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HomeMy WebLinkAbout09/15/1986 Meeting (2) M I NUT E S e Eugene City Council Dinner/Work Session Eugene Community Conference Center, Seeger Room September 15, 1986 6 p.m. COUNCILORS PRESENT: Richard Hansen, Debra Ehrman, Emily Schue, Cynthia Wooten, Ruth Bascom, Jeff Miller. COUNCILORS ABSENT: Freeman Holmer, Roger Rutan. BUDGET COMMITTEE MEMBERS PRESENT: Arden Munkres, Kim Short, Gary Pape, Shawn Boles. The adjourned meeting of September 10, 1986, of the City Council of the City of Eugene, Oregon, was called to order by City Council President Richard Hansen. His Honor Mayor Brian B. Obie arrived during the meeting and presided then. I. FINANCING OPERATING AND CAPITAL BUDGETS A. Introduction e City Manager Micheal Gleason said Finance Director Warren Wong would discuss the annual Six-Year Financial Forecasts for Eugene. Mr. Gleason said the forecasts include many variables because the City's budget and revenues change constantly. Mr. Gleason said the City's costs have increased annually about 1.5 percent more than its revenues for the last five years. The increase in costs is caused by an increase in population because of annexations, inflation, and demand for services. He said the demand for services is caused partly by the city's size. For example, a small town is not expected to have a bomb squad, but Eugene must have one. He said the City has increased productivity, made small cuts in expenses, reorganized, and eliminated some operations to absorb about three-quarters of the annual increase in costs. Consequently, the deficit caused by the increase in costs has been only about $400,000 a year. Last year, however, the City lost about $3 million when the Federal Revenue Sharing program was discontinued and the Budget Committee and City Council increased the budget appropriation for the Police, Fire and Emergency Services Department. Mr. Gleason said budgets are balanced by increasing revenues, decreasing costs, or changing programs. He said about 40 percent of Eugene's General Fund is spent on the Po 1 ice, Fire and Emergency Services Department. Discussing wages, he said the Ci ty has wanted to keep wage increases to 3 e MINUTES--Eugene City Council September 15, 1986 Page 1 percent but disputes that have been settled in binding arbitration have generated increases between 3.5 and 4.2 percent. The Personnel Division has e been successful in having the arbitrators compare Eugene wages to wages in Corvallis, Springfield, Salem, and Albany. He said wages for firefighters and police officers would have increased 22 to 28 percent if Eugene were compared to Tacoma, Spokane, and Bellevue, Washington; and Santa Rosa and Glendale, California. He emphasized that City wages and salaries are appropriate for thi s market. Mr. Gleason said the wage settlements for other City departments were reviewed last year for Councilor Holmer and the report indicated that City wages for clerical and semi -sk ill ed employees compare favorably wi th wages in the private sector in this market. They are less than those paid in Portland, however. He said the percentage of wages the City pays for fringe benefits has been decreasing. It is now 28 to 29 percent for firefighters and police officers and 20 to 21 percent for other employees. Mr. Gleason said City employees have increased their productivity and the City has the same number of employees it had ten years ago. He said the number of executive managers, mid-managers, and first-line supervisors has been reduced in the last five years. Some positions, such as those in Central Dispatching (911), have been added and are financed with funds from other jurisdictions. Answering a question from Mr. Hansen, Mr. Gleason said cities in other states do not have the same financial restraints that cities in Oregon have and cities in Washington do not have to reduce expenses. City salaries compare favorably with salaries in other cities in Oregon. He said increased productivity usually results in small savings. Organizational changes, such e as the Redeployment Plan for the Police, Fire and Emergency Services Department, result in 1 a rge savings in operating costs after capital investments are made. He said productivity probably cannot be increased any more without eliminating programs. He suggested a subcommittee look into the matter if the council wants to pursue it. Mr. Gleason said Oregon cities must rely on a property tax system in which the tax base does not grow, the State decreases the kinds of properties that can be taxed, and the tax rates get higher. He said the situation will get worse until property taxes are relied on less. Mr. Papel said he does not agree that City salaries are competitive with salaries in the private sector. He sa i d a study by a 1 oca 1 organization indicated that Eugene, Lane County, and Eugene Water and Electric Board (EWEB) salaries are higher than those in private industry. Mr. Gleason responded that the City has automated much clerical work; consequently, City clerical workers have special skills and wages reflect the skills. Mr. Hansen suggested Mr. Gl eason present wage comparisons to the Budget Committee. Replying to a question from Mayor Obie, Mr. Gleason said the City's cost for fringe benefits is competitive in this market. e MINUTES--Eugene City Council September 15, 1986 Page 2 B. Six Year Financial Forecast/Financial Environment and Short- and Long-Term Strategies e Mr. Wong distributed copies of "FY88 Operating and Capital Budget Fundingll and "November 1986 General Election Ballot Measures." He reviewewd the FY88 Operating and Capital Budget Funding page by page. Mr. Wong said the Six-Year Financial Forecast is the first step in the preparation of the FY88 budget. He discussed the Oregon property tax system. He said serial levies could be used to fund the capital budget. He said the City's debt service is decreasing because no General Obligation Bonds have been issued since 1980. He said the Eugene property tax rate probably will increase in the future and the percentage of the General Fund received from property taxes probably will continue to increase. Answering questions from Mr. Hansen and Ms. Bascom, Mr. Wong said none of the General Obligation Bonds have been used for urban renewal. The bonds are not included in the 6 percent increase in the tax base. The bonds that are maturing were approved by the voters in the 1960's, the 1970's, and 1980. Mr. Wong reviewed the assumptions for the forecasts, and said an increase in the City's expenses of 3 percent and 5 percent were forecast. He said the forecasts indicate a deficit starting in 1988 but the budget submitted by the Ci ty Manager wi 11 balance because State 1 aw requi res it to balance. He pointed out that the $3 million deficit forecast for 1988 is equal to the loss of Federal Revenue Sharing Funds. He said the projected deficits also result from bi ndi ng arbitration in labor disputes which raise wages 3.5 to 4.5 percent. Mr. Gleason added that wage settlements are being made at 3 percent e if binding arbitration is not involved. Answering a question from Mr. Pape', Mr. Gleason said some unions will not settle without binding arbitration. Mr. Wong said other reasons for the projected deficits are the reduction of State and Federal support for cities, the addition of programs such as the annexation program, inflation, and the use of one-time resources. He sa i d Eugene's financial condition is not disastrous and is similar to the condition of other Oregon cities. He said the staff intends to manage the situation so that major service reductions do not have to be made. Answering a question from Mr. Short, Mr. Wong said the revenues from annexations usually about equal the addit i ona 1 operating expenses. Mr. Gleason added that annexations are the only way the City can really increase the assessed value of the property in the city. Mr. Wong reviewed the financing strategy the council adopted last March. He said the council decided to gradually transfer delinquent property taxes into the Capital Budget and to consider serial levies for the Capital Improvement Program (CIP). He said the City's expenses are growing about 2 percent faster than its revenue. e MINUTES--Eugene City Council September 15, 1986 Page 3 Answering a question from Mr. Miller, Mr. Wong said the Tax Allocation Fund cannot be used for the Hult Center operating or capital budget. e Replying to a question from Ms. Wooten, Mr. Gleason said an example of micro- service adjustments was the reorganization of the Development Department and the elimination of a position. Replying to questions from Ms. Erhman and Ms. Bascom, Mr. Wong reviewed the transfer of delinquent taxes from the operating budget to the capital budget and said it increases the projected deficit in the operating budget. He sa i d the tax bills received by most citizens will not go down even though the City's General Obligation Bonds are being paid because the property tax rate is increasing. Responding to Ms. Bascom, Mr. Papel said the taxes of other jurisdictions, such as the school districts, are included in a taxpayer's bill and some of those jurisdictions are increasing taxes. Answering a question from Ms. Ehrman, Mr. Gleason said Corvallis has been very successful in funding its capital budget with serial property tax levies. Ms. Ehrman asked Mr. Gleason to provide additional information about Corvallis later. Mr. Hansen asked if any Oregon cities have thoroughly evaluated their role and Mr. Gleason responded that Springfield did so. As a result, revenues about equaled expenses for one year. Subsequently, expenses have risen. Mr. Mi 11 er wondered i f any State Legislature committees are considering e measures to stabilize local governments. Mr. Wong said some committees are considering specific local programs such as State-mandated programs but they are not working on a comprehensive solution. Mr. Wong said the State reserves a number of revenue sources for itself. For example, local governments cannot tax vehicles or increase their tax bases when new buildings are constructed. Answering questions from Mr. Papel about utility districts, right-of-way charges for public utilities, and infrastructure fees in the list of possible revenue sources, Mr. Wong said a street and road utility district could be established to provide revenue for the City, EWES could be charged for its use of the public right-of-way, and a fee could be charged to construct and maintain storm sewers. Ms. Wooten suggested the City consider i ssui ng mi ni -bonds as EWEB did recently. Mr. Wong said the City Attorney is analyzing the State law to see if the City can issue such bonds but the overhead costs for them are great. Responding to questions from Ms. Ehrman and Ms. Wooten, Mr. Wong said the infrastructure in the Riverfront Research Park will be funded by the tax increment district; however, expenses, such as the expansion of a fire station, might have to be funded by the General Fund. He said the revenues from annexations balance the operating expenses but they do not fund capital e MINUTES--Eugene City Council September 15, 1986 Page 4 expenses. Mr. Gleason said the council guidelines indicate that a vote in March 1987 on a serial levy will be considered to fund the Police, Fire and e Emergency Services Redeployment Plan. C. Discussion/Additional Direction Mayor Obie suggested the councilors comment on the possibility of decreasing the projected increase in the Cityls expenses. Mr. Hansen said he supports decreasing the projected increase. He said the City's taxes are not the largest part of the bill that taxpayers receive but he does not think citizens will approve increasing City taxes. Mr. Miller and Ms. Ehrman agreed with him. Ms. Ehrman said the voters might approve specific projects, however. Mr. Boles said the specific projects should be described exactly for the voters. He suggested scientific polls be commissioned to see if the voters wi 11 approve specific projects. He said the research should be done before the council decides about submitting the projects to the voters. Ms. Schue pointed out the financing of improvements to Mahlon Sweet Airport had not been discussed during the evening. Mayor Obie said the council has increased user fees recently.. He said he is concerned about the increasing costs of operating the City. Mr. Wong responded that the City cannot control the increasing costs such as binding arbitration settlements. In addition, the council has added some services to the budget such as the fi re preventi on program. Mr. Gleason sa i d the projected deficits are mostly the result of losing Federal Revenue Sharing funds. He said many cities charge for such things as business licenses and have higher fees than Eugene has. e Mr. Miller wondered if churches, school districts, State offices, and other such organizations could be charged for the police and fire protection the City provides. Mr. Gleason said such a charge for servi ces woul d be controversial and probably would provide only about $150,000 annually. He emphasized that the expected deficit is about $3 million. Mr. Pape' said the Lane County 0 & C Fund has money in it. He wondered if Lane County officials could be persuaded to transfer some of it to the City to pay for things the City does for the County. Several councilors responded that the Urban Services Policy Committee is working on such a transfer. Mayor Obie suggested Budget Committee members review the work of the Urban Services Policy Committee. Mr. Boles said capital projects increase future operating costs. He thanked the councilors for not approving capital projects when operating funds for them are not identified. He said it is difficult to differentiate between replacement of the infrastructure and the purchase of new assets and the distinction should be made in the budget. He said voters are more apt to approve replacements than purchases of new things that will increase operating costs. He said the council will have to approve new sources of revenue even though such decisions are difficult. e MINUTES--Eugene City Council September 15, 1986 Page 5 Ms. Wooten expressed concern about IInickel and dimell increases in revenue. She said the council faces the same financial problems each year. e Mayor Obie pointed out that Eugene's tax rate has increased substantially. He said higher tax rates may pressure the voters into approvi ng the tax limitation measures on the November ballot. Mr. Miller suggested the council discuss its problems with State legislators. Mayor Obie suggested the councilors also listen to the legislators' problems. Several councilors reviewed past attempts to discuss City problems with State legislators. They suggested the council concentrate on legislative candidates. Answering a question from Ms. Bascom, Mayor Obie said the City.s Federal lobbyists are working on approval of an airport boarding tax. Mr. Short said Budget Committee members and councilors should continue to work with legislators and encourage efforts to increase revenue bases. He said it probably will become increasingly difficult to hold wage agreements to 3 percent, the November ballot measures increase social services and constrain revenue bases, and people do not know what the results of the Tax Reform Act will be. He said the Budget Committee should focus on cutting services this year. Ms. Wooten said she is not interested in cutting services. She is interested in increasing the City's revenues. Mr. Boles urged the councilors to seek additional sources of revenue for the e City. Mr. Gleason summarized by saying the City's financial condition is not hopeless. The forecasts i ndi cate future problems but solutions will be sought. He said cities cannot rely on the State and Federal governments any longer. Mayor Obie recessed the meeting at 8:15 p.m. to September 17, 1986. ;~ M cheal Gleas City Manager (Recorded by Betty Lou Rarick) mnccse15 e MINUTES--Eugene City Council September 15, 1986 Page 6