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HomeMy WebLinkAbout05/20/1985 Meeting - /.OJ .~ . I .a~- '~ M I NUT E S Eugene City Council Dinner/Work Session McNutt Room--City Hall May 20, 1985 5:30 p.m. COUNCILORS PRESENT: Cynthia Wooten, Richard Hansen, Emily Schue, Freeman Holmer, Debra Ehrman, Ruth Bascom, Jeff Miller, Roger Ru ta n . Mayor Brian Obie called the work session to order. He said the council would not be asked to make decisions. The session was to be informative. I. ALTERNATIVE CAPITAL FINANCING City Manager Micheal Gleason said the staff report would include information about the 20-year costs of financing the Eugene Agenda capital projects and operations, financing general capital projects in light of -the loss of Federal Revenue Sharing funds, and financing infrastructure maintenance costs which the City has been deferring. He said there was no way to summarize the infor- mation. The staff would discuss the assumptions and the results of each action. Mr. Gleason said the Metro Area General Plan and specialized studies indicate the growth and density the community will achieve. They are the basis for the Capital Improvement Program (CIP) the council adopts. Each year the council adopts a capital budget which implements the first year of the ten-year CIP and an operating budget. Each year a six-year Financial Plan is completed. In the past, the council has not had a revenue plan to forecast how the CIP and the operating budget will be funded. The staff would present information which could be used to develop a revenue plan for the next 20 years. Finance Director Warren Wong distributed copies of flip-chart materials titled IIRevenue Worksession," a report titled "Analysis of Selected Revenue Alterna- tives for the City of Eugene" from Chastain Economic Consulting, and a report titled "Eugene Agenda Capital Financing" to the councilors. He said.Chastain Economic Consulting had access to the State financial forecasting system. Discussing the material in the "Revenue Worksession," Mr. Wong reviewed basic tax evaluation criteria which are used to examine taxes. The criteria are productivity, neutrality, equity, efficiency, capacity, stability, and politi- cal acceptability. He reviewed the assumptions, alternative assumptions, and projected yields for a personal income tax, a corporate income tax, and an employee-paid payroll tax. MINUTES--Eugene City Council Work Session May 20, 1985 Page 1 e e . Answering questions from councilors, Mr. Wong said a personal income tax would be figured on a person's adjusted gross income (AGI) as reported on the Oregon income tax form. It could be collected from both residents and non-residents who work within the city. Employers could be empowered to withhold the tax on salaries or wages. Other income would be taxed when a personal income tax form is filed. A corporate income tax could be levied on an attorney who lives in Pleasant Hill and has an office in Eugene. The Oregon Department of Revenue will collect City income taxes, an employee payroll tax, or a corpo- rate income tax for a fee. It probably would be the most cost-efficient way to collect the tax. Answering other questions, Mr. Wong said a surcharge on the Oregon State in- come tax would be the easiest tax to administer. A surcharge could not be collected from non-residents. The exclusion of non-residents would reduce the projected yields by about 30 percent. Responding to questions, Mr. Wong said bank employees would pay the employee payroll tax. The yields for the income taxes were based on a flat one percent of AGI. A City tax could be deducted from State and Federal taxes. Responding to a question from Ms. Wooten, Mr. Wong said a 3t-a-gallon gas tax would generate about $1.5 million a year for Eugene. Assistant City Manager Dave Whitlow reviewed the assumptions and the capital requirements for the five Eugene Agenda projects, the library, and a swimming pool/community center. Responding to questions from councilors, Mr. Whitlow said the City's tax increment revenues will be higher if the voters do not approve a State sales tax. In that case, the general fund would be paid back sooner. In the downtown revitalization, it was assumed the City would buy land for $34 a square foot and sell it to a developer for $6 a square foot. There is no existing agreement about the price. Mr. Gleason noted that land with structures would be assembled and sold without structures. Mr. Whitlow said improvements in the Downtown Plan that are not included in the downtown revitalization and for which there is no known funding source total about $1 million. State funds, Federal funds, systems development charges, and assessments constitute the available $29.7 million for transportation improve- ments. Very few State transportation funds are assured. Answering questions, Ms. Wooten said the construction of a community center was included with the swimming pool in order to take advantage of the opportu- nity to replace Lincoln School. Mr. Whitlow said a new library in a new structure at 8th and High would permit the existing library to be converted to a swimming pool and community center. The new library would cost $9 million, and the conversion of the existing library to a pool would cost $4.2 million. Expansion of the existing library would cost about the same as a new library at 8th and High because much maintenance has been postponed on the existing library. A 100-space parking structure was included in the cost because the expansion will take some of the existing parking. An expansion of the exis- ting building will have to be constructed while the library operates, which complicates the construction. About 10 additional full-time people will be needed to staff the library if it is doubled in size. MINUTES--Eugene City Council Work Session May 20, 1985 Page 2 e e e Mr. Whitlow reviewed page by page the "Eugene Agenda Capital Financing" report. The report included the five projects in the Eugene Agenda, the library expansion, and a swimming pool/community center. The report indicated phased bonding for the downtown revitalization, the Riverfront Science Park, the library expansion, and a swimming pool. In addition to the cost of finan- cing the Eugene Agenda over a 20-year period, the report incorporated the costs of financing the unfunded balance of the CIP, the costs of the general capital projects currently funded by Federal Revenue Sharing receipts, the projected deficit in maintaining the current service system, and the costs of the projected workload increase due to growth in the City's population. Huge fluctuations in annual costs were avoided by assuming that some projects will be paid for by bonding and some projects will be paid for by cash and by ini- tiating projects in different years. Responding to questions, Mr. Whitlow said the proposed financing of the air- port expansion includes principal and interest. The net cost of the River- front Science Park is $6.6 million, but interest will bring the total cost to $10 million. The estimate for the debt service for the Riverfront Science Park is less than the estimate for the debt service for the library because it is assumed that some cash from a new income stream (income tax or payroll tax) will be used for the Riverfront Park. The library debt service is typical for a 20-year general obligation bond. State law indicates tax increment funds must be used in the district. The funds cannot be put into the general fund. Mr. Holmer noted that the library expansion will be constructed within a short time and the Riverfront Science Park will be constructed over 15 or 20 years. Mr. Whitlow said the net annual cost for the Eugene Agenda plus the library expansion and a swimming pool/community center is highest in the second year at $5.1 million and lowest in the 20th year at $508,000. The total cost would be $52 million, which includes both principal and interest. Mr. Wong noted that some bonds will not be redeemed until after the 20th year. Mr. Whitlow said the City will lose Federal Revenue Sharing funds of $2.7 mil- lion in 1986-87. The estimate of those funds was increased 5 percent each year and added to the Eugene Agenda costs, as was the unfunded part of the CIP. The addition of the unfunded part of the CIP would maintain the City's assets much better than they are maintained now. Mr. Whitlow cautioned the councilors that the operational and maintenance figures were only estimates. Answering questions, Mr. Whitlow said the second year operational and mainten- ance costs for the Riverfront Science Park increased greatly because of the need for consultants. He will check to see what other costs were included in the estimate. The Riverfront Science Park will not increase the proceeds from the City's property tax because the tax base will not be increased. The esti- mates of the general fund service system indicate that there will be no gen- eral fund deficit in the sixth year. Responding to questions about a new revenue, Mr. Whitlow said a one-percent income tax would generate enough money to fund the Eugene Agenda, the library expansion, a swimming pool/community center, the Federal Revenue Sharing fund MINUTES--Eugene City Council Work Session May 20, 1985 Page 3 e e e loss, and the unfunded part of the CIP. The property tax would continue to generate a general fund. The only part of the general fund included in the report was the forecasted deficit. Mr. Gleason reported that Eugene has the lowest per capita operating cost of all the major cities on the west coast. The property tax in Eugene is high because the City has relied almost exclusively on the property tax. Mr. Rutan said the capital financing analysis was excellent. He would like to see a comparison of the proposed Eugene taxes to taxes in Portland, a few other Oregon cities, and a few midwestern cities. Mr. Miller wondered what the effect of the proposed Eugene taxes would be on business activity. Mr. Gleason replied that expansion of the airport is con- sidered essential by almost everyone. The development of the Riverfront Sci- ence Park by the City and the University of Oregon is a very logical strategy. Several councilors asked the staff to format the information in a different way for future consideration. Ms. Wooten wanted all the information for each project on one page and a page for each project. Mayor Obie suggested the data for all the Eugene Agenda projects be presented together and that the data for the library, the swimming pool, the Federal Revenue Sharing Funds, and the unfunded part of the CIP then be added to the Agenda projects one by one. Mr. Hansen asked the staff to present background information on tax increment districts that indicates when the tax increment financing will end in the Riverfront Science Park. He wondered when the area will be taxed and suppor- ted just like the rest of the city. Mr. Miller asked for the estimated revenue from an income tax that would be a percentage of the State or Federal income tax. In that case, protection for low-income people is built in. He also wanted an estimate of revenues from a surcharge on Oregon State income tax. Mr. Holmer noted that the Capital Financing Report indicated that 80 percent of the capital cost requirements would be spent in the first five years. He suggested that some of the projects be started later. Noting that it was sug- gested the projects be funded by an income tax, he said he preferred using income tax funds for operating expenses. Ms. Bascom said an income tax might conflict with the land use plans. Answering questions from councilors, Mr. Wong discussed estimated growth in the income tax and the property tax. Mr. Whitlow said the City.s dependency on the property tax could be reduced if another source of revenue is found. II. SUGGESTED PUBLIC INFORMATION PROGRAM Ms. Bellamy discussed a public information program designed to generate com- munication between the public and the councilors so that the councilors will MINUTES--Eugene City Council Work Session May 20, 1985 Page 4 e e e have lots of information before they make a decision about what to put on a ballot. The program consisted of town hall meetings led by a councilor and scheduled from July 15 to August 5. Several councilors discussed the program. Ms. Ehrman said the council should make basic decisions before the staff prepared material for the town hall meetings. Mayor Obie said the council will not make a final decision about a November vote until after the vote on the sales tax in September. Mr. Hansen said it is difficult to get people to meetings in July and August. He felt the program should be initiated in the fall. Mr. Rutan and Ms. Schue agreed with him. Ms. Schue said that people believe the council is "trying to put something over" when meetings are hel d in the summer. Mr. Holmer suggested that the program be titled "Alternative Revenue Sources and Capital Projects Funding." Mayor Obie said the council will meet on June 3 to make preliminary conclu- sions about a revenue source and the scope of future actions. The meeting was adjourned at 7:24 p.m. ~~: Mi cheal Gl eason City Manager (Recorded by Betty Lou Rarick) BLR:vr/1732C MINUTES--Eugene City Council Work Session May 20, 1985 Page 5