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HomeMy WebLinkAbout09.27.10 Work Session Minutes Budget Workshop Minutes September 27,2010 Mayor Larson called the workshop to order at 5 :31 p.m. Present: Larson, Donnelly, Wilson, Fogarty (arrived 5:36 p.m.), May (arrived 5:36 p.m.) Also Present: Peter Herlofsky, City Administrator; Teresa Walters, Finance Director; Cynthia Muller, Executive Assistant MOTION by Wilson, second by Donnelly to approve the agenda. APIF, MOTION CARRIED. Mayor Larson stated Council had a lot of questions on staff's reductions amounting to $400,000. Councilmember Wilson stated it is hard to understand the implication of some ofthe smaller items such as supplies of Kleenex, toilet paper and hand soap. That does not do much. Revenues are declining and one of his recommendations is to look at management staff and ways to consolidate that area. He did not have any specific positions in mind. This is consistent with what most organizations would do with declining revenues. He realized staff is optimistic about the housing market, although with the federal first time homeowner credit that expired in April, and projects coming on line in 2011, it is hard to believe there will be an up tick in market valuation which will further challenge the City. To look at line staff, it becomes more challenging. Councilmember Donnelly stated there are some things put in here for effect, such as toilet paper and closing warming houses which do not amount to that much money. (Councilmember Fogarty arrived). As far as staffmg, Council told staff to cut $400,000 and included in that is $130,000 in staff. He did not want to get into how to manage that and how to deliver the services. (Councilmember May arrived). Expecting donations and closing the warming houses are not acceptable. We need to come up with a different way to save that money. He was fme with the building permit number. We have the CDA senior housing next year. If Council does not like the number, then we have to cut $20,000 more. Councilmember Wilson stated he sees consistently throughout the list is office supplies, legal services, dues and subscriptions, equipment repair. When we look at the expenditures every month, he liked the fact we support the local hardware store, but it seems there are a lot of petty expenditures with Municipal Services. He asked if there was a better way to look at repair of vehicles. Under Recreation programs, the puppet wagon, etc. are programs people pay for and add value. We have this new Rambling River Center and it seems we are cutting it at the ankles by reducing heating expense, etc. Are we making it an enjoyable place for seniors to go to or are we making it a less friendly place. City Administrator Herlofsky noted the new HV AC system should provide some efficiency with heating and cooling. Councilmember Wilson did not want to micro-manage the City budget, but we need to be prepared for a lower number than $340,000. From the staff end, it would be nice to know before we approve the budget, what your plans are if we fall short $50,000 or $60,000. 21 Budget Workshop Minutes September 27, 2010 Page 2 City Administrator Herlofsky stated the opposite of supplies is inventory. Inventory also has a cost associated with it. Each of items does not mean someone made a trip for each item; a number ofthem were purchased at the same time. With the variety of things they have to work with, it is less expensive to do it this way rather than have an inventory. Councilmember Wilson clarified we have always done our own fleet maintenance and that still may be the best way. At the same time, there are businesses that do that kind of work rather than government paying for it. The private sector would gain revenue from us. He felt we need to be more nimble with those kinds of services. Finance Director Walters stated the problem is there are not a lot of places that can fIX the type of equipment we use. It would cost more to find someone. Councilmember Wilson asked if the Mayor was hoping to leave tonight with a consensus as to what Council wants. Mayor Larson stated he hoped Council would get on the same page and give staff better direction. He thought Council gave good direction last time, but after seeing this list, Council didn't. Mayor Larson agreed with Councilmember Wilson and strongly believed we will have to eliminate a management position. He asked ifhe should name the position. He also had specific questions in the Administration section. Office supplies will be reduced by $10,000. Mayor Larson asked how will we do that, what is being eliminated and what position will that put us in. City Administrator Herlofsky stated paper will be reduced and with that comes less copies. We will have to trim back and watch every little thing. Mayor Larson asked what will be eliminated. Finance Director Walters stated color toner and not making color copies. City Administrator Herlofsky stated the color copier at the Rambling River Center would be removed and we are looking at all our copiers. Mayor Larson stated we have a $5,000 reduction in color copies. What will not get copied? What will not be put out because ofthat $5,000? City Administrator Herlofsky stated we may tell Council at the beginning of the year we will not provide paper copies and we will send the agendas bye-mail. Mayor Larson stated those are black and white. Let's deal with color copies. City Administrator Herlofsky stated the Park & Rec brochure, anything that comes out in color. Mayor Larson asked ifhe could be more specific. Staff came up with $5,000; do we have an idea other than some things. City Administrator Herlofsky stated we have color copiers and we will get rid of them so nothing will be done in color. Mayor Larson asked if that means we will not put things out or they will be in black and white. Ifwe are going to cut things, Council needs to know what so if someone asks we know what to tell them. City Administrator Herlofsky stated Council asked for $400,000 reduction and that is what you have. We looked at all of the items and what we could eliminate. One of them was reduce copies, no color, reduce office supplies. We looked at items that would be reasonable and that we could work on through the year. We will be cutting on a day-to-day basis next year. If some emergency happens where it needs to go out on paper, we will say this is where we went over. We will try to cut expenses all over in a very general sense. It would be hard to say we will eliminate certain documents. The Park & Rec brochure will not be color. Mayor Larson asked will it not come out at all or will it be in black and white. City Administrator Herlofsky stated it could be either case. It could go through e-mail or on the website. Mayor Larson asked how staff came up with $5,000. City Administrator Herlofsky stated we looked at the current expense and we left enough in the accounts to make it through the year. Finance Director Walters stated we looked at how many color copies we actually make because you can see that by the meter. We may have to have at least one color copier. Mayor Larson asked if the $10,000 reduction in office supplies is all paper. Finance Director Walters 22 Budget Workshop Minutes September 27, 2010 Page 3 replied no, it is also pens and general office supplies. City Administrator Herlofsky stated we have $37,000 in 2010 in office supplies. Finance Director Walters stated we also looked at where we are right now. We have a $37,000 budget. What have we spent year to date and what do we anticipate spending by the end of the year? We have told people not to order anything unless you absolutely have to have it. By the end of the year we could be spending $8,000 less. Mayor Larson was worried about people not being able to do their jobs properly because they do not have the equipment and supplies to do it. He was concerned $10,000 is a lot of office supplies. Staff does a great job and he does not want to set them up. Finance Director Walters stated year to date we have spent $10,482 and have a balance of $27,000. Mayor Larson stated so the $10,000 reduction in your opinion will work. City Administrator Herlofsky stated everything we have brought to Council we intend to make work. Council said to cut $400,000. We did it in a way that we thought would be something we could work with. People know there is only so much in the budget and they will make an effort to only spend that much. If things come up that are over and above, we will deal with that. When we look at the budget we look at categories, divisions, and the total budget. We will do our best to manage it. He felt we will be alright with the budget that was presented. Mayor Larson then asked about communications. Postage is being reduced by $2,500. That will mean something not being mailed. Do we know what? Finance Director Walters stated it was discussed to e-mail the newsletter and set up a system where people would have things e-mailed on a regular basis. Mayor Larson asked if that meant a list servo Finance Director Walters replied yes, but that is an additional cost. We did not budget for that. City Administrator Herlofsky stated we will try to fmd ways to cut back on postage. Where we can e-mail we will, rather than use postage. Mayor Larson asked about Community Development where professional services will be reduced by $2,300. Staffreplied that will be using the attorney less. Even with legal services in general, it has been discussed to have the City Attorney present at Council meetings once a month. Council meetings are covered under a retainer, but there is a cost for him being here. Mayor Larson asked about Human Resources and cutting professional services mandated employee training by $3,300. He thought it was said staff would like to keep the training to reduce litigation. Are we risking litigation by not training? City Administrator Herlofsky stated we had a budget in that area of$128,000. We may have to look at some other line items in that account. Finance Director Walters stated if it was mandated training we have to do the training. Staff would not cut anything unless those employees have already had that training. Mayor Larson confIrmed we were comfortable in the $1,500 reduction in the labor attorney. He asked ifwe should leave in some overtime for IT in case the Police or Fire Departments need something. City Administrator Herlofsky stated we would have to reschedule the time worked. It will not keep the job from being done. Mayor Larson suggested leaving half that amount in. Mayor Larson asked about security training being reduced by $750. That is for the security equipment around the building. Mayor Larson asked if it was a good idea to eliminate the maintenance agreements on the equipment. City Administrator Herlofsky stated we may have some deductibles. We may pay based on a need for someone to come in. Mayor Larson asked about the Police Department and how much we spend on animal control and how will we reduce it by $10,000. Stafffound a different approach to handle this. In Police Patrol we are reducing shooting supplies by $2,000, tasers and handguns by $4,000, and officer training by $7,000. Mayor Larson asked what this will do to us. What training is being 23 Budget Workshop Minutes September 27, 2010 Page 4 eliminated? Finance Director Walters recalled they will not need new officer set-ups and training. City Administrator Herlofsky explained the reductions are general and we looked at items where we had some room. Councilmember Fogarty stated she understood staff was comfortable with the recommendations, but the reality is after the fIrst of the year and a resident asks why wasn't the Park & Rec brochure mailed out, she needs to know that is one of the items she was responsible for eliminating. It is not micro-managing, it is to be able to answer to residents and to understand it. City Administrator Herlofsky stated we do not have a lot of people, and when things happen we do our best to work with it. We will have to watch each month carefully. Mayor Larson noted the Fire Chief was under the impression his membership would be reduced by two, but this document shows fIve. City Administrator Herlofsky stated the reduction is two members for a total of 50 members. Mayor Larson did not like what we are doing to Engineering. At one point we are saying we want plats reviewed within 30 days and this is saying they need to wait. Some of the things we asked staff to do earlier this year, we will have to take back ifwe implement this and he did not want to do that. Councilmember Fogarty stated the 30-day process is for commercial and retail. That would push residential to a back burner. City Administrator Herlofsky stated Council has asked to get away from Bonestroo and try to do more things with staff. Some of these cuts are not a partner in that. Ifwe have development going, we will not slow it up because we are shy about calling in a consultant. We would like Council know as soon as possible. Mayor Larson spoke with City Engineer Schorzman about the intern they had this year and staff really liked him and thought the intern would be a great fit in the City. City Engineer Schorzman felt he could justify hiring that intern and making it up by reducing professional services. City Administrator Herlofsky stated there is some money in the budget for professional services. Finance Director Walters noted full time salaries shows as a reduction, but as we are talking about reductions, it is an increase in the budget. Councilmember May noted that was discussed at the Engineering workshop that this would be the last year to use Bonestroo and in 2011 we would look at getting someone on staff to replace them. It was clear from the workshop that we were paying more than we would ifwe hired someone. But because ofthe experience that person has, staff wanted more time to work with him. Mayor Larson stated it is two different people; one would be an intern and one an Assistant City Engineer. Mayor Larson stated he agreed with Councilmember Wilson that a department head position needs to be combined. City Administrator Herlofsky stated ifhe throws a dart and picks someone that is not who Council agrees with, then it makes it a very interesting place to work. He cannot recommend a reduction in staff beyond what we have and expect to get the work done. If Council feels there is a need for change, then he needs some consensus from Council that will direct that to be taken care of. He suggested letting the individuals know as quickly as possible so there is some time frame to allow people to plan ahead. Mayor Larson stated the Administrative Services Director duties are not worth the money we are spending and he would like to see that position eliminated and combined with others. 24 Budget Workshop Minutes September 27, 2010 Page 5 Councilmember Fogarty agreed with most of what Mayor Larson said. Her overall concern is that a lot of what we are seeing in this list is one time reductions. She does not anticipate money coming in anytime soon. She was looking for more long term solutions and does not see many. Cutting back on training which we have done, you cannot do that forever. We have to have well trained staff. They need the training legally and ethically. It is better for our organization to be well trained. You cannot continue to cut that every year. She was not comfortable with cutting that for a third or fourth year. Councilmember Wilson agreed. Councilmember Fogarty appreciated what the Police Chief has done and it is a good one time cut for 2011, but it does present a problem for 2012 where we may have turnover. She found closing the warming houses, closing the poo~ eliminating the puppet wagon, etc. unacceptable. Mayor Larson stated if we keep the warming houses open, then we need to remove the snow from the rinks. Councilmember Fogarty asked about the warming house person removing the snow from the rinks. Staff explained it is too difficult and takes too long to shovel snow from the ice. Councilmember May stated there is no one in this room that is not experiencing tough times. She empathized with the work staffhas and is in total agreement with having to look at the management level. We have to look at long range cuts. She appreciated the questions from Mayor Larson about paper because it seems that is an easy number to plug in. She appreciated he gave it some real thought because likely some of those numbers are not realistic. The long term view of the budget is where her mindset is and 85% of the budget is labor. That is an unfortunate circumstance. We need to figure out how to rearrange management and if that means we have to hire a clerk down the road for far less money to do some tasks, maybe we have to look at that, but the management level has to be looked at. One thing a resident brought up was the DOT officer so she was surprised to see animal control in the reductions and no mention of the DOT. She would like some follow-up from the Police Chief on that. Councilmember May asked if the franchise fee was taken into account with these numbers. City Administrator Herlofsky stated the franchise fee has nothing to do with the general fund budget. The franchise is to cover seal coating where half was assessed and half came from the road and bridge fund. Councilmember May asked when the franchise will be discussed again. City Administrator Herlofsky suggested having a discussion at the October 11, workshop. Councilmember May asked if there has been any discussion on the Economic Development position. We have two City Planners and she appreciated them having the extra time because there is not a lot of new development, but felt now is the opportunity to scale down in that department. She also had a note about Bonestroo which was discussed. Councilmember May noted staff responded to her fmancial summary questions, but there was no answer on the investment interest. Finance Director Walters tried to explain what we did, when we did it, and how things have changed since then. Councilmember May asked under Human Resources what does limit employment advertising mean. Finance Director Walters stated ads would not be placed in the Star Tribune, but posted on the LMC website, and cheaper newspapers. Councilmember May asked how much the calendar costs. She liked the calendar, but if she had a choice between a rec program and the calendar, she would choose the rec program. Finance Director Walters stated some ofthe calendar is paid for through advertising. Staff will look at this. Councilmembers noted there is a lot of information in the calendar. 25 Budget Workshop Minutes September 27, 2010 Page 6 Councilmember May asked if they will see a $500,000 reduction on October 11. City Administrator Herlofsky was trying to determine a consensus from Council. There have been comments regarding staff reductions and other items. It is difficult to accommodate each individual preference. Councilmember May stated that was the agreement to see $400,000 and $500,000. Councilmember Wilson stated for the preliminary levy we agreed to $400,000 and then work on $500,000 to see what that would look like. Finance Director Walters asked if there was a consensus as to what Council wants to see reduced from the budget and what they do not want reduced. Councilmember Wilson agreed with Councilmembers Fogarty and May. Staff is doing a good job with working with what we have, but Council is not as optimistic on the revenue side as staff is. Market values of homes continue to go down which is a negative impact; we lost the market value homestead credit which is a negative impact; the interest is a negative impact; the debt service is a negative impact; there is so much uncertainty about the revenue side. That is why we have to look at staff. We need to be as innovative as possible and focus on the things residents want us to focus on - Police and Fire, picking up the garbage, having clean water and lessen some of the things that are not as high a priority. Councilmember Wilson noted we have rents at the liquor stores. In the budget we are seeing expenses and revenues being about the same at 7.5%/year. We are transferring about $150,000 - $170,000 to the general fund. He asked if it could be offset by new taxes coming in from non-government business being there and not having some of the other expenses. City Administrator Herlofsky stated in the last ten years the liquor store has provided just over $1 million in transfers to the general fund. We would have a hard time getting fees to match up to that. He agreed that the leases entered into ten years ago probably were not to the best advantage to the City. They were done with the idea there would be some long term growth. It is retail which suffers some ups and downs. There have been a couple more liquor stores strategically located in Apple Valley and Lakeville to capture some of that same market. We are paying substantially more in the lease and we have made some changes in the labor contract that have starting wages for new part-time clerks at $5 less per hour. There will be about $20,000 less in expenses for employees this year. It will take the next six months to get things straightened out with the current leases. Staff is looking at options and will get back to Council. Councilmember Wilson asked what the transfers have been over the last three years. It has amounted to $300,000. City Administrator Herlofsky noted we may want to borrow some money to build a liquor store and the mortgage could be for ten years and it would cost less than a lease. We are still working on the numbers and the location. Mayor Larson stated his reasons for wanting to reduce management is so Council can have packets, keep paint for the foul lines and ag lime for the ballfields, keep the grass maintained in parks, keep the warming house open, keep the snow off the rinks, keep the puppet wagon, train the Police properly, etc. He wants to keep some services rather than cut all services. Councilmember Fogarty stated she understands what they are asking the City Administrator to do; to eliminate staff It is not an easy thing to do. None of us have an ulterior agenda. We are looking at the things we have to cut which is a staff member. It is not an easy time to cut staff It is not a great market to turn people out into and our staff is fantastic here. There is no ill intent; it is a matter of wanting to preserve other things. City Administrator Herlofsky stated he has been told there were two positions, now there is only one? Mayor Larson stated he is suggesting one. Councilmember Wilson stated two positions have been identified. 26 Budget Workshop Minutes September 27, 2010 Page 7 Councilmember May stated she is looking at the $500,000 number, so she would say two positions. City Administrator Herlofsky stated in the budget there is one retirement that we will not replace and a second one that may result in moving around of some people. There is a posting and that is where the moving around of people comes in. Councilmember May stated there is not a lot going on in Economic Development and we have two Planners. Mayor Larson stated the Planners are plenty busy now and have a lot going on. Councilmember May stated we have identified what we need is a Director position in charge ofthe EDA. She would like to visit that this time next year. She would like to eliminate the Economic Development Specialist position for 2011 and re-evaluate what we need in 2012. City Administrator Herlofsky noted activity has picked up and we have been selling buildings. Now we want to move away from that support. The two positions mentioned report directly to him and it means their duties will have to be distributed. He clarified they are talking about the Administrative Services Director and the Economic Development Specialist. Councilmember Fogarty replied that is what we are talking about. Finance Director Walters asked about the other items put back in the budget. City Administrator Herlofsky stated right now nothing has been put back in the budget. There is no consensus from the Council. There has been a lot of discussion. We have $400,000, with the two positions you have another $150,000 at least. Mayor Larson noted he just went over a list of things he wants put back in the budget. Councilmember Donnelly stated we started with a number, we got the number, but that did not include the positions we wanted. Now we are taking people out. Councilmember May stated the number was $400,000 and $500,000. This happened last year where it is all about the bottom number. To her it has been about the higher number. That is where positions come in. With 85% of the budget being labor, that is where we have to look. The warming house and things for kids to do are not one ofthe options. Councilmember Donnelly stated the warming house amounts to $3,000 and was put in for effect. We set the levy and we have to stay under that. We want to re-organize and get rid of some people. Weare talking about a long term budget. Councilmember May noted we have 195th Street payment coming up in 2013. That is why we are talking about more long term solutions. Councilmember Donnelly stated there have not been good decisions made in the past such as Vermillion River Crossing. We will see about 195th Street. Vermillion River Crossing was a complete surprise. It is a tough market and he understood we need to consider everyone, but we are punishing the staff for decisions they have no part of. There were high level decisions made that are crushing us now. He felt staffwill not get a complete consensus on what to do. Councilmember Wilson took full responsibility for the Spruce Street bridge. He voted for it and for the 15-year tax abatement. Council had every indication it would be successful and it hasn't been. We do not have revenue coming in. He was sorry we will have to let two people go. We need to adjust to the fact we do not have new revenue coming in. When revenues pick up, he wants to be able to hire people. What he does not want to do in the mean time is for a lot of these positions such as maintenance, municipal services, engineering, cut them up from doing their job when we can reduce staff and allow everyone to do a better job which the community is looking for. Councilmember Fogarty agreed the public will pay one way or another; through dollars or through a reduction in services. They will pay both ways. The majority of Council is leaning more towards keeping taxes down and we understand there is a flip side that it will reduce 27 Budget Workshop Minutes September 27, 2010 Page 8 services. Residents won't pay as much in property taxes, but they will see a reduction in services. We have to leave the avenues open where we can have the most potential for growth. City Administrator Herlofsky needed to have a clear understanding of what Council is looking for. Changing people's employment is a very serious thing. Also with the current positions we are talking about there are some issues with the bargaining unit and bumping and other things that will occur. The clearer that is determined by the Council the more effectively it can be managed and started in a way that cuts down on the concern by employees for their own well being. When you start talking about one position, it can affect three or four more. That is why it is critical we have a strong feeling from Council on what they want. Councilmember Fogarty stated to her the difference between $400,000 and $500,000 is one position. City Administrator Herlofsky asked if Council still wants to go to $500,000. Councilmembers would still like to see it and Councilmember Fogarty felt that cannot be done without eliminating two positions. Mayor Larson would like to see that option and also have funds available for the Deputy Registrar. Councilmember Wilson asked if City Administrator Herlofsky was asking if Council was looking at staff members beyond the proposal. There are two included in the $400,000 at a value of$130,000. Mayor Larson stated we accept that, but also another one in management so we can effectively run other departments. The position he mentioned will relieve some ofthe services we have cut so tight where we are handcuffmg ourselves and also another position to bring us closer to the $500,000. Whether we accept the $500,000, who knows? Councilmembers Wilson and May agreed. Councilmember Wilson stated outside ofthose we mentioned, we all agree we do not want to cut park and rec programs. Do we want staff to bring back a revised document with the elimination of the Administrative Services Director and the elimination of the Economic Development Specialist. Staff should give us what is most critical from this list. Councilmember Donnelly would also like to see the DOT, and what that does for the City. City Administrator Herlofsky stated he will place something on the October 4, agenda so Council can make a decision. Council will make a staff decision and he would recommend they take action at the October 4, Council meeting. Then it will be done, and a few other things will need to take place before the end ofthe year. He would like to say Council will discuss staffmg for 2011 and let Council make the motion on whatever they decide. Finance Director Walters asked about any changes to the revenue. Councilmember May stated look at reducing the interest income number. Councilmember Wilson has asked staff about the permits and he is cautiously comfortable with the permit number, but not comfortable with the interest revenue. MOTION by Wilson, second by Fogarty to adjourn at 7:04 p.m. APIF, MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 28