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HomeMy WebLinkAbout01/21/1986 Meeting e e e M I NUT E S Eugene City Council Work Session Valley River Inn--Umpqua Room January 21, 1986 5:30 p.m. PRESENT: Brian Obie, Mayor; Cynthia Wooten, Richard Hansen, Emily Schue, Freeman Holmer, Ruth Bascom, Debra Ehrman, Roger Rutan, Jeff Miller, City Councilors; Micheal Gleason, City Manager; Dave Whitlow, Assistant City Manager; Warren Wong, Barb Bellamy, Gary Long, Susan Smernoff, Cathy Freedman, staff; Kim Short, Alan Contreras, Budget Committee; Jim Boyd, The Register-Guard. The meeting was called to order at 5:30 p.m. by Mayor Obie. I. ITEMS FOR DISCUSSION Mayor Obie reported on the meeting between Lane County, Springfield, and Eugene regarding Mahlon Sweet Airport. There will be future negotiations between the public bodies in order to explore alternatives for funding the airport project. After a lengthy discussion, the Mayor directed Mr. Gleasc1n to choose a date for a Ci ty Counci 1 Cammi ttee to di scuss a strategy for ai r'- port planning. Members will be appointed by the Mayor. Mr. Obie announced the Partnership nominations that have been made, including Ed Whitelaw. Mr. Rutan suggested that the presentation to the Springfield City Council be made by two councilors and one staff person. II. FY87 BUDGET PLAN/CIP FUNDING A. Introduction Mr. Gleason reviewed the agenda and explained the rationale for each item. The purpose of the work session is to give the City Council an opportunity to discuss issues related to the budget and the funding of the CIP. Mr. Hansen requested that the about how it will be covered. will be given the opportunity given. shortfall be addressed with specific information Mr. Gleason responded that the City Council to choose specific cuts after the options arE! MINUTES--Eugene City Council January 21, 1986 Page 1 e B. Historical Perspective Mr. Long reviewed the history of budget planning through a series of visual exhibits, which reflected the background information distributed to the coun- cilors. In summary, Mr. Long reported several conclusions: 1) Federal and State government assistance is either flat or gone with no increases in sight; 2) the City is more productive and is meeting the service demand; and 3) property tax dependency, if it continues to increase, will cause an imminent crisis. . Gleason encouraged the council to look carefully at diversification strategies. C. Financial Management Policies Mr. Whitlow referred the councilors to the draft Financial Management Goals and Policies document, which was distributed. The current policy document is three years old, and the proposed draft reflects changes suggested by the staff. No final action is expected at this time, but will be requested before the FY87 Budget is adopted. Mr. Whitlow commended the City Council and staff for past major accomplishments, especially the movement of Federal Revenue Sharing out of the budget. Mr. Whitlow highlighted the proposed changes and additions in the draft statement. Questions were addressed and discussion was held as each item was explained. e D. Oregon Property Tax System Mr. Wong compared the Oregon system to rate systems in other states. He explained that the dollar amounts levied in Oregon do not increase if the value of property increases. He reviewed the tax base and how it can be increased without a vote or with a vote of the people. He also explained the formula for increasing the tax base when property is annexed. Mr. Wong explained how supplementary operating and capital levies can be used. The property tax system in Oregon does not grow with the economy. E. Operating/CIP Requirements Mr. Wong distributed copies of the FY88-FY93 Operating Budget, which is a draft of the City's Six-Year Forecast. He said the forecast was in draft form because the FY86-FY87 budget has not been completed. Mr. Wong reviewed the Operating Budget. He said the staff tried to hold variables as constant as possible. For projected revenues, it was assumed the tax collection rate will return to 88 percent, the delinquent tax collection rate will be 60 percent, and no new user fees or charges, revenue sources, new taxes, or annexations will be approved. For expenditures, it was assumed the service system approved in FY86 will continue, there will be no enhancements or additions to services, there will be no annexations, and there will be no population increase. e MINUTES--Eugene City Council January 21, 1986 Page 2 e e e Mr. Wong sai d the Operati ng Budget i ncl uded two estimates for expenditures., One estimate was for a three percent increase in expenses and the other assum- ed a five percent increase in expenses. He said the City is planning a thr'ee percent increase. If the increase is three percent, the City will have $500,000 with which to reinstate services or capital projects in FY86-FY87. If the increase is five percent, the City will have a deficit in FY86-FY87. He noted that the City has cut more than $1 million worth of services from this year's budget. Emphasizing the difference in a three percent increase and a five percent increase in expenditures, Mr. Gleason said the City cannot control such things as binding arbitration settlements. Mr. Long said past experience indicate's that costs increase about four percent a year. Answering questions from Mayor Obie, Mr. Wong said the budget included all approved revenues except funds from the State gas tax, which will be in the' Capital Budget. The State cigarette tax and the increase in the Group W franchise were included in the expected revenues in the operating budget. Mr. Wong reviewed the estimated replacement value of the City's assets, which total about $1.3 billion. He said $7 to $14 million is needed annually to maintain the assets. Answering a question, he said the replacement costs were based on 1984 replacement values. He reviewed the City's expenditures for capital projects from 1980. He said about half of the 1986 general capital projects have been frozen because of cuts in Federal funds. Mr. Wong said the Capital Improvement Program (CIP), which will be presented to the council. will indicate that the minimum amount needed to maintain the investment in general capital projects and protect citizens' health and safety in FY86-FY87 is $1.58 million. Answering questions, Mr. Wong said no projects in the Riverfront Research Park are included in the FY86-FY87 CIP. It will include only about $450,000 for street overlays, although $1 million to $1.5 million is needed annually for street overlays. About $4 million is needed now to catch up on the street overlays that have been postponed in the past. The amount budgeted for the FY86-FY87 CIP is not enough to maintain the City's infrastructure. Discussing the Six-Year Forecast, Mr. Wong said there will be a gap between revenues and expenditures. Answering questions. he said the gap may decrease in 1992 because the tax collection rate may increase and property taxes will have increased the six percent annually permitted by State law. F. Six-Year Financial Strategy Mr. Wong presented a Six-Year Financial Strategy which, he said, is intended to fund the operating budget and a minimum CIP ($1.58 million in FY86-FY87). Mr. Wong said no in the strategy. nues. Some will $600,000. new major revenue sources, such as a sales tax, are included New revenue sources will produce comparatively small reve- produce only about $5,000; some will produce as much as MINUTES--Eugene City Council January 21, 1986 Page 3 e The financial strategy, Mr. Wong said, is: 1} to transfer increasing 20 per- cent increments of the collected delinquent property taxes to the CIP for five years (in the sixth year all the delinquent property taxes will be in the CIP); 2} to consider serial levies when projects can logically be financed that way; and 3} to initiate new user fees and other revenue sources or decrease services. e Mr. Wong proposed that the CIP projects be divided into two tiers. Tier 1 projects will be those that can be paid for with known, existing funds. Tier 2 projects will be those dependent on the new financial strategy. When funds for Tier 2 projects are obtained with one of the strategies, the pro- jects can then be moved to Tier 1. Mr. Wong said new serial levies should be for specific projects from the approved CIP. The terms of the levies should be specified, and savings or arbitrage should reduce the levies. He recommended the Fire Department Redeployment Plan in FY88 and FY89 be financed with a serial property tax levy. He said the debt service of the City is decreasing and none of the existing general obligation bonds will be outstanding in 1998. Answering questions, Mr. Wong said the surplus cash carried forward can be transferred to capital projects. The estimated delinquent property taxes will be about $3 million annually for five years. The forecast indicates that user fees could be stopped in FY88, but they probably will be needed after that because the forecast does not include population increases. Revenue from the Trojan facility to be received in FY87 is classified as "other" in existin9 resources. The contingency fund is not included in the forecast because the amount in it is not certain until after the audit. A list of traditional revenue sources was included with the material on the financial strategies. Answering other questions, Mr. Wong said the six percent increase in property taxes permitted by State law will produce about $1.2 million in 1987. Mr. Gl eason sai d it is di ffi cul t to freeze expendi tures at the present 1 eVE!l without laying people off. Fuel for police cars must be purchased even if its cost increases. G. Discussion/Further Direction Mayor Obie suggested that each of the councilors comment on the financial strategies. The councilors said the presentations were excellent. Mr. Hansen said discussing opportunities to raise money for City government before the council considers ways to decrease expenditures bothered him. He said people want the City to "tighten its be1t," although he realized that has been done. Ms. Schue said much has been cut from the City budget, and the suggestions for additional cuts were horrendous. She knew citizens do not want new taxes, but perhaps they can be asked in different ways. She suggested a combination of cuts and new sources of revenue may be the solution. e MINUTES--Eugene City Council January 21, 1986 Page 4 e e e Ms. Wooten said the council needs to be vigilant about expenditures and what is expected from citizens. She is interested in pursuing new sources of revenue. She is concerned about user fees, but she will consider them to fill the gap between revenues and expenditures. She said sometimes user fees are appropriate, but the council should be careful about them. Mr. Holmer said the three percent increase in costs will be difficult to accomplish, but unless the council receives other direction, it should be attempted. He favors user fees. He said serial levies are difficult to get passed, and he is glad they are not recommended until 1988. He is concerned because the City is not maintaining its infrastructure adequately. Mr. Miller said people may want services, but the last vote indicated they do not want additional taxes. He said hourly wages in the community are lower than in the past, even though employment is up. People do not want to pay more taxes because of increased City costs. He wished the system could be changed so that City expenses do not increase when most people's wages do not increase. He said user fees are a wise choice, although they must be approved carefully. He hopes dedicated revenues can be sought from the State. Ms. Bascom liked the idea of funding the Fire Department Redeployment Plan with a serial levy. She would prefer reductions in each department's expenses to implementing the service reductions suggested. She favored user fees. She also favored the use of the delinquent taxes collected for the CIP. She would approve an executive budget prepared with the forecast Mr. Wong presented. Mr. Rutan said the budget is too tight. There are too many things that could change downward. He said the costs will probably increase more than three percent, and planning should indicate that. He said the council should start the budget process by making some difficult policy decisions. He hoped the financial strategies can be more dramatic. He does not like serial levies, but they must be considered. He hoped the money the City is investing now will be returned in a better economic condition in the future. Ms. Ehrman was bothered by the recommendation to fund the CIP with delinquent taxes because people may not pay them. She said reducing costs may not mean cutting out complete programs as suggested; she would like to explore such things as wage cuts for non-union employees, because people in the community have had to take wage cuts. She will consider serial levies and user fees. Mayor Obie said people in the community seem to want a decrease in the per capita cost of local government, they want a decrease in the property tax, and they want local government income spent for services. He thought the City could accomplish these things. The per capita costs probably can be decreased if the population grows. He favored user fees for such things as library costs, gas taxes, and business licenses. He is apprehensive about increasing property taxes because they may become too burdensome for people and delin- quent taxes may increase. He is also apprehensive about serial levies. He said he would like to reduce property taxes because the per capita income in the City is decreasing. MINUTES--Eugene City Council January 21, 1986 Page 5 e e e Mr. Hansen suggested the council discuss user fees. Ms. Schue responded that citizens find ways to avoid user fees such as library card fees. Ms. Wooten said things may change so that the assumptions in the forecast will not be accurate. H. Future Work Sessions The councilors asked Mr. Gleason to arrange another work session on the budget. Mr. Miller asked the staff to present a list indicating what could be expected from specific user fees, how the revenue would be collected, who would pay it, and how people with low incomes could be exempted. He would also like to know the consequences of the suggested service cuts. Ms. Ehrman said she would like to know what was proposed in the serial levies that were voted on from 1970 to 1981. I. Airport Expansion After some discussion, the councilors decided to consider appointments to a committee to work with representatives of other jurisdictions on the airport expansion on Wednesday, January 22, 1986. Mayor Obie adjourned the meeting at 9 p.m. Respectfully submitted, ~-0/ Micheal Gleason City Manager (Recorded by Judy Jernberg and Betty Lou Rarick) 1949C MINUTES--Eugene City Council January 21, 1986 Page 6