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HomeMy WebLinkAbout04/23/1992 Meeting e e e M I NUT E S Eugene City Council McNutt Room--City Hall April 23, 1992 5:30 p.m. PRESENT: Shawn Boles, Ruth Bascom, Debra Ehrman, Bobby Green, Paul Nicholson, Randy MacDonald, Kaye Robinette. ABSENT: Roger Rutan. I. WORK SESSION: EUGENE DECISIONS--DEVELOPMENT OF DETAILED STRATEGIES Tony Mounts, Eugene Decisions Project staff, explained the revenue package for Strategy B. He said that a property tax for public safety and fire expansion has been added, as well as a personal/corporate income tax for affordable housing and human services. The percentage for entertainment tax is uncer- tain, as is its relationship to the library expansion and information systems. He added that the council had discussed a ten-year sunset on the property tax and a seven-year sunset on the entertainment tax. Mike Gleason, City Manager, distributed the criteria for developing Strategy C, which balances the $8 million shortfall through service reductions and eliminations only. The criteria follow the service priorities set forth in the Financial Management Goals and Policies. Mr. Gleason said that critical life safety services have the highest priority. He said that mandated services would be reduced to the legal minimum, such as citizen involvement in the planning program. A sustainable minimum service level would be estab- lished for parks maintenance. In response to a question from Mr. Boles, Mr. Gleason said that citizen involvement would be kept at the minimum level legally required. He added that this reduction would occur program by program, not across-the-board. Mr. Boles pointed out that the council members will most likely view the "core service levels" differently from the way the public does, with respect to Public Safety and Administrative Services. He said that the council should adjust services that have a large service impact but a low impact monetarily. In response to a question from Mr. MacDonald, Mr. Mounts said that the corpo- rate/personal income tax would cover the cost of affordable housing services. In response to a question from Ms. Bascom, Mr. Mounts said that library costs covered by the entertainment tax would reflect only the costs of enhancing the library. Mr. Mounts distributed information on Strategies A, B, and C, and on the corporate/personal income tax. As indicated in the packet, the funding target for Strategy A was $8,000,000. Service changes totaled $3,478,000. The MINUTES--Eugene City Council 5:30 p.m. April 23, 1992 Page 1 e e e packet included details of the adjustments council has made over the past week. Regarding corporate and personal income taxes, Mr. Mounts said that the first schedule demonstrates results of these taxes in increments of 5 percent and .05 percent, respectively. He said that approximately 7.5 percent of the total base against the total personal income tax is business-related. Mr. Mounts said that the Department of Revenue bases its charges on the number of returns the City generates, not the amount of revenue that it collects. Mr. Mounts explained the figures in the handout which represent revenues required to balance Strategy A. He said that if the council wishes to achieve a 50/50 split between personal income tax and corporate income tax, a .10 percent tax on personal income and a 1.5 percent tax on corporate income would be necessary. Mr. Nicholson expressed hesitance about overburdening poorer members of the community. The council briefly discussed the possibility of allowing a personal income exemption, so that not all personal income would be taxed. As requested by Mr. Nicholson, Glen Svendsen from the Eugene Decisions project team provided figures which revealed that a tax of .25 percent on the portion of personal income over $10,000, accompanied by a 1.5-percent corporate income tax, would result in a similar 50/50 split. Mr. Nicholson moved, seconded by Ms. Ehrman, to approve a personal income of .25 percent tax on the portion of an individual's income over $10,000 and a corporate income tax of 1.5 percent. In response to a question from Ms. Ehrman, Mr. Boles said that there are approximately 4,400 businesses in Eugene. Mr. MacDonald wondered whether staff had based its analyses and suggestions on existing programs in other communities. He said that the corporate tax rate could be reduced to 1.3 percent. Mr. Mounts agreed, but cautioned against reducing it at this point, since the figures are estimates. Mr. Robinette felt that the suggested percentages were adequate starting points. Mr. Nicholson reiterated his concern that recommendations emerging from the Eugene Decisions process may shift more financial burdens on to those in the community who already cannot afford many City services. Ms. Ehrman shared his concern, and supported the concept of allowing a the suggested personal income tax exemption. Ms. Bascom wondered how the City has allowed corporate representatives to provide input. Staff agreed to provide a summary of the citizen/interested party participation process, which would include a summary of methods and results of the tabloid. Mr. Boles requested an impact statement from the Department of Revenue regarding administration costs of implementing the personal/corporate income tax. The motion passed, 6:1 (Mr. Green opposed). The council directed its attention to the revenues required to balance Strategy B. MINUTES--Eugene City Council 5:30 p.m. Apri 1 23, 1992 Page 2 e e e Mayor Miller moved, seconded by Mr. Boles, to approve a .15- percent personal income tax and a 2-percent corporate income tax, thus achieving nearly a SO/50 split. Mr. Nicholson said that this concept is simple and would be easy to present to the public. Mr. Boles said that the total corporate income is $150 million. Mr. Mounts added that the total personal income is $2.9 billion. He said that figure includes wages, salary, and other income. The council briefly dis- cussed the fairness of this tax strategy. It was noted that these are not actions to be taken, but suggestions to be presented to the public. The motion passed, S:2 (Ms. Bascom and Mr. Green opposed). Regarding public safety, Mr. Mounts said that staff has suggested two serial levies: a $1.4 million capital levy for ten years, and a $2.75 million operating levy for three to five years. The latter includes $.5 million for fire redeployment, and initially $1.7 million for community police services. He said that the programs would be phased in, over the five-year period, and the proposed levy would be sufficient to cover the needs for those two programs for a five-year period. After five years, another five-year serial levy would be required. In response to a question from Mayor Miller, Mr. Mounts said that the primary risks involve maintaining the bond obligations while being faced with possible layoffs and service reductions. Mr. Robinette pointed out that the projected costs will increase after the fifth year. Mr. Mounts said that the entire program will be implemented in phases. Mr. Robinette expressed concern about whether the two serial levies would fund the program for the entire ten-year period. Mr. Boles said that if the sunset constraint were removed, staff should be able to craft a sustainable package. Mr. Mounts said that if the entire amount were levied through the tax base, sustainability would still not be guaranteed. Mr. Nicholson expressed concern about the amount that taxes would be raised. Mr. Gleason said that the tax percentage will not be known until the results of the Eugene Decisions process are clearer. Mr. Nicholson expressed concern that property owners may end up paying more taxes than if Ballot Measure S had not passed. The council agreed that if the programs cannot be sustained over a ten-year period, either the funding mechanism or the program must be changed. Mr. MacDonald moved, seconded by Mr. Nicholson, to direct staff to generate a package based on a GO bond to fund fire station construction. In response to a question from Mr. Boles, Mr. Gleason said that a bond is usually 20 years. Mr. Wong added that the property tax levy for General Obligation debt service is decreasing. He said that it is currently approxi- mately $.57 per $1 of assessed value, and in three years, will be reduced to $.25 (solely for the Hult Center bond). Mr. Wong said that a bond could be structured whereby only the interest was paid during the early year of debt repayment. Mr. Boles pointed out that the voters may only approve one package. He said that capital and operating budget should be linked. Mayor Miller said that MINUTES--Eugene City Council 5:30 p.m. April 23, 1992 Page 3 e the council should not approve a capital project unless an operating budget mechanism is generated, and vice versa. The motion passed, 5:2 (Mr. Boles and Mr. Nicholson opposed). Mr. MacDonald moved, seconded by Mr. Nicholson, to meet the fiscal needs of the operating component of the package through a tax base increase. e Mr. Wong said that the council would be asking the voters for the total tax base desired for next year. Ms. Ehrman said that she did not support a property tax increase. Mr. Nicholson said that the City should receive a reasonable share of the property tax. He wondered if a specific amount could be determined by the circumstances at the time. Mr. Wong said that the council must determine the amount the City needs prior to imposing the tax. Mr. Boles reiterated his concern about the difference between the capital for fire services versus that for police services. He requested that the council reconsider its previous vote, in light of the possibility that the operating budget portion may pass, but the capital budget portion may not, or vice versa. Mr. Nicholson shared Mr. Boles' concern. Mr. MacDonald pointed out that it is standard budgetary procedure to create a capital and an operating budget. Mr. Robinette said that fire and police services are public safety issues, and should not be considered separate issues. Mr. MacDonald said that the City has discussed fire redeployment with the County and that State laws require coordination of the City and County on this issue. He added that half of the population of lane County resides in Eugene, and that the City must participate more actively in County decisions. He agreed with Mr. Robinette's view that fire and police issues should be viewed together as public safety issues. Mr. Nicholson said that he was opposed to increasing property taxes. The motion passed, 4:3 (Mr. Green, Ms. Ehrman, Mr. Nicholson opposed). e Regarding library enhancements, Mr. Mounts said that the council direction was to fund the enhancements with a two-percent restaurant and entertainment tax, with a sunset after a specified period. It is assumed that the tax would be levied for a minimum of 10 years, that a bonded debt of 10 years for construc- tion would amount to $2.2 million, that the marginal operating costs for the main library, one branch, and information system is $1.177 million, and that taxes for the marginal operating costs would be collected from year one. Mr. Green said that he does not support this proposal because his constituents are interested in a branch located in their neighborhood, not enhancing the main branch. Mr. Boles wondered why library enhancements could not be funded by a small bond or be self-funded. Mr. Gleason said that the City does not have $14 million (construction costs for the first year) on reserve not already marked for other purposes. Mr. Boles said that if a five-percent tax was imposed and dedicated to library construction, the City would own the library in three years. He wondered if the City could automate the debt service management of mini-bonds. Mr. Wong said that the City could use a standard system, or manage it itself. Mr. MINUTES--Eugene City Council 5:30 p.m. April 23, 1992 Page 4 e Nicholson said that imposing a two-percent restaurant and entertainment tax would be nearly adequate to cover library enhancement costs. He said that this proposal is a small tax and would be easy to present to the public. Ms. Bascom preferred a three-percent tax. Mr. Boles moved, seconded by Ms. Ehrman, to approve a five- percent restaurant and entertainment tax for library enhance- ments for three years and drop to a two-percent tax for seven years. In response to a comment from Ms. Ehrman, Mr. Gleason said that operating costs must be included in overall costs. Mr. Nicholson said that the citizens will not approve of the extra taxes. The motion failed 4:3 (Mr. Ehrman, Mr. Boles, Mr. Green in favor). Ms. Bascom moved, seconded by Mr. Boles, to approve a three- percent restaurant and entertainment tax for 10 years, with a sunset clause and the additional funding being allocated to park maintenance. Mr. Robinette amended the motion to eliminate the park mainte- nance clause and add that taxes would be reduced, if possible. Ms. Bascom accepted the amendment. The amended motion passed, 5:2 (Mr. Nicholson and Mr. MacDonald opposed). e Mr. Gleason summarized the draft strategies for Option C. He said that this option assumes that all regulation systems will be moved to fire and life safety, including regulations regarding planning, building inspection, and fire codes; and facilities will be reduced to sustainable minimum maintenance levels with programming accomplished in another way. Development-related services have been eliminated. Mr. Gleason said that services that fall into categories 4 and 5 of the Financial Management Goals and Policies were eliminated. He added that affordable housing and specialized recreation were exceptions and were not eliminated because the council has expressed a desire to target senior citizens and special populations. In response to a question from Mr. Boles, Mr. Gleason said that "minimum maintenance of the City's assets" refers to the sustainable service guidelines set by the council. He added that the phrase applies to parks maintenance. Mr. Boles said that service level 2 states that fixed assets will be main- tained and replaced so as to optimize their life. He said that Strategy C reflects a shift in that policy. However, there is no comparable shift in service level 3. Ms. Bellamy noted that the total figure savings represents a reduction of $733,231 in City administrative costs. Ms. Bascom left the meeting (7:50). Mr. MacDonald said that this option represents a valid first analYSis of what the minimal sustainable level of services would be. Mr. Gleason verified that all the services eliminated received a rating of four or five in the Financial e MINUTES--Eugene City Council 5:30 p.m. April 23, 1992 Page 5 e e e Management Goals and Policies. Mr. Boles expressed a concern that Strategy C must still comply with the criteria of sustainability over time. In response to a question from Mr. Ehrman, Mr. Wong said that 10 percent of the General Fund employees represents approximately 100 to 150 people. In response to a question from Mr. Nicholson, Mr. Wong said that the figures represent no forecasts or projections, as directed by the council. Mr. Green stated that although services may be eliminated from General Fund support, other entities may take over that responsibility. Regarding the Bach Festival and Summer Theatre, Ms. Bellamy said that these services would be contracted out. Mr. Gleason added that this represents a $600,000 savings. Mr. Gleason said that it may be helpful for staff to generate a presentation for the public which depicts Strategies A, B, and C, and summarizes the differences between them and the current level of services. The council briefly discussed the fact that Strategy C is a valid option and may be required. It was noted that it reflects a significant departure from the way services are currently delivered and requires critical examination. The council also discussed the possibility that the public would not believe this is a valid option and may regard it as a "scare tactic." Members agreed that this option must be clearly presented. Mr. Robinette moved, seconded by Mayor Miller, to adopt the draft version of Strategy C, with the underlying assumption that staff will continue their in-depth analyses, and with the understanding that the City Council may need to adjust the strategy after reviewing the analysis. Mr. Green expressed a desire that the council define the "core services" and that the council discuss wages of City employees in the near future. The motion passed unanimously 6:0. Mr. Boles moved, seconded by Mr. Robinette, to present options A, B, and C to the community. The motion passed unanimously, 6:0. The meeting adjourned at 8:30 p.m. R~~ Micheal Gleason, City Manager (Recorded by Kathy Varner) cc53023.092 "" MINUTES--Eugene City Council 5:30 p.m. April 23, 1992 Page 6