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HomeMy WebLinkAbout2007-02-09 Transcription February 9, 2007 City Council Budget Wark Session Page I February 9, 2007 City Council Budget Work Session 8:35 A.M. Council: Bailey, Champion, Correia, Elliott, O'Donnell, Vanderhoef, Wilburn Staff: Atkins, Helling, Karr, O'Malley, Lewis Tapes: Tape 07-17, Side 2 BUDGET: Wilburn! Okay, this is the additional budget session, and we received the memo, information packet #2 from Steve about a possible rate reduction, using the Emergency Levy and the Debt Service Levy, lowering those down. Urn, did you have any other detail that you wanted to explain? Atkins/ You have this, if you pull this out.. .Iet me walk you through it...yeah, that's it. Same thing, yeah. All set? Across the top is the history of tax rates. Ijust wanted you to have that for background information. The proposed budget, we're working on Fiscal 08, 9 and 10...shows those. Those rates are slightly different than in the original budget proposal. You'll recall, our values were down slightly when we got our final numbers from the auditor. It was about 3 cents. It did not dramatically affect the General Fund cash balances, so those numbers remain the same. We made the assumption that the goal was to reduce the taxed rate to what it was, and so that 17.297 from 17.783 - that's a levy tax rate reduction of .48. That gets calculated in the form of numbers. We selected the tax rates to be the Emergency and the Debt Service Levy. Other rates have significant restrictions on them. These were the two, simply the easiest with which to accomplish the goal of a tax rate reduction. General Fund balance, less the Emergency Levy, less paying for Debt with current cash, results in the rates being reduced, the rate - one time - for FY08 to be the same as it is in FY07. The cash balance position, although declining slightly, is at least close to what your current policy is. The only thing we did not calculate, because it's just a difficult number to do, is that we will have a loss of investment income because we simply won't have that, reduce the cash position, so for each million dollars, the figure is about a $50,000 loss in investment income. And that's it! Elliott! Steve, just the bottom line for me, the budget that we got, the proposed budget that we got initially for 08, was a cash balance of 15.7, and this would reduce that to 14.5. Atkins/ 14.5, that's correct. Kevin, is there anything we need to add? O'Malley/ The only thing is that we went through each tax levy. There's certain restrictions and restraints on the tax levy. The 95-cent Transit Levy, we assumed you didn't want to change Transit. The Tort Levy is actuarially determined. The Library Levy is fixed by the election. The Emergency Levy was available, so we This represents only a reasonably accurate transcription of the Iowa City City Council Budget Work Session meeting of February 9, 2007. February 9,2007 City Council Budget Work Session Page 2 reduced that to zero and the Employment Benefits Levy also is tied to the General Fund Levy. So the only other one left is Debt Service Levy. That's how we came about that process. Elliott! You said the Emergency Levy zeroed out? O'Malley! Yes. Atkins! Yes, We did away with it. We had. ..our original budget proposal (someone coughed, unable to hear) 10 cents, it's now gone, yep. Elliott! What makes that precarious? Or does it? Atkins! Not really, you know. The Emergency Levy was intended to be what it is: an emergency levy. Once you've maxed out your 8.10, it becomes available to you. Elliott! And we do have l4.5...what percent is that? The 15.7 was 32%. Oh, I see it! I see it! Atkins! Right underneath, it's 29, Bob. Elliott! Okay, thanks. I'm blind! (laughter) Correia! These are all. . . I mean, these are all estimated numbers, even our revenues, so if we have in the past our actual money going into our reserve at the end of the year has been higher because our expenditures end up being lower than we estimate and we get more revenue. So... Atkins! Yes, that 2%. Correia! Right, that 2%. So, we may be... Atkins! Yep, yep. Bailey! And I'm assuming that given that loss of interest income, I mean, you'll do cash management to the degree you can to make sure that we're maximizing that. So... O'Malley! That's correct. We have sweep accounts. We don't have any idle cash. So.. .it's always invested. Wilburn! Any other questions or comments? Champion! I like it too. I'm...what would the tax rate be, if we kept our cash at 30%? Just roughly. This represents only a reasonably accurate transcription of the Iowa City City Council Budget Work Session meeting of February 9, 2007. February 9, 2007 City Council Budget Work Session Page 3 Atkins! It would go up just slightly, Connie. (unable to hear) Yeah. Vanderhoef! I agree, Connie. Atkins! Remember, it's a budget and you're over 12 months out. We may end up the year there. These are projections. I'm not uncomfortable with 29. What I am uncomfortable is the decline. That's the thing that we have to watch, carefully. Bailey! Well, since we review the budget every year, I'm not uncomfortable with 29, and keeping an eye on this if other people are less risk averse than 1. I don't have a problem with this because I think it's within that sort of, I don't want to call it margin of error, but it's within a margin that I think we might be at 30 at the end of the year, and ifour objective is to lower our levies, I think that this gets us there. Atkins! Yeah, looking at the budget, when we used the little house for the calculation. 07 was.. . remember, this is City taxes only. We don't know what the schools and the county are going to do so... Bailey! Taxes probably won't go down. Atkins! Yeah. In our case, if you did adopt this policy, the tax on $IOO,OOO would go down ever so slightly, but it does go down from 07. Elliott! The City's portion? Atkins! The City's portion, yes. O'Donnel1l Steve, if we don't do this then we're looking at 2.8 increase? Atkins! Yes, that's the...2.6, yeah, 2.6, Mike. Elliott! At this point, 1. .. Atkins! Which would be a zero increase in the tax rate. O'Donnell! I'm very comfortable doing this. Elliott! I am also. Bailey! I'm very comfortable with this. Wilburn! Sounds like there's consensus... Vanderhoef! I'm not comfortable with this. This represents only a reasonably accurate transcription of the Iowa City City Council Budget Work Session meeting of February 9, 2007. February 9, 2007 City Council Budget Work Session Page 4 Wilburn! Well, can I have a show of hands of those who are. . . Champion! Well, I'm comfortable with it. I'mjust... Wilburn! That would be everybody except for Council Member Vanderhoef, for the record. You can go ahead and comment if you wish, Dee, I'm just, I just wanted to see where we were at. Vanderhoef! I can see doing some of it, but not all of it. And the Emergency Levy seemed to be the best piece to do, and the other thing that we have not talked about is increasing our debt through our Capital Projects, and I would like to look at how that might impact the raises, and how it would impact that FYI 0, and the 27%. Atkins/ We will do that. And we...that, that tax levy, Debt Service, will need further analysis. We're not uncomfortable with these numbers as we've projected them. Could there be some impact on future projects, and the answer is yes, and we have to bring that back to you, but that's at least two years out. Vanderhoef/ And the other thing that makes me uncomfortable with this is pulling this all down at this point in time, does that leave us open for a huge increase at some point in time, and how does this fit in with the services that we're being asked to provide, primarily our fire service, and with new communication, we have budgeted for it, but we don't know that it's going to come in at that price. So, you know, we're still flying a little bit... Atkins/ You do. ..you're correct, Dee. There are some pending issues. You certainly want to discuss Transit, but we believe that the financial condition ofthat is going to allow you certain discretion - whether you do use it for Capital or Operations, that's yet to be decided. That there has been some interest in expanding City's role in the housing programs - we need to talk about that. Exactly... because we do have a good debt position. I mean, it may require tax adjustments, but that is certainly something that is available to you. And then the Joint Communications Center - we just simply don't know. We'll be finding out very soon. Our overall use of debt is very sound. Your interest in levying the taxes to pay for it is a political question, that you have to decide on the level of projects that you want to do. V anderhoef/ We also have pending out there a request to buy down cost of land for housing projects. So, if we get down into that 27% reserve, then we have nothing there to do. Bailey/ But this isn't a straight shot. I mean... Atkins/ Yeah. (several talking) This represents only a reasonably accurate transcription of the Iowa City City Council Budget Work Session meeting of February 9, 2007. February 9, 2007 City Council Budget Wark Session Page 5 Bailey/ .. . constantly reevaluate, and I understand your anticipation of some projects, and . I think it's a little bit easier for the public to understand a higher tax rate or using the Emergency Levy, when they can actually see some projects we're bringing on line. I mean, I think it's inappropriate to tax people so we have a saving's account, so we can bring on projects down the road. When we do that, I think people understand the levies will go up. Vanderhoef/ But I don't see this as a saving's account, in that we have not been able to reach the goal of hiring the firefighters. So, any time we tinker with monies going through the General Fund, we have decreased our ability to do this. O'Donnell/ The option is to increase taxes. Vanderhoef/ And I'm saying I'm not comfortable with going the full amount. I can lower it some, but 1... I... Bailey/ But we aren't hiring firefighters this year. I think once again, the community would be supportive of a tax rate that would support hiring firefighters if we were doing it this year. We're simply not doing it this year, so it doesn't make sense to me to raise the tax rate in anticipation of something, and hold the money... Correia! Especially when we say we can't use money that's held in reserve to fund ongomg expenses. Bailey/ Right. Elliott! And, Amy, that's where I find a very comfortable bottom line in this. Any time you have virtually 30% of your budget in cash reserve, you are in a very sound fiscal position to meet and greet virtually anything that you can imagine that would come up, and we'll do later, but I think this...with 29% in cash reserve is just, to me, business-wise a significant, very comfortable margin. Vanderhoef/ But when we're projecting to go to 27... Correia! It's a projection! Vanderhoef/ I understand that, but that is not just slightly below our own policy. (several talking) Bailey/ I would be comfortable with 27, and I know others here wouldn't. Correia! I would be comfortable with it. Bailey/ Right, I hear that, but I guess what I'm saying is, we won't necessarily get to 27, Dee. There are, if there are enough people who are uncomfortable with it, but I'm comfortable with 29% this year, and if...if our past performance is any indicator, This represents only a reasonably accurate transcription of the Iowa City City Council Budget Work Session meeting of February 9, 2007. February 9, 2007 City Council Budget Work Session Page 6 and I know that you can only use that to a certain degree, we will be, we will probably be at 30. O'Donne11l Well, and the purpose.. . obviously nobody wants to raise taxes, and I'm also very comfortable with this, and this also gives us another year, a full year, to review this budget and look for possibly other savings. Bailey/ And I think we have to continue to do that. O'Donnell/ And I think we can do it...very easily. Wilburn! Is there anyone of the six who are in favor of this proposed amendment to, to keep the tax rate the same as Fiscal Year 07, in light of the concerns that were expressed? Correia! So you're suggesting keeping the Emergency rate at 3.... Wilburn! What we... Correia! 3.8%, or the.. . Wilburn! Council Member Vanderhoef expressed a concern. I gave her some time to try and persuade, convince. It appears that they're not, there's not, or there's not a majority who wish to, the majority wishes to go ahead and accept this. Elliott! As proposed by the City Manager and Finance Director. Wilburn! Correct. Urn.. .so just (several talking) so just in summary for the media that was present, just so there's clarity about some of the comments that were made, the City of Iowa City is making some adjustments in our Emergency Levy and our Debt Service Levy, so that the overall tax rate for the City of Iowa City will remain the same as Fiscal Year 2007. That does not make any changes in our anticipation of some proposed options for exploration of fire station. So, that does not change. And, this is a budget that Council will continue to take a look at some of the concerns that were expressed, given some of the pending projects that are coming forward. Atkins/ While you cannot vote, I'm taking this as a clear majority, will accept that tax rate, because it'll be important the night of the hearing that we tell the public the tax rate will not change. We just need to kind of put some things together to deal with that, but that would be the plan on the 20th. Elliott! Now, urn, Mr. Mayor, now is not the time to do it, but at some point when the budget has been finalized, I would like to have City Manger and the Finance Director participate in a discussion with us about the year-end cash balance and the policy we now have, and what they perceive as negative aspects of changing This represents only a reasonably accurate transcription of the Iowa City City Council Budget Work Session meeting of February 9, 2007. ._.~-_._._._.__.._----~---------,..-,--_.__._~---~_...-----_._._-_._---~----+----~---_.._--_..._-------- February 9, 2007 City Council Budget Work Session Page 7 that policy, because I think there's some feeling on the Council that we don't agree with that policy, and I think we need to hear from the people who know more about it, perhaps than we do. More about it than I do! Atkins/ I'd like that opportunity. That'd be fine. Wilburn! Okay. All right. (several talking) Bailey/ .. .Bob is suggesting having a discussion to take it and really affirm (several talking, coughing). Atkins/ The most critical element is not only the number, but probably the most critical element is the policy, and do we discipline ourselves and stick to the policy? If we do that, then that's looked upon favorably in our operations. Champion! I thought we had a policy of 30%. Atkins/ We do. (several talking) Elliott! We're wondering, because this goes against that policy, and we're wondering is that policy what we agree to, and I would like to have an informed discussion about that. O'Donnell/ This goes slightly against the policy, and I also would welcome that. Wilburn! And we're also, again, we submit a one-year budget. We're doing that for one year, and.. .as with (several talking) as long as we do what we say we're going to do, if we deviate from the policy, then it's reviewed favorably. Okay. All right. Thanks everybody. This represents only a reasonably accurate transcription ofthe Iowa City City Conncil Budget Work Session meeting of February 9, 2007.