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HomeMy WebLinkAbout11.22.10 Work Session Minutes Council Budget Workshop Minutes November 22,2010 Mayor Larson called the workshop to order at 6:30 p.m. Present: Also Present: Larson, Donnelly, Fogarty, Wilson, May (arrived 6:34 p.m.) Peter Herlofsky, City Administrator; Teresa Walters, Finance Director; Jim Murphy, Police Sergeant; Randy Distad, Parks and Recreation Director; Todd Reiten, Municipal Services Director; Lisa Shadick, Administrative Services Director; Brenda Wendlandt, Human Resources Director; Cynthia Muller, Executive Assistant MOTION by Fogarty, second by Wilson to approve the agenda. APIF, MOTION CARRIED. Mayor Larson read a prepared statement addressed to City Administrator Herlofsky. From the July workshop until now I feel like we have been fighting and working for two different causes. I feel like in this budget you have been fighting to keep your staff and I admire you for that, and how hard you have been working for them. In a perfect world and in good times I believe your budget suggestions would work. But this is not a perfect world and these are not good times. The last three years have been tough, not only for the City losing around $1 million in revenue from the State, but the last three years have been tough mainly on the residents of Farmington. Most people have seen a reduction in their yearly income, they have seen a decline in property values and they have had increases in their expenses. Council has been fighting for the residents and the taxpayers. With this budget we have asked you to come up with long term reductions and I have not seen a lot of those. For months we have asked you to reduce staffing, mainly a department head, and you have come up with everything but what we have asked you for. The budget has seen an increase in debt service and an increase in bond payments along with a decline in revenue. With the increases in debt service and reduction of revenues, this budget cannot support all of the department head salaries. Council does not like losing jobs, but in these hard times we have to make hard decisions to bring our revenues and expenses back into balance. I am asking the City Administrator to work with us and do what needs to be done and make the hard decisions we ask you to make. Mayor Larson stated this sums up his frustration over the whole budget. This should have been done months ago. Councilmember Fogarty was comfortable with changing the Police Sergeants contract. She did not know if asking staff to reduce their hours, unless it is a permanent fix, is exactly what Council was looking for. She has struggled with where Council wants to go, what we want to do, and what our goals are for 2011 and beyond. That is why we have been asking for permanent cuts. She noted we did have a one time, for two years in a row, a contribution to the Fire fund. It is possible that will not be as high next year and the solution was a permanent fix. There are some permanent reductions that took care of a temporary situation. The $79,000 is a one time one year savings for 2011. It is possible that will wash out if we do not contribute to Budget Workshop Minutes November 22,2010 Page 2 the Fire fund next year. We cannot fix every problem that will come up in future years with one year's budget. There are some permanent cuts. She is struggling with the $79,000. (Councilmember May arrived). Mayor Larson agreed as long as the market holds. Councilmember Wilson asked where the $79,514 is. Councilmember Fogarty stated it was in previous information when we had to put more in the Fire fund than anticipated and an employee volunteered to be laid off. That position will not be reinstated and is a permanent reduction of approximately the same amount. Councilmember Fogarty was also comfortable with the permit revenues and felt they were conservative. She trusted staff as far as the interest revenue. Councilmember Wilson stated he was extremely floored by the quasi attempt at trying to double back on the November 18, e-mail. This Council was not open to furloughs. He did not know how the discussion from the last workshop resulted in asking AFSCME if something that happened two years ago could be considered for this year. That is not a permanent solution. Councilmember Wilson would have appreciated it if Council would have been contacted about the direction and asked to reconsider furloughs. He would like to know who the individuals are that requested reduced hours. He has been told that the City Administrator has said no one will lose their job. So for someone to lose their job would be an uncomfortable position to be in. He does not want to hand pick positions, but Council has to set the strongest financial position possible for the upcoming Council. This started in January with wanting to borrow money from every fund in the City to payoff our debt. Council agreed to not do that. We have rising debt payment, Council decisions to take care of the arena, we have the fIrst full year of the senior center. He takes no joy in someone leaving the City, but when you have declining revenues you have to look at expenditures. He felt it is a challenge to the teamwork when furloughs are brought up on November 18,2010. He did not hear anyone on Council talk about being open to furloughs. We took that off the table in July. We felt it was a drain on employee morale to cut hours. Councilmember May stated there is nothing long term presented. Since July that has been a common message. A lot of these suggestions are borrowing time. Everything in the budget will be on the table next year. Overall the process is flawed. When we throw out a number, it becomes about the number. Some have the opinion that if staff meets the number that is all there is to it. There has to be more to the process than figuring out how to plug things in to reach a number. There has to be input from Council and residents if we are okay with how the number is achieved. We have been battling that since July in trying to see long term solutions. If the economy does not turn around, we could be looking at these same tough decisions next year. We have to look at serious solutions this year. A suggestion from a Council candidate was a Community Council. Maybe that would help Council and staff look at ideas in long term solutions. If that would help spur more discussion maybe we need to try that. She suggested looking at that in January to help with good discussion on how to improve efficiencies and be better prepared on finalizing a budget rather than on November 22. She was disappointed the building permit revenue was not reduced. The interest should be a reduction of $70,000. The recommendation to keep the levy the same was also a concern. The idea was to look out for the taxpayer and now we are going to talk about a contingency. She was back to where are the Budget Workshop Minutes November 22,2010 Page 3 permanent cuts. No one wants to talk about anyone losing their position. It can be a tough break for some, but good people land on their feet. Spending will not change until we can accept cuts. She felt we need to do more work and she would agree with calling a special session. Councilmember Donnelly stated there is nothing permanent about any of this. The State could change everything next year. He understood the desire for long term cuts, but long term is hard to define. There is nothing permanent and nothing long term about any of this. The legislature will be completely different next year and we have no idea what they will do. He stated there have kind of been mixed messages as far as who should go and how many. All the people working for the City are here for a reason. As soon as you lose someone, things change, and then you have to re-hire someone; that costs and you lose the continuity and the morale. As far as the tax statement, what is in this budget will do that. It does not increase taxes and reduces $425,000. As far as trying to fmd a perfect long term fix, there isn't one. There are too many variables. Councilmember May appreciated the fact there is no perfect fix, but shouldn't we look at a little every year until things do turn around. Weare not asking to fix the whole thing. Councilmember Fogarty asked if this budget eliminates two or three positions including the voluntary layoff. City Administrator Herlofsky stated the positions removed from this budget includes one retirement, one layoff, and Bill Weierke's position will work its way through the organization we will not replace the last person. The layoff is voluntary. The other positions noted for this meeting were two reductions to 32 hours and one for halftime. We still have the Police Sergeants willing to participate. Early on in the budget process, he told Council he would prefer to not lose any employees. He never promised anyone; he told Council. Regarding furlough, no one on management used the word furlough. He knew Council said no furloughs. This was the result of an employee being willing to work 32 hours. We thought if one will, others will also. We found a couple people willing to adjust their hours. This could be considered putting it off for another year. If things turn around in a couple years, he would rather use the people we have here rather than let people go. This was an attempt to meet Council's objectives. It did not hit exactly, but he tells people they are never to do exactly what he tells them, because we will both be sorry for it. It requires both parties to think of the best way. Council had the option at an earlier meeting to discuss which positions to take action on. He was still trying to gauge what five people want; not one, not two, but at least three out of five. Sometimes he is trying to make sure he has sufficient direction. This Council has been a true challenge to figure out exactly what everyone wants. Council was having the same issue from their side. Mayor Larson stated when we had the opportunity to take a vote at a Council meeting there was some misunderstanding there also. One year we were told one way and the next year another way. Council did have the opportunity, but the information given to us was mixed. If Council was clear on how things could work, the outcome would have been different. Councilmember Wilson stated Council provided information to staff on what areas to enhance and cut. It was the refusal from the City Administrator to act on that. He gave credit to Councilmember Donnelly to remind Council that it is not their role to micro-manage staff, but to give direction. At the last workshop Council had a very good discussion of the big picture. We know this is a tough decision, but this is a tough economy. We directed the City Administrator Budget Workshop Minutes November 22, 2010 Page 4 to make cuts. He felt the majority of Council agrees with what is presented other than staffmg. Councilmember Wilson suggested going through the three categories to get a consensus. Mayor Larson realized we cannot compare the City to a business, but businesses here have had to let people go. As revenues stop coming in, you have to make adjustments. We cannot tax our way out of this, but it feels like we are being asked to do that. If the City was a business and we had $1 million in department head salaries, for every $100,000 worth of salary, you want to make 10% on your money. In a private business you have to do $1 million worth of work. If you can't generate the $1 million you have to eliminate expenses. Unfortunately, the expenses are people. It has to happen. Our bond payment and debt is going up, our revenues are going down. No one wants to make the hard decisions, but someone has to. Regarding the voluntary reduction in hours, Mayor Larson would not accept that tonight. Council has been asking for long term fixes and this is not long term. This will get us to next year and that is not what Council is asking for. Unfortunately, the hard decision has to be made. Regarding the Sergeants contract, we did agree in closed session to negotiate that with them. He was in support of that, but was not in support of voluntary reduction of hours because it is not long term. Council has been asking since June for long term fixes. It seems we are fighting two different battles. He appreciated the City Administrator wanting to keep staff, but we can't keep the high salaries. Somewhere in there we have to make a reduction. Mayor Larson agreed with Councilmember Donnelly that we got the $425,000 reduction, but he also agrees with Councilmember Wilson and does not agree with how we got there. We will be sitting in this same position next June and sooner or later we have to address it. Council has asked to address it this year. Iftimes get better and we do have to hire people, it does cost money, but we need to make the hard decisions now. Our expenses and debt are too far out of balance. The only option is to cut at City Hall or raise taxes, and he was not willing to raise taxes anymore. Councilmember Wilson stated if the next Council wishes to adopt the Deputy Registrar office, reductions in staff will be a silly idea. Mayor Larson stated we have to get the high salaries under control. He was worried we will not have enough money to run the City, the budget is so tight. Any issue during the year could throw it off. Even our fund balance is low. Regarding the three sections presented by staff, Councilmember Fogarty stated it is important to recognize we are % of the way there. We cannot fail to recognize there will be three positions not within the City next year. That is not a small reduction for a staff our size. Permanent cuts have been made. The City Administrator, staff and Council have done a lot of work. Building Permit number - Mayor Larson, Councilmember Fogarty and Councilmember Wilson agreed with the building permit number. Councilmember Wilson noted we have to be prepared for an up and down and we have been close on the building permit number. Councilmember May stated philosophically building permit revenue should be a contingency. It is money we don't know if it will come in; it's a projection. Councilmember Fogarty noted the City Attorney will tell us the number cannot be zero. City Administrator Herlofsky stated philosophically if you don't count it as revenue and leave it at zero and still want the same level of service, then we have to levy additional money to accomplish that task. Councilmember May stated then let's use last year's number. City Administrator Herlofsky stated in the past staff has recommended Budget Workshop Minutes November 22,2010 Page 5 levying additional money for the fund balance which was a major concern of that Council. The same philosophy works; it is a matter of how you apply it. Interest Revenue - Staff provided a number of $50,000 which is an estimate. Mayor Larson stated the interest amount was at $250,000, then Council cut it to $180,000, now staff is recommending $200,000. Councilmember May noted there is a statement that the contingency from the position and pay reductions would make up the shortfall. City Administrator Herlofsky stated if Council decides to leave the levy where it is from September there will be a $40,000 contingency. Councilmember Fogarty was comfortable with the interest amount recommended. Position and Pay Increase Reductions - Mayor Larson did not accept this as it is not long term. Councilmember May also did not support this. Councilmember Fogarty suggested one more staff reduction. The fact that three people stepped up to prevent a reduction is not lost. There are three positions being cut for 2011. She hesitated with a fourth position. Councilmember Wilson stated in private business we would do what Councilmember Donnelly suggested which is to have a consultant come in and analyze the City. He agreed with Mayor Larson and Councilmember May that it needs to be long term. He did not agree with the willingness of staff to reduce hours. Mayor Larson stated in a business the Board of Directors would give direction and it would be followed. He appreciated the employees stepping up, but that is not what we asked for. Councilmember Donnelly was okay with what staff presented. It shows staff came together by taking less money and giving up hours. That is hard to ignore. There is nothing permanent about this. The bond payment goes up $250,000 next year so we will do this all over again. If you want long term, we should cut $500,000 more right now. We have the ice arena next year and bond payments up $250,000 next year. In two years 195th Street starts for another $500,000. We have long term serious issues. He is not qualified to determine if this is the right structure for the City. City Administrator Herlofsky has decided this is the right structure for the City and Council disagrees. So he suggested bringing in a consultant to do a study and determine the right structure. Until we come to an agreement we will not get anywhere. Our debt payment is up $562,000 this year and we are trying to absorb that without raising taxes and we are close. Mayor Larson and Councilmember Fogarty agreed with the Police Sergeants contract. Councilmember Fogarty stated we have a $79,000 hole to fill. City Administrator Herlofsky stated in 2011 as in 2010 and 2009 there will be some personnel changes. This allows us to get through one year with three positions going away. Councilmember Wilson stated either we accept the three positions or Council has to hand pick a position. We will not get a recommendation for a position. Or we can provide a number and this is the area to reduce. Councilmember Fogarty decided to agree with staffs recommendation. Councilmember May stated everyone in this room understands it is reality. She was disappointed that we have to look at department heads. She did not want to point to one of these people, nor should we. The whole thing about choosing a position is very concerning. When it came time to hiring a Finance Director, Council couldn't have anything to do with that. The City Administrator is fme with hiring. We have cut to the bear bones and there is no where else to look. All this work since June and we are going to accept this? Councilmember May said flat out no. She was disgusted with the whole process. She was here to advocate for the residents and we just cannot afford everybody. There is no more money. She apologized to the Police, but there is no savings there; Budget Workshop Minutes November 22, 2010 Page 6 we are just spreading it out. Good people land on their feet and that is reality. City Administrator Herlofsky stated two people volunteered to take a 20% cut in pay and one said 50%. Councilmember May stated look at what we have to deal with next year. Not only are we rehashing what we are dealing with this year, we will have a whole new set of problems. Mayor Larson stated we will have to replace equipment that has been put on hold. Fire Chief Pietsch noted the Fire Department in three to five years will look at five to seven major vehicles at $500,000 - $1 million each. Mayor Larson stated to keep the ISO rating for insurance we have to update the equipment. We have to make hard decisions now. Councilmember May stated we probably will be faced with a tax increase, but now is not a good time. Councilmember Donnelly stated we cannot run this like a business. In business if we cannot afford the bridge, we let the bridge go back, but we can't. We have to tax to cover those decisions. There is no way we can cut enough people to cover the increasing debt in the future. We can lose a department head, but we cannot do that forever. Mayor Larson understood we cannot run the City like a business, but we can make business-like decisions. We have a lot of overhead. Mayor Larson asked if Council wanted to accept this as is, ask for an additional cut coming from a department head, or something else. We have to tell the City Administrator what we want and he will have to do it. Councilmember May thought we did a good of that at the last workshop. Mayor Larson thought we would see something different than what we have. Councilmember Wilson stated the question is if we make a recommendation will it fall on deaf ears again. Mayor Larson noted it is in the minutes from the last workshop that Council chose option 3 to eliminate two positions. That was not done. Councilmember Wilson stated however, these are additional cuts, we just don't like them. Mayor Larson stated option 3 was to eliminate additional positions, not reductions. City Administrator Herlofsky stated the reductions do equal one full- time equivalent employee. So it was one reduction in personnel. The whole group is made up of full-time equivalents. He tried to find a way to do it that would not be detrimental. If things get worse next year, we will go through this and find other ways to cut back on staff. Councilmember Fogarty felt it would not be appropriate for Council to name a specific position to cut. It has to be a management team position and the City Administrator has to decide where it would be least detrimental. Council reached a consensus on this. Those who volunteered to reduce hours should be told thanks, but that is not what Council wants. Councilmember May asked about the recommendation to keep the levy the same amount. Mayor Larson stated as tight as this budget is, we may need the tax money. Councilmember May asked if the process is flawed if we choose a number we cannot exceed, but that is the number. The number is never lower. Councilmember Wilson stated it cannot be about the number. It has to be about a bigger plan for what we will do financially. If the bucket of money does not accomplish the equipment repair, or the reserve money if interest payments do not come in, you do not see the priorities in the number. We gave a recommendation and we will be comfortable with whatever that number comes out to be. Councilmember May noted if the savings come in higher, staff still wants to keep the levy at the higher number. City Administrator Herlofsky stated it would be advisable for staff to give Council that option. We do not have to reduce the full amount. Finance Director Walters stated it amounts to about $.25 on taxes, but it would help to have that contingency. A line item can be shown in the budget for contingency. Budget Workshop Minutes November 22,2010 Page 7 City Administrator Herlofsky stated all Administrators are concerned with what has happened with the State in the last couple years with their financing. One thing the new legislature can do is put restrictions on Cities to raise their levy by a reasonable amount. The lower you put your levy, the smaller the base, and the fewer resources you will have available in the future. Mayor Larson asked if Council wanted to recommend reducing a department head and keep the levy at 3.73%. Councilmember Wilson wanted to eliminate the reduced hours in favor ofa permanent management staff reduction. Mayor Larson wanted management because of the larger salary and line staff has been cut already. Councilmember Wilson stated if we direct the City Administrator to reduce management staff, whatever the number comes out to be, we have to be fme with that number. Councilmember Donnelly stated the recommendation Council gives, will not change the taxes for people, it will hurt morale of City employees because they collectively came up with a way to meet the number we asked. Our goal is to affect the taxes and we will achieve that with this proposal. He would agree with eliminating a staff position if we have done it in a managerial way; if we evaluate the structure of the City and someone says this is way out of line. He would agree with this ifit was done objectively. He felt we will need to evaluate the structure for next year anyway. Bring in a third party to evaluate the structure. If that consultant says there is way too many of one group, maybe they will find a better way to run things. We have a proposal that will achieve the impact on the resident's tax statements that we agreed to. He commended the employees for pulling together to achieve that number. Ignoring the employee input and sacrifices is not a good thing. Councilmember Wilson stated the recommendation for 32 hour weeks came about in the last two weeks as a result of the City Administrator not liking the recommendation Council made two weeks ago and then trying to figure out a different way to arrive at a solution that would be workable for Council. Council's direction is: - Agree to the building permit revenue of $340,000. - Agree to $200,000 for interest revenue. - Direct the City Administrator to reduce one management staff position and eliminate the language regarding working reduced hours. - Agree with the Police Sergeants contract. - Accept whatever number these directives come out to be. MOTION by Fogarty, second by Wilson to adjourn at 7:59 p.m. APIF, MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant