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HOME OF PELICAN ISLAND
CITIZENS BUDGET REVIEW ADVISORY BOARD
MINUTES
TUESDAY, JUNE 26, 2012 - 6:00 P.M.
City Council Chamber, 1225 Main Street, Sebastian
Mr. Ed Herlihy called the meeting to order at 6:00 p.m.
2. The Pledge of Allegiance was recited.
3. ROLL CALL:
Present:
Dionna Farmer
Ed Herlihy
Tim Slaven
4.
Not Present:
Gary O'Hara (Excused)
William Flaherty
Harry Marshall
Christine Vicars
Staff Present:
AI Minner, City Manager
Debbie Krueger, Administrative Services Director
Ken Killgore, Finance Director
Donna Cyr, Recording Secretary
Also Present:
Vice Mayor pon Wright
Chief of Police Michelle Morris
Approval of Minutes: June 12, 2012 Regular meeting
MOTION by Mr. Marshall and SECOND by Mr. Flaherty to approve the June 12, 2012
minutes as written, motion passed on a unanimous voice vote.
5. Budqet Overview and Update bv the Citv Manaaer:
Mr. Minner gave his PowerPoint presentation of the proposed budget (see attached).
He went over the budget calendar to make sure everyone feels comfortable with the
process and dates. Mr. Minner did an overview of the City's expenses, revenues and
went into more detail with what he sees as the budget weaknesses. Some of the
weaknesses identified are the decreased property value (47% in the last six years), the
drop in Utility tax and Franchise taxes, the decline in the LOGT (which means there is no
money budgeted for either street paving or for the Go Line bus). Also, revenue is being
depleted in the Stormwater Fund. He said there is equipment that needs replaced and
money needed for the Stormwater Park operations.
Mr. Minner went over the General Fund's three step test to determine if we are in a
sound financial spot.
1.) Does the organization have enough funding to sustain capital purchases, without
using reserve funding? The answer is no, he said. The City has used reserve funds to
purchase capital for the last few years.
Budget Advisory Meeting
June 26, 2012
Page Two
2.) Does the organization have enough funding to sustain operational costs, without
using reserve funding? Mr. Minner answered no, because the City's reserve fund has
decreased on average by $130,000 per year since FY 07, although the organization
revenues/expenses have been reduced by 18.8%.
3.) Does the organization have 25% of its annual expenses in reserve? He answered
yes, as of FY 11 the City has 44.7% spending/reserve ratio but under the identified FY13
Plan, the current millage can not sustain the City operations beyond FY14.
After going over these questions Mr. Minner's recommended action to the board is to set
the millage rate to 3.7166 and increase the Stormwater Fees an extra $1.00 a month
(from $4.00 to $5.00). Mr. Minner did do some checking of other communities in the
area and the average rate is $4.98 a month on their Stormwater fees. He would suggest
the board recommend to Council to set the DR420 to 3.7166.
Also Mr. Minner let the board know there were still some unknowns that could affect the
budget. The City will be going out for bids on Employee Health Care; General Liability &
Workers Compensation Insurance; Janitorial Services bid and Ditch / Swale
Maintenance contract bid.
At this time Mr. Minner opened up the floor to questions and discussion from the board.
6. Board Review and Comments on Draft Proposed Budget — FY 2012/2013:
Ms. Farmer questioned the $100,000 change of the updated forecast from the last
meeting numbers to this one. Mr. Minner explained that revenues from franchise fees
and utility taxes had been further adjusted because of concerns that we may have still
been overly optimistic.
Ms. Farmer also had questions on Capital equipment purchases because Mr. Minner
said they could be increasing. He explained the Renewal & Replacement fund and said
that all the repairs or replacements had been put off and now must be addressed. He
gave examples of renovating the restrooms at BSSC; the need for resurFacing the tennis
courts, replacing MIS equipment, a park mower and a truck bed need replaced, etc.
Ms. Farmer asked for clarification on the line graph comparing the reserve funds with the
millage rate. Mr. Minner explained the graph again and said if we don't change the
millage rate we will be in trouble.
Mr. Flaherty said he understood the recommended millage rate increase and
Stormwater increase. He also asked for a summary of what will happen if we don't
increase the millage rate — what are the consequences. Mr. Minner said that nothing
would happen right away but eventually there were be decay in services; decay in roads;
decay in the reserve funds; and the possibility of a decline in personnel attitudes. Mr.
Minner also stated that finally when we did raise the millage rate it would be significant.
Mr. Marshall asked if any more thought was put into borrowing money at such a low
interest rate. He said that with $121,000 for Capital expenditures, we could borrow half
a million dollars at the low interest rate and cover our projected expenditures for the next
five years. Mr. Marshall wants to know where we could get the biggest bang for the
buck with raising the millage rate. He mentioned that gas was coming down in price
which is good for the economy. He asked if we increase the millage rate now what will
Budget Advisory Meeting
June 26, 2012
Page Three
happen in the future when times get better. Mr. Minner answered Mr. Marshall by
explaining that there are three issues that he wanted to hit on. One is bonding out for
street improvements, gas prices and how they are affecting this and third looking into the
future. Mr. Minner said that he and Mr. Killgore did consider borrowing money but have
concerns, since there are no projected revenues available that can cover the repayment.
There was discussion regarding raising the millage rate to use that money for street
resurfacing and committing that revenue to making the loan payments. There was
discussion on when we will hit bottom in the market. Mr. Marshall asked about Mr.
Minner's long term projection and Mr. Minner thinks that the projection looks bad for a
while and Mr. Marshall thinks things are going to get better soon. They decided to agree
to disagree.
Mr. Flaherty stepped out at 7:24pm and returned at 7:28pm.
Ms. Vicars asked for verification on the franchise fees total. In the draft budget it is
budgeted for $1.22 million but in the slide presentation tonight it shows the fee at $1.14
million. Mr. Minner said the changes were made last week. A revised copy will be
posted on line. The new numbers for the Electric Franchise fees are $1.070 instead of
$1.150 and the Electric Utility Service Tax is $1.260 instead of $1.280. Mr. Minner said
he duplicated the numbers from last year and that is where the difference of $100,000
came from.
Ms. Vicars also asked why the City Council cell phones expenses jumped and it was
explained that there were two Council members with City cell phones and now there are
three. Regarding Ms. Vicars' question about longevity on page 17 of the draft Budget,
Ms. Krueger stated that because of the different time of the year, one starting in
September, the longevity would only affects the budget slightly. Ms. Vicars asked about
the health reimbursement accounts since it was new this year. She stated that last year
the projected amount was $125,000 but this year we are only budgeting $70,000. Mr.
Minner explained that there is a portion that is unused and that money will roll over into
the new year. Ms. Vicars identified the Chief being at the meeting and thanked staff for
all the hard work and sacrifice put into balancing the budget. Mr. Minner said he will get
everyone a good copy of the updated tax options sheet.
Mr. Slaven asked if the proposed budget was based on the 3.3041 millage rate and Mr.
Minner said actually it was based on the rate of 3.3041 applied to our previously
estimated taxable values, which was based on being 6% less than last year. As certified
taxable values were even more of a reduction, additional adjustments will be required.
Mr. Minner said there is no money in this draft budget set aside for street resurfacing in
the General Fund at this time.
Mr. Slaven questioned the Police budget where it showed budgeting two new officers but
their budget is down from last year? Mr. Minner answered that we are down those
officers and we've had those vacancies almost all year. We need the officers but the
City wanted to wait until the collective bargaining agreement changes had been
implemented. The hiring process has already started.
Mr. Herlihy said revenue is down and property assessment is down and utility fees have
gone down. Mr. Herlihy referenced a chart that Mr. Minner gave to Council members
showing that the public safety costs are not being covered by taxes collected. Mr.
Herlihy said he feels if we stay at the tax rate where we are now we will fall drastically in
Budget Advisory Meeting
June 26, 2012
Page Four
the hole. Capital expenditures are needed because equipment is getting old. He said
raising the millage rate is a tough thing to do but we don't have a choice.
Vice Mayor pon Wright spoke saying that he had done some research and that the
unemployment rate in Indian River County is well over 10%; that property values are
down in some cases as much as 50%. Mr. Wright said he feels that there was a growing
disparity in salary rates between the Public and Private sector. He also said that the
cash in the reserve fund keeps continuing to drop. Despite an effort to achieve a
balance between income and expenditures we have spent over $1,250,000 in our
reserve fund since 2007. We can't sustain doing that for much longer. Mr. Wright said
that now is the time to start looking at how the City spends its money and how personnel
issues are addressed because we did a two year contract with our unions and they don't
come up this year but next. He recommended that the board look carefully at the next
12 months but consider how the year after that is going to get fixed. That is the real
threat to our financial stability. Mr. Wright did thank the committee for all its hard work.
At the suggestion from the board Mr. Minner continued with his PowerPoint presentation.
Mr. Minner discussed the Special Revenues such as the Local Option Gas Tax (LOGT),
the Discretionary Sales Tax (DST) and the Recreation Impact fees. He also went over
the Debt Service schedule and the Enterprise Funds. Mr. Minner explained DST funds
are being set aside for quarter round improvements, the Airport Drive East project,
allocating funds to complete the Working WaterFront, upgrade and glazing the windows
at the Old School House, upgrading the rails on the Barber Street bridge, bridge
inspections, a Police truck and Code Enforcement vehicles. Recreation Impact Fees
will fund the BSSC multi-use field lights, playground equipment at the Creative
Playground, Schumann Park playground equipment, and Community Center playground
equipment. Mr. Minner went over the CRA fund and the Debt Service schedule.
Mr. Minner stated that the revenue trend was improving at the Golf Course because of
the steady play and fee increase. He did let the board know that there were some
Capital Improvements needed such as repairs and replacement on some cart paths and
the Club House needs painting and new signage. There will be more discussion at the
CIP meetings regarding repairs to irrigation, tee box replacement, and greens
replacement. He will get a better feel for those costs.
Mr. Minner wanted to explain that the Airport has shifted its personnel to the General
Fund, with its employees also helping out in Public Works.
Mr. Minner explained that the Building Department had no projected loss for FY 2012.
Mr. Minner's recommendation to the board is to ask Council to set the millage rate for
the DR420 report to 3.7166. That way Council has some discussion room.
Ms. Farmer asked for explanation regarding the Golf Course's salaries, bonuses,
overtime and departmental supplies. She felt that they were a little out of line. Mr.
Minner said he would look at the numbers again.
Mr. Flaherty asked about the DST money being $2,645,000 in revenues then on page 83
the money is designated to certain projects, what drives this selection of projects? Mr.
Minner said that goals and directives by Council direct the projects. He said debt gets
paid first, drainage improvements and the %4 round projects are also important.
Budget Advisory Meeting
June 26, 2012
Page Five
7
Mr. Marshall questioned if it would be a good idea to sell or lease out the Golf Course.
Mr. Minner said that no study has been done to determine the benefits. Mr. Minner did
say that the sale would probably not be an option because of the lease arrangement with
the Airport. He will do some checking to see if a lease would work.
Mr. Herlihy brought up the point that the Golf Course is an Enterprise fund and it has no
effect on the General Fund, that it is self supporting. Mr. Minner agreed. Mr. Minner did
say he felt the maintenance costs are fixed and reasonable, that the overhead was
reasonable, and our rates are reasonable. Before he did anything he would want to
have the lease reviewed by the FAA and do a market study on the fair value of the
lease.
Ms. Vicars asked about the Airport building and the percent of occupancy? Mr. Minner
said the wings are leased out. He said he doesn't see a revenue generator out there.
The rent from these businesses washes out the utility expenses and it's not a liability on
the General Fund as when it was first built and was supposed to house the Engineering
and Public Works Dept. Ms. Vicars said it was just an observation but it seemed like
the Golf Course does pay for itself.
Mr. Slaven asked what the proposed millage rates for area Cities were. Mr. Minner
said we had done those comparisons in the past but we didn't have them right there.
Ms. Krueger said she would get the board that information. Mr. Minner said that he
thought the average millage rate around the state is at 5.00 mills.
MOTION by Mr. Herlihy and SECOND by Ms. Farmer to recommend to City Council to
set the millage rate to a maximum on the DR420 form at 3.7166
Result of the voice vote:
AYES: 5
NAYS: 1 — Mr. Marshal
Passed 5-1
Other Discussion/Questions by Committee Members:
Mr. Herlihy reminded everyone the next budget meeting is Tues., July 17th at 6pm.
8. Being no further business, Mr. Herlihy adjourned the meeting at 8:29 p.m.
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Citizen Budg t Advisory Board Chairper n Signature
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