Citizens Budget Committee Meeting
February 18, 2016 6:00pm
CALL TO ORDER
Citizen Budget Committee Member Runkel called the meeting to order at 6pm.
Election of Chair & Vice Chair
That Citizen Budget Committee Member David Runkel be appointed Chair of the Citizens Budget Committee.
That Citizen Budget Committee Member Mary Cody be appointed as Vice Chair of the Citizens Budget Committee.
It was agreed to schedule the appointment of the liaison to the Audit Committee to the May 12th meeting.
APPROVAL OF MINUTES
That the minutes of the November 19, 2015 Citizens Budget Committee meeting be approved as amended.
- Mary Cody’s name be added to the tentative parties interested in being on the ECTS Sub Group in paragraph 12 of the Discussion of ECTS Grants process.
- That further information be added to the first paragraph of Discussion of ECTS Grant process to read “Runkel introduced the ECTS grant topic and noted that there was a memo handed out. He proceeded to ask if anyone had any suggestions to how this should move forward. “
- Addition of a question to the last paragraph in the Supplemental Budget section, by Shaun Moran regarding the software purchase.
UPDATE ON ECTS GRANT PROCESS
Rosenthal noted that a group of people had been identified as interested in meeting informally to streamline the application. The outcome was ease for applicants, less time consumption, less confusion and less paperwork for the subcommittee making the decisions. He believes this is now a better process that it was previously but would like to ask applicants after this process if they thought it was easier.
Marsh thanked the attendees of that informal meeting and commented that good changes have been made and it will be easier for the applicants. Marsh expressed her desire to see ECTS grants on a two year calendar.
Tuneberg spoke to the changes, pointing out that there will be a longer time in between the presentations and the allocations this year.
2nd Quarter Financial Report
Tuneberg spoke to the financial report as was presented to the City Council on February 16, 2016.
Stromberg referred to previous years particularly regarding the self-insurance fund and asked if we were doing much better this year. Tuneberg answered yes that they had felt comfortable paying some money back to the Reserve Fund. Stromberg asked if the City was having a good year. Kanner answered the City was having an okay year and noted that there are good and bad months and at the moment they are balancing out.
Tuneberg addressed questions about contingencies and how the City uses them to date and what effect they have on Ending Fund Balance (EFB). He noted at this point the City hadn’t felt the need to tap contingencies for unanticipated expenditures, however it is early in the budget cycle. He went on saying sometimes we have some unexpected unanticipated expenditures and don’t always ask for a transfer of appropriations if it’s this early. However if a situation arises and it’s large enough and has no resource for the expenditure, we may then go to council and ask for appropriations transfer from contingency or some other area if available. This money would always be transferred out of contingency into the appropriate cost center and spent from there. He went on to explain that if we underspend what was budgeted, this would be a positive effect on the EFB that would be carried to the following year.
Rosenthal asked what percentage the City projects would be spent of the contingency. Tuneberg answered last biennium was about 1/3. Contingency expenditure is unpredictable and hard to project and while he would hope it never got to 100%, he would like to see it remain around the 1/3 range. Rosenthal asked for clarity if 1/3 of the contingency equals approx. $1 million dollars. Tuneberg answered yes.
Runkel pointed out that property tax revenue in November looked to be up about ¾ of a million dollars and asked if we budgeted for that. Tuneberg answered when the City did the calculations they allowed for about 3 – 3.5% growth. Runkel also noted there was a substantial increase in permits and licenses. Kanner pointed out that the number Runkel was referring to includes all tax revenue and not just property tax.
Moran asked for clarification regarding the software purchase that he thought had been presented as part of the budget in May and turned down and why it was now so urgent to make this purchase through the use of a supplementary budget. Tuneberg explained that it was the same general ledger budget software that had been mentioned in the budget message and that message stated that the City was not asking nor did it include it in the budget because they thought they could make it through to the next biennium It was, however, later discovered that the provider, Tyler would no longer support the Eden software used by the City. He went on to explain that as well as that issue, the City was continuing to struggle with utility billing software Springbrook (which was not part of the software mentioned in the budget message) whose functionality was poor and requiring the City to charge higher fees for online payments and Tuneberg reminded the Citizens Budget Committee (CBC) that the budget had been adjusted several times in the past for continuing increased bank fees. Tuneberg explained that Tyler had purchased Eden and created Munis and had given customers the opportunity to migrate from Eden to Munis or go out to bid. The City took into account all of this information coupled with an attractive bid from Tyler Munis which was available until the end of January and made the recommendation to the City.
Moran asked if the savings were focused more internally or on the software and if it was normal not to go out to bid. Tuneberg answered the savings were in the software and that we normally go out to bid however, we are not required to. He also pointed out that there were five or six other government agencies who had gone out to bid and that Tyler Munis had won the majority of them. Moran asked if we employed buyers for software technology. Tuneberg answered no. Moran asked if the City used resellers. Tuneberg answered no. Moran asked why. Tuneberg noted that in his experience with value added resellers, they might give a discount but could charge us for ongoing work. He explained that this wasn’t the case with Tyler who had offered for us to move from the old software to the new software at a good cost. Moran indicated that he was satisfied with these answers.
Furuichi asked what the total cost savings were. Tuneberg answered the discount was approximately $325k. Kanner added that the cost was approx. $650k. Tuneberg noted that it included installation, support, set up, programing customization, migration of data, report generation and training before and after. Furuichi asked if this would fix Springbrook. Tuneberg said it would be an improvement and that the savings from moving from Springbrook would make up for the conversion over time.
Voisin asked what the annual cost is for the new software. Tuneberg couldn’t recall at the time but noted the full suite from Munis including all of the added packages was less than the cost of Eden and Springbrook combined. He noted the information was available in the council communication and would forward this to all of the CBC Members.
Moran asked if the City anticipated any cost beyond what was used for this suite. Tuneberg answered no and encouraged members to read the December council communication.
Review of Financial Policies
Tuneberg explained that there are accounting policies and methodologies in the budget document to assist the reader. He noted that this subject had been brought up to prepare members for the next budget cycle and for the coming May meeting which we will propose to combine the two documents. Tuneberg pointed out that with the number of changes there is a need for these to be updated. He outlined the resolutions leading up to the current document and why these changes are needed. He also emphasized that he would like to see these changes happen in advance of the new budget process.
Gates asked regarding RES 2010-05, what is the 12% referring to with regard to fund balance in the general fund. Tuneberg noted that it is a percentage of annual operating revenue.
Runkel referred back to the council communication and asked if the ‘cash up’ in general fund balances are meeting the percentages. Tuneberg answered that when they create the budget and projecting out they are usually under projected. Kanner added that there were a number of funds that were under projected.
Stromberg asked if when these projections are made if the City assumes that no contingency will be used in that year. Kanner answered no, that the City shows and unassigned fund balanced. Tuneberg added this is shown in the long term.
Kanner outlined the current projection for PERS rates. (Presentation attached). He noted that in December PERS sent out the City’s estimate for the 2017-2019 cycle and the City would get the final rate in fall, however, December rates probably wouldn’t change much. PERS is predicting that these increases will also be reflected in the next three budget cycles.
Kanner had a power point presentation to present, however, a technological glitch prevented its use. .
The City is projecting an overall increase in PERS expenditures of 3.58% points. This means expenditures will increase from 16% to 19.6% of payroll. That translates to $2.8 million in FY2017, $3.5 million in FY2018 and $3.57 million in FY2109. This means that the projected cost in the current biennium $5.613 million and in the 2017-19 biennium the projection is $7.07 million. He explained that in the general fund and parks, the increase looks striking, but it’s important to realize that this is only 1.6% of the total general fund, so what this really means is that we are unlikely to be able to fund anything new in the next budget cycle without identifying new revenue streams.
Kanner explained that PERS is currently paying for employees who have retired and the projection for those who will retire in the future and there isn’t enough money to cover this. The state liability grew from $9 billion to a projected $20 billion. This is partially because system wide earnings fell below 8%. He explained that employees in tier 1 are guaranteed to have their money grow by 8% a year and when the earnings fall below this PERS has to make up the difference. In addition, PERS readjusted the actuarial tables to assume that retirees will live longer. They are therefore paying benefits to people for a longer period of time which equates to an extra $1.7billion dollars. Finally an adverse court decision on a change in how PERS calculates cost-of-living adjustments had a $5.1 billion impact on the system’s unfunded liability.
Moran asked if Ashland’s unfunded liability was $16 million dollars. Tuneberg noted that the City’s share of the unfunded liability is $3.58 million. Kanner said the City doesn’t have to pay the unfunded liability; PERS uses that to calculate the City’s rates. He went on to explain that there are some positive trends in that the unfunded liability isn’t really very high, and the Oregon Public Service Retirement Plan (OPSRP) rates are much lower than PERS being that it is a fully funded system. Another positive is that 58% of City employees are OPSRP members and this percentage is rising.
Gates asked if the OPSRP program was a defined benefit program and if it had a built in escalator. Kanner answered that it is a defined benefit program, but was unsure about the built in escalator and he added that it does not have a guaranteed rate of return.
Moran asked what sort of notice are employees required to give before retiring. Kanner was unsure but believes it’s 30 days to the City and 90 days to PERS.
Furuichi asked what happens to the unfunded liability in PERS employee accounts. Kanner explained that it is systemic and there is not actually any unfunded liability in member accounts. Furuichi asked what the impact is on the city once they retire. Kanner answered that there is a positive impact because they are replaced with a lower cost employee. (Second question not legible).
Voisin requested the slideshow be sent to the budget committee members.
Role of the CBC
Runkel stated there was a question raised at the last meeting regarding the role of the budget committee and it’s down time while there isn’t a budget to consider. He raised the question of whether the committee should adjourn, or if the members should be utilized in other areas. He opened the topic to members for ideas.
Stromberg remarked that it is his belief that the role of the CBC members is to ask questions about matters that don’t make sense and sorting through those things until they do make sense. In order to do that, there needs to be an understanding about City practices and that takes time and questions. He noted that one of the effects of the biennium is that the CBC members have half the amount of time to learn using the actual budget process.
Furuichi referred to discussion suggestion, item 1 and quoted “the Budget Committee’s role should be limited solely to the responsibility spelled out in ORS294.426 and 294.428”. Kanner noted that this is not a recommendation, rather a suggestion that the committee may possibly discuss. Furuichi asked if that precluded paragraph 3. He noted that in 294.428 there are three paragraphs and that this had only references one of those. Kanner clarified that the items in paragraph 2 are discretionary. Furuichi questioned if the role of the CBC should be limited to just 294.428.
Kanner clarified that paragraph one (1) is ‘shall’ and is mandatory. Paragraph two (2) is ‘may’ and is discretionary. He asked if the CBC wants to exercise other discretionary functions. Furuichi asked if that is what paragraph three allows. Kanner responded that paragraph 3 is procedural and says when you are in deliberations on the budget in the period between delivery and approval, the CBC has a right to compel officers of the city to come and speak to you about the contents of the budget. Furuichi said he sees no reason to make any changes to the role of the CBC.
Runkel clarified that the intent of this item is to ask what the elected members of the council would like to assign to the CBC.
Darrow stated that she believes it is clear in 294.428 what the CBC has to do and that the rest is at the discretion of the City Council and that there isn’t an inherent right of the CBC to go beyond that and that the City Council holds discretion as to what the CBC’s role is.
Cody referred to paragraph three (3) and asked what advisory committee means. Kanner stated that after having a meeting in August and having several people asked that this item be a topic of conversation, he was not overly comfortable answering this question because he doesn’t believe that it is his job to tell the CBC what he thinks their duties should be.
Gates noted that at the August meeting he had asked for clarification to the role of the CBC and felt as though he was still confused about this. If the ultimate responsibility is to approve something, he believes that the CBC should still get into the detail of the item. Kanner commented that the statute doesn’t provide guidance beyond the plain language presented, nor does the Department of Revenue provide guidance. He went on to note that different budget committees in different jurisdictions act differently and he is unable to provide guidance beyond what is presented.
Marsh said she believes the CBC is a reservoir of talent which can be utilized for various things from year to year and that as a Council member recognized the need to call on the CBC as extra eyes. She stated that she also believes that education in the off year is important to for the CBC to be able to understand the detail in the actual budget years.
Voisin referred back to an earlier budget meeting and a discussion that was had regarding capital improvement projects where they had approximately. one hour to make a decision regarding a $34 million project and doesn’t believe that there was enough information provided. She went on to state that as a Councilor she would like to have the CBC’s eyes on things like that.
Gates referred to the additional reservoir requirements and believes that there wasn’t initially enough time to look at that.
Seffinger thinks it helps with transparency and being sure the budget is readable by the public. Lucas said she doesn’t like the two year budget.
Moran read the following statement;
“This is the 2nd or maybe the 3rd time since late last year that I have heard that the “role of the budget committee” should be brought up for discussion and review. Although I would strongly argue that I think we could have found much best use of our time tonight discussing parts of the actual budget, part of me applauds the move toward a more open dialogue around this committee. When I decided to volunteer for the Budget Committee I was convinced the professional experiences I had and the expertise and talents of the other voluntary members would blend nicely with the established elected members and could help in the committees’ task of tackling the fiscal policy and budgetary issues facing our town so I am surprised that we sit here tonight discussing our role. We can’t have this committee being lauded for asking questions which on one hand are cited for improving transparency and accountability in the budget building process yet on the other hand be criticized for asking the very questions which provided those answers. We can’t have one without the other they go hand and hand.”
“What we do and can do on this committee is clear. Considering the role of this group is specifically outlined on the City of Ashland website I don’t understanding why tonight we needed to spend precious time discussing the meaning of our existence. Isn’t a role to this committee to hold public meetings to review, question and approve the budget? No-one, no council-member, Ashland citizen or budget-committee volunteer could rightly be asked to approve or sign off on a budget if they didn’t know the details behind the numbers. Part of the budget approval process is to gain transparency into the #s in the departments and divisions represented in this budget, insure the process is as efficient and effective as possible, and raise questions on issues in departments where the financial direction underway now may differ from the trajectory and budget assumptions outlined before we approved the budget. I firmly believe that as a service to the Ashland community we have been tasked to represent here on this committee we have the obligation to be professionally curious, inquisitive and thorough and yes sometimes ask those difficult questions.”
“I know there are many very important issues facing this committee which we could have dedicated time tonight discussing. Yes, I do think it was rewarding to review the costs and realities of PERs and I appreciate the time spent there tonight. After all compensation costs, wages and benefits for our town employees are one of that largest line items in the budget growing +9% biennium over biennium and makes up 30% of the budget we just approved. No, this committee doesn’t need to negotiate their salaries but shouldn’t we as budget committee members be allowed to ask the questions needed to be competent, proficient and knowledgeable in the details of those salaries and benefits, one of the largest single component of the budget we have been asked to approve? Of course we should. This isn’t personal. We shouldn’t be distracted by those who feel picked on, singled out or uncomfortable by fair and practical questions around their departments fiscal issues, the budget or the process. Their discomforted should be outweighed by this committees need to know the answers to those questions. The statutory role of the Budget Committee is undeniably limited but we all have an obligation here to review and question before we approve any budget. Going forward we need to continue to have a rigorous open discussion on the budgetary and fiscal policy issues facing our town and this committee. These issues should be our focus along with an achievable course of action to address them while of course working within the already clearly established framework of the Budget Committee charter. I feel this discussion is a step in the right direction and I look forward to working with this committee to achieve our budgetary objectives in the months and years ahead.”
Morris stated that he believes going back to a one year budget would take away time for questions in the off year and believes the off year should be utilized to answer questions on various topics.
Runkel asked whether people like to do work outside of meetings researching topics for the off year. Cody noted that she would like to be part of it.
Furuichi asked for the list of topics and was advised that they are available in the minutes from the November meeting.
Morris stated the following could be added to the list of subjects for the off year.
- Audit performance update
- Waste Water treatment plant system and improvement plans
Stromberg asked why Morris wanted to add AWAC. Morris responded because the City is assigning money therefore we should be able to able to review this.
Darrow asked for clarity on whether the CBC is in fact being asked to investigate items if such items are pushed forward to them by the Council. Morris clarified that the suggested item was put on the agenda as a budget member and not as a council member and the thought there were a lot of questions about that subject the prior year. Darrow repeated that she would like clarity about what it means if something is put on the agenda. Marsh pointed out that her position is financial in reason.
Furuichi suggested and volunteered to be on a smaller group that could get together to discuss items from the agenda – for example, the water or capital projects, particularly about a 10-year CIPs, it would be good to know the expenditures for each year.
Seffinger asked who is going to meet and to what level of detail. Furuichi sees it as something that would be governed by the City Administrator.
Marsh said she would be reticent to set up a subcommittee out of concern that a subcommittee may unnecessarily create work for the CBC.
Stromberg added that Council members are busy and have a lot on their plates and it would be great to tap into the talent on the CBC.
The next meeting of the CBC will be held on May 12, 2016, 6:00 p.m. at Civic Center Council Chambers, 1175 East Main Street
To adjourn the meeting at 7:54pm.