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HomeMy WebLinkAbout05/23/1984 Meeting M I NUT E S e Eugene City Council McNutt Room, City Hall May 23, 1984 11:45 a.m. COUNCILORS PRESENT: Brian Obie, John Ball, Freeman Holmer, Joyce Nichols, Emily Schue, and Betty Smith (from 12:00). COUNCILORS ABSENT: Dick Hansen and Cynthia Wooten. Revenue work session of the City Council of the City of Eugene, Oregon, was called to order by Councilor Obie in the absence of His Honor Mayor Gus Keller. e I. CONTINUED DISCUSSION CONCERNING REVENUES (background material distributed) City Manager Micheal Gleason introduced the agenda item. Addressing the issue of timing, he stated that the expected income flow would be lost if the council missed the September window, adding that staff was already dealing with some cut issues in FY1986. He stated that different assumptions made the financial gap or variance exist between the proposals of staff and Mr. Holmer. He stated that some agreement on the financial forecast must be made by the council, stating that an assumed wage increase of five percent would mean a deficit of $700,000 to $1 million unless beginning cash balances were used. He stated that performing the first year of the three-year add-back proposal would mean another $1 million. In response to a question, Mr. Gleason ex- plained that the deficit under Mr. Holmer's proposed forecast would be approx- imately $400,000. In response to Ms. Schue's request for clarification, Finance Director Warren Wong reviewed the Summary of Estimated Deficits/Surpluses as estimated by staff, the council, and Mr. Holmer as listed in his April 20 memorandum to the council. He explained that the staff version was based on its projections and assumptions, the council version being a modification of the staff version incorporating the council's changes to the revenue and expenditure assumptions, and Mr. Holmer's version was based on his assumptions on the forecast. He . stated that the council had suggested that any new revenue measure be placed on the ballot. Mr. Wong then reviewed the 1984 election dates as listed in his May 21 memorandum to the City Council. He stated that staff will start in mid-July to plan for the 1985 budget and will perform a revised projection for 1986 which will be available in mid-September. He stated that the council will have to direct staff on how to deal with any deficits for that year by either service reductions or using the cash balances. Mr. Gleason suggested that service reductions or cash adjustments be performed over an 18-month rather than a 12-month basis so that the effect would not be so abrupt in dealing with staff and program reductions. He explained that these measures e MINUTES--Eugene City Council May 23, 1984 Page 1 e e- e could be performed from either the capital or the operating side of the budget. He added that the resource system was $400,000 to $800,000 short, not including any add-backs. Ms. Smith entered the meeting at this time. Mr. Obie questioned what the impact of a sales tax or "Son of 3" would be. Mr. Gleason responded that he did not believe the public would willingly support any measure that would so drastically affect the schools and other City systems. He said that a risk was involved with increasing any tax. He said he could handle a cash-flow issue in a November or March election differ- ently than not addressing the issue at all. He stressed that the City has been hamstrung by the State agenda for the past three years. Ms. Smith asked if staff's recommendation to move forward as expressed during the previous work session still held true. Mr. Gleason said it did and that staff was considering the effect of an election on the City. Mr. Obie com- mented that the council needed to develop a decision process. Ms. Smith agreed that basic decisions must be made. She said the council was aware of the distinctions among the various proposals and that it must decide what it desired and then develop its own proposals. Mr. Holmer said that property taxes had increased over the past five years and that he found it difficult to add any additional tax burden just to fund programs of lower priority than those in the current budget. He agreed with Ms. Schue, stating that the questions involved were whether to restore programs and whether to accept the forecast schedule. While he recognized that person- nel must be compensated at the CPI rate, Mr. Holmer stated that to project or budget salary increases at five percent with the add-ons, increments, and promotions would create expectations that he could not support. With the exi stence of "Son of 3, II he suggested that the counc1 1 not make any fi rm decisions on additional taxes unless it was prepared to support program restoration. Addressing the issue of the City infrastructure, Mr. Holmer said that staff had projected increasing expenditures starting in 1987. He sug- gested that the council wait until after the November election to obtain a better picture of the City's economic future. Ms. Schue said she would be willing to establish dates and related issues after she had determined the council's basic philosophy. She said the City has known that revenues will not cover the desired expenditure levels. She said the council must communicate to the public the financial constraints faced by the City. Ms. Nichols agreed that the public must be informed, adding that the council had not yet reviewed the pOSSible proposals to be included in the November election. She said the publiC must be informed of the status of the City budget, the projections chosen by the council, and the level of services to be expected. She suggested that a full disclosure of alternative revenue sources be performed, followed by a public hearing to obtain public opinion. Then the council can make a decision on a plan to be presented to the voters. She stressed that the City should not allow the state-wide election to make decisions for the residents of Eugene. In response to a question on the possible timing for this program, Ms. Nichols said the council should perform a review of the proposals by the end of the summer MINUTES--Eugene City Council May 23, 1984 Page 2 e e - so that public opinion could be obtained during September and October before the election. She agreed with the idea that any cuts take place over an 18-month period. Mr. Ball asked if the council was going to cut services or increase revenues. He said he felt that the process questions were an evasion of that primary question. Mr. Obie stressed that unity among the councilors was necessary for any action to be successful. Mr. Holmer questioned Mr. Ball's statement, stating that no one wanted to curtail the current level of services. He said that no cuts were necessary within the revenues presently available if the six- percent annual increase in the property tax was used and fees were adjusted. In response to a question, he stated that he would be against increasing the revenues. Mr. Ball said it must be determined which councilors were against increasing revenues. Mr. Obie said a question of degree existed whether to increase revenues by $500,000 or $3 million. He commented that the council should determine whether to adopt the three-year restoration plan. Ms. Nichols temporarily left the meeting at this time. Referring to the list of service restorations as listed in the April 6 letter from the City Manager to the City Council, Mr. Obie asked if the council wished to support those restorations and whether the public should be given the opportunity to provide input on the restorations. Addressing the issue of Public Safety, Ms. Schue stated that the general public was not concerned with the closure of fire stations as long as a truck responded to a fire. She said the actual situation and the effect of such closures have not been explained to the public. Mr. Obie said he was in favor of putting that decision to the public. Ms. Smith asked if the public should be allowed to identify which services should be restored. Mr. Obie responded that the public should be informed of what the funds would provide. Mr. Holmer commented that the council had already decided that restoring the fire stations was a low pri- ority, stating that it was taking a calculated risk while attempting to improve the City's capability to handle fire protection. He added that planning for a successor station was included in the 1985 CIP as part of a long-range plan. Ms. Schue said the City was not implementing its long-range plan; she said that such cuts were counter-productive. Mr. Ball said the voters were not-being given a choice; he felt that the public would fund the fire stations above some items chosen by the council. He said that the council asking the public for additional funding for fire protection after it had already decjded on the budget would give the public a false picture of the present situation. Ms. Nichols returned to the meeting at this time. Ms. Schue stated that the City was funding the most critical services on a year-to-year basis and not implementing long-range plans. She said she did not agree with putting the critical items out to the voters. Mr. Holmer stated that every effort must be made to provide services without adding new taxes, stating that the City cannot base its decisions on possible resources that might not materialize. He said he recognized the difficulties of making assumptions for the future. MINUTES--Eugene City Council May 23, 1984 Page 3 e e - Mr. Gleason cautioned the council that the projections were not precise enough on which to base decisions. He said he felt that the City was spending more than it was taking in; therefore the City will either have to cut services or use its cash reserves. Mr. Obie stated that some choices did exist based on the assumption of a five-percent increase per year on fringe benefits and wages. Mr. Gleason stressed that the council must choose its future and then act on its decision. He said staff was suggesting a decision that was more active on the resource side of the budget for operations and capital, thus maintaining the beginning cash balances. In response to a question on service restorations, Mr. Ball stated that he would support restoration of the Fire and Police prevention and public edu- cation programs and reinstating the Libary hours, programs, and book materials to FY1981 levels. Ms. Smith, referring to the April 6 letter from the City Manager, stated that she had some reservations about restoring additional services. While she sup- ported obtaining voter input on the levels of services desired, she stressed that the council must be cautious in restoring any services. In response to a question by Mr. Obie, she said she would vote against service restorations. Ms. Nichols said she would not presently support any service restorations. She said the council discussion begged the question of whether the current local economic situation was short- or long-range. She stated that the council would have a better picture of the situation in January based on the presidential election and federal programs. She felt that some issues might be corrected if the City could maintain its current levels for a while longer. While she said she supported the Library, she said that the City did not have the current resources to perform those restorations. Ms. Schue said she disagreed with Ms. Nichols' analysis, stating that the City has maintained its level of funding by raising property taxes. She said the situation was becoming worse because the City realized that it could not continue to raise taxes. She also disagreed that a better economy would solve Eugene's current economic problems. Ms. Nichols said she recognized that a better national economy would not solve all of Eugene's problems, but that as people felt more secure they would be more supportive of City programs. Ms. Schue responded that the City could not continue to increase property taxes even if people felt more secure. Ms. Nichols questioned how the council could assume public support of any additional tax if the public was not in favor of increased property taxes. Ms. Schue stated that some questions must be asked in this regard. In regard to restorations, Ms. Schue said she was flexible, stating that she would like to see some service restorations such as those identified by Mr. Ball. She said the question must be put to the public. Mr. Ball said he would buy Ms. Nichols' argument on the economy. He agreed that the voters should have the opportunitY to state what levels of services they wanted. He suggested that the council wait a year to study what changes have occurred. Mr. Holmer said he would vote in favor of service restorations at an appropriate time, especially those that could be provided by revenues without new taxes. Mr. Ball said he would be willing to pursue specifically targeted revenues for capital infrastructure. MINUTES--Eugene City Council May 23, 1984 Page 4 - Mr. Obie said he understood the consensus of the council was that restoration was not an issue. In response to a question, Mr. Gleason clarified that the topic of discussion was the 1986 budget. Ms. Schue said she would like to see some restoration but was not prepared to place the City at risk in doing so. Mr. Ball said he had already stated those restoration items that he would support, adding that they should be dealt with in the budgetary process. e On the issue of salaries and fringe benefits, Mr. Obie said he tended to accept Mr. Holmer's argument based on his own experiences in the private sector, although he might be overlooking some factors. Mr. Gleason stated that the wage structure of the United States led the Wage and Price Index and the City's wage structure reflected that factor. He said the only way to keep City wages in line with the inflation base would be to reduce the employment base. He stressed that salaries were 80 percent of the budget and to miss the projection by one percent would mean more than $800,000. Mr. Holmer stated that a substantial advantage was given to the employees of one public agency in the form of a fringe benefit on which taxes were not required, increasing the net compensation for the employees. He stated that setting a framework for negotiation would strengthen the relationship of staff dealing with other employees. Mr. Gleason said he agreed with the concept of compensation being the entire issue. He said the City was in a respectable position in the market, lying in the mid-point of the Oregon public sector. He cautioned that missing the salary projection would have drastic results. While the employees settled for no salary increase this year, he said the market will drive the City. Mr. Gleason said the differences were little but comprised 85 percent of the budget. He said that the budget did not include a growth figure for employment and that this factor would be a problem in the future. He said he would be more willing to follow the budget guidelines set if he could obtain some tolerance to prioritize budget items from the council. In the area of salaries and fringe benefits, Mr. Ball, Ms. Smith, Ms. Nichols, Ms. Schue, and Mr. Obie agreed to support Mr. Gleason's recommendations, while Mr. Holmer supported his own recommendation. With regard to General Contingency, Mr. Obie stated that staff was recommend- ing a ratio of 1.3 percent while Mr. Holmer stated that 1 percent was adequate. In response to a question, Mr. Wong said that one percent represented approxi- mately $300,000. He stated that $500,000 was in the beginning balance for next year's budget. He added that the General Contingency Fund had not been totally used in previous years but it will be wiped out during the next supplemental budget. Mr. Gleason stressed the necessity of holding the line. Ms. Smith, Ms. Nichols, Ms. Schue, and Mr. Obie agreed with the staff recom- mendation, while Mr. Holmer supported a ratio of one percent. Regarding Unappropriated Ending Fund Balance (UEFB), Mr. Wong explained that it was the cash-flow requirement for the General Fund. He said that staff was recommending an increase of $500,000 each year. He explained that Mr. Holmer had taken the percentage for FY1985 and used it to calculate the ratio for succeeding years, resulting in an annual increase of approximately $300,000. He said that $5.8 million was in the budget just passed but staff felt that e MINUTES--Eugene City Council May 23, 1984 Page 5 e e - the amount should be $7.1 million. He said that the only safety net if the General Contingency Fund was depleted would be the General Fund services. In response to a question, Mr.. Holmer reviewed his proposal which he calculated would save $200,000 each year. He said the percentage ratio for the FY1985 budget was adequate for succeeding years. In response to a question, Mr. Holmer stated that he had first assumed no new taxes and then made decisions to stay within current revenues. Mr. Obie said he supported Mr. Holmer's proposal. Ms. Schue and Ms. Nichols stated that they would support the staff recommendation. Ms. Smith said she would support Mr. Holmer's proposal for one year, with a review to take place at that time. She asked if the City would end up paying more in interest if it had to borrow to resolve any cash-flow problems without an adequate fund balance. Mr. Wong stated that this situation will occur during the next year, it being necessary for the City to borrow the difference between the $5.8 million and $7.1 million in tax anticipation notes. Based on available information, he said this could mean a net add to the budget of $100,000. Ms. Smith said she wanted the situation reviewed on a yearly basis. Mr. Ball said he would support the staff recommendation on a one-year basis, stating that he wanted to study the effect of the tax anticipation notes. Mr. Obie stated that no consensus had been reached on this issue. With regard to Federal Revenue Sharing, Ms. Schue said she did not want to speculate on whether the entitlements would remain constant; therefore, she said she would support the staff recommendation. Mr. Holmer said that staff apparently felt that the Presidency and Congress would remain unchanged; he said he was guessing at the outcome of the November elections. Ms. Smith, Ms. Nichols and Mr. Obie said they would support the staff recommendation. Mr. Obie said that a general consensus had been reached in support of the staff version. Mr. Gleason said he did not want the discussion characterized as the City Manager versus Mr. Holmer. However, he said the debate was important. He stated that the deficit for the next year would be between $400,000 and $500,000. He asked what direction the council wished to choose for the future. While Mr. Holmer was suggesting using the beginning cash balance, Mr. Gleason urged that the cash balance be carried forward. Mr. Obie said the council had made several assumptions on the revenue sources and that some decisions would have to be made on the differences in the future. He said that the council should look at revenue sources other than taxation if the deficit came within the $400,000 to $500,000 range. Ms. Smith temporarily left the meeting at this time. In response to a question on the capital side of the budget, Mr. Wong stated that he had been working with Bill Guenzler of Public Works. He explained that the FY1985 budget has a backlog of approximately $4 million, with street overlays to cost approximately $800,000. Referring to the list of capital projects as listed in the May 21, 1984, memorandum on the CIP for 1984/85 through 1993/94, Mr. Wong stated that the City was looking at a funding liability of $500,000 to $1 million each year on non-street projects. He stated that staff could provide the council with a list of those streets that should have been paved. Mr. Obie said he would like to see a list of those MINUTES--Eueene City Council May 21, 1984 Paee 6 e e e streets that required paving. Mr. Ball said he did not want to get the council involved in studying individual street projects. Mr. Obie asked for suggestions on reaching the total dollar figure for this area. Mr. Ball said he felt confident with the accuracy of the figures. Ms. Smith returned to the meeting at this time. Mr. Holmer said the figures listed appeared appropriate. Mr. Obie stated that a general consensus had been reached on this item. With regard to non-street-related projects, Ms. Schue said staff had stated that a backlog of approximately $4 million existed before starting the accrual. Mr. Ball said it was clear that politics will not allow the funding of capital priorities without a specifically targeted revenue source. Mr. Gleason noted that the Library and Airport were not included in the list of non-street- related capital projects. Mr. Ball asked whether the council was willing to identify and pass a targeted revenue source for capital projects. He referred to the City of Springfield actions in this regard. Ms. Schue commented that Springfield had held a hearing to inform the public of the situation, something which Eugene has not done. Mr. Obie suggested that the council study capital projects at a later date. Mr. Ball commented that the council should also study what other jurisdictions are doing in this area. Mr. Ball commented that the council had passed a method for funding the Hult Center and other deficits in a funding program including other revenue sources. He stated that the resolution was that the council would come back to the General Fund if other revenue sources were not found. He stressed the neces- sity of addressing the issue. The meeting was adjourned at 1:10 p.m. Resp~ctf .. ?? .olJ~ . ~ Micheal D. Gleason City Manager (Recorded by Thom Strunk) TS: vr/CM7 a8 MINUTES--Eugene City Council May 23, 1984 Page 7