Loading...
HomeMy WebLinkAboutApproved Minutes - 2004-05-03 CITIZENS' BUDGET COMMITTEE MINUTES May 3, 2004 The chair called the meeting to order at 6:00 p.m. in a meeting room at the US Bank Building, 120 N, State Street. Members present included Rodger Chapel, Henry Germond, Councilor Gay Graham, Chair Jeff Gudman, Councilor Jack Hoffman, Sandy Leybold, Councilor Karl Rohde, Ron Smith and Patt Thomas. Mayor Judie Hammerstad, Lucerne Currie, Councilor Ellie McPeak, Councilor Lynn Peterson and Councilor John Turchi were excused. Staff present included Doug Schmitz, City Manager; Chris Jordan, Assistant City Manager; Janice Deardorff, Assistant City Manager; and Richard Seals, Finance Director. Minutes for the May 12, 2003 meeting were approved on a voice vote. IV. PUBLIC COMMENT Tracy Marx, 17644 Treetop Lane, said she had not been to one of these meetings before, and wanted to know if there is money to spend in the neighborhoods. Mr. Gudman stated that there is a neighborhood grant program available and there is a process for that. He then deferred to Mr. Jordan. Mr. Jordan explained that there is money for neighborhood grants, but that the City has a biennial budget and is in the first year of the two-year budget. $50,000 was allocated for neighborhood enhancement grants in the biennial budget and the application process to receive those grants already occurred for the two-year period. The grants were awarded by Council a few months ago. The next cycle will be in 2005. David Marx, 17644 Treetop Lane, asked if the grants had been awarded in January or February, to which Mr. Jordan responded that they were awarded by Council a few months ago. Mr. Jordan further stated that if he remembered correctly, it was in Fall of 2003 when the City was accepting applications. It will probably be Summer to Fall of 2005 for the next process, provided that it's allocated in the next budget. He advised Mr. Marx that a packet containing information about the neighborhood enhancement grant process could be provided to him, if he left his name and address. Mr. Jordan confirmed that there would be no additional money available from this process until 2005. Mr. Gudman stated that the Committee members had been provided copies of an email from John Pullen, 18 Britten Court, in which Mr. Pullen stated he would not be able to attend the meeting, but he still wished to comment upon the use of state revenue sharing funds. Mr. Pullen stated in his email that in the past, these funds were used for street maintenance or projects closely associated with street maintenance. Last year was an exception with the funds used for a long range study. Mr. Pullen further stated that he would prefer to see the funds used to supplement the charges Lake Oswego citizens will pay beginning July.1 for street maintenance. He further mentioned a street in his neighborhood, Tanglewood Drive, which he feels is in bad need of repair. Citizens'Budget Committee Minutes Page 1 of 12 May 3,2004 Mr. Gudman stated that the email would become part of the public record of the meeting. He also stated that Mr. Seals had responded to the email and requested that Mr. Seals briefly advise the Committee of his response Mr. Seals said he explained to Mr. Pullen what the City did with the state revenue sharing funds last year. At that point, the State's budget crisis indicated that the City would not get those funds anymore, since they had been frozen. Staff was concerned that the Street Fund could take a real hit, so they replaced this uncertain revenue stream with franchise fees that were more stable and more certain. The risk of receiving these funds was then transferred to the General Fund. This did not leave the Street Fund short, instead it was kept whole by replacing revenues from a different funding source. Mr. Seals concluded by saying that Mr. Pullen requested that his email still be made a part of the public record. V. ELECTION OF CHAIR AND VICE CHAIR Mr. Gudman stated that his term as both Chair and a member of this committee ends in August. Instead of waiting until the next meeting and having the new Chair start without the benefit of working in advance of the next budget cycle with Mr. Jordan and Mr. Seals, Mr. Gudman thought it would be beneficial to have a new Chair effective at this night's meeting. He called for nominations for Chair and Vice Chair, effective upon election this evening, and noted that the candidates can only be selected from citizen members and not Council members. Councilor Graham inquired if a Council member can nominate someone. Mr. Gudman answered that anyone can nominate. Councilor Graham nominated Sandy Leybold. Henry Germond and Patt Thomas seconded the nomination. There being no other nominations for Chair, Mr. Gudman called for nominations for Vice Chair. Councilor Rohde nominated Rodger Chapel, who was unable to accept the nomination at this time. Mr. Gudman called for other nominations. Rodger Chapel nominated Patt Thomas. Henry Germond seconded the nomination. Nominations were closed. The Committee elected Sandy Leybold as Chair and Patt Thomas as Vice Chair by unanimous voice vote. Ms. Leybold recognized Mr. Schmitz, who thanked the outgoing Chair, Mr. Gudman, for a job well done. Citizens'Budget Committee Minutes Page 2 of 12 May 3,2004 VI. PUBLIC HEARING ON USE OF STATE SHARED REVENUE Mr. Jordan briefed the Committee on ORS 221.770 regarding certain state revenues to be shared with municipal agencies. In order for the City to receive this money, a resolution needs to be passed by the City Council indicating that a hearing has been held in front of the Budget Committee, in which there was a discussion of the uses of state shared revenues. There must also be a public hearing in front of City Council, where the Council elects to receive the state shared revenues. This is the public hearing on the uses of state shared revenues. Mr. Jordan further stated that although the Committee went through this process last Spring when they did the biennial budget, according to State law the public hearing must be held annually. Mr. Jordan then stated that funds had previously been budgeted at approximately $200,000 annually in the Street Fund. However, last year when the budget was put together, it was not certain the City would get this money, so they were replaced with franchise fee money to keep the Street Fund whole. The state shared revenue funds were then allocated to the Street Car Fund, $50,000, and then anything additional would go into the General Fund. These were actually budgeted at zero, because it was not certain the City was going to receive them. Currently the revenue stream is back on track and the City is getting the full amount, at which point there will be $50,000 annually in the Streetcar fund with the remainder in the General Fund. Ms. Leybold then opened the meeting for public comment. There was none. Karl Rohde moved to accept the use of state shared revenue. Mr. Gudman seconded the motion. The motion passed on a unanimous voice vote. VII. STATUS REPORT ON THE FIRST YEAR OF THE BUDGET Ms. Leybold recognized Mr. Seals. Mr. Seals reviewed the budget status report, the debt status report and the reserves status report, as summarized in the three spreadsheets provided to Committee members. Discussing the budget status report,he stated that the spreadsheet was a summary of all City funds by type of revenue and type of expense. The first column are 24-month budget numbers followed by about 10-month action numbers through April 20th. In terms of percentages, the time period represents about 42% of the way through the cycle. The City was tracking on target in the revenue area and a little under in expenses, which is what one would expect to see. He further stated that things Citizens'Budget Committee Minutes Page 3 of 12 May 3,2004 are looking well, and when as we'll see when we get to the reserves, the fund balances are another good gage that the City is tracking on budget. Ms. Leybold asked if there were any issues which the City found troublesome in the subaccounts or line items. Mr. Jordan said the only thing that still concerned staff was the status of the PERS litigation, which has gone to the Oregon Supreme Court. The overall impact of that is unknown, but the Supreme Court could overturn the legislature. More money will be owed at that point, but the question is how quickly will that money have to be paid into PERS. Other than that, the City's financial picture looks pretty good. Mr. Seals stated he thought the Supreme Court was supposed to rule by the end of the year. Councilor Graham asked if Qwest was at all a factor. Mr. Seals stated that they started paying again and are current since about a year ago. They took a year off, while involved in litigation. Councilor Graham asked if they were appealing. Mr. Jordan said yes, they were appealing, and that money had been reserved in the budget should Qwest be successful in their appeal, in which case the City would have to refund the money it received from them. Mr. Germond asked if Qwest had paid their arrears and Mr. Jordan responded affirmatively. Ms. Thomas asked if something had occurred with PERS in the past week or so, on the state level. Mr. Jordan responded that about a month ago a special fact finder made his report to the State Supreme Court. They are going to hear the case,he believes, in July. Sometime after that, there will be a decision. Councilor Hoffman asked if the Committee could review the budget status report again to make sure he understood it. In terms of budget, the forecast is $50 million of income from property taxes for two years and so far we have received $22 million or 45%. Mr. Seals stated that the City will get another portion of property taxes around 5/15 and that should bring it closer to 50 percent. Mr. Hoffman then stated that franchise fees were supposed to be $3.8 million in 24 months and so far only $1.6 million have been taken in. Mr. Seals stated that those come in monthly, so accordingly, they are tracking right at 42 percent Citizens'Budget Committee Minutes Page 4 of 12 May 3 ,2004 Mr. Hoffman asked if Staff would consider adding another column to the chart that was provided, which shows budget through 4/20/04, or another column that provided 10 month budget numbers, and Mr. Seals responded affirmatively. Mr. Hoffman asked about the $2.6 million in the miscellaneous revenues budget. Since the City has received only $0.7 million and is short$1.9 million, does that mean there will be a shortage of miscellaneous revenues? Mr. Seals said that those will probably be down. They include interest income and interest rates have decreased. Mr. Hoffman stated that the subtotal for revenues is $117 million. So far, $47 million has come in, so the City is short $70 million Mr. Seals said that is correct if you annualize on a straight line. A lot of the revenues, however, come in portions. Mr. Geunond said that most of this comes in at the end of November when tax statements go out. Mr. Hoffman said it would be nice to know what the budgeted number was for 4/20/04 as compared to actuals as of 4/20/04. Mr. Seals said that Staff does not currently break up the budget by month as some of the biggest revenue, like property taxes, comes in November 15, February 15 and May 15. Come May 15, another 5 percent will be picked up. Mr. Hoffman asked about expenses. Expenses do not appear to be tracking. Personal services are$55 million. That's what is supposed to be spent, but we only spent$20 million. How come we haven't spent $22 million or$23 million? Mr. Jordan said the budget is based on having an increase in the second year. Staff assumes that there will be pay raises and we assume that there will be benefit increases and things like that in the second year. We would want those expenses to be less than half by June 30th Mr. Germond said that he thought we budget for a position for the full year, so if someone leaves,you have vacancies. Mr. Gudman said he thought the budget already factored that in. It does not assume every position filled all the time. You factor in some vacancies. Mr. Jordan said that Staff generally budgets for just about everybody being here the entire year. Although, this budget does leave certain positions vacant for the entire time. Mr. Gudman said he thought that staff was budgeting turnover of some fraction, such as 1 percent. Citizens'Budget Committee Minutes Page 5 of 12 May 3,2004 Mr. Jordan said that generally we do not, but it can be carried over as a built-in cushion. Ms. Leybold said she thought Mr. Schmitz raised a good point when they went to a biennial budget, that it was to account for that shift, averaging the effects over two years. Mr. Hoffman asked if the contingency of$18 million was something that was carried every year. Mr. Seals stated that it is typically around that. Ms. Leybold asked if that was the reserve fund. Mr. Jordan responded that it was , plus the unappropriated ending fund balances. There are policies as to how much would be kept in contingency and typically just that amount would be kept. Mr. Hoffman asked if essentially $24 million is carried over every year. Mr. Seals said yes, but it usually winds up being more than that, because not all budgeted capital projects are completed during the fiscal year. Mr. Gudman asked if the fact that, on the revenue side,the second biggest consolidated revenue source, sales and services, was running a bit behind was due to a timing question. Mr. Seals stated that was right, that those are basically utility rate revenues from the enterprise funds. In that area, we use full accrual accounting and so there is a two month lag, because last July's and August's funds get accrued to the prior fiscal year, whereas most other revenues are recorded on a cash basis. Mr. Gudman asked Mr. Seals to confirm that at this point he didn't foresee anything out there that would indicate that the $29.6 million budgeted for two years is the number that will not be met. Mr. Seals stated that was right. Mr. Jordan said that when you think about utility revenue, instead of being ten months, it's about eight months right now out of twenty-four, so it should be right about a third and it's running almost exactly a third. Mr. Germond asked if the street maintenance fee revenue had been put into this yet, or if that will come later. Mr. Jordan responded that when they did the budget, the street maintenance fee had not been adopted, so no funds were included for that. Depending upon how much of that is going to be spent, a supplemental budget may have to be approved in about six months or so to put some of that money into the budget. Citizens'Budget Committee Minutes Page 6 of 12 May 3 ,2004 Mr. Gudman asked to come back to the question of personnel services and budgeting 100 percent all the time. We do have reserves and contingencies already built in and just would like to suggest that with the next budget cycle, some level of turnover be factored into the budget rather than 100 percent. Otherwise, it seems to me we're doing a reserve on a reserve. Ms. Leybold asked if there were any other comments or questions. Mr. Smith asked if any of Staffs assumptions have changed since the budget was crafted and since now there is a year's worth of data. Mr. Seals said the only thing would be the PERS rate in our longer range projections and that we are still waiting for the outcome. No other assumptions have changed in this ten month period. Mr. Smith asked Mr. Jordan and Mr. Seals if they would say the budget was on track, given all the issues of cash flow. Both responded affirmatively. Mr. Jordan stated he felt it was on track both with the PERS issue and the second point, which was the street maintenance fee, which in fiscal year 04-05 should bring in about three quarters of a million dollars that was not budgeted. Mr. Smith asked what the expense was. Mr. Jordan responded that they did not have any expenses appropriated for the street maintenance revenue because they didn't have any money, and so this will be the only money that they will have for street maintenance during this biennium. The question will be how much money are we going to actually be able to spend during this biennium. That's a factor that will have to be discussed with the Engineering Department. Ms. Thomas stated that she thought about $1.2 million a year was needed, which was how the street maintenance fee was decided, and it was being phased in. She asked if that was correct. Mr. Jordan replied that it was actually a little less than that now. The State, with the increase in the vehicle registration fees, will allocate about $200,000 - $250,000 more to the City, and so the Council approved a street maintenance fee that will only bring in revenues around one million dollars. Ms. Thomas stated about $1.2 million or $1.25 million is still needed to address a typical year's street maintenance needs, but they didn't do anything last year, and she asked about the status of City streets. She also asked where we were on that and when will we actually start to try and catch back up again. Mr. Germond said that he sees a lot of paint marks on the street. Citizens'Budget Committee Minutes Page 7 of 12 May 3,2004 Mr. Jordan stated that the City is doing slurry seals right now, trying to keep things put together for a little while, and otherwise, they are about a year out. He said that if they did a survey right now, the paving condition index was probably dropping slightly, but not a great deal, it has only been a year. Ms. Thomas asked if in another two years they would catch back up again. Mr. Jordan said he would hope they would start closing the gap. Mr. Germond asked if they would start doing some of that work while the dry season was here. Mr. Schmitz said that awarding the bid for the slurry seals would be on the agenda for the 18tn Mr. Seals then discussed the second spreadsheet he provided the Committee. He stated this showed all the City's long-term debt, bond issues spread out by fiscal year, which gives an idea about how much money is owed. Before discussing how much money the City has, he thought they should look at how much is owed. These are annual principal amounts only, and total $55 million. The big change in this area from the prior year is in the revenue bond area. One was just paid off- the surface water revenue bonds. The City ended up saving about $200,000 of interest by doing that. The first two issues, the 94 issue and the 96 issue, will be paid off shortly. These tie into the bonded debt rate and the property taxes we receive in the next few budgets. Mr. Hoffman asked Mr. Seals if he remembered what the 1997 bonds were, specifically the amount of the 12/1/97 issue. Mr. Schmitz said that $6.9 million was what the voters approved. Mr. Hoffman then asked for totals on the 1999, 2001 and 2003 bond amounts. Mr. Seals advised that $13 million was split between the 1999 and 2001 bonds, and that the 2003 amount was $9.5 million,plus some refundings. He further stated that these were all principal amounts going forward, excluding interest. Mr. Hoffman asked if that meant that the City pays more than the amount shown. When advised that was the case, he stated that he didn't know how much the City was paying every year and that in 2005 they were paying more than $2.4 million for GO bonds. Mr. Jordan stated that in the budget on page 194 the principal and the interest for each year are listed. Mr. Hoffman asked if that meant it was approximately $2.6 million or$2.7 million. Mr. Jordan said that was correct, the budget allocates for two years, $4.3 million principal and $3.3 million in interest for the two years. Citizens'Budget Committee Minutes Page 8 of 12 May 3 ,2004 Mr. Seals said there were several ways he could show the information, and perhaps principal and interest could also be shown. Councilor Graham said that she thought it should be shown since that is a large amount. Mr. Seals said he would do so. Mr. Jordan advised that this did not refer to the revenue bonds,just the general obligation bonds. Revenue bonds show up in the utilities. Councilor Graham asked if any of these bonds, especially 1994 and 1996 are slated to be paid off as had been authorized. Mr. Seals said that both issues have been advance refunded, which means they have been paid off in advance, using an escrow company. They still show up for a few more years until their call date,but they have essentially been paid off in advance—those first two issues. Councilor Graham asked if there were any others, especially looking at 1993 and 1997, that were being considered for an early pay off. Mr. Seals said Staff is looking at the 1997 street bond issue. Its call date is coming up in a couple of years. The call date is generally a ten year date on a twenty year issue, at which point you can pay the series off It's not like your mortgage, which you can pay off at any time. Mr. Geiinond asked if you could only pay part of the bond off. Mr. Seals responded that you can pay it all off, or any portion thereof, at the call date. So we are looking at that one. It has to do with the yield curve and where the rates currently stand. Mr. Germond asked Mr. Seals where the principal resided, if it went to the escrow account. Mr. Seals stated they go directly to a trustee. They have a list of bond holders who have bought the principal. We send our money to them and they distribute it out to all the people who have purchased bonds from them. The money is distributed when the bond date is reached. The City charges it in the bonded property tax rate. The trustee is paid and then the people who bought the bonds are paid back. Mr. Geimnond asked if the principal is paid back like a balloon mortgage. It isn't paid until it comes due. Mr. Seals said that is correct. Mr. Germond asked if the City received interest on the money it sets aside to pay principal, if it has reserves to pay that. Citizens'Budget Committee Minutes Page 9 of 12 May 3,2004 Mr. Seals said that is correct, but the City does not set aside funds, it collects just what is owed in one particular year. Mr. Gudman asked if anything has changed regarding LORA bonds being effectively tapped out due to the size of the district. Mr. Seals said that some longer term projections have been made and there have been some updates in that area regarding Wizer's plans. That's the biggest one that comes to mind. The possibilities of what he might do, changes this. That is several years out, but projections are being run along that route. Other than that they're basically tapped out. Mr. Seals then addressed the issue of reserves and how much the City has, and more specifically, how much money the City estimates it will have at the end of this fiscal year. He stated that the third spreadsheet provided to the Committee is laid out by fund. There are a couple of funds he wished to point out, such as the Community Development Fund, which is running a little high, as is the Parks Bond Fund. These are estimates based on where the funds are at for ten months and where Staff thinks they will be as of 6/30. The Parks, Fields and Pathways Fund is basically over by $3 million and that's a timing issue dependent on when the open space lands are purchased and when money is spent on the athletic fields and pathways. Ms. Thomas asked if this was the fund that includes the $2 million for artificial turf. Mr. Seals said that was correct - open space, pathways and park development. Mr. Jordan stated that most of the areas in which the City is over its estimated reserves involve capital projects that haven't been done yet. Utilities; Parks, Fields and Pathways; Parks and Recreation Fund are all capital projects. Most of the overages are capital projects that have not been completed at this point. The Public Safety Fund is also over, but it includes buying a fire engine, which will help take that fund down a large amount. All these things are coming together and that's why the reserves look big right now, but in just the next few months or so, it will taper down. Ms. Leybold asked about the Community Development Fund. Mr. Seals said that the building reserves are up and Staff is looking into an expansion of that department in that area. Mr.Jordan stated that the Building Department revenues have to be dedicated toward expenditures that help with building code compliance, so it can't be used any place else. Mr. Seals added that they are restricted monies by State law. Ms. Thomas asked if they could be used for seismic upgrades. Citizens'Budget Committee Minutes Page 10 of 12 May 3 ,2004 Mr. Jordan answered that they have to be used for inspection services and the like, which are associated with the building code. The money can be invested and used in different things,but it has to always be dedicated to the building department. Ms. Thomas asked if there was $400,000 extra in the Street Fund. Mr. Seals said that this was his estimate of where the capital projects were going to be at June 30th in the Street Fund. The hard part is that most of these are projects that are going to be done in the summer, including the slurry seal projects. If this money is not spent by June 30th, then it carries over to July. Ms. Thomas stated that surface water fund is under the amount estimated. Mr. Seals stated the reason for that was the authorization to pay off the surface water bonds a few months ago. It was planned that reserves would be utilized, and some of this money was used to pay of the surface water bonds. This was anticipated. Mr. Gudman asked if the old fire engine would be sold or donated. Mr. Jordan said he believed it was to be sold. Mr. Seals continued by saying that June 30th was the beginning of the dry period, with no money being received between June and November, for the most part, since property taxes come in November. That is typically why you see large numbers estimated for June 30th. Councilor Graham asked about the Library Fund and the Adult Community Center Fund having what seems to be minor numbers. She wanted to know if this was just due to holding tight with expenditures. Mr.Seals said they were almost right on budget,they don't have a lot of room. In the Library, there was a need to supplement the budget by $50,000 to replace the air conditioning system. They may be under a little bit. There is no real issue with the Adult Community Center, they are certainly not in excess. Councilor Graham asked if the next budget for these areas, especially the Adult Community Center,should be expected to stay around the current amount or should there be some allowance for cost increases. Mr.Jordan said the Adult Community Center should be treated the same as other property tax funds,which is to continue services at the same level and make sure there are adequate funds to maintain this service. Chances are there won't be anything additional for anything big. There has been some capital in there the past few years, and it is hoped that there won't be a lot more capital to deal with in the future. Citizens'Budget Committee Minutes Page 11 of 12 May 3,2004 Councilor Graham also asked if there was some seismic work to be done. Mr. Jordan stated that was being done this biennium. Ms. Leybold asked if there were any other questions. There were none. Mr. Germond moved to adjourn. Mr. Gudman seconded the motion. The motion passed on a voice vote. X. ADJOURNMENT The meeting was adjourned at 6:40 p.m. Respectfully submitted, Richard W. Seals Finance Director Citizens'Budget Committee Minutes Page 12 of 12 May 3,2004