Budget Committee Meeting
CALL TO ORDER
November 17, 2014
Stebbins called the meeting to order at 6:02pm.
Dave Kanner City Administrator/Budget Officer
Lee Tuneberg Finance Director
Kristy Blackman Administrative Assistant
APPROVAL OF MINUTES
To approve the minutes as presented from the Budget Committee meeting dated October 28, 2014.
BUDGET DISCUSSION AREAS
Marsh requested that the issue relating to a Human Services Commission and Human Service funding be added to the agenda for discussion.
Discussion of a supplemental budget for the 2013-2015 Biennium.
Kanner explained that the council received the Ashland Fiber Networks (AFN) strategic business plan and has expressed a preference for pursuing and option that will allow AFN to upgrade speed reliability and service in order to be competitive with Comcast when they presumably take over Charter Communication’s territory next year.
He noted the business plan identifies almost $600,000 in various upgrades to the system and that Council has requested to launch upgrades immediately because there is a 2 ½ year window in which the city could obtain an advantage over the competition.
He pointed out that council has requested this to begin in the current fiscal year instead of waiting until the next cycle. Kanner quoted Mark Holden Director of Electric Utility as saying ”the City Of Ashland (COA) could get started with 100k in the current fiscal year” and that council has expressed a desire to move 100k out of the reserve fund and into the telecommunications fund in order to jump start those improvements.
Reading directly from the distributed memo Kanner quoted the following:
“Requirements of the Reserve Fund will be identified during the annual budget process and may include the following as approved by the Budget Committee:
“1. Appropriations to fund a capital improvement identified in the coming fiscal year for which sufficient funding sources have not been accumulated.”
Kanner went on to explain that this is a Capital Improvement Project (CIP) for which a funding source has not been identified and in keeping with the resolution council is seeking concurrence from the Citizens Budget Committee (CBC) to move money from the reserve fund to the telecommunications fund.
Kanner noted that bandwidth is purchased from Hunter Communications who is the middle man between suppliers in Portland and San Francisco and that it cost $17 per megabyte (mb) and that if the systems were in place to purchase directly from Portland or San Francisco, the net cost would be reduced to $1 per mb. He noted that while this is still more than the Charter or Comcast pays, it would make AFN more competitive. Kanner also pointed out that in order to distribute this higher speed bandwidth, the COA would need to purchase new equipment. Kanner stated that it is possible to use the $100,000 to purchase the equipment needed to bypass Hunter Communications and the equipment to distribute bandwidth.
Stebbins raised the issue of funding options and noted that this biennium the telecommunications fund budgeted $150,000 as a contingency being $75,000 for each year. At end of first year none of the $75,000 has been spent. Stebbins proposed that the $100,000 be drawn out of that fund, leaving a $50,000 balance. In regard to the remaining $500,000 required for the project, Stebbins stated that she supports the final paragraph in Kanner’s memo and council’s preference of using the Reserve Fund as opposed to central service fees.
Stebbins also recommended that the money be issued as a loan.
Kanner noted that while sourcing the $100,000 from the contingency fund is a good option, without a way to repay that money, it would draw down the fund balance going into the next budget cycle. This would mean starting the next budget cycle with a smaller beginning fund balance creating a need to source the $100,000 to clear the deficit.
Kanner pointed out that currently both revenues and expenditures in the telecommunication fund are running approximately 1% behind. He also noted that while this change may not save a lot of money, it would make AFN much more competitive and attractive to business customers. This also doesn’t guarantee that AFN would be able to repay the $600,000, but by 2018 they would be able to turn a profit.
Slattery asked what the cost savings would be compared from $17 a MB to $1 a MB and what the cost would be if this were in effect now. Kanner estimated the difference to be $240,000 a year at $17 per MB as compared to $8,000 per year at $1 per MB.
Darrow asked for clarification regarding what the $100,000 is purchasing and why it is needed right away. Kanner responded that while it isn’t needed right away it would give AFN an advantage to be able to purchase the equipment needed before Comcast moves in next year pending FCC approval. He noted that both Charter and Comcast would be reluctant at this point to make any capital investments in the network in the immediate future and the COA would have a 2 to 2 ½ year window in which they would have the advantage over them with better equipment.
He continued on noting that the equipment being purchased would be used to get the COA directly on the fiber lines that go to the exchanges in Portland and San Francisco and to buy the equipment for the server room at North Mountain Avenue which will then be able to deliver the increased speed and increased bandwidth.
Runkel noted that this seems more likely to be something that should be coming out of the contingency fund.
Cody asked what the advantage would be of using the Economic Development program funds to fund this project. Kanner noted that the only advantage is that the money is already appropriated and the use of the funds would be consistent with the purpose for which they are appropriated.
Voisin expressed her approval of using funds from the Economic Development program.
Marsh suggested moving forward and recommended the approval of the use of funds from the contingency fund.
That the Budget committee recommend to the council that we use an expenditure of up to 100k from contingency funding for the initial phase of the Ashland Fiber Network expansion.
Morris noted that he would like to see the money be delivered as a loan and to monitor how the improvements perform. He stated that he was not in favor of using the money as suggested in the recommendation.
Voisin expressed her concern with supporting this source of funding stating she believes it will be difficult to regain the money back.
Roll call vote was called
John Stromberg Aye
Rich Rosenthal Aye
Dennis Slattery Aye
Carol Voisin No
Pam Marsh Aye
Mike Morris No
Denise Daehler Aye
David Runkel Aye
Roberta Stebbins Aye
Bill Heimann Aye
Mary Cody Aye
Garrett Furuichi Aye
Traci Darrow Aye
Greg Lemhouse Absent
Marsh raised the issue of Housing and Human Services Commission doing a strategic plan for the spending of the Social Service grants, suggesting that the commission would take over the Social Service grants funding process and take them to council for approval.
Runkel expressed his approval for this process.
Heimann suggested that someone from the budget committee to sit on the new commission.
Slattery raised a point of order noting that this item was set to be discussed at the council meeting on the following evening.
Meeting was adjourned at 7:04pm
Kristy Blackman / Administrative Assistant