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HomeMy WebLinkAbout09-02-2026 Personnel & Finance Budget Meeting Minutes (approved)OFFICE OF THE CITY CLERK BIANCA L. 'TIRADO, CITY CLERK PERSONNEL & FINANCE Committee Members Present: Committee Members Absent: Councilmembers Present: Others Present: Presenters: Agenda: SEPTEMBER 2, 2026, 5:30 P.M. Sheila Niezgodski, Karen L. White, Ophelia Gooden-Rodgers, Rachel Tomas Morgan, Caz Margenau None Sharon McBride, Canneth Lee, Heidi Beidinger, Sherry Bolden-Simpson Bianca Tirado, Jasmine Jackson, Lari' onna Green, Veronica Pitt-Payne, Bob Palmer James Mueller, Kyle Willis 2027 City-Wide Budget Overview Members marked with an asterisk (*) are in virtual attendance via Microsoft Teams. Please note the attached link for the meeting recording: https://docs.southbendin.gov/WebLink/Browse.aspx?dbid=0&repo=sbend&mediaid=413307 Please note the attached link for the meeting presentations: https://docs.southbendin.gov/WebLink/Browse.aspx?id=412347&dbid=0&repo=sbend Committee Chair Sheila Niezgodski called to order the Personnel and Finance Committee meeting at 5:30 P.M. 2027 City-Wide Budget Overview James Mueller, Mayor of South Bend, with offices on the sixth floor of City Hall, South Bend, IN 46601 , presented the 2027 City-wide budget overview. He gave a summary of macroeconomic conditions including inflation, unemployment, wage growth, and interest rates. He noted that competitive wages are growing faster than City revenues, presenting a personnel challenge. He described the City's fiscal position as strong and spoke about the overall impact of Senate Enrolled Act One (1). He noted that the 2028 income tax changes have been delayed until 2029, and the City is approaching a "soft landing" in the spend-down of American Rescue Plan dollars. Jasmine Jackson 0rrEF DEPurY Orr 0 .. ERK I 0rrEF OF STAFF INTEGRITY I SERVICE I ACCESSIBILITY Matthew N cal D EPurY Orr QERK / DIRECTOR OF POLICY Veronica Pitt-Payne D IRECTOR OF SPEGAL PROJECTS EXCELLENCE I ACCOUNTABILITY I INNOVATION I INCLUSION I EMPOWERMENT 300 City Hall I215 S. Dr. Martin Luther King Jr. Blvd. I South Bend, Indiana 46601 I p. 57 4.235.9221 I f. 57 4.235.9173 ! www southbendin.gov @ CITY OF SOUTII BEND I OFFICE OF THE CITY CLERK Mayor Mueller gave a detailed summary of various City funds. The General Fund is projected to have a surplus of seventeen-point-seven million dollars ($17,700,000) over the reserve requirement after implementing the proposed 2027 budget. The local income tax (LOIT) funds combined are projected at seven-point-six million dollars ($7,600,000) above the reserve requirement. The Rainy-Day Fund, which carries a three percent (3%) reserve requirement of total City expenses, holds approximately twelve-to-thirteen million dollars ($12,000,000- $13 ,000,000), with a surplus of approximately two-point-five million dollars ($2,500,000) above the requirement. He stated that the Rainy-Day Fund is not intended for routine use, since drawing on it negatively affects the City's debt rating. He showed a graph of the City 's cash reserve balance over time, noting that the proposed 2027 budget will slow the spend-down rate of the past few years. Mayor Mueller continued with an overview of projected 2027 revenues. He said property taxes are projected to grow faster than anticipated, while income taxes will remain flat to 2025 actuals. He noted that the City did not receive the expected special distribution from the state in 2026. He described other revenue sources, including enterprise utilities, building permit fees, debt proceeds, donations, interest earnings, and payments in lieu of taxes. He noted that declining interest rates will reduce the City's interest earnings. The proposed budget reflects an overall City- wide budgeted deficit of eleven-point-five million dollars ($11 ,500,000), with six-point-nine million dollars ($6,900,000) from the General Plus Funds, and the remaining four-point-six million dollars ($4,600,000) across capital and debt funds. He noted that deficits in capital and debt funds are expected, since bond proceeds will be spent on community projects. The deficit in the General Plus Fund is the reason for tightening expenditures. Mayor Mueller then presented the proposed 2027 budget by department. He stated that the overall City budget is essentially flat, with less than one percent (1 % ) growth. The Public Works budget shows a fifteen percent ( 15%) year-over-year reduction, driven by significant capital expenditures in 2026. He noted that the Police Department and Fire Department budgets contain placeholder figures due to pending labor negotiations. He said the two (2) departments with actual operational reductions for 2027 are the Department of Community Investment, with a five percent (5%) reduction, and Venues Parks and Arts (VPA), with a (3%) reduction. He explained that salary assumptions used across the budget include a three percent (3 % ) increase for non-bargaining employees and a three percent (3%) increase for Teamster employees as part of an existing multi- year agreement. Kyle Willis, City Controller, with offices on the second (2nd) floor of City Hall, South Bend, IN 46601 , gave an overview of the budget hearing schedule. He stated that today is the first (I5t) budget hearing and the Department of Innovation & Technology will present tomorrow. He said all departments have been informed that their presentations are due by the end of the day prior to their scheduled hearing. He added that a budget summary for each department will also be provided to Councilmembers. Committee Vice Chair Karen L. White thanked the presenters and said she will review the materials in preparation for tomorrow's hearing. EXC ELLENCE I ACCOUN TABILITY I INNOVATION I INCLUSION I EMPOWERMENT 300 City Hall I 215 S Dr. Martin Luther King Jr. Blvd. I South Bend , Indiana 46601 Ip. 574.235.9221 1 f. 574.235.9173 1 www.southbendin.gov ~ ~ CITY OF SOlITH BEND I OFFICE OF THE CITY CLERK Committee Member Rachel Tomas Morgan thanked the presenters. She asked Mayor Mueller to explain what Senate Enrolled Act One ( 1) originally proposed, what was changed during the last legislative session, and what the actual impact will be. Mayor Mueller said this is challenging piece of policy to understand, and the original proposal would have overhauled the local income tax structure starting in 2028. He explained that the City currently receives a one-point-seven-five percent (1.75%) income tax distribution from the county. Under the original bill, the City would have had to levy its own income tax, capped at one-point-two percent (1.2%). The county would then levy a separate income tax, raising the tax burden for City residents while reducing actual City revenues and disrupting City services. He explained that state lawmakers delayed the changes until 2029 to seek input from local government units, with many localities favoring a one-point-five percent (1.5%) county-wide income tax. He said this rate would likely keep the City whole, but property taxes could also face further reductions. Committee Member Ophelia Gooden-Rodgers asked if presentations and materials for future budget meetings could be provided in advance. Mayor Mueller said the administration aims to provide all budget materials at least twenty-four (24) hours in advance. He acknowledged that they do not always meet that goal. Citizen Member Caz Margenau asked what it means to have a "soft landing". Mayor Mueller explained that the City's cash reserves grew during the American Rescue Plan period, and there has been spend-down over the last few years. He said a "soft landing" means that spend-down will flatten out without dipping below the reserve requirement, which is fifty percent (50%) of operating expenditures or seventy-to-eighty million dollars ($70,000,000- $80,000,000). Councilmember Sherry Bolden-Simpson asked why the City did not receive a special distribution in 2026. Mayor Mueller said the state claims that the reserve in this account has been spent down and needs to be rebuilt. He acknowledged speculation that the state is holding these funds so they can offer relief to local governments when Senate Enrolled Act One (1) takes effect. Councilmember Bolden-Simpson asked if there is a chance that the City will receive special distributions in the future. Mayor Mueller confirmed that there is a chance. Councilmember Dr. Heidi Beidinger asked about the thirty-one percent (31 %) mcrease m interfund transfers projected for 2027. Mayor Mueller said interfund transfers are used to clean up after fund changes and closures. He asked Kyle Willis to elaborate on the 2027 increase. Kyle Willis stated that the increase is primarily driven by the wastewater and water utilities. He explained that those utilities transfer cash from their operating funds to their capital funds to cover EXCELLENCE I ACCOUNTABILITY I INNOVATION ! INCLUSION I EMPOWERMENT 300 City Hall I 215 S. Dr. Martin Luther King Jr. Blvd. I South Bend, Indiana 46601 I p 574.235.9221 If. 574.235.9173 i www.southbendin.gov (~ CITY OF SOUTH BEND I OFFICE OF THE CITY CLERK upcoming capital expenses. He noted that wastewater has a twenty-five-million-dollar ($25 ,000,000) capital program planned for 2027, and waterworks has its own capital needs and debt service payments. Councilmember Dr. Beidinger asked if the interfund transfers are primarily coming out of Public Works. Kyle Willis confirmed that is correct. Councilmember Dr. Beidinger asked about the frequency of this type of transfer. Kyle Willis said it fluctuates from year-to-year depending on capital project needs. He noted that utilities are rate-driven, so they have the revenue and fund balances to sustain those transfers. Council President Canneth Lee thanked the presenters. Councilmember Sharon McBride asked if there is a reason for the decrease in donations. Kyle Willis said donations have been high in previous years due to specific capital campaigns. He noted that donations are never guaranteed, and he is unaware of any current drivers. Mayor Mueller confirmed that donations are usually tied to specific projects and fluctuate accordingly. He explained that donors often pledge funding over multiple years, and the City will finance the pledged donations upfront. The fluctuation in donation revenue reflects the extended receipt timeline of these multi-year campaigns. Committee Chair Niezgodski noted that the proposed 2027 budget does not reflect a five percent (5%) cut across the board. She asked if cuts will be more significant in the upcoming years. Mayor Mueller stated that five percent (5 %) was the target for a balanced budget, however, the impact on residents and City services would have been too great. He said the administration has been working to slow the rate of reserve spending rather than achieve immediate balance, and more cuts will likely be needed going forward. He stated that public safety remains a priority, and any personnel cuts will be pushed out as long as possible. He noted that there is more urgency to make cuts in VPA since the Parks Fund had a one-million-dollar ($1 ,000,000) deficit in 2026 and the cash reserve level has fallen below the requirement. Committee Chair Niezgodski asked if the Parks Fund receives a transfer from the General Fund. Mayor Mueller confirmed that is correct. Committee Vice Chair White asked how a five percent (5%) reduction would affect the City's delivery of services, staffing levels, and community impact. Mayor Mueller acknowledged that there will be impacts. He said the City would not make these choices unless absolutely necessary, and they have worked to minimize the impacts as much as possible. He encouraged the Council to ask each department directly about its specific situation. He noted that leadership at both VPA and the Department of Community Investment believe their core functions will continue without disruption. EXCELLENCE I ACCOUNTABILITY I INNOVATION I INCLUSION EMPOWERMENT 300 City Hall I215 S. Dr. Martin Luther King Jr. Blvd. I South Bend, Indiana 46601 Ip 574.235.9221 If. 574.235.91731 www.southbendin.gov CITY OF SOUTH BEND I OFFICE OF THE CTI-Y CLERK Committee Chair Niezgodski asked where the City's tax levy is expected to land. Kyle Willis said it will be similar to last year, and it will be discussed in a future presentation. Committee Chair Niezgodski opened the public hearing. Tina Patton, 707 Sherman Avenue, South Bend, IN 46616, asked how the budget deficit and anticipated cuts will affect the City's continued investment in affordable housing and homeownership. She asked if there is a specific framework in place to ensure housing remains a priority. Mayor Mueller said the City is proud of its reputation around housing, and this is not something they want to slow down or stop. He explained that funding for housing comes from redevelopment funds and federal sources, which are separate from the City budget and not impacted by the deficit. He stated that growth is the best way to close the deficit, since property taxes on a single large development can generate enough revenue to fund several City jobs. Sue Kesim, 4022 Kennedy Drive, South Bend, IN 46614, followed up on her previous email to Councilmembers. She asked when the 2024 folder will be added to the Budget folder in the Finance public drive. Committee Chair Niezgodski recalled receiving this email. Kyle Willis said he would look into the concern. He clarified that no budget book was produced in 2024. Committee Chair Niezgodski recalled that no budget book was produced in 2024 due to a staff transition. She asked Kyle Willis to provide any missing budget presentations from 2024 to City Clerk Bianca Tirado. Clerk Tirado confirmed that the Clerk's Office will follow up. Committee Chair Niezgodski closed the public hearing. With no further business, Committee Chair Niezgodski adjourned the Personnel and Finance Committee meeting at 6:28 P.M. Respectfully Submitted, Sheila Niezgodski, Committee Chair EXC ELLENCE I ACCOUNTABILITY I INNOVATION I INCLUSION I EMPOWERMENT 300 City Hail 1215 S. Or. Martin Luther King Jr. Blvd. I South Bend, Indiana 46601 Ip. 574.235.9221 If. 574.235.9173 J www.southbendin.gov