priorities and um you we take our guidance from you all in in that regard. I know that when I first come um well not when I first a couple years after I was on the council, we had the same kind of study here done and um we had a uh survey um I think it was the NAV tech field of the citizens uh did a survey of what's important

047to the city for you and salary for the employees was not even listed there. It was just, you know, streets and safety. Uh, I don't want us to have to lay someone off in the near future because things are getting real tight right now of jumping up with a big pay increase for everybody. And from what I'm studying right here, I'm going to use this for instance. If the assistant city manager was still here, she she would get almost a 20% raise. >> Okay. Of >> she's not >> right. Of of of what you is proposing. And I don't know whether you're thinking about filling that position or what, but I'm going to say let's concentrate. I'm not I'm not against nobody but let's concentrate on the two lowest position and that's public work department

048and the police department fire department. >> So the the challenge there that that is absolutely what what is folks the the the focus of the study was to put the the adjustments on the positions that are are farthest below market and and that is exactly what the proposal that's before you. Um the the the challenge with saying you don't want administration to get payraises is it you will create what they refer to as compression within your system where you'll end up with um subordinate employees making more than their their supervisors. Uh particularly when we look at most of our um executive level employees or leadership team are salaried employees that aren't making a whole lot more hourly than their employees that they are supervising who are getting overtime and then oftent times are are making

049more than the supervisor. I understand what you're saying is, but my personal feeling is that we shouldn't give employees raises because of what data says. We should give them raises for their performance. >> So, I should wait till they threaten to to leave. >> No, let them leave if they want to leave. uh every administration that we have here, police chief been here 20 plus years, public work director been here 20 plus years and goes so long. So who are we trying to protect? It's the ones that in the boots that's the ones looking for a better job or better pay. >> Agreed. And and they're the ones that are getting the the vast majority of the proposal in front of you. Okay. I kind of read it different from >> What are you What

050are you saying? What >> I'm I'm saying that Well, let me ask you this question. If you're at liberty to say in the administration part of what's the biggest raise just one employee going to get, what's the biggest race? I I don't have individual employees listed in front of me. >> I just want to make for sure we take care of the boots on the ground. The one >> absolutely that is that is absolutely the commitment that I'm making to you. That that is the reason for this study >> because a couple years ago we had a study. I don't know what happened to that study, but two years ago and and now here we are again with another >> Well, it was four years ago and and and what I was told by I

051wasn't here then and what I was told from the staff that was here was the city couldn't afford to fully implement it. >> I've done it right here. It was in our 2425 budget right here two years ago. >> The salary survey. >> Yes. >> I don't believe so, but okay, I'll look at it. Yeah. But yes, the the salary survey that was done uh in 2022 uh I was told that the city at that time couldn't afford to fully implement it. So they did what they could, which is very common. Annette Annette will will offer that same from her experience as well. I'm sure um that it's it's common that cities can't afford to do everything. And that's why in this case, we said, well, let's try to do it in two steps. Let's

052get what we know we can afford now, get it in April, get it implemented, and then let's work through the budget process and see if we can make that that last step and get us fully implemented. There's a chance that we would come back and say, you know what, we we couldn't quite get there. We're going to get three of that 5%. Or something. A and that may be a reality that we have to come to to to live with that that we just couldn't do the full thing in in this year. And that's that's what we will live with. But, you know, that that was the the plan going forward was to try to do it in two manageable steps rather than trying to do it all at once or just saying, "Well, we

053can't afford it." >> Also have clients that will maybe go out and an additional year um in bringing their system up to market. Um the rub in going out beyond that is that the market has changed once you go beyond two years and you're looking at at different market data. >> And you also consider their the each employees current level of of pay. >> Yeah. which when you look at it individually, there may not be the need for a huge jump or or adjustment. >> Right. Well, if I'm looking at the chart right, I don't know have did you look at it, but some of the administration have been changed and the uh group pay just say for instance fire chief the fire chief have been dropped down from a group pay I'm not sure

054I'm following your question >> okay on your new plan that you're proposing you have changed the pay scale correct >> we did that in the budget Yes, sir. That that was a part of the adopted budget. >> Yes. But it's part of the salary survey right now. >> Well, adjustments to the to the system were adjusted. The only two positions um that she outlined in the that were changed as a part of this salary survey were the municipal court administrator and the IT systems manager. All other positions stayed in their same pay grade as as adopted in the in the pay structure. So we moved the pay structures overall and then because the market told us that those two positions were still not aligned with the market meaning that they were considerably misaligned with the

055market they were upgraded by one pay grade. So those were the only two jobs that moved that changed the internal equity or their actual pay grade. I just hope that we can come up with a plan that will work good for everybody. Uh I know nobody don't want taxes raised. Everybody will still want the services. Nothing being cut without raising taxes. Uh that's what I'm worried about because if we give this big increase, the money got to come from somewhere or something's got to be cut. >> Yes. Yeah. And you still have to fully evaluate all this information anyway. This is right. >> You think you can crunch everything in what we have right now without raising taxes or cutting services? Cuz I'm not in favor of doing neither one of those. Okay. I am

056comfortable with the April implementation. As I said, we will have those discussions going forward in the budget about the other 5%, but I'm comfortable with the the the proposal that she laid out for you today for the April implementation. Um, very much so. >> You know, it's hard to give somebody something to be able to take it back. >> Understood. Is there anything else I can help you with now? No, I I appreciate u very much what you did and it's u I think very very comprehensive and uh gives us gives us what we need to help make make our make our decision. >> Yes, sir. >> Thank you. >> Have a good evening. Thank you. >> Thank you much. right here. >> We're ready to go back to the audit or No, >> not

057yet. He had he had 6:00 miscommunication. So, he's on his way. Hopefully, he'll be here in a couple minutes. >> All right. Discussion on proposed updates to investment and purchasing policies. >> Yes, sir. I'll try to run through these relatively quickly. Um, I did put a hard copy in front of you, mayor and council, so you don't have to turn around. Um, it's underneath the audit packet because I thought the audit was going to go before this item. But we do have two items on tonight's uh agenda uh dealing with the investment policy um and the purchasing policy. And make sure this is working here. >> Yep. Okay. So the uh the the investment policy um one of the things that the uh public funds investment act calls on us to do is to review

058the investment uh policy annually. Um when when Michael and I got to looking at it through as a part of this year's audit, uh we realized it had not been done in a few years. um which doesn't mean that we had anything necessarily wrong, but we we wanted to get it before you get the uh get us caught up on the annual review of it. And that gave us an opportunity to make a couple cleanup uh edits on on how we actually invest our um the the the public funds uh to try to maximize the um the investment but while while continuing to safeguard the u the security of them um and to make sure that we've got um the appropriate controls uh over how the money is invested and and how that um that

059money gets handled. Uh so in this in this new proposed policy there's not significant uh changes that I would say but it cleans up the governance uh a little bit. It very specifically uh designates the city manager and the finance uh director as the investment officers. It says that we have to have the annual training that the public funds investment acts uh dictates us. It tells us where those public funds investment act training uh courses can be found and that we have to use one that is um that is recognized as uh providing uh the the legal training or the training that meets the legal requirements. Uh it has our control framework spelled out and does require us uh to provide quarterly uh reporting and an annual review of the policy. So, we built right

060into the policy that language so that it it just catches people's eyes in case it falls off the radar. It's it's a reminder to us. We did uh specifically uh spell out the investment pools. These are the state uh investment pools um that uh that we utilize. Uh that is a the the safest way for for the city to invest the money. it's in a a protected investment pool rather than uh something that gets locked up in a CD. Uh they are liquid. They they are most of them have liquidity that if you get it in before 10 or 11:00 in the morning, you get the money that same day. Um at worst case scenario, you get it the very next business day. uh as opposed to a CD where uh our investment um interest

061income is tied to a time frame that it that money is is tied up and so the the investment pools allow us that if something comes up and we need the funds we we have access to it. Um and in most cases it gives us better interest yield than the CDs anyways. Um, and then we >> again that aligns with what we're >> It aligns and again aligns with what we've been doing historically. We're just just getting a little bit clearer. Um, and then we we shorten down the list of authorized brokers and dealers. Um, not that there aren't other good financial institutions out there, but it becomes unmanageable if we've got 40 or 50 different um, banking institutions as a list to choose from and trying to monitor and maintain and figure out. You

062know, this gave us a good uh level of of competition. Doesn't mean we couldn't come back if if some other new bank moves to town and we want to use them. Uh it just simply takes us bringing it to you all one time and you all can make an adjustment and we can add that. And then depository institutions are separately are are handled separately through a separate procurement for our our normal checking account um instruments. So we use our depository for our daily cash needs. We use the investment pools as our primary tool and we use those brokers uh when we have like a uh a debt issuance or large fund coming in for a capital project. We need a safekeeping account uh or something along those lines. And again uh we've got um processes

063spelled out for um for how we utilize those. And again that that's what we've been doing. It's not a change. Uh we're just putting it in writing to to to make sure that we're covering it. So key points being uh the policy is simply being modernized and updated. Better clarity on governance. Um keeps us uh in a conservative uh investment stance, but PFIA, public funds investment act compliant uh with regard to the training and the requirements there. Um, we we reduced that exhibit B, that list of of authorized brokers so that we could manage it a little better. Um, and really it's just about better clarity and control. Um, not really a change in our investment strategy. Um, and then as we jump into, do y'all want me to pause? Anyone have any questions on

064the investments or you want me to go right into the purchasing? >> Does he need to read that item? >> Do you need to read that? It's all It's one item. >> Is it one item? >> It's two on the regular agenda. >> Sorry. Okay. >> Uh so the purchasing policy um I may ask for uh the the city's legal council to to offer some additional insight uh at the appropriate time. One of the things that that the reason we we brought this forth right now is um because there have been some changes in the state law uh with regard to purchasing authorities and what levels require um competitive procurement and so we wanted to make sure that we were uh in alignment with the uh that that state law. We also uh did not

065really have uh clear levels of authority and thresholds for approvals. Uh so this policy really goes into detail about what level um you know can can a department director approve, what level requires the finance director to also sign off and what level requires uh the um uh the city manager's uh approval on top of those other two. Um, so again, much more of a modernization and clarification. Um, just again trying to match Texas law with regard to competitive procurement. Um, and to outline uh the processes so that we we make sure before I jump forward, Carrie, do you want to add anything about the law that changed? I may have missed something. >> Yes, sir. It's uh the mayor the major change was uh increasing the amount at which the city has to go out

066for competitive bids. Uh prior to uh 2025 the amount was $50,000. So any contract that the city would enter with certain exceptions um emergencies uh public health and safety the city would need to uh engage in a competitive procurement process to enter into a contract that required the expenditure of more than $50,000. In 2025 the legislature changed that to $100,000. And so pretty significant change. I think that's the most significant change um with respect to the purchasing laws uh this past legislative session. So that is reflected in this new policy and as Robert pointed out there are different levels of you know something may only require a a PO approval something uh the next level up would require certain level of approval. the city manager could um can um uh approve expenditures of up to

067$50,000 and then anything um over 50 requires council approval, but the city would have to go out for competitive bids. Anything over $100,000. And so that's the general structure, but that's the major change. That's a from this past legislative session. And so then just I guess this kind of uh elaborates on what Carrie just mentioned. The threshold ladder is very explicit within the policy. It it kind of breaks down those those different levels of of um spending authority and the approvals that are required. Uh the the legal compliance section is very is expanded to include uh historically underutilized businesses which has been a recent uh change also uh in in the in the state procurement requirements. um and being clear that we're looking for the best value for our local community. Um not in all

068cases would that be the lowest price. Um and so we we have some definitions in there for that. The contract administration is is more complete uh requiring uh bid bonds and performance bonds at certain levels and those kind of things, spelling all those out. uh more formalized internal controls. Um and and again giving um guard rails for what the what thresholds are and when they when items have to have council approval, when they have to have city manager approval, and when we have to do a formal uh RFP or RFQ um process. And so this kind of uh illustrates uh that up to basically under $500. Uh the staff level procurement cards or staff level uh requisitions uh allow the department director to approve those. Uh when they get up above that, they have to

069have the department director as well as the finance director. 5 500 to to basically 5,000 uh 5,000 to 50,000. Again, more formal structure on how we have to get bids. Um, three written quotes. Um, it could be a sole source or or a cooperative purchasing program. Uh, it does require a purchase order to be formally issued by the finance department. Uh, and requires all three uh levels of approvals. And then anything 50,000 to 100,000 would come here um uh to council prior to. But um if it's over a hundred then that the change there is if it's over $100,000 it would require the competitive procurement. Um and so um the operational impacts are are requiring the departments to uh to document that they're that they're looking for the best price, the best value for the

070for for the expenditure of public funds. Um, council still pre-approves larger uh, purchases. It is a slight difference from today is 25,000. We're trying to get that closer to what the the state law. Uh, and again, we're only talking about budgeted expenditures. We're not just talking about the city manager can go out and spend $50,000 on something that wasn't conceived in the budget. That would require us to come back to you all for a budget amendment. Um and uh again giving specific finance oversight uh in certain thresholds. Um it we also tightened up our PECARD system. Uh it was timely because we had a new PECARD vendor that the state uh contracted with and they are in the process of distributing those pecards now. So, we took that as an opportunity to get new card

071holder agreements, to put new uh requirements in place, to require new training, and to require uh of our PECARD users uh more frequent reconciliation of their accounts so we don't have things like lost credit card receipts because they had to wait a month before the reconciliation happened. So, they're reconciling them the very next week um and getting those things filed with finance department so we're not missing uh documentation. still having some flexibility uh to to look at um opportunities like a cooperative purchasing or emergency purchases um making sure that we're consistently administering our contracts um and making sure that we have good uh process controls. So again the key points here uh really just modernizing tightening the governance um allowing us to administer the the purchasing policy uh in a manner that will be conducive

072to having the records for the audit uh when they come up. It does align our policy with current Texas law from the uh competitive procurement um requirements. add some plain language threshold table with defined approvals so it's very clear uh what spending limits uh are formalizes uh the use of co-op co-ops and and pecards as opposed to purchasing uh purchase orders um and again just uh allowing us to make some of those improvements that have been identified uh in our audits to make us more audit ready and to make sure you know we're we're um I don't want to jump into that topic yet but we're really excited that we're having the audit delivered tonight on time. First time in about 10 years for this city. And uh that that's an exciting milestone. And and

073while that doesn't mean uh that all of our work is done, it means we we've we've accomplished a pretty significant milestone and we're excited about that. And um and so this just allows us to uh continue that preparedness and to um be ready for um for the annual audits when they uh do come up. So questions on investment or purchasing and the auditor is here now. So when we get done with this we can jump onto that. I have a I have a question for Carrie. Uh in determining the the award of of a contract, one of the criteria was uh if the individual is a resident, if there are two bids that are essentially the same and one of the the biders is a resident that they would automatically get the bid. This is

074pretty easy to determine if you have a a single proprietor or a partnership. But if you have a corporation, does the residential thing go to the corporation or to the officers of the corporation? My recollection is uh the council member is that it would it would be based upon the uh the corporate headquarters where where it's you know the the uh where they're listed either um in the secretary of state's office what they designated as corporate headquarters. That's my recollection. I can I will check on that and follow up with you. >> Okay. I just want to make note that the state legislature did something to help us. That's noteworthy. >> Still uneven. >> No, no, I didn't say that. Is this is this are these policies as far as on the uh finance I

075guess in general kind of in alignment with the the government finance officers? Um >> yes sir that that is where a lot of our recommendations came from. I I don't want to put words in Michael's mouth, but yeah, he he spent a lot of time looking at, you know, the GFOA and public funds investment act requirements and and getting those incorporated into these documents again just to modernize them and to make sure that we're consistent with what today's industry best practices are. >> I was going to say best practices is what it's Right. Any other questions or comments on that? All right. And go back. I think uh they're here. So, we'll go back to item number three. Discussion on annual audit report for fiscal year 2425. >> Good evening, council. I apologize for my

076tardiness. that had 6:00 now for this meeting and uh thankfully was planning on being here early uh which is late but uh uh happy to report that we do have the audit ready and issued uh and presenting for you tonight. Uh I'll be utilizing this PowerPoint presentation to go over the results of the audit. Um I do want to first just uh let you guys know how much work has gone into this from city staff. Uh uh as you are aware at the start of this audit, there was right when we were starting um a change in personnel. Um and so uh Michael and his team had to jump in not only at a new role, but also had to get up to speed real quick to get an audit going. And so, uh, between,

077uh, Michael, Emily, Robert, and the whole team in the finance department, uh, they've done they they put everything they need to put into it to get it done and make sure that we have this ready for you guys, uh, for the March meeting. And so, my hats off to them for all the hard work they put into it. Um, uh, first, I do like to give a quick overview of the audit process, and I, this is the the workshop, correct? So, this, so I don't know if we're on a time limit or not. We're good. >> Um, but I do like to quickly go over the audit process. So, we do perform the audit in accordance with generally accepted auditing standards. And so, those standards require us to go through various phases throughout the audit.

078And that first phase being the assessment phase. So, uh, we look at anywhere where money is coming in or going out, we're looking to see what kind of controls are in place. Uh, so we have questionnaires, uh, that we have completed for each of those departments. We obtain any policies and procedures that already exist within the city. uh ensure that we read through those and have a good understanding of the process through that uh as evaluation as well as sample test each of those areas. So uh through those samples we make sure that what we see in practice is consistent with those policies and procedures and then from that we would make any recommendations uh which we were able to see already recommendations that we made last year being implemented because we didn't have the

079same findings or or recommendations from the previous year. um from the that would move into what's called the riskbased approach. So uh we evaluate the financial statement line items. Every line item within the financial statements has a different risk associated with it. So we do evaluate those annually uh to ensure we understand what those risks are and how that's going to drive and change the audit pro process in terms of what level of detail we perform the testing procedures as well as uh any modifications to those audit processes to ensure that we're comfortable with the accuracy of the financials. when all said and done. Uh and then we have a compliance component. So some of what you all were just talking about on the bid, we're looking at bid requirements. Uh making sure that the

080city did follow any uh other required bidding that needed to perform be performed during the year. Uh any grant activity that's going on. We're looking to see uh does the city require a single audit? uh if they had grants, were they following the compliance uh aspects of those grants to ensure that they are um properly funding those those those uh projects and spending those funds as uh required? Uh as well as the public fund investment act, all the all the requirements over the quarterly reporting and how those investments are are reviewed and how those are presented to you all during council meetings. Uh and we also review all your city council meeting minutes throughout the year. So if you all may have approved something that has a compliance component to it, we would evaluate those

081as well to ensure that those are in line and and in in accordance with those compliance requirements. And then finally the fieldwork phase. So that's where we're actually tying out the numbers for the year. So we're performing confirmation with third party wherever possible, bank, uh assessor, collector, what have you. Uh and then performing cut off procedures over year end. So uh anything that may happen after year end, we're about we're looking through that activity. We're seeing what might need to be acred back and did it already get acred back by the city or any adjustments needed to ensure that those are materially reflected on the balance sheet. And then as we're tying out that balance sheet, we're also testing the material accuracy of your revenues and your expenses to ensure those are properly reflected. Uh

082once all testing procedures are done, it does go through multiple layer review in that conclusion uh phase to ensure that no additional audit procedures are necessary as well as that all required communication and note disclosures are in that report uh that we have for you this evening. Uh next, this is just covering the components of the audit report. So from front to back, first thing in the report is the auditor's opinion letter. That's our opinion over the financials. Uh and uh next is the management discussion analysis or the MDNA. And so that's going to give you uh a lot of highle activity uh information. So it's going to give you a comparison year-over-year from the previous year to this year. Um it's going to highlight any of the significant changes that may have occurred. It's

083also going to go over some of the more material aspects of the financials such as uh budgeted activity as well as capital related activity and your debt. Uh behind that is your basic financial statements. So that's going to include your governmentwide full acral statements as well as your fund level statements for your governmental funds and then the notes, the financial statements. And so the notes is the kind of that thick part in the middle of the report. It gives a lot of detail pertaining to those financial statements. Oftent times those statements may not mean a lot uh until you look into those notes to understand how those numbers were arrived at. And there's oftent times charts and breakdowns of those numbers as well to help you gain some understanding on uh maybe what changed during

084the year and and how those numbers uh total up to those financial statement amounts. Uh behind that required supplementary information. So that's going to be things such as your budget to actual for your general fund. Uh and then your TMRS schedules and things of that nature are in the other supplementary section. Um as it pertains to the auditor's opinion, there are four possible opinion types that we as auditors are able to issue. There's an unmodified, qualified, disclaimed, or adverse opinion. Uh, and the city did receive unmodified opinion. That's often referred to as a clean opinion. That's the highest level of assurance that we, as the auditors, are able to provide. I'm happy to report that it was a clean report issue. >> You might want to say that one more time, >> we do want

085to hear that. There are situations where you may not get it. Uh, so uh, but the, uh, the financials are materially stated and, uh, clean opinion was able to be issued. Uh next just highlighting some of the financial uh changes and highlights over the year. So this is first looking at the governmental funds. Uh this is comparing the ending fund balance for uh 2024 to versus 2025. Uh so that far right column is getting giving you that change uh comparison. So uh first the general fund overall had a decrease in fund balance of 1.1 million. Uh and that's just due to the way the city had budgeted things for the year. So there was a plan to draw down that fund balance and there is a uh budget actual on the next slide. Um that

086will break down that comparison to the budget. Um so that is utilizing that fund balance uh for very specific purposes and so the budget was actually in line with uh what we saw happen during the year and so um so no nothing surprising or concerning there. uh your debt service fund had an overall decrease in in fund balance of 118,000. And that's just due to timing of those uh those property taxes as well as use of those funds for uh future debt which often times you are you aren't trying to typically leave a large balance there and so that those funds being reduced down to being more align with what is needed uh is is is practical and what was intended for that year. Your capital projects fund had been clean cleared out the previous

087year and uh this year had an increase of just under two million. That's just due to those capital project issued debt uh debt the note that or the bond that was issued during 2025 uh to fund future capital projects. And so that was the uh that fund being uh funded through that bond issuance grants. there were an increase of 40,000 uh primarily due to uh a few grants that had uh come in that that it did not have expenditure requirements yet and so most of the activity within that fund were a wash of funds coming in and those funds being used. Uh so most of that uh typically washes out and there's not usually much of a fund balance remaining but there were a few grant funds that were issued to the city that um

088did not require expenditure yet and so had a remaining balance. And then the other non- major funds that is all the other uh uh non- major funds are funds that are not required to be presented as major. So there's a an evaluation that's done over every fund to ensure that all material funds are broken out in the front of the financial statements and the all all the other non- major funds uh can be consolidated but we do include a breakout of those funds in the back of the report for more detailed review purposes. uh but those are all special revenue funds primarily uh that are used for very specific purposes and so over uh from over 20 from 24 to 25 cumulatively there was an overall increase of 148,000 uh primarily uh I think hotel

089motel was one of the bigger drivers for that utilization of the funds did not uh exceed uh what funds came into there and then a few other uh amounts that came in over across the other funds that added up to that overall increase of 148. So everything looks to be in line with what we would expect. No no no no concerns over the utilization of those funds. Uh next this is the summarized view of your budget to actual for your general fund. Uh so view of that is on 74 your report but that far right column is going to show you the difference or variance between the actuals for the year and then the budgeted column is that far left column. Uh so revenues we saw a positive variance there of 98,000. So meaning 98,000

090more came in than was had budgeted for. Uh so always a good thing to have a little bit more come in than expected. U revenue or expenditures rather had a positive variance of 584,000. Uh meaning uh you came under budget by that amount. So uh general fund was under budget by 584,000 for the year. And then other sources and uses that's primarily uh transfers in, transferred out and also lease issuances. And so those those fall under that category there. We had a negative variance of 241,000 primarily just to those lease amounts coming in um uh more than uh than planned uh resulting in a negative variance there. But overall total net change for the budget was a total positive budget variance of 442,000. Uh so assuming the city did accomplish everything you were seeking to

091accomplish in the general fund, uh sign of a very healthy budget for the for the fiscal year. Uh and then on that slide at the end there, I always like to carve out and just point out the the health of the fund balance within the general fund. So we evaluate the health of the fund by looking at what the assigned unassigned portion of the fund balance is and comparing that to your operating expenses for the general fund that year. Uh and so typically we want to see at least 20% there. We recommend typically 25 30% as a target. Uh the city has a goal of 25% or 90 days. Uh and so for fiscal year 2025, the city's at 31%. Uh so comparing your unassigned fund balance to your expenses for the year. So uh

092another way to look at that, uh some people kind of will look at it and consider a reserve of sorts. And so how far would you be able to operate into that next year? Uh assuming expenses were evenly distributed and consistent with this past year, uh you' be able to operate about 30% into that year before needing more funds uh to run. Our goal was to increase that and slow you slowly impact it. >> Uh next this is proprietary funds. So these are those business type funds. Uh so these we look at and evaluate differently. And so uh we first look at the net operating income or loss for the fund. And so that's that first line there for the water and sewer fund. We see net operating income of 1.1 million and 999 uh,000

093for uh respectively. Uh those are again the operating activities for the fund and then gas had a loss of 491,000. I do want to point out that that line item does include depreciation expense which is non-cash. So from a a cash flow standpoint, it it actually is doing better than it looks there from an operating standpoint. Um, but it is important to factor in that depreciation expense as it does help to to plan for the future in terms of any potential repairs and maintenance type costs as well as potentially future uh infrastructure uh replacement and things of that nature. Um, and then that last item line item there is reflecting the overall change within those funds. So this is after both operating activity as well as any nonoperating activity. uh had an overall increase in

094the water fund of 487,000, sewer 453,000, and then gas had an overall decrease of 661,000. And then next, the communication letters. So there are two letters that come with the report. Uh the first letter being the communication with those charged with governance. Uh and so that letter goes over a lot of required communication as it pertains to the audit. It covers our responsibility as the auditors, management's responsibility as it pertains to the audit. Uh, and there are a couple things I always like to carve out from that letter and highlight. So, one being that the audit was conducted in compliance with all ethics requirements uh as it pertains to independence. Uh, two, didn't have any difficulties encountered when working with management and then three, audit adjustments that were identified have been or are in the

095process of being corrected by management. And then the second letter uh is a communication regarding internal controls. And so this would be where we highlight any recommendations or findings and things of that nature. Uh so there were a couple recommendations uh that were be that were made and management has is already actively implementing changes on those as well, but I'd be happy to to discuss or answer any questions you may have. I would like to ask the city manager a question. >> Sure. >> About the uh the gas. Uh I I do remember when I was attending the university class and then thereafter heard that gas was one of our number one revenue source and everything and looked like we was in a loss this past year. So that's not true anymore. Well, the the

096the budgets that I've reviewed for the last four years have have almost all shown um us breaking even on some years and some years being slightly under. Um and so I I do think that's something that that we're going to be looking at as a staff very closely. Um and part of what we're going to be looking at in this year's um uh rate study to to make sure that our rates are set, you know, where where our one one valuable thing that you all um did just uh the month before last in executive session is you have a new contract now for gas service which will um in most cases drastically reduce um our cost. Uh we had a three-year contract uh for gas that um we know playing armchair quarterback looking backwards we

097know was not the best price that we could have gotten uh for the gas over the last 3 years. Uh and so hopefully looking forward uh we will be in a better position uh to operate that system and and to and to be made whole on it. All right. Thank you. Thank you very much. I'm so glad that >> happy to answer any of the questions. >> So glad this is >> you might need to tell them what was the opinion again. My modified opinion. >> Say it into the mic very loudly. >> Yeah. Again, uh >> got that Connie. >> Yeah. again uh the the team worked really hard to make sure that that happened and so was happy to was happy we were able to get it issued earliest as it as you

098mentioned in a number of years. So u thank you all. >> Thank you. >> Pick up on item six. >> Yes. Um, mayor and council. So, um, discussion on 2026 MUCATs facility utilization agreement and fees. believe Tiffany's gonna going to cover this. This we we decided to bring this back because of the discussion that that occurred last month when we were talking about um giving a partial credit uh for this year's and there was some questions uh as to whether or not the um the fee uh that we currently charge uh covers our costs and whether or not we cover the uh lifeguards. And so, um, we we discussed we discussed the language in the, uh, current agreement with the mudcats, with the city attorney, and there's some, uh, my term would he may not

099use this term, my term would be ambiguous language that isn't real clear on whose responsibility it is to cover the lifeguards. And so, uh, we just wanted to get some direction from you all so that we can make sure that this year's agreement covers it clearly. Tiffany, you want to add anything? I I don't know if I left anything out from what you wanted to intro with. >> No, I I I think that's great. Um, historically, um, the expenses have not matched up to what they've paid, but also our pool at that time had a lot of run or had a lot of maintenance issues. So, there were a lot of years that they didn't have full seasons because of pumps going down, different things happening. So last year we brought to you a fee

100increase from 1,500 to 2500 because those renovations to the pool had been made to kind of start uh recouping some of those costs and uh you boil a frog a little bit at a time was our thought. So um it wouldn't really be fair to jump it up too far. So we went from 1500 to 2500. If you look in your packet, we included if uh we take the dates that they've given us in their agreement, the cost just for the lifeguards for this coming season would be about $4,737. Um which as you can tell their fee of 2500 does not cover. That also doesn't cover any kind of storage fees, admin fees, any of those extras, chemicals, things like that. Um so we are bringing this back to you to get your advice on

101how you would like us to proceed with that. Cara, can you explain about the contract how it was? >> Yes, sir. Um, kind of pull that up right now. The prior one, the language was ambiguous. the the contract had never been staff had never interpreted the contract or discussed with the MedCat's organization being responsible for payment for the life charts. Um and so when you look at that historic um interpretation of the contract by both parties, um in my opinion, if if there were a if the contract were presented to a court, the court would say, um we're we're not going to enforce that contract in a way that would say that the mudcats would be responsible for the uh the lifeguard cost because that it had never been interpreted that way or discussed between

102the parties that way. Um and so the language u I think was ambiguous in that respect and so that's uh that's why I came to that opinion and conclusion. I think moving forward we can definitely clarify that. But u the historic dealing of the parties with respect to that cost really I think was the primary um factor that I considered in terms of whether or not a court would look at that contract and say that the lifeguard fees were payable by the uh mudcats. So that's the reason for taking that position. Council member, >> when you say the cost of lifeguards for a full season is approximately $4737, >> talking about the season of the mudcat season or you talking about the pool season? >> No, the mudcat season. >> Just the mudcat season. >>

103Just during the time they are using the pool. That will be our cost of the lifeguard. >> And what is the number of lifeguards that we require? >> Uh there should be a schedule in your packet there. Um so it depends. Daily practice requires one pool manager, one lifeguard. swim meets require two pool managers and two lifeguards and uh then they also have an awards party at the end um which requires four lifeguards and two pool managers >> and Tiffany they raise their money by charging the fees to participate. Uh, correct. They charge 100. I I looked before I came. It's 115 per swimmer. They also seek sponsorships throughout the community. >> Well, definitely. I don't want to charge them $8,000 to use the facilities. >> So, did the 20 was the 2500 paid last

104year? >> Yes, >> it was. And you all at your last meeting provided a $500 refund and then towards this year's >> fee. So currently we will we are anticipating collecting $2,000 from them this year. >> Is there I think I asked this at the last meeting. Is there no way to um build in that the mudcats provide a volunteer lifeguard who maybe goes through the city's training program to be a volunteer? I mean it if thinking about softball or soccer, we don't provide we don't require them to pay those leagues to pay for umpires um through the city because they have their own lifeguard or their own umpires and referees and whatever else, you know, whatever they need to pay for. So is there a way to to work that in to help offset

105the cost? I would have to refer to Carrie with liability, but I would imagine the liability would be greater for the city. Uh, having somebody outside. Um, I would be concerned just with with a pool is very different than a baseball field. Um, and so we drug test our lifeguards. We have management over those guards. Um, we have supervisory capabilities. So, I would be really concerned bringing somebody from the outside in. I spoke to one of the uh former coaches of the Mudcats and uh he recommended that if the Mudcats are required to provide their own lifeguard that it be somebody separate from the coaches, somebody with just the responsibility of being the lifeguard because the coaches may be wrapped up in helping somebody with their stroke or something like that and not be aware

106of what's going on in the rest of the pool. So, that's that's a consideration and something that we we could consider. Uh what we consider since it's uh a month before they get started here, keeping it the way that we've had it in the past and get together between now, next year, and work something out with them. I think that'd be a great way to move forward with this, sir. >> I do too. And and I also think with that that maybe implementing a a three-year uh step plan like we did with baseball and football uh last year, I think also would be um more fair as far as being able to gradually increase those fees and that way they'll know too what to expect for the next three years. Then at the end of

107that three years, we re-evaluate. >> Yeah. records. Um, you know, my thought is that all the facilities that the city has, uh, I want everybody to use them, but we don't want to outpric them. >> Yeah. And those those numbers of of lifeguards, how is that number determined about how many, you know, that that total cost there, you know, as far as how many are there at any one time, >> right? So the state tells us how many lifeguards we need based on the number of kids in the pool. >> Okay. >> You say the state. I think it's Red Cross. >> Red Cross. Yes. Correct. >> So I just want to point out again that we could still potentially and I don't know that you had a chance to answer um having gone through

108this with them and in another lifetime last year. Uh if we had a volunteer who was maybe not a coach, but somebody that they had that was certified as a lifeguard that you could then train and you could have control over, but is it was not on the dollar that they would need to have? >> Not on the city payroll. Is that not an option? Is that something that would put us in I assume that there's liability? I don't know if it's more liability than having just our >> Isn't just the Red Cross certification all that would really be >> that's really >> required right >> I think before I give you a final answer I appreciate the opportunity opportunity to take a look at it but I think there are ways to contract around

109it if if that is the structure that the council would like to see you can obviously build in indemnification provisions into the contract first thing we don't want to happen is anything bad but you can you can contract around those things. Um the question will be do they have the financial insurance or backing to to >> that's right to to back up the indification obligation that they enter into. So >> when you're an employee, you get the benefit of the backing of the city and insurance. And >> yeah, I I think legally there's a way to do it. Um with the proper vetting, proper um indentification um but I would like the opportunity to take a a deeper dive into it. >> I did see their insurance policy for the previous year and so they

110did have a substantial insurance policy for the team itself. and the city would want to be added as an additional insured and those sorts of things. So, um I think there's a way to do it. I just u would hate to give you a final answer before really taking a look at >> if that's okay. >> Yes, sir. >> And I would suggest another concern just like when we rent any other facility, we typically like when we rent the Navasota Center, we have someone on staff to ensure that the building rules are followed and things like that. you we just had a $650,000 renovation of a pool. Well, are you going to have to have a staff member there to make sure it's locked up, that it's opened, that you know those rules are followed,

111so are you really saving anything? Um, >> don't get me wrong, I'm not I would not suggest that we not have a city person there, but if if there's a requirement to have three lifeguards and potentially we could have two that are volunteer through the organization and one manager of the from the city, I think that may be appropriate or maybe okay to help reduce >> just to reduce that cost. >> Yeah. I I seem to remember that at various times uh the mudcats shared the pool with general swing. >> If they did, it's been a while. >> Yeah. Well, this is in existence for a while and that if they didn't need the whole pool, if they could use half the pool, uh that perhaps that would satisfy the the requirement of of the

112cost >> and I will say they have worked with us this year um as far as moving their practice time back an hour so that we are able to extend public swim an hour which we previously haven't been able to do. So, with our fees in regard to little league soccer and versus the do the fees that we charge those associations do they cover all the expenses >> pro no um but I will say like with little league they put in a lot of their own dime right so they do a lot of maintenance on the fields themselves and things like that um but probably with the other leagues no when you when you talk about >> it's not any different Then the mudcats are not covering all expenses. The soccer is not covering all

113the expenses. >> Correct. Correct. >> That's I know we it would be great if they do, >> but I think that's part of us oper. The pool never makes any money. It's something that we offer to the community as a benefit and it's just part of that cost involved. all our expenses to break even. >> Quality of life, >> nobody be able to afford to swim. >> Yeah. >> But I think you got to be fair to across the board. If we give so much of a discount or whatever you say to soccer to the it ought to be uniform across and not try to make the mudcats pay all their expenses per se. >> But it's good though that in the discussion with them that they understand what costs are involved, >> right? And

114that's something that we we have talked to them about. They were not very happy with us last year when we increased by a thousand. But we explained to them, you know, the cost of the storage for the year and the cost of the lifeguards and things like that. And so I think that that helps smooth it over when they see the difference between the two. >> Okay. You got Yes, sir. >> what you need. We do. >> Thank you. >> I'm going to suggest we just push that last item to the to the next time, sir. Okay. To our put it on our on the next workshop.