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HomeMy WebLinkAbout06.21.04 Work Session Minutes CITY COUNCIL BUDGET/CIP WORKSHOP MINUTES June 21, 2004 Mayor Ristow called the meeting to order at 9:55 p.m. Present: Ristow, Cordes, Fitch, Fogarty, Soderberg Also Present: David Urbia, City Administrator; Robin Roland, Finance Director; Kevin Carroll, Community Development Director; Dan Siebenaler, Police Chief; Randy Distad, Parks and Recreation Director; Lee Mann, Director of Public Works/City Engineer; Lisa Shadick, Administrative Services Director; Brenda Wendlandt, Human Resources Director; Cynthia Muller, Executive Assistant Finance Director Roland, stated the 2004 budget will be revised during the 2005 budget process. Staff made Council aware of some problems. There are solutions that can be decided on and Council can give staff directions, or Council can direct staff to prepare a revised 2004 budget with the 2005 budget process. Council can decide on staffing now, but a revised budget can be developed which addresses revenue changes, etc. MOTION by Soderberg, second by Cordes to approve the agenda. APIF, MOTION CARRIED. 2005-2009 CIP Councilmember Fitch stated he hoped the CIP document was not a rush put together by staff. For $25 million worth of projects to be proposed for 2005 he cannot imagine the thought process. The second item is residents have asked him how can the City Council not be aware of what was happening in 2003 budget wise in the shortfall if we know some ofthe items already in 2004 are short that were short in 2003. How did we not know in 2003 at some point, earlier than March 2004 that we were going to have problems? Finance Director Roland stated the problem with 2003 is that in November budget to actual numbers were on track. The majority of the entries which affected the bottom line, we did not know until year end when we did mark to market for the investments and the interest income which is a three tiered process, does not happen until year end. That was a significant shortfall in revenues. Staff could not tell Council in November that would happen. Councilmember Fitch asked how staff could already estimate the shortage for 2004. Staff is trying to err on the conservative side and say that ifthings fall the same way as 2003, we have a problem. Since interest rates on short term paper and the 4M fund have been under 1 % for the better part of six months, she would anticipate we would see a similar situation in 2004 as 2003. With regard as to how did we find ourselves in this position, the majority of the revenue shortfall for 2003 was not able to be identified until year end. With regard to expenditures being over their budgeted amounts, as far as the police department, there was overtime in a couple significant cases. It did not appear to be a major issue given the rest of the general fund budget as the months went by. At year end, there were other adjustments in the police department having to do with those issues. In Community Development, we had the Council Workshop Minutes June 21, 2004 Page 2 revenues to offset expenditures, however there were significant billings in December. With regards to Parks and Recreation we had significant expenditures that were not as carefully monitored as they should have been. Staff is watching very carefully this year to balance between park maintenance and forestry. With regard to recreation, a brochure was sent out for fall/winter programs, which the City collected revenues for, but staff did not identify there would be more expenses to be covered by those revenues. Staff transferred the budgeted amount for the senior center and the pool. Staff could have transferred more which would have put things in more of a deficit because those operations did not meet their revenue expectations. There were a number of issues having to do with the Spruce Street Corridor project. At year end staff identified which expenditures belonged in the general fund to be offset by the grant money. Staff identified other funds that were paid out that are currently being identified as deferred revenue in other capital projects funds because staff had to expend that money on behalf of developers up front so it can be assessed as part ofthe development agreement. Councilmember Fitch hoped there was a commitment from City Administrator Urbia that it will not take three years before the CIP is addressed again. He hoped staff and the City Administrator were committed to at least looking at where we are going on an annual basis. Council then reviewed Parks projects listed on the CIP. City Administrator Urbia stated staff adjusted the sequence of park projects. The first adjustment was the Rambling River park, where the Master Planning would happen in 2006 and do the project in 2007. This has been pushed back two years. Staff felt the Rambling River park improvements would happen after the Seed Genstar park. Councilmember Cordes stated for 2005 out of the park improvement fund we are identifying $492,000 worth of projects. In 2006 out ofthe park improvement fund we are identifying $378,000 worth ofprojects. This exceeds the fund balance at this time. So we are depending on development that will contribute to this fund. Ifthe money is not there, the projects are not done. Parks and Recreation Director Distad stated they pushed the Rambling River Park back two years, but pushed up the Middle Creek Park one year to take the place of Rambling River Park. Councilmember Cordes asked Parks and Recreation Director Distad, as the professional sitting there, do you think that if we did $492,000 worth of projects coming from the park improvement fund in 2005, you will not short change yourself for future projects or things that may come up. Parks and Recreation Director Distad stated these are high estimated costs. There are opportunities to be partners with other organizations and grant opportunities for funding. These parks need to be developed. If staff feels there is not enough money in the park improvement fund to carry on for future years, priorities will need to be decided. Perhaps only a piece of playground equipment can be installed. City Administrator Urbia stated an analysis will need to be done and ifthere are issues with cash flow, we will have to pull back. Councilmember Cordes stated without the money we cannot do these projects. Staff gave Council a $25 million CIP for 2005, she was shocked at the amount. She feels staff has the professionalism and integrity to present a CIP that is realistic. She stated if anyone thinks this CIP for 2005 is realistic then I must be way out in left field. Finance Director Roland stated no one on staff thinks it is realistic. Councilmember Cordes asked then why present it to Council like this? Why did staffnot prioritize the projects, you are the professionals. Finance Director Roland stated there are two projects in 2005 that constitute $6 million in Public Works that could come this year or next year or in 2006. It depends on when Mr. Devney and Mr. Berglund sell their properties and how fast they want to develop. If staff did not put this in 2005 and warn Council Council Workshop Minutes June 21, 2004 Page 3 it is out there and has the possibility to be done, then staff would be remiss in the middle of 2005 and say the land owners want to develop and we have to do these projects. Staffknew that $25 million in 2005 was not going to go, but these are the needs identified by the various places and developments we are doing. The one that is on there for 2005 that Council is committed to doing at this point is Ash Street. Councilmember Fitch asked what does the City really have to pay for? Finance Director Roland stated the projects are broken down on individual sheets showing what debt would be required. If the developer were to build the infrastructure as part of the development as we do with residential projects, there would not be this cost and bonding requirement. The developer could come to the City and say you build it I will pay for it later. Staff is responsible to give Council all the information, and sort it out. In 2005 the City has to do Ash Street. There is $2.6 million in bonds, half of which is deferred assessments ifthe properties come into the city. After that the sewer meter replacement and prairie creek drainage way dredging are covered 100% by a capital project fund or an enterprise fund. Between Ash Street and City Hall, the two bond issues would total approximately $10 million. If those two projects were done in 2005 the debt to be issued would be $10 million. Of that, the City would have to levy in subsequent years the amounts shown on the spreadsheet. The Ash Street bonds are supported halfby assessments and half by the tax levy. The cost for Ash Street is $6.6 million. The City Hall bonds are $7.5 million. The bonds for Ash Street are $2.6 million. If Council were to issue $10 million in debt and did three public works capital projects, the debt levy would not be as high, because the assessments would pick up the difference. Mayor Ristow asked how City Hall would be paid for, where do the general obligation bonds come from? Finance Director Roland replied we bond for them and do a tax levy over time. Mayor Ristow suggested putting the City Hall, Fire Station and Community Center on a referendum and see if they can be built. No one is going to say they are going to raise taxes. There have been concepts that City Hall will be built, but he has not heard it from three Councilmembers to move forward with the project. We need a City Hall, a Fire Station, and a Community Center. Let's decide if we are going to use a referendum or general obligation bonds. Councilmember Fitch stated the Community Center has to be on a referendum, the other two we have a choice. Finance Director Roland stated there are two kinds of debt. The referendum debt is on market value. The G.O. debt is a tax capacity debt. It is spread more evenly and equitably across the City. A market value debt weighs more heavily on residential properties. City Administrator Urbia suggested moving the maintenance facility expansion up with the other two buildings, and from public works take out those that will not be bonded. He suggested doing a process of elimination and determine projects we know have to be done for maintenance reasons. Councilmember Fitch broke it down to three projects - Fire Station, City Hall, and the Spruce Street bridge. A lot of 195th Street will be done through development. Councilmember Soderberg suggested putting City Hall offto 2006 or 2007. Councilmember Fitch saw the Spruce Street bridge and the Fire Station first because they require less money, and the City Hall out another year or two behind that. By that time, some of this debt is going away and we have some funds. The proposed additional levy is $827,000. For that money he Council Workshop Minutes June 21, 2004 Page 4 proposed another officer later this year and possibly two next year, a Fire Hall, the Engineering Tech position which could save us money. We need to replenish the reserve fund and adjust for the interest income. He came up with $840,000 just for these items. Finance Director Roland stated the 2004 base budget is where we start for 2005. Salaries and benefits are at $3.5 million and for contracts we are committed to a 2.581 % increase which amounts to $90,000. The health insurance benefits are at $417,000, which staff sees at a 15% increase which equals $62,600. Base budget for charges for supplies and services is at $1.9 million with a 3% inflation factor equals $60,000. These three items show a $212,600 increase. If the City wants another officer in 2005 annual salary is $46,900, at 30% for benefits it comes to $61,000 per officer. If the City wants three officers that is $180,000 if they start at the first of the year. The subtotal of these two items is $400,000 which leaves $420,000 left for other positions, projects, etc. In the performa, a 10% increase is assumed in expenditures which comes to $6,672,000. This leaves $220,000 in levy dollars. Councilmember Fogarty did not have a problem putting City Hall off for a year to spread the debt around. She is concerned that there are soil issues with the Fire Hall and that may get pushed back itself. Staff stated the soil corrections are included in the cost. Councilmember Fogarty stated as far as Spruce Street, there is no sense building a bridge and a road if they have not started development. If they do not start in 2005, are we going to keep pushing everything back or are we going to reconsider putting City Hall forward. Councilmember Fitch stated that is why the CIP needs to be reviewed every year, because some priorities come faster. Councilmember Cordes noted there is the grant with the Spruce Street bridge and there is the possibility oflosing funds if we do not start construction. Councilmember Fitch stated it defeats our purpose of trying to push that development and connecting it to downtown. Some of the cost will be covered by development, but with only New Century out there, the City will have to cover some of the debt for a while. Council agreed to move City Hall to 2006 to free up some debt and allow completion of the Ash Street project and moving forward with the Fire Hall and Spruce Street. Councilmember Fogarty recalled there was an agreement with Wold that the current work would be credited toward the architectural costs for City Hall. City Administrator Urbia will discuss this with Wold. Wold is currently doing a space needs study and will present a report to Council. If Council decides to do the project, that report can be used to reduce the cost. Councilmember Cordes stated by moving City Hall to 2006, you decrease bonded debt by $7.6 million, but then in 2006 we increase the bonded debt to roughly $17 million. It is not just moving City Hall it is looking at other projects. Finance Director Roland replied ifpublic works is required to do five major projects in a year, they cannot do that, something has to give. Most likely there will be one major and one minor public works project. Staff used to reprioritize the CIP every year, but Council also receives the feasibility study for each project. All of these projects were on the 2001 CIP. City Engineer Mann listed several projects that have been completed since the last CIP. Councilmember Fitch felt holding offa year or two on a couple projects would give the City a break. Finance Director Roland noted certificates of indebtedness are being issued for more fire trucks, and we need a place to store them. Regarding the tax rate, Council would like to see the tax rate for $600,000, $800,000, and $1 million. Council Workshop Minutes June 21, 2004 Page 5 2004 Revised Bude:et Finance Director Roland asked Council if they wanted to make final cuts now or see a revised version of the budget and have staffhold back the next couple months. Staffhas identified $48,000 in cuts that can be stopped now and another $66,000 in potential cuts that staffwill hold back on. City Administrator Urbia brought up the tuition reimbursement. Council will need to approve staff taking money from another fund to cover reimbursements this year. Council agreed it was not fair to change policy this year and agreed staff should cover the reimbursements. Council would like to look at the policy and perhaps establishing a maximum amount in 2005. MOTION by Cordes, second by Soderberg to adjourn at 10:54 p.m. APIF, MOTION CARRIED. Respectfully submitted, ?~L~ ;h-?~4~ c::? Cynthia Muller Executive Assistant