Budget Committee Meeting
CALL TO ORDER
May 2, 2007 6:00pm
Civic Center Council Chambers, 1175 East Main Street
Chairman Thompson called the Citizenís Budget Committee Meeting to order at 6:03 pm on May 2, 2007 in Council Chambers at 1175 East Main Street, Ashland, Oregon.
Councilors Hardesty, Chapman, Navickas, Jackson, Hartzell and Silbiger were present. Budget Committee members Heimann, Bond, Gregorio, Levine, Everson, Stebbins and Thompson were present.
MARTHA BENNETT, CITY ADMINISTRATOR
LEE TUNEBERG, ADMINISTRATIVE SERVICES/FINANCE DIRECTOR
TINA GRAY, HUMAN RESOURCES DIRECTOR
ANN SELTZER, MANAGEMENT ANALYST
RICHARD APPICELLO, ASSISTANT CITY ATTORNEY
SHARLENE STEPHENS, CLAIMS MANAGER
CINDY HANKS, FINANCE ACCOUNTING MANAGER
BRYN MORRISON, ACCOUNT REPRESENTATIVE
MIRANDA IWAMOTO, ACCOUNT CLERK II
ELECTED OFFICIALS PRESENT:
BARBARA CHRISTENSEN, CITY RECORDER
BURKHOLDER-TURNER, MUNICIPAL JUDGE
City Recorder, Barbara Christensen, presented the City Recorder budget. Ms. Christensen started by handing out charts that show detail about the departmentís new revenue stream. The new revenue stream is Passport Services. The charts display how much revenue has been received and the number of passports issued since January 2006. Ms. Christensen explained that the U.S. Post Office in Medford was originally the only place to obtain a passport before implementing it at her office. Ms. Christensen said there is a $30 fee (amount established by federal government) that the department receives for each processed application. Ms. Christensen indicated that local businesses who sell passport photos have also benefited from this new service.
Ms. Christensen continued by talking about her budget, stating that it has stayed baseline and that there is very little change. Ms. Christensen said the change in Personal Services is for a staff member who is going on family leave and therefore, a temporary person will need to be hired during that time. She reported that Materials & Services has stayed fairly even. Ms. Christensen said that although her department was not asked to cut an additional 5%, the budget is still tight. She talked about how the City Recorderís office needs more storage space and that the department now pays the storage rental fees out of Materials & Services budget. The cost per year is $2700.
Ms. Christensen also reported that the City Recorderís office is responsible for the advertising of the committee and commission vacancies. The advertising was reported to cost approximately $1000 per year. The committee asked why the City Recorderís office was responsible for this advertising cost. It was answered that the City Ordinance requires vacancies to be advertised and that itís the City Recorderís responsibility to put out those notices.
Committee member Gregorio inquired about why miscellaneous fees jumped. It was answered that the increase was due to merchant fees (merchant fees are the fees associated with bank card use). Ms. Christensen reported that the merchant fees used to be divided between the various departments. However, because the City Recorderís office is in charge of banking services it became more appropriate to put the total expense in that departmentís budget. Committee member Everson asked about cost recovery. It was answered that cost recovery is not allowed by law. It was also reported that the merchant fees are estimated to be $89,000 this year. Councilor Hartzell asked how long card transactions have been used by the City. Ms. Christensen answered that they have been used for at least 12 years. She also spoke about how bank card use works to the advantage of the City because there isnít a float time associated with the monies. When asked about the processing time, Ms. Christensen thought it was about the same. Ms. Christensen also explained that there are different merchant fee rates for different cards.
Committee member Stebbins commended Ms. Christensen for implementing the Passport Services.
Committee member Levine asked if the City of Ashland accepts electronic payments and if so, what is the charge. It was answered yes and that costs vary by use.
Mr. Gregorio inquired about the imaging system. Ms. Christensen answered that her office is always trying to work with the imaging system. She reminded the committee that documents are available through the website and that the City Recorderís office continues to train various departments on how to put documents online. It was reported that it takes a lot of staff time and can be expensive (scanners). Ms. Christensen encouraged use of electronic images to save paper. Mr. Levine asked why the electronic images donít replace the need for storage. Ms. Christensen answered that the City Recorderís office follows the state archivist retention schedule and that the state only recognizes electronically scanned documents for a certain period of time. The City has many documents that must be retained longer than the allotted period of time and some documents must be retained permanently.
Councilor Hartzell asked if the expense was neutral for Passport Services. Ms. Christensen stated that after an analysis, she estimates that the City Recorderís office clears $10,000 per year from Passport Services.
Councilor Hartzell also inquired about the impact on the City Recorderís budget if the proposed charter passes. It was answered that there wouldnít be any implication to the budget rather just more time spent reviewing the new charter.
Everson/Levine ms to approve the City Recorder budget as presented. All Ayes.
Martha Bennett, City Administrator, presented the budget for the Administration Department. Ms. Bennett opened by explaining the structure of the department. She reported that Administration has four divisions which are Human Resources, Legal, Mayor/Council and Administration. She introduced the representatives from each division: Richard Appicello from Legal, Tina Gray from Human Resources, and Ann Seltzer from Administration. Ms. Bennett explained that Human Resources had been part of the Administrative Services Department but was moved into Administration this year.
Ms. Bennett continued by explaining the responsibilities of the department (see attached handout). She reported that the Administration Department provides coordination and support activities for the City of Ashland. Ms. Bennett explained that the Council provides policy leadership for the City and that the Administration division coordinates interdepartmental efforts and does intergovernmental work. Human Resources is responsible for employee recruitment and support. The Legal division represents the City of Ashland in all legal matters.
Ms. Bennett continued by explaining the major accomplishments of the current fiscal year (see attached handouts). Ms. Bennett talked about hiring two new department heads (Community Development and Police). Administration has supported lobbying efforts because itís a legislative year. Other major accomplishments include special projects such as the Mt. Ashland expansion, library funding, dealing with vacant properties and the Public Arts Master Plan.
Ms. Bennett continued by speaking about the distribution of the Administration budget. The total Administration budget is approximately 1.6 million dollars. She stated that roughly 9% goes to Mayor/Council, 42% goes to Administration, and that both Human Resources and Legal each make up about ľ of the budget.
Ms. Bennett talked about the steady upward trend of this yearís budget due to salary and benefit increases. Ms. Bennett also spoke about the 2007 budget and the $100,000 previously approved for the community visioning effort. The project was not addressed and therefore, the $100,000 from the general fund was not spent. In 2007, there were also higher than expected outside legal costs and higher than expected recruitment costs. Ms. Bennett also reminded the committee that even though Human Resources was in the Administrative Servicesí 2007 budget, she included Human Resources in the bar graph (page 3 of the handout) to demonstrate the trend. The committee inquired about the increased legal costs, Ms. Bennett explained that it was due to turnover and a federal litigation matter.
Ms. Bennett continued to discuss the distribution of each proposed budget (see attached handout). Ms. Bennett explained that the Mayor/Council budget is approximately $184,000. Of that, about $117,000 is spent on Salaries & Benefits and 36% is spent on Materials & Services. Ms. Bennett stated that the largest portion of Materials & Services are the dues paid to such organizations as SOREDI, RVCOG, League of Oregon Cities, etc. She reported that the majority of the Administration budget is also Salaries & Benefits. The Material & Services charges for Administration are broken down into two categories, Central Service and General Fund. Central Service expenses are those that support the department such as employee training, copy charges, etc. The majority of the General Fund expenses are Public Educational Government Access fees (PEG fees) that are paid to Rogue Valley television to broadcast the various meetings.
The Human Resources budget is about $479,000 of which 72% is made up of Salaries & Benefits. It was reported that the Materials & Services number includes recruitments and retirement planning. The committee asked what makes up the Personal Services number. It was answered that Human Resources has 3 people, the Human Resources Director, Human Resources Assistant and an Administrative Assistant. Ms. Bennett also explained that the workload in Human Resources is growing. Ms. Bennett continued by explaining that the Legal budget is approximately $480,000 and that 72% of that budget is also for Salaries & Benefits and 28% is for Materials & Services. Ms. Bennett stated that the Materials & Services number includes outside legal counsel.
Ms. Bennett continued by talking about the changes to the budget from 2006-2007. As previously stated, Human Resources was moved from the Administrative Services Dept. to the Administration Dept. Ms. Bennett explained that Human Resources moved because it needs a more city wide view. Human Resources staff was increased from 2 to 3 because of significant employee turnover which is expected to continue. Ms. Bennett reported that 20 people attended a recent PERS retirement meeting. The committee asked if this meant Human Resources was now in a higher category within the City of Ashland. The answer was no. The Materials & Services budget increased because of increased recruitments and advertising. It was reported that the training budget for City Council also increased to make sure all councilors are provided with adequate training. Ms. Bennett also spoke about how $100,000 for visioning was eliminated from the General Fund. She also talked about how the Public Arts Master Plan was not finished in 2007 and so there is an increase of $5000. The last change Ms. Bennett discussed was the increase for outside legal counsel for services needed before/during the recruitment for the new City Attorney.
Ms. Bennett listed the challenges for the upcoming year (see attached handout). The challenges include finding and supporting a new City Attorney, coordinating City funding for library (if levy fails), developing major projects on both Crowman and Railroad properties, working with RVTD, recruiting new employees and negotiating new Electrical union contract.
Mr. Gregorio asked about trade offs between Human Resources and Legal. Ms. Bennett explained that there was an error on page 3-11 and that Legalís 2007 amended Salaries & Benefits should read $223,720 and that Contracted Services should read $49,638. Ms. Bennett explained there were two supplemental transfers in Legal and that the supplemental transfers were accidentally added to Salaries & Benefits. However, the grand total should be the same. Ms. Bennett also stated that there werenít trade offís, more that both departmentsí workloads have increased so much that outside help is needed.
Ms. Thompson clarified with Ms. Bennett that the increase for Human Resources was really just a transfer from one City budget to another and that itís not an actual increase (with minor exceptions) to the City wide budget. Ms. Thompson also asked about whether or not the budget was flat, up, or down. Ms. Bennett replied that the department is relatively flat from budget. She said that they are up about $200,000 from projection and that the majority of that is for the outside legal counsel, the additional Human Resources staff member and the additional Materials & Services for recruitments. Ms. Thompson also asked about the $100,000. Ms. Bennett replied that it was backed out of both revenue and expense. Ms. Bennett continued by saying that there wasnít an overall reduction to the Administration budget but that the goal was to keep it flat. Ms. Bennett also explained that they took one position from Administrative Services and moved it to Administration (Human Resources). Therefore, the Administration budget increased and the Administrative Services budget decreased.
Mr. Tuneberg followed by reminding the committee that departments go across funds and that the $100,000 is in the General Fund. Mr. Tuneberg called attention to page 4-66 which shows the long term Central Service fund. Mr. Tuneberg explained to the committee that the Administration budget was up approximately $455,000 but that the corresponding line items in the Administrative Services budget was down about $419,000 and the difference is roughly the movement of Human Resources from Administrative Services to Administration. He also explained that the $100,000 is separate since itís in the General Fund.
Mr. Levine inquired about the percentage of increase in fringe benefits for this year. It was answered that itís 10% increase for health benefits plus a salary increase fringe of about 1% so itís a total of about 11%. When asked about a specific increase, Ms. Bennett answered that itís due to the City Council benefits because the budget includes full-family coverage. Most likely, the reality will not be full-family but wanted to be cautious in estimating the benefits.
Mr. Heimann asked why the City gives employees a 4% salary increase when the COLA is only 2.1%. It was answered that the different unions determine the salary increases and that those increases are negotiated during contract negotiations. Ms. Bennett continued to explain that to keep line managers and mid-managersí salaries competitive with the union employees, they must give a 4% salary increase. Otherwise, thereís not a lot of incentive to be a manager. It was reported that there are currently 53 management employees within the City of Ashland. Ms. Bennett also said it is her belief that the line supervisors are the heart of the City and the ones who make everything work.
Bond/Everson ms to approve Administration budget as presented.
The committee was opened to discussion.
Ms. Thompson talked about how salaries and benefits continue to drive the budget forward and expressed concern over the other needs of the City. She also said that the business industry looks at head count. Ms. Bennett replied that the current budget is facing that dilemma right now. Councilor Hartzell inquired about employment safety and risk management. It was explained that a person (who works with the Cityís risk management) moved from Legal down into Administrative Services. It was also explained that Human Resources is responsible for workerís compensation and the workforce safety portion of employment safety and risk management.
The committee voted on the motion. All Ayes.
Administrative Services/Finance Director, Lee Tuneberg, presented the Administrative Services budget. Mr. Tuneberg started with the major responsibilities of the Administrative Services Department (see attached handout). The department performs various duties such as the accounting and financial reporting, the billing and collection services, municipal court services, downtown parking management, risk management and centralized purchasing services.
Mr. Tuneberg explained that the structure of Administrative Services is divided into two categories: operating and non-operating. The operating division includes administration, municipal court, accounting, purchasing and customer service. The non-operating division is made up of the band, grants, debt, and capital. He listed the major accomplishments (see attached handout) as a successful bid for audit services (contract is 3 years long), the appraisal of Mt. Ashlandís assets, the conversion to an internally-built software program for utility billing, revision of purchasing rules, inventoried assets and awards for budgeting and financial reporting.
Mr. Tuneberg continued by speaking about the Budget Comparison graph (see page 3 of attached handout). Mr. Tuneberg pointed out that Fire Station #2 was included in the 2007 budget. However, since the measure failed, itís not included in the projected 2007 or in the proposed 2008. Mr. Tuneberg explained that the 2008 capital number ($215,000) breaks down as $15,000 for furniture and equipment and $200,000 for capital improvement for Parks Open Space. Ms. Thompson inquired about Parks Open Space. It was answered that it is restricted money for park improvements and that it is separate from Ashland Parks & Recreation. Mr. Tuneberg also compared the expenditures for the operating and non-operating divisions (see attached handout). He spoke about the decrease in insurance services. Insurance Services includes premiums, losses, consulting work, and the risk management salary. There is a decrease because in 2006-2007 the department was expecting to pay ďcatch-upĒ to PERS. Mr. Tuneberg explained that the department planned well and therefore, the increase was absorbed. The committee asked about the decrease for Buildings. It was answered that the previous year represented Fire Station #2 and because the measure didnít pass, itís no longer in the budget. It was also reported that there are no capital improvements budgeted for municipal buildings this year.
Mr. Tuneberg continued with the significant budget changes. The changes include Human Resources moving from Administrative Services to Administration, a cut in Fire Station #2 costs, and a reduction in professional services. He also explained that a person from Administrative Services moved to Administration and that an employee from Legal (Administration) moved to Administrative Services. The employee from Legal is specializing in Claims Management. Another change from the previous year is the inclusion of LID financing.
The service impacts of the cuts were reported as decreased studies and ad hoc reviews. However, if Administrative Services is asked to complete a study then necessary funds will be sought from City Council. Another impact is that administrative costs for project financing will be rolled into the total cost and paid over time.
Mr. Tuneberg highlighted how the Administrative Services Department is funded. Mr. Tuneberg explained that the department is paid by internal charges for services provided to the various City departments. He also spoke about possible revenue sources and the impacts these revenues might have on the public (see attached handout).
A challenge that Mr. Tuneberg reported was getting and keeping experienced staff. Mr. Tuneberg explained that the Staff Accountant position was recruited for twice and that both times, the recruitment failed to identify an ideal candidate. Mr. Tuneberg also spoke about the challenge of the workload for audit, budget, project financing, rate model development and insurance program reviews. Other challenges include finalizing the Transient Occupancy Tax, increasing automated transactions to improve customer service, providing timely financial reports and balancing credit ratings with capital needs and capped revenues. Mr. Tuneberg predicted that with capped revenues, rising costs and aging fixed assets, the City will struggle with finding good borrowing rates.
Councilor Hartzell asked about the changing Staff Accountant position. It was explained that an Account Clerk moved to an Account Clerk II and that this individual will be trained to work at the level of a Staff Accountant. Mr. Tuneberg also spoke about an Account Clerk who will be retiring. The Account Clerk currently works at .75 FTE, however, due to the difficult hours and the need for staff coverage, the position will be increased to 1.0 FTE.
Ms. Everson inquired about marketing the new internally-built software. Mr. Tuneberg responded that it may be a possibility. Mr. Gregorio asked about the City of Ashlandís credit rating and itís comparison to other municipalities. Mr. Tuneberg explained that the City of Ashland has a good credit rating and that the City buys insurance to guarantee timely payments. Mr. Tuneberg explained that in the future, creditors will not only look at revenue vs. expenses, they will also want a guarantee that the City is willing to raise rates to cover debt service.
Mr. Gregorio also inquired about capitalizing the administrative costs for project financing and how those costs are determined. Mr. Tuneberg answered that the project engineers help determine the costs and if the engineers do not provide the information, then a percentage will be used. Those percentages can vary and are also reviewed by consultants. Mr. Gregorio commented that subjective percentages allow room for capitalizing additional City expenses. Mr. Tuneberg reported that the percentages vary based on the cost of the project because the same amount of work goes into all the projects. Mr. Levine asked if the auditors follow the same capitalization standards. Mr. Tuneberg explained that the City has a capitalization policy and that the auditors monitor the consistency of the policy. Mr. Tuneberg reported that various departments are trained on these capitalization levels.
Ms. Stebbins called attention to page 3-37 and the $400,000 fringe benefit. Mr. Tuneberg explained that it is the Insurance Services fund. He explained that 3 years ago, the City anticipated a significant rate increase for PERS. All of the departments paid and that PERS money was put into the Insurance Services fund. However, due to changes in legislation, that money doesnít need to be expended and therefore, the fund is still carrying that money. Mr. Tuneberg also recommended that the money stay in the fund because of new workerís compensation legislation that looks likely to pass.
Ms. Thompson asked about the 20% increase in fringe benefits for Municipal Courts. Mr. Tuneberg explained that in 2007, there was less budgeted for health benefits than should have been. It was reported that the benefits for the previous Municipal Judge had not been expensed correctly. It was also reported that fringe benefits will fluctuate depending on full-family coverage or single coverage. Mr. Tuneberg said that the City pays 95% of health benefits and that the employee portion is 5%. Ms. Stebbins wants to consider reevaluating the 95/5 split. Councilor Hardesty agreed. Mr. Tuneberg explained that the employee percentage is negotiated via the unions and each union is negotiated at a different time. Ms. Everson asked if there is compensation for single family health care vs. full family coverage. The answer was no.
Everson/Levine ms to approve Administrative Services budget as presented. All Ayes.
The meeting was adjourned at 7:50 pm.
Account Clerk II