Budget Committee Meeting
January 18, 2001
Civic Center Council Chambers, 1175 E. Main Street
Present: Budget Committee members: Martin Levine, Regina Stepahin, Howard Braham, James Moore, Jr., David Williams, Chris Hearn, Russ Silbiger, Don Laws, Cate Hartzell, Mayor Alan DeBoer, Cameron Hanson, John Morrison and David Fine.
Absent: Councilor Susan Reid.
Staff: Greg Scoles, Lee Tuneberg, and Ken Mickelson. Parks and Recreation Commissioners Sally Jones, JoAnn Eggers, and Jim Lewis.
Others: Miles Murphy of the Ashland Daily Tidings.
Greg Scoles began the meeting welcoming everyone and asking last year’s chair, Regina Stepahin to start the process.
CALL TO ORDER
Regina Stepahin called the meeting to order at 7:05pm.
The budget committee members introduced themselves, then Stepahin asked for elections of officers to be made.
ELECTION OF OFFICERS
Chair Motion by Braham Second by Williams Unanimous vote for Levine
Vice-chair Secretary Motion by Braham Second by Moore Unanimous
vote for Stepahin
Presentation by Lee Tuneberg, Budget Officer, handouts were provided.
Tuneberg reviewed page 2 the budget process as required by Oregon statutes and adapted for Ashland. Starting in January appoint budget officer, prepare the document, notify public and present budget in April. Committee meets number of times necessary to review, amend and approve the budget during the April- May timeframe. Approved budget presented in June to council for acceptance, amendment if necessary and adoption by end of June. Staff distributes final budget documents to interested parties, county and state in July per law.
Tuneberg covered page 3 the tentative schedule created by following last year’s process and the use of subcommittees. He cautioned that these are tentative dates subject to change per the Committee’s discussion tonight.
Tuneberg reviewed elements of last year’s budget document and process as a reminder to prior participants and for the new ones using pages 4 through 7. Page 4 is a look at the prior budget in a departmental perspective. This was a new approach last year that was done to enhance committee and public reading. He said the same departments would appear in the new budget. On page 5 was the presentation of the budget more in line with the State format showing major categories such as personal services, materials and services and capital outlay as well as other areas like transfers, contingency and fund balance. On page 6 is the same budget in a fund perspective. This shows the funds budgeted last year and note the absence of numbers in the 2001 adopted column for Cemetery Trust Fund and Cemetery Fund since those and other activities were incorporated into the General Fund.
Hansen asked for clarification on the Cemetery Trust Fund and Tuneberg corrected that it was the Cemetery Fund and the Band Fund that were not budgeted separately
Tuneberg went on to cover the prior year assumptions and reflected on last year’s process, comments from the Committee and public and proposed from staff a revision to the process if acceptable to the Committee.
The proposal was to amend the process to start with year two of the Long Term Plan included in the FY 2000-2001 budget document as a base budget for the next year. Additionally, to employ both current and long-term assumptions adopted tonight, incorporate the Council’s strategic plan that is to be updated on 2/10/01 and include the updated capital improvement program in constructing the FY 2001-2002 Proposed Budget and the Long-Term Plan to be included within that document. The number of budget committee meetings could then be reduced by focusing on changes from the based budget and reducing or eliminating the lengthy presentations given by department heads in the prior year.
Tuneberg took the Committee through the FY 2000-2001 current assumptions, long term assumptions, general fund long-term plan layout and strategic plan handouts.
Laws commented on the memo and interest by the Budget Committee in being able to compare the proposed to a base budget and to make changes rather than just approve it.
Scoles explained that this approach seemed to get at what the Committee had wanted for improvements to the process and allowed us to compare and contrast multiple budget years without having to go back and reconstruct or defend the entire budget. An example being the belief that the City was going to continue to provide police services similar to prior years so why spend time justifying the base service accepted in the prior year but focus on changes. Department heads could then prepare to talk about those (service) changes and issues the Committee is more interested in rather than a Power Point presentation that cuts into valuable committee Q&A time.
Levine commented that the proposal seemed to get at the issues in the memo.
Questions regarding the assumptions on page 9.
Fine looked at page 9, Assumptions 3 and 4, and Page 13, Assumptions 1 and 2. He said that assuming in each of the instances the property tax rates do not increase, he would also assume in each instance the growth of available property tax revenue would grow by 3% due to increased valuation, plus 3% a year due to new construction. The intent was that a typical resident's tax bill for someone continues to reside in the community in any of these years will not go up by more than 3% a year, and that is something council wants in terms of maintaining livability in the community.
Scoles indicated that market value can grow but the assessed value can only grow 3%. He said this is for the long-term resident and if they don't do construction at their house, or buy a new house, then those assessed values would only grow at 3%, but it could be less. The tax rate proposed at least for planning purposes is to hold the same tax rate, and this will apply to both Parks and to the General Fund, which are the two key components.
The County uses a process whereby they assess a certain sector of the County each year and do a real market value. Because of Measure 5 they only adjust the rate for tax purposes at 3% a year.
DeBoer stated that the percentage of assessed value can only go up 3%, then the communities fall under their bonds and their tax authorities. However, he said if you buy a new house it gets appraised and then it goes up 3%.
Scoles said that annexations add to the gross amount of dollars and so does new construction and historically we have seen about 3% in terms of assessed value growth outside of the limitations.
There was a question if in the projection there was any attempt to put a value on the other allowable growth items.
Scoles replied that we have attempted to put 3% in there as the additional growth component.
Fine asked if the Budget Committee would assume that the percent levy would not be increased, and if so, would staff be able to develop a budget along those lines. He indicated that two years ago the Budget Committee told Scoles' predecessor that when they suggested that a property tax rate would not increase by more than x%, the Budget Committee said that they wanted the x to be a zero. Fine said if they were to say they wanted an increase in the rate to be zero, with no increase in rate, what would happen to services?
Scoles said that what is proposed is a zero increase in rate. Scoles indicated on page 9 what would the maximum assessment be based on these assumptions. He said although this is for planning purposes, it is for planning this year 's budget. Essentially it is $1.50 for general fund assessment and that would stay constant. However, if you buy a different house or do some work that it would raise.
Laws said that the out year budgets are based upon services and their authorizations and service levels. He said that what they have there in terms of taxes are assumptions of revenues. He thinks that the demand is going to be greater than the revenue supplied, quite considerably.
Scoles indicated that the authorized permanent rate is 492, excluding the bonds. This number is the same as last year, which is the historic split between the City and the Parks.
Williams said that on behalf of the City taxpayers he has reservations about assuming $3.62 for the total city and $2.12 for the Parks.
Scoles said that what this actually equates to is a little over 3% growth in that part of the General Fund, and the City's costs with labor costs and material costs go up more than 3%, and so we will have to use some innovative thinking even using these numbers. A balanced budget could be delivered with a different set of assumptions, and it could be that the rate will be reduced, but it will impact the level of services within the General Fund and then likewise in parks if the Committee were to limit it. He clarified that the total general fund is nearly $10 million, and the budget is something like $5.5 or $6 million so another $4 million would come from other sources within the General Fund. He feels there are other ways of generating money and that holding the line on property taxes is a good target, although he said that is the Budget Committee's call.
Williams said that he would be interested in knowing the consequences if we could hold taxes constant on existing homes. He comes back to the notion that we advertise in our budget summary pamphlet that the amount of property tax money levied in Ashland is one of the lowest tax levies of any major city in Jackson County. He doesn't feel that is true, although he would like to see it to be true, especially given that we have high home prices in Ashland and therefore for any given home Ashland citizens pay more in property taxes than citizens in Medford or Eagle Point.
Scoles gave an example of what a difference might be. If you collect the same property tax we collected this year, next year, then what you are looking at is about a half a million dollars shortfall. So you would either have to cut half a million dollars in expenditures out of the General Fund or find that revenue in another place. He confirmed that it is 3% of the assessed value.
Tuneberg said that his perspective in the budget preparation is identifying what it is you are doing, or attempting to do. Capital improvements and city services will drive our costs or expenditures and if the city limits the amount of revenue that comes from property taxes, about $6 million from property taxes, and if you want to limit that and provide the same service then we would have to raise the rates in our utilities or find the revenue elsewhere.
Fine addressed dealing with the long term assumptions, and asked for a change in trying to accommodate it. With the knowledge that we will need this sort of revenue, and that we will either get this type of money from the property tax base without any greater increases, or find some other less repressed tax to make up the shortfall, this is something which council can address in the Strategic Planning meeting. What could be done in the long term is to make taxation less regressed in Ashland, or consider a services tax.
DeBoer asked if a person sells their house does it get reappraised or does it keep the same base plus 3%. Each time a house is sold it reappraises. So if you are looking at 3% growth it might be closer to 4-1/2% although most of the new construction is not taxed.
Scoles replied that historically it is about another 2% or so.
DeBoer replied that the Building Department could give the amount of new permits, and they could track the difference between non-profit and profitable, which would help in pre-planning. He said that property taxes are only paid by about one third of our residents, so if we are talking about livability and affordability in Ashland, he is a little hesitant to reduce property taxes which would force us to increase electricity and water. As everyone pays utility bills, if a street user fee is added, or anything else added to the utility bills, everyone pays it. We want to keep a balance of people here, and those property owners are also gaining from the acceleration from the value of their properties. He said that utility rates are going up, and whether the City absorbs some of that by reducing our 25% tax or do something else to keep it affordable, the money has to come from somewhere.
Scoles said that if you reduce the 25% tax then you have the same thing as eliminating the property taxes.
DeBoer thought the $2.12 and the $1.50 should be challenged.
Moore agreed and felt that a lot of time was spent on that subject last year and a conclusion was never reached. He said there is a tendency to move the budget toward that and that is where his concern is.
Silbiger said that a good portion of the meeting tonight was spent saying that you don't want a budget process where you can tell the City this is how much you have to spend, and then come back with a budget and magically reach that number. He feels this is a council decision.
DeBoer replied that we also have an elected board he believes is equal to the council.
Hartzell said part of what was questioned was the addition, which seems to repeat what is in 3, and she is curious that the Parks Director wants this in here as an important connotation of the agreement that was made between their department and the City at the time when the measure took effect.
Scoles said that 3 was modified later to add in the Parks and it is almost redundant to have 11 with that.
Braham stated that these were the same issues that were struggled with last year but there was no resolution then either.
Laws said that he is convinced that parks has a special place in the hearts of Ashland citizens, and that is the reason they have their own levy.
Scoles explained that historically the Parks get $2.65.
Tuneberg explained that the authority and the ability to levy more is there, but we are not doing it.
Morrison questioned 11, and asked if we had maintained the split the same way it was and when it says being consistent with prior years, what years are those?
Scoles explained it would be for a couple of years, since Measure 50.
Hartzell questioned No. 5 on page 9.
Tuneberg explained that before we wanted to go above that $1.50 we would look at cost savings elsewhere. It is a kind of guarantee that we are not trying to fund our activities through taxes.
Hartzell asked if we are also looking at the long-term assumptions on page 13. When she looks at No. 15, ambulance revenues will grow at 3%, and she asked if that is based on the population growth and anticipated rate growth.
Scoles said that is the whole package and that is a conservative growth rate.
Laws questioned the actual population growth.
Scoles replied that the population growth was a little higher last year. He said if you use a higher number then you are going to anticipate more revenue and possibly more expenditure, and you want a more conservative approach to the projections.
Scoles explained that these are some of the assumptions used. When we are developing a lot of our revenue sources we use many other assumptions too.
Braham asked about follow-up information and how close the actual was to estimates and the impact on budget.
Tuneberg added that staff looked into the trends and the population growth, which they looked at with a conservative approach.
Scoles said that one of the things to do would be to go back and try and get a realistic face on the assumptions, which would show the trends.
Tuneberg clarified that in anticipating large increases in BPA to the city, we looked at a higher rate of perhaps 20 or 25% and in this budget in the long term, we only looked at a 7% increase to the public, and by doing that, it is not a great windfall.
Scoles suggested maybe 3% for No. 4 instead of 3.9.
Levine suggested that perhaps we should state that any increases beyond anticipated inflation shall be passed on down.
Budget committee members requested that materials be distributed in advance of meetings.
Levine said not as much time spent on out years and long-term plans.
Hartzell asked about department heads defending two years’ information.
Scoles said staff putting more time into the second year than last time.
Hartzell asked if this wouldn’t promote "padding" in second year.
Williams asked if we were proposing to approve a two-year budget with long-term plan assumptions.
Tuneberg spoke of the different elements that lend themselves to a multiple year perspective like the CIP, rate models and financing plans.
Laws pointed out the problem with projecting out too far, the numbers become less reliable as time goes on. The increases we’ve had in the past have been very significant. For those departments that have been less careful than others in the out years, when they get here and they’re asking for a significant different amount of money than what was in the projections.
Williams asked again whether the process was requiring approving a two-year budget. When approving the budget not only to approve the 2001-2002 Budget but to approve the 2002-2003 projections which will become a base of the following year.
Tuneberg said actually we’re asking you to look at the 5 year projection and look at reasonableness knowing that we can’t predict out that many years with great amounts of certainty. We are using the assumptions here. We are not ready to do a biennial budget. It would be very difficult to accurately predict that and hold to that budget. We will still review and adopt appropriations for one year at a time but staff and the committee would be considering the next year’s numbers as they are constructed using approved assumptions.
Levine identified the Committee’s official charge to review and approve the proposed budget with necessary changes and then to certify the tax levy.
Scoles explained that through the process we aren’t "locked into" numbers accepted for year two.
The Committee asked about the validity of the year 2 numbers that we will begin to use as the base budget for 2001-2002.
Tuneberg indicated that even though some department heads did not play a great part in preparing the second year information in the current budget, this process would allow them to validate or change the numbers from the base for 2001-2002 and to explain the differences.
Levine asked if there were any changes to the proposed process.
Laws commented on staff’s past practices to present reasonable budgets with good justification that does get reviewed by council through out the year.
Levine asked if there were any comments or changes for the assumptions.
Williams asked if the assumptions would automatically make a tax bill go up 3%. Giving that house prices on the market have spiked dramatically and gone up 20-25% in the last year, and the previous seven years were increased in actual value. Basically by saying that we will adjust our rate downward by an amount of equivalent to the growth of assessed value, when assessed value grows more than 3%.
Scoles clarified the limit set by Measure 50.
Hearn asked how this impacted by the "three year cycling" process used by the county.
Levine said that 2 years ago the budget committee said the property tax rate would be $0.
Scoles said annexations add to the gross amount of dollars and so does new construction and historically we have seen about 3% assessed value growth outside of the limitation. Essentially these are for planning purposes they are not to levy the assessment, or to develop the levy.
Fine said we would follow the assumptions to construct the budget even if the direction was $0 increase in tax revenue.
Scoles commented that the assumptions are designed to help us for planning purposes only, and for developing the resources for the budget.
Williams stated his experience is one that if the rate is set at 3.62% it will be that rate, not less.
Levine discussed revenue projection.
Williams said he still has a problem with setting the rate of 3.62% at the beginning.
Williams said there are two ways to look at the budget you could project what revenues would be available or what limitations you want to place on that, and then once you have that then you can find your expenditures, or you can set a level for services and develop what its going to cost to provide those services and then go back and look at revenues.
Tuneberg commented on the creation of the budget with the things we now like CIP and strategies that will impact the fees assessed and rate levied.
Williams asked about the long-term assumptions and how they will allow making up for shortfalls and could we limit the rate over the multiple years.
Laws asked how could if we don’t have impact analysis.
DeBoer asked about growth and how property gets re-appraised and comparison information for residential commercial and non-profit. Those utility bills are paid directly by a greater percentage and limiting taxing may dramatically impact other rates.
Williams talked about the historic split between parks and us and that they’re below the same numbers we used last year.
Silbiger asked if there was an alternative to recommend.
Williams said he would be interested in what would happen if you could hold taxes constant.
Hartzell asked about developing service levels before setting the rate.
DeBoer challenged the Parks commission to look closely at their part of the rate.
Morris commented that that was a concern with the committee last year.
Richard Land commented that the Parks rate is driven by park needs and public desires.
Silbiger said setting the rate in advance is like giving the agency a check.
DeBoer commented on the council’s review of the budget and uses.
Howard stated that these were the same issues struggled with last year but there was no resolution then either.
Laws commented on how important the parks and the rate are to the public.
Scoles explained that the $2.12 rate for the Park is a lot less than what was authorized.
Morris asked if the distribution had stayed the same over the years.
Scoles and Mickelson confirmed it.
Committee members asked clarifying questions on both sets of assumptions:
Hartzell clarifies p9 #5, p13 #15.
Laws questioned actual population growth.
Scoles said last year was a little higher
Levine asked in Community Development couldn’t provide better information.
Hartzell asked for more background information on assumptions and the sources used.
Howard asked about follow-up information on how close actual was to estimates and the impact on budget.
Silbiger questioned whether the ambulance and cemetery budgets were still treated as enterprises even though they had moved to general fund.
Tuneberg said there was still a relationship between fees and services but they were not longer separate enterprise funds.
Morrison questioned putting in rates for labor negotiations
Committee discussed the benefit of not stating specific dollar or percent.
Levine asked if there were any recommended changes to the assumptions.
Laws moved acceptance of the current and assumptions
Moore suggesting amending tax rate on p9 #3 to read "not to exceed"
More discussion with the amendment being accepted.
FULL COMMITTEE VERSUS SUBCOMMITTE MEETINGS
DeBoer recommended no subcommittees.
Moore said it could work with information being distributed in advance.
Levine meetings would be more information with no big presentations.
Laws asked that the materials be distributed in advance.
Scoles said that summary information would be provided in department format.
Hartzell said the new format would be aided with full information, department summaries and strategic plans but didn’t want to be limited to only changes.
Scoles said we could provide information on changes and be ready for any questions so discussion is not limited.
Tuneberg asked if the 2000-2001 dept summaries were adequate.
Laws said some were lacking.
Hartzell asked what would happen at the 4/19 meeting.
Tuneberg gave an overview of what the budget officer would present.
Committee asked how we could get through all the information and get questions answered in fewer meetings & how would the parks fit in.
Levine asked if the committee thought it could be satisfied with less meetings.
Howard said it could happen with less presentation and grouping like departments with each other.
DeBoer asked about one meeting a week between 4/19 and 5/17.
Hartzell pointed out the grant meetings occur before and could be done the way the calendar says with slight modification of times.
Moore moved the committee adopt 4 meetings in 4 weeks.
Laws said he was concerned that the committee could get all their questions answered with so few meetings. Hartzell asked about subcommittee sign-up.
Committee felt like subcommittees still employed, everyone needs to sign up and meetings are open for attendance. DeBoer suggested the Thursday meeting schedule with a Tuesday identified by the budget officer.
Vote was all in favor except Laws and Stepahin for fewer meetings and less formal presentation.
Levine asked staff to email information out, requesting sign-up for subcommittees and confirming calendar.
ADJOURNED – Meeting adjourned at 9:45pm.Respectfully submitted by Kirsten Bakke, Administrative Assistant