FY2022

support an annual dedication of $1 million entirely to initiatives identified in the Climate Action and Adaptation Plan. Building upon the Fiscal Year 2021 momentum of these initiatives, this budget expands these efforts while emphasizing the intersectionality of climate action and social equity. Second, despite new financial challenges, the budget aims to provide enough resources for making substantial progress on City Council’s Strategic Plan priorities and adopted Master Plans. The preceding pages of this letter outline several investments, which have been prioritized even amid the pandemic-related uncertainty, to advance each strategic plan objective. Third, this budget continues to respond to the State’s phased 2013 property tax reform while also grappling with new financial pressures brought on by the COVID-19 pandemic. As the taxable percentage of multi-residential rental property values continues to be reduced over the next few years, there will be increased pressure on the budget. In recent years, the adopted budgets have contained funding for new initiatives, maintained or improved service levels, and reduced the tax levy rate through a reduction in the debt service levy. The City’s ability to accomplish these objectives has been principally due to the robust growth in taxable valuations in recent years. This growth has offset the losses associated with the property tax reform phased implementation. However, the sharp drawback in development during the first year of the COVID-19 pandemic exacerbates concerns about our community’s ability to sustain the same level of valuation growth through the final years of property tax reform implementation. State property tax backfill payments currently total $1.5 million annually. This budget was crafted anticipating the increasingly real possibility that the state legislature will end or phase out backfill payments to cities and counties. Should the backfill not be funded, the City will be able to maintain status quo operational funding but will have difficulty meeting growing service demands and bolstering support for residents and businesses through the pandemic. Both past budgets and this budget include measures to financially prepare the City before the full impacts of the tax reform are realized. This not only enables us to shift resources and adjust operations gradually, avoiding abrupt service disruptions or steep tax rate increases, but also provides additional protection against a slower economic recovery from the pandemic than forecasted. An example of this preparation includes the aforementioned Emergency Reserve Fund, which was created after the tax reform legislation and now has a balance of approximately $5.2 million. However, while the City has taken such steps to manage the impacts of tax reform, maintaining service levels will require prudent decisions as the tax reform continues to be phased in through Fiscal Year 2024 and COVID-19 impacts continue. Finally, while special attention is given to the overall impact of tax and fee changes on our community during every budget cycle, this budget was particularly attentive to the financial struggles our households and businesses are facing amid the pandemic. Overall, the Fiscal Year 2022 impact to households is a 1.8% increase in City taxes and utility fees over Fiscal Year 2021. This includes a proposed $0.10 decrease in the City property tax rate, a previously approved 5% increase in water rates which was delayed due to the pandemic, and a state mandated increase

15