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HomeMy WebLinkAbout100906 CITY OF PORT TOWNSEND CITY COUNCIL MINUTES OF THE WORKSHOP SESSION OF OCTOBER 9, 2006 CALL TO ORDER AND PLEDGE OF ALLEGIANCE The City Council of the City of Port Townsend met in workshop session this ninth day of October 2006, at 6:30 p.m. in the Port Townsend temporary Council Chambers in the Port Townsend Fire Station conference room, Mayor Mark Welch presiding. ROLL CALL Council members present at roll call were Frank Benskin, Laurie Medlicott, Scott Walker and Mark Welch. Michelle Sandoval was excused. Catharine Robinson arrived at 6:35. 8eoff Masci arrived at 6:55 p.m. Staff members present were City Manager David Timmons, City Attorney John Watts, Finance Director Michael Legarsky, Public Works Director Ken Clow, and Legal Assistant Joanna Sanders. CITY MANAGER'S 2007 PRELIMINARY BUDGET City Manager Timmons distributed to Council the preliminary budget reminding that it is a snapshot that would evolve throughout budget discussions. He reviewed the cover memorandum included in the budget that calls for a status quo budget plan and commented that 2007 would be the year to consider future general fund options. Enterprise, utility and capital funds are performing as projected. Council has taken action to raise utility rates and over the years the reserves being built would address deferred maintenance and capital projects. Capital funds are self-limiting depending on the amount of money allocated to fund them and how the projects are progressing. While the City has been successful in many grant programs, the grants will require matching funds so the City allocations would be limited. The priorities in the capital programs reflect Council program priorities outlined in June of 2006 - particularly the objectives for Upper Sims Way and for the Police station relocation. City Hall and Fire Hall capital projects would be finalized and closed out in 2007. Mr. Timmons then reviewed the assumptions in a strategic budget model produced several years ago with a 6-year summary of revenue, expenses and fund balance. He commented that while some areas of the budget look good, in other areas the City would struggle. A decision on fire district annexation would not go into effect until 2008, but in 2007 the City would finalize the transfer of Fire Department assets and personnel. A slow down in the housing market has caused a decrease in permit revenue, which is not expected to change in 2007. There has been a modest growth in retail sales tax, but this is offset when adjusted for inflation. Other issues are that City Council Workshop Meeting Page 1 October 9, 2006 the Library has the highest per capita use in state, Police calls for service are up 30 percent over last year, and Parks and Streets are crumbling. The City has reached the bottom line for general fund services. The City either needs to cut programs or take measures in 2007 to increase sustainable revenues. With the estimated $200,000 reduction in revenue, there would need to be a reduction in Development Services program areas. Under Fire/EMS, the completion of consolidation actions this year would hopefully result in a nearly seamless transition in 2007. The equipment rental audit is complete so the budget includes continuing the initiative to update the vehicles due for replacement. The most dramatic personnel change would be in the Fire/EMS fund where the transfer of personnel in 2007 would adjust the FTE count. The City would also be addressing staffing in DSD, PTTV, and Public Works engineering. Options to reduce costs or adjust revenues and fees would require Council discussion. The Finance and Budget Committee has been reviewing options, but it is time for full Council discussion. Mr. Timmons then reviewed his list of specific department and fund recommendations as written (General Fund, Special Revenues, General Government Debt Service Fund, Capital Project Fund, Enterprise Fund and Trust Fund). The General Fund reserve would not be maintained as a policy goal. There remains a fund balance of $150,000, but the unrestricted balance remains below the Council minimum 5% goal. Because revenue growth is not keeping pace with expenses, there would need to be adjustments prior to 2008. Much of this is beyond our control with pension rates 3 times inflation, health insurance costs are contained but are still twice inflation, and chemicals, concrete, and building materials expenses are going through hyper-inflation. The City has also not budgeted for impacts if Initiative 933 were to pass. Under the Capital Project Fund, Mr. Timmons indicated the Transportation CIP would be a primary focus in 2007 based on funds coming from other sources. Individual projects reflecting Council priorities are the next phases of Upper Sims Way, Water Street improvements, Discovery Road sidewalks. Also scheduled is the completion of the Transportation Functional Plan and then submitting funding requests for the next phases to state and federal representatives. Deferred maintenance would be targeted in 2007 under the Utilities Capital Funds. Sewer planning for Upper Sims Way would also begin in 2007. Stormwater capital budget allocation is under review, primarily due to the DOE Stormwater manual adopted by Council. There would be a recommendation for how to address this added expense to street related improvements. Member Masci arrived at 6:55 p.m. City Council Workshop Meeting Page 2 October 9, 2006 Under the Enterprise Fund and Trust Fund, reserves are being generated so that the City can begin investing in the infrastructure. Updated figures and schedules are in place to allow older vehicles to be replaced with more appropriate vehicles for street and park maintenance. The largest vehicles in the fleet, the fire apparatus, are being transferred out under the consolidation strategy. The information services budget is essentially status quo. During budget deliberations, there would likely be more discussion about additional areas of IT support. The City would be looking at long- term healthcare policies for those still in the Fireman Pension's Fund. Mr. Timmons then reviewed the documented list of items not included in budget affecting levels of service in the areas of police, parks, facilities, street, library, and technology totaling approximately $1.3 million. Several revenue options were presented in the form of user fees, utility taxes, capital funds, and operating fund levy options. The only ones recommended at this time for the 2007 budget are the user fees. Mr. Masci asked if the permit tracking software listed under 2007 User Fees was $180K versus the 15K listed, Mr. Timmons explained it is $60K and would be spread over four years. Mr. Timmons reported that from 1999 to 2006, the CPI was 21 %. The City has not adjusted its current fee schedule to keep up with inflation. If the stormwater user fee were adjusted, it would provide $1 OOK for the stormwater fund and primarily would provide more funds for maintenance and capital improvements. The cable utility franchise fee would raise approximately $60K. Currently, the City does not assess a cable utility tax of 6%. These funds could provide technology upgrades for PTTV as well as City Hall public access capabilities. Mr. Timmons currently explained that the City has a general fund tax of 10% on all public utilities for water, sewer, storm, and garbage. An option is to put an additional 10% tax to be allocated to the street fund, which would provide $550K for the street fund. He reminded that a large part of the City is exempt from property tax, but they are not exempt from utilities tax. Private utilities - electric and telephone - are currently limited to 6% unless the City goes to the taxpayers for more. Many communities are raising this to 10% and then allocating the additional 4% to streets, it would raise an additional $400K. Another idea that would require voter approval is real estate excise tax (REET). The Council enacted this REET in 1992, but did not seek voter approval. The County currently collects the full REET tax and the City could generate an addition $400K with the REET II in place. This has to be used for capital streets, utilities, and parks. Other options reviewed were levy options (library, parks/pool, metropolitan parks district, street, fire, fire district annexation). These would not produce revenue until 2008. Mr. Timmons explained that he did not include banked capacity in any of City Council Workshop Meeting Page 3 October 9, 2006 these options. If Council approved a general levy option, banked capacity would have to be used first. Any approval of a junior taxing district such as a fire or parks district would require the maximum allowed city levy rate to be reduced by the junior taxing district levy amount. Mr. Timmons reminded that these revenue options are listed for Council consideration. The only ones recommended and included in the budget are the user fees. He is also recommending that Council not break up budget discussion into committees, but to address it more comprehensively in full Council discussions. Yet to be provided to Council is a consolidated summary budget. Mr. Masci asked about the possibility of getting the percentage of properties that are exempt from property tax. Mr. Timmons explained this is not available from property valuation. He mentioned there are over 1,000 acres in un-opened right of ways. It might be possible to get estimates based on properties that have recently become exempt. Mr. Walker expressed concern about using the utility tax to fix the streets. He would rather see the motor vehicle excise tax used for this purpose. Mr. Timmons explained that based on formulas, the City only receives about $200K. Ms. Robinson asked where we are in the utility rate increase. Mr. Timmons responded that the cost of service analysis is nearly complete. He explained that the City deferred the additional rate amount until there was more information about the secondary disinfection requirements. Mr. Welch asked to know more about the effect of utility taxes on Port and school districts. Mr. Masci asked about impact to the senior program of a new utility tax. Mr. Timmons indicated Council has the discretion to structure a protected class on the cost of service report. There was further Council discussion about the Fire District levy amount. Mr. Masci explained that a condition of his support of the fire annexation was that the General Fund be reduced by the amount of the fire levy, so the citizens would feel no impact. The additional $125K in transfer cost was not anticipated. Mr. Timmons provided an explanation of general levy rates. Many jurisdictions now list fire, library and parks as discretionary services, because these communities choose to put these services in districts and are not paying them through a general levy. So it was explained to Council that in order to deal with the funding requirements necessary to bring service levels up for streets, one option was to establish a district. City Council Workshop Meeting Page 4 October 9, 2006 Mrs. Medlicott said she believes the public needs an explanation of the breakdown of the dollar. Mr. Masci suggested that there be public forums on levels of service. Mr. Timmons talked about the desire to shift to programmatic review of the budget and what is sustainable. He added that Staff could produce a proposed budget schedule this week. He recommended Council review the budget and then submit questions to staff. SCHEDULE DATE FOR MURPHY APPEAL Council discussed and confirmed this appeal would be set for Wednesday, November 1, 2006 at 6:30 p.m. RECESS Mayor Welch declared a recess at 8:27 p.m. for the purpose of a break. RECONVENE The meeting was reconvened at 8:40 p.m. ADJOURN There being no further business, the meeting was adjourned at 9:00 p.m. Minutes by Joanna Sanders Legal Assistant Attest: ('J .~., ,I, ^ ... ...',.."._ . ;'. t1. / L.' .---- \, //'1 n " ' " ',.J' ><_" c- \. Pamela Kolacy, CMC City Clerk City Council Workshop Meeting Page 5 October 9, 2006