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HomeMy WebLinkAbout08/13/1992 Meeting -- e M I NUT E S Eugene City Council Work Session McNutt Room--City Hall August 13, 1992 5:30 p.m. COUNCILORS PRESENT: Shawn Boles, Ruth Bascom, Roger Rutan, Debra Ehrman, Bobby Green, Randy MacDonald, Paul Nicholson, Kaye Robi nette. The work session of the Eugene City Council was called to order by His Honor Mayor Jeff Miller. 1. WORK SESSION: EUGENE DECISIONS John O'Connor of the City Manager's Office facilitated the meeting. The Council Committee on Eugene Decisions presented a process proposal to assist the council in strategy construction. Mr. Boles outlined the proposal. The council examined an example strategy developed by the committee using the proposed process. e The council discussed the process and agreed to accept the proposal. The council discussed the enhancement component of Affordable Housing. Responding to a question from Ms. Bascom questioning the cost attached to the component, Mr. Boles said that the cost had been increased by $200,000 to fund systems development charges (SDCs) for low-income housing. He said that the figure was a rough estimate. Mr. MacDonald clarified that, rather than waiving the fees and reducing the systems development fund target by a like amount, the proposal was to replace those fees and maintain the fund. Mr. Boles concurred. Mr. Nicholson maintained that, due to the way the original shortfall was calculated, the figure should be reduced to $300,000. Ms. Bascom referred to the popularity of the component in surveys and suggest- ed that were the figure to be reduced, other enhancement costs should be reduced. Mr. Nicholson moved, seconded by Mr. Boles, to reduce the cost of the component to $300,000. Mr. Rutan recalled that the council had made a commitment to recognize the cost of low-income development on the community. He believed that the City e MINUTES--City Council Work Session August 13, 1992 Page 1 5:30 p.m. - e had done a reasonable job in estimating the costs of the systems development charge associated with low-income housing and favored retaining the $500,000 figure. Ms. Ehrman asked if the $200,000 was an annual cost. Mr. Boles clarified that the $300,000 figure was not to build housing, but rather to leverage about $1 million in private funds. He indicated that the $200,000 figure was based upon $1 million in total construction costs. Mr. Nicholson maintained that in order to adjust the figure for affordable housing to $500,000, the shortfall would need to be reduced by $200,000. Tony Mounts of the Administrative Services Department said that the System Develop~ ment Fund is a separate fund and assumptions about the fund were not included in the financial forecast. The General Fund has contributed little to the fund as the policy to subsidize low-income SDCs had been adopted recently. There was a brief discussion about the relationship of the Systems Development Fund to the General Fund. Mr. Nicholson asked how the revenue from SDCs was recognized in the shortfall. Mr. Boles stressed that the fund was not a General Fund. Mr. Mounts said that when a developer pays for a permit with an SDC, the permit money goes to one fund and the SDC goes to another fund. Ms. Bascom asked if the money to offset the property tax exemption and SDC subsidy would come from the Contingency Fund in the current fiscal year. Mr. Boles said yes. Ms. Bascom suggested that the component cost be established at $500,000 until the council has more experience with such requests. The motion failed, 8:0. e Mr. Boles moved, seconded by Mr. Robinette, to place the component at a cost of $500,000 into the enhancements category. Ms. Ehrman moved, seconded by Ms. Bascom, that those items categorized as enhancements in the past continue to be catego- rized as enhancements, and to eliminate the shortfall and consider it part of the base. The motion passed 5:4; Mr. Miller broke the tie by voting yes. Ms. Ehrman moved, seconded by Mr. MacDonald, that all compo- nents be considered part of the base. The motion failed, 3:5. Mr. Boles moved, seconded by Mr. Robinette, to add community policing at a cost of $2.15 million into the base. Ms. Ehrman objected to the addition of the component to the base due to its low ranking in community surveys. Mr. Nicholson responded that community policing is not well-understood in the community. He said that the council should use its own judgment due to its understanding of the issue. Ms. Bascom pointed out that public safety was a protected category in the first round of public input. She maintained that the community objected to large increases to the area of public safety while the council "gutted" the e MINUTES--City Council Work Session August 13, 1992 Page 2 5:30 p.m. e City's park systems, cultural services, and planning capacity. Mr. Miller said that he believed the issue was whether basic public safety services would be part of the property tax base. He agreed with Mr. Nicholson's assessment of the community's understanding of the component. The motion passed, 6:2. Mr. MacDonald moved, seconded by Mr. Boles, to change the word "base" to "category I" and the word "enhancements" to "category 2." Mr. Green asked what the terms referred to. Mr. MacDonald said that he wanted to maintain the process model but remove the rhetorical weight of the two words. He suggested "category I" and 'category 2" could be useful value- neutral terms. Mr. Green said that the terminology would not remove the recognized connotations from the categories. Mr. Nicholson said that the council was suffering from the consequences of not deciding the real issue: did it wish to dedicate specific revenues to specific services? The motion passed, 5:4 (Mr. Miller casting the tie-breaking vote) . Mr. Robinette moved, seconded by Mr. MacDonald, to place the fire operations and fire station construction enhancement components into Category 1. The motion passed, 8:0. e Ms. Ehrman moved, seconded by Mr. Boles, to put $500,000 for the human services enhancement component into Category 1. The motion failed, 5:3. The council briefly discussed what failure of the motion entailed, and agreed that failure to include the component in Category 1 meant that it was moved to Category 2. Mr. Robinette moved, seconded by Mr. Green, to place the library enhancement component into Category 2. The motion passed, 5:3. Mr. Boles said that the council needed to discuss funding sources for the six components identified for inclusion in the strategy. Mr. Rutan cautioned the council that it needed to be realistic in considering the proposed enhancements due to his belief that the City did not have and could not procure the necessary revenues to support the enhancements. Mr. Rutan said he was looking forward to the revenue discussion and was interested in the views of other councilors. Mr. Boles said that Mr. Rutan's concerns were reflective of some members of the community and suggested the council review the cost savings and enhance- e MINUTES--City Council Work Session August 13, 1992 Page 3 5:30 p.m. ~- e ments identified thus far in the process. Ms. Bascom raised the cost associ- ated with community policing and requested council discussion of the accuracy of the figure. Mr. Robinette said that the $2.15 million identified for the program was for the first year of operation. Mr. Miller added that the Public Safety Advisory Committee (PSAC) had indicated that the cost was the minimum amount needed. Ms. Bascom said there was a philosophical disagreement about the way a community is made more safe: through additional police services, or through the types of amenities such as those cut by the council: human services and a library. Ms. Bascom said the council is taking the former direction. Mr. Miller pointed out that the component reflected the direction of the council-adopted long-range plan. He said the council needed to act before it was too late. Community policing takes time to implement. Mr. Miller said that the service was not a luxury. Ms. Bascom said the council had made a tentative decision to include the component. She continued to question the component cost. The council discussed revenues. Barb Bellamy of the City Manager's Office distributed a chart entitled "levels of Support for Various Taxes: All Sample Surveys Combined." e Mr. Boles expressed the hope that the council would place the information from the chart in the proper context, and not discuss each revenue option as though it was to be referred by the council to the voters. While he agreed with Mr. Boles, noting the support some options received from the community, Mr. MacDonald pointed out that the voters could launch a referendum and place a tax on the ballot. Mr. Boles moved, seconded by Mr. MacDonald, to fund the fire operations and construction through a general obligation bond. Mr. Nicholson pointed out that general obligation bonds must be referred to the voters. Were the bond to fail, the component would be eliminated. He believed that the component fell into Category 2 rather than Category 1 were that the case. The motion passed, 8:0. Responding to a question from Ms. Ehrman, Mr. Mounts reminded the council that gas tax moneys can be used only for road-related costs. He said that the council had realized $360,000 in savings by moving the street tree program out of the General Fund into the Road Fund, increasing the shortfall in the Road Fund. That shortfall could be addressed through the proposed local increase in the gas tax. e MINUTES--City Council Work Session August 13, 1992 Page 4 5:30 p.m. e Ms. Ehrman moved, seconded by Mr. Boles, to increase the gas tax by two cents to fund the street tree program. Responding to a question from Mr. Rutan, Mr. Mounts confirmed that the local option gas tax would be restricted to the city of Eugene and would realize about $1.14 million each year. That amount would pay for the street tree program as well as the shortfall in the Road Fund. Mr. Rutan said the council needed to consider the implications of a gas tax unique to Eugene. He did not believe the public would understand or appreci- ate its link to the Road Fund. Mr. Miller agreed with Mr. Rutan's remarks, saying that the tax would put the city at a competitive disadvantage with adjoining communities. He suggested that the council recommend a local increase in the gas tax to the City of Springfield and Lane County for further consideration at a metropolitan level. Mr. MacDonald suggested that a one-cent gas tax would not be sufficient to put the city at a competitive disadvantage. Further, he said that the council needed to maintain responsibility for moving the street tree program into the Road Fund. He recommended a one-cent, rather than two-cent, increase. Regarding Mr. Miller's comments about interjurisdictiona1 cooperation, Mr. MacDonald pointed out that Lane County had $50 million in Road Funds and did not need a local option gas tax. He suggested the basic service government approach of Springfield's City Council might preclude metropolitan-level discussion of taxes. e Ms. Bascom said she found Mr. Miller's arguments for interjurisdicational cooperation convincing and urged the council to take that approach. Ms. Ehrman reminded the council that it had received no indication of interest on the part of Lane County or Springfield in efforts to solicit an intergov- ernmental approach to service delivery and anticipated budget shortfalls on a metropolitan basis. She recollected council discussion regarding the link between peripheral development and increasing infrastructure costs and suggested that the gas tax was an appropriate way to support such services. Mr. Robinette indicated his support for a one-cent gas tax. Mr. Boles suggested that revenues realized from a two-cent gas tax could be used to support the low-income program for improvement of substandard streets. He further suggested that the council could implement a one-cent gas tax and seek a second one-cent increase at the metropolitan level in conjunction with Springfield and Lane County. The motion passed, 5:3. The council took a ten-minute recess at 7 p.m. Mr. Robinette moved, seconded by Mr. MacDonald, to fund fire operations ($500,000) with an increase in the property tax of e MINUTES--City Council Work Session August 13, 1992 Page 5 5:30 p.m. e approximately ten cents per $1,000. Mr. MacDonald asked if the ballot measures for the general obligation bond and increase in property tax could be designed so that, were one to fail, the council would not implement the other measure. City Attorney Glenn Klein said yes. Ms. Ehrman said she was opposed to any property tax increase. Mr. Miller said there was a sizeable number of property owners who benefit from, but pay no taxes for, fire protection services. Mr. Miller suggested that those costs could be captured more equitably by a utility tax. Mr. Nicholson called the utility tax cumbersome and said that enhancements in services should be paid for through an income tax only on upper bracket income citizens. Mr. Green said he opposed an increase in property tax. The motion failed, 5:3. Mr. Nicholson moved, seconded by Mr. Rutan, to fund the $2.8 base services shortfall and all enhancements, with the excep- tion of the library, through a combined corporate/personal income tax. e Responding to questions from councilors, Mr. Nicholson said he believed the council should compute the total dollar amount required to fund the package and discuss further the split between the two funding sources. Mr. Boles asked if Mr. Nicholson wanted to split the total dollar value of the base shortfall and enhancements between the two sources, or establish the same percentage rate for both sources. Mr. Nicholson said he supported a tax of approximately .5 percent on both sources. Responding to a question from Mr. Boles, Mr. Mounts said that a .5 percent corporate income tax would raise about $750,000, and a .5 percent personal income tax would raise about $5.8 million. Responding to a question from Ms. Bascom, Mr. Nicholson said that the personal income tax had a low-income cutoff and would be assessed against the upper income bracket only. The cutoff was $17,000 for a family. Mr. Rutan referred the council to the corporate income tax analysis, which he believed indicated that it was logical and reasonable to tax corporations at a higher rate than individuals. He said Mr. Nicholson's proposal put the preponderance of the tax burden on individuals. Mr. Nicholson responded that the State corporate tax rate was lower than the personal income tax rate. However, he indicated he was open to argument regarding the rate, and request- ed that the council commit to the general principle of raising $6.5 million e MINUTES--City Council Work Session August 13, 1992 Page 6 5:30 p.m. e from those sources. Mr. Green asked Mr. Nicholson why his motion did not include the library. Mr. Nicholson said he was amenable to including the entire package in his motion. Mr. Mounts noted that the Department of Revenue had indicated administration of a corporate income tax would cost $300,000 to $350,000. At the rate suggested in the motion, a considerable percentage of the yield would be spent on administration. Mr. Boles suggested that the rate be adjusted to achieve the even split and capture administrative costs. Mr. Green endorsed inclusion of the library in the motion due to its impor- tance to the community. Mr. MacDonald supported inclusion of the library operations in the proposal, but suggested that the council fund library construction with a 20-year general obligation bond. He said that construction costs are capital projects that are generally supported by revenue bonding. That funding mechanism would allow the council to create a challenge for the community to come forward with private sector dollars. Mr. MacDonald said the public sector could provide the rest of the required funding with a mechanism that allows the leverage of private funds and terminates after the construction is complete. Mr. MacDonald suggested that the personal income tax had received little support in comparison to the corporate income tax because of the "tax somebody else" attitude reflected in the survey results. He said he would prefer to e establish a balance in rates between the two revenue sources. Mr. Nicholson said his motion would exclude the $300,000 required to fund the Convention and Visitors Bureau. Mr. Boles indicated his opposition to the motion as stated, adding he would support the motion if it established an equal split in revenue yield from the corporate and personal income tax. Mr. Rutan said that the proposal met the standards of adequate yield, effi- ciency, progressivity, and equity. In addition, there is a precedent for both taxes inside and outside Oregon. He endorsed the direction the proposal reflected. Mr. Miller said his philosophy of general purpose taxes for general purpose government was embodied in the proposal. However, he referred the council to the chart, which he maintained showed low support for a personal income tax and indicated that people preferred a mix of funding sources. He questioned whether two taxes constituted a mix. Mr. Robinette moved, seconded by Mr. Boles, to amend the motion to balance the revenue yield equally between the personal and corporate income taxes. e MINUTES--City Council Work Session August 13, 1992 Page 7 5:30 p.m. e Mr. Nicholson and Mr. Rutan accepted the amendment to the motion. Mr. MacDonald questioned the split's equitability. Ms. Ehrman indicated that she would not support the amendment or the motion as she believed the corporate income tax should raise more money than the personal income tax. While she accepted the argument that the citizens might not understand the equitabi1ity of the personal income tax, Ms. Ehrman believed the council should honor the survey results. Mr. Boles said he supported the amendment, suggesting that the issue was not one of equity of rates but an equitable balance in terms of revenue collected. Responding to Ms. Ehrman's remarks, Mr. Rutan agreed that corporate taxes receive higher levels of support due to the perception that some one else is paying them. In fact, typically the end user pays the tax. He expressed concern about the competitive disadvantage the tax could place on the communi- ty for those companies doing business on both a national and international basis. Mr. Rutan said that such taxes mean the costs of goods and services are directly impacted. The profitability of such corporations has a direct relationship to jobs in the community and, subsequently, the personal income tax. Mr. Nicholson maintained that the community would find his original proposal both equitable and efficient. He said that the amendment was inequitable, placed a disproportionate burden on one portion of the community, and would e put Eugene at a competitive disadvantage with other communities. The amendment to the motion passed, 5:3. Mr. Nicholson amended his motion to include the library in the services to be funded. Mr. Green seconded the amendment to the motion. Mr. MacDonald said he would oppose the amendment due to his belief that the capital costs should be funded through a general obligation bond. Mr. Miller agreed with Mr. MacDonald. He said that the City needed to find a means to leverage private community support for the cost of constructing the library. Mr. Nicholson said that his motion did not preclude establishing a challenge to the private sector for private dollars in support of the library. Mr. Boles and Mr. Rutan agreed. Responding to a comment from Mr. Miller, Mr. Nicholson reiterated that the motion represented a general principle, and the final cost of the library would be established after other sources of funds had been secured. Ms. Ehrman said she would oppose the amendment as it did not reflect the community sentiment expressed in the surveys. She believed that a tie between the library and the two selected taxes was unwise, and ignored the positive e MINUTES--City Council Work Session August 13, 1992 Page 8 5:30 p.m. e input received for other tax sources. The amendment to the motion failed, 4:5 (Mr. Miller casting the tie-breaking vote). Mr. MacDonald moved, seconded by Mr. Nicholson, to amend the motion by funding the library's operational costs with the proposed combination of personal and corporate income taxes. Mr. Boles indicated his opposition to the amendment due to the council's policy to avoid commitment to capital projects without assurance regarding adequate funding for both capital construction costs and operations and maintenance. He did not believe it made sense to separate the operational costs from the construction costs. Ms. Bascom suggested that the council could mount a successful campaign around building construction with the use of the revenue sources previously discussed and private sector dollars. Mr. Boles said he was not interested in mounting such a campaign but rather in coming to a decision following the IS-month Eugene Decisions process. He added that the council should not continue to cast each decision as though it intended to refer the issue to the voters, but rather discuss the merits of the arguments with respect to financing of services. He did not think the council action would discourage private fund-raising. e The motion failed, 5:3. The council voted on the main motion. The motion failed, 5:3. The councilors briefly discussed the rationale for their votes in favor of and in opposition to the motion. Mr. Green, who supported the motion, indicated he wanted to fund the entire shortfall and enhancement package with the proposed mix of revenues. Mr. Rutan said he voted in favor of the motion and supported Mr. Green's position. Ms. Ehrman said that the inclusion of the personal income tax did not keep faith with the public's desires and lessened the council's credibility. Mr. Nicholson said that the council needed to keep in mind the public re- sponse. However, he believed the council needed to consider other data as well. He termed the tax equitable and efficient. Mr. MacDonald said he opposed the motion as he was not convinced of the merit of dividing the revenue yield between the two sources. Additionally, Mr. MacDonald urged the council to consider the probability that the State Legislature would work on a bridge financing mechanism that could include a e MINUTES--City Council Work Session August 13, 1992 Page 9 5:30 p.m. - personal income tax surcharge. Ms. Bascom said she found the revenue split to be fair and believed it would appeal to the public. Mr. Robinette indicated he had opposed the motion due to his concern about the ability of the City to raise the estimated revenues associated with the taxes. Mr. Boles indicated he had supported the motion due his belief that the combination of corporate and personal income taxes was the most equitable means to fund what he considered core services. After brief discussion of the voting breakdown, the council agreed to take another vote on the motion. Mr. Boles restated the original motion, which was to fund the remaining shortfall, community policing, fire operations, afford- able housing, and human services with a mix of personal and corporate income taxes, each source to yield an equal amount to realize the total. Mr. Nicholson called the council's attention to the change in the balance remaining to be funded due to the deletion of the Convention and Visitors Bureau contract. The motion failed, 5:3. The council took a ten-minute recess at 8:10 p.m. e Ms. Bascom moved, seconded by Mr. Rutan, to fund the budget shortfall and all the proposed enhancements, with the exception of the fire station construction, through a combination of corporate and personal income taxes designed to yield equal amounts. Mr. MacDonald reiterated his concern regarding the proposed yield split. Mr. Rutan encouraged the council to avoid writing tax policy at the meeting. He said that the motion was focused on the revenue sources and embodied a general concept that would require further refinement. Mr. Rutan suggested that the council would not be able to develop a specific formula until further research had occurred. Mr. MacDonald moved to amend the motion so that the ratio between the personal and corporate income taxes is based upon the proportion of income. The amendment died for lack of a second. The motion passed, 6:2. Mr. Boles outlined the next steps in the process, which included the need for further discussion of the specific mix of percentages for the corporate and personal income tax, discussion of implementation steps and time lines, and e MINUTES--City Council Work Session August 13, 1992 Page 10 5:30 p.m. e further review and refinement of the entire strategy package. Mr. Rutan suggested that the council consider establishing a revenue task team to develop a proposal that, within a short time frame, addresses the concerns raised by councilors. Mr. Boles anticipated that review of the decisions in the step of the process labeled "Implementation/Time" would set the context for the type of effort suggested by Mr. Rutan. Mr. Boles moved, seconded by Ms. Bascom, to refer a general obligation bond for fire construction to the voters at the March 1993 election. Mr. Miller questioned the timing of the referral. He supported a November referral due to the length of time that it took to construct the facilities and the community need. Mr. Robinette said that the council needed to resolve the issue of how to fund operations prior to constructing a fire station. In addition, Mr. Robinette believed that there will be several revenue measures on the November ballot. Mr. Boles anticipated that further review of the strategy could lead to adjustment of that date. The motion passed unanimously, 8:0. Mr. Boles moved, seconded by Mr. Nicholson, to adopt the proposed mix of corporate and personal income taxes with a ten- year sunset by council ordinance. e Mr. Green said that he supported the motion, but questioned the inclusion of a ten-year sunset. Mr. Boles said he was not in favor of any revenue source that does not require a periodic review and community checkpoint. He said that the sunset provided such a checkpoint, and constituted the extent of the bind the council could put on future councils. Ms. Ehrman said she understood the need for periodic review but questioned the availability of other substitute revenue sources in the future. Further, Ms. Ehrman raised the issue of sustainabi1ity. She said that such a sunset would create a crisis for the organization in ten years. The motion passed, 6:2. The council agreed to revisit the components of the final strategy at its August 17 meeting, and to discuss the implementation process for the strategy. The council briefly discussed the formation of a revenue task force. Mr. Rutan indicated his willingness to serve on such a task force. The council agreed to discuss the task force proposal at its meeting of August 17. Responding to a question from Mr. Green, Mr. Gleason indicated that he would be prepared to discuss the ramifications of the council strategy at the meeting of Wednesday, August 19. e MINUTES--City Council Work Session August 13, 1992 Page 11 5:30 p.m. e Mr. Boles said that the council needed to be clear to the community about the consequences of rejecting any measure referred for a vote. He said that the result would be Strategy C. Mr. Robinette suggested that the Council Committee on Eugene Decisions take on the task of communicating to the community the council's actions thus far in the process. Mr. Miller thanked the Eugene Decisions staff for its work on the process, and commended the contribution made by Mr. Boles as a member of the Council Committee on Eugene Decisions. The meeting adjourned at 8:48 p.m. . (Recorded by Kimberly Young) cc53012.082 e e MINUTES--City Council Work Session August 13, 1992 Page 12 5:30 p.m.