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HomeMy WebLinkAboutApproved Minutes - 2009-09-08 Special0, LAKE 0 CITY COUNCIL SPECIAL MEETING MINUTES September 8, 2009 ot[GON Mayor Jack Hoffman called the special City Council meeting to order at 7:03 p.m. on September 8, 2009, in the City Council Chambers, 380 A Avenue. Present: Mayor Hoffman, Councilors Jordan, Hennagin, Moncrieff, Olson, Tierney, and Johnson. Staff Present: Alex McIntyre, City Manager; David Powell, City Attorney; Robyn Christie, City Recorder; Carol Bryck, Asst Finance Director; Guy Graham, Public Works Director/City Engineer; Kim Gilmer, Parks S Recreation Director 3. STUDY SESSION • Mayor's Report on Clackamas County Public Hearing Mayor Hoffman reported that 200 to 300 people attended this meeting tonight. He mentioned that he had had only three minutes to speak, during which he emphasized that he was there because this was an important issue to Lake Oswego, even though Lake Oswego elected officials have not been able to participate in these meetings because the City Council met on the same night. He said that the County Chief Planner called out Lake Oswego's August 28 letter as an important exhibit to which the Commission should pay attention. He suggested that the Council meet again to discuss issues that have come up since the Council's August meeting. He described the next steps in the urban/rural reserves process, which would take several months. He indicated that the process would end up with intergovernmental agreements between Metro and the Counties designating areas for urban and rural reserves. 3.1 Budget Process Debrief The citizen members of the Citizens' Budget Committee joined the Council at the table: Ron Smith, Chair, Kelly Calabria, Dan Williams, Katherine Shallenberger, and Jeff Gudman. Mayor Hoffman commented that he thought that the article from the International City/County Management Association regarding good budget skills and good financing, which Mr. McIntyre had put in the Council Digest, was very good. Mr. McIntyre indicated that for years, staff has incorporated many of the concepts discussed in the article in its financial process. Mr. McIntyre referenced the survey that staff sent out to the Committee members regarding the budget process and how to improve it. He indicated that he received eight responses, which he has kept confidential. He emphasized the themes of transparency, public engagement, and a understandable process for the Committee members and the general public. He mentioned the seven questions on the memo that he had sent out (p. 3) regarding expectations and improving the process in 2010. Ms. Calabria suggested that one way to shorten the meetings, which some would agree ran long, was to shorten the staff presentations. Councilor Johnson disagreed with shortening the staff presentations, although she agreed that shortening the meetings would be good. She argued that going through what each department did was an important and educational part of the budget process. She observed that the complexity of the City operations contributed to the length of the presentations. City Council Special Meeting Minutes Page 1 of 13 September 8, 2009 Councilor Jordan expressed her appreciation for the volunteer effort of all of the Budget Committee members. She spoke to making the most effective use of the Committee and staff time. She agreed with Councilor Johnson that this was the first year in a new process of department heads being responsible for their own budgets on an annual basis. She mentioned the change from individual funds within the general fund to one large general fund. She observed that the process would always be difficult following an election year and new people coming on board. She speculated that this next year might go smoother because everyone would be more familiar with the process and with each other. She spoke of building in something to help the public focus its comments on those items that the Committee would be looking at, and to see whether the Committee was working in the right direction from the citizen point of view. She spoke to the Committee focusing more broadly on whether the City was expending funds in the right areas at the right total amounts. Chair Smith commented that he saw education, information, and timeliness as integral elements in building a better process. He agreed that the Committee had had a steep learning curve this year. He spoke of holding quarterly meetings to review how well the City was doing in the context of the decisions made by the Committee. He spoke of continuing the Committee's education in order to increase its knowledge of budgetary terms and processes, and to study the issues critical to creating a capability within the Committee. He asked to receive the budget information a minimum of three weeks before the first meeting in order to give the Committee members sufficient time to review the information. Mr. Williams concurred with Chair Smith regarding receiving the material further in advance of the meetings. He commented that he found the department presentations beneficial in explaining how all the avenues of the City came together. He asked if the department heads had enjoyed giving the presentations. Mr. McIntyre indicated that he thought that the department heads enjoyed sharing stories about what their departments did. He spoke of improving the information provided by using meaningful metrics, with each department finding performance measures to track and evaluate their individual tasks. He mentioned that the department heads also went through tremendous changes this year and a steep learning curve. He said that staff would do better next year in fine-tuning the presentations and stories to the budget document itself. He indicated to Mr. Williams that he felt that the presentations accomplished the purpose of getting buy in from the staff. Councilor Johnson agreed with Mr. Williams that staff buy -in was important. She commented that staff might find it frustrating to give a presentation, leave, and then not be there to defend their budget during the Committee's discussion. Councilor Johnson raised the question of how they could use the Budget Committee rules to create a more efficient and effective process. She suggested discussing what issues the Committee would talk about and what assumptions it would make about the department budgets. Councilor Hennagin questioned whether the Committee needed to meet so often for such long meetings. He argued that efficiency should lead to less hours spent in meetings. He suggested that the department heads provide the Committee with a memo that went through their budget line by line with a short explanation of why an item increased or decreased. Councilor Moncrieff expressed her appreciation for the department heads' presentations. She asked to see more explanation for the Committee as a whole on how the Council goals connected to the budget, given that the purpose of the City budget was to provide services to the citizens. She suggested starting the budget process with goal setting. She spoke to clarifying what the Committee's role was in determining where cuts came from, or did the Committee just direct Mr. McIntyre to cut x amount of dollars from the budget. Mr. Gudman commented that he thought that the process had gone reasonably well. In response to Councilor Hennagin's points about efficiency, he recalled that the suggestion that the Committee City Council Special Meeting Minutes Page 2 of 13 September 8, 2009 simply identify those items that it wanted to change and accept the rest as submitted went nowhere. He noted that that might change next time. He held that including all Committee members in the quarterly review meetings would enhance the spring budget meetings substantially by reversing the learning curve from two-thirds education, one-third substance to one-third education, two-thirds substance. He argued for spending the majority of the Committee's time on those areas where the City spent the majority of its money: personnel services and capital expenditures. He acknowledged that people found it easier to understand and discuss a 11.95 can of oil" than the larger amounts, yet both the Committee's education and decision-making should focus on the City's major expenditures. He concurred with Councilor Moncrieff about the need to understand how the Council goals and the City budget related to each other. He commented that the Committee had gotten into a circular loop during the budget process in that the Council's admirable goals established in January had no budgetary items associated with them at that time. Then, whenever a goal -related item came up in the discussion, the answer was usually that the City had to do it because it was a Council goal. He suggested correcting this loop by having staff identify the dollar amounts associated with the adopted Council goals and providing a priority list to the Council before the budget process began. The Council could then decide how many of its goals it could afford to do at this time. He agreed with the request to receive the materials in advance. He thanked Mr. McIntyre for providing the materials for tonight's meeting in advance. He commented that the fund -by -fund information that staff provided during the Committee meetings was often at the second and third level. He explained that he would find it helpful also to have first level information, such as the totals across the City's personnel services fund for five years, which staff could then break down department by department. He spoke of starting with the totals of the major revenue sources citywide, regardless of whether they were from governmental or business activities. He argued that if they were concerned with the total fiscal health of the city, then they needed to start with the totals and see where the trends were. That would help them make good decisions and avoid drilling down to the $1.95 issues. He commented that he did not know why a given item was or was not included in the capital budget this year because the selection criteria had been so broad that anything could have been included. Ms. Shallenberger indicated that she also appreciated the department heads' presentations. She agreed that getting the information earlier would help make the Committee more efficient. She commented that a rolling forecast would be one way to provide preliminary information about the next year. She commented that often City Council goals were around certain types of activities, while the budget was structured around departments. She recalled wondering during Committee meetings how much it cost to do a given activity, such as arrest someone or write a ticket. She pointed out that this was part of Mr. McIntyre's metrics in seeing how the City spent its resources on activities. She concurred with Mr. Gudman about prioritizing the City goals using estimated cost information. On the issue of budget cuts, she suggested identifying the City's existing activities and processes that were inefficient and a waste of time, or services not used. Councilor Olson commented that Ms. Shallenberger was describing zero -based budgeting (starting a budget from scratch) as opposed to the City's current practice of starting from where the City was now and changing it. She concurred with Councilor Hennagin's suggestion of a preliminary memo from staff that explained the materially significant changes, up or down. City Council Special Meeting Minutes Page 3 of 13 September 8, 2009 She agreed with getting the material ahead of time. She recalled that some of the misunderstandings and disagreements came about because, in her page -by -page review of the budget, she sometimes did not find an item until late in the process. She agreed that the new process and new people this year had served to lengthen and increase the number of meetings. She speculated that there would be shorter meetings just by virtue of this being the second year in a row with the same people. She concurred with Councilor Jordan about starting the budget process during Council goal setting. She spoke to the Council having some sort of agreement regarding issues, such as the use of reserves, before going into the budget process. She agreed with Mr. Gudman that a big picture/actual results financial statement (income balance sheet) would be useful at the quarterly meetings. Councilor Tierney commented that the Committee members shared the common goal of delivering to the citizens the best services within the financial capacity of the community. He observed that there were many different types of budgeting, including the standard type of incremental budgeting used by the City. He argued that the City could take on a more challenging process, as suggested by Ms. Shallenberger, such as zero -based budgeting. The Committee could look fundamentally at what the City did, establish that that was what the City wanted to do and how much it was going to cost, and evaluate whether it had services that it wanted to eliminate. He pointed out that City Policy No. 3 stated that the City should be evaluating its services on a continuing basis and identifying where greater efficiencies could be derived. He commented that he saw many of the challenges faced by the Committee this year centering around a philosophical disagreement on how much the City should spend. He reiterated his philosophy that current expenditures should not exceed current revenues. He remarked that the dollar amount changes in the budget were inconsistently explained across the departments. He suggested setting a standard that, if a department was doing something different, more or less, then that should be articulated in an agreed upon way. He mentioned that he had thought that they needed more meetings (Chair Smith agreed) because this was the most serious undertaking of the Council. He contended that one could not understand the top level without first understanding the details underpinning the top level, and that took time. He noted that all Committee members were committed to the goal of having the best budget possible. Therefore, they needed to invest the time to reach that goal. He commented that the use of standard financial reports could have made the process easier. He spoke of looking first at the revenues, which they never looked at this year. He mentioned finding in the audit report the kinds of financial statements that provided the revenue and expenditure information they needed. He agreed with Chair Smith that information, education, and a good starting point would improve the process. He commented that the philosophy of what they wanted to do as a community and how much money they thought they had to spend preceded the Council goals. He suggested finding a municipal budget expert to educate the Committee with respect to where Lake Oswego was going as a community, where communities in general went (specifically communities in Oregon). He pointed out that, without growth in the community, the City was limited to a 3% increase in its expenditures. He referenced an article in the recent Oregon League of Cities magazine discussing the underfunding of PERS due to the market situation, and the projected 50% increase in the next fiscal year. He noted that this was a magnitude of 5-6% of salary, which made up 80% of the budget. On paper, that meant that there was no reason to talk about any new things because the City did not have the resources to do anything new. He spoke to the Council looking ahead to where it was going to be, and to both long-term and short-term items, in order to set what the City could do to provide services to the community. City Council Special Meeting Minutes Page 4 of 13 September 8, 2009 Mayor Hoffman noted the various discussions scheduled over the next few months regarding finances, the economy, and Council goals. He commented that he thought that the Committee could go through the budget process in less than 20 hours. He noted that the City Manager was required to provide the Committee with a budget. He speculated that, using Councilor Hennagin's idea of a written narrative from the department heads, the Committee could move through the process quickly. Councilor Johnson recalled that an efficiency issue that came up was the citizen members of the Committee asking the Council for a better definition of what the Budget Committee was supposed to do and talk about. However, because the Council did not have a good understanding of some issues, such as the relationship between the goals and the budget, the Committee as a whole did not have a good understanding of some issues, which contributed to extra time. She agreed with Councilor Olson's suggestion to talk about budget items earlier during goal setting. She held that it was important in the goal -setting discussion to frame what questions the Council wanted to bring to the Budget Committee. With respect to Ms. Shallenberger's comment about cutting programs or improving their efficiency, Councilor Johnson remarked that she thought it would be interesting to ask the department heads ahead of time what were 'the losers' in their departments, as possible items for cutting, and where they could find additional efficiencies. She pointed out that some of a public agency's services would be 'losers' by definition because they did not generate sufficient revenue for someone else to take them on, yet they were services important to the City. Councilor Jordan concurred with Councilor Johnson's comments about department heads explaining ahead of time efficiencies that they have found in their systems, since that was part of the City policy referenced by Councilor Tierney and part of transparency. She observed that citizens did not feel that the government was actually working all the time to try to provide services more efficiently and cost effectively. She spoke to providing reports to the public regarding the efficiencies undertaken by City departments in making the best use of the taxpayer dollar. Mr. Williams mentioned that his company had employee recognition and financial incentives for finding efficiencies. He wondered whether the City could do something similar. He agreed that the public in general was jaded about political processes, and did not see that anything would change with public involvement. He expressed his appreciation for the volunteer time and service of the Council. He commented that he had not known what the Council goals were. He suggested that the staff communicate those goals and their estimated costs to the appointed Committee members and to the general public. Chair Smith agreed that fewer or shorter meetings were a byproduct of effectiveness and efficiency, yet he did not share the goal of fewer meetings. He held that the Committee had needed one more meeting to discuss the options that it had asked Mr. McIntyre to come back with. He speculated that they would have had a different result if they had not truncated the process due to fatigue. He remarked that they had not needed to take citizens through the angst some experienced, especially with respect to the skate park. Councilor Moncrieff asked for a discussion about reserves, their purpose, and where the City had to be legally on its reserves. She asked about the relationship of the reserves to the capital improvements program projects, and when it was appropriate to dip into reserves to pay for cost savings in capital equipment. Mayor Hoffman clarified to Mr. Gudman that the bond evaluators in San Francisco did not explicitly say that the City should not dip into reserves for operating costs. Mr. Gudman agreed that questions about the reserves needed to be asked going into the budget process, especially in light of known upcoming items, such as the 18% to 24% PERS increase in 2010/2011 (c. $1.5 million). City Council Special Meeting Minutes Page 5 of 13 September 8, 2009 Mr. Gudman suggested that next year staff not present any items listed as 'TBD' (to be determined), since any dollar amount would impact the Committee's decision-making for all other items. He agreed with Chair Smith that the process regarding the $250,000 cuts was neither the Committee's nor the Council's finest hour, even though the Council arrived at a decent outcome. He volunteered his services to staff to help develop management reports, as he had a lot of experience in that area. Ms. Calabria agreed with Councilor Tierney that looking at trends of city growth and where the community was going in the big picture was important. She spoke to planning for unanticipated future challenges in the budget, so that when they occurred, the City could adjust as needed to address the situation. Mayor Hoffman said that he anticipated that Mr. McIntyre and his financial team would start the process of looking several years out in light of PERS and other issues, and the slow economy and possible reduced income. Mr. McIntyre stated that what he heard in the discussion was that the issue was not so much the number of meetings but rather the efficiency of the meetings, the information, and the output. He noted that tying the goals to dollars was easier said than done. He pointed out that none of the Council goals referenced the police department, yet his operating assumption with respect to public safety had been business as usual (no cuts) because the Council had not said to increase or decrease that fund. He spoke of being more explicit in stating his assumptions and getting buy in from the Council. He indicated that staff would present quarterly reports to the Council, including the citizen Budget Committee members. He explained that the intent of the reports was to present meaningful and understandable information that people could evaluate in terms of whether the City was headed in a good direction or not, and what to do about it. He discussed the concept of service tradeoffs. He pointed out that the City government was a service industry providing public services. He observed that no one ever believed that there was a complete 'loser' service because there was always a stakeholder out there who used it. He commented that the hardest part was developing a policy process for doing those tradeoffs, for identifying who made the decision and what constituted a tradeoff. He asked to hear feedback from the Committee on how the members wrestled with that from a policy point of view. He mentioned that government was the number one growing industry in the United States; cutting services was anathema to the provision of services purpose of government. He indicated that he would lay out as explicitly as possible some financial foundations for moving forward with the Council goals. He indicated that he could do some loose revenue forecasting in November, per Councilor Tierney's request. He recalled that he had told the Council in February that it could do whatever it wanted to do; it just had to have the budget reflect those goals. To the extent that the Council wanted to do a given project badly enough, it had the prerogative of dipping into the reserves. He commented that that nuance got lost in the discussion. He said that he could paint a financial picture for the Council during its goal setting process, which it could keep in mind as it moved forward. However, if the Council decided that something was a priority, no matter what, then it had three options: cut services somewhere else, find additional revenue, or use the reserves. He mentioned that the City did have an Employee Excellence program that he started last year with the intent of encouraging employees to think about how to be even better employees on the City's behalf. He pointed out that a department head's job was to be more efficient, and to look at their operations and services with an eye to efficiency. City Council Special Meeting Minutes Page 6 of 13 September 8, 2009 He expressed his hope that there was a widespread belief that staff did work hard to spend the taxpayers' money wisely and appropriately. He held that these processes existed to help staff do so in an even wiser manner. He referenced Chair Smith's comments about education, information, and timeliness. He said that staff would try hard to get the information to the Committee earlier. He mentioned that he still did not have a Finance Director, as it was a tough market for finance people right now, so staff was operating at a deficiency. He spoke of the culture of an organization. He commented that the staff constantly chasing issues and rarely getting ahead of an issue frustrated him as a manager. However, long-term department heads told him that that was how it has always been in Lake Oswego. He described his problem as having a number of good managers chasing day by day because of the high performance expectations placed on City employees by the residents. He indicated that nothing would make him prouder than staff getting ahead of some of these issues and leading them. However, it was all tied to resource allocation and distribution and how best to do it. 3.2 Financial Review — Year End Biennium Ms. Bryck gave a PowerPoint presentation on the preliminary FY2007-2009 biennial budget results (FY ending June 30) and the current year activity. She indicated that staff was recording all post -close activity and preparing work papers for the auditors and the comprehensive annual financial report. She clarified to Councilor Hennagin that State law required the City to record in the previous fiscal year the payments received in July and August for work done in June or before. She presented a chart showing the consolidated general fund information. She noted that revenue collection was down from the estimates due to reduced gas tax money, reduced franchise fees, and reduced building permit fees. She pointed out that expenditures were also down in response to the reduced revenues. She indicated to Councilor Tierney the revenue amount of the consolidated general fund budget, which was a two-year number. Councilor Tierney suggested that staff treat the bond as a loan, similar to how the audit repot treated it, as he found it confusing to include the bond sale as revenue. She indicated to Councilor Olson that she would provide the Council with a copy of her presentation. She reviewed the errors in the report, as noted by Mr. Gudman. She explained that she took the reporting from the City's financial system and reformatted it into a more readable form. She confirmed to Councilor Tierney that the budget gained $750,000 between the beginning fund and ending fund balances. She speculated that the departments were very conservative in their spending towards the end of the year. She explained to Councilor Tierney that, while staff budgeted going into reserves during the 2007-2009 biennium, the actuals showed that the City spent less ($83.8 million) than its revenues ($85.7 million). She confirmed to Mayor Hoffman that that was a variance. She noted that, because the City did not receive revenues in an even stream throughout the year, the first quarter reports might not look very good, but the second quarter reports would look better. She explained that the City received a large property tax electronic deposit from the County at the end of November/early December, and then smaller deposits in February and May. Councilor Jordan asked for a report comparing property tax collections from November 2007 through November 2009. She spoke of seeing whether the same number of people were paying the full amount in 2009 as paid the full amount in the prior years. M . Bryck mentioned that the City Council Special Meeting Minutes Page 7 of 13 September 8, 2009 November 2008 property tax collection had not been off by much, and their total collections for the year met their expectations. Councilor Tierney suggested that staff develop a quarterly presentation that showed the estimated revenues per month for the entire year, based on the City's revenue history, and the actual revenues received per month for that quarter. Ms. Bryck indicated that that would require manual processing, but staff could do that for the large areas. Ms. Bryck discussed the financial reporting that staff would provide moving forward with an annual budget process. She mentioned a comprehensive annual financial report posted online, monthly financial updates in the Council Digest, and a quarterly Council report. She reported that staff has loaded the new budget into the system. She reviewed which expenses have and have not been posted through August 31. She noted when they expected their revenues to come in over the year. Councilor Jordan suggested including in a report instances where the City spent more to purchase items locally (as part of their sustainability philosophy), versus buying in bulk. Ms. Bryck indicated that staff was working on a developing a mechanism to flag those items as a way to measure how well the City was doing on sustainability issues. Councilor Olson noted some errors in the report. Ms. Bryck explained to Councilor Olson that the $2.3 million in combined actual revenue under the Community Center Development Fund was a transfer from the general fund to cover the costs of the debt and operations of the West End Building. Councilor Olson observed that it was not real revenue then, but simply transferred revenue. Ms. Bryck confirmed to the Councilor that the $500,000 difference in the beginning balance of the Community Development fund was the maintenance transfer. Councilor Olson noted that, in the Parks fund, the revenues were down from forecasts for the year. She asked for a report on why either the expenses were not down more or what was down in the revenue versus what was not down in expenses. She recalled that the Committee had discussed extensively increasing personnel and materials costs in the Parks programs as a way of generating more revenue from more classes. Ms. Bryck indicated to the Councilor that staff had expected the increase shown in the water fund due to sales to wholesale water customers and increased consumption. She explained that the surface water requirements were significantly under budget because of delayed capital projects related to the Clean Streams Program. Councilor Olson commented that she liked the report format, as she found it helpful to have the information summarized. Councilor Tierney complimented staff on ending the biennium in a positive way. He commented that the City had good managers of the City's daily activities who recognized the need to keep expenses lower than the revenues. He indicated that he did not like the report format because it did not present a simple picture of the financial health of the City. He referenced the report on p. 143 as providing him with a better indication of what the community was doing on a financial basis. He asked to receive the monthly and quarterly information in the more standard financial statement formats. Councilor Olson commented that she would like to see the standard reports as well, mentioning in particular the consolidated financial statement piece that was still missing from the reporting. Ms. Shallenberger concurred with Councilor Tierney regarding the report format. She spoke to separating out the transfers, as they were their own separate entity and not under the control of the department heads. City Council Special Meeting Minutes Page 8 of 13 September 8, 2009 Mr. Gudman concurred with using a reporting format similar to the standard financial report formats described by Councilors Tierney and Olson. He commented that if the City's current financial system could not provide the standard financial reports with a few keystrokes, then the City should seriously consider upgrading the financial reporting system. He pointed out that if the Council did not receive good basic financial information, then it could not make good decisions. He suggested dropping the pennies for the million dollar figures. Ms. Bryck explained that the City's system was not able to handle a two-year budget, and thus staff developed these kinds of reports. She indicated that the system reports for an annual budget would be much more user-friendly. Mr. Gudman suggested that staff provide a consolidated total and a memo explaining what the major fund variances were as part of making the process more efficient. He mentioned that he had noticed a favorable variance but it took him a while to identify where it came from. Ms. Bryck explained to Councilor Hennagin that the money comprising the ending fund balance of one fiscal year became the beginning fund balance of the next fiscal year. She indicated that if a fund required a contingency as well as an ending fund balance, then the ending fund balance number included both those elements. Councilor Hennagin asked if they should be concerned when the ending fund balance plus the contingency was substantially less than the beginning fund balance for that year. Ms. Bryck clarified that they closed out the Parks fund, and the surface water ending fund balance was actually higher because of some capital projects not done. Mayor Hoffman recessed the meeting at 8:50 p.m. for a break. He reconvened the meeting at 8:54 p.m. 3.3 Capital Improvement Plan Process (no written report) Mr. Graham gave a PowerPoint presentation. He reviewed the strategic asset management (SAM) concept that he had presented to Council in January: "managing infrastructure capital assets to minimize the total cost of owning and operating them, while delivering the service levels that customers desired." He argued that SAM was the best business model for utilities and the public sector for managing assets. He explained that SAM enabled organizations to make infrastructure investment decisions based on risk and a better knowledge of the condition, the life expectations, and the consequences of failure of the City's assets. He noted that the goal was to achieve the lowest sustainable life cycle costs for services. He presented a chart of information on the City's street and traffic lights infrastructure. He indicated to Councilor Moncrieff that SAM was not a computer program per se, but it did include a computerized maintenance management system as one of its elements. He reviewed the basics of a capital improvements program. He defined the program as a short- range plan that identified the capital projects, provided a brief description of the project, its funding sources, and its anticipated schedule. He mentioned staff's hope to include large equipment purchases in the plan next year. He described the CIP as providing a roadmap of where the City would invest its resources in capital improvements over the next five years. He pointed out that, while 95% or better of the first year projects would be delivered, the projects in years 2 through 5 were more speculative. He discussed CIP financing. He noted that utility and transportation funding sources were dedicated, while the general fund sources were discretionary. Police, fire, library, parks and recreation, services, and capital projects all competed for the discretionary funds. He noted that the City always looked for opportunities to leverage general fund dollars by using dedicated fund dollars to do the portions of a project falling under the dedicated fund. City Council Special Meeting Minutes Page 9 of 13 September 8, 2009 He presented a comparison of the City's last CIP document (FY 2004/05) and the current CIP adopted by the Council in June. He anticipated that this document would improve over time and add more value to all the stakeholders. He presented three slides listing the projects identified for the current year. He noted that the 43 projects represented a total capital investment of just under $47 million from a variety of funds. He showed a pie chart illustrating the distribution of that $47 million among the projects. He commented that the City would likely complete the $263 million worth of projects identified in the five year plan (and future projects) over the next 20 years. He reviewed the general steps of the CIP process, including the capital needs assessment, the compilation of a project list, and a meeting with the Finance Department. Staff then developed the preliminary CIP and project roster based on prioritization, followed by a stakeholder involvement process and a final document recommended to the City Council by the City Manager for adoption. He reviewed the schedule of the process for this year's plan, including a significant public involvement process to learn what projects the neighborhoods wanted to see done, a presentation of the City Manager -recommended CIP to the Planning Commission in February, a City Council public hearing in March, and Council adoption of the CIP budget in June. Mr. Graham indicated to Councilor Hennagin that the CIP was a citywide effort engaging all departments and coordinated by Public Works. He said that Public Works, as the department with the staff and technical knowledge to deliver the projects, hoped to provide support to the individual departments and LORA in terms of delivering their capital projects. Ms. Gilmer indicated to Councilor Olson that, in the past, Mr. Knippel has served as the Special Projects Director and overseen the actual construction of projects for which Parks & Recreation did the planning, public outreach, and bidding. Mr. McIntyre explained that his goal was to have the individual departments do the planning and then hand over the blueprints to Public Works to deliver the project. Mr. Graham explained that ideally staff would like to create an algorithm based on objective criteria to develop a priority list of the projects. Since that did not exist, staff tried to quantify subjective criteria, mix it with objective criteria, and develop a prioritized list. He mentioned developing formalized project evaluation guidelines to turn the subjective evaluation aspects of projects into objective criteria as much as possible. He indicated that the goal was to develop a practical method to prioritize projects that made sense and was defensible. He pointed out that developing a list for the dedicated fund projects was easier than developing one for the projects of the departments competing for general fund monies because dedicated fund projects competed only amongst themselves. He indicated that the first priority for projects was those projects that would help maintain the existing levels of service, as opposed to projects that would enhance or expand services. Projects that impacted a greater number of community members, such as arterials, usually ranked higher than projects with a smaller impact, such as local roads. He noted that staff would develop a program that met the Council's goals regarding capital projects. He discussed evaluating projects based on risk, for which staff could use strategic asset management to help the Council make decisions. He observed that their business was to minimize the impacts to citizens both personally and financially. He discussed the challenges facing the program, including limited staff to deliver projects, lack of funding, competing priorities between stakeholder groups, and departmental silos. He noted that the Lake Oswego community had high levels of expectation, which staff had to temper with what was reasonable and achievable as part of managing expectations. He indicated that the key was keeping and maintaining clear lines of communication, which facilitated transparency, managed expectations better, and helped break down silos. City Council Special Meeting Minutes Page 10 of 13 September 8, 2009 He discussed the next steps. He mentioned including in the next CIP the LORA projects and large equipment assets. He said that they would continue to refine the process and criteria as part of enhancing transparency. He spoke of his goal of implementing industry best practices in the capital program. He asked the Council to endorse the proposed process, and to provide feedback. COUNCIL QUESTIONS Mr. McIntyre indicated to Councilor Olson that in the past the Planning Commission did review the CIP for consistency with the Comprehensive Plan. He said that he did not know if LOIS went through the Planning Commission, as the last CIP the City did was in 2004. He would find that out for the Councilor. Councilor Olson asked if there was a process step to get input from the Advisory Boards, noting that the Transportation Advisory Board would be very interested in doing so. Mr. Graham indicated that staff would look into how to facilitate that dialog. Councilor Tierney suggested utilizing the staff liaisons to the Advisory Boards. He commented that the Boards, as groups appointed by the Council, should have a higher status in the process than the neighborhoods. Mr. Graham indicated to Chair Smith that the maintenance study of the life of an asset was a foundational question, and, as such, not a part of the process. He explained that how a strategic asset management plan would help. The root of a SAM plan was first identifying what assets the City had and what condition they were in. From that, staff could then estimate the remaining life span and plan ahead for replacement. He spoke of setting aside money each year in order to have sufficient funds available to pay for infrastructure replacement at the end of an asset's lifespan. He acknowledged that investing in existing infrastructure was not as exciting as investing in something new, but SAM would help with managing the existing infrastructure to reach its maximum lifespan. He described SAM as the foundation on which they built the capital program. Councilor Jordan spoke of building funds into the budget specifically to set money aside for infrastructure maintenance. Mr. McIntyre indicated that such funds might be more generic than assigned to a particular infrastructure asset. He mentioned possibly increasing the amount of reserves in the wastewater fund to pay for system improvements over time. Mr. McIntyre pointed out that it was difficult to tell taxpayers that the City needed funds to build a new library, to pay for its operation and maintenance, and to start a sinking fund to pay for the next library. He described it as a hard decision because the Council would be setting aside funds that could otherwise have gone towards other needs. Councilor Jordan commented that this might change the limit for required reserves in order to build in a cushion for use in the future. Mr. McIntyre confirmed to Councilor Jordan that the City could use dedicated utility funds for the maintenance facility. Mr. Graham confirmed that the Council could have directed staff not to spend money on street or surface water projects this year, and instead put that money towards the engineering study for the maintenance facility. Councilor Jordan asked if the plan would identify those tradeoffs and the associated risks. Mr. McIntyre referenced the analogy spoken of by Ms. Shallenberger and Councilor Olson on the service side of the equation, in terms of trading off services as opposed to adding a new service and increasing incrementally. He held that the analogy held true on the capital side as well. Mr. McIntyre referenced Councilor Moncrieff's question asking whether there was a computer model to make this happen. The answer was no, which was why people like Mr. Graham existed to apply their expertise to help ascertain what the next best way to spend City revenues was. He pointed out that SAM was in its infancy at the City. He explained that that was important to remember, given the time needed to acquire the data, as illustrated in how long it took to gather the condition data for City Hall. H observed that he had only one person to work this compl x City Council Special Meeting Minutes Page 11 of 13 September 8, 2009 system applied across $1 billion worth of infrastructure, and that person was also managing another $20 million in services. He speculated that this would be a 10 -year effort to get it right. He pointed out that LOIS was a sophisticated and robust plan that provided a clear understanding of where it was going. However, it took seven years to achieve that plan, and five fulltime staff members to implement it. Dealing with the City's other infrastructure assets would require that same level of effort and resources. He commented that the tradeoff was that the City could do it right going into it or just keep chasing, which was a Council decision to make. Councilor Hennagin asked what the taxpayers would say if the City did start to set aside perhaps $10,000 a year for future projects. He observed that the people who were not going to live 100 years might not be happy about being taxed to replace a building that would not be replaced in their lifetime. Mr. Graham indicated that the Council needed to tell that story. He mentioned his impression of Lake Oswego as a community that really supported the concept of sustainability. He argued that if they did not change their ways, the future generations would have to pay more. He said that his personal approach was that he wanted the facilities that he was responsible to manage to be in as good or better condition than the way he inherited them. He agreed that it was a tough decision and one that many people did not want to discuss. Ms. Calabria commented that she liked Mr. Graham's direction of maintaining the assets and being proactive. She recalled from her time on the Natural Resources Advisory Board the City acquiring open space but without a maintenance plan. Mr. Gudman concurred. He commented that he thought it would be beneficial to the Council in its decision making process to know on a quarterly basis where the City was with respect to the $47 million capital budget. He held that knowing when the City anticipated spending chunks of the money impacted other decisions across all departments and funds. The Council indicated its support of the proposed capital improvement program process with the addition of including the Advisory Boards. • September 21 meeting process Councilor Olson reported receiving a phone call today from someone who was very upset and concerned about the proposed process for the September 21 meeting. Mayor Hoffman reviewed his conversations with staff regarding the process, including possibly moving the meeting date. He stated that Lauren Hughes would have her chance to make her PowerPoint presentation to the Council before October 15. Councilor Jordan suggested considering whether the Council needed two meetings on this matter or whether it should stay with the one meeting discussed earlier by the Council. Mayor Hoffman stated that he and staff were working on it. Councilor Tierney stated for the record that he wanted to hear from this interested group sooner rather than later. He indicated that he was not sensing from the group that they perceived in a positive way the Council's efforts to hear their presentation. He emphasized that the staff work on this meeting needed to have an emphasis on engaging everyone involved. He held that the Council was not well served by moving the meeting date and giving the impression that it was not interested in hearing from the group. He mentioned that the Council had voted in support of hearing from this organized group and others. He noted that this was part of the Council's public engagement. Mayor Hoffman stated that he specifically told Ms. Hughes that she would have an opportunity to present their position to the Council and to talk with and engage the Council. He commented that he could not do anything about her hearing a different message than what he directly told her. Councilor Olson commented that the Mayor has changed the complete format and content of the September 21 meeting from what most Council members and the citizens had thought it would be. City Council Special Meeting Minutes Page 12 of 13 September 8, 2009 Councilor Johnson spoke to setting up a good and beneficial process in moving forward with a discussion on this unprecedented situation. She indicated that she would be happy to get involved in this process but she trusted the Mayor and the City Manager to make sure that the meeting was efficient, and that it had good dialog and information that would help the Council make a good decision. She commented that achieving that had a lot to do with how they set up the conversation, which was why she thought they needed a discussion about the process. Mayor Hoffman confirmed that any Council member could call him to talk about this City Council and Mayor public forum. He said that it would not be a forum created and driven by any specific interest group but rather it would be a community -wide effort. Councilor Moncrieff recalled that she had understood from the July discussion that this meeting would be a community -wide effort, driven by the Mayor who had the responsibility to set the agendas for the Council meetings. Councilor Johnson agreed. Councilor Olson argued that the Council had agreed to let this group make a separate presentation to the Council. Mayor Hoffman pointed out that there were more people interested in this topic than just this group. He indicated that he was still discussing with staff whether to hold one meeting for everyone or separate meetings. Councilor Tierney stated that he thought that this Council has been very interested in public engagement, wanting to hear diverse points of view in a structured way that made sense. He commented that that message needed to be communicated to members of the community. He noted that there was a vocal group that has brought forth many issues, which have influenced how the Council viewed the sensitive lands issue. He expressed his concern that this group could set the attitude of the community about this Council, citing the negative letters to the editor about the Council and the Mayor. He commented that, in hindsight, working with this group in allowing them to vet earlier than the Council has might have diminished that negativity. He said that he wanted the community to perceive this Council as open to hearing what people had to say, and then making decisions. He indicated that he was looking forward to hearing from this group sooner rather than later. He also wanted to hear the group say that it understood that it would have an opportunity to present, as opposed to Council members getting phone calls that said the opposite. Mayor Hoffman reiterated that he told Ms. Hughes that the Council would hear the group's presentation sooner rather than later. 4. ADJOURNMENT Mayor Hoffman adjourned the meeting at 9:51 p.m. Respectfully submitted, .a L�_ - Robyn Christie City Recorder BY THE CITY COUNCIL: Hoffman` City Council Special Meeting Minutes Page 13 of 13 September 8, 2009