00:00:08,501	S1:
Welcome to Bismarck Insights with mayor Mike Schmitz, a transparent and engaging conversational dive into meaningful topics impacting local government in Bismarck, North Dakota. Bismarck Insights is dedicated to removing barriers between the city of Bismarck and the citizens we serve every day.

00:00:28,501	S2:
Hello and welcome to Bismarck Insights. I'm Mayor Mike Schmitz, and today we're we're kind of in budget season. So we're going to talk 2026 budget for the city of Bismarck with Dmitri Chernykh, the director of our finance department, and other areas that fall underneath him. Dmitri, I think this is like the third time, maybe fourth time, third or fourth that you've been on insights. And we certainly have a common ground because we both practice in accounting. So but we're here today to to talk about the Department of the Finance Department and how our 2026 budget is going to look, what the processes are. And certainly as a result of the legislative session this past spring, it's it hasn't necessarily had a dramatic impact on how we go about the process of budgeting, but certainly it has an impact on how we're going to look at budgeting going forward, where where we need to be very aware of what those limitations are on funding sources so that we do not overspend and certainly don't want to look for other avenues. That just is a way around that property tax, because that is not what we want to do. We want to we certainly respect what the intent was. So welcome. And thank you.

00:01:41,200	S3:
Thank you for having me.

00:01:42,167	S2:
So let's first let's talk about a little bit about 1176, which is the House bill that passed the legislative session. And and what from your view as the Director of finance and the person that oversees the budgeting process for all of our components of the city of Bismarck. What do you view that doing for us or or guide? The guidance has given us.

00:02:05,400	S3:
Yeah, a great question. This has definitely been a kind of an interesting road for the past. You know, I would say eight months that we have to sort of go from the start of the House. The House bill was introduced to the implement, to the approval of the House bill, to how it changed from where it was in the beginning to where it ended up and to where we are now, where we're planning for the 2026 budget. Um, the House bill really restricts the city's property tax to grow collections to grow by more than 3%. And I think that was the intent of the legislators and the the state to really put a cap on how much the cities and political subdivisions can collect in property tax. Um, the impact of this to the city really boils down to where the city cannot collect more than 3% in any given year, which means that.

00:02:59,367	S2:
An increase.

00:03:00,067	S3:
In more. Increase. Correct. Sorry, I increase in more than 3% in any given year. You're correct on the total collection of property tax for the city. Um, and what that really does is in the past, the city had that ability to move that up and down. And however, the city commission chose to work with property tax, where now it's capped at 3%. So nothing can go above that. What that could what that does is basically we need to be careful on how we project future operating budgets and how we potentially add positions, which are ongoing costs for the city. And so we're very careful this year, when we were planning the 2026 budget and how we looked into the future and how the we looked at ongoing costs for the city into the future and what what limitations we would and limitations we would have in terms of adding potential costs that would run into future years.

00:03:57,601	S2:
Okay. So let's talk a little bit about the how 1176 is working. You mentioned it's a 3% increase on the prior year property tax dollars that the city had levied or assessed. Um, and, and then that that still has an interplay because valuations still play into how this is calculated. Because the bill only said if you collected $100 next year on those same properties that previously were levied, you can collect $103. But how that's allocated still varies based upon the makeup of values of the properties within the city of Bismarck. So 3% for for dollars might not be 3% for the actual tax that a person on their house pays. It could be more. It could be less. Hopefully it's well relatively within the range. Um, we we know there could be the risk of some outliers and we hopefully won't see significant components of that, but the goal. We know what property values on average, went up in the city of Bismarck at around 3.25%. So that means, generally speaking, probably going to see around a 3% increase in dollars for those properties year over year. Correct?

00:05:13,667	S3:
That is correct, mayor. Um, overall, the the political subdivisions can only collect up to 3%. But you're correct, individual properties may have fluctuations because the the formula itself, how it's built, it's built on a factor times the valuation and the ending number. The result is capped at 3%. What the city can actually use as revenue as as resources for future expenditures is capped, not individual property taxes, because those are individual properties are based on their valuations, meaning what their market is. So the valuations are not capped and they can fluctuate depending on what the market does in different areas of Bismarck. So some properties may have an increase, but some properties may actually have a decrease in their valuations and have, you know, a reduced property tax bill.

00:06:05,667	S2:
And it's all in an allocation. So it's property a divided by the total of all properties. So hopefully we can you know we're going to have to work through this. And we understand it as the Commission we've been very concerned to how that plays out. Yeah. Um the the other thing is we're only a component of the total property taxes that are levied on one's home in the inside of Bismarck. And I don't remember what the ratio is, but let's just say it's 25%.

00:06:32,667	S3:
That's probably between 25 and 30.

00:06:34,767	S2:
That's generally been where it's been at. Um, but then there's also if there's new property that comes on or improvements to property, then those properties receive the same rate as anybody else had. So they could certainly see a significant increase if they improve their property because they've got new value, a new new property in the city. And that also is part of the budgetary numbers that are coming through the other part of the 1176. That happened, though, or two actually two pieces. Most critical is a personal residency credit. And so that went from 500 to 6 1600. Correct. So, you know, we would anticipate there may very well be many property owners in this side of the city of Bismarck that, um, even with everybody's all the political subdivisions, all four of us, um, that once they see that $1,100 credit, it increase in credit if they applied for it. And please do apply for that if you have. Well, you'll need to do it next year. Now it's probably past the date, but that certainly could see people have a reduction in their property taxes globally.

00:07:42,000	S3:
Um you're correct. You know, you're right. There are four political subdivisions. And that's something we need to make clear to our to our, uh, taxpayers is that there's school district. There's the park district, there's the city, and then there's the county. Those for Maine. Maine. Political subdivisions make up the property tax bill. So it's not just the city or just the county, or just the school district and just the park district. We're all combined together on every. I'm a resident of the city of Bismarck, just like you are, and we receive a property tax bill that has those political subdivisions broken down and everybody charges something different, where we're all capped at 3% this year, how much we can actually collect. But like you said, the individual bills will be based on a factor. The credit will certainly help because like you said, I think it will definitely. We all should see citizens of Bismarck should see a reduction in their property tax for the most part.

00:08:37,667	S2:
So, Dimitri, let's talk about in addition to the personal residency credit, the legislature did enhance the homestead credit a little bit. We can help with that, assist people fill that out. But I encourage citizens to do that because that also will help your taxes on your houses.

00:08:51,868	S3:
Yeah, absolutely. Thank you. Mayor. We, our staff on the third floor of the city County building on two, two, one North fifth Street. If anybody wants to come in and get help with with the with the the the tax credit we were helping. We're our we have staff dedicated to helping people with, uh with filling out those tax applications tax credit applications and determining eligibility.

00:09:15,467	S2:
Oh, perfectly. Let's move into the 2026 budget. And kind of the process that you asked the departments to go through, and then what the city will go through, and we'll get into some more specifics. But how does it start? How do we determine what we have to do? Because we first budget expenses and then see if that even fits within the revenue that we might have, and then start making some adjustments.

00:09:36,901	S3:
Thank you. Mayor. You're exactly right. We start we start by asking department directors. We give them about a month, month and a half to look at their existing budgets from the year before and determine what they potentially need into in the following year's budget, in this case 2026. We start the process around March or April and take it into about June to where department directors can add things, remove things, talk through things with us, and obviously talk to their portfolio commissioners. So every city commissioner has a portfolio department or departments like yourself. And, you know, we try to encourage our department directors to discuss their needs and their requests with their with their portfolio commissioner, to to see if there is agreement and their support for what they're asking for. And then they basically upload everything electronically to the finance department. We organize that sorted, put it into a summary sheet and in summary form. And then we also, um, try to use those numbers to project out what would the budget look like if everything was approved. And so then we bring that over to the budget Committee, which consists of the city administrator to monarch, Assistant City Administrator Doug Wiles, uh, and uh, Commissioner Ann Cleary and myself and I have obviously have two of my, two of my staff from the finance department that assist me with assist us with calculating numbers. Um, we get together. We meet with every single department, excuse me and their portfolio commissioner. And we discuss the budget and we discuss items that are being requested. Um, once that process is done, we get together as a group, as a budget committee, and we review each item, all the requests, the entire budget, and try to determine if everything that was requested is truly a need. And we go through a filtering process, if you will, and try to determine what makes sense for the budget. And the other part of it, which you you kind of mentioned, is that first we start looking at the expenditures. We look at the spending that we're doing, and we're comparing that to the resources that are available to us. So can we do that for all of our departments, for all of our funds, for all the resources that we have to try to make sure that we have a balanced budget. We obviously cannot spend more than what we have. And so we have to be very diligent about what can go on to the to the 2026 budget and what cannot. And then once that process is completed, we bring that over and we share that with each commissioner and we share that with the city commission table in July, where we discuss the budget. I go through my very lengthy slide presentation, and I try to inform everybody of where we end up and what the recommendations are for the requests and for potential positions, for potential additions to the budget, and basically explain how we fit things in to the resources that are available to us.

00:12:40,767	S2:
Sure. And so as you entered into that process, as we did for 2026, and obviously we we approved the preliminary budget already. And in this month, September coming, we'll will finalize our budget. And there's probably still going to be some edits to the budget. I'm anticipating at least some consideration of edits. But there there was some priorities. I'll call them priorities. Or maybe they're maybe priorities a bad word, but I areas where we identified that were probably some needs that needed to be addressed going into 2026, um, including positions and some capital spending. Fortunately, we have reserved dollars from prior revenues knowing we're going to have some capital expenditures, larger capital expenditures. So we've set some of those aside. But let's talk about some of those, you know, heavier lists that we're having to look at for 2026.

00:13:36,367	S3:
Um, yeah. Um, mayor, we had we have kind of two buck two ways of thinking. And this is two thoughts. And it kind of, you know, we were very careful about how we think of things in terms of the budget. We have something called when we look at and you know this very well is the ongoing cost portion of things, one time portion of things and things that are capital projects that are very large expenditures of funds because we need to build a building or something to that effect. And as you know, when when it comes to ongoing things, those include like new positions, new personnel that we need to hire for the city to keep running the city effectively. And then as well as any sort of increases to operating budgets. And we've one of the things with those areas is we've added certain positions that that needed to help with continuing operations of the city. And, you know, HR was was a very big emphasis in terms of adding positions this year for us. Again, we were very we were a little bit more limited this year by House Bill 1176 on our resources. So we were very limited on how many positions we could potentially add. So we had to be very, very conservative in our approach with that. In addition, we had, you know, a lot of departments such as police, fire, public works needed a little bit of a catch up to inflation. And so we had to increase their operating budgets. And so we focused a lot of our, our ongoing costs towards increasing their operating budgets so they could continue to operate effectively into the future and try to catch them up to the past several years where we had significant inflation. Um, the other and, you know, as you mentioned, some of the capital projects that we've had, um, you know, on on point, we have a, a new half cent sales tax that will potentially help with the building of the new police station in the near future. And so we had to budget for that. We budgeted for a six fire fire station. Um, we looked at things of of that nature. We're obviously contributing, continuing things like the water treatment plant expansion project, which is funded purely by water fees. So it's not anything related to property tax. Um, we and we continue our, our street improvement projects that we do every single year. So a lot of those which are funded by sales tax. And so we continue to have these projects, those were kind of our main focus areas that we, um, had to resolve and had to kind of make sure we have enough resources to attain.

00:16:05,767	S2:
And on the fire station, we had a we have set aside a significant dollar amount for that. So that's not a direct impact. But we also know that that won't be the last fire station we need to build. So we have to be forward thinking related to that. But with fire station comes a major piece of equipment, which I don't think many people understand what the cost of a fire engine is, but, you know, 1.2 to $1.5 million for an engine and you have to place that order multiple years in advance.

00:16:34,868	S3:
I believe 26 months, I think it took for the last one.

00:16:37,901	S2:
And so those are the things that you you looked at as we went through the budgeting process for 2026. Correct. Um, obviously you said we budget for all of the departments that the enterprise funds, which are like water and sewer and landfill, as well as the general fund and the general fund, is what property taxes fund.

00:16:58,100	S3:
Correct.

00:16:58,701	S2:
The enterprise funds are not funded by property taxes unless we need to supplement maybe a capital improvement from somewhere. Um, hopefully not very often that does that have to happen. But it could. Um, as I as we went through the preliminary budgeting process, we were also trying to be very conservative on any rate adjustments that are the more noticeable reoccurring type items like water rates, that's actually below 3%. The increases are not or it's real close. It's not above.

00:17:30,667	S3:
Correct. I believe the water rates increased about 3% and the the sanitary sewer rates increased about two and a half.

00:17:37,501	S2:
So that bill was under 3%. Total. Total. Totally. Um, so yes, we will see some lottery adjustments, but we also made a positive adjustment going into 2025 to ratepayers and adjusting the base rate.

00:17:53,067	S3:
So correct. We actually decreased the base rate as per your direction and direction of the City commission in 2025. So we're just starting now to sort of move with inflation and try to move. You know, just continually try to keep up with the costs of of outside influences. You know, obviously a lot of the costs are not coming internally. They're coming from the outside. Chemicals and things of that nature are costing the city a little bit more. And so we just try to keep up with the cost of inflation.

00:18:22,667	S2:
Okay. So let's generally speak, you know, if we look at our budget for the city and as certainly the general fund, but as a whole, all the other departments that are enterprise fund related, it's not like we have this cost of a bunch of equipment. A significant portion of our budget is made up of personnel costs. What do you think? That's a rough range of what that might be of of the general look of the global budget.

00:18:50,267	S3:
I think between 70 and 75% of our budget, of our overall budget is personnel. I mean, you know, the whole point of, you know, a local government is to provide services. And so a lot of our our costs come from service oriented positions and things to, to help. And another significant portion of our budget is capital projects. You know, and with all the water plant expansions and the fire stations and police stations and, um, you know, lift stations that we add all the time, you know, all sorts of improvements to roads and streets. I mean, those are the big things in addition to our personnel.

00:19:28,267	S2:
So the general fund, again, is what most of us property owners probably focus on.

00:19:33,467	S3:
Um, correct.

00:19:34,567	S2:
I'm not saying that's the only thing that we should focus on, but it probably becomes the the hot button. So if we look at the general fund from an expenditure standpoint, Yep. What? What's kind of the makeup of that? Let's take the bigger pieces of it. So if we've got whatever our general fund budget number is, total is what, 70 ish million?

00:19:55,701	S3:
Yep. It's right around there.

00:19:56,868	S2:
So how much of that is like for police? Sure.

00:20:02,067	S3:
So, you know, General Fund ended up being right around $72 million. Um, police makes up about $40 million of that. Um, which is, you know, 56%. It's quite a significant portion of things. Um, property tax collection is is actually a smaller part of our general fund. If most people don't really know that or understand is that property tax doesn't make up 100% of the general fund, it makes up only 36.8% or 36.8 million, which is a much smaller percentage. If maybe around around half of the general fund is made up of property tax, then we have other forms of resources such as state aid and that we're very gracious for as well as we're allowed to move about $10 million of sales tax every year into the general fund to help offset the property taxes, which has been going on for many, many decades, several decades. Um, yeah. So general fund, general fund, about half of it is public safety for sure.

00:21:03,968	S2:
And we define public safety as.

00:21:06,267	S3:
Police, fire and Centcom, which is our 911.

00:21:10,567	S2:
And in addition to that, another thing that's very critical to our our residents is roads and streets and snow removal and general maintenance. Not not repair, not big repairs, but just general maintenance. And that's kind of how much of our general fund budget as well.

00:21:26,467	S3:
Uh, you're correct, mayor. Um, the, the roads and streets is a is a huge chunk of of our operations. And depending on the year, you know, we always have to be prepared for major snowfalls like we had in 2022 and 2023, where it was constant, you know, multiple major storms that we had to clean up and be ready for. So yes, it makes up a significant portion of, I would say between 10 and 10 and 15% of our general fund budget goes purely to them and them. One of the key things for them is making sure not only that our staff are there and available to to ready to do that kind of work, but also that they have the equipment that is operational and ready to, uh, to go when, when the storm hits.

00:22:12,567	S2:
So part of my point of all of that is by the time I take public safety and add streets to it, we're somewhere between 60 and 70% of our total general fund budget. Correct. Going to those components. And our general fund budget is funded by roughly 50% property taxes. Yeah, exactly. So our property taxes are only covered a portion of those very critical pieces of the general fund. And we have other pieces that are critical as well, like public health and some, you know, community development related engineering type stuff that doesn't all get covered by the fees that they may be collecting. And and so this is this is an important thing that that the city commission and the team at the city who do a wonderful job need to evaluate as we go into budgeting. And we're budgeting six months in advance of the year, even happening, actually start budgeting almost 12 months a year in advance of the year happening. So it's kind of hard to always know where inflation is going to take us. Um, what other challenges did you see for 2026?

00:23:19,567	S3:
You know, another thing you know, it's important to mention is the the police is sort of trying to become more technologically advanced and trying to move into. And all of public safety is really a lot of our departments. And you've kind of encouraged that with some of your messages to the staff and saying that we need to become more efficient, we need to become, you know, look for efficiencies, look for things to improve on. And one of the things we've done is we've implemented body cameras and we've used that system, the axon system, to to add on different features that included making things more efficient for the police officers so they could document their reports using AI and able to and utilize that technology to maybe create some more efficiencies and give them a little bit more time in the field, rather than sitting at their desks writing up reports, which could take them quite a bit of time. So we've kind of moved into that new area of, of utilizing technology as much as possible to create efficiencies. So we don't have to necessarily maybe add personnel or add additional ongoing costs that could potentially use up more resources for the city. And I think that's probably the future of the city in general, is to try to become more efficient, utilize technology so we can, you know, minimize the the increases of costs every year.

00:24:40,767	S2:
And we can see that even within the the police department as a result, you know, the request for positions was mitigated. And we believe that will happen going forward to that. You know, yes, there's an ongoing cost to that technology, but it probably is allowing us, you know, who knows what the number of FTEs is, but it would only probably take two officers or maybe three officers, and that pays for that. So if we've saved three, if we save more than three officers as an FTE this year, we're money ahead as a city. And and hopefully we you know, the goal is to stay still. Still be a very proactive law enforcement, um, and keeping our citizens safe. Do you see any other things that, as we look into beyond 2026 and how 1176 is probably been, um, you know, going to have an impact on us? I mean, we already know we try to be very conservative in our processes this year. What do you think the impacts might be going forward?

00:25:42,567	S3:
Great question. I, in my personal observation of data and information and how we went through the budget process and kind of how we see, you know, others react to, you know, the 3% cap, I think the issue is going to come when we when, when, when we have a true need to expand our services, when we need to maybe to fill a new fire station or we need additional police officers having the cap of 1176 might create a 3% cap, might create creates some challenges for that. I'm not saying that we couldn't overcome them or we can't find different ways of of addressing them, but I think that's something that we'll definitely face where, you know, we need to add between 12 and 50 new firefighters for a new fire station. You know, in a few years. Well, that'll cost us quite a bit of money, probably cost us several million dollars that we won't have in order to to fill that fire. To fill that fire station with the proper amount of personnel in order to make sure we're reacting to, you know, fires. And the same goes for, for all departments, really, um, not just fire, but police kind of in the same boat as well as any other departments that are funded by general fund, like you mentioned, that that will require additional resources in order to provide adequate services.

00:27:04,367	S2:
It's going to cause us to continue to look for alternative methods of delivering services to to stay within that. And, you know, and I appreciate it. I mean, we we all want to try to control our out-of-pocket costs as individual residents. And so the city needs to do the same thing as as is required. Um, related to the whole budget, you know, as a, as an entity, we certainly encourage our residents to, you know, be engaged. Um, where can they find the budget? Uh, how do they how do they engage if they want to? We have an upcoming hearing in September.

00:27:39,167	S3:
Correct?

00:27:40,200	S2:
Um, go ahead and speak to that.

00:27:42,100	S3:
Absolutely. Um, we will post the we will post the budget on our website. Um, at the end of this month. Um, there you will also believe the the county auditors will be sending out letters with dates of public hearings of when, um, your, the citizens are able to attend to the public hearing and make comments, public comment on the budget. Um, which will be on September 9th, I believe. Um, and we will post the budget on our website. It's also available if you actually want to look at the July 12th meeting, I believe is the 12th, where we presented the the or 20, 26th or 12th, one of the meetings where we presented the budget in the agenda packet. There is a lot of information on the budget that we discussed. It also is my presentation if you want to look at DMA's, um, video of that. It certainly would help explain some of the information, but we will post the budget on our website and we'll have a link to it where citizens can go and take a look and and bring their comments if they choose to. On September 9th.

00:28:49,467	S2:
And I believe it was the 26th. It was the second meeting in July when the when the preliminary budget was presented. So yes, Dimitri, thank you for spending some time with me today and sharing some very insightful information. And I know it ain't very high level still, but there is a lot of information. If citizens want to dig into the budget, they can certainly find access to it. And um.

00:29:11,400	S3:
And.

00:29:12,501	S2:
See where where we're actually spending money.

00:29:14,467	S3:
Yes. And citizens are welcome to reach out to me. Um, to our finance department is 701355 1600. Or they can email me and find my email on the city website. I'm happy to answer any questions to any citizen and talk about the budget and answer questions as as they as they come.

00:29:32,868	S2:
Well, thank you for making yourself available. It's a pleasure.

00:29:35,667	S3:
Thank you mayor.

00:29:48,467	S1:
Thank you for watching Bismarck Insights with mayor Mike Schmitz. If you have specific topics or questions you'd like addressed in future episodes, email Schmitz at Bismarck gov.

00:30:02,167	S1:
Or call the City of Bismarck at (701) 355-1300.

00:30:06,567	S1:
To learn more about the City of Bismarck, visit Bismarck, N.D. gov. Or follow us on a variety of social media channels by searching Bismarck, ND gov. Bismarck Insights is a collaboration between Dakota media access and the City of Bismarck. You may find Bismarck Insights episodes on government access channels two and 602, as well as on Roku, Apple TV, and fire TV devices. On radio access 102.5 FM and on demand at fretboard.