2025-061 Budget Work Session ISR July 18, 2025 Report No. 2025-061
INFORMAL STAFF REPORT
TO MAYOR AND CITY COUNCIL
SUBJECT:
Budget Work Session Follow Up
BACKGROUND:
On June 17, 2025, a Budget Work Session was held. During the session, various City Council
Members requested additional information that required follow-up.
DISCUSSION:
1. What impact would a financial and or credit rating downgrade have on the City?
Municipal bonds are rated by independent credit rating agencies like S&P Global, Moody's, and
Fitch. These ratings reflect an issuer's ability to repay its debts, helping investors understand the
likelihood of getting their money back.
These assessments occur both when new bonds are issued and during annual reviews of existing
debt. A city's credit rating directly influences its borrowing costs. A decline in a city's credit
rating signals increased risk to the market,which in turn:
• Raises borrowing costs: Lenders demand higher interest rates to compensate for the
elevated risk.
• Impacts existing debt: Since current debt is reviewed annually, a downgrade can affect
the terms or market perception of previously issued bonds.
For instance, a 10-year AAA-rated municipal bond might yield 3.26%, while a lower-rated, high-
yield municipal bond could yield 5.59%. This significant difference illustrates the risk premium
investors demand for less secure bonds, making borrowing more expensive for lower-rated
entities.
2. When is it appropriate to use fund balance, and how much?
It's recommended to use fund balance only for one-time expenses that exceed the regular budget
and are in line with the fund balance policy. If fund balance falls below policy levels, it's crucial
to have an adopted plan to bring those levels in alignment with policy in the near future. Credit
rating agencies consider fund balances and fund balance policies when assessing a city's credit
rating. If the City were below its fund balance targets and did not have a plan to meet fund
balance policy levels, the City's credit rating would likely be negatively impacted, increasing
borrowing costs.
July 18, 2025 Report No. 2025-061
3. How much funding is available in projects that could be moved back to the General
Fund or reallocated?
Approximately $3.2 million was transferred from the General Fund to the Catalyst,
Sustainability, and Streets Fund. This item will be a discussion point during the August 9
Budget Workshop.
5. Could staff evaluate if DCTA is interested in being part of the sponsorship process
for festivals?
DCTA has expressed interest in participating in the sponsorship program. The City will work in
conjunction with DCTA and provide subsequent updates to the City Council. Furthermore,
DCTA has independently supplied additional shuttle and bus services for the event, incurring no
cost to the event organizers or attendees.
4. Is the City looking at utilizing security firms as an alternative for special events?
For FY 25-26 special events, the Police Department is assessing how security firms could be
utilized and whether it's feasible.
5. What was the final cost of the Police Headquarters?
The original contract for the Police Headquarters renovation, new Substation, and Firing Range
construction was $46,039,401.00,which included a $5.9 million Owner's Contingency. The
final contract value totaled $56,870,880, reflecting a$10.8 million increase from the original
contract amount.
This project went to bid in early 2020,just before the COVID-19 pandemic hit. As a result, the
construction phase was significantly impacted by pandemic-related market disruptions. These
disruptions led to increases in material costs and extended lead times,both of which contributed
to higher overall project expenses.
To manage these unexpected costs, the project utilized its Owner's Contingency and secured
additional funding. This extra funding addressed major cost drivers, including:
• Electrical,power,utility, and data infrastructure
• Interior finishings, openings (doors and windows), and exterior weatherproofing
• Technology, security, and audio/visual infrastructure
• Unforeseen operational impacts, temporary structures,underground infrastructure, and
owner-requested adjustments
To approve the necessary supplemental funding for these changes and cost increases, the City
Council passed two ordinances: Ordinance No. 21-2479 and Ordinance No. 22-2495.
July 18, 2025 Report No. 2025-061
STAFF CONTACT:
Jessica Williams, Chief Financial Officer
REQUESTOR:
City Council, Work Session Follow Up
STAFF TIME TO COMPLETE REPORT:
2 hours
PARTICIPATING DEPARTMENTS:
City Manager's Office