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HomeMy WebLinkAbout10.23.06 Work Session Minutes CITY COUNCIL BUDGET WORKSHOP MINUTES OCTOBER 23, 2006 Mayor Soderberg called the meeting to order at 5:00 p.m. Present: Audience: Soderberg, Fogarty, McKnight, Pritzlaff, Wilson Randy Oswald, Joanne Payne, Nick Schultz City Administrator Herlofsky added some updates to the agenda. MOTION by Pritzlaff, second by McKnight to approve the agenda. APIF, MOTION CARRIED. Updates The new Police Chief Brian Lindquist was introduced. An updated schedule ofthe mill and overlay project was distributed. Paving will start on Wednesday and the project has been extended a couple days past November 1,2006. At the last EDA meeting a tour of several cities was scheduled for November 18, 2006, from 8 a.m. - 2 p.m. to tour downtown development areas. Councilmembers McKnight and Pritzlaff will be attending. A meeting will be held on November 15,2006 with MnDOT to discuss the traffic study on TH3. Councilmember Fogarty will attend. 2007 Budeet In 2006 the revenues are at 65%, and does not include second half property taxes. Even with permits being down, revenues will be close. Expenditures are at 71 % of the budget with 75% of the year completed. The parks secretary has not been hired and an assistant city engineer has not yet been hired and the engineering technician position has not been filled. This has helped to keep expenses down and should add $100,000 - $200,000 to the fund balance at the end of the year. This is one way to add to the fund balance. The monthly fund balance typically goes below zero for revenues. Right now we are at a break even point where revenues and expenditures are equal. It will dip below in November and up again in December due to property taxes. In the 2006 budget, there were three police officers scheduled to be hired at different times of the year. This is a good way to manage the current budget, but at that time you also need to agree on the next year's budget as from the start we have a $100,000 difference in salaries just because of when people were hired in 2006. In 2007 the parks secretary position will not be filled, we still have the assistant city engineer position and the engineering technician. The police positions will be filled. The 2007 budget does have one reduction in building inspections. There is a retirement scheduled for next year and if this occurs that position will not be filled. If this does not take place, the position with the least seniority in the department will be eliminated three months into the year. Budget Workshop Minutes October 23, 2006 Page 2 City Administrator Herlofsky reviewed the 2007 goals: 1. Accept Contracts Professional contracts will be reviewed. Staffwill be looking at whether we should continue to contract work out, what areas, and how much of an increase there would be. 2. Building Permit Reduction Building permits have been reduced for 2007. Some Councilmembers have asked for further reductions, but there are some activities happening in 2007 that will help with that balance, such as the new high school. 3. General Fund Balance (35%-40%) Personnel and expenses have to be watched very closely. 4. DCC Budget This will go up, but costs will be reduced in the future and services to citizens will be increased. 5. City Hall 6. No Rate Increase (43%) 7. Debt Service % This is at 22% ofthe total levy which is below Council's goal of25%. This is higher than 2006, but there are a number of bonds coming on in 2007 such as the Ash Street bonds, the Main Street bonds, and the Fire Station bonds. 8. Parks Funding Staff is waiting for the Parks Commission to make their recommendations regarding park improvements. 9. Retail/Commercial Development 10. Communication It is in the budget to increase the part-time position for the Communications Specialist to full time in addition to different software programs to support the website. 11. Rambling River Days Staffhas been attending the meetings to provide support for this event. There will be personnel costs involved that will be in the general operating budget. 12. Road Improvement Projects Flagstaff, Elm Street, 1 95th Street, and 208th Street will be reviewed in 2007. Staffs role in the Elm Street project is to work with the county to identify feeder lines that need to be oversized for utilities. Staffwill bring the feasibility study to Council. The county is the lead on this project because they have turnback funds. Staff plans to have weekly meetings with downtown property owners and businesses during the project. Staffwill provide Council with an update at the next meeting. As far as capital outlay items, cameras in squad cars are being reviewed. Four new squad cars will be purchased and four cameras are being considered to be installed in those cars. Staffwill verify if they will be automatic cameras. There is one scheduled for the 2007 budget. Councilmember Pritzlaffhesitated to delay the defibrillators and the tasers. Staff discussed this and the budget reflects they are delayed. There are funding opportunities to accept donations towards these items. Capital Outlay items that have been pushed into 2008 will be reviewed next year. Councilmember Pritzlaff asked for an explanation ofIT becoming an internal service fund. Finance Director Roland explained that it becomes a cost center that charges each department for work done so the general fund is not picking up all the costs. City Administrator Herlofsky Budget Workshop Minutes October 23, 2006 Page 3 noted nothing will be brought over to the new City Hall that is not needed. He would like to eliminate some files by scanning documents and throwing away documents that are not needed. Councilmember Wilson asked iflabor was 2.75%. Finance Director Roland replied yes, for cost-of-living. They built in 3% because the merit program was not eliminated. Councilmember Wilson noted Lee Mann received a promotion at Bonestroo and that impacted the cost to the City. Finance Director Roland stated the retainer remained the same with a 3% increase. City projects saw a 3%-5% increase, but that is built into project costs. Staff anticipates a 3% increase across the board, but that should reflect the retainer less than it affects the rest of the budget. Finance Director Roland noted for the Campbell Knutson contract she has been advised the administration and Council charges will be less under the retainer, but the prosecution charges will increase. Councilmember Fogarty asked if pass-through costs for developers went up. Staffnoted this is reviewed during the annual organizational matters and explained how the process works and what the charges cover. Councilmember Pritzlaff noted they had discussed the City having their own gas tanks at the Maintenance Facility to save fuel costs. He asked if that should be considered sooner. Finance Director Roland replied the City has changed to a single provider for gas. Over the last 5 months the City has averaged 6,200 gallons of gas or diesel at an average price of $2.568/gallon. The high was in July at $2.76 and in September it was $2.21. The fuel costs in the budget are at an average price of $2. 75/gallon for a total of 74,000 gallons for all City vehicles. Staff is working on a cost benefit analysis for the gas tanks to determine how long it will take to recoup the cost of the tanks. Currently, the City pays $.25/gallon less than the price at the pump. With our own tanks there would be an administrative cost. Staff is still reviewing this issue. Councilmember McKnight noted the building permit number was at $756,000 for 2007. Looking at the most recent update we are at $523,000 for this year. He asked about the rationale for having it significantly higher next year. Finance Director Roland noted the 2020 Comp Plan identifies an average per year of275 building permits. Historically the numbers have been way above 275. The $756,000 is based on 275 permits at $2,750 per permit. It does not include commercial, industrial, or governmental building permits the City would charge for. Councilmember McKnight did not see the high school being a $240,000 savior. We have worked on the last two budgets to reduce this and he was not comfortable with this number. He does not want to count on commercial/industrial permits to save us. Finance Director Roland stated they have tried to take steps to address the fact we might have fewer building permits. They have reduced the size of the Building Department. To reduce that number means significant cost issues that would need to be addressed. City Administrator Herlofsky stated we know we will be short in building permits, but looking at other items we feel we are comfortable. Councilmember McKnight did not want to plan on a new budget, wipe the slate clean, and plan on it again. Councilmember Pritzlaff stated the building permits take care of Community Development. He asked how much money it takes to run Community Development. At $2,750 per permit how many permits does it take to break even for all the departments it has to cover? Finance Director Roland stated it costs $366,708 to run the Building Department. If you add Planning and Development Services that is another $431,000 which would mean $800,000 is Community Development and Public Works costs. The 275 building permits would be within $50,000 of balancing that. Building permits are covering all of Community Development because the City does not charge for plan review. The City does not receive a permit fee until the permit is issued. Councilmember Wilson stated it would be more consistent to plan just for Budget Workshop Minutes October 23, 2006 Page 4 homes and not commercial. The high school issue has taken so many turns, he does not want to put any weight on that revenue source coming in. Councilmember Fogarty stated this is still $125,000 less than we budgeted for last year. Councilmember Wilson noted we are entering the fourth year in a row on being short on building permits. In July he would rather be sitting at 200 building permits with 75-100 pending and be in phenomenal shape. Finance Director Roland asked if we do not use historical data and we do not use the comprehensive plan estimate, what should staffuse and where would Council like to cut the other $125,000 that will need to be cut to reduce the number to 250 or 225. Ifwe are going to make cuts in dollars we need to know where the cuts in services need to come. Councilmember McKnight stated the 4305 building permits line item is where he obtained the $756,000. He asked what is the comparable number to date for this year? Finance Director Roland replied 522. Councilmember McKnight stated that is the historical data he would use. Councilmembers were concerned with just using one year. Councilmember McKnight stated if we go back five years we are getting into the boom years. The number is not right this year and it is not right for next year. Councilmember Wilson felt staffs way oflooking at this is not invalid, but we are trending in the wrong direction and this is reflective of the market. Councilmember McKnight stated if you want to talk about cuts, he would like to have the Communications Specialist increase in the budget, but is next year the year to do it? Do we have any out-of-state travel in the budget? Finance Director Roland stated there are training dollars for all of the departments for a variety of different state and national conferences. This includes Administration, Finance, Human Resources and Police. We have had a police officer on the list for five years for the FBI Academy, ifhe can go we will send him, and that is out-of-state. The entire amount of this cost is in the budget. Councilmember Pritzlaff stated that is a good example for one person, but is it necessary for department heads to attend every year. Finance Director Roland stated she is on the Executive Board of the GFOA and will be on it for the next three years. As part ofthat she has signed on for attendance at a national conference. For the last two years she has paid for it herself. In 2007 the cost of her hotel and airfare for that conference is included in the budget. City Administrator Herlofsky noted he encouraged that. Referring to the number of building permits, there were 341 in 2000,464 in 2001,557 in 2002, 560 in 2003,225 in 2004,225 in 2005, 198 in 2006 through the end of September. The 275 is a little optimistic. Mayor Soderberg asked if this coming year will be as dismal as the current year. Finance Director Roland replied the increases in the mortgage rates are at 6.35% on a 30- year mortgage which are still the lowest historically. Predictions are things should trend upward. Councilmember Pritzlaff noted builders he works for have cut their staff in half. Mayor Soderberg stated Council has asked staff to cut $250,000 from the first budget draft. Staffis comfortable with this number. If the number is cut further, it would mean a reduction in staff. If the numbers are not coming in, we can reduce staffthen as well as now. Councilmember McKnight stated he was not comfortable with moving forward with this number. Councilmember Pritzlaff asked how we sit with the rest ofthe departments for out-of-state training. He will be looking to see if we get our money's worth, and the trend with how often staff attends out-of-state conferences. City Administrator Herlofsky noted the advantage with attending each year is the rapport and networking. If we get a value back, we should continue. We can look at whether we have one or two participants attending. Finance Director Roland stated there are department heads that have gone to national conferences on a regular basis on the City's dime and there are some who have never gone to a national conference on the City's dime. Councilmember Fogarty asked ifthere was any value in having a policy for one national conference per department head every other year, but that seems unfair. City Administrator Herlofsky stated if you go every year, we should expect something back. He suggested meeting Budget Workshop Minutes October 23, 2006 Page 5 with department heads and reviewing if they go to a conference in March, do not expect to go to a conference in September. Councilmember Wilson noted staff has not abused conferences, but he suggested reducing costs the first and second quarter to lower the building permit revenue required and see how we are at mid-year. City Administrator Herlofsky stated you manage the budget from the first day the same way all the way to the end. You do not spend money at the end because you have things left over. Conferences have a tremendous benefit to individuals. In his agreement he is authorized to go to the ICMA Conference. Because he is on the board, there is no cost to attend three out of the four events he attends. You have to manage it to make sure it is a good expense. We should not do anything differently in January than we do in December. At the first of the year we need to watch revenues and expenditures. Councilmember McKnight asked if interest investments come in as regularly as the chart shows. Finance Director Roland explained it is a journal entry based on the budget. Right now in investments we have a surplus of$350,000 that has not been allocated back to the funds for this year. At year-end we will make sure the funds that were budgeted with interest income receive that dollar amount or a percentage. The balance left over is allocated to all funds based on cash balance. Councilmember McKnight stated the magic permit number would be what we have today or what we think it will be at the end of the year. City Administrator Herlofsky stated in October 2005 there were 34, November had 35 and December had 21. Next year he is looking at expenses not being 100%. A 1 % variance in the budget is $80,000. Councilmember Wilson would rather see a year where we are so conservative that in July/August we are coming out better than expected. Councilmember Pritzlaff asked ifthe City could look at not using building permits as revenue. Finance Director Roland noted that is how Shakopee got in trouble. They charged far in excess of the actual cost to perform the service and used the money for other things. Councilmember Pritzlaff noted at the last EDA meeting, it seems we are going to have a lot of help and direction. In March 2006 he brought up the issue of the Economic Development Specialist and what that person was doing in 2005 when it came to Council and there was a promotion, and what we were getting out of that. With the EDA going better than we thought, is the need for that position still vibrant for the City. City Administrator Herlofskystated Human Resources is doing a job analysis ofthat position. It will help us in determining what skills we have or do not have in that department. We will then be in a position to take action that will be beneficial to the City. Weare looking at what duties the person planned to be doing and what are they doing. Weare looking at discrepancies we need to clarify. Councilmember McKnight will be watching the weekly report of building permit numbers to see where he is comfortable for next year. Mayor Soderberg stated we can cut the number down to 220 or 200 building permits which is $200,000 more out of the budget. If that is what Council wants to do, then we need to identify where we are going to cut. We would have to talk about cutting people. Weare already talking about cutting one building inspector and that is the right area to do it. Ifwe are saying we are cutting the dollar amount from $756,000 down to $550,000, then we better identify who will go or how many people will go. We can do it now or in July. Individuals have already been told if a retirement does not occur someone will be laid off in the first quarter. If the numbers do not materialize, it may be two or three we will lay off or dismiss. Councilmember McKnight stated he threw out a couple ideas already and those were pounded down quickly. Mayor Soderberg stated we will get the fund balance up by watching expenditures. That has been a consistent goal for eight years to have the fund balance at 35%- Budget Workshop Minutes October 23, 2006 Page 6 40%. He cannot go to the public and say we are levying $200,000 this year to build up the fund balance. Councilmember Wilson stated there are two major items reflective of a growing City. One being the $571,000 in debt and the second being the $338,000 for the DCC. Finance Director Roland noted the $338,000 is the capital outlay that is separate from the general fund. In the general fund there is $150,000 more in expense. City Administrator Herlofsky stated they have encouraged all departments to look at revenue they have not been responsible for in the past. rfsomeone leaves, we can look to see if the position is needed. We may look at positions as we move into next year. There are some we have not filled. Staffhas heard Council's concerns and they will be addressed. Councilmember Fogarty noted we have a promotion and a position to fill in the Police Department and asked if we intend to do this immediately. Ifwe can hold off for the first quarter, maybe that could be the solution. The police officers are comfortable with where they are. City Administrator Herlofsky stated we are taking advantage ofthat now, as we have not filled Brian Lindquist's position as he has been waiting. We will not take official action until the next Council Meeting. We will advertise for a sergeant after that. We will be a person short well into next spring just in the normal process of filling the position, but it is budgeted for the first of the year. Councilmember McKnight asked ifthere are savings with a long-term employee leaving and paying out accrued benefits. Finance Director Roland stated some of it is accrued at year-end, but there is also less salary paid out. Some of this cost is also covered through the employee expense fund. The budget needs to be approved at the second meeting in December. If other changes are needed, staffwill need guidance. Councilmember Pritzlaffnoted there has been a $36/year City tax increase which is not bad and is because ofthe appreciation of homes. The rate went down. This should be communicated at the truth-in-taxation hearing. Councilmember McKnight noted the building permit number is not realistic based on this year and last year. Finance Director Roland stated if we are talking about cutting funds, then we need to discuss what Council is willing to cut with regard to services. If that is people, or programs, then that is what staff needs to hear. City Administrator Herlofsky felt if we cut another $100,000 that might make everyone more comfortable. Staff will look closer at the budget. The workshop to discuss strategic planning was re-scheduled for October 30, 2006 at 5:30 p.m. MOTION by Fogarty, second by McKnight to adjourn at 7:02 p.m. APIF, MOTION CARRIED. Respectfully submitted, _~~d.-7Yl~ l-,.." Cynthia Muller Executive Assistant