Minutes

February 22, 2006, 7:00pm

Civic Center Council Chambers, 1175 East Main Street

CALL TO ORDER

The Citizen’s Budget Committee meeting was called to order at 7:03 p.m. on February 22, 2006, in the Civic Center Council Chambers, 1175 E. Main Street Ashland, Oregon.

The Budget Committee and Staff introduced themselves.

ROLL CALL

Mayor John Morrison was present; Councilors Chapman, Jackson, and Silbiger were present.  Councilor Hardesty and Amarotico were absent. Budget Committee members Gregorio, Levine, Mackris, and Thompson were present.  Budget Committee members Bond, Everson, and Stebbins were absent. Councilor Hartzel arrived at 7:21 p.m.

Staff present:             Gino Grimaldi, City Administrator

Lee Tuneberg, Administrative Services and Finance Director

                                    Cindy Hanks, Project / Court Manager

                                    Bryn Morrison, Account Representative

                                    Veronica Ward, Administrative Assistant

ELECTION OF A CHAIR, VICE-CHAIR/SECRETARY

Mayor Morrison nominated Martin Levine for Chair and Lynn Thompson as Vice Chair.  Committee recognized that the practice of the nomination was that both the Chair and Vice Chair were citizens. Committee member Arlen Gregorio seconded the nomination.  No other nominations were voiced.  All Ayes.

APPROVAL OF MINUTES

Approval of minutes from previous Budget Committee meetings dated:

5/05/05 Budget Committee Meeting

5/11/05 Budget Committee Meeting         

5/12/05 Budget Committee Meeting

5/16/05 Budget Committee Meeting

5/19/05 Budget Committee Meeting

Committee member Lynn Thompson MS to accept the minutes from the previous Budget Committee meetings as listed above.  Mayor Morrison seconded. All Ayes

Budget Officer Presentation

A.  Overview

Lee Tuneberg, Administrative Services and Finance Director, began the presentation by speaking to the annual process of creating the budget and how the process is governed by Oregon statutes.  He described the process of the budget approval and what were roles and responsibilities the budget committee members.  The Budget Committee is made up of six councilors and six citizens, the Budget Officer is named in the City Code as the Finance Director and for that reason the City does not pass a resolution every year to name the Budget Officer. Mr. Tuneberg presented the current fiscal years budget document (FY 2005/06) as example for those on the budget committee.  He also stated that this first meeting is more of an informative “get to know you meeting” for the staff and budget committee members as well as the process that is followed. The Budget Committee meeting when the Budget Message is presented is the more official meeting when numbers for the new budget year are presented to the committee by departments; this is where the committee begins to make decisions on the presented budget.  Mr. Tuneberg reminded the committee of the training session of the following Monday for all budget committee members.

B.  Update on Current Budget Year

Mr. Tuneberg discussed the handouts of the Adopted budget and adjustments that have been made this fiscal year.  General Assumptions were presented as a comparison in attempt to start the process for the committee to see where the budget was currently and how the budget was being constructed for the next year. At the Budget Message presentation the Budget Officer will at that time identify, explain, and clarify any adjustments that had to be made in order to build the proposed budget. 

Mr. Tuneberg then asked for a subcommittee to participate in the review of applications for Economic and Cultural Grants; the grant presentations will take place on April 5th and 6th, he asked for volunteers.  Budget Committee members Hartzell, Thompson, Morrison, Silbiger, Mackris, and Jackson volunteered.

C.  Proposed Assumptions

Mr. Tuneberg discussed the two handouts of proposed budget assumptions, see attached.  He described the benefits and process of the long term budget as a look ahead for each fund, where the fund was currently and where it was going, it was a look at what issues needed to be addressed.  This coming year (FY 2006/07) the city department heads met to discuss assumptions and as of December 2005 identified that the CPIW was running at 3.5% for the prior year, although the city looks at a June to June time period and is looking at using a 3% cost of living for general products.  However there are a few areas where the standard overall index is not followed, for example Fleet is showing that fuel is up 50%. Staff will use a higher factor and possibly budget up to 50% more in the FY 2006/07 budget.  The assumptions help create elements of the budget that help with the trending, for example population growth.  This rate has fluctuated over the years from .8% to 1.8%, the city has averaged 1.5% in the past and anticipates 1% for next year.

The committee and staff discussed the property tax rate for general property tax revenue for the City.  The pressure of providing services and the impact on the budget for additional positions and how these are relatively tied to property tax were discussed.  It was expressed that the City looks at other alternatives that can be implemented to meet requirements before raising property taxes to balance the budget.  Mr.Tuneberg noted that five years ago the property tax was lowered just a few cents.   Property assessed value which contributes to the growth of property tax revenues 3% and 2% for new construction which has been pretty close to the trend for the past few years. This year the City will be negotiating Police and Fire Union contracts and staff will try to accommodate the amounts in the proposed budget itself. The budget also addresses the Council Goals that have been established and they may directly drive specific positions identified in the proposed budget.

The PERS rate will be steady for the next 12 months and staff does not anticipate an employer rate increase until July 1, 2007 to 10% from 18%. Health care premiums are in the 7-9% range, staff is currently building the budget with a 9% increase. This rate may go down closer to the time the budget is completed.  Staff will maintain the infostructure and not cut costs that would significantly degrade the city’s ability to provide services and comply with federal and state requirements.

The committee questioned the 1% population growth, setting the trend of 2% for new construction and used a 1.5% population growth in the past years.

Mr. Tuneberg responded that in the past year, the population growth rate had been lower than 1.5% and 1% was suggested as a conservative rate and that it would not have an impact on state shared revenues.  City Administrator Gino Grimaldi, added that the rate is not a direct connection of new construction and population growth, there is commercial and smaller families in larger houses. The committee discussed the ramifications if the population growth exceeded the trend.

The committee further discussed the possibility of a property tax increase for the FY 2006-07.  The committee questioned the wording stated within the proposed property tax increase to balance the budget.  It was again mentioned that the proposed increases to staff positions would be a direct relation to the property tax increase.  Staff and Committee settled that it would be a goal that a property tax increase would be a last resort in balancing the budget and maintaining the level of service required of the city and to meet the goals set forth by the Council.

The committee discussed the proposed positions and the impact on the individual departments and building their budget.  The committee questioned the impact if the proposed positions were not approved within the budget process and what would be the result of not having the added service of the position in that department. They also questioned how that would impact the council goals.  

The committee discussed the increase in the Capital Improvement Fund.  Mr. Tuneberg spoke to the complexity the Engineers and Public Works department have to project out the completion or start up of projects when staff creates a budget in the early winter months of the year.  In some cases there have been increases in the 30% range in capital improvement, the thought was that it wiould not continue at that level for the FY 2006-07, the CIP would be higher at the 10 -15% range.

D.  Long Term Assumptions

Mr. Tuneberg described how staff creates the long term assumptions and budget. See Attached. Departments identified changes in service levels, programs, and requirements in the long term to the best of their ability.  There could be a significant change in revenue streams in addition the Capital Improvement Fund goes out many years and inflation.  Those factors all change those numbers.  Previously 2.5% for inflation had been used where some years that worked but in others a 3% would have been more conservative.  Identifying a grow 1.2% of population, prop tax, personal services using a 5% trending. Assessed evaluation still using a 3% standard growth and then 2% for new growth.

The committee questioned the growth rate used. Mr. Tuneberg responded that part of this is due to the types of projects that are being constructed; a government project does not contribute to the assessed value growth.  When projects do not get approved and built the inflation rate would not grow. 

The committee questioned if inflation rate in relation to the transient occupancy and food and beverage tax rates.  Transient occupancy tax (TOT) was set at 4% and food and beverage (F & B) was set at 5%.  Mr. Tuneberg discussed the trends that have being seen and the factors that affect those trends.  He also explained that the City has had a longer history in trends for both the TOT and F & B exceed the CIP. Councilor Jackson stated that most businesses pay their tax quarterly verses monthly.  The   committee further discussed whether the 3% CPI was appropriate.  Mr. Tuneberg explained that the 3% is a default number that is used when departments create their budget.  The departments may have certain items that stay flat and others that increase above the 3%, for example fuel being one that is not as predictable.

Mr. Tuneberg said that on intergovernmental revenues staff used a conservative 2% and stated that the number depends on the activities that are going on. The Committee asked what is included in this. Intergovernmental revenues include monies that go towards operations and grants, DEA monies and revenue sharing.  A good example is Gasoline tax, which has become very difficult to predict. In that it is a set rate based on the gallons sold.  If the gasoline price per gallon goes up for the consumer then the number of gallons purchased reduces and the city revenue stream is restricted.   They briefly discussed grants that are awarded.  Mayor Morrison confirmed his understanding of inflation.  The committee and staff further discussed how the trends influenced the rates proposed for each budget year, but that the actual numbers seen in the current year also helped to shape the proposed rates.  On a long term basis, the city will use a standard percentage that is more trend oriented.   Mr. Tuneberg further explained the definition of Personal Services Cost and Personnel Service Cost and how the titles are explained in the Oregon Budget Law.  The committee asked about specific targets for Community Development and why they were not shown in the proposed assumptions for FY 2006/07. Mr. Tuneberg referred to the assumptions sheet and noted that it is an on going target. 

The committee and staff discussed the General Fund Assumptions Comparison for fiscal year 2006-07, see attached handout.  They discussed how the city used the fund balances and targeting to assure financial viability for the City over all as well as complying with state and federal requirements.  Staff and the committee reviewed the comparison table and discussed the numbers and estimates listed on the handout.   The committee questioned the 1.2% for population growth on the proposed assumptions; Mr. Tuneberg asked for the committee’s direction on that issue.  The City had been vacillating between 1.2% and 1.5% in the long term projections; the 1.2% would be preferred by Mr. Tuneberg unless the committee saw a reason not to use a conservative approach.  The committee discussed the possible population growth and annexation of property and how that would affect the rate.  The discussion continued regarding the standards of budgeting of revenues and expenses, process of calculating projections, assumptions and comparisons for funds.  The committee agrees to leave the rate of 1.2% for the population growth assumptions.

The Committee asked about long term assumptions of inflation rate and how that rate is used.  Staff responded that the 3% is used when a better number or better way of calculating is not available.  The city used industry standards when available otherwise the CPI - W or CPI -U was used.  Staff proposed to change the target property tax rate on the annual percentage from the $3.88 to the $3.71 and work through the budget. 

Each item listed on the General Fund Assumptions Comparison handout was reviewed and discussed.

A correction was noted on the transient occupancy tax revenue between the Proposed Budget Assumptions – Long Term and the General Fund Assumptions Comparison.  The rate will reflect the correction of a 4% increase in FY 2008.

E.  Tours and Training

Staff discussed the options of tours and training.  At the end of the year the City circulates a survey about the budget process itself that includes the topics of how the budget process has worked for the committee members, how staff has preformed, and what could be done to improve the process.  Staff noted a training provided by Oregon Department of Revenue on March 8th, 2006 as well as a training given by city staff on Monday evening the 27th of February at the Council Chambers.  The training given by city staff was to go over the budget document and the process.   Tours of city facilities are offered for March 20, 2006. 

F.  Calendar

Mr. Tuneberg noted the appreciation of the volunteers on the different city committees.  The meeting schedules have been selected over the years for the convenience to the committee members and in accordance with the availability of city facilities.

Mr. Tuneberg verbally listed the calendar events and dates.  He also reminded the committee of the legal requirements for publishing the budget as presented and approved to the committee. The calendar does need to meet those legal requirements.

The calendar is published and also on the City’s website.  The calendar was approved as attached. 

Mr. Tuneberg requested volunteers for the grant subcommittee meetings. The committee discussed the pros and cons of the subcommittee and agreed that the subcommittee works best for the entire committee.  The committee asked if there were backup meeting dates and room availability if the budget committee was not finished by May 22, 2006.  The committee does have the room reserved for one additional evening if additional time is needed.  The only concern would be if there is great change or deliberation at that point and the legal requirements for publication of the additional meeting date.  (Lead time required by Oregon Budget Law as well as the local paper for the advertisement.)  There was further discussion of the calendar between committee and staff.

G.  Questions

Staff asked if anyone had any further questions.  Committee and staff discussed Schedule of Budget Adjustments handout; this four page handout is attached.

Mayor Morrison opened the door for new members to speak or ask questions.  He also reminded the committee about the following Monday night training for budget committee members.

ADJOURNMENT

This meeting was adjourned at 8:34 p.m.

Respectfully Submitted,

Veronica Ward

Administrative Secretary