Loading...
HomeMy WebLinkAbout04/11/1984 Meeting (2) M I NUT E S - Eugene City Council Work Session McNutt Room--City Hall April 11, 1984 5:55 p.m. COUNCILORS PRESENT: Cynthia Wooten, John Ball (from 6:18), Richard Hansen, Freeman Holmer, Joyce Nichols (until 7:14), Emily Schue, Betty Smith (until 8:00), Mayor Gus Keller. COUNCILORS ABSENT: Brian Obie Revenue Worksession of the Eugene City Council of the City of Eugene, Oregon, was called to order by His Honor Mayor Gus Keller. I. INTRODUCTION e City Manager Micheal Gleason introduced the topic and reviewed the meeting agenda. He stated that the goal of staff was to review the forecasts and the assumptions, adding that the final budget would result from the best guess of the council and staff. He explained that the forecasts were based on the budget previously presented to the City Council. Any suggestions on specific figures from the council will be recalculated into the forecast and presented to the council at a later date. Mr. Gleason said he hoped that the council will accept the six-year forecasting methodology for the future. He stated that he would address service restorations after the council agreed on the assumptions. II. FINANCIAL FORECAST AND ASSUMPTIONS Finance Director Warren Wong, referring to a financial revenue chart, stated that staff had incorporated the revised restoration schedule after reviewing the original schedule developed by the Financial Planning Committee in January 1983. Having reviewed the restoration schedule, he stated that the restora- tion amount was reduced to $2.7 million from the $2.9 million of the previous year and $.5 million from the current year. Factoring the new restoration amount into the forecast, he said an equal restoration of $900,000 was assumed for each year beginning in FY86. The forecast will project a deficit ranging from $2.1 to $3.2 million between FY86 and FY90. Mr. Wong stated that he will review the 19 key revenue and expenditure assumptions which drive approximately 95 percent of the forecast. He stated that he will explain the staff methodology and assumptions and the council can then incorporate its own drivers into the forecast. In response to a question, Mr. Wong stated that the difference in not restoring services would be approximately $1 million in FY86, $800,000 in FY87, and approximately $0 in FY88, assuming the 5 percent cost of living increase and the six percent property tax increase. Mr. Gleason added that this also assumed no increased capital or employment and 40 percent - MINUTES--Eugene City Council April 11, 1984 Page 1 e e - restoration. He in the forecast. long stated that 40 FTE. recommended adopting the service restoration budget outlined In response to a question, Director of Staff Services Gary this restoration would mean an increase of approximately Mr. Wong then began his review of the 19 assumptions as outlined in his April 6, 1984, memorandum to the City Council. The following statements reflect the discussion held in relation to the 19 assumptions. A. froperty Taxes--Current Mr. Wong stated that the figures presented were the best estimate of the assessor prior to the February collections and assumed a collection rate increasing to 88 percent as of FY90. Mr. Gleason added that any future annexations to the City will be a net wash. In response to a question, Mr. Gleason stated that speeding up the collection process would require a change in State law. He reviewed the levy process; he added that he felt the people would not vote to pay their taxes prior to when the State levies its rates. The councilors discussed the options of changing the penalty process to address those individuals who do not pay their taxes and moving the tax collection date from November to October. Another suggestion raised was changing the City's fiscal year to coincide with that of the Federal govern- ment. Mayor Keller stated that any return to the previous lifestyle of people moving every seven years would force individuals to pay their taxes. Mr. Wong stated that staff was currently working with the 8S-percent collection rate, adding that delinquent taxes were increasing significantly. It was the consensus of the council to adopt the rate as outlined. B. froperty Taxes--Prior Years Mr. Wong stated that the collection rate was averaging 38 percent, with staff expecting the rate to increase to 45 percent by FY90. He said that staff usually saw delinquent taxes being paid off by one-third each year under good economic conditions. In response to a question, Mr. Wong explained that the 15 percent rate of the current levy going delinquent each year would result in a total of delinquent taxes averaging one-third. Mr. Gleason added that this assumed a payment of approximately 85 percent of the current taxes and one- third of the delinquent taxes. He stated that property assessments were currently stable. Consensus was reached on the proposed rates. Mr. Ball entered the meeting at this time. C. In-lieu-of Taxes--EWEB Trojan/Electric Mr. Wong stated that the proposed rates assumed a rate increase and a growth factor in terms of consumption. Mr. Gleason stated that the proposal did not resolve the outstanding Trojan issue. In response to a question, Mr. Wong stated that the rates listed were based on the price increase per unit and the growth factor. Mr. Gleason stated that the growth rates had not been as high as expected. While Ms. Wooten said the need to use Trojan was lower than expected, Mr. Gleason added that not using Plants 1 and 2 might place the utilities in a deficit position. Ms. Wooten felt the figures were optimistic given other factors. Mr. Holmer suggested a rate of one or two percent above the inflation MINUTES--Eugene City Council April 11, 1984 Page 2 e e - rate. Ms. Wooten suggested obtaining advice with the Power Council and BPA. Mr. Gleason stated it would be hard to factor down the Power Council northwest area projection figures to the Eugene area. In regard to the Trojan issue, Mr. Gleason stated that the tax law required that a municipality running the utility must distribute any benefit to its owners as a minimum payment of three percent to reduce the property tax. He said the major issue was the amount of the gross receipts; he said the auditors did not see the Trojan contract as a separate issue. He stressed the need for a process by which to approach the issue. In response to a question, Mr. Long stated that the figure involved was approximately $1.5 million per year. The councilors and staff then began a discussion on EWEB, its charter, and the payback of taxes from the utility. Mr. Gleason stressed the need for negotia- tion of the issue, warning the council of the possible legal and political problems involved. Mayor Keller stated that the City Council would become involved in the issue if EWEB deviated from the goal of resolving the issue in the near future as agreed upon several years ago. It was suggested that Mayor Keller contact the chair of the EWEB board to duscuss the auditors' statement, the general situation, and the options available to the council. Ms. Wooten asked staff to present a report on the jurisdictional authority of the City Council over EWEB. Mayor Keller added that the report should include a review of the EWEB charter. Mr. Gleason briefly reviewed the authority of the council over EWEB. Ms. Wooten asked to see the original ordinance covering the EWEB operation. Mr. Gleason stated that the City did not have a clear relationship with EWEB although it was operating under a City charter which gave EWEB the responsibility to manage the utility. Mayor Keller stressed the need for the issue to be addressed publicly and well-defined. Mr. Gleason stated that it could be a three- to five-year agenda for the City in redesigning its relation- ship with EWEB but the winners would be the property owners and the rate payers. D. Franchise Tax Mr. Wong stated that the tax was assuming an increase based on increases in consumption and prices. Mr. Gleason stated that the water utility was not included in the assumptions. Ms. Wooten stated that most cities have a water revenue, thereby decreasing the property taxes. In regard to Schedule 1.1, Mr. Holmer asked why the business licenses and permits were scheduled for a three percent increase when inflation was at six percent. Mr. Wong responded that staff had taken a conservative approach on this issue. Ms. Wooten stated that the City was trying to eliminate some of the business licenses. Mr. Gleason acknowledged that the City has been slow to keep the permit fees at the cost of the regulation. Ms. Wooten said Terri Vanderpool had reported that the City was attempting to deregulate the system. Mr. Gleason stated that building fee increases were not included in the budget; he said staff was preparing a report for the council to associate the cost of the system and the coordinated permit counter. Ms. Smith recommended putting the system in place. Mr. Gleason said the system will cost approximately $200,000 due to the space required. He said the system could be financed from the capital side of the budget. MINUTES--Eugene City Council April 11, 1984 Page 3 - e - E. Federal Revenue Sharing Mr. Wong said the City was receiving approximately $3 million each year but the amount would be reduced by $300,000 due to the inclusion of the State Property Tax Relief Program as part of the taxing effort. He assumed the Federal Revenue Sharing would remain at $2.7 million and that the program will be continued. He added that there was some discussion in Congress about restricting the use of these funds for high unemployment areas. Mr. Holmer stated that the City should attempt to operate without going to new taxes. He felt that the City should be more generous in estimating that Congress might recognize inflation in the Federal Revenue Sharing. He said a four- to five-percent inflation rate would result in an increase of $105,000 to $125,000. Ms. Wooten said she assumed that the program will be re-enacted without the inflationary increases. Mr. Gleason stated that there were no inflationary increases in Federal Revenue Sharing for the past six years. Ms. Nichols left the meeting at this time. The meeting was recessed at 7:15 and reconvened at 7:20 F. State Shared Revenues G. State Cigarette Tax Mr. Wong stated that the FY84-85 estimates were from the League of Oregon Cities. He stated that the projections called for an increase of two percent per year for both items. Mr. Holmer stated that an increase of four percent would mean an additional $13,430. Mr. Gleason stated that the City was being optimistic in these projected rates of two percent. Mr. Holmer, refer- ring to Schedule 1.1, stated that the "Otherll intergovernmental revenues were projected at approximately $246,800 from FY84 through FY90. He felt the City could be more generous in estimating this revenue area. Mr. Gleason explained that the grants included in this section were budgeted only after received; grants cannot be forecasted. Mr. Holmer stated that this was a resource area which should be assumed; he suggested that the average for the past four years should be used for budget calculations. He did not believe that the resource, as part of the General Fund, could be deleted. He said he would agree to take the figures out of both the revenue and expenditure sides. Mr. Wong stated that the FY85 figure should be used as a benchmark. In response to a question, he stated that staff would attempt to segregate the various funds. Mr. Gleason explained that people were hired and fired based on avail- able grant funding. Ms. Schue felt that attempting to identify the source of funding in each of the departments was unnecessary. Mr. Gleason stated that any revenue would also have to be shown on the expenditure side as well. Mr. Hansen suggested that the average grants over the past five years be used as the State Shared Revenue figure. It was decided to retain the State Cigarette Tax figure as recommended by staff. MINUTES--Eugene City Council April 11, 1984 Page 4 - H. Fire Charges Mr. Wong stated that the contracts were renewed every year. Mr. Gleason stated that the Fire contracts were a positive cash flow element of the budget, explaining that they were paying for some of the fixed overhead costs. Mr. Holmer suggested that they should be increased at five percent along with other costs. Mr. Gleason stated that the major contract was Santa Clara/River Road. He explained that the City would lose that contract if the area were annexed; property owners would have to pay for the service. Mr. Gleason stated that the rate may decrease. It was decided to increase the staff rate to five percent. I. Court Fines & Forfeitures Mr. Holmer, referring to SChedule 1.1, asked why the funding of Parking Tickets was held constant at $183,000 from FY85 to FY90. Bob Deis of the Finance Department stated that the Court Administrator had suggested that no increase be added due to the loss of one position. He thought that the figure was based on the lack of increase in the rates and the number of parking spaces. Mr. Holmer suggested that the rate be increased to five percent. Mr. Whitlow stated that the rate might be influenced by the availablity of police officers and workload. Mr. Gleason agreed that the rate could be increased; he felt the council would expect to see the necessary changes in the ordinances. He explained that the increased prices would be incorporated after the present supply of parking tickets was exhausted. It was agreed to raise the rate to five percent. e Mr. Holmer asked if any calculation had been made by staff on the interest earned by the tax money collected by Lane County. Mr. Gleason stated that no calculation had been made. J. Interfund Transfer from State Tax Street Fund Mr. Wong explained that $1.965 million was being transferred to the fund in FY85 because the City was spending its beginning capital on several at-risk projects. He explained that any funds received beyond FY85 would be trans- ferred out of the account. Mr. Wong stated that the projection was based on discussions with the State on the expected gasoline volume sales. Mr. Gleason stated that the Street Fund had a beginning balance which the City reduced this year to handle some at-risk projects. He said in the future the City would be spending an amount equal to what was expected from the State. K. Interfund Transfer from Other Funds Mr. Wong reviewed the methodology and assumptions, stating that staff was projecting a five-percent growth rate. There were no objections to the projected rate. e MINUTES--Eugene City Council April 11, 1984 Page 5 e e e L. Services & Materials Mr. Wong reviewed the methodology and assumptions, stating that staff was assuming a five-percent inflation rate based on the FY85 budget. Mr. Gleason clarified that utilities were not included in this item. M. Salaries & Wages Mr. Wong stated that staff was assuming a five-percent cost-of-living adjust- ment. He said there was a declining factor for merit increases because staff believed that there would be a greater turnover in personnel as the economy improved. He did not perceive such turnover to be occurring at the present time. Mr. Holmer suggested that Fringe Benefits be discussed at this time due to its relationship with Salaries & Wages. N. Fringe Benefits Mr. Wong stated that the figures listed were a composite average of the four bargaining units. He reviewed the items included with these benefits, stating that the only variable over which the City had any control was medical insur- ance. Mr. Holmer, while he believed that the City should be fair with the employees, suggested that any personnel expenses should be limited to a rate equal to the inflation rate. He said the City should negotiate with the employees that the inflation rate should equal the total package of direct salary and fringe benefits increases. He added that the City would have to increase the rate in other areas to balance the salary and fringe benefits increases if it did not limit such increases. Ms. Wooten was concerned with setting any limitation, stating that the City Council did not have the auth- ority to negotiate with the employees. Mr. Holmer responded that the council could provide a framework for bargaining and that it should give some direc- tion to staff. Mr. Long stated that the City used to tie wages and salaries to the Consumer Price Index (CPI) but difficulties occurred when the CPI rose to 10 percent and above. He expected the five- to six-percent rate to be conservative. He added that health costs were not part of the CPI but were still an obligation of the City. Mr. Gleason stated that the wage settlement with the bargaining units included the fringe load but other costs would be included when the contract was finally signed. He said he was usually tied to the market line in the settlements. While he would like to achieve the suggested limitation, he did not believe it would be possible. In response to a question, Mr. Gleason said he could not assume that any settlement would be reached based on the inflation rate. He recognized that negotiations were based on the market but many factors were involved. Ms. Smith left the meeting at this time. The council continued its discussion of limiting salary increases. Ms. Schue said the City must expect to pay the fringe packet and believed that the projec- tions were based on actual costs. Mr. Holmer stated that he did not want to disturb the fringes but only wanted to place a cap on the total salary and MINUTES--Eugene City Council April 11, 1984 Page 6 e e - fringes. Ms. Schue commented that health costs were out of the control of the City. Ms. Wooten stated that she was not willing to support such methodology. Mr. Long said statutory criteria were included in setting wages and fringes which were more important than revenue forecasts. He said the forecast could not be used to set limitations on wages and fringe benefits. Mayor Keller understood Mr. Holmer to suggest a framework under which the City could negotiate. He stressed that staff should not discount Mr. Holmer's philosophy. Mr. Gleason said he understood the discussion to suggest that the system used to predict revenue should be used to predict wages as well. While he thought it was a good theory, he commented that it was overly optimistic, stating that wages have historically outstripped costs. He explained that the City Council has adopted a system of wages based on the market. He said going below the market price on wages would cause problems. He felt the increased productivity of the City should be reflected in the wage scale. He stressed that wages could not automatically be tied to services and materials. In response to a question, he said salaries were included in the total projection by assuming there would be no increase in employment. He believed that this will cause problems in the future. In response to a suggestion of having a five percent increase in the budget to allow an increase in wages if productivity increased, Mr. Gleason said this assumed that the work would stay the same. He said he was most concerned with the productivity side of the budget, stating that he did not have the capital resources or staff to perform the analysis needed. O. Non-Departmental--Non-Contingency Mr. Wong stated that the projected rate of 1.3 percent for the operating budget was based on an average of the rates from the past several years. He said the figure might be low, but it was sufficient. Mr. Holmer stated that $340,000 could be saved each year if the City backed out the $1 million in the fund. Mr. Gleason explained that the $340,000 was a one-time savings because the amount was carried forward each year. Ms. Wooten explained that the contingency was rolled over each year. Mr. Wong said that only part of the contingency was spent each year, the remaining falling into the beginning working capital each year. Mr. Holmer stated that staff had provided him with a printout of Non-Departmental Detail which the other councilors did not have. Mr. Wong stated that the contingency was based on 1.3 percent of the operating budget. The City could save approximately $27,000 if it backed out of the restorations. Mr. Holmer felt that the City could live with the present revenues, stating again that the City could save up to $340,000 if the con- tingency were reduced. Mr. Hansen requested that staff study the issue and provide a report on the issues and totals for consideration by the council. P. Non-Departmental--Transfer to FRS Capital Projects Q. Non-Departmental--Transfer to EPAC Operations (Hult Center) Mr. Wong reviewed the methodology and assumptions for both items. Ms. Wooten stated that she could not consider the Hult Center as part of the budget without another source of revenue. She added that she did not agree with the particular MINUTES--Eugene City Council April 11, 1984 Page 7 e e - assumptions made for the Transfer to EPAC Operations. Mr. Ball commented that an expenditure should not be included in the budget unless revenue was available to cover it. Ms. Schue stated that she wanted to go to the voters on the Hult Center issue and to develop a new form of revenue. Mr. Hansen said he was unwilling to go to the voters for anything in which the Hult Center was high- lighted. Mr. Gleason stated that the General Fund needed additional capital, partially due to the Hult Center deficit. Ms. Schue said the public should be told that the City had budget and capital problems beyond the Hult Center. Ms. Wooten stated that the tax package proposed was a compromise to address this issue. Mr. Holmer said it was likely that Proposition 3 would be on the fall ballot; therefore it was inappropriate to ask the voters for approval of another tax. Ms. Wooten stressed that the City needed to restore some of the items previously cut from the budget and that the City needed to develop a new revenue source to provide basic services and restore those items. She said the City will have to reorder its priorities if the voters turn down a single new revenue source. Mr. Hansen stated that he must be convinced that the entire package rather than a single item was needed. Ms. Wooten stated that she supported the tax package to protect the General Fund and other existing services. Mr. Hansen felt that proposing three revenue resources multiplied the chances of being turned down by the voters. He suggested that a wage tax be studied. Several comments were made against the wage tax based on the fact that a percentage of the population did not work for wages. Mayor Keller urged that the sales tax should be supported, stating that Proposition 3 will win if it is placed on the ballot. He said other jurisdictions would adopt the sales tax if Eugene and Springfield adopted it first. He said no perfect tax existed, but he felt that a county-wide income tax would be a big deterrent to attracting new development to the area. R. Non-Departmental--Transfer to Fleet Fund Mr. Wong reviewed the methodology and assumptions. He explained that the City could spend $1 million each year to play catch-up in replacing vehicles. S. Non-Departmental--Unappropriated Ending Fund Balance Mr. Wong reviewed the item, stating that staff had arbitrarily picked $500,000 as the increase per year. He stated that the figures quoted were lower than what was really needed. Mr. Holmer suggested that using the same percentages for FY86 and beyond as was used for FY85 would provide a savings of $225,000 each year and would increase the amount to be earned on Tax Anticipation Notes. Mr. Gleason warned that the City could lose on TANs, especially if the City lost its AA bond rating. He said he was willing to study TANs as a strategy. Mr. Gleason stated that he did not disagree with Mr. Holmerls comments, stating that the difference being argued in the budget was small and that staff did not have the solutions. He said 35 positions in the City were "at risk.1I He felt that the City may be creating a bigger problem for itself. Mayor Keller agreed that the difference being discussed in the budget was $1 million, but the real issue was how finite the council wished to be on the budget. Ms. Wooten stated that the key issue was the council IS position on service restorations. She appreciated the efforts and work of Mr. Wong. MINUTES--Eugene City Council April 11, 1984 Page 8 e e - Mayor Keller suggested scheduling a meeting during the next week to deal primarily with service restorations. The meeting was scheduled for 5:30 p.m. on April 26. The meeting was adjourned at 8:57 p.m. (Recorded by Thom Strunk) TS:ky/CM23b1 MINUTES--Eugene City Council April 11, 1984 Page 9