WEBVTT 1 00:07:38.658 --> 00:07:40.629 Good afternoon, colleagues. 2 00:07:40.709 --> 00:07:44.608 Members of the council and the general public, I'm calling to order this work session of the Portland City Council. 3 00:07:44.673 --> 00:07:48.411 It is 2:01 PM on Wednesday, October 7th. 4 00:07:49.824 --> 00:07:54.187 Colleagues, welcome once again to the budget, the topic that never stops giving. 5 00:07:55.086 --> 00:08:01.281 Uh, we're here today to kick off our discussion of the Fall Technical Adjustment Ordinance, known colloquially here as the Fall TAO. 6 00:08:02.307 --> 00:08:08.389 Uh, to preview briefly the process ahead, the fall supplemental budget has been filed and is referred to the Committee of the Whole. 7 00:08:09.206 --> 00:08:14.512 As with all items referred by my office, it is visible to councilors and the public on the council documents page. 8 00:08:15.538 --> 00:08:19.305 Today's work session is intended to do the major informational work. 9 00:08:19.641 --> 00:08:26.742 By the end of today, we should have a strong shared understanding of the goals and the content of the TAO as proposed by the administration. 10 00:08:27.975 --> 00:08:36.534 In these 3 hours, staff will walk us through the ordinance as well as discuss and ask questions in preparation for the detailed work that will happen in the Committee of the Whole. 11 00:08:37.658 --> 00:08:39.570 Next week, we will take the item up in committee. 12 00:08:40.227 --> 00:08:46.714 The committee is the place— is the time and the place for us to debate and adopt any major amendments to the ordinance authored by councilors. 13 00:08:47.548 --> 00:08:55.464 Assuming that ordinance passes from committee, we will have agenda time held on the last 2 weeks of October in full council for the first and second readings. 14 00:08:56.057 --> 00:09:02.447 This is intended as a time for smaller tweaks and changes in response to public testimony on the document that has come out of committee. 15 00:09:03.506 --> 00:09:15.032 As I've said many times in this room, one of the most important stories of the first 2 years of the budget process under the new form of government is the steady transition in how documents that become— that come before council are developed before we see them. 16 00:09:15.769 --> 00:09:20.321 A lot of last year's fall TAO process was spent in discussion about carryover encumbrances. 17 00:09:21.154 --> 00:09:25.995 Bureaus still basically had latitude to set their own terms as to what was encumbered carryover and what was not. 18 00:09:26.508 --> 00:09:30.307 As we'll hear early in the presentation, the encumbrance policy has been tightened. 19 00:09:31.077 --> 00:09:38.384 We are slowly and continually moving this city government from a basket of quasi-independent bureaus to a single government. 20 00:09:38.961 --> 00:09:39.924 We're not there yet. 21 00:09:40.471 --> 00:09:43.859 There will be more problems, and we are absolutely going to talk about them. 22 00:09:44.245 --> 00:09:48.322 But I think it's a good sign that the problems of this year are not the same problems we had last year. 23 00:09:49.173 --> 00:09:50.458 Okay, enough fellowship. 24 00:09:50.940 --> 00:09:56.464 CFO Biery and Budget Director Levine will be walking us through this presentation today. 25 00:09:56.784 --> 00:09:58.166 The presentation is in 3 parts. 26 00:09:58.293 --> 00:10:01.297 We will take a break midway through the second section around 3:30. 27 00:10:01.929 --> 00:10:06.418 And if and when we get to the budget calendar, I'll offer some additional framing and an update from my office. 28 00:10:06.548 --> 00:10:08.428 With that, Jonas and Ruth, take it away. 29 00:10:10.070 --> 00:10:10.504 Great. 30 00:10:11.212 --> 00:10:12.130 Thank you, Council President. 31 00:10:12.178 --> 00:10:14.610 For the record, Jonas Biery, Chief Financial Officer. 32 00:10:14.836 --> 00:10:17.782 And thank you for the tee-up regarding what we expect. 33 00:10:17.831 --> 00:10:27.028 And yeah, just to lean into that, you know, we're hoping that this space is really providing a preview for you of some of the key information. 34 00:10:27.994 --> 00:10:37.897 And opening up some of that initial dialogue so we can hopefully make more— most efficient use of our time at Finance and Governance Committee next week, and then ultimately the 2 council meetings at the end of October. 35 00:10:39.772 --> 00:10:44.879 Thank you, Council President, for teeing up some of the improvements that we've talked about. 36 00:10:44.993 --> 00:10:46.749 And we can skip ahead one slide, please. 37 00:10:47.571 --> 00:10:56.537 Really glad to have those recognized and wanted to provide a little more context about those to frame up some of those process improvements. 38 00:10:56.585 --> 00:10:56.715 Thank you. 39 00:10:57.623 --> 00:11:19.777 Ruth's going to talk about the numbers in details, but really wanted to highlight some of the upgrades that will emphasize sort of the broader conversations we're having around better analysis and quality of information, improving transparency, and aligning to initiatives that we've talked about recently in the context of financial stabilization. 40 00:11:20.625 --> 00:11:28.177 I believe that all of these improvements are consistent with feedback and requests we've heard from councilors, including some dialogue at this morning's council meeting. 41 00:11:28.225 --> 00:11:28.400 Thank you. 42 00:11:29.283 --> 00:11:32.664 Regarding consistency, predictability, and transparency. 43 00:11:32.729 --> 00:11:37.105 Those are values that we share and hope to continue prioritizing. 44 00:11:37.618 --> 00:11:41.754 So greatly appreciate council support as we continuously improve our processes. 45 00:11:42.731 --> 00:11:48.214 The key upgrades in this package in the fall TAO that you'll be considering in the coming weeks. 46 00:11:48.678 --> 00:11:53.904 The first is doing this work earlier and making more space for dialogue with you. 47 00:11:54.995 --> 00:12:04.875 The second, compared to recent years, we're expanding and enhancing our reporting on prior prior year fund balances and on contingencies and reserves, and we'll have some detail on that. 48 00:12:05.581 --> 00:12:14.937 In this fall TAO, we're taking leadership to recognize reserves in alignment with new guidance from the Department of Revenue. 49 00:12:15.628 --> 00:12:27.312 This change will also align with our own prior discussions on improving information regarding reserves, and it's included a robust citywide review of all contingencies and reserves. 50 00:12:27.729 --> 00:12:50.465 Ultimately, this is a huge transparency improvement, really a big level up and will be, I think, very, very helpful in the future and responsive to some difficult conversations we had in the past so that we can more properly categorize information as contingency versus reserves and be more clear about what those reserves are actually intended to be held for. 51 00:12:51.412 --> 00:12:53.466 And we'll share more detail about that. 52 00:12:54.703 --> 00:12:55.072 The—. 53 00:12:55.682 --> 00:13:14.774 The TAO package also includes creation and formal implementation of a business license tax stabilization reserve and the associated policy with that, which is in response to a fiscal 26-27 budget note and is also in alignment with the financial stabilization recommendations and actions that we discussed a couple of weeks ago. 54 00:13:16.120 --> 00:13:24.649 With a budget as large as the city's, there's always going to be a lot going on within the line item details, and we're certainly happy to share every single one of those with you. 55 00:13:25.658 --> 00:13:41.977 However, I do want to observe that with the exception of some kind of large net-zero packages related to the reserves reclassification I just mentioned and related to organizational realignment, generally this is a simpler and smaller fall TAO compared to prior years. 56 00:13:42.025 --> 00:13:50.097 And I think that's by intention and design and responding to some of the feedback that we've heard and tried to manage through our budget system. 57 00:13:51.013 --> 00:13:52.826 Council President mentioned encumbrance carryovers. 58 00:13:53.885 --> 00:13:55.153 That's received a lot of airtime. 59 00:13:55.410 --> 00:14:10.160 As a result of that feedback, we've instituted a much more kind of restrictive expectation around how encumbrance carryovers are used and a much more robust analytical process related to requests that do come forward. 60 00:14:10.578 --> 00:14:17.047 And so that improvement has limited the amount and volume of encumbrance carryovers compared to prior years. 61 00:14:17.095 --> 00:14:18.876 And so we'll share those details as well. 62 00:14:20.048 --> 00:14:26.126 Lastly, generally, This fall TAO continues the city's movement towards financial stabilization. 63 00:14:26.864 --> 00:14:37.043 I do expect we'll still be facing a budget challenge in fiscal '27-'28, and we obviously can't be complacent about the work we have remaining in fiscal '26-'27. 64 00:14:37.620 --> 00:14:46.389 But the big picture today will show that we're essentially on target with the adopted budget, and that's a massive improvement from where we stood at this point a year ago. 65 00:14:47.623 --> 00:15:09.379 Budgets are inherently complex, can sometimes be arcane, and budget conversations are rarely easy, but I did want to just take a minute and kind of set the tone to emphasize the effort that's been made and will continue to be made to shift away from some of those challenges of the past and move us towards an environment of transparency, confidence, and trust. 66 00:15:09.379 --> 00:15:12.200 All right, so Council President previewed the agenda. 67 00:15:12.200 --> 00:15:12.980 Yeah, you can skip forward. 68 00:15:12.980 --> 00:15:13.899 Thank you. 69 00:15:13.899 --> 00:15:15.480 So kind of 3 sections. 70 00:15:15.480 --> 00:15:18.289 The first will be the prior year reporting. 71 00:15:18.399 --> 00:15:21.120 It's an area where we've heard requests for additional transparency. 72 00:15:21.220 --> 00:15:22.659 We agree with that. 73 00:15:22.659 --> 00:15:27.123 So I want to take some time to walk through some of the details around the the priority reporting. 74 00:15:27.541 --> 00:15:38.520 Second will be to talk about the proposed actions in the fall TAO, the adjustment ordinance itself, which includes some technical adjustments and a small amount of more discretionary items. 75 00:15:39.097 --> 00:15:42.356 And then we'll move to talking about a budget calendar. 76 00:15:43.592 --> 00:15:52.984 And just noting that the budget calendar, as we get there, processing calendar conversation does reflect the feedback that we heard from you all in the September 10th work session around process improvements. 77 00:15:53.032 --> 00:15:53.304 Thank you. 78 00:15:54.859 --> 00:15:59.456 And colleagues, I'll just note there's a dedicated time for Q&A, so I will not be having folks interrupt. 79 00:15:59.552 --> 00:16:01.331 Please hold your Q&A until there's time for it. 80 00:16:01.412 --> 00:16:01.748 So great. 81 00:16:01.812 --> 00:16:02.822 Yeah, thank you, Council President. 82 00:16:02.870 --> 00:16:08.139 Yeah, we do intend to have a little space after each section, so because they are kind of discrete topics to some degree. 83 00:16:09.245 --> 00:16:10.510 All right, so let's dig in. 84 00:16:11.489 --> 00:16:17.993 Wanted to start officially with a reminder of kind of what the fall TAO is and why we do a fall budget adjustment. 85 00:16:18.553 --> 00:16:24.448 The first rule of a mid-year budget adjustment is to maintain continued compliance with budget law and with city policy. 86 00:16:25.267 --> 00:16:40.239 Mid-year adjustments are allowed for urgent or unforeseen expense adjustments, to reconcile fund balances, to adjust contingencies, and et cetera, to match beginning fund balances, to align expenditures to city policy, and in limited circumstances to make other changes. 87 00:16:41.393 --> 00:16:57.390 The fall TAO is an important moment to review prior year actual expenditures, which are now known now that the fiscal year has ended and we've been able to do that work, and to understand why those amounts have changed and how those changes relate to fund balances and other potential decisions. 88 00:16:58.690 --> 00:17:04.236 So the first topic is prior year reporting and updates on contingency and reserve amounts. 89 00:17:05.342 --> 00:17:06.608 Why do we do prior year reporting? 90 00:17:07.346 --> 00:17:11.594 It's a best practice to track, monitor, and report on budget spending and status. 91 00:17:12.234 --> 00:17:41.565 And while reporting and monitoring of budgets has gone through sort of peaks and valleys at the city over the years, where sometimes we've done a little more robust work, in recent years done maybe a little bit less, we're currently working citywide to improve the budget monitoring process, to improve the reporting cadence, And also to ensure that that work is being done in a consistent and coordinated manner that can be sort of strategically implemented citywide rather than being maybe more ad hoc and inconsistent as it has been in the past. 92 00:17:42.382 --> 00:17:49.113 Improved budget tracking and reporting is also responsive to a prior budget note, I believe, Mario 3 from '25-'26. 93 00:17:50.153 --> 00:18:05.135 The budget monitoring detail that we're going to talk about next also provides context for why specific TAO adjustments may occur and helps illuminate why we need to make those changes to remain in budget balance and compliance. 94 00:18:07.210 --> 00:18:10.099 Lastly, priority reporting can help inform future decision-making. 95 00:18:10.212 --> 00:18:19.758 For example, if we observe underspending occurring every year in the same or similar circumstances, that may indicate that we actually need to make a change in what we're budgeting for. 96 00:18:19.823 --> 00:18:21.296 And so that's another important outcome. 97 00:18:22.969 --> 00:18:25.790 And then before I hand to Ruth, just a couple of caveats. 98 00:18:26.576 --> 00:18:29.351 First, you know, we're a large and complex organization. 99 00:18:30.025 --> 00:18:36.903 Financial data changes every single day as we make payments and receive payments, and data can often be messy. 100 00:18:38.042 --> 00:18:44.568 Actual expenditures differ from expected budgets for many reasons, and those reasons can sometimes not be super clear. 101 00:18:44.712 --> 00:18:56.204 And so that's part of the broader process improvement, both to make that clear in the initial budget adoption and to make that clear in ongoing reporting and to make that clear, of course, in these moments of adjustments. 102 00:18:58.203 --> 00:19:10.526 That sort of real or perceived obscurity also makes clear why moments like this are really important so we can have transparent communication and dialogue about what's happening. 103 00:19:11.587 --> 00:19:17.039 The second caveat is that it's not unusual for fund balances to change. 104 00:19:17.105 --> 00:19:19.057 We actually would expect that they change. 105 00:19:21.616 --> 00:19:21.778 They—. 106 00:19:21.778 --> 00:19:29.963 We typically would expect that they would actually increase, that fund balances would increase, i.e., be underspent, rather than decrease, i.e., be overspent. 107 00:19:30.028 --> 00:19:31.095 We don't want overspent budgets. 108 00:19:31.159 --> 00:19:32.451 We do want underspent budgets. 109 00:19:33.018 --> 00:19:37.496 That is why often we have additional fund balance that requires adjustment. 110 00:19:38.191 --> 00:19:40.817 That exists for a variety of reasons, all of which are healthy. 111 00:19:41.211 --> 00:19:55.933 Conservative forecasting, as I mentioned, which might mean revenues are coming in higher than expected, intentional efforts to reduce or eliminate costs, and then potentially program delays, which might be either anticipated or unexpected. 112 00:19:56.688 --> 00:20:12.713 So with that kind of tee-up about why we want to talk about priority reporting and why I think you'll be interested in it, Ruth is going to move to doing kind of a hypothetical explainer about fund balance, And then get into some of the actual numerical changes, importantly including contingency and reserve information. 113 00:20:14.900 --> 00:20:15.093 Great. 114 00:20:15.255 --> 00:20:17.950 Okay, so I'm starting way at the beginning here. 115 00:20:18.951 --> 00:20:25.944 I just thought this was helpful because this is a confusing topic even for those of us who do this professionally and do it every year. 116 00:20:26.334 --> 00:20:29.344 So I just, I thought maybe for the public this would be a helpful thing. 117 00:20:29.457 --> 00:20:39.509 So this is a very simplified hypothetical example that's sort of in some sequential slides here to demonstrate why these true-ups are necessary and how they work. 118 00:20:40.423 --> 00:20:44.488 Um, so in this example, we're starting with a prior year budget. 119 00:20:44.615 --> 00:20:46.688 Obviously, in this case, this is '25-'26. 120 00:20:47.329 --> 00:20:50.542 Um, revenues and expenditures are balanced as is required. 121 00:20:50.784 --> 00:20:55.265 There are program expenses, all the stuff we pay for, and there's contingency. 122 00:20:56.404 --> 00:21:07.734 Um, as Jonas mentioned, We, you know, typically per financial policy, we sort of are conservative in forecasting both our revenues and expenses. 123 00:21:07.832 --> 00:21:19.625 So in this hypothetical example, the revenues come in a little bit higher at the end of the year than they were budgeted to, and the program expenses come in a little bit lower at the end of the year than was budgeted. 124 00:21:19.705 --> 00:21:22.086 Mm-hmm. 125 00:21:23.915 --> 00:21:27.234 And, you know, this, as we said, this is not an uncommon occurrence. 126 00:21:28.076 --> 00:21:32.740 In reality, but it's not the only situation that could arise. 127 00:21:35.799 --> 00:21:42.421 In order to maintain balanced budgets and for accounting purposes, the funds, the revenues and expenses have to equal at the end of the year. 128 00:21:43.112 --> 00:21:49.915 That gap between the actual revenues and actual expenses is made up by actual ending fund balance. 129 00:21:50.028 --> 00:21:51.057 That's the term. 130 00:21:52.182 --> 00:21:52.489 Okay. 131 00:21:53.558 --> 00:21:55.500 So now we move to the next year. 132 00:21:56.095 --> 00:22:08.000 And as a reminder, you don't know what those actual numbers are typically for us until mid-August sometime, right, until after the fiscal year has closed and we're able to do all of those accounting true-ups and the like. 133 00:22:09.027 --> 00:22:13.439 At that point, we have already adopted a budget, obviously under law. 134 00:22:14.161 --> 00:22:17.659 And so we don't— at the time of the adoption, you don't know what that ending fund balance is. 135 00:22:17.770 --> 00:22:21.237 So in this example, you've got a little bit more revenue and a little bit more expense. 136 00:22:21.285 --> 00:22:21.348 Yeah. 137 00:22:21.685 --> 00:22:26.372 In the current fiscal year than in the previous fiscal year, and they're both balanced. 138 00:22:26.998 --> 00:22:40.397 Now we come to the fall and we have to recognize that ending fund balance that appeared in at the end of the fiscal of the prior fiscal year and add it to our budget. 139 00:22:40.478 --> 00:22:43.688 In this case, it's a, it's an increase in the during the true-up. 140 00:22:44.314 --> 00:22:51.278 And as you can see in this example, so increases, that becomes what's called beginning fund balance, which is a revenue. 141 00:22:51.326 --> 00:22:51.375 Okay. 142 00:22:51.792 --> 00:22:54.090 Because it's extra resources, essentially. 143 00:22:54.830 --> 00:22:58.592 And that has to be matched on the expenditure side by something. 144 00:22:58.785 --> 00:23:06.028 In this example, it's matched both by an increase in both program expenses and contingency, as an example. 145 00:23:08.540 --> 00:23:13.486 I note that this is a simplified example, although it's not an uncommon one. 146 00:23:16.343 --> 00:23:17.454 But a couple of things. 147 00:23:17.553 --> 00:23:27.330 The sort of true-up of ending fund balance and the expenses, the change in expenses is rarely kind of one-to-one when you get to the fall, right? 148 00:23:27.492 --> 00:23:33.315 First of all, it could be split between program expenses and contingency, and there's often other stuff going on. 149 00:23:33.363 --> 00:23:36.771 There might be other revenues changing, other expenditures changing. 150 00:23:36.819 --> 00:23:42.307 So it often can be a little confusing once you get to the numbers in the fall. 151 00:23:42.921 --> 00:23:48.478 We will, however, as part of this presentation, be going through the specific fund balance adjustments for all of the funds. 152 00:23:48.542 --> 00:23:48.853 Thank you. 153 00:23:49.667 --> 00:23:57.175 And providing a spreadsheet after today that has all of the details about the contingencies and reserves. 154 00:23:58.390 --> 00:24:05.338 So hopefully that will make it a little bit more transparent and that this explainer will help you to make sense of those numbers. 155 00:24:08.266 --> 00:24:08.539 All right. 156 00:24:08.780 --> 00:24:16.586 So, and just to really hit home on this, Why do we update the fund balances? 157 00:24:16.634 --> 00:24:19.080 So why can't you just leave the ending fund balance there? 158 00:24:19.596 --> 00:24:22.381 You have to reflect all of the city's resources in the budget. 159 00:24:24.460 --> 00:24:25.413 And then what does it mean? 160 00:24:25.769 --> 00:24:29.505 I touched on this a little bit, but what does it mean to update the fund balances in the fall TAO? 161 00:24:30.135 --> 00:24:31.478 Does it mean there's new money? 162 00:24:32.000 --> 00:24:34.138 Sometimes it does and sometimes it doesn't. 163 00:24:34.220 --> 00:24:38.354 So I gave a couple of examples of how this could play out differently. 164 00:24:39.352 --> 00:24:52.996 These are not the only 2 examples, but— In one example, there's kind of a multi-year capital project that results in fund balance in year 1 because the capital project wasn't completed, and maybe that was even planned to not be completed in the first year. 165 00:24:53.525 --> 00:24:58.895 Those expenses then travel with the revenue that becomes beginning fund balance. 166 00:24:58.976 --> 00:25:02.117 The expenses, the obligation travels to the next fiscal year as well. 167 00:25:02.759 --> 00:25:05.373 So there may not be another dollar available. 168 00:25:05.436 --> 00:25:06.815 It's just the same work that's moved to the next fiscal year. 169 00:25:07.057 --> 00:25:07.557 Fiscal year. 170 00:25:08.121 --> 00:25:19.114 In the second example, it does result in new resources because, you know, again, maybe this is— we've got a volatile revenue stream, we've conservatively forecast it so it comes in with excess revenue. 171 00:25:19.517 --> 00:25:25.263 There may be some new revenue available that we, you know, having closed the fiscal year, know came in. 172 00:25:26.848 --> 00:25:32.027 There are numerous other ways that this could play out, but just to kind of highlight that. 173 00:25:33.020 --> 00:25:35.271 And then what happens to those fund balances? 174 00:25:35.385 --> 00:25:40.588 Well, Council obviously has to appropriate and make the decisions about all of them. 175 00:25:41.056 --> 00:25:46.480 There is financial policy in some cases, and we're going to talk more about some of that later in the presentation today. 176 00:25:49.119 --> 00:25:55.962 So the next slide looks at general fund ending fund balance and budgeted beginning fund balance over time. 177 00:25:56.010 --> 00:26:04.238 So essentially the same as those graphs I just showed you in the hypothetical example, but the actual general fund numbers over time. 178 00:26:07.385 --> 00:26:10.733 And let's see, a couple of things to note about this. 179 00:26:11.122 --> 00:26:16.460 So the difference between the blue and the yellow is what you're sort of truing up in the next fiscal year. 180 00:26:17.036 --> 00:26:28.647 It's not the case, though, that the entire gap is sort of available because there are some required adjustments that have to be made, and we'll talk more about those for this year later in the presentation. 181 00:26:30.055 --> 00:26:35.018 The other obvious thing to note here is the shape of this graph is unusual. 182 00:26:35.195 --> 00:26:39.694 I think the— and kind of raises questions about why it is. 183 00:26:39.807 --> 00:26:51.409 And the big reason is there was sort of a bump in the snake, I guess, in fiscal year '22-'23, because you can see that really big gap in '21-'22 immediately post-COVID. 184 00:26:53.353 --> 00:26:58.607 That created a whole bunch of one-time resource that we've talked about a lot as kind of the fiscal cliff. 185 00:26:59.468 --> 00:27:02.068 And it took several years to work through that, right? 186 00:27:02.116 --> 00:27:07.913 The more one-time you have allocated, the more is likely to carry over into the next year for several years in a row. 187 00:27:08.797 --> 00:27:14.560 We're now back down to sort of below our pre-COVID numbers on this. 188 00:27:15.042 --> 00:27:24.259 For this year, part of the reason beginning fund balance is so low is because we actually dipped into our contingencies during '25-'26 to make it through the fiscal year. 189 00:27:24.757 --> 00:27:33.950 So often part of beginning fund balance is contingencies that once we get to spring, we say, great, we didn't need this, we can put it into next year as beginning fund balance. 190 00:27:34.416 --> 00:27:40.057 We didn't have much of that this year, and so that's why we're kind of historically low in the current fiscal year. 191 00:27:42.817 --> 00:27:46.038 And I will talk more later in the presentation about what that means for the fall TAP. 192 00:27:48.082 --> 00:27:48.919 General fund returns. 193 00:27:50.144 --> 00:28:01.118 As Jonas mentioned, we did a bit more prior year reporting than we have with bureaus in recent years, particularly around the general fund, to look at essentially where was their underspending. 194 00:28:01.954 --> 00:28:09.897 This slide rolls all of that information up general fund-wide because I didn't have time to go through all 26 bureaus with you. 195 00:28:09.994 --> 00:28:16.087 But we do have additional information, and if there are specific questions, we can come back next thank you. 196 00:28:16.167 --> 00:28:17.467 I'll be back next week to answer them. 197 00:28:17.595 --> 00:28:26.384 But essentially what this shows you is 2 kinds of general fund returns, one from last spring. 198 00:28:27.858 --> 00:28:30.874 And so you can think of this as like true underspending. 199 00:28:30.986 --> 00:28:33.969 Like it doesn't have the revenue side of the picture. 200 00:28:34.032 --> 00:28:35.653 It's just the expenditure side of the picture. 201 00:28:35.717 --> 00:28:39.967 How much less did we spend than we had originally budgeted for? 202 00:28:40.448 --> 00:29:02.510 So $6.5 million was So the $14.8 million was sort of returned to the general fund in the spring, and then looking at the discretionary portion of the kind of the end of the fiscal year budget to what happened— sorry, the last revised budget to what happened at the end of the fiscal year in the general fund, that was $14.8 million. 203 00:29:03.423 --> 00:29:11.467 Of that total, $4.6 million is proposed to be carried over through encumbrance carryovers in the fall, and we'll talk more about that. 204 00:29:11.530 --> 00:29:11.626 Thank you. 205 00:29:12.173 --> 00:29:12.221 Yes. 206 00:29:12.334 --> 00:29:13.778 And we'll talk about that number later today. 207 00:29:15.047 --> 00:29:22.096 But the net result of all of that is $16.8 million in what I would call like true general fund underspending. 208 00:29:23.316 --> 00:29:24.922 A couple of things to note about this. 209 00:29:25.901 --> 00:29:32.773 That is out of a total general fund allocation number of about $875 million. 210 00:29:33.304 --> 00:29:35.391 So it's less than 2% of the total. 211 00:29:35.550 --> 00:29:36.289 So that's one thing. 212 00:29:37.398 --> 00:29:37.511 Okay. 213 00:29:37.787 --> 00:29:41.308 Which is kind of roughly what I would expect. 214 00:29:43.710 --> 00:29:53.723 Another thing is it includes $6 million of contingency that wasn't drawn, which includes $4.3 million that we budgeted as beginning fund balance. 215 00:29:54.142 --> 00:29:58.675 That was from the housing ordinance that happened in the spring last year. 216 00:30:01.055 --> 00:30:12.135 And then the other roughly $11 million is split between personnel vacancy savings and external materials and services underspending. 217 00:30:13.089 --> 00:30:23.555 Both of those on some level I think can be tied to directions to restrict spending from the city administrator last year. 218 00:30:24.334 --> 00:30:28.847 There was a hiring freeze in place, so that certainly resulted in some vacancy savings. 219 00:30:29.532 --> 00:30:35.123 And then there were directions to, you know, reduce contract spending. 220 00:30:35.396 --> 00:30:39.535 And we have more details on all of this and can provide additional during Q&A. 221 00:30:39.663 --> 00:30:44.828 I have some of it handy, and then we can also provide more details in spreadsheet form after today. 222 00:30:46.013 --> 00:30:52.955 But I just wanted to give you sort of the high-level view of this kind of prior year reporting that we completed in the general fund. 223 00:30:56.138 --> 00:31:17.732 All right, and then outside of the general fund, in terms of fund balance adjustments, this slide shows you the biggest ones by dollar figure in terms of that difference between what was sort of expected, what was budgeted, and then how did it actually end at the end of the fiscal year. 224 00:31:18.380 --> 00:31:20.708 And you can see it goes in both directions. 225 00:31:20.820 --> 00:31:23.342 Some of them are a reduction and some of them are an increase. 226 00:31:24.042 --> 00:31:24.925 In fund balance. 227 00:31:25.553 --> 00:31:34.287 I'm not going to go through each line on this, but as I mentioned earlier, the— we'll provide a full spreadsheet on the contingencies and reserves. 228 00:31:34.400 --> 00:31:43.551 And then exhibit 2, which is posted with the ordinance, has all of the appropriation changes, and there's for every single fund. 229 00:31:43.615 --> 00:31:50.410 And so there's more details on every fund, um, in that exhibit once when you see that. 230 00:31:52.065 --> 00:31:54.491 A couple of things to highlight here as well. 231 00:31:55.199 --> 00:32:01.278 You'll see a lot of these relate to capital and debt financing, and that's pretty common. 232 00:32:01.392 --> 00:32:17.353 A lot of the big swings in fund balance result from these multi-year capital projects or from debt financing, which obviously has multiple technical entries involved in multiple funds where the funding comes into one fund and then gets dispersed out to other funds. 233 00:32:17.404 --> 00:32:26.000 So one delay in the— in a bond issuance has a big swing, um, in this case for multiple funds in the city. 234 00:32:28.270 --> 00:32:37.827 Um, and then PSF at the bottom is the sort of multi-year projects, um, where the funding is carried from one fiscal year to the next. 235 00:32:40.160 --> 00:32:44.571 All right, we're going to switch topics a little bit. 236 00:32:44.718 --> 00:32:45.743 The next section of the thank you. 237 00:32:45.791 --> 00:32:48.232 So the next presentation is on contingencies and reserves. 238 00:32:48.280 --> 00:32:55.410 And as I sort of said, this is connected in some ways to the fund balance conversation, but it's also a distinct topic in and of itself. 239 00:32:56.711 --> 00:32:59.279 And we're recommending a change in how we're budgeting this. 240 00:32:59.441 --> 00:33:06.472 And so I've asked Allegra Wilhite, who's the Executive Director of the Tax Supervising Conservation Commission, to come. 241 00:33:07.050 --> 00:33:07.355 Here she is. 242 00:33:07.773 --> 00:33:10.247 So she's going to tee it up, and then I'll go into more of the details. 243 00:33:12.124 --> 00:33:16.260 All right, good afternoon, councilors, city administrator, and mayor. 244 00:33:16.758 --> 00:33:21.376 I'm Allegro Wilhite, and I'm the executive director of the Tax Supervising and Conservation Commission. 245 00:33:21.730 --> 00:33:24.022 You may remember that I get to see you all once a year. 246 00:33:24.214 --> 00:33:29.330 We're part of your budget process, as we are for almost all of the taxing districts here in Multnomah County. 247 00:33:29.907 --> 00:33:35.746 So Ruth has talked a lot about some very wonky budget things, and I get to talk about even wonkier budget things. 248 00:33:35.938 --> 00:33:38.134 So, so excited to be here today for that. 249 00:33:39.080 --> 00:33:46.134 City staff had asked if I could come and provide a little bit context on one particular aspect of the TAO that you're hearing about today. 250 00:33:46.983 --> 00:33:57.144 The intent for me to be here is just to provide a little bit of insight into the larger perspective of Oregon budget law that we're talking about here and why you're seeing certain proposed changes. 251 00:33:57.752 --> 00:34:05.156 So the fall TAO includes moving some budgeted contingency funds to the budget category of reserve for future expenditures. 252 00:34:05.653 --> 00:34:12.385 And in Oregon budget law, there is a clear definition and distinguishment between contingency and reserve. 253 00:34:12.449 --> 00:34:12.528 Yes. 254 00:34:13.204 --> 00:34:22.652 Though in practice, some local governments have used the terms pretty interchangeably, and I would say generally speaking, the public and for most folks, it all means the same thing. 255 00:34:23.246 --> 00:34:28.918 Oregon budget law is quite explicit about these being different definitions for different flavors of money. 256 00:34:29.175 --> 00:34:49.085 So I think, Ruth, you might have a slide that kind of breaks it down, but I'll say from sort of the simplest way to think of it, I think, is that contingency is defined in law as So the example that I use when I'm giving trainings on this is that maybe, you know, you're going to have some kind of weather event every year. 257 00:34:49.632 --> 00:34:52.844 You don't know what it's going to be, so you put money in contingency. 258 00:34:52.940 --> 00:35:06.190 You know you're going to spend it, but you don't know if it's going to be purchasing materials and services for sandbags because of flooding, or if you might need that money for personnel services to enhance fire services because of wildfire encroachment on the city. 259 00:35:06.239 --> 00:35:06.579 Councilor Smith. 260 00:35:06.925 --> 00:35:07.166 Right? 261 00:35:07.278 --> 00:35:10.438 You don't know, but you do know you're going to have to be spending something. 262 00:35:10.967 --> 00:35:13.693 So those funds go into contingency from budget law. 263 00:35:14.559 --> 00:35:19.306 Now, there are other things that we know that we're going to purchase, but it's not going to be in the current year. 264 00:35:19.451 --> 00:35:20.733 It's going to be further out. 265 00:35:21.135 --> 00:35:23.012 Another example is a fire engine. 266 00:35:23.380 --> 00:35:24.471 They're really expensive. 267 00:35:24.648 --> 00:35:27.838 We usually have to save for years, right, to buy one of those. 268 00:35:27.951 --> 00:35:31.992 So we might know we're going to buy a fire engine in fiscal year 2029. 269 00:35:32.137 --> 00:35:36.387 So we need some reserves for that, but we're not planning to purchase it in the current year. 270 00:35:36.451 --> 00:35:36.498 Right. 271 00:35:37.494 --> 00:35:39.661 So I'm looking up to see what your slides are here. 272 00:35:39.806 --> 00:35:43.788 Yes, you've got that not anticipated, which again, I think is kind of that clear thing. 273 00:35:44.798 --> 00:35:59.905 Another piece that's important to understand, I think, about the reserve for future expenditures piece is that if that purpose comes up sooner, let's say there's a big sale on fire engines and you can get one for half off this current year, great. 274 00:36:00.114 --> 00:36:06.103 You can actually still access your reserve for future expenditures even though it was planned for fiscal year 2029. 275 00:36:06.166 --> 00:36:06.215 Okay. 276 00:36:06.615 --> 00:36:08.333 Because it's the same purpose. 277 00:36:08.813 --> 00:36:13.626 So that's another way in which it's different from just like fund balance that's sitting there and you can't spend. 278 00:36:13.690 --> 00:36:19.481 You can do a supplemental budget if the purpose for that money comes up sooner, if there's another opportunity. 279 00:36:19.721 --> 00:36:22.577 So as decision makers, I think that's important for you to know. 280 00:36:23.891 --> 00:36:34.543 So in terms of how we got to where we are now, as I mentioned, many local governments would use contingency and reserves somewhat interchangeably and use contingency as an overall savings account. 281 00:36:35.168 --> 00:36:43.844 I believe one of the reasons for this is because it wasn't explicitly stated in budget law that you could have a reserve for future expenditure in any fund. 282 00:36:44.260 --> 00:36:48.784 It looked like it could only be in reserve funds, and so people kind of ignored it and didn't use it very often. 283 00:36:49.777 --> 00:36:59.945 We actually were having conversations with many different districts about this, this very issue this last spring, and so we went to Department of Revenue and said, can we get some clarity on this? 284 00:37:00.266 --> 00:37:05.146 And their guidance back to us was, it's not forbidden to use it in other funds, and so you can. 285 00:37:05.916 --> 00:37:18.998 So given that, we have updated our training and our guidance to say, let's take advantage of this definition of this tool in our budget handbook to be more transparent and clear about the flavor of this money. 286 00:37:19.143 --> 00:37:30.605 And so that's what we're talking about here with reserves versus contingency, is the opportunity to have more transparency about exactly what those funds are committed for and how you're planning on spending them. 287 00:37:30.684 --> 00:37:30.844 Thank you. 288 00:37:31.735 --> 00:37:41.365 So from a budget law perspective, I do see this change as better aligning with the legal budget law categories as well as providing improved transparency. 289 00:37:44.110 --> 00:37:44.884 Great, thank you. 290 00:37:45.820 --> 00:37:47.726 I'll let you talk about the specifics. 291 00:37:47.838 --> 00:37:48.226 That's the—. 292 00:37:48.322 --> 00:37:49.744 Yeah, the wonky budget law stuff is done. 293 00:37:49.856 --> 00:37:52.601 Yeah, stay for questions on this section. 294 00:37:52.681 --> 00:37:56.085 We'll go to questions, Q&A on this section in a few slides. 295 00:37:56.632 --> 00:38:08.317 So, um, so yeah, so as Allegra mentioned, um, the fall TAO includes actions to make this shift for a number of different funds. 296 00:38:08.893 --> 00:38:13.307 Um, and this slide kind of aligns with what Allegra just laid out. 297 00:38:13.644 --> 00:38:28.552 And then at the bottom, it states that the total change that we're recommending based on this guideline, these guidelines, and our review with bureaus of all the different contingencies and reserves citywide the total change is $1.08 billion. 298 00:38:30.858 --> 00:38:42.807 So that is $1.08 billion that would shift what is currently budgeted as contingency but would become budgeted as RFE, as reserve for future expenditure, to improve that distinction and transparency. 299 00:38:44.804 --> 00:38:51.329 And the next slide has a little bit more of a breakdown of what that looks like across the different funds, but I do want to hit this thank you. 300 00:38:51.378 --> 00:39:00.114 I want to make this point clearly because it will be significant because it is still sort of in the budget, but it is not appropriated. 301 00:39:00.563 --> 00:39:11.559 And so importantly, when we report out the number of our total budget that is appropriated by City Council every year, it will be lower by $1.08 billion as a result of this change. 302 00:39:12.199 --> 00:39:26.005 And so we're actually going to put out a press release about this next week and have it clearly on our website so that So when it's in the press in the spring, we can point back to this explainer and this moment when we said, this is why we're doing this. 303 00:39:26.697 --> 00:39:31.889 And it will look funny when we run the year-over-year numbers as a result of this change. 304 00:39:34.253 --> 00:39:44.103 But sort of separate aside on what numbers are the most useful to look at when we're talking about total budget, but for this purpose, that is one of the reasons we wanted to do it. 305 00:39:44.152 --> 00:39:44.492 Councilor Smith. 306 00:39:44.606 --> 00:39:45.322 To highlight that. 307 00:39:48.146 --> 00:39:55.655 This slide, I couldn't list every fund for space, but these are the largest shifts by dollar value. 308 00:39:57.510 --> 00:40:05.150 The biggest one is PSEF, and again, this is just because they have a clear 5-year spending plan. 309 00:40:06.550 --> 00:40:12.135 And so rather than having the entire amount for that 5-year spending plan that's that's outside the current fiscal year. 310 00:40:12.583 --> 00:40:14.523 In contingency, it splits out. 311 00:40:14.586 --> 00:40:27.389 It remains— there's a significant amount that remains in true contingency, and there is an amount, about $300 million, that is for future fiscal years that moves to reserve for future expenditure. 312 00:40:27.469 --> 00:40:34.583 And as Liger was saying, if for some reason council wanted to make a decision to pull some of that forward, you could still access that money and pull it forward. 313 00:40:34.759 --> 00:40:38.717 It's just differentiating between the 2 different purposes of those funds. 314 00:40:38.780 --> 00:40:38.925 Thank you. 315 00:40:41.675 --> 00:40:50.407 I won't go through each of the others, but, you know, they're some of the biggest funds in the city, so it's kind of no surprise that they have the largest contingencies and the largest shifts. 316 00:40:51.050 --> 00:41:04.798 A lot of them also are capital funds that do a lot of capital investment, and so they have these large multi-year projects that, you know, and they have capital replacement needs out in future years. 317 00:41:04.849 --> 00:41:04.965 Thank you. 318 00:41:07.099 --> 00:41:15.599 This again, all the detail will be provided to back this up, and those 23 other funds that are added together at the bottom will be broken out. 319 00:41:16.963 --> 00:41:22.527 Okay, that is the conclusion of the slides for the first section, so we can do Q&A. 320 00:41:22.655 --> 00:41:26.713 And maybe if you have questions on the contingencies first, we can do that. 321 00:41:27.163 --> 00:41:27.884 Absolutely. 322 00:41:28.028 --> 00:41:30.963 Colleagues, feel free to jump into the queue if anyone has any questions about this section. 323 00:41:31.690 --> 00:41:33.266 Prioritizing our time around contingencies. 324 00:41:34.927 --> 00:41:39.971 Oh, Councilor Smith, there we go. 325 00:41:44.018 --> 00:41:44.972 Thank you, Council President. 326 00:41:45.054 --> 00:41:49.068 Thank you all for, for giving this, um, presentation. 327 00:41:50.315 --> 00:41:59.380 And in terms of the encumbrances, uh, we had $4.5 million In encumbrances? 328 00:42:00.041 --> 00:42:17.173 I thought the encumbrances were not outside of the budget, that they were already in the budget with existing money from the previous budget or the existing fiscal year, and that they don't get paid for out of contingency. 329 00:42:17.271 --> 00:42:22.217 They get paid for out of the money they already have because we thought that they were going to pay the whole thing. 330 00:42:23.900 --> 00:42:24.170 Yeah. 331 00:42:24.271 --> 00:42:29.920 If, if our expectation is what budget law says that their expectation is that it's going to be spent in that fiscal year. 332 00:42:30.512 --> 00:42:30.849 Right. 333 00:42:31.121 --> 00:42:40.304 So, um, the encumbrance— I'm going to come back to the specifics behind that $4.6 million in the encumbrance carryovers later, but it is not funded out of contingency. 334 00:42:40.384 --> 00:42:51.231 So basically, the, the sort of example scenario is you have a project— say we had a project last year and we were paying bills up until the end of the fiscal year. 335 00:42:52.242 --> 00:42:59.003 There may, in some cases, there's a certain amount left over from their budget, and these are general fund bureaus, right? 336 00:42:59.052 --> 00:43:01.751 So if we didn't pull it forward, it would fall back into the general fund. 337 00:43:02.201 --> 00:43:10.103 There's a certain amount left over from their budget, not from contingency, but from their external materials and services budget at the end of the fiscal year. 338 00:43:10.858 --> 00:43:17.909 And they had to keep it open, essentially protect that budget because they might have had bills come due in June. 339 00:43:18.422 --> 00:43:20.972 And so that's the scenario where they're pulling the money forward. 340 00:43:21.132 --> 00:43:25.927 But it is, it's external materials and services money that would appear as underspending. 341 00:43:26.119 --> 00:43:34.153 And then they're saying now this fiscal year, actually, we need that underspending from last year to pay for that project this year. 342 00:43:34.217 --> 00:43:37.474 But we'll talk more about the details of that later in this presentation. 343 00:43:37.889 --> 00:43:39.958 And so that's considered an encumbrance? 344 00:43:41.097 --> 00:43:50.126 Yeah, the encumbrance is the, um, is the sort action within the fiscal year to sort of hang on to the budget for a contract, right? 345 00:43:50.335 --> 00:43:51.329 That's the part that's—. 346 00:43:51.456 --> 00:44:03.003 So for example, I had a— oh, it was a $30 million spend for software and some other fees that were associated with software. 347 00:44:03.869 --> 00:44:07.012 And I set that aside with my '25-'26 budget. 348 00:44:07.878 --> 00:44:17.550 And when we were going into this new budget, they said it was going to be This can be encumbered because you started this in this fiscal year. 349 00:44:18.416 --> 00:44:33.735 So my thought was that, that, that money that I had set aside, that that automatically comes over or set in a different pot that's encumbered, and it has nothing to do with the money that I have for this fiscal year. 350 00:44:34.521 --> 00:44:37.458 You just take it out of that other pot that we set aside. 351 00:44:37.570 --> 00:44:37.795 Yes. 352 00:44:38.148 --> 00:44:59.514 So this is really confusing to me because it sounds like if you've had any, um, if I had any, uh, unused monies, that that money is going to be used instead of the money that I thought was being moved into a separate pot of money that of my encumbered dollars from the current fiscal year. 353 00:45:00.751 --> 00:45:04.315 Councilor, let me try and see if I can shed some light on it. 354 00:45:05.101 --> 00:45:07.639 'Cause I think there's kind of 2 different things that are happening. 355 00:45:07.751 --> 00:45:09.099 There's bureau money and then there's—. 356 00:45:09.099 --> 00:45:10.224 And they're overlapping, right? 357 00:45:10.304 --> 00:45:14.302 And so the first is in your example of $30 million. 358 00:45:14.798 --> 00:45:19.809 $30 million is sort of budgeted, encumbered, expected to be spent in this current fiscal year. 359 00:45:20.418 --> 00:45:26.503 And we thought we were going to spend $30 million and we only spent $25 because the project didn't get delivered by June. 360 00:45:26.920 --> 00:45:32.090 So there's $5 million left unspent that we want to continue into the next budget. 361 00:45:32.137 --> 00:45:34.416 So it's the same kind of dollar. 362 00:45:34.543 --> 00:45:36.356 We're not having it come from a different pot. 363 00:45:36.469 --> 00:45:40.510 We're saying we had this $5 million remaining that we didn't spend. 364 00:45:40.559 --> 00:45:41.875 We know we need to spend it next year. 365 00:45:42.324 --> 00:45:45.420 Let's take that encumbrance and carry it over to the next year. 366 00:45:46.269 --> 00:45:46.510 Okay. 367 00:45:47.056 --> 00:45:58.909 Separately and simultaneously, we're making adjustments to total fund balance, which lead— the hypothetical example that Ruth gave— that leads to potential changes in contingency. 368 00:46:00.802 --> 00:46:05.965 So I think there's two— if I'm understanding the question, there's sort of two things happening simultaneously. 369 00:46:06.061 --> 00:46:17.864 One is the encumbrance carryovers, which again we're going to talk about in a little more detail and separately, but simultaneously the math around the change in contingency and fund balance. 370 00:46:19.211 --> 00:46:30.230 So another way to think of it is if we had in that example, that $30 million example, if we said We do need to carry some money over, but we only need to carry $4 million. 371 00:46:30.230 --> 00:46:31.690 We don't need the full $30 million. 372 00:46:31.690 --> 00:46:33.579 Now we only need to spend $29 million. 373 00:46:34.070 --> 00:46:37.929 So we're not going to carry— we're not going to do an encumbrance carryover of $5 million. 374 00:46:37.929 --> 00:46:40.949 We're only going to do an encumbrance carryover of $4 million. 375 00:46:41.230 --> 00:46:47.710 And that's some of the analysis that we've really done more deeply is to make sure that those encumbrance carryovers are accurate and needed. 376 00:46:47.710 --> 00:46:50.769 In that example, there's $1 million left, right? 377 00:46:50.769 --> 00:46:52.469 So that $1 million in theory—. 378 00:46:52.469 --> 00:46:52.550 That's not true. 379 00:46:52.813 --> 00:46:58.385 Would move to fund balance and become a consideration for the future year. 380 00:46:58.514 --> 00:46:59.835 Right, right. 381 00:47:01.559 --> 00:47:01.771 Thank you. 382 00:47:03.298 --> 00:47:03.851 Thank you, Councilor. 383 00:47:04.193 --> 00:47:04.989 Thank you, Councilor Smith. 384 00:47:05.072 --> 00:47:05.737 Councilor Pirtle-Guiney. 385 00:47:06.306 --> 00:47:07.478 Thank you, Council President. 386 00:47:09.235 --> 00:47:13.108 I appreciate this overview of what's changing between contingency and reserves. 387 00:47:13.302 --> 00:47:22.612 I just want to make sure that I understand what I think were more straightforward pieces of contingency and reserves and whether they staying in their current categories or not. 388 00:47:24.576 --> 00:47:31.557 So money put aside for cost overruns on a construction project, that continues to be contingency? 389 00:47:33.320 --> 00:47:44.976 Yeah, I think by and large, unless it was set aside for— unless you wouldn't— you're not going to know about it until 3 years out and you're waiting until that 3 years out time to assess whether you need it. 390 00:47:45.041 --> 00:47:48.260 But yeah, I think generally, like We're doing a construction project right now. 391 00:47:48.371 --> 00:47:52.161 We don't know exactly how much it's going to cost, so we've got a little extra in case it goes over. 392 00:47:52.385 --> 00:47:53.414 That would stay in contingency. 393 00:47:53.686 --> 00:48:03.690 Okay, and then I'm gonna use a very imprecise term, but I'll say true what-if contingency. 394 00:48:03.737 --> 00:48:18.302 So the BLT fund that's set aside, the percentage of our budget that through our budget policies we set aside Every year, those what we have called contingencies in the past, are those still contingencies? 395 00:48:18.798 --> 00:48:41.061 Yeah, the only real shift of those sort of regular kind of general fund contingencies is we've had a confusingly labeled commitment item called major maintenance reserves, and that that would in many cases shift to a later year. 396 00:48:41.126 --> 00:48:53.079 So if you're building a new structure and you know it's going to need maintenance at some point in the future, and you're saving for that future maintenance on this new building, you would put that into RFE. 397 00:48:53.704 --> 00:49:00.786 And some of that type of contingency— some of that type of funding was held in contingency previously, and we've shifted some of it. 398 00:49:01.570 --> 00:49:05.929 Some of it, again, to your point, it might be needed this year, and so we've left that part in contingency. 399 00:49:06.427 --> 00:49:35.697 And if I may, I would just add the sum of it is actually kind of important because the work that's been done, I don't want to lose sight of the fact that CBO team and dozens of others have put in many, many hours to do that analysis that we frankly haven't really done meaningfully in the past to identify what the sum of it is and why so that we can be intentional and direct and ultimately transparent to the public and to you about why something is in a contingency. 400 00:49:35.795 --> 00:49:36.018 Thank you. 401 00:49:36.387 --> 00:49:38.664