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HomeMy WebLinkAboutCouncil Minutes - March 9, 2026MEN am" .. Special City Council Minutes — March 9, 2026 Mayor Jerry Merrill Council Members: Bryanna Johnson David Reeser Colin Erickson Bill Biggins Eric Erickson Alisha ll'etjen (208) 359-3020 35 North V East Rexburg, ID 83440 Rexburg.org I Engage.Rexburg.org (Sty staff: Spencer Rammell — City Attorney Matt Nielson — Finance officer Keith Davidson — Public Works Director Alan Parkinson — Planning & Zoning Administrator Scott Johnson — Economic Development Director Deborah Lovejoy — City Clerk 12:00 P.M. City Hall Front Conference Room - Roll Call of City Council Members Review Audit for Fiscal Year 2025 — Matt Nielson and Rudd and Company Attending: Mayor Merrill, Council Member Riggins Council Member C. Erickson and Council Member Tietjen City Staff: Finance Officer Nielson, City Clerk Lovejoy and Deputy Clerk Gonzalez. Audience Members: Auditing professor for BYU-Idaho University, Kevin Kimball, Teresa Flanary auditor with Rudd and Co., Colton Sezlak, a BYU—Idaho student, Justin Marquart, who is also a BYU— Idaho student. Finance Officer Nielson explained that Rudd and Company serves as the city's auditor. He stated that Teresa Flanary is the lead auditor, and that a team of about four or five auditors work on the city's audit. On the city side Finance Controller Scott Miller and he are the primary individuals working on the audit. Finance Officer Nielson further explained that the fiscal year ended in September, and internally the city began working on the audit in October. The auditors came on -site at the beginning of January. He mentioned that there are a few changes related to the Governmental Accounting Standards Board (GASB) rules. Many of the changes involved SBITAs, which relate to leases and similar agreements, and those would be discussed later. Another change affecting the city's accrued absences, which required adjusting the way those accruals are calculated. He noted that they would show that change later. He also explained that another major change would occur the following year, when the MD&A section would have to be updated due to new standards. Although he could have chosen to implement the changes that year, he decided not to because he did not want the city to be the first to test the new format. He mentioned that he plans to attend training with GFOA, and he expected those trainings to cover the changes in detail, so it made sense to wait. Finance Officer Nielson said Mrs. Flanary will cover the first three sections of the audit report, after which he will discuss the MD&A section. Mrs. Flanary explained that three parts of the report belonged to the auditors, while the rest of the report belonged to the city. The first section, which covers pages one through three, is the auditor's report on the financial statements. She noted that the city has historically kept up well with accounting standards. The finance team regularly attended training and proactively worked to ensure the financial statements complied with required standards. She also mentioned that the team frequently contacted the auditors with questions when they were uncertain, which she described as both unusual and very positive. From a financial perspective, she stated that there were no material issues with the financial statements, and the auditors believed that the statements were presented appropriately according to the required standards. Finance Officer Nielson moved into the MD&A section. He explained that they will not review every page, because doing so would take too long. Instead, he highlighted some key financial points that he believes are important. Mrs. Flanary clarified that the document being reviewed is a draft; however, it is not marked as a draft due to computer issues earlier that day. Some page numbers still need to be verified, and there could be minor formatting issues that will be corrected later. She emphasized that these issues were related only to computers and not to the accuracy of the report. Finance Officer Nielson explained that the city's assets and deferred outflows exceeded its liabilities and deferred inflows by approximately $191 million at the end of the fiscal year. Of that amount, about $4.8 million was classified as an unrestricted net position, while about $38 million consisted of restricted assets, which were funds available to meet ongoing obligations. He also stated that the city's net position increased by about $16 million during the year. When reviewing the financial statements, the finances are divided into governmental activities and business -type activities. Governmental activities increased by about $7.3 million, while business -type activities increased by about $8.7 million. He then discussed fund balances. Governmental funds referred to non -utility funds, while business -type funds included utilities such as water, sewer, and sanitation. The governmental fund balances totaled about $25.7 million, which represented a slight increase of about $1.3 million compared to the prior year. Finance Officer Nielson explained that the item the City Council should probably care about the most is the general fund balance. He stated that the balance is approximately $5.7 million. He noted that it had dropped slightly and that the reserve level was now about 29%. He reminded everyone that 7 the city's policy is to keep the reserve between 25% and 33%. He also explained that projections for fiscal year 2026 showed that the reserve could decrease further, and the finance team is aware of that situation. He said he has informed the City Council for some time that the city will need to tighten spending, especially regarding capital projects. He added that if a recession occurs, the city will likely need to significantly reduce operational expenses as well. Finance Officer Nielson explained that over the last few years, forecasts for general revenues, particularly sales tax revenue, have remained relatively flat. Since sales tax had the largest impact on the general fund budget, this trend is concerning. Based on conversations happening at the state level, he expected that sales tax revenue might even decline this year. He also pointed out that one of the biggest challenges the city is facing is keeping up with inflation, especially in construction projects, where costs have risen significantly over the past five years. The city has been seeing those increases on nearly all its projects. From an operational standpoint, he noted that the city had experienced an average cost -of -living increase of about 2.8% over the last ten years. He recalled that the COLA for the upcoming year is around 2.7%, which provided some context for how costs continued to rise over time. He explained that many people believed property taxes were the solution, but property tax increases did not even keep up with inflationary costs. Because of that, relying on property taxes alone would likely lead to ongoing operational deficits. Finance Officer Nielson said that $1.3 million of the general fund balance had to be used as carryover to balance the fiscal year 2026 budget. He emphasized that this is an important point to consider, as it is the largest amount he has ever needed to use to balance the budget. Typically, the city tried to keep that amount under $1 million. Finance Officer Nielson noted that he would not go through every detailed explanation of the 7 financial statements. Instead, he briefly explained that some statements are prepared on a cash basis, while others used an accrual basis, meaning transactions were recorded when they became due or payable rather than when the cash is received or paid. He said they will discuss those concepts later. When reviewing the net position section, Finance Officer Nielson realized that one of the numbers shown was from the previous year and would need to be updated. He explained that the prior period adjustment would be removed, but the updated figures still reflected a net position of about $191 million, which he mentioned earlier. Finance Officer Nielson moved on to discuss large capital projects, which were summarized on page six of the report. He explained that the city did not complete many street projects the previous year, which he mentioned in earlier City Council meetings. However, the city expected to complete many street projects during the current year. He added that the timing of construction has been unusual, because many streets were built in late fall the previous year. Finance Officer Nielson reported that contributed assets had been very large the previous year, particularly from street infrastructure as well as water and wastewater systems. The contributed assets mostly came from new developments. Developers installed infrastructure such as streets, water lines, and sewer systems, and then transferred that infrastructure to the city. Once the city received it, it became an asset on the city's books. He acknowledged that it eventually created a liability in the future, since the city would ultimately be responsible for maintaining and replacing it. Finance Officer Nielson pointed out several of the major projects from the year. One of the largest n was the new sewer line designed to serve the Teton, Rexburg, and Sugar areas. The city had also purchased land for a future police facility, which has become a topic of discussion. The city paid about $1.3 million for the land, but an appraisal valued the property at $1.5 million. Because of that difference, the city recorded $200,00o as contributed assets, reflecting the value that had effectively been contributed beyond the purchase price. He also noted that the city has been working on upgrades to the wastewater headworks, where a major project has begun. He explained that this project would likely continue for several years. In addition, the sanitation shop project has finally been completed. He said he would not go through every project listed but noted that the report reflected the early stages of several large capital projects. Lurke Capita Item ERpi used(aver $100,000) included: CONTRIBUTED CAPITAL FROM DEVELOPERS TO STREET 8 4.359,330 SEWER LINE REPLACEMENI'/UPSI!-FJNEW LIPTSTATION-TET( 2318,997 IAND-POLICE ST'ATION(8200,000 CONTRIBUTED ASSET) 1,501,358 PLANT UPGRADE-HEADWORKS 1,393,009 NEW SANITATION SHOP PH Il 1,078,726 WATER RIGHTS PURCHASE. 715,912 NEW CAMEL TRUCK-W W COLLECTIONS 573.960 LID IMPROVEMENTS-W W COLLECTIONS 560,213 NEW GRADER -STREETS 466,716 CONSTRUCTION COSTS -LID SVPEET PROJECTS 394,125 son NEW STREET SWEEPER -STREETS 3BZ680 SEAL COAT/CHIP OR SLURRY SEAL STREETS 366,994 CHANGE TO RADIO READS IN WATER DEPT 340,198 WASTEWATER LINE REPLACEMENTPROJECIS 338,570 FIBER INITIATIVE CONSTRUCTION FINAL 327.291 FIBER SURVEILANCE/ACCESS CONTROL 274,318 LID IMPROVEMENTS -WATER 223,964 57H W RIVER CROSSING PROJECTIDESIGN/FEASABILITY 189,415 NEW TRAFFIC SIGNAL AT TREJO/YELLOWSTONE-PH II 147.735 9111 E BR1DUEUROAD DESIGN 144.444 ICE RINK INITIAL CONSTRUCTION FEES/IMPROVEMENTS 141,922 I+JON LAKES CLUBHOUSE REMODEL 137.657 TELEHANDLER STREETS 136,674 NEW PUMP AND MOTOR WELL p5 108,129 RUGGED COMM TRAFFIC SIGNAL SYNC SOFTWARFJEIC 101,357 NORSEMAN AIRPLANE PURCHASE -FLIGHT MUSEUM I001000 USED CAMEL TRUCK PURCHASE SHARED COST -WATER 100,000 Also see Note 83 on Pull. 41 to 42. Finance Officer Nielson moved to page seven, which provided a more detailed comparison of financial activity. The table compared governmental activities for the previous year and the current year, as well as business -type activities for those same periods. Another column combined both categories into "all activities." On the right side, the report showed whether the changes were favorable or unfavorable, with unfavorable amounts shown in parentheses, along with the percentage change. He noted that current assets had increased by about 4%, though he did not review every item in detail. He pointed out that liabilities had increased by about 26%, but he explained that this increase was not owe concerning, since many of those liabilities were simply obligations that would be paid shortly after the start of the new fiscal year. He also highlighted that capital assets had increased by about 12%, and the notes at the bottom of the page provided additional explanations for those changes. Statement of Net Position Comparison (2025 vs. 2024): Fesw.t(e Ooa wrnel Acn.mn Rue,ne.ry . Aenv'ulee All Attn,oe. (UM ee dde) Pactte 2025 2M4 2025 Net 202, WA ❑,e CTe,Se C.unent Anna S32591A43 131,135,581 127,451,637 326.516,/99 160.053.5110 S)],652.407 S2,40101) 4% C6ptel. Nantvirctn Mm! Wetted Ou&1 9f Rtaoutce, 9/592101 9314/281 6192232) 53474432 16D.314,424 141.621700 14A91,T74 1^(1) T.tel Asa IJI1I11,9N 121,213p16 99.3M.MD 79,M1.311 220d67,ON 205.Y75,111117 17-92,737 99a Currc.t Lubdac 6091,1.93 5,6922n2 3,64D,513 2.170,451 %.9l b[N 7.81 I1,051,/4)) -26%(2) lafbaftwenem labanm e.e nefettd w of Rmomw 11413111 11378319 1192 D1 9,114,656 19601,219 30,407,113 195,0➢6 4% Tou oethrh. r7,M1210 16,92111,781 134032415f.5 11-U&IO 29-dow 20.310.SM (I,TM9Y5) .8% C,ppul Aa,eu.7M d Related ikle 93,3311,11113 !r.054% 54,1]3,M3 45,)eooso 141,193,726 132,415,SA IS.M,147 12%(3) Resncad 15.533616 15,WS.812 2;494AT2 23.256,115 31.030.158 31.161927 113116% -2% UrcOUIIed 4/06153 1731N3 4AJ6.155 3.TI793 !n74.362 W%(4) TOW Ned Poldo. f tsisAta734 51oh,36),Ws S 77.MVIS S 011,6414311141 S 1914029.039 S 111.009J" 5 16.019.740 9% Nmm to the Satetorot of Net Poshioe Comparison t t) The City hd n laryc numtu7 of capita pm)con to plcted l0 time 1 aeel Year fas both govemmm W and bminest type funds (2) The busmas.type funds dracused in ppabks suhslcnlially as eumpmed In [be Prim year 13) Fee mmc 1 (4) ()mtstrio cd land balN¢[ maeaae'J ognif cand71W pa9emme tal de Iuta Because the City has not been required by the Governmental Accounting Standards Hoard (GASB) to list streets and storm sewers acquired before October 1, 2003, those items are not included in the ^a` Beginning Net Asset amounts under Governmental Activities. All acquisitions of streets and storm sewers on or after that date will he included. The City may decide in the future to estimate the historical cost of those previously acquired stTects and storm sewers and adjust the beginning balances at that time. Finance Officer Nielson moved to page eight, which focused on long-term liabilities. He mentioned the changes related to accrued compensated absences, which are required by new GASB rules. Previously, the city calculated this liability by taking the total sick leave and vacation hours owed to employees and multiplying them by their pay rates. Under the new requirements, the city had to conduct additional analysis to determine how much of that leave employees used or cashed out within the following three months. After adding these scenarios and reviewing the data, the calculation is slightly revised, /but the change was not considered material. 0 Cbvnges in lung -Term Llabilides: � A summary of long-term transaction of the City for the year ended September 30, 2025, is as follows: OD ON am. obl,aw 13u Ww uw LO 9/30=4 Iacmpd Pad W=023 Yw \ GamnmsYl AstFab: Aarm CsmpmLoa 6) S 1,04UM S 179)10 S S 1.226.133 S 1,226,1$2 \n-(s luk lJob"Y(�111 e39JW 223,990 1063,330 319,622 OP /I �FenadlYq,ec WlipOvn /t ak 12) I74,486 (51,692) 1n.W4 5I,N2 toe PgNkINw 13) 137.IM 22%,Wl 3%,m2 47,304 No mLbbdk5 (N, 141 e.351.042 (3,044560) SJ01,412 Gmammm,4 Anmurr 1�-I=I Aw,i 3 10.711.112 3 662.070 S (7.014,242) S 1.316.710 $ 1,704,M0 arrlar ypr ArlNalm: A"md Comp=sr dAbbsac.(N 61 3 115.050 3 1t'" S S IMAM S 166.O Net Pm,um La666Y (NW 14) 1.291,131 (310,409) 901422 wain UK) LM(1w 101 6.944.733 091,616) 6,74g137 2021101 Wpewasr ansez lboO.INw In) M,000 (730.1m) Nuueau,pe /utlnbn Lmyi roan libi6lsr S 9,151,6M S 31,006 S (1J69,025) S 7.113,615 S 361, 164 rpw to -I CM Litlditia S 19.900,516 S 693.076 S (4.463.267) S 16.130,325 $ ;073,924 'there are currently no outstanding General Obligation Bonds. 4overomental Activities Ibe format of the Statement of Activilics lists the expuroes first and then the revenues with a resulting Net Expense. The reason for this kind of format is to highlight the relative financial burden or subsidy of each of the functions on the general revenues of the City, including property tax, after that function's specific revenues arc subtracted. The next page contains a comparison of the changes in the net position from 2024 to 2025. nn Mrs. Flanary added that this outcome is important because if the analysis has produced a material difference, the city would have needed to record a prior period adjustment in the financial statements to reflect the change in methodology. Since the difference was small, the adjustment could simply be accounted for in the current year. Finance Officer Nielson reviewed the lease liabilities. On the governmental side, these mainly involved police vehicles that the city leased. He reminded the group that the city had been running the police vehicle leasing program for several years, likely around seven or eight years. After some discussion, the group agreed that it had probably been closer to eight years. He also mentioned that the city had been working with Bancorp to analyze the leasing program. Based on that analysis, the city had 171 decided to extend many of the leases beyond the original five-year term, since several of the vehicles were now reaching the end of those initial lease periods. Finance Officer Nielson explained that instead of returning the leased vehicles at the end of the term and selling them, the city had begun extending many of the leases for an additional two to three years. At the end of those extensions, the city would pay about one dollar to purchase the vehicle. This meant the city would own the vehicles outright and could then surplus and sell them independently. He noted that the city tried to maintain two different types of vehicles in its fleet. Administrative vehicles were typically kept longer because they did not accumulate the same high mileage and usage as patrol vehicles, although the mileage might appear low, the engine hours are often five times higher due to the amount of time the vehicles spent idling. Finance Officer Nielson said in addition to administrative vehicles, the city had also been purchasing trucks at the end of their leases. Many of these trucks came off lease after about five years with roughly 40,000 miles, and the city could purchase them for around $18,000. These trucks were then reassigned to other departments, where they would continue to be used for many years. He explained that departments like Parks and Public Works often kept trucks for 15 to 20 years, so acquiring these vehicles through the lease program had been very beneficial. Mrs. Flanary added that there would be some accounting changes related to these vehicles. In the financial statements, there are two categories: lease liabilities and finance purchase obligations. If the city planned to own the vehicle at the end of the lease, accounting standards required it to be treated more like a loan rather than a traditional lease. As a result, those items would move from lease ^ liabilities to finance purchase obligations in the financial statements. Although the classification would change, the underlying obligation remained essentially the same. The shift would likely appear in next year's financial report as assets moved between those categories. Finance Officer Nielson emphasized that the approach is very strategic, because certain vehicles — such as patrol vehicles —were not ideal for long-term ownership due to heavy wear and tear, while others could still provide many additional years of service. He also noted that the city still has a small finance purchase obligation related to golf carts, which appeared in the financial statements under that category. El Finance Officer Nielson reviewed the contracts payable, which are related to SBITAs. When asked to clarify the term, Mrs. Flanary explained that SBITA stood for Subscription -Based Information Technology Arrangements, which essentially referred to software subscriptions that the city used. Finance Officer Nielson reviewed the net pension liability, which was tied to PERSI, the Public Employee Retirement System of Idaho. Instead of calculating those figures internally, the city hired outside professionals to determine the numbers, since those specialists already had established systems and handled similar calculations for many clients. He explained that outsourcing the work had proven to be more cost-effective than doing the calculations in-house. on" Council Member Tietjen asked whether the change meant the city had paid less into PERSI. Finance Officer Nielson clarified that the change is due to strong investment returns over the past 18 months, which has significantly improved PERSI's funded position. Because the retirement system's financial health had improved, the city's reported liability decreased accordingly. Mrs. Flanary added that the number represented an actuarial estimate of the city's share of the pension obligation at a specific point in time. If PERSI had theoretically ceased operations at the end of the fiscal year, that number would have represented the city's portion of the funds needed to meet future obligations. However, because the calculation changed every year based on market performance and other factors, it was somewhat artificial in nature, though still required to be reported in the financial statements. Finance Officer Nielson noted that PERSI is considered one of the top -managed retirement systems in the United States, often ranked among the top ten. He believed this strong performance was partly because PERSI did not include health insurance benefits, which could place additional strain on retirement systems. Although employees did not receive health insurance through PERSI, the absence of that benefit helped keep the system financially stable and well -managed. He then noted that the business -type activities section contained many of the same types of liabilities and explanations. Finance Officer Nielson explained that the city has a water loan through the Department of Environmental Quality (DEQ). The balance on that loan had decreased by a couple hundred thousand dollars, leaving about $6.7 million remaining. He noted that the city was not in a hurry to pay off the loan, since it carried a 30-year term with a very low interest rate of 1.75%. Because of that favorable rate, the city simply made the minimum required payments each year. Finance Officer Nielson reviewed the wastewater revenue bonds, explaining that the city had likely been in about the fourth year of that repayment schedule. There is a full schedule at the back of the report that shows the details. He described the financing as a very good arrangement because the city had spent about $13 million on the project, but only $11 million needed to be repaid, since the first $2 million or so had been forgiven, effectively acting as a grant. The remaining amount was financed at 1.75% over 30 years. He noted that the city had paid off a sewer bond that year, which was positive news. However, the capital improvement plan suggested that the city might need another sewer revenue bond within about three years. He added that the timeline might be extended slightly, depending on how quickly future projects progressed. Council Member C. Erickson asked whether the ice-skating rink would appear in this year's report. Finance Officer Nielson explained that it likely would not appear immediately in the main section. Instead, it would likely show up in the combining financial statements near the end of the report. The project would also have its own fund, which has been created as Fund o6, so the city could track its operations and financial performance separately. Finance Officer Nielson reviewed the changes in net position comparison. The table followed the same structure as earlier sections, showing governmental activities, business -type activities, and a combined "all activities" column. On the right side, it indicated whether the changes were favorable or unfavorable. He highlighted a few key changes rather than reviewing every item. The first major change involved capital grants and contributions. He said he has never seen so many grants for sewer projects as the city had received over the last few years. These grants have been exceptional and have brought in a significant amount of outside funding for water and sewer infrastructure. For example, wastewater capital grants totaled nearly $6.6 million, compared to about $3.2 million the year before, which he described as a very positive development. He also reminded the group that the city had received a large pml• amount of contributed infrastructure assets from development. Finance Officer Nielson pointed out the investment earnings, which decreased by about one-third overall. He explained that this decline was largely due to changes in the market and falling interest rates. Additionally, as the city began spending more funds on large capital projects, the amount of money available to earn interest naturally decreased. The third item involved the sale of assets. One of the largest transactions was the sale of the Squires property to Valvoline. Although the property has not yet been developed, the city had recently signed a new agreement after addressing some issues related to the legal recording of the property. Valvoline is now planning to sell the property to another buyer. The city agreed that the new buyer would follow the same development timeline requirements, which required development within about three years. Finance Officer Nielson explained that the property was located near Stationary Place, in front of where the WinCo development was expected. The city had originally purchased the property for around $340,000. After acquiring it, the city took the land needed for infrastructure improvements, completed those improvements, and retained the necessary easements for future access and development. When the city eventually sold the remaining property, it made more than $400,000 in profit. He added that the outcome had been somewhat surprising. Two years earlier, the city had tried to sell the property with a minimum bid of about $350,000, but no bids met that minimum. The city decided to hold the property and later put it back on the market, where it eventually received bids of about $75o,000 and $820,000. He noted how dramatically land values had increased in that area along end East. He emphasized that the city did not purchase property with the goal of making a profit. The original purpose had been to support infrastructure improvements. The profit was simply a fortunate outcome, and the funds from the sale went directly back into street projects. I""+ Finance Officer Nielson reviewed the proceeds from loss on the sale or disposal of operations. The city began the process of disposing of the fire department's assets and debt early. The fire department transitioned from being operated by the city to becoming a fire district on October i. He explained that Fire Chief Childs needed to determine his cash flow, so the Finance Department began disposing of some operations and funds earlier than planned so that the fire district could manage its own cash flow. As a result, $2.7 million was transferred toward the end of the fiscal year so the fire district would be prepared once October arrived. He noted that the same process would continue in fiscal year 2026, when approximately four additional funds would be completely closed out and transferred to the district. He mentioned proceeds from the loss or sale of assets and noted that this category also showed a decrease. Finance Officer Nielson reviewed the Wastewater Fund, there were many projects, particularly construction -related projects. Finance Officer Nielson reviewed page io. Public Safety referred to police and emergency services. Emergency services included both the city's fire services and ambulance services. The city was still participating in a joint venture agreement for those services, and the page explained how those responsibilities are split. Nate to tba Stattauent of Chaaw in Net Position Cousparlson (1) Sewer received a large federal grans for sower line replacement for tam sugar. mxburg and had an increase in contributed assets (2) low am rates began to drop from the prior year and we spent down some of rho reserves on projects (3) Sale of Assets increased dramatically. mainly due to sales in street operations and the fiber fund (4) The city is no longer the employee of record for the fire dept as of 10/l/25 and began to transfer assets to the fire district for several fun is (5) to FY 2024 the city had done an audit of assets for all business type funds and disposed of a large amount of assets as compared to a nonsral year like FY 2025 (6) A large amount of construction projects ocoved, inleWing a ,saltation shop and several sewer Una replacement projects Below are some details about some of the activities found in the Statement of Activities. Governmental Activities Central and Administrative (Mayor & City Council, Economic Development, Customer Services, Information Systems. Financial Managcmcnt. Human Resources, Building Maintenance, legal, Planning and Zoning, Engineering, GIS, Building Safety, Shop, and miscellaneous other departments). Most of these departments' expenditures arc offset by revenues from overhead charges. Public Safety (Police and Emergency Services) It is important to note that the Police and Fire functions create the meant financial burden on the general revenues. but. customarily. that is what property tax is for. To provide the most efficient and cHectivc funding of fee and ambulance services in Madison County, the City of Rexburg, the Madison County Ambulance District, and the Madison County Fire Protection District have formed a joint venture doing business as the Madison Fire Department. Madison County reimburses the City for Ambulance expenses and its portion of shared expenses. Madison County Fire Protection District also reimburses the City for its portion of shared expenses. In Fiscal Year 2019, a change was made on changes for personnel in the joint venture from 5091* ambulanc e/50'/o fire to 481/16 ambulance/52% fire, which increased costs for the City and fire district to help alleviate funding concerns related to the ambulance district. Parks, Recreation and Cultural Arts The Parks Department is mostly funded by General Revenues. Only about $40,214 was taken in as parks reservation fees in 2025. The Recreation Administrative expenses in the general fund arc subsidized completely by General Revenues, while the Recreation Programs arc intended to be self-sufficient. In 2025. a transfer of $3,848 from the general fund was made to subsidize 2025 losses in the Recreation Program Fund. We anticipate the general find subsidy to the Recreation Program Fund to go away next year as we eliminated some programs with large losses and raised some rates to help this fund sustain itself in the future. 10 Finance Officer Nielson reviewed parks and recreation. Many people believed that parks generated significant revenue; however, parks only brought in about $40,000 and are therefore highly subsidized by the general fund. Recreation programs, however, had performed well. A transfer of $3,800 was made to subsidize direct program costs. Administrative staff who work in recreation are funded through the general fund, which acted as a subsidy because the department operated within the general fund. However, the recreation programs themselves cover their direct costs through program fees. This has been the department's goal. He noted that Recreation Director Lewis has done an excellent job helping move toward this goal, whereas the pervious Recreation Director had previously pushed back more strongly and believed the programs should continue to receive more subsidies. The goal is for the fund to fully support itself and eventually begin covering some overhead expenses. Finance Officer Nielson mentioned the golf course, explaining that it has exceeded its budget for expenses but had also exceeded its budget for revenues. The golf course experienced the biggest year it has ever had and was extremely busy. The City hired a Golf Professional during 2021 and ended the Golf Manager contract an December �A 31, 2020. This decision has continued to help the City and County to better address capital needs and reduce operating losses at the courses under this new model. The Golf Courses experienced their highest operating revenue and patron usage of all time in the Fiscal Year 2025. Major capital improvements continued to be made in 2025 at Teton Lakes Golf Course. In 2025 the operating fund of the water park Rexburg Rapids experienced an operating loss of $18,364. In 2025, the fifteen -year combined operating loss reached an amount of $233,642, which means Rexburg Rapids has operated with an average loss of S 15,576 per year in its fifteen seasons. 'lhc City Council also transferred 520,000 from the general fund in 2025 that will be kept in reserve for future major capital projects or repairs at the water park. The capital reserve carryover was $51,277 at fiscal year-end 2025. It is anticipated that the council will continue to transfer additional funds from the general fund for these ongoing capital replacement expenses and will likely need to increase the annual transfer amount in coming years to keep up with the capital replacement demands. Cultural Arts includes the Tabernacle Civic Center and Museum of Rexburg, the Legacy Flight Museum, the Romance Theater, and the Rexburg Cultural Arts fund. General revenues and taxes heavily subsidize the Cultural Arts Funds. The Cultural Arts Funds were subsidized over 5594,800 in 2025 by the general fund. Major capital projects are scheduled to occur at the Tabernacle with the HVAC project being the next phase of projects to be completed in 2026. Streets The Street operating fiord is funded by State Highway User I =, County Road & Bridge property Taxes, and other charges and is not subsidized by General Revenues, except for I OW6 of the franchise fees that have been allocated to that fund. The City shifted 100% of the franchise revenues from the general find to streets a few years ago to address the needed street repairs/replacement more quickly. The street operations fund transferred nearly $3.04 million to the Start reconstruction fund for future projects in 2025. ------------- Business-type Activities The Utility Departments include the Sanitation, Water, and Wastewater departments. The City maintains separate Capital Reserve Funds for Water and Wastewater that are funded through capacity fees and used for large construction projects to expand capacity. In 2010, the City started a project to expand the Wastewater Treatment plant and wastewater lines to increase capacity and to address some other maintenance concerns at the existing plant, which work was substantially finalized by the end of 2018. The improvements helped eliminate odors and with the disposal of bio-solids, and added new capacity as mentioned above. To pay for the construction maintenance upgrades and expansion of the plant, the city secured a revenue bond of 10 million dollars on December 8, 2010. which will be paid back with capital reserve funds and increases in utility fees. The city did complete a tax-exempt current refunding (refinance of bond) in June of 2020, saving 5309,460 in cash flow savings from interest savings (after fees) by privately placing this debt. Our final annual bond payment was made in 2025. The utility funds, which include three respective utility operating funds, water capital reserve, sewer capital reserve, water capital construction, and the sewer plant construction fund, decreased in cash and short-term investments by $1,364,444, ending the year with a balance of $23,453,870, which can be seen an the Statement of Net Position. Finance Officer Nielson reviewed the Rexburg Rapids operating loss of about $18,000, which was much better than expected. Over its 15 seasons of operation, the average operating loss had been about $15,500 per year. He noted that this was very good for a public swimming facility, since most government -operated pools typically operate at a loss. The speaker also explained that money from the general fund was transferred to cover capital replacement needs. Additionally, the city did not have to pay debt for the facility because it had been built through urban renewal and then donated to the city to operate. He explained that if the facility had been run as a for -profit business, admission would have needed to be around $20 per person during the first year just to break even, and it would likely cost OM" over $30 per person today. Finance Officer Nielson reviewed the cultural arts funding. Cultural arts included the Romance Theater, the Tabernacle, the Legacy Flight Museum, and the Cultural Arts Fund. The total subsidy for these entities in 2025 was approximately $595,000. A question was asked about the Legacy Flight Museum, and Finance Officer Nielson clarified that it was not managed by the Cultural Arts department. Instead, it was primarily operated by volunteers and City Clerk Lovejoy. It is simply categorized under cultural arts for budgeting purposes. He noted that the major project coming up was the Tabernacle HVAC project planned for 2026, while the major project in the past few years had been repointing the exterior of the Tabernacle. Finance Officer Nielson reviewed the streets fund. The main source of revenue for streets is the gas tax, also known as highway user fees. County road and bridge funding has not been a major source of revenue because it has decreased significantly over the past eight years. However, the city had been addressing this issue with the county commissioners, and the funding had increased slightly the previous year, which was a promising sign. The hope is that this funding will continue to increase. Finance Officer Nielson also explained that loo percent of franchise fees were allocated to the streets fund. This decision had been made about eight years earlier when the city recognized that streets and related projects were underfunded. For political and strategic reasons, the city transitioned franchise fee revenue from the general fund to the streets fund. However, the speaker noted that if the general fund were ever in serious financial difficulty, the city council could choose to redirect some of those franchise fees back to the general fund. Council Member C. Erickson pointed out that even with these franchise fees, the streets fund was still underfunded. Finance Officer Nielson also noted that the city expected to receive less funding from the state for street projects in the coming years. Although the state had previously provided an additional $3.2 million due to a surplus, that extra funding would likely not continue. Finance Officer Nielson mentioned the city's business -type funds and explained that these included enterprise -style funds such as utilities. The utility funds consisted of operating funds for water, sewer, and related services, along with construction funds. Despite completing a significant amount of capital work, the city's cash balance only decreased by about $3.3 to $1.4 million, which was considered reasonable. The city still maintained approximately $23.4 million in cash and short-term investments. He explained that the city managed its investments strategically. Working with Finance Controller Miller, they aligned investment maturities with the city's capital improvement plan so that funds would become available when projects required cash. Overall, the city typically managed between $48 million and $50 million in investments. The City of Rexburg provides wastewater treatment services to the City of sugar City and the City of Teton at a per gallon charge that includes operating costs. Both cities have provided their share of capital up front through the payment of cspftaIi7j,06X1eft that reserve certain mounts of capacity for their usage. Those two cities together provi a 6.43% o f the total monthly -billed revenue for the wastewater department. Sewer rates were last increased on October 1. 2025. Water rates were last increased on October I, 2025. Sanitation rates last increased on October I, 2025, Water and sewer capacity fees and Impact Fees were last updated December 7, 2022. The city anticipated rate changes for water and sewer in early calendar year 2026 and we are in the process of finalizing a rate study to also increase the water and sewer capacity lees sometime in 2026. the city received the final findings of the water facilities planning study at the end of2015 and began construction in 2016. The projected improvements required additional funding beyond that available in am capital and operating reserve funds. The water upgrades were funded with a combination of reserves and a loan that was finalized in 2022 from the Department of Environmental Quality (DF.Q). The loan included principal forgiveness of $2,211,300. The water project will provide needed production, storage, and delivery capacity to meet the current water demands and future water demands as our population grows. In 2012 the City began to provide curb -side pickup for recycling to single family residents at no additional onsl to the customer. In 2015. the majority of single-family residents were receiving the recycling option. The Recycling Program is a joint effort with a third -party vendor. In 2014, 2015, and 2016 it became necessary to increase the recycling contract expenses to maintain the program at its current service level. There was no increase in recycling costs in 2017. but a substantial increase in fees in 2019 was necessary because the vendor was no longer able to sell all recyclables and was forced to pay tipping fees for some items, which costs were passed on to the city. This same fee from the vendor was increased in 2022. The city is not currently seeking to add the recycling option to commercial and multi -family users because the cons have increased. and the value of the recycled products has dropped. When we recycle goods, it reduces the Madison County tipping Pecs expense we would otherwise pay fur disposing goods. The city analyzed recycling with the oversight committedcuuncil members during 2022 and dctermined to continue to offer the service with no changes, other than fee changes. FUND FINANCIAL STATEMENT ANALYSIS As noted earlier. One City of Rexburg uses fund accounting to ensure and demonstrate compliance with legal, grant and budget requirements. The focus of the City of Rexburg Governmental Funds is to provide information on the current year cash Flows and balances. Such information is useful in assessing the City's current year financing requirements. Unassigned fund balances that are not held for emergencies or cash Dow purposes, may serve m a useful measure of the City's net resources available for spending at the end of the fiscal year ,..a that could be added to expected revenues for the following fiscal year. The General Fund Balance (sec page 67) decreased by S 179,642 during the year. 'the Street Funds Balance (scc page 681 igcreaod hy$2;060,454eicaving a fond balan of S6,814,837 in the street opcmtiore. street repair, and street reconstruction funds. This carryover axe es t m 12 Finance Officer Nielson added that wastewater services are provided to the cities of Sugar City and Teton. Waste from those communities made up about 6.43 percent of the total wastewater processed at the plant. However, their waste was more expensive to treat because it traveled a long distance before reaching the facility, especially from Teton, and it was often nearly septic by the time it arrived. He mentioned that sewer rates had increased and that water and sewer rates were raised again in January. A new rate study was underway, and the city expected to receive the results within the next four or five months. Finance Officer Nielson referenced a water loan described earlier in the report and then moved to discuss the distinction between major and minor funds in the city's financial statements. The major funds are listed in the report. The general fund balance decreased by about $179,000, which was considered a positive outcome compared to what had originally been budgeted. Meanwhile, the streets fund balance increased by about $2 million, bringing the total fund balance to approximately $6.8 million. Although this was a high balance, the city has projects planned, and the funds would be used once those projects were engineered, bid out, and completed. 001041 Finance Officer Nielson explained that the remaining funds in the streets budget were largely committed to planned projects. Although the streets fund showed a high balance, the money was already obligated for projects that still needed to be engineered, bid out, and completed. Mayor Merrill added that this is important for City Council Members to understand. During council meetings, when discussing LIDs that the city does not have a large amount of money available to be able to cover all the Local Improvement District (LID) costs. However, Council Member C. Erickson clarified that the city did not actually have excess funds available, because the money has already been committed to projects even though it had not yet been spent. the stint impact fund. lbc fund balance will be carried over for projects that are already, planned and budgeted tar in future years. The F.magrncy Services Fund (sere page 69) is financed by three entities: the City of Rexburg (Im fire suppression services), the Madison County Fire Protection District, and the Madison County Ambulance District. All expenditures are billed to the three entities based on the benefit received by each.:he1undbWm;eis-n^mud*al mys-rem-hccausethe Overentities reimburse all expenditures. ,T%e P.mergmcy Services Fund ended the fiscal year $233,043 over u ge . The Local Improvement District (LID) Debt Service Fonds (see page 70) balance increased by S494,gLAuring the year. This fund balance chungcs each year as LID's are paid off and new LID's ara added. The Local Improvement District (LID) Consmiction_k_tuxis (see page 71) had no change in fund balance. lTic city attempts to close out these constructionfunds in the end of each year if they can. Police, Fire, Parks and Street Development Impact Fees combined were up in 2025 over 2024 and the city-collcacd in the amounts of $§9,596, SQ,-890 5326,528, and $429,908 respectively, totaling S.88,922 f ualified capital improvctnrnts in lfia c dcpertnnrnts. It is important to illustrate the need or Impml fees by looking at the fund balances of each respective fund to determine the health of than funds in providing the necessary capital in meet the demands of the growth in our community and its impact on am current service levels. At the rnd of the fiscal year 2025, the Police Impact Fee Ford was at $344,487. We hope to construct or purchase a larger police station in the near tioure and pion to save impact fees to help with this colt. The Fire Impact Fee Fund had a balance of $25,922, which will help fund the future replacement of rite engines and expanxinn at addition of Ore stations. the Parks Impact Fee Fund balance was $871,379 and is being accumulated for fume park projects, including the Teton River Park that will be constructed in the summer of 4026. -the Street Impact Fees Fund balmce available to be used for qualified street projects wai 82,487,295. T)te city finalized the respective Capital Improvement plans and Impact Fee Analysis fbrrachlypc of impact fee in May of 2020. We also perfarmed an update to the perks impact fees in May of 2023. We plan to update the capital improvement plans and impact fee analysis in 2026. "Thr Joint Fire Equipment Ford had a positive fund balance of $219,332, which comes (Trim contributions from the City and the Madison County Fire Protection District. These funds arc for fume purchasesoffire equipment and facilities. This fund is moving firms the city of Rexburg budget W the Madison Fire District 60dgeLin Fiscal. Y uir2026 mdwr,*Zg r to dispose of operations in 2025. The GIS (Geographic Information System) Fund was first created in 2004 to Imck the funding of the joint City/Coorty GIs Department on a 50150 financing split. Ilse golf courses, Teton Lakes of 27 holes and the Legacy Course of 9 holes. are jointly owned and managed by the City of Rexburg and Madison County. their governing boards appoint a Golf Board consisting of six citizens and a member of each of the governing boards to aetes t liaison to the Board. At the end of the fiscal year the Golf Operating fund had a caryovard $627.718`1lind much of this will go towards future capital projects. The Gulf Construction fu"rried ova 1212.900 and we plan to increase this find balance to replace the irrigation systems at Teon Lakes in five or am years. them was a tranater of $107.500 frnm the Unit Operations Fund to the Gulf Debt ServicciCupital Savings Food to help save for the irrigation pmjcct and to pay back the golf cans purchased with a loan from the city/county. Finance Officer Nielson reviewed the 9th East Corridor project, which had previously been referred to as East Parkway. The corridor runs from Barney to 7th North. The city had already purchased land PER for the road as well as surrounding park land. The bridge portion of that project had been at risk of cancellation by the federal government because the cost estimate increased significantly. The original estimate had been about $6.2 million, but engineers later estimated the project would cost approximately $23.5 million, and the project had not yet gone out for bids. During a call with project partners, there was concern that the project might need to be canceled. Finance Officer Nielson suggested that they request additional funding from the federal government while the city located additional funding sources locally. He proposed finding funding through urban renewal and the city's reserves. Although he initially doubted the request would succeed, the partners later confirmed that they had secured additional federal funding. The federal government agreed to contribute $4 million, urban renewal committed another $4 million, and the city planned to use its street impact fee reserves along with a portion of street operations funds to cover the remaining costs. The project was expected to go out for bid and move forward the following year. Finance Officer Nielson reviewed the emergency services funding. The city zeroed out that fund at the end of each year. Emergency services had gone over budget by about $233,000 that year, and they had been over budget by approximately $210,000 the year before. He explained that the city was working with Fire Chief Childs and County Clerk Kim Muir at the county level to revise the budgeting process within the joint venture agreement. They planned to meet in mid -March to discuss those changes. As part of the proposed changes, the speaker recommended implementing a target -based budgeting approach. Emergency services would present their requested funding increases, but the city would evaluate those requests against available revenue. If the department requested a large increase, such as 12% or 20%, the city might respond that it could only afford something closer to 6%. The department would then be responsible for adjusting its budget to fit within that limit. Council Member C. Erickson agreed and emphasized that emergency services needed to stay within*l� their approved budget. He expressed concern that the department exceeded its budget by $200,000 to $300,00o each year. Finance Officer Nielson noted that the city was typically responsible for about 35% to 38 % of any amount that emergency services exceeded its budget, with the remainder being shared by other entities. Finance Officer Nielson also proposed that if the department went over budget, the deficit should remain in the emergency services fund as a negative balance and be incorporated into the following year's budget. This approach would require the department to account for the overspending in the next year. Conversely, if the department came in under budget, the remaining funds could be carried over to help cover future expenses. He explained that this approach would incentivize the department to manage its budget more carefully, although it might also encourage them to request higher budgets initially. Mrs. Flanary asked whether this fund included wildland fire funds. Finance Officer Nielson clarified that wildland funds were not included in this fund, although they appeared elsewhere in the combined financial statements. Finance Officer Nielson moved to Local Improvement Districts (LIDs), which are another major fund. The debt service fund for LIDS had increased by about $500,000. These funds represented money the city had loaned for infrastructure improvements. He added that construction funds are typically brought down to zero at the end of each year within LIDS, which is normal practice. Finance Officer Nielson reviewed the impact fees. Impact fees have increased slightly compared to the previous year. The city collected approximately $900,00o in impact fees overall, including about $70,000 for police, $62,000 for fire, $326,00o for parks, and $429,000 for streets. Council Member C. Erickson asked how the impact fee distribution is determined. Finance Officer 7. Nielson explained that the city conducted an impact fee analysis for each category —police, fire, parks, and streets —and each fee had to be spent specifically within its designated category. The funds were tied to a capital improvement plan for each area. The city conducted these studies with Zions and was currently updating them. He emphasized that the funds cannot legally be redirected to other purposes. For example, the city could not take all the impact fee revenue and spend it on a single project outside of its designated category. He added that the updated studies recommended significant increases in police and fire impact fees. This recommendation was largely due to the increased cost of construction per square foot compared to earlier estimates used in previous studies. The parks impact fee study also recommended an increase, while the streets study was still being finalized. He said the council would be updated as those studies progressed. At the same time, the city was also reviewing capacity fees for water and sewer, which had not been increased since 2022. Those fees were also expected to increase. Finance Officer Nielson noted that about $ 2.5 million in street impact fees had been carried over, which would likely be used for the 9th East Corridor project mentioned earlier. The project's share from impact fees was expected to be closer to $3.2 million. Finance Officer Nielson reviewed the golf course fund. The golf course carried over $627,000, which he described as an excellent outcome. Historically, the golf course often ran deficits of hundreds of thousands of dollars and sometimes they had to borrow money to cover those losses. Council Member Tietjen asked about the difference between the Joint Fire Equipment Fund and the Emergency Services Fund. Finance Officer Nielson explained that the Joint Fire Equipment Fund was shared between the fire district and the city. Each entity contributed $io5,000 per year to the fund. The money was saved and invested until it was needed, and the purpose of the fund was to pay for major equipment purchases, such as replacing fire trucks. At the time, the fund had accumulated a balance of a little over $1 million. He clarified that this fund is separate from the Emergency Services Fund. The Emergency Services Fund primarily covered operational expenses, such as day-to-day costs of running emergency services. It included only a small amount for minor capital purchases. Council Member C. Erickson noted that although there is currently a carryover balance, the city would face a large expense in the coming years to replace the golf course sprinkler system. The replacement is expected to cost several million dollars. 10 Finance Officer Nielson explained that the city had renamed Fund 51, which had previously been called the Golf Construction Debt Service Fund. That fund had originally been used to pay off debt related to the new nine holes of the golf course, but the debt had been fully paid off the previous year. The city was now using the fund to set aside between $18o,000 and $20o,000 each year for future golf course improvements. The money came from subsidies from both the county and the city, along with a transfer from the golf course operating fund. The goal was to save enough money over about five years to begin replacing sprinkler systems, potentially one section of nine holes at a time. Finance Officer Nielson noted that the Legacy Golf Course would have a completely new sprinkler system when it opened, hopefully in April. Although the course had not officially opened yet, people had already been using it. The city had not placed flags on the holes yet, but golfers had still been going out to play. Golf Staff would soon need to work throughout the course to complete the additional sprinkler system work. Council Member C. Erickson clarified that Teton Lakes is officially open while Legacy is not technically open yet, even though people were already using it. Finance Officer Nielson mentioned that the course had been busy, partly because the Buddy Pass program has increased participation. Finance Officer Nielson reviewed page 14 of the report, which showed several net income numbers. He noted that the Water Capital Reserve Fund is an important fund. The city carried over approximately $5.56 million in that reserve. After reviewing the report, he clarified that some of the numbers represented a combined total for certain funds. Proprietary Funds "ITtc City of Rcxburg proprietary find statements provide the some type of information found in t government -wide statements, but in more detail. 'Ibese statements include information from b it capital reserve and operating funds. T �� Fund 25 is the Sanitation Fund Fund 26 the Water Operations Fund. and Fund 27 the )w0gewatcy '� Operations Fund. 'Ibcsr operating funds ended the year with net income of $8.735 8, of whit9'idi $4,658.629 was due to grants and contributed assets from developers. The Utility Operations Funds increased in cash and investments by $1,700,553, ending the year with a balance of $15,462.829 in cash and investments. The Sanitation Furid ended with a balance of S1,428,791. 'Ibe Water Operation Fund ended -with "a balance 9f $7,791,443. the Wastewater Operations Fund ended with a balance of $6,242,595. ' The Water Capital Reserve and Capital Construction fund ended with a combined balance of $2.43 million in cash and investments. The Wastewater Capital Reserve and Wastewater Treatment Plant Construction fund ended with a combined balance of S5.56 million in cash and investments. GENERAL FUND BUDGETARY HIGHLIGHTS Ibe City strives to maintain a total general fund committed fund balance equal to a minimum of 25%, or greater, of general fund budgeted expenditures for necessary cash now, for unforesrrn emergencies, and to mitigate current and future risks. At the end of 2025, the fund balance was 28.96%of the 2025 actual expenses. the city expects this fund balance to continue to decrease over the next few years as it anticipates the construction of or moving of the police station along with some other large capital expenditures for our historical buildings. A large portion of this carryover is also typically used as a fund balance carryover in the budgeted revenues to balance the budget from year to year. Revenues Total Budget of Revenues $ 19.276.200 Budgeted Cash Carryover (Deficit) 1,000,000 Budgeted Revenues Expected Net of Carryover 19.276,200 Actual Revenues Received (including transfers in) 19,432,747 Surplus (Deficit) of Revenues vs. Budget 156.547 Expenditures Total Budget of Expenditures 19,276,200 Actual Expenditures (including transfers out) 19,612,389 Under (Over Budget (336,199) Excess ( fiici cy) of Revenues over Expenditures (179,642) Fund Balance — Beginning Fund Balance 5,860,191 Ending Fund Balance $ 5,690,549 14 Finance Officer Nielson reviewed highlights from the general fund. The city had budgeted approximately $18.2 million in revenues, excluding carryover funds, but received about $19.4 million, including transfers. On the expense side, the city has budgeted approximately $19.27 million and spent about $39.6 million. Although spending slightly exceeded the budget, the city also brought in additional revenue. Overall, the general fund balance decreased by about $179,000, which is much better than expected. Finance Officer Nielson reviewed page 15 of the report illustrates areas where revenues and expenses were either over or under budget. Some of the discrepancies were related to GASB accounting entries for leases and asset obligations, which were difficult to estimate accurately during the budgeting process. However, some individual accounts or depamnents in the general fund showed variations that are notable (S100,000 or more): Significant Revenuers Gverage (Shortage) Sales Tax $ 539,050 Sale of Assets 254,769 Investments/Unrealized Gain (Loss) (�'12�9�,�65�4,,) Ice Rink Contributed Assct-4% (Did not happen yet) r r"s Federal Grant - Forestry (Out on hold) (312,255) GASB % Software SBITA Post -IT Dept 401,573 Police Admin• - GASB Lease entry Vehicles 607,338 Sieniftcant Expenditures Under (Over) Budgct GASB 96 Software SBITA Post- IT (Offset by above-nct SI2,054) S (413,627) Police Detective Wages/Bcnefits (99,059) Porter Park Irrigation Project not approved -Federal Grant 318,300 Ice Rink Contributed Asset -Offset by entry above 240,000 Police Admin'- Offset by Lcasc entry above (607,338) STREET FUND BUDGETARY HIGHLIGHTS Revenues Total Budget of Revenues S 9.5-5,-00 actual RCvenlleS Received (mclad111211:ttlsfets ut) 14.960. 3 2 Surplus (Deficit) of Revenues vs Budget 5.385 0 2 Expenditures Total Budget of Expenditures 12.495.400 Actual Expenditures (ulduding tiati4ers out) 12.000.27S under (Cher) Budget (404.S78) Excess iDeficiency)ofRevenues overExpenditures 2,060.454 Fund Balauce Beginning Fund Balance 4.754,353 Ending FwndBalance $ 6.814.W Finance Officer Nielson explained that sales tax revenues had remained strong during the year. Revenue from the sale of assets also performed well. However, investment income came in under budget. The city also did not receive a contribution related to the ice rink project because the project had not yet been fully completed and operational. Shortly after the facility began operating, the developer turned the project over to the city. As a result, the city expected to record a contributed asset of over $5 million in fiscal year 2026 once the official valuation is finalized. He also mentioned the forestry grant, which has not yet been collected. The city had recently submitted a test request for funding a few months earlier to see whether it could still receive some of the grant funds. The outcome was still uncertain, but the city expected to find out soon. Finance Officer Nielson reviewed the street funds. The city had originally budgeted about $9.5 million in revenues for the street fund but received nearly $15 million. This higher -than -expected revenue contributed to an increase of about $2 million in the street fund balance. He explained that part of this increase came from strong state highway user funds, including an additional $1 million that the state had provided due to a surplus. However, the city did not expect to receive that extra funding in the current year or the following year. Under significant expenditures, Finance Officer Nielson pointed out a transfer from street operations that was about $2 million over budget. He explained that this was a positive outcome because the funds were transferred into the street repair or reconstruction fund for projects. The city first covered operational costs such as snow removal and general maintenance through the street operations fund. Any remaining funds were then transferred into the street reconstruction fund to support future projects. The goal was to zero out the street operations fund each year by transferring the remaining balance into project funds. _ Council Member TYetjen asked whether the city expected to use those funds soon. Finance Officer Nielson responded that the funds would likely be used over the next several years, since street projects often take significant time to engineer, bid, and complete. He also noted that several projects had not started as planned, which explained why some expenditures appeared under budget. One example was an overpass project that had originally been planned but was canceled after the federal government withdrew $2 million in funding. The city intended to continue reapplying for federal funding opportunities whenever possible. Finance Officer Nielson reviewed Ambulance District funding. The speaker explained how the costs of the joint emergency services operation were divided among participating entities. Madison County 12 Ambulance covered about 42% of the total cost, the City of Rexburg covered about 36%, and the fire district covered about 22%. The Madismt Ambulance District paid approximdel f,12"%uof thenet c9sts�during the past fiscal year. The City and the Madiwn Fire District each paidabout 36% 22%Ipmspeetively. es w 1 LSD Operating Fund Revenues and Fxpcnsere both approxmfatc33,043 over budget - both because this fund is usually zeroed out at the end of the year and any savings or overture ore shared by the three entities imrrrediatcly. Tlue City's share of the net expenses was $1.893 352 of a $1,818,200 budget, or $05,152 over budget. LID CONSTRUCTION FUNDS BUDGETARY HIGHLIGHTS Rn enuue, Total Budget of Reeetntn OEM Acnral Rr•eaun Received uucludwa uwsEm uu 1.295.?9S Surplus (Deficit, of Revenue, rs Budget Ofi`><1.502 /1M Exueutdduues Total Budget of Expenditures ?.a95.aw1 Actual Expenditures ,including bau,fru our, L795.?9S L'nder i0veri Btdvt 2.699.50: Excess �Detiiciency. of Re,roue, ovei Expendinu rs LID DEBT SERVICE FUNDS BUDGETARY HIGHLIGHiS'`•..[,x, Pncnue, Total Budget of Recent cs $ a41.100 Actual Revenue, Received � including trmusfn s in 1 515.'4ri SuurpIm(DefrcitiofReviaaesys. Budget 13:=3601 Torah Budget of Expenditure, 1141,11.. aerial Expenditure, undudina nan+ter• out, :4 -.,, Crider, rhm! Budget oln.?-1 Excess (Deficiency- ofReveuues over Expendmat, -oliel Fund Mange Beginning Ftuud B+lanee 1 use i.-so. Enyng Find Bal.ume S I.484'eg. It is typical for a new LID debt service fund to be created each year and in sumo years to close on an LID. We have up to 20 indivich d debt service LID funds at a time curtrdicinted into this report. REXBURG URBAN RENEWAL AGENCY separately issued financial sutemcnus for the Rexburg Urban Renewal Agency, a component wit of the City of Rexburg is available at the City offices. Il Finance Officer Nielson reviewed the Local Improvement District (LID) debt service funds. These funds are used to help finance infrastructure improvements that benefit specific property owners. Construction expenses were first paid by a construction fund. After the project was completed, the portion owed by property owners was transferred to the debt service fund, which then carried a negative balance until property owners repaid their share over time. The general fund ultimately backed this balance. Because of this structure, he emphasized that the fund was not unlimited. Council Member Tietjen asked whether the city could eliminate interest in LID payments, Finance Officer Nielson explained that doing so would quickly deplete the fund. Without interest, many property owners would borrow as much as possible and take longer to repay the debt, which would strain the city's financial resources. Council Member Tietjen realized that the fund represented money owed back to the city and acknowledged that it could not be used to reduce LID costs. Finance Officer Nielson reviewed page 18 and provided an overview of the city's total expenses and what categories those expenses are included. The largest expenditures were for street construction and Local Improvement District (LID) projects, along with police services. He noted that fund transfers appeared to be one of the largest categories but clarified that these were not additional expenditures. Fund transfers simply represented money being moved from one fund to another. Because governmental accounting requires these transfers to be recorded, they appear as expenses even though they are not new spending. The total budget was about $73 million, but if fund transfers were excluded, the city's actual expenditures were closer to about $62 million. Overall expenses increased by about $1 ^ million, or roughly 1.3%, compared to the previous year. Street expenses decreased by about 18%, while police expenses increased by about 26%. The increase in police expenses was largely due to the purchase of land during the year. Finance Officer Nielson reviewed page 19, which showed the city's revenue sources. The chart contained many categories, but he highlighted that fund transfers on the revenue side must match the transfers shown on the expense side. Property tax made up only about To% of the city's total revenue, which he noted was often surprising to people who assumed it was a much larger portion. State tax revenues represented a significant share of funding, and utilities such as water and wastewater accounted for about 17-18% of the total revenues. 13 Actual Total Expense FY 2025 Total: S73,549,136 mama In maaa. .l Emergency Ford ➢aenha 9avlele All 1Len Bm) endues 11.032 Ba%1 Yaa; RNnanon. CURural Ant, 'of s,509 p%1 S0llbep Sarety 1.117(2%) Administration. DVOMad- meludlF Fear 5.7201s'bl Mneeltan.w.-. Airport 109(MI omen. LID Canwctl nni 8arvla 0.974 (n%) Shop 530(1%) Engineering 723 O%1 mtatmMr 7,981 111%) Pon. t0.0112 ome..727(6%) 114%) Gle Sa(1%) Mommn MI(S%) [Its Actual Iad 2iNpcnxm pie chn .locate the mktive rile of the Jcpmmens or entmoria of e.pema. lads 1.1 F.panealegory include hlahopaatingexpense and mpita plochaae.7enlc. Opmin, hi)una does lam tywieM, iMude capita e.,uue and is the ammunl needed is find the day. wday oprmioes of OM City ('ul+iW Fxpcnz is uwaly defiruJ x+en aperoc if Use herclit or item pumblood is apntW m last two or mine yam sect it depreciated ova medtiple yeah as delamired by the city's depredation whWule. Cannmetion (. generally. edge piece of th pie oath ynr and k capita in We. hot varisx sWdeiy from yar m ymr m am.uM. due who ovadahlc furling land the neodt eif that year. Fund 1'mnafen arc made between different falls m pay for ehr,a for Ietvices givsm se to fad da deficit position of fords with a umsfcr from the f rd Farad the mnl opens in 2025 imoa[W by sppoximemly 1 1%m S909.OW dollars compuW m 2024. We had Jon n,cr an 18% nduaion in area relaut pri,ects noes the prior you. hd pollee apm. ma by 2, " with gin pmchue of Isnd for a furore police stalion We dw n v a ling, immense, in arlagency oervice apensa as act bean to partially dispose of.paldmil in woad finds with the transition if the fire doptiom eel firm talc city at employer 1. the, fire district a the employer run frseal Y. Fund umst'ac saw. v,, lingo mett,dnn in e.fan[es nfever $3.4 million. Actual Total Revenue FY 2025 Total: $03.628.777 m.w.n o..wc rww elan eue[a.a,. Reston., elaxl rteo.n s,ns.e Adannxl ID a«.u.. 11.1111 ...n.uen.p.r .."metal w«r««e.«q.l.minl D.[«..w[lw Ltxl M[m[pMMb2iulnl Yw[I wllln4xl rr..«Aew.aorr u.en aW lnl tOYbMn.mllYl rwwp... a tllnp.A1 Wle".1 [p1rYbalesa"', heewry➢M«IasMe. A.III[nMl u.4ry [x. Anun.n 111nry rat. SMt oxl e.wn a ,all . xn la%I or..wa cwmwha. inn le*1 stallions Met .w.nrwr W �1 aW r.w 1n«A.1a 0`1 nl0ry c.assec.M4ae[] "ass's 11n1 I r. ca..ren IM C.naeWnaUMA(nI Illc Adud fnbl Racna pic than lows the m4tivc sia, of the asgaria of mooned by wuree. 711td RevmW cWcpricv include hop uperatin, .... oral revenue that is restricted in capital quchaa. Operating Revaoc deal rot inch* menne reserved for capita purchases and is the mmwnt n..led s fund the dry to day o,crati[ma of the City. Capital Revam it to"),' cOnW as ... nattered In be wednn ptrchoev lhul am 9,, and to lair tame mom yam Finad'I io efere and InwrfludChoget are made betwen different funds to Fey frct"as far emus give or in food des deficit position of o peniculu Itnd with A transfer from the General or another FLoad. IJD Asamemew ore roam chorpdi aphm a gmculu baefiled property for Improsmoab rage by the City thmugh a I.,o1 Improvement Ili Win (LIB). Ssa l'aa iwlude S.la I W, Fuel I'll, ud Li411se 7u 12cvmm tht ore dielribmed to lac ('ides by the 5ss of Idaho. II is mlevw id pint our Ipa aBegirt) and Rc.. impnnul it is s Ihc ids, l e xeifbeert of 8 , Ciry, is a rtlulwlY smell pun of the fwl NevenW tlWga. koul R Nridp litx is property luhe Imed by Ih Cnwdy f u Ihir Nrled R Poid,e hard Ihel xre tuned over by state Ilaw m Ibe Cin'. Ira amnWt sat Irmnerrtd is aW m hof the Rag 8 Hndp I u a inn pmpmies within des Ciry limiess. Ira Nog @ Hridp lax hadeerumd tsaulY far dosed year, Years. Iles intal rctam in 2025murcead by 3,91l6 or over S3.1 million dnlloa campuW to 1024. 1 Wad and None Small imcued dightly. Imnlmerd nminp d.cd by neuly fl million. Field 'I'maukri daraocd significantly fna the prior year with foil. overall pgats being .,lad Mayor Merrill asked about contributed capital. Finance Officer Nielson explained that contributed capital referred to infrastructure provided by developers, such as water, sewer, and street improvements that developers built and then turned over to the city. These entries were not actual cash revenue; instead, the city recorded them as both revenue and an expense, so they balanced out. The amount could vary significantly from year to year depending on development activity, and that year was a particularly large one. Finance Officer Nielson emphasized that pages 20 and 21 are some of the most important sections because they show operating expenses. In fiscal year 2025, the city had about $48 million in operating expenses. Emergency services accounted for the largest portion at about 22%. However, he clarified that the city only paid about 35% of the total emergency services costs because the expenses were shared through the joint venture. Police services were another major expense, along with water and wastewater utilities. Street expenses were expected to increase in future years as more projects moved forward. Actual Operating Expenses FY 2025 $47.971.715 x .r in assessment taMtbll MIl MXI sual0anp BMy Ia71Ys1 Recreation Ins filet 0.0 No 11%I ,teammates52IBM) Wal US 11%1 6hap 320llxl seen. as5111e%) Custaw eamen Mf (1%) "ayes 6 Cusped an (1%1s pal Come1.61^) eta o,&ona unceamgl Fana.wW aslegl.[wa n371i%1 some 62M II mi commonness tmaa loenlm) norm Rawu<n n1 ryxl Economic Davalopinaw Nalc Alhnnppefan nxl Calla cto Sao l warwN m reMdnab%1211]]1 12%I town 2nslexl F aMng is Zonm952y1%1 YWash seat (19Y) Pill, I M12%) I7a &1Wl openuag lspaec Pic dun law the rchm,l .izeof the dgsbnau.r accimnesof operating expenses. Operating Lxperse does not typically include capita expense fine& nod is the aminmt needed in find the day'm-day operational; ofthere City. Public Safety camona. which include the Police, Rm. and Amhusnce leparmems. alnpnu ab.m 39% ofe oprntinit expenses. This number has imroad tubvsnudly Ycu over year over yw win IheTiatf"App Thew Wtvl%ufwhichmindsgin .9hcct.Saninmm�. [lad WuuIlMlc4me. asmwtfasppo3imately Jl%vflhcupnadntlnpemn. Taal upernions acounsd fin 6%, leaving mepo mused, 24Ya far des ear Ofda d<pamnens mauy.xia. Actual Operating Revenue FY 2025 $49,450,039 (Chan Is m thmmennael Inurlund Che rges- Oveehead 4.053 (11%) Operating _ _ Property TaxlRood A Contributions. Bridge 8.514 (17%) 4.402(9%) permits & Licenses 1.796 (4%) Miscellaneous_ 3.90618%) Guilty C', 14,188 Franchrse FeeslROW Charge 2.389(5%) Pates Rim Golf Arts Charges 2.514(5%) Stain I.... 7.499 (15%) Its Actual Operate, Hsieh. is then lows Ifs held. ilxc of du atq.. of upwity revmm. Operating Revalue does not include marry mans fur capita expenses and is the smomp provided to find the day'tuday epaedmu of be City, Utility Chug,,, svheh include the Wanesua. Sanistlon. ud W.Icr oar fin, ire about 29''. ofth (mail Property 'I'u. Shim, l ace(with ft peahofit. load use A and InsrlW4 dsarym for Mrvra, �A yivc�l 7rmsfne) ire gmmfplepmu rev'emees tot can be used at des Ciry ('nut, it's direretirm Maly of the other atcpda tpaci6ed tic etch fed a epai.l platonic eg most be spat aceomino le the optmin8 apace ird.7aeed 6y �xilllsslY SS.i7 mi8ion or IZ . m ampemd m 2024, with Nine sw ne.,ramens il9nd du Ivgot ia'rave ..is, from Public safety fin amuxinuaely $4 million. Pula ..popes .Ben lararuing raenuea irKTc wd hy:lppmxim.aly e.', or S2 bN mdlm a w nl mW s 2f124, wilh inerwcd apprslximmlely5547.t319 send FanerpneySmim appmxiwslY'f3.49 milli�nm wbegern the largenunease awmilor in the utility clArya of7''. or SIIN9,I1,110. Misallaneomrcvauccrow mdi4m ofapm omatedesfiredcputnmtvamitiorstothethedsluauIheirnewmpluYaof apup iwauein mvalseofoverf683.000 in lope putJW maluye ulacm in wildlmdNaatn leased eat focal )ear. 'flu mull, uf<rutn, lima torobined had W ianam of $242.000. in 2 ampued to Ihc pros yell. fh,pany we, oarcesd appm.tmwly 6% whim Ittfsematia rystems showed a la,, to. lava the prior yen rile primarily Dun the reduction in mete sac of S': and m ineroem in fmchi.c end rips of wy ohxrym of g%. 'ITe imp)emanlauon of . caw GASH 96 rule regudinp suhmn lion -basal information technelo,y mcmm. fee, in lone on it. to met inerco. in Nulf re,cnun incrusted come 13%compered In th[ armgemas. All ohm depusann W Iw aimnifrcam in. or decrmvz. Fiber npma5 prior you. (F,orhsW IntrRmd chsrga increased 11% nr aPpoxim rely S41M.IM0. Its other docnaeed dp(feemiy once spin se wellopeating irarewa or do. care lax Jrutem, in other uw. N, II Mr. Kimball pointed out that police and emergency services together made up about 39% of operating expenses. Finance Officer Nielson agreed and explained that public safety costs have increased 14 significantly over the past four years. While general revenues had grown by about 19 % during that time, police costs had increased by over 40%, fire services by more than 6o%, and ambulance costs by over 8o%. These increases were mainly driven by rising wages and the addition of personnel. Council Member C. Erickson noted that the city had conducted a salary study showing that police wages had been behind market levels, which had caused the city to lose officers to other agencies. As a result, the city has increased police wages over the past few years to remain competitive. Finance Officer Nielson added that salary studies were typically conducted every five years, and sometimes they revealed significant market adjustments. Police and fire wages have seen particularly large increases in recent years. Finance Officer Nielson summarized that public safety accounted for roughly 40 % of operating expenses. Utilities made up about 31%, streets about 6%, and the remaining 24% covered other departments. Many of those other departments are considered overhead departments that support city operations. Some of their costs were reimbursed through internal charges to departments that generated revenue, such as utilities and building permits. These departments paid overhead charges back to the general fund to help cover shared administrative costs. Finance Officer Nielson reviewed operating revenues. Operating revenues totaled about $49 million, which was slightly higher than operating expenses. Utility charges made up the largest portion at about 29%, while state taxes accounted for about 15%. Other sources, such as the golf course and similar activities, were sometimes assumed to generate large revenues but represented only about 5 % of the total even in strong years. Internal charges between departments accounted for about 8 % of revenue, returning approximately $4 million to the general fund to help pay for overhead services. Mrs. Flanary reviewed page 23 and showed a government -wide view of the city's finances, which helped answer common questions from residents about why the city charged certain taxes or fees and where that money was spent. This page simplified the information compared to the detailed fund -level statements. The chart displayed the city's governmental activities across five main categories. The first column showed total expenses for each category, while the next column showed direct revenue, which refers to revenue that is directly paid for a specific service. Direct revenue included things such as fees that residents paid for services. These payments covered only part of the total expenses in most categories. CITY OF REXBURG, IDAHO STATEMENT OF ACTMTIKS GOVERNMENT WIDE ONE" For the year ended Septernber 30, 2025 Program Revomm Net Wxpenael Revenue and Changes In Not Position Charges Operating Capital for Services Grants and Grants and Governmental BustnewType Component FUNCTtONSIPROGRAIAS Expenses and Taxes Contributions CorMbut{ons Acdvldn Activities Total Unit PRIMARY GOVERNMENT GOVERNMENTAL ACTIVITIES Gonerat and AdminlstratNo S 0.335.133 S 5.692,456 5 3WA50 S W3.155 S (1,773,582) S S (1,773,662) $ Public Safety 18,097,687 4,172.293 3,697,179 433,128 (7,794,487) (/,794,487) Parfet, Got(, Recreation and Ans 5.144,412 2,767,WS 113,9f8 802,958 (1,859,720) (1,859,720) - Streets 6,885,497 2.758,198 - 6.375,244 2,575,940 2,576,946 - Int "M Eamso (tine d) 44,8li4 (44.6541 (44,654) Tatty Govwnrnanlal Aeftons 36,207,383 15,418,706 4112,345 7.979.5M (8.890 777) (8.B98.777) BUSINESS -TYPE ACTIVITIES Water 4,603,064 4,454,270 2.074,874 2.020,080 2,026,080 Waste Water 7,383,416 8,502,051 - 8,599,982 5.730.627 5,738,827 sanlsatfen 3.821.025 3,505,936 (110,080) (115.089) Total Buslna Act:rltles 16,487,505 14,462al7 8 674 if8 7 649 618 7 849 618 TOTAL PRIMARY GOVERNMENT S 61,694,88B S 20,581,013 5 T1112,345 1504,3 1 S (8,898,7T7) S 7,549,818 S (1,047,159) COMPONENT UNIT Rexburg Urbal Renewal district S 203,917 S 3 S S S $ S (283,917) GENERAL REVENUES: Property Taxes Levied for General Purposes 8,en.495 8.613.406 2,638A18 State Taxes 7.499.015 7,499.015 - Invesfinerd Earnings 1,318,219 790,620 2.105.748 333.138 Nliscetard"M 1.399,138 139,100 1.538,238 7,982 Proceeds from (Loss on) Sale of Operations (2,720.WM (2.720,900) Procce fs from (Lose on) Sale of Assets t92 6591 122,884 30 306 (13,820) Total General Revenue 16,014,408 1,052,493 17 068,899 2,866 718 Change In Nat Position 7.317,629 8.702.111 10,019.740 201,801 NET POSITION - BEGINNING BALANCE 100,363,096 68,846,204 175.009,298 7,249,790 NET POSITION - ENDING BALANCE S 113,660.724 S 77,348,315 S 191,029,039 S 9,831.600 The Accompanying Notes are an Integral Pert of the Financial Statements 23 Mrs. Flanary explained that when comparing expenses with direct revenue, most categories showed a ICI deficit, meaning the fees collected did not fully cover the costs of providing those services. Streets appeared to show a surplus that year, but that was mainly due to additional grant funding received during the year. In most cases, governmental services operate with deficits because they rely on general revenues such as taxes to cover the remaining costs. The remaining deficit —about $8.7 million —had to be covered by general revenues,'which were shown in the bottom portion of the chart. These included property taxes and state revenues. Finance Officer Nielson emphasized that property taxes were not designed to directly cover a specific service but instead helped fund many government services collectively. He explained that when residents asked why taxes could not be reduced, it was important to understand that lowering those revenues would require reducing services as well. Mrs. Flanary then described the enterprise funds, which represented business -type activities such as water and wastewater utilities. These services generally operated differently from governmental services 15 because they were intended to function more like businesses. Their goal was to break even or generate a small surplus through user fees. In that year, water and wastewater showed positive results, partly due to contributed capital from developers who built infrastructure and turned it over to the city. Finance Officer Nielson added that enterprise funds often showed a positive balance because of depreciation accounting, which set aside funds over time to replace infrastructure when it eventually wore out. However, since depreciation was based on historical costs, replacing infrastructure decades later usually costs significantly more than the amount originally set aside. Mrs. Flanary noted that the city did a good job with long-term planning. Many smaller governments focused only on immediate needs, but larger or well -managed cities needed to plan five, ten, or even fifteen years ahead. This sometimes meant raising rates before costs increased to prepare for future infrastructure replacements. Although that approach could be difficult to explain to residents, it helped n ensure long-term financial stability. 7 The discussion then moved to page 24, which showed the major funds at the fund level. Page 26 displayed the related revenues and expenses for those funds. The general fund received particular attention because it served as the city's financial safety net. If the general funds remain strong, the city's overall financial condition is usually strong as well. The city's general fund balance was about $5.6 million, which has decreased only slightly during the year. However, the general fund also transferred nearly $3.2 million to support other funds and operations. These transfers represented subsidies to other programs or services. While such transfers are common, they raised questions about long-term sustainability if unexpected expenses occurred. CITY OF REXBURG, IDAHO BALANCE SHEETS — GOVERNMENTAL FUNDS September 30, 2025 Emergency LID Debt LID Other Total General Street Service Service Construction Governmental Governmental Fund Fund Fund Funds Fund Funds Funds ASSETS Cash and Investments S 5,596,510 S 6,395.585 S 272.059 S S 314,992 S 12.613.503 S 25.162.729 Receivables 1.372.578 1.167.730 134.585 2,330,429 - 3.300.429 8.394.751 Aowued Interest Recelvable-Leases 410 - - - - - 416 Lease Receivable 234,011 - - - - 234,511 8appaes Inventory 61.697 - - $1.597 Pre-mment 68.351 - 3.000 91.351 Due tram Other Funds 2.573.768 2,573,788 TOTAL ASSETS S 9,839.700 S 7.611,660 S 408,844 S 2.330.429 S 314,992 8 16.016.012 $ 38,519.443 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable S 3.576.148 S 728,185 S 253,546 S 48,908 S 314.292 S 309.426 S 5.230202 Accrued Payroll Uablilly 329.783 38.394 110.900 - - 258,007 735.093 Due to Other Funds - - - 1,861.041 712.747 2.573.788 Other 30.260 42,190 22,725 96165 TOTAL LIABILITIES 3,904,031 790,829 408.644 1.909,947 314,092 1,300,906 8,834,248 DEFERRED INFLOWS OF RESOURCES Leases 208.030 - - - 208,930 UnaysWble Revenues 45 200 1.M.240 - 15.294 1,970,824 TOTAL DEFERRED INFLOWS OF RESOURCES 254,220 - 1.910.240 15.294 2,179,754 FUND BALANCES Ier>dable 87,478 - - - - - 87.478 Restricted - 0.814.837 - - 7.888,518 14.483.355 Committed 6,503.071 - - - 7,061,399 12.644,470 lh+asslaned (1,480,758) (20,104) O.509.662) TOTAL FUND BALANCES 5.680.649 6.814,837 (1,489,766) - 14.699.813 25,705 441 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES S 9.839.700 S 7.611.665 S 408.644 S 2.330.429 S 314.992 S 16.018.012 S 30.519.443 The Accompari ft Notes are an Integral Part of the Financial Statements 24 Mrs. Flanary explained that emergencies —such as equipment failures or infrastructure problems — could quickly drain the general fund if reserves were not available. The city, however, had done a good job building fund balances not only in the general fund but also in other funds such as streets and utilities. This forward planning helped prepare for future projects and unexpected costs. Mrs. Flanary said the general fund appeared financially strong. There was no universal rule for how large a city's fund balance should be, but the city already had an internal policy. The city's minimum requirement is 25 % of annual expenditure, though city leadership preferred to keep the balance closer to 3o%. Following COVID-19, the city's fund balance had temporarily risen closer to 40%, partly due to federal funding. She noted that while the pandemic period brought significant federal aid, the City Council had been careful not to rely on that money for ongoing expenses. Much of the federal funding f"'I had instead been invested in long-term infrastructure projects such as fiber expansion. Mrs. Flanary reviewed the proprietary funds which were shown on pages 28 and 29. Page 28 displayed the balance sheet for these funds, while page 29 showed the operating revenues and expenses. These funds included utilities such as water, wastewater, and sanitation. She noted that the city's cash and investment balances in these funds are very strong. This indicates that the funds are financially stable, not losing money, and saving enough for future projects and unexpected needs. Finance Officer Nielson added that the sanitation fund balance had decreased compared to the previous year. Previously, the sanitation fund had around $3.4 million, but the balance dropped because the city used some of those reserves to build the new street shop facility. The city had 16 intentionally saved money in that fund so the project could be paid for in cash rather than through debt. Going forward, the main goal for sanitation would be maintaining reserves to replace garbage trucks. Adding a new sanitation route could cost about $600,000, which included the truck and associated staffing costs. CITY Of REX8 a0. tnA110 CIRr Of ItMAG, WAHO STATRMNT OF KET posmON - PROPitwrARy rumn6 I STATLM[!YT Oi REVL UE9,E1 MffIJW AI(D CIIk%1S A 2, Bu ftr,Oie4ypd A&Vd1ea U(W POBRIOPI - PWMrrAKV nXM ___ _ errtorprtuFuNtsASSETS bpi02fL1S fi� Nhpsr Wouvantt4r Total Moretti Assrtb Enterpnse Ftatds Cosh and trmgm%e m 0 1.428,791 S IO,228,324 S 11,798,7S5 5 23,453,570 80t11501 a* wutaluw TOW Rocawbtas 324,110 60,402 3.044.122 3.971.042 3000fts trwahxn 33,145 33,145 OPERATN REVEWS Tat o Cwrraae Aarrcb 1,766.054 10,029,725 I4.842.e77 27,456A57 y U" 8Mi1 U 1391,451 S 4,333,539 S 6,348.083 S 14,163,073 capo Aroma One tare Foos 222,055 11,107 233.172 AOCae m41 AUM 4,432,252 h o e.&IM (II. o.77s3) (i+.a9,841) (34.526,44"4) mudwimull 4,485 137,95 6.2% 148,548 Taur Cap" Asses 2,3e3.412 26,196232 34,040,335 01,599,979 TOTAL OPERATWO MUM 3,5050 4.60,409 6,3%.446 U.584.791 TOTAL ASSETS 4,149,466 30•(125.950 48.863.212 00.058,636 DEFERRED OUTFLOWS OF RESOURCES OPERATING EXPENDITURES Parisian Ra a eo sa,202 104.701 I;M 361 322 344 Uny C � �"Mo„�. 3,428,332 3,505,928 4,434,156 11,388,416 TOTAL ASSETS AND DEFERRED Dep cWon end knozaWn 192,693 837,6M 1.490,714 2,521,087 OUTFLOWS OF RESOURCES i 4,237,148 S 38,130,659 S 49.012.513 S 69,380,98Q LIAGMTgas TOTAL OPERATING EXPEkDIT M 3,621,025 4,343,608 5,924,870 13,889,5M Currom t.laaaaes• Acm sts Poyabb f 522,909 S 342AN S 1.878.724 S 2,744,579 OPERAitNO INCOSIE (115, 349,601 440 576 ""°I 675 288 Accrued Compormateo Aburms Accrued Payroll 20,857 15,604 48.445 90,753 37,099 42,125 165.058 94,028 Accrued knerM Payable 4.111 - 4,111 NON•OPERATING REVENUER PffNW) Other chants Recorim in Aawnce 22,767 201.464 4,059 568,705 300 m ow,705 Gwits and Conbibrdiol ifte 0I Cepwp 615,475 4.164,135 4,779,610 CoMM POMM or (eno eo"r Obbo corm zo 608 MAN Oath ww Capital 1,374,750 1,042,848 2,417,598 Tow cu=ffl Lm tm 590,227 614,064 2,704 368 4,208,677 Net Rom& horn Capital AW SIB 1,030 8,000 113,834 124864 Noncurrent LIMMO Imrestnlard Earrings 42,8M 334,730 428,729 806,295 rtorKuerant Person at Lone -tarn Obl�oera Nat Parrs.ah LrsbeM 233.775 8.444.029 2%1,042 389,005 6.544.029 901.422 UnrCB�d W f1 =) (8,760) p,488) 15,7 ( 66) Tatar Nalumm Lrablrlbs 235,775 6,840,071 389.605 7,445,451 klteresl Etaen3e (14,807) M,970 (63,718) TOTAL LIASILM23 Vd,00 7,754,155 3.073,971 11 654120 TOTAL NON4PERATWG REVENUES DEFERRED D(FLOW3 OF RESOURCES ��$) 43,886 2 249,668 MOO 8,0�,823 Penabrl tdMd 73,160 142 437 182 000 378 837 NET POSMON CKWE IN NET POSIT= yi= 20A 6,173.685 8,10W 1 trrrar m0 in Copts Assets Nei at Retstso OW 2.353.412 10,450.095 34.040.335 54.853.042 Reamed for Cf mt Prgsets 2.434.881 4.600,293 7.035,174 FM BNAIM ffADM Of YEAR 3,409,M 25,634,378 39.W2,M7 68.64 A4 053020 ps 07$.154 7349071 7,135,074 15 459 299 TOTAL NET PORFM 3,336,508 20.234,041 45,775,702 "7 345,315 TOTAL LtA LT638,DZFVU DDIFLOW8 FM BALVA END OF YEAR S 3.338,SM S 28,n4,047 S 45,775,102 S 77,348,315 or RESOURCES, ANO NaT PO=*N $ 4.237.740 S 38.130.e59 S 49-012•5?3 6 09.300,90D Tim AcwmpoyW Naas we an kkVW FWt of r!s ftow sl 394aoeRh 7bc Ammpl yka Nara Ina 1:40 &1 d the FcNXW Stdu= 28 29 Council Member Riggins asked how depreciation is calculated. Mrs. Flanary explained that depreciation was typically calculated using the straight-line method over the expected life of an asset. For example, vehicles might be depreciated over seven to ten years, while buildings might be ow" depreciated over 50 to ioo years. The finance director added that the city often used garbage trucks until they were no longer usable, sometimes keeping them in storage yards to salvage parts for other trucks rather than selling them. Mrs. Flanary also pointed out a line item labeled "grants received in advance" in the wastewater section. This amount, about $688,000, represented the remaining portion of the city's COVID-related funding. Most of the federal funds had already been used for the city's fiber project, but the remaining funds were transferred to wastewater and needed to be spent by December. The city planned to use this money for equipment related to the wastewater treatment plant's headworks project. Mrs. Flanary reviewed the cash flow statement on the following page. This section showed how cash had increased or decreased in each of the proprietary funds. For example, sanitation cash decreased by about $800,000, water increased by about $372,000, and wastewater decreased by about $942,000. The auditor emphasized that these increases or decreases were not necessarily good or bad. Instead, they should be evaluated based on whether they matched the city's plans. If the city planned to spend money on projects, then a decrease in cash would be expected and appropriate. Overall, she noted that the city's cash positions and fund balances remained strong across these funds, indicating no major financial concerns. CI.1Y OF REXBURG, IDAHO STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS September 30, 2025 Business Typo Activtttes - Enserpfto Funds Sanitation Water Wastmter Totals CASH FLAWS FROM OPERATING ACTIVITIES Rttaelpts from Customers S 3,523,653 $ 4,647,713 $ 2,262,900 $ 10,434.350 Payments to Suppliers (t,571,166) (W8,209) (503.329) (3.042.704) Payments to Employees (526,494) (1,245,585) (1,222,854) (2,BM4,913) Intemal Activity - Payments to Other Funds far Seances (891,452) (1,088.140) (1,408.371) (3.367,973) Other Paymentsllttwam Payments (238,748) (20,W6I (259,274) NET CASH FROM OPERATING ACTIVITIES 295,7133 1,345,273 (871,5641 769,492 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES sale 01 Capaaty and COnmbuttoris 615,475 4.104,136 4,770.610 Acquisitions of Property, Pleat and Equiprncnt (1,133,212) (1,649,883) (4,043.353) (6,826.448) Change to Grants Reoetved In Advance - (41,29b) (41.296) Proceeds from Sere of Assets 1,030 8,0W 227,260 236,208 Interest Income 42,838 334.730 428.7120 808,295 Principal Payments on Revenue Schuh (198.616) (790.000) (988.816) Interest Peyfrle o - (74,807) (8,971) (83,778) Challga to Intmest Papble for Capital 115 (351) (238) Unreaarod (Bain (Lmaa)an Invoststants (8,260) (7,486) (15,766) 17 NET CASH FROM CAPITAL AND RELATED FiNANCIINGACTWITIES (1,089,346) (973,268) (71,324) (2,133,938) NET CHANGE IN CASH AND INVESTMENTS (793,583) 372,007 (942,888) (1,384,444) CASH AND WVESTUENTS AT BEGINNING OF YEAR 2,M,354 9,954,317 12,741,643 24,818.314 CASH AND W NTI ENTB AT END OF THE YEAR S 1,426.791 S 10.226,324 $ 11.798.766 S 23.453,870 RECONCILIATION OF OPERATING MEOW TO NFT CASH FROM OPERATING ACTWIM OP=b V I $ (115.089) S 349.801 $ 440.679 $ 675.283 Adlusomm a to Reconcft Operating Incwne to Net Cush Provided by Opeea ng Activftlev Depmdabon and AmodUtlan 192,693 837,6W I AW,714 2,521,087 GatA m on Sale ofAaaets (84.649) (1,780,985) (1,W5.814) Cttanpes in Astiasts stet LtaD 10m ¢naesse) Deaesse in accounts receivable 13.00 18.371 (2,325,480) (2,293,442) (tnaease) Oevease in imetnary (12,753) - - (12.753) Inareae (Detxnase) h acoorents payable 207,970 195.932 1.259,335 1,673,237 Irtaeaae (Oearaase) in waved cmPensate4 absences 3,296 Z478 25,233 31,006 masses (Deersaae) in payro0 sexual 1,499 4,109 4,031 9,M) Inmeae (Ooae=) In net persion retnted hens 451 879 1,003 2.333 Iruxeaso (Decease) M depeslts oavable 4,057 20,682 3,949 28.828 NET CW FROM OPERATING ACTIVITIES S 295.783 S 1,345,273 S (871,564) S 769.492 Non -Crib InvesUrm and Flmincina Activates: The Cay MWW cap"I InMn=e ca awrJagons In "datlan 10 street. water, wasltrarater, and lightterg lnpraYemeetts. The vs&te of rnese inbusteuctum otuelrlbutloos lo hated below by im paeted pmpdabry tend. and are charged against C&PU experdium and oor u trttan r0Y8nue. WSW S 1,374,750 Wastewater 1.042.848 The Accompanying Notes are an Integral Part of the Financial Statements 30 Mrs. Flanary moved into the note disclosures section of the report. These notes contained additional details about the financial statements but usually did not change significantly from year to year. One section described the city's capital assets, which were listed on pages 41 and 42. These pages summarized the total value of the city's assets, including buildings, vehicles, equipment, and infrastructure. While the report did not list every individual asset, it showed how much the city had invested in each category over time. Mrs. Flanary mentioned new accounting standards related to right -of -use assets for leases and software subscriptions (SBITAs). These items had previously been listed separately but would be grouped with other assets in future reports due to updated accounting standards. The underlying values would remain the same, but the way they were presented would change slightly. Another note described the city's installment notes and revolving loans, which appeared on page 43. These represented short- term loans made by the city that were being repaid over time. Some loans were paid off during the year while new ones were added. Finance Officer Nielson explained that these loans were typically small business loans, including 71,11 fagade improvement loans or financing for equipment or property improvements. The program was administered through a loan committee working with Altura as a third -party partner. The city had developed formal policies for the program about eight to ten years earlier after experiencing a few bad loans in the past. Since adopting those policies, the city had been much more careful about approving loans and had experienced strong repayment performance. At the time, about $48o,000 remained available in the revolving loan fund for future applicants. These loans were generally used to help local small businesses expand or improve their buildings. In many cases, the city loan served as supplemental financing when a business had already secured a larger loan from a traditional financial institution but needed additional funding to complete the project. Borrowers are required to provide guarantors or sufficient equity in their assets to secure the loan. One recent example mentioned was the Nitro Station project, which had strong financial projections and reliable lease agreements when it applied for financing. Mrs. Flanary reviewed note 10 on page 46, which served as a summary of the city's long-term obligations. Notes 10 through 14 all related to this same topic and provided additional details. These notes included information about lease liabilities, long-term debt, and repayment schedules. If someone wanted to know what the city was leasing, how much debt remained, or when it would be paid off, those notes contained the full schedules and explanations. Mrs. Flanary noted that the following pages contained many detailed disclosure notes, they are included to provide transparency and meet reporting requirements. Much of the technical information in those notes was generated through templates provided by the state, and the city's financial staff filled in the city -specific numbers before the auditors reviewed them for accuracy. i Finance Officer Nielson added that the city used outside support from Rudd and Company to help manage lease accounting software. The city had previously been paying more than $1o,000 annually for the software alone, but by having the firm manage the system, the city was able to reduce that cost and save several thousand dollars each year. The software was especially helpful because many leases had to be recalculated when accounting standards changed. Mrs. Flanary reviewed Note 15 on page 59, which listed instances where expenditure exceeded the approved budget. The auditor reminded the council that overspending in a category was not always a negative issue. Sometimes higher expenditures occurred because revenues also came in higher than 18 expected. When additional revenue is received, it is often reasonable for expenses to increase accordingly. If the difference is not large enough to require a formal budget amendment, it might simply appear in the financial statements with an explanation. Finance Officer Nielson added that making constant budget amendments would require additional staff resources. Since the city did not employ a full-time budget specialist, staff made reasonable estimates and adjustments as needed throughout the year. Mrs. Flanary reviewed Note 16 on page 61, which covered the city's component unit, the Rexburg Urban Renewal Agency (RURA). This section provided a summary of that agency because it is closely related to the city's finances. The note included highlights such as the agency's purpose, its cash and investment balances, and its long-term debt along with repayment schedules. For more detailed information, readers could refer directly to the Urban Renewal Agency's full financial statements. She reviewed Note 17, which explained fund transfers between city funds. These transfers showed how money moved from one fund to another. Although the transfers appeared as both revenues and expenses in the financial statements, they balanced out overall because the same money is simply moving between accounts. For example, the street operating fund transferred about $3 million to the street reconstruction fund to pay for future projects. Finance Officer Nielson pointed out that the general fund transferred about $3.1 million to other funds. This represented the general fund subsidizing other services or programs. The notes also showed exactly which funds received those transfers. Mrs. Flanary explained the "due to / due from" accounts shown on page 65. These represented short- term internal loans between funds, usually used to handle temporary cash -flow timing issues. For example, the general fund might temporarily cover expenses for another fund until that fund receives its own revenue. These internal loans were expected to be repaid in the short term, usually within a year. If the repayment period were longer than a year, the amount would be reclassified as a different type of liability rather than remaining in the "due to / due from" category. Finance Officer Nielson explained the tax abatement related to Basic American, which appeared in Note 18. The tax abatement agreement is scheduled to end in 2026. City staff have recently met with the county assessor, Shawn Boyce, to review the situation and begin preparing paperwork to annex the facility into the city. Once the annexation was completed, the property would be added to the city's tax base in the following year's budget. Finance Officer Nielson mentioned that discussions with the county assessor, the city noticed that the assessed value of Basic American was listed at less than $5o million, which seemed low given that the company had reportedly completed about $113 million in facility upgrades. The assessor explained that the company might challenge the assessment, but it was likely that the final assessed value would increase to somewhere between $too million and $120 million. This increase would eventually benefit the city's tax base. However, because the property is located within the urban renewal district, the additional tax value would initially benefit the Urban Renewal Agency rather than the city's general fund. The city would not be able to add that value to its own budget until the urban renewal district expired. Even so, the increase would still support additional projects within the district. Finance Officer Nielson explained another disclosure that summarized how the city's fund balances were allocated. This section provided a quick overview of where funds were restricted or designated for specific capital projects. It allowed readers to quickly see which projects the city had planned to spend money on. Mrs. Flanary reviewed the budget -to -actual comparison schedules beginning on page 67. These schedules compared the city's original budget, the final amended budget, and the actual financial results. The general fund received the most attention because it served as the city's financial safety net. The original general fund budget expected to use about $1.3 million of existing fund balance to cover expenses. However, actual revenues exceeded expectations by about $535,000, and actual expenditure came in at about $672,000 lower than budgeted. As a result, the city only needed to use about $180,000 of the fund balance, creating a positive variance of roughly $1.2 million compared to the p,.m original budget. She noted that similar comparisons are provided for each of the city's major funds but did not go through each one in detail. Mrs. Flanary reviewed page 85 Schedule of Expenditures of Federal Awards, which lists the federal money the city received either directly or indirectly. The total federal funding for the year was $3.1 million. Of that amount, $2.2 million was a direct award from the U.S. Environmental Protection Agency, and those funds were used during the current year. That EPA award was the program that was specifically audited. Under federal regulations, if an entity spends more than $750,00o in federal funds during the year, an amount that will increase to $1 million next year —auditors are required to conduct additional testing. They must audit 20 % or 40 % of the federal expenditure, depending on the overall risk level of the entity. Because of this requirement, the auditors select the programs that present the highest risk and test those programs. In this case, the EPA award was selected because of its size, the 19 fact that it was a unique award, and the type of funding involved. All these factors qualified it as a high - risk program, so it was the one chosen for the audit. Finance Officer Nielson asked for the date on the document to be updated, noting that it should be changed to 2025. Mrs. Flanary said the final two sections belong to the auditors. Page 88 contains the auditor's report on internal controls. The auditors clarify that they do not give an official opinion on the city's internal controls. Instead, their role is to report if anything comes to their attention that represents a material weakness or a significant deficiency in the city's internal control systems. There is also another category of issues that may not be as serious but are still worth mentioning. If a concern does not rise to the level of a material weakness or significant deficiency, the auditors include it in a separate management letter. That letter is internal only and is provided directly to management. In contrast, the internal control report included in the audit is external and transparent, meaning it is published with the city's financial — statements. For this year's audit, the auditors reported that no deficiencies or material weaknesses were identified. Everything appeared to be operating within proper parameters, and the staff responsible for financial oversight seemed aware of their duties and actively monitoring the processes. She noted that there had been a finding in the previous year's audit. That issue involved the way revenue is recognized for grants that were received in advance. However, the city corrected that problem, and it did not appear again in the current audit, with no additional issues identified. Mrs. Flanary reviewed the compliance report for major federal funds, which appeared on page go. Earlier, she said she has explained that when a government receives more than $750,000 in federal funding, auditors must perform additional testing under what is called a single audit. This testing examines whether the funds were used according to the rules and requirements tied to that federal funding. The report on page go summarized the results of that testing. The auditors reviewed both compliance with the federal program requirements and internal controls related to how those funds were spent. After completing their testing, the auditors reported that they did not identify any significant deficiencies or material weaknesses in the city's processes. They also concluded that the city complied with the federal requirements in all material respects. Mrs. Flanary explained that the final three pages of the report summarized the additional testing that had been performed. If any issues had been discovered, they would have been listed in that section so readers could quickly identify them without having to read the entire audit report. However, since there were no findings, the section simply confirmed that the testing had been completed successfully. She concluded the presentation of the financial report and asked if there were any questions. Finance Officer Nielson asked whether the auditor could prepare a one -page summary comparing the current year's financial results with the previous year. This type of summary had been prepared in prior years and was helpful during city council meetings because it allowed council members to quickly see the most important changes without reviewing the entire report. Mrs. Flanary agreed to provide the summary. Finance Officer Nielson noted that completing the audit at this time of year is helpful because the city is about to begin its budget planning season, and the audit results provided important information for that process. Adjournment: Adjournment 8:og P.M. Attest: `�/ / / /I��G4212�J alp QGz Ma ja na Gonzalez, City Deputy Clete 411