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HomeMy WebLinkAbout06092011BUD MinutesmOF HOME OF PELICAN ISLAND CITIZENS BUDGET REVIEW ADVISORY COMMITTEE MINUTES 6:00 P.M. THURSDAY — JUNE 9, 2011 CITY HALL 1225 MAIN STREET SEBASTIAN, FLORIDA 1. Chairman Ed Herlihy called the Budget Meeting to order at 6 pm. 2. The Pledge of Allegiance was recited. 3. Roll Call Present: Dionna Farmer William Flaherty Jerry Klenck Harry Marshall Christine Vicars Brad White Ed Herlihy - Chairman Al Alvarez (alternate) Staff Present: City Manager, Al Minner Administrative Services Director, Debra Krueger Finance Director, Ken Killgore City Clerk, Sally Maio Airport Director, Joe Griffin Also Present: Vice Mayor Don Wright Chairman Herlihy introduced new member Dionna Farmer and Alternate member Albert Alvarez. 4. Approval of Minutes: A. Meeting of Mav 24, 2011 MOTION by Mr. White and SECOND by Ms. Vicars to approve the May 24, 2011 minutes passed on a voice vote of 7 -0. 5. Board Discussion of Upcoming Budget — FY 2011/2012 A. Estimated Taxable Values B. City Manager's Budget Summary The City Manager introduced the Budget Team - Administrative Services Director, Debra Krueger, and Finance Director, Ken Killgore and noted that Nancy Viedt, Finance Accountant was a member of the team but not in attendance tonight. Citizens Budget Review Advisory Board June 9, 2011 Page Two The City Manager then gave a power point presentation (see attached), and highlighted some areas for the Board members. He said staff is still examining special revenues, briefly described enterprise fund activities, cited the $880,000,000 assessed valuation recently received from the Property Appraiser, a 10.8 % reduction from the last fiscal year and 40% reduction over four years. He exhibited a chart (see attached) showing three alternative plans for fiscal year 2012, Options A, B and C. Plan C — Where the City Should Be The City Manager noted he has stated for the past several years that one of these days we will have to raise taxes but each year, internal efforts are made to stave off that occurrence and staff continues to deliver service without a drastic change to the community. He described the effect of passage of State amendment #1 in 2009 which increased assessed value reductions by adding an additional $25,000 exemption and by capping the way in which elected officials can increase the millage rate by requiring supermajority votes, and put in a CPI index which judged where those rates need to be. He said his concern was if we continue on the current path, we would need a supermajority vote to balance the budget. He then described the areas in yellow on the chart which show financial weaknesses eventually will need to go back into the budget: 1) furlough days which currently saves taxpayers $300,000; 2) local option gas tax funds which are currently being transferred into the general fund which restricts use of those funds for other capital purposes; 3) a portion of the stormwater funds currently being transferred into the general fund which takes away the ability to do some stormwater projects; 4) reworking of the whole of the general fund, airport fund, golf course fund, and building fund to increase cash to the enterprise funds, at a cost of $225,000 from the general fund; and 5) he noted the final weakness in the general fund is reduction of capital expenditures. He said if we were to do all of that there would be a $1.15M deficit with the existing millage rate, and which would have to be increased to 4.6912 mills to accomplish. He said council would lose their heads when they go to Publix, the political winds don't support it, and though we would still be below 2009 taxing levels, the citizens don't want increases and it is felt we can continue to try to do more with less. Plan B — Middle Point The City Manager said it has been contemplated that if we go to the rolled -back millage of 3.6947, there are some things we can accomplish. He said there have been three middle management retirements from Police Department, those retirements allow us to use attrition, and he is looking to the Chief and Deputy Chief to take on more of the work load, have less middle management and trade the three management positions for one new position, with a result of 36.5 officers, which would save almost $296,000. He said we could add back in the enterprise fund expenses which would increase the budget to almost $10.3 M. He said although the rolled -back millage of 3.6947 is not technically a tax increase, it could result in some residential as well as businesses tax increases because of the Save our Homes Act, though this option is a realistic proposal. 2 Citizens Budget Review Advisory Board June 9, 2011 Page Three Plan A — Reinventing Local Government The City Manager said in Plan A we assume the deficit with $880,000,000 in assessed value, take a complete conservative revenue approach resulting in approximately $9.996 M in revenues, and with personnel cuts recently made there will be a total cost for personnel of $8,046,079. He said on a year to year basis operating expenses run anywhere from $2.2 M to $2.4 M and he projects 2012 expenses to be $2.29 M which is about a $50K decrease from where we were two weeks ago, and for which he was proud of department heads. He said if we purchase a new City phone system with DST funds we can eliminate the annual maintenance cost, we plan to reduce building facilities costs, and we have $30K in capital items we need to purchase and recommend utilizing a transfer from general fund reserves, because it is a non - recurring expense and the cash reserve is still in a position to absorb those funds. He said with all of that there is a $370K deficit, and to balance it, we go back to the Police Department reorganization, not replace management staff that is leaving, transfer the Detective Bureau Sergeant to Road Patrol Sergeant, shift supervision of the Detective Bureau to the Chief and Deputy Chief for a total savings of $370K which gives you a balanced budget. He said staff recommends Plan A, a tough decision because it continues to put stress on the organization, keep the millage at 3.3041, noting major cuts have been made, said early retirement buyouts are no longer conducive because of the cash we would have to pay out in the future, noted staff middle management has been reduced in every general fund department we have, thus putting the load on upper management. He said if we continue to have reductions some day we may have to increase taxes. He recommended "keeping the powder dry", but as we go forward, we need to eventually get back to the issues of Plan C. He said if we go to Plan B this year, next year we will need another tax increase, stating he believed a future tax increase is imminent, and it would be better to fight that battle in a year when it will give us maximum return for that dollar, and put us in a position where we can tackle some of the issues we need to tackle in Plan C. The City Manager cautioned that several factors could affect the numbers such as the collective bargaining agreements to come, going in with no COLA/merit and continuing furloughs, SPD retirement issues, health care and dependent care coverage concerns, possible general liability and property casualty anticipate increases, fuel cost issues, noting staff is working on anticipated fuel costs for next year, possible inclusion of $2M new construction estimates, and a couple more unknowns. He noted the budget is a work in progress until about August when numbers start to come in, and said he thought we have done a good job up to this point. Dionna Farmer inquired about the $30,000 capital cost and maintenance cost savings from purchase of a new phone system. The City Manager responded that the City's phone system is a 10 year old Siemens system, we are losing our ability to link Outlook and the phones together, it has become difficult to get parts, it has been put off for a couple of years and we need it. He said it can be done by not taxing the general fund, taking the expense out of DST funds, and then we save $12K per year in the general fund by eliminating the current maintenance cost. He said the hitch is if we procure now, by October 1 we can start putting it in, but he can't get rid of the maintenance contract until we get the new system. 3 Citizens Budget Review Advisory Board June 9, 2011 Page Four He said the $30,000 for capital costs is a mower for parks, a mower for the cemetery, and hardware and software for the MIS Department. He said the MIS people came up with a new computer plan to divide segments of the server to serve multiple functions and keep systems running efficiently. He said the big system users are MUNIS, Building Permits, Police Records, and Laserfiche. He said we are looking at $30,000 capital expenses in a $1OM budget. William Flaherty said in looking at the $880M assessed value and the millage rate, is there an assumption that we will collect 100% of those funds. The City Manager said you can get into a scenario where if you underbudget your tax revenues and only budget 75 %, you can get into a situation where you artificially kick up your taxing levy because you budget at such a low amount, that creates fluff in the budget, and artificially keeps taxes high. He said Tallahassee tells us how much we have to program and sets the number we cannot budget below at 95% of the assessed value. He said if you do a calculation on that number, $880M times 95% divided by $1000 times the millage rate, plus $30,000 gives you the number before you. He said the City has been collecting revenues at about 96% for the past several years, and it has not dipped below yet. Jerry Klenck said he had asked for a report back from the Administrative Services Director regarding seeking the additional sales tax on gas, and Ms. Krueger said she had provided the Board with an email on March 23rd reflecting the July 201" City Council meeting where the Board Chairman brought it before them and the issue essentially died. Mr. Klenck said he would like to make that recommendation again, and Chairman Herlihy said the appropriate time to do that is when we make our budget report to Council in July. Mr. Klenck said that would be too late because it has to be in before July and that is why we lost it last time. The City Manager said if there is an approved motion he can bring it forward to City Council on June 22 "d MOTION by Mr. Klenck and SECOND by Dionna Farmer to forward a request to City Council to recommend the additional one cent gas tax to the County at the June 22nd Council meeting. Mr. Klenck noted that a Florida League of Cities representative told them we are one of the few counties in the State that does not impose the additional tax. Brad White said even if the County approved it, there would be no guarantee they would share the money with the City. VOICE VOTE on the motion carried 6 -1 (Marshall — nay) The City Manager said he would put the Board Chairman on the agenda to make a presentation to City Council. Mr. Klenck asked if the Finance Director had looked up the collision deductible. 4 Citizens Budget Review Advisory Board June 9, 2011 Page Five Mr. Killgore said the cost is $7,500 per year for all City vehicles, that prior to May there had been no accidents for which city staff was responsible, but since May we have spent $8,500 for accidents caused by City staff. He said the collision deductible was $1,000. Mr. Klenck said costs for others' vehicles would come under liability, though he thought $7,500 was reasonable cost for collision. Mr. White expressed his appreciation for the City Manager's presentation and said Council has tough decisions to make. Harry Marshall asked about the Police Department pension plan. The City Manager said it was a defined benefit plan for police officers, and other employees have a defined contribution plan. He further pointed them to the chart under Total General Fund Revenues that shows the expenditures for retirement contributions and the Chapter 185 retirement contributions, noting that the retirement contributions are 9% for all employees who are not a part of the defined benefit plan and accounts for about $275K, and for the 38.5 police officers in the defined benefit plan the City's contribution has dropped to 22% and accounts for about $514K. Mr. Marshall asked what it takes to change this and the City Manager said this is the million dollar question that all local governments are trying to resolve. He said while retirement benefits are not items in the collective bargaining agreements (CBAs), to change any benefits we have to change the CBA, for the police retirement fund, which is a Chapter 185 local plan managed by the City that follows FS 185, the State made changes this year that will affect us and the statutes, but they really won't affect us because one of those changes was that it will require an employee contribution into the plan and we are already requesting a 5% employee contribution, the plan receives approximately $140K which is derived from casualty insurance from the State, and the City contributes $515,000. He said we have to follow 185 rules to receive State money. He said under the new legislation, to continue to receive State funding those officers have to contribute at least 3 %, and the other change is that at retirement age if you have accrued leave up to certain limits and you get those funds paid out, those payments do not become a factor of your last year's earnings which increase your retirement pension, a change that will affect our Police Department. Harry Marshalls asked how we could change this for new hires. The City Manager said under the current CBA there is an entitlement in the contract that new hires get the same as those in the existing plans, so for the City to change this for new hires we would have to collectively bargain. In response to Mr. Marshall, the City Manager said the agreement is strictly between the City and the bargaining unit, but there are statutory limits established by the State in 1999 that you cannot drop below, and if you do that you lose State funding. He noted there are at least two communities that have said retirement pensions have become so burdensome that they have collectively bargained and rejected State money so they can bargain. He said they will be talking about some of those issues as we go into bargaining. 5 Citizens Budget Review Advisory Board June 9, 2011 Page Six Chairman Ed Herlihy said the presentation was excellent as usual, echoed the City Manager's thoughts on the need for the new phone system, the concept is a modern system where we are not stuck having to buy equipment from one manufacturer, which is currently Siemens, and they are getting to the point where they won't or can't support the system. He then advised the next meeting is scheduled for Tuesday June 28th, the proposed budget will be submitted to the Board on June 171h and if any of the Board members should want a workshop once they see the budget, they should let the Finance Director know and it can be held in the conference room, less formally as has been done before. The City Manager closed by saying that if anyone needed more detail about the budget or would like to speak with him, they should feel free to contact him at 388 -8200 or aminner(ad)citvofsebastian.orq. In response to Mr. Klenck, he said he will call when the proposed budgets are ready and would personally deliver his if need be. 6. Being no further business, Chairman Herlihy adjourned the meeting at 7:05 pm. Approved at the June 28th, 2011 Citizens Budget Review Advisory Board meeting. rman DEp(.r+V Crky C-1erk fo( Sally Maio, City Clerk Recording 6