Full Budget Committee Meeting / CIP & Public Works
April 11, 2002, 7:00pm
City Council Chambers, 1175 East Main Street
Present: Alan DeBoer, John Morrison, Diana Goodwin-Shavey, Jim Moore, Don Laws, Susan Reid, David Williams, Cameron Hanson, Marty Levine, Regina Stepahin, Ray Olsen
Absent: Russ Silbiger, Chris Hearn, Cate Hartzell
Staff: Greg Scoles, Lee Tuneberg, Kirsten Bakke, Paula Brown, Mike Morrison, Steve Burkhalter
CALL TO ORDER
Marty Levine called the meeting to order at 7:03pm.
APPROVAL OF MINUTES
Approval of minutes from previous budget subcommittee meetings dated:
1/17/02 Budget Committee - Introduction
3/13/02 Economic & Cultural Development Grant Presentations
3/14/02 Economic & Cultural Development Grant - continuance
Hearn moved to approve all minutes as written. Moore seconded. Voice Vote: All Ayes. Motion passed.
Budget Message and Overview
Scoles began the presentation of the 2002-2003 budget message by thanking the committee. He went on to discuss the issues and challenges with this year's $91 million budget, stating that Personal Service costs were the largest with an increase of 5% this year. He explained that capital projects had been reduced by $7 million this year. He pointed out that all budget committee meetings would be televised weekly through May 16th. Scoles complimented Tuneberg and staff for putting the document together and said that errors would occur because of its complexity. Scoles explained that the proposed budget being looked at tonight was built on assumptions adopted at the previous full budget committee meeting.
Scoles summarized some of the major FY03 Capital Improvement Projects stating that the Library expansion project was scheduled to be completed in November of this year. The fire station project will be bid next week; new office space is being built at the old Hillah Temple site to be completed in November and the Siskiyou Blvd./Ashland Street project should start some time in August. He said the Hargadine parking facility project, (the City's parking lot adjacent to OSF building), has been completed and that the current challenge was to balance revenues and expenditures for that facility.
He referred to the proposed property tax rate, levying $3.56, ($1.47 the City, $2.09 the Parks), per thousand, which is exactly what was levied last year, stating that the cap is $4.29. He clarified that this was possible because we have a variety of funding sources, including electric revenues, wastewater revenues, property tax, hotel taxes, food and beverage taxes, etc., as well as stable reserves. He mentioned the AFN project and its interim financing.
Scoles spoke of the challenges faced in the coming year including compliance with the Strategic Plan Goals that the Committee identified earlier this year (pages 1-16 through 1-18). Another challenge is health care costs for the City, which are ever increasing. Scoles stated that a 25% increase is anticipated and a 30% increase has been budgeted in the proposed document. He explained the increasing challenge with (Public Employee Retirement System) PERS costs, clarifying that there is not a major increase in the PERS line item, but a significant shift in anticipated unfunded liability, estimating around $5 million that will have to be dealt with. He said another issue is the increase in the employers' contribution of around 3% of employees' costs, which is an increase of about 30% in PERS costs.
Scoles mentioned the collaboration efforts with the City and the Parks and Recreation Department. He noted some of the areas where better coordination would reduce operational redundancy and increase financial efficiency including human resources, accounting and accounts payable.
He described the challenges of the 911 emergency dispatch, which involves developing a report for the consolidation of (Public Safety Answering Points) PSAPs. There are 3 PSAPs in our county, (Ashland has three), and consolidating those groups could result in significant savings to the City's budget because State monies are received to augment their operation.
Scoles talked about the City of Ashland and other cities suing Qwest for franchise fees, noting that the City prevailed and Qwest owes the City $180,000 to $200,000. Scoles asked if that was included in the revenue for this year. Tuneberg said we still estimate Qwest revenue but not the payback. Scoles noted that Qwest wants the City to sign an agreement stating they will be paid back if some other court found it to be an unauthorized expense, but that the ten cities involved won't agree to that. He referred to another ruling for FCC telecommunications, saying that cable modems (such as AFN) are exempt from franchise fees by the FCC, but that this is a preliminary ruling, and could result in a reduction of revenues to the General Fund.
Scoles then mentioned the challenge with rates and the increasing cost of services. He talked about potential rate increases to a number of utility areas, including electric. He reminded the Committee that the Electric rates hadn't been raised as much as initially proposed, and didn't include the highest increase last year because we were hoping better news would come out of BPA. Tuneberg said the City had budgeted for two increases, a 30% and a 20%, part surcharge and part base rate, but wound up increasing 10% base charge and 10% surcharge, anticipating visiting it again in winter or spring, but opted to hold off until July. Scoles said that the City probably couldn't hold off any longer, but the type of increase was less than projected last year. He mentioned the proposed water rate increase, a slight adjustment to fees in Airport and to AFN.
Scoles explained that the Parking Lot was a place where projects and increases in staffing could reside until decisions are made to put them into the budget.
There was a discussion regarding the increase in Personal Service costs. Scoles said that the 25% increase in health care costs was the increase in the cost of the medical premium for the whole city. Reid asked about the PERS unfunded liability of $5 million. Scoles said that the increase in the unfunded liability was due to the model, so that the increased rate to be paid to PERS made up the difference over time and was projected out over 28 years. He said that since the market wasn't good over the last couple of years and the model changes over time. He also mentioned, as a comparison, that Medford has a $12-14 million unfunded liability.
Goodwin-Shavey asked about the Property Tax rate and the difference between what Scoles mentioned and the rate in the document. Tuneberg said that would be addressed in a few minutes.
Williams asked how we would deal with the $5 million unfunded liability in the long-term. Tuneberg explained that it was the difference between assets and liabilities over the length of the plan going out 25 years, given all the participants currently in the plan, past, present, and future. Scoles said that PERS is a major issue statewide, and that it was not proposed to solve those issues in this budget. There was continued discussion about this issue.
Levine asked about cutting the capital improvement budget by $7 million, and if previously scheduled programs had been removed. Scoles explained that he meant that this year's budget ($13 million) was $7 million less than last year's ($20 million).
Tuneberg began the presentation of the Budget Message by walking the Committee through the Proposed Budget document. He pointed to the Introduction section on page 1-6 where the message itself starts. He continued with an overview touching on the highlights and discussing the 5 sections of the Proposed Budget document.
Starting with the Introduction section he noted that the Committee does appropriate for one year but also creates a long-term budget that goes out another five years. He referred to the Budget Assumptions on page 1-9, which also shows a budget comparison between last year and this year.
He then spoke to Goodwin-Shavey's question about the incongruence of the Property Tax rates listed in the document and the rates discussed. Tuneberg explained that some numbers were not changed in the final production of the document and that those numbers had not been updated to reflect the proposed rate. He referred to the Budget Assumptions on page 1-9 saying that the third item was incorrect and that property tax rate has been reduced to $2.09 for Parks and $1.47 per thousand for the City, with a combined rate of $3.56. He discussed some additional levy's, including the Youth Activities Levy. He mentioned the table on page 1-10 showing projections for the end of this fiscal year and how it compares with the target levels of restricted Ending Fund Balances. He spoke about the table on page 1-11 displaying potential rate increases to meet operational costs and capital costs. Tuneberg pointed out the table on page 1-12 showing several changes for the coming years to the System Development Charges (SDCs). He discusses operational expenses on page 1-12, saying that the table shows personal services with a 6% increase budget to budget, and health care costs (provider estimates approximately a 25% increase for the plan), but which is shown at 30% at the recommendation of City/County Insurance Services. He said Materials and Services decreased due to the electrical wholesale power costs coming in considerably lower than the predicted cost, but it was important to stay flexible to adjust rates every six months. He said that Paula Brown would cover the Capital Improvement Projects listed on page 1-13 in her presentation. Tuneberg stated that page 1-21 charted the formal budget process set by Oregon budget law, and mentioned that next year the Committee may have to begin the process sooner than January to get all the departments working together to meet the time lines. He said pages 1-24 and 1-25 contained summaries of the overall budget going back two years, both the adopted and the baseline, and said that each department will be presenting their individual budgets over next six weeks. He noted that the bottom line for the budget is $91,256,000. Tuneberg addressed the omission of $30,000 in the Senior Program, saying that the errors and omissions will be resolved by the end of the process, along with any other recommendations for changes by the Committee. He pointed out that page 1-25 contained another breakdown on the Requirements by Classification, Personal Services, Materials and Services, and Debt Service. He noted that Debt Service had dropped from $60 million to $10 million this year based on projects and internal borrowings and that capital construction and projects dropped from $22.5 million to $15.2 million. He spoke about the big changes in budgetary requirements, or soft money contained in Interfund Loans going from $4.5 million to $6,625,000, which is the interfund borrowing going towards AFN.
Levine asked for clarification on Personal Services. Tuneberg said this included staff time, including temporary work, PERS, health care, any insurance, overtime, and anything related directly to payroll. Levine wanted to clear up any confusion between Personal Services and Personnel Services. Tuneberg said they can be used interchangeably, that the major category titles identified in the Budget Law are used, so rather than personnel, personal services is being used. He explained that Materials and Services includes those services bought from other people. He said Operating Transfers were constant, Contingencies were a little less, and Unappropriated Fund balance, which in the past was in the $30 million range, this year is budgeted to $10 million and budgeted for next year at $13 million.
Tuneberg said that Paula Brown would cover this section of the document in her presentation.
Tuneberg continued saying that the next part of the document was introduced two or three years ago. He explained that this section shows the budget by department and that at the back of the departmental budget on pages 3-114 and 3-115 there is an overview of restricted fund balances. Unappropriated Ending Fund Balance are shown in a breakout of different funds and the fund balance, with the chart on 3-114 showing the percentage of monies that are restricted, reserved, and open unreserved.
Resources and Long-Term Plan
Tuneberg said the next section goes back to the fund presentation document of the past, including summaries of expenses and revenues of all funds. He referred to pages 4-2 4-7 summarizing resources and long-term. He said that the rest of this section went into each fund projecting out to 2008. He explained that in going out over time the estimates become more difficult to make and less likely to be 100% accurate.
Tuneberg continued giving an overview of the last section in the document. He walked through the Appendix starting with the History of Property Tax Levies reiterating the proposed combined rate of $3.56. He talked about the Youth Activity Levy (YAL), which has a few more years to go saying that the renewal rate has not been projected. He said this section also contained information on the Chart of Accounts, the Salary Schedules, bargaining units and a glossary.
Levine asked if the GASB 34 change that is going to affect the audited financial statements was going to have any affect on the budget. Tuneberg said that the money budgeted in the Finance Department only covered the transition to GASB 34. Levine asked if the changes would affect how budget document is presented. Tuneberg said he did not believe it would that it was primarily the financial report, not the budgeting model that would change due to GASB 34.
He brought up the parking lot issues and programs, and said that in the next few weeks those things that are not included in the 2002-2003 $91,200,000 budget would be identified to the Committee. Tuneberg then asked if there were any questions. He said that even though the handouts would not be discussed tonight, the intention was to give more information up front and the departments would speak to those issues in future meetings.
He said that similar to last year a budget questionnaire would be sent out at the end of this process to find out from committee members how things went, including how well the different segments are working.
Goodwin-Shavey had a question regarding page 3-115, asking if there was any correlation between the individual line items and the distribution between restricted, reserved, and unrestricted/reserved. Tuneberg said that it is broken down in some cases, and that in some funds it is so long and detailed that it is not possible to include it in the presentation. He turned to pages 4-38 and 4-39 to the Enterprise Fund, Wastewater, and walked the Committee through the long-term model. He said that this section showed the resources projected out to 2008. The mid-section shows the anticipated expenditures and at the bottom of the table, the pieces are reconciled. Tuneberg stated that this was the best that could be done at this point to provide information about what is restricted, reserved, and unrestricted/reserved. Tuneberg offered to walk through the spreadsheets outside the meeting if Goodwin-Shavey wanted more information.
Review of calendar
Tuneberg reviewed the Budget Calendar noting when the budgets would be presented for each department. He noted that next week the Parks and Recreation, Finance, and Community Development Departments would present their budgets at 7:00pm on the 18th. He pointed out that the Electric Department and AFN funds would be covered at the meeting on April 25th at 3:00pm. On May 2nd at 7:00pm Administration, including legal, Administrative Services, including the Senior Programs and City Recorder/Treasurer Departments would present their budgets. On May 9th at 7:00pm Court, Police, and Fire and Rescue would be covered.
He continued saying that May 16th would be the last time the Full Budget Committee meets, with the goal of approving the budget with whatever amendments required. On June 14th the Public Hearing, where the City Council receives the approved budget and has the ability to change it, limited to some degree by Oregon Budget Law, then adopts it, sets appropriations, and ordains taxes. The ordinance is read that night for the first reading, and the second reading is on June 18th. He finished by saying that July 1st will begin the new budget. He asked for questions on the schedule; there were none.
Levine opened the meeting for public comment; there were none so the public portion of the meeting was closed.
Capital Improvements Plan Pages 2-1 to 2-85
Paula Brown, Public Works Director, began the presentation of the City's Capital Improvements Plan (CIP), focusing on fiscal year 2003. She said that $13,434,400 was the total CIP projection for FY03. As she walked the Committee through a PowerPoint presentation Brown explained the significant increase in street improvements. She summarized the Capital Improvements Plan touching on LIDs, Airport, Storm Drains, Water Supply, Water Plant, Water Distribution, Wastewater Plant, Wastewater Collection, Electric, Telecommunications, Facilities, Technology and Parks and Recreation.
Brown pointed out that the major focus this year is on Transportation. She detailed sections of the Siskiyou Project saying that the cost is $2.2 million. She gave an overview of all the Divisions and projects for this year. She asked for questions on the CIP; there were none.
Public Works Pages 3-41 to 3-69
Brown began by acknowledging the staff, giving an overview of the Department. Referring to the handouts provided, she summarized the organizational chart and personnel by division. She spoke about the request for the additional 1.0 FTE Transportation Coordinator position. She detailed the Department by fund summary, focusing on highlights and concerns.
Goodwin-Shavey clarified that the proposed new position did not show in FY04. Brown apologized and explained that she hadn't added it in yet.
Brown continued saying that one position had been added in the Geographic Information system (GIS) and was funded out of the Electric Department. She went on explaining some of the trends and challenges. She said transportation is high this year because of the large capital program, about $3 million in capital on the Street side.
Cemetery Page 3-67
Brown said the Cemetery budget is flat, with no major increases, within $1,000 of baseline for FY03.
Airport Page 3-44
Brown stated that the Airport has struggled for years, but that revenues are increasing, new businesses are out there and $3,000 revenue at the Airport is significant. She said, in the long range, most of the capital improvements at the Airport are through FAA grants, or grants that are FAA washed through the state side of ODA. She said the "soft match" can be used, which is her time, Legal Department's time and Engineering's time. She mentioned security issues and improving the airplane automobile conflicts. Brown said we are below the baseline because we are looking at reality in capital projects.
DeBoer asked if Brown was dropping $1,000 in salaries and wages. Brown responded that it is usually used as a placeholder in an effort to balance the budget. Morrison asked what the $1,000 would go to. Brown replied that the $1,000 is truly a placeholder and the money is never spent that it's needed in case they have to hire someone to manage the Airport if the FBO left. It allows you to hire a person without coming back to the Budget Committee to do it. Reid asked whether future growth would be good. Brown said it would not be as tight in the future, because it was very difficult when $3,000 makes a big impact on the budget. She is hoping that there won't be as many contingencies and that there will be a more stable revenue stream for the Airport.
Street Division Page 3-46
Brown gave an overview of the Street budget, discussing staffing levels and personnel needs. She noted that a great deal of Street's work is cyclical and a great deal of crack sealing is taking place presently.
Reid asked about the miles of ground-up asphalt. Brown said that Reid was referring to when they dig up asphalt, it is stored and once a year it is ground up and used mostly on dirt roads to keep the dust down and keep them from rutting. She said that with a city that encourages paving helping the dirt roads survive is good and bad, but that the program is good on dirt roads. Reid said it does help to keep the dust down and that it is wonderful to recycle material, so she is supportive of the program. Brown replied that it is a good program and they get a lot of miles out of the recycled asphalt.
Brown mentioned developing an enterprise fund for storm drains, which will help and is something she and Tuneberg will work on in the coming year.
Water Division Page 3-52
Brown referred to the Strategic Plan Goals, saying that the TAP Intertie project is complete to Talent. She said that water is running to both Talent and Phoenix, and it came in within budget. She said they would bring back to council a projection on when that water will come to Ashland. Moore asked for clarification on the timing of the project. Brown said they brought back a preliminary request to the City Council for an earlier construction date. Council's direction was for her to look at the up-front things such as right-of-way, engineering, any of the design elements that need to be done right away and to secure a space and a location for the TAP line. She said the timing for the TAP is still 2015-2016. Moore expressed concern about liability with the Water Treatment Plant being the only source of water if there is a storm. There was continued discussion about the TAP project's timing and budget. DeBoer said his desire was to put it in immediately.
Brown continued talking about the Water Division saying they would also be looking at a bond issue or other sources of funding for the large capital projects. She reiterated that the budget was basically flat, mentioning the Hostler system being completed on the capital side, the Hostler Dam safety study, which all impacts the capital program and material services. She said capital would fluctuate. She reminded the Committee that baseline budgets are only a percentage, and she and Tuneberg are working on having the baseline budgets reflect the capital improvements, which will keep her baseline from being 19% off. She said the Forest Interface is part of this fund as a grant this year; ordinarily the Forest Interface fund is about $80,000 to $90,000; this year it is $241,000. She said it is a pass-through grant, but they showed it, so the total on the Forest Interface budget is higher.
Wastewater Division Page 3-58
Brown referred to page 3-58 saying that the good news and bad news with Wastewater is that the big capital project is almost over; the Wastewater budget doesn't go down that much, which is one of the differentials between the capital program going down but the operation program going up. She said the new plant is great, that the membrane facilities will be in operation next month. She said they would see the operations costs going up. She said that was actually bad news because she was hoping to have some savings. She explained that on the collections side, the main problem in the sewer line system is roots, that they will be doing the pretreatment ordinance, they will continue doing the smoke testing to see where there are illegal connections.
Brown said they have started the root program back up, and that it will kill the finger roots, not the tree, and that they are experimenting with as little chemical as possible and to still get the effect of root destruction. She said that the budgeting implications she has listed are plant-related, getting a good handle on chemical and electrical costs.
She said the last system to go in is the solids drying centrifuge system and that a place has to be found to re-use the solids, that putting them in the landfill just isn't the right thing to do, so they will be looking at another way to do that. Brown said they were starting their debt repayment for the Wastewater Plant, which is one of the reasons the plant operation budget is so high, with a $3 million hit the first year. She said capital outlay is down, personnel is up, both collection and treatment are up a little, and total budget is not up much.
Moore asked about the status of the Wastewater Treatment Plant. There was a question as to whether the budget included anything that might have to be done about temperature regulation. Brown said that was one of the new challenges, getting the new permit with the temperature regulations, which won't hit next year, but two to three years from now.
Morrison asked about the timeframe on debt service. Brown said it begins this year and is a 20-year loan, with a big hit this year with $3 million, and less than $1 million each year after that. Tuneberg said principal & interest settles out to $1.2 million. Brown said DEQ has been very good with the clean water state revolving fund loans.
Administration & Engineering Page 3-64
Brown gave an overview of the Administration and Engineering Division saying that costs are relatively flat. She said they were asking for an additional 1.0 FTE Transportation Program Coordinator position on the Parking Lot that was not included in the budget yet. This position would support the Engineering and Administration side so that they could complete council goals. She said that this was a senior to mid-level staff position at the System Associate Planner level. She said that this position could talk to different agencies, look at funding and write grants, help with the public identifying educational programs and help manage projects. There was continued discussion about the workload and the GIS system.
Facilities Maintenance Page 3-66
Brown said that the budget for facilities was fairly flat, but showed some increase this year from janitorial support because of the Living Wage ordinance.
Fleet Maintenance Division Page 3-68
Brown gave an overview of the Division and referred to the Equipment Replacement List on page 3-68 of the Proposed Budget document. There was a discussion about the replacement schedule and Brown commented that staff does a great job extending the typical replacement timeframe.
Shop Page 3-68
Brown said the budget for shop was flat.
Levine motioned to adjourn. ALL AYES. None opposed. Motion passed. Meeting ended at 9:05pm.Respectfully submitted by Kirsten Bakke, Administrative Assistant