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HomeMy WebLinkAbout2003-01-13 TranscriptionJanuary 13, 2003 Council Budget Work Session Page 1 January I3, 2003 Council Budget Work Session 6:30 PM Council: Champion, Kanner, Lehman, O'Donnell, Pfab, Vanderhoef, Wilburn Staff: Atkins, Helling, Herting, Karr, Lewis, Mansfield, O'Malley TAPE: 03-05, BOTH SIDES BUDGET OVERV1EW Lehman/OK, we're in business. Steve? Atkins/All right. Lehman/Hit it. Atkins/Everybody got their stuff? Lehman/Yes. Atkins/OK. First thing I would like you to do is I have two handouts; one is a packet of about six or eight pages. Those are the overheads. You can work from them. You don't need to--it's the thing you just picked up. But one that I do want to make a substitute--we have a new page 23. There was an incorrect calculation so take the page 23 in your budget books, rip it out, and put that one in. Karr/Steve, if they rip it out they don't have 24 on the back. Atkins/Oh, then you can't rip it out; leave it in and put it on top of it, please. (Laughter) Kanner/Am i too late--it's all excited. Atkins/OK. Vanderhoef/You take all the fun out of it. Atklns/Put a big X on the other one. O'Donnell/Page 24. Atkins/OK. Just to give you a heads up, the handouts are formatted this year in some sort of a summary fashion; hopefully that will make it a little easier for you to work with, particularly as you step through the changes that are proposed. Our citizens' summary is in preparation. It should be ready very shortly. We'll get that out. The mic is dead? This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 2 Lehman/Well, we can sure pick you up. Atkins/Timeout. Lehman/I think it may be--- Atkins/It's pretty technical here. Lehman/Marian, I think it was coming through the speakers. Atkins/Hey. Want to try again? ! have to start all over? OK. There are in the operational budget this year really very few changes. There are issues pending that will have, I believe, in the long (can't hear) direct impact on our budget. We've tried to take them into consideration. For example, we have done our best to estimate fuel costs that we are expecting. There could be some wild fluctuations in fuel costs depending upon certain world events. Secondly, Homeland Security, there clearly is going to be a national issue that we're going to have to carry out, if the Federal government holds true to form. We'll carry it out and pay for it at the same time, which it's very difficult to predict that one. And then the Economic Stimulus package that's going through Congress, particularly the dividend tax issue, what's going to happen there is kind of tough to say. Champion/I'm fine. Atkins/The dividend tax, if for example, that makes municipal bonds less desirable; therefore, higher interest rates, which makes it even more important that we maintain the highest credit rating we possibly can. If in doing so, that also gives us the lower rate. A couple other things that are pending is that we are currently going through a collective bargaining process. We're moving right along. I don't see any major hurdles there; we'll hopefully have agreements in the next couple months. State legislature convened today, and that's usually enough said. Yeah? Lehman/Steve, last year during budget discussions I--Connie brought to our attention that at some point in time we were going to have to look at health insurance costs being borne totally by the City. I presume that you're in the process of collective bargaining that that's at least the appropriate time to do it. Atkins/We are talking with our labor union representatives about that. Without getting into specifics, throughout the state there has not been a strong movement to change some of those--- Lehman/Well, I just brought it up. Atkins/...and it's just, it's clearly there. School districts, because they have a sort of a different bargaining strategy, they always bargain against that cap there for their allowable growth. We don't have the same. We have the same basic principles in This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 3 collective bargaining; we just simply don't have the same limits. Champion/We don't have a cap for insurance and benefits. Atkins/Yeah. Champion/So, even though it's included in their package, they--it's not cut while they justify. Atkins/1 defer to you, Connie; I don't know enough about school finance to--- Vanderhoef/It doesn't come out of the General Fund. It's just they have a total that they present to the taxpayer. Lehman/Right. Atkins/Yeah. Lehman/Benefits levy. Vanderhoef/Yeah. And watching that go up. Atkins/Now, my plan with respect to the budget review is that tonight we would do Operations. Tomorrow is off. Wednesday morning at 8:00 o'clock, I would have all of the staff here. We would do Capital Projects on Wednesday morning. The 27th, we are scheduling for Boards, Commissions, and those folks who come before you. And then the 28th--these are all 6:30 meetings--would be open and available as you see fit. In the balancing of the budget we have applied all the applicable laws as we know them to be. As you know the State Legislature is banging around at issues of the importance for some tax reform. I personally have served on two committees. It never goes anywhere, so we have to wait and see. The State aid information arrived on the 23rd of December so we were kind of hustling around to get things put together for you, and those numbers are also down a tad bit, so if that's any message we're getting from the state, things appear to be difficult. With that, let me just launch into the summary presentation I have prepared for you tonight. The first item up is some basic budget policy issues. You'll find these in your charts. Our General Fund cash position--and I'll show you a chart on that in a moment--has improved over last year. If you'll recall, you made a number of adjustments. We did end the year, last fiscal year better off, and so therefore we're able to recognize that on our cash position. Our General Fund contingency, we have traditionally tried to keep a policy of 1 percent of expenditures; we have not done that this year. We made our contingency a little smaller because none of it had to do with our ability to balance the budget, because it is one of those open-ended appropriations. State financial aid continues to decline. In fact, Deb just this afternoon prepared a chart for me. Thirteen years ago we received $1.5 million in State aid for General Fund budgets and support This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 4 for our transit system. This year we expect to get $ 1.3 million. In 13 years, it's gone from $1.5 to $1.3. Simply adjusting for inflation, that number should be around $2.2. So, State aid continues to decline. I don't expect it to change. It's one of those easy appropriations for the State Legislature to take on. The rollback continues to decline. Nothing new there. Federal support is declining. We lost about 13 percent of our CDBG monies and home monies this year. Most of it is based upon the Census information. Kanner/Yeah, that's not because of cutbacks, Steven. Atkins/Formula driven. Kanner/They say that we have less pull that is poverty--- Atkins/Poverty. You got it. That's correct, Steve. The 25 percent debt service--our policy--again I'll show you that--is our overall allowable debt. As a matter of local policy--it's not a State law. It is exceeded slightly and I'll show you that our debt position in the plan we have remains stable. We don't see much growth. Our credit rating--- Champion/You mean growth in debt? Atkins/Growth in debt. I have a chart that will show you that, Connie. We maintain our overall plan is to continue to do our best to maintain our credit rating. We do have some concern with the large bond issue coming up with respect to the schools and the overlapping debt. It appears to be reasonable: a short-term debt of 15 years. That will be looked upon favorably, but with all the other financial issues kicking around, it's kind of difficult to predict that one. Capital Improvement Plan. There are fewer projects. There is an emphasis in the plan about growing our property tax base; that's our primary source of income, and if we're going to put our capital dollars into something, we're suggesting that capital projects that provide for growth in tax base. We have some significant increases in our Operational Expenses. Health insurance last year went up 40 percent. We are projecting that it will go up another 15 percent this year. Our police and fire pension--again, I'll show you some specifics--it's up rather dramatically. We pay 17 percent on the base for police and fire personnel into their pension. Their fund under-performed substantially, which means the State sends us a bill, and so this year it'll be 20.5 percent increase. In total dollars, it's about a $400,000 increase in the contribution to the pension plan alone. Lehman/Is that part of the benefits levy? Atkins/Yes. And then our property insurance, we're beginning to feel the fallout--excuse me I don't mean that in a lighthearted way--from the 9/11. Our insurance program is up about 23 percent with Austin?????. In fact, one of the proposals we have is that Erin Herting, our assistant finance director who serves as our risk manager, This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 5 we're going to have to redo, dig into our insurance and maybe some expanded self-insured retention, a number of things which over the next year, that's going to be one of her tasks because of the increase. Yes, Irvin. Pfab/I don't think we can attribute everything to 9/11. Atkins/No, can't. Pfab/Part of it to mismanagement by insurance companies. Atkins/The general market increases and--- Pfab/No, but I mean the investment end of the insurance companies were down. Atkins/They're down, they're down. Pfab/So, I mean--- Atkins/And then Airport Operations, we need to have some time with you. I really-- we've rearranged some finances which we're not real comfortable with. I'll show you those again this evening, too, but I really think we're going to have to--we've got to pick a date--you've got to be self-sufficient by or whatever adjustments that you would choose to make. And we'll talk a little bit about that. So those are some of the policy issues. Next chart is to give you a feel for our cash balance. It's page 20 in your budget. Your policy is that in any given year, no less than 15 percent of expenditures in a five-year average and 20--as you can see we've done, out- performed that. We're in the 25 percent average range over the five-year period. We feel more comfortable about that, particularly when it comes to credit reading time. Another sort of peripheral issues, you'll note under the expenditure side in fiscal '04, the receipt side is $40,000,436, the expenditure side is $40,000,964. That is about 1 percent, we believe, during the course of the fiscal year; we can make up that difference in just the management of the City funds. We would have proposed further reductions. They just got a little too painful and we think if we're given time, we can accommodate that adjustment. And, again, with our healthy reserves, we feel real comfortable about that. Yes, Steven, go ahead. Kanner/Is this the first time that expenditure in greater than receipt has been projected in--- Atkins/No. We did it a couple of years ago--four or five years ago I think we had, and I'd have to go back and check. We generally try to use the I percent factor. If we're within 1 percent and we have 12 months to accommodate it, we believe the budget's balanced because we can make up for that. We can make up that. Particularly when we have good solid reserves that would ride out any problem. Some of our--again, we believe with those reserves we can ride that out. I'm not overly concerned about that. OK. Next up is our General Fund. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 6 (Laughter by several) Atkins/It wasn't meant to be. Do we have it up there? Vanderhoef/Yeah. Atkins/OK. OK. I just want to highlight in the General Fund because most everything in our General Fund, there are not dramatic changes. In our property tax, I think the most telling comment is if you'll look at fiscal '02, our property taxes were 15,502--you can see that number, first line. '03, we're actually down a tad bit. '04, we're getting back up. With all the State restrictions, regulations, and everything that goes with it, our property tax, while it's reliable, only grows at a very, very modest amount, which means that the rest of our General Fund revenues become even that much more important to us. State aid, I've already pointed that out to you, that it continues to decline. Virtually, none of these are no growth. There's decline in the State's participation in our, in the State Legislature. Unfortunately, State aid is subject to an annual review. Who knows at the end of a Legislative session what those numbers might be. Pfab/Steve. Atkins/Yes, sir. Pfab/What lines are affected by what you just--- Atkins/Property tax, transit levy, library levy, tort levy. Pfab/OK, but I mean, you talk about State aid. Atkins/State aid would be monies and credits, military credits--- Pfab/Monies and credits, OK--- Atkins/Personal property. Where's transit? Transit assistance, State transit assistance, further down at the bottom. Those are the major ones. Pfab/OK. Atkins/Bank franchise tax. To give you an example, I can bank franchise tax--it used to be around $250,000 a year until the State capped it. We have very prosperous banks. The State chair's in it--they capped the number. A noteable line item up there for the first time is the Senior Center fees. That's $57,000. Another noteable line item is the County's support for the Senior Center at $75,000. We don't know what they're going to do. A year ago they contributed $140,000. Then it went to $100,000, and then the Committee talked to them as well as some of the Senior Commission, and you will recall a number of $70,000 to $75,000 as being thrown This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 7 around. Senior folks did cut their budget and since the reduction in their overall expenditures, but 75 and 57--that gets us back to approximately where we were. They have indicated they will provide a report to you on those fees. Interest rate, excuse me, interest income is down. That is just simply market conditions. And the sale of land, please note that, because these are important; these are one-time revenues. They only occur a couple of times so we don't want to rely on them; again, the important thing for our reserves to be in a good position. That's that sale of the, substantially the sale of the peninsula property. You'll recall when we bought it, we agreed to have if repaid to us once the development started over a period of years. OK? Kanner/Where's the old water plant sale? Is that in the previous year? Atkins/No. We haven't sold it yet officially. Kanner/Won't it be in this year (can't hear) also? Atkins/Did we show, did we put that in the-- O'Malley/It's a Water Fund. Is it shown in the Water Fund as revenue? Mansfield/It's not shown anywhere; Atkins/OK. Lehman/Maybe it would be in the Water Fund. Atkins/Yeah, it would be. Yeah. Lehman/So it would not be reflected here. Atkins/No, it would not be reflected--I mean, you could choose to take the money and put it in the General Fund. You have the ability to do that. Lehman/Have a little tough time explaining it. Atkins/Yeah. Well, we're going to talk about water in a little bit. Kanner/Steve, what's miscellaneous revenue? Atkins/Miscellaneous revenue is--- (Laughter) Atkins/I don't mean to be smart-alecky about it. Oh, you know, we may get a small grant during the course of the year. We may get reimbursibles. For example, we'll This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 8 spend something, get the money reimbursed back to us. It's not a real reliable source of income. And you'll see aberrations. One year it's $150, then it drops to 50, and then something else. But generally that's what we--correct, Deb? Deb/Correct. Atkins/Thank you. OK, the next chart up is just to give you a little feel. If you look at fiscal year '02, that number, it grew substantially. That was the revaluation. You remember all that we went through? That was an 8 percent growth. The difficulty was that was the year the rollback tanked and virtually all that increase in value went away. Now, this year to the next is 1.8 percent in growth, in assessed value. Are you with me on that? Vanderhoef/One percent in what? Lehman/1.8. Atkins/1.8 percent. Pfab/You're talking--- Kanner/From '03 to '04. Atkins/That's right. Kanner/In 100 percent. Pfab/Which is 100 percent? Atkins/The first line. Pfab/OK. Atkins/Got it? Whoops. Yes. That's our values. Now the difficulty that we have is the taxable assessed value, which you operate off of, .8 percent. And then to the next year, 2 percent. You got about a 2 percent increase in your taxable value, after all the gyrations we go through with the State. So while our base is growing the last couple years and historically in the 4 to 5 percent range, our actual base for tax purposes is growing in the 2 percent range. It makes it difficult to take any major General Fund initiatives. OK? That's why the State must take on the issue of property tax reform. We're a prosperous community. As you know, there are many cities in Iowa that don't enjoy our base ground. OK, next up. Vanderhoef/We have to keep the inflation at 2 percent if that's all--- Atkins/If you keep the inflation at 2 percent, of course, that whacks our insurance--or our This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 9 interest income goes down with that too. Pfab/They get you coming or going. Atkins/OK. This chart is a combination of two that are in your budget, page 16 and 17. And what I want to try to show you here is why the tax levy is up. The tax levy last year, or this current fiscal year, is 16.8. In this proposed budget it is 17.6. That's an 80-cent increase. Here are various tax levies for insurance this year, current budget we're in, it's 21.6. For the proposed budget with the increase and expense for insurance, 24.3, or .027 increase. Employee benefits--this is pension, health insurance--28.47. Proposed this year 31.90, or an increase of 34 cents. Debt--this year 41.61, proposed 45.95, increase of 43 cents. Add them ail up, there's ~vhere you tax increase is. Our general operating budget has not changed. Those are the issues that I pointed out to you earlier, particularly that employee benefit and the debt. Now, the debt, you do have some ability to pull it down, but not a lot, because we're now locked into that cycle of a big debt that we sold a year ago when we sold the library bond and all the other. Does it--are you up to that? Champion/Yes, perfectly. Does that already include the library? Atkins/Yes. Champion/Wow. Atkins/Yeah. And you'll see our debt policy is a little different this year, trying to ease that a tad bit, so I thought the important thing for you to note is that insurance is market-driven. Employee benefits is substantially market-driven with respect to its value, the cost. State regulation with respect to the pensions, and then debt service is what it is. OK? Again, our general operating budget is substantially unchanged. Pfab/I have a tough question. Atkins/Shoot. On this one? Pfab/Maybe not. Atkins/Yes. Pfab/And that is when we originally looked at the debt to the library, what adjustment, how did the market changes affect it? Help us or hurt us? When we were looking at the financial--- Atkins/When we sold the library bond because of our credit, we got a really good deal. I mean, we got a really good number. The bond market, in fact, the bond market-- This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 10 help me out, Kevin--as I recall the bond market was really at a low point. We hit it really good. O'Malley/It was at a Iow point back in--- Atkins/Yeah. Pfab/When you had to make a final projection, how much different of a number did you have to plug in versus what you were able to make the sale at? O'Malley/Our sale was pretty much right after the election so we didn't plan much on that. There wasn't much planning. Pfab/OK, all right. O'Malley/It was a matter of just (can't hear) the homeowner think they were going to be paid--- Atkins/We were very fortunate to hit it early, at a good time. Pfab/For a period as we go out, we may have lucked out more than we anticipated. Atkins/We can only hope. The next page in your summary is just that. I tried to summarize for you--this is sort of--this is again not in your budget--this is an expanded highlights page. And the budget and the changes in it substantially revolve around these items. We are currently involved in collective bargaining. We have traditionally--and there's no reason at this point to make economics--we can bargain very effectively with our employees. Page 41, and you'll see that in your book, it's in the City Council's budget, we have identified $50,000 for a Public Power Study. At your direction, I assigned it to the City Council's budget not knowing where to put it. Lehman/That answers the question as to why--- Atkins/Oh, there's a spike in it, yes, there's a spike in the Council budget. Champion/I thought we were getting a big raise. Atkins/No, no. You're going to do a public dog study. The Contingency Account is a little less than 1 percent. We know that going in, page 48-49, our aid to agencies and community events, the amount of money set aside is the same as it was last year. Under economic development, we did not fill that position. You know Steve Nasby--we've assigned some of those duties to him; we've spread them out throughout our planning department's organization. We believe that we can still continue to address those issues. So that position is vacant. An important project and expensive is our cemetery records. Virtually everything around here is going This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 11 computer--cemetery, it figures it's its turn and particularly all the historical information that's stored there. This is a one-time expense. I think it's a minor--it's $4,000 or $5,000 to maintain it, but the front end is expense. The SEATS contract, a noteable increase, is up $100,000 over '03. This is our every other year policy with respect to the deer-kill contract--it's $100,000. We have a housing inspector proposed to be funded by the CDBG program. When that comes time, we'll discuss that. Vanderhoef/Is that $50,000 including benefits? Atkins/Yes, that's everything. There's two new positions at the library. We agreed to three; they have funded, they have one, and this would be their next two. Senior Center fees, $57,000, reduced County funding to $75,000. Folks, your guess will be as good as mine. We've added a treatment plant operator and utilities technician at the water plant. That's with the opening of the plant. The treatment plant is the wastewater plant, the expanded capacity and treatment processes as well as the utilities, technician and water. This is part of that overall long-term plan. This is it for them and we're done with their--that gets their staff to the level they need to be. Lehman/But, now, both of those are not, neither the water treatment plant nor the utilities technician are General Fund? Atkins/No, they're not. Vanderhoef/But they are benefits. Atkins/Airport. I want to take a couple minutes to talk with you a little bit about Airport. I really believe you need to target a--we need to pick a date. I don't know what it is, but we did something in this year's budget that we're a little uncomfortable with but felt compelled to identify this. We had projected that in fiscal '04, the Airport's General Fund subsidy would be $213,000. The budget you have in front of you has a General Fund subsidy of $180,000. What we did, we--Kevin came up with this idea even though we're not so sure we like it all that well; but it was something we had to show you as an option--what we came up with was the Airport hangers had always been our understanding they were to pay for themselves. They do not. They require General Fund subsidy. So we rescheduled those payments, spread them out over a much longer period of time--in our judgment, almost too long--it's 30-year payback. That's why we need to work on the Airport financing. If we had not stretched those payments out, the General Fund subsidy would be $30,000 higher than what you have in the budget right now. We have always understood those Airport hangers were to pay for themselves; they are not and the Airport Commission, I believe, has got to figure out either a new source of income to subsidize those and/or raise the rates. Champion/Yeah, that's really too bad because they should finance themselves or they This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 12 shouldn't--- Atkins/We've always understood they would be--I'm sorry they're not here--I don't believe in telling tales--but that had always been our understanding. And Kevin put pencil to paper and said, look, and we need to pull the expense down this year, so we did have a lot choice. We can go back and refigure in the future years. Yes, sir? Pfab/OK, I like the concept but I'm trying to figure out how, what was the mechanism you get to do this? I don't understand. Are we borrowing money? Atkins/No. Instead of a 15, we borrow money internally and pay ourselves back. Pfab/Oh, OK, thank you, so internally--- Atkins/So, like I said, for a 15-year schedule, Irvin, we made it a 30-year schedule. That's not healthy. Pfab/OK. All right, does it, do we get a reasonable return of interest on this? Atkins/We charge interest on it. Pfab/Oh, but what--is it the going rate? O'Malley/Four percent. It was 5 percent; we reduced it to 4 percent. Pfab/Is that a flexible thing? Atkins/You can do anything you want. Pfab/(Can't hear) Yes, I think that. O'Malley/I think we figure the credit quality and term. Lehman/And we got access to the collaterol. Atkins/Yeah, we got access to the collaterol real easy, that's right. (Laughter) Atkins/But I think the important thing is that they have pending in front of you a $15,000 proposal to do that study, and I'm writing a memo to them which I'll share with you. I'm not convinced that that $15,000 on a strategic plan. What they need to do is how can we raise the income stream at the Airport to pay its bills? Otherwise, two years ago I believe the Airport subsidy was $80,000 or something. But unfortunately the arrangements they made with Jet Air, they're locked into it. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 13 Well, I'm telling you things that we went through once before; it just became very clear and I thought, you know, Kevin came up with a good idea to stretch that out to pull it down, but we're only pulling it down temporarily. When you think about having a meeting with them to say, we need a target date. You're going to be self- sufficient by. It doesn't even have to be our lifetime; they just have to decide something. Pfab/But the problem is, what if they aren't? What'lI they do? Atkins/Oh, what do you do? Champion/The Airport. Atkins/Then you have to make choices. Pfab/Can you close the Airport? Atkins/Sure you can, but I'm not suggesting you do. Pfab/No, no, but I mean, it looks to me like--- Atkins/It's a very complex process, Irvin. Or we have to decide as a matter of public policy, the Airport will receive a subsidy and this is the level of the subsidy. Pfab/All right, let's suppose that we decide we're going to close it down. How do, do we have the power to do that? Atkins/Mm-hmm. Champion/Why not? Atkins/We just got to pay the Feds back their money. O'Dormell/Which is a great deal of money. Pfab/How much money do we owe? O'Donnell/Who knows. Atkins/Millions. O'Donnell/Couple hundred million. Atkins/But the land's for sale anyway. It can be worked out. Lehman/Steve, when we built those hangers and I've been on the Council for about three This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 14 of them or four--but as I recall, our finance people, I mean, we--the numbers that we got when we built those hangers were numbers that would pay them offwith lease. I mean, are they not enough leases or not enough rent? Atkins/Not enough money. Lehman/No, no, at the time we did it, we computed that as well as they did. Because I remember once we refused to build the hanger until they came back with a higher commitment on leases. Atkins/Yes. Now, here's ho~v I understand it. Emie, I don't want to make it sound like a cop-out but please understand that I don't have that same level over that I have over other operating departments to tell. But that was the proposal clearly. Lehman/Oh, yeah. Atkins/But in the meantime, several things happened. One is they made the Jet Air Agreement. Lehman/I understand that. Atkins/Remember we were thinking about their money in aggregate. Lehman/All right, in aggregate. Atkins/Yeah. Lehman/You got it, partner. Atkins/We viewed each hanger as its own cost setter and should pay its own way. That's what we understood it to be. That's not the case. Lehman/Well, except they would except for the big one with that $50,000 a year hit from Jet Air. Atkins/Yes. Lehman/That drags them all down. Atkins/It drags them ail down. Lehman/Which is why they're no longer self-sufficient with rent. All right, fine, I understand. Had that Jet Air contract not been--had it been a $50,000 a year higher contract as we had with T.S. Air--- Atkins/Yes. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 15 Lehman/...they would have paid as we had computed. Atkins/We hope so. Lehman/I mean, I think, we--- Atkins/I think, Kevin, yeah, I think we hope so, Kevin, right? Lehman/I think we helped them with the competition. Atkins/Oh, yeah. Lehman/OK. Atkins/Kevin. Lelunan/Fine. Thanks. Atkins/But, anyway, that's a biggie. I think--and you're going to need to have some discussion with those folks. Central Services, you'll note, is down. That's reduced cost to telephone services; that's why we're doing all those things we told you about changing the telephones. Well, we're going to change 100,000 bucks. So, that's coming down. Pfab/Can I ask a question? Atkins/Yes. Pfab/What was the, what were you able to do, how were you able to cut it down? Atkins/Essentially, Irvin, we're going to be the telephone company. Instead of Qwest going to each one of our buildings and charging per line, which is coming to this building, then we've got lines going throughout, and so we're saving money on all those lines. It's something like 250 lines. Pfab/Is that the reason, is that where the--- O'Malley/That's where the maintenance are saving it. Pfab/What about, say, like long distance? O'Malley/That's a separate contract; that's a separate line. Pfab/But, is that reflected in this? O'Malley/No, that's a separate. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 16 Pfab/All right. OK. Vanderhoef/How much infrastructure did we, how much did we put into it, the payment for that infrastructure? Atkins/Oh, ~ve're going to have $500,000 or $600,000. We've got a six-year payback, I thought it was. Does that sound right? O'MaIley/That was the original line Dee (can't hear) Atkins/Yeah. O'Malley/...and then the University and Johnson County and the Iowa City School District joined in our program--they wanted to join up--and so it ballooned from a $700,000 program to about a million three ($1.3 million) and they're going to pay their share back. And so we were looking at a four-year payback; now we're looking at a seven-year payback. Atkins/Yeah. But all the governments--it's just not costing us anymore. Vanderhoef/If we budget $100,000 quotes that you call "saving," we're getting paid off for our project. Atkins/Yes. Right. Pfab/How much of that--and I'm not sure which term to use--excess capacity or capacity of use--is it? O'Malley/Essentially, Irvin, we're, when the University and the school district, they bought their own wire. But since we have the contract, it's in our sheet. So we own the sheet and they own the wires within that sheet. Pfab/But if the wires that we own sheet, how much excess, how much more capacity do we have? O'Malley/We have efficient capacity because we've--- Pfab/1207 O'Malley/I'd say about 300 percent. Pfab/OK. Atkins/OK. Kanner/And so for our payback on that $700,000, is that going to be equal to the This represents only a reasonably accurate transcription of the Iowa City Council Meeting o f January 13, 2003. January 13, 2003 Council Budget Work Session Page 17 $100,000 savings? Atkins/It will be each year. We'll be saving $I00,000 a year, per year. So after seven years--- Kanner/You're saying after paying back our debt service on that, we're going to save an additional $100,0007 O'Malley/Right. We'll have $100,000 savings. Atkins/After we've paid off our bill, the $100,000 will continue to accrue with the savings every year thereafter. Vanderhoef/Every year. Atkins/That's what I'm saying. Vanderhoef/You put money in to save money. Karmer/So our debt service is $200,000, or let's say for this infrastructure a year, then we have to pay and we're going to save $300,000 in costs, with a net gain of $100,0007 O'Malley/I'm not sure about your example, but--- Karmer/Rough figures. O'Malley/Rough figures, we're going to be saving $100,000 per year in what we'd have paid the telephone company. Karmer/Right. O'Malley/So we use that $100,000 each year for the next seven years and we'll pay off the system. After seven years. Karmer/Is that going to equal the payoff for the debt service on that--- Atkins/Oh, yes. O'Malley/It'll be more than that. Atkins/Yes, more than that. Lehman/But the debt service comes out of the $100,000 (can't hear---paid). Atkins/Yes. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 18 Lehman/Right. Kanner/So we end up with a net of approximately $10,000 to $20,000? O'Malley/Yeah, because we sell our debt on 1 O-year increments, so that $700,000 would be spread over 10 years, and $100,000 comes this year so it's probably $30,000 plus. Champion/But now, it just sounds pretty good. Who else did you say was in on that? Atkins/University of Iowa and Johnson County. Champion/Are they paying in that debt service? O'Malley/No, they're going to pay up front. Atkins/They're going to, yeah. Champion/Oh. O'Malley/They pay theirs up front. We're not going to--- Vanderhoef/Now, I think this is something that not all the particulars of it, but I think it's something that the citizens ought to realize that hem again, this is the great governmental collaboration to save all the taxpayer money. Atkins/Tell them reporters to report that. (Laughter) Lehman/That's really, that's the exact problem. Vanderhoef/It is. I mean these things are worked out by our staff. It's not anything I did and I'm not taking any credit for it, but I am applauding you for doing it. Pfab/But I also--it makes you wonder that Qwest must have looked at us as kind of a choice morsel. Atkins/(Can't hear) (Laughter) Karmer/And one can go further and say the other utilities are the same moist--- Lehman/We can't say that yet, but we'll find out. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 19 Atkins/Something about a study. All right. (Laughter) Atkins/OK. I've already mentioned to you the comprehensive review of all our property, worker's comp, and general liability insurance will be a task this year. Our healthy reserve position may be further reduced because our road use tax came in better than we thought. I'll show you that in just a moment. And then, page 121 is health insurance. We're projecting a 15 percent increase this year and then the increase in police and fire pension, we did not that I know of get anything from IPERS. In fact, IPERS is paying a dividend this year that I know of. So they did OK, but the police and fire pension plan under-performed substantially. Pfab/OK, how is this, is the police and fire pension performance based on a year-by-year basis and on a past year or an anticipated year? Atkins/To my knowledge, it's historical. That's how they do it. Pfab/So, if they have a good year this year, say on investment end of it, that can change quite a bit? Atkins/Well, the unfortunate thing happens is that once you get your contribution up on behalf of the govemments--the State sends us the bill--there's usually this head- long rush into saying now that we have a lot more money in the plan, maybe we ought to think about some new benefits. And that's the whole political process that goes on at the Legislature. ! mean, we truly--they send us a bill and we pay. Yes, sir? Vanderhoef/That's an unfunded mandate. Atkins/Well, we have City representatives on their pension board. Yes, it is, Dee. It's an unfunded mandate. It's a bill. Vanderhoef/Surprise. Here you go, guys. Lehman/(Can't hear) (Laughter) Atkins/Steven, you had a question for me? Karmer/Two issues. One, we now have an option apparently as have City Council members to have IPERS and Social Security. That was revised--- Wilburn/That's right. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 20 Kanner/...the first week it was for a short period you couldn't have Social Security and we got a refund before we contributed to Social Security. But now, the State is saying you can have Social Security and 1PERS both, but it's up to the City Council to have that option. I'd like us to discuss allowing City Council members to have Social Security along with the IPERS plan. Champion/We do have some--- Pfab/I would go along with it. Vanderhoef/I don't understand what you're saying there. It isn't either or; you're saying both? Atkins/It can be both. Kanner/It can be both, but it's up to the City Council to allow that. Champion/We've already done that, haven't we? Atkins/No, this is a new law. Vanderhoef/I guess what I'm asking you then is whether you are looking at the City contributing to both or that it would be an option that I could choose to say I want mine put into Social Security, then take it out of my check? Kanner/I believe the reason the City Council has the final word is because the--- TAPE 03-05, SIDE 2 Kanner/...along with the employees, us the City Council, so you would have IPERS that you would pay your I percent, which the City would match, or whatever IPERS is; and Social Security you would have your 7 percent or so deducted and the City as employer would match it with that. Champion/We already do that. Lehman/No, we don't do that (can't hear) Kanner/No, it was changed, Connie. We got a refund of our Social Security because we were told that we can't go into both, whereas other public employees can go into both. Atkins/Yes. Champion/Oh, I see. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 21 Kanner/But it was changed; now it's changed back, but you have some flexibility on the City Council. Lehman/Well, that'd be a discussion for another time. Atkins/Oh, we can put it on, Steven said place it on the agenda. We'll make a note of it. We'll put it on a future agenda. Lehman/Yeah. Pfab/I had just one question for you. The City Council are the only people in this position, right? Atkins/As far as I know. I mean, we as City employees pay both IPERS as well as Social Security. Yes, sir? Kanner/And the other thing is--a follow-up on the GASB 34. I was just reading an article on it in one of our magazines for a couple months (can't hear). I put it in our stack--it will be in there Thursday. But they were talking about costs being anywhere from $40,000 to $i40,000 per a couple cities of somewhat similar sizes. And I guess a lot of the cost is you have to inventory infrastructure, like roads--- Wilburn/Correct. Kanner/...that you didn't have to put into the accounting. And it seems like we have to-- the deadline that 1 saw was this year. Atkins/Fiscal '03. When we do the audit for '03, which we're doing, we will be doing when this budget year ends, we have to have accounted for GASB 34. Kanner/So are you putting in the budget some hiring a consultant or doing this in-house? Atkins/You're getting a memo, by the way, Thursday in your packet on that issue to help summarize. But, Kevin, why don't you tell them? O'Malley/Yeah, we are looking at adjusting our personnel in accounting to take some of that work load. We do have some historical records and there's some other ways of valuing those roads, and we do have--Steve's correct--it is supposed to be in conformance this fiscal year. And it should be done by November of this year. So we're going to be doing a new charter accounts and some other accounting. So accounting's going to be very busy this year trying to meet that compliance. Kanner/Are we going to be, are you budgeting that we hire another person? O'Malley/No. We have, we had a staff member retire, and we're looking to upgrade that position to a professional position and that person would work with the rest of the This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 22 staff on that task. And we will probably bring in some consultants if there's some unique valuation issue. But our accounting people have been going through the last two years to training on GASB 34 and implementation. So, --- Atkins/And our auditor knows that's what they have to do this time. O'Malley/Right. In fact, our auditor put on some classes on GASB 34 and implementation. Lehman/So, we're covered. Atkins/So, well--we hope so. We've chosen to try to do it in-house. O'Donnell/OK. Atkins/...as opposed to hiring some folks. I think once the system, help me, Kevin, once the system is in place and we're accustomed to accounting under those rules and regulations, we can move along. But it's going to be a big year and everybody has to do it now. Champion/My question is--because ! was choking on the popcorn, Mike tried to kill me,- Atkins/I could say that's not funny. Champion/What is this Nasby thing, what is it? Atkins/GASB. Champion/You told us once. Atkins/Govenm~ental Accounting Standards Board. Champion/Right. Atkins/And they do something called Governmental Accounting Procedures. So, GASB, Governmental Accounting Standards Board, has a rule called number 34. So GASB 34 applies to governments. If we're going to fulfill the GASB, the Standards Board's rules and regulations, we need to have the things done that Kevin pointed out so that we then follow generally accepted accounting procedures, GAAP. Lehman/That's an inventory o f the value o f public property. Atkins/I'm putting them in your packet. But the kind of bottom line is that bridge has a value. Like, if you look in this budget, you'd never find the bridge identifying. But This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 23 we have to identify it, value it, and depreciate it. Kanner/And that's going to help us in the long run, I think, because--- Atkins/In the long pull, the public will be better served because they understand completely the inventory of all the assets that we have. But in the long run, it should, for budgeting purposes, I think, as you're pointing out, allow us to say we've got to put some sort of financial schedules together because those things ultimately have to be replaced. Lehman/The other thing is that will be still incredibly misleading. You value all the streets, sidewalks, bridges, all of those things. Atkins/Parks. Lehman/The average person looks at the financial statement, and, my lord, is the City rich! You couldn't sell any of those assets for anything. Not a nickel but you can't get rid of them. Pfab/You might be able to sell the (can't hear) Atkins/You know, the Brooklyn Bridge thing is not so far off. Lehman/That's exactly right. That's exactly what it is. Karmer/But it will help us, for instance, when we vacate--- Atkins/Yes. Kanner/...items. It'll be a little less controversial, I think, because we will be a little clearer of what that's worth. It might be off to a certain degree, but at least we have somewhere to start with in (can't hear) Atkins/I think as Eleanor pointed out, there's something in the law that we must receive just compensation. Is there some terminology? Vanderhoef/Yeah. Atkins/Well, I suspect they're going to have to rewrite some of those laws because it will be very specific as to if you don't accept that value, you as a Council would have to declare why you're choosing not to accept that. Not so much what you're accepting, the other way around. OK. Champion/(Can't hear) Atkins/True. OK. Two items I want to add to this list. The last couple days--this This represents only a reasonably accurate transcription of the Iowa City Council Meeting o f January 13, 2003. January 13, 2003 Council Budget Work Session Page 24 occurred in the last couple days. I've talked with Terry Trueblood and he spent some time with Parks and Recreation Commission. It is a very high, high priority for them to get their master plan. Do you remember we set it aside last year? They were not thrilled--but they also didn't say no--that we would finance a master plan for Parks and Recreation from the Parkland Acquisition Fund, which is not General Fund, and then repay it back over a couple of years. We've done this in the past. O'Donnell/How would we pay it back? Atkins/We would have to make it a General Fund appropriation over a number of years. We have done this in the past. It gets them their master plan. We will make the Parkland Acquisition Fund whole unless--you could take the money, just pay for it if you wanted to. They feel very strongly about that. I told them that I would communicate that to you. It's something that is not in this budget but you need to think about. And so at the bottom of your list, if you can just write "master plan." Yes, Irvin? Pfab/Will this work in a number of, the master plan, now you're talking values or strategy? Atkins/Both. My reading is more strategy than value, Irvin, but they need to have a comprehensive plan of sorts. Pfab/So the value that we're working--- Atkins/Oh, for the GASB set? We'll certainly get, likely to get an inventory, and may make our records that much better, but I'm not really concerned that our parks' records are--I think they're pretty accurate. So, you will hear about that one. That one did not get in the budget. And one more addition: we have been working water rates off and on now for the last several months and have tried to do some projections on our cash position. We'd like to recommend lowering the rates by 5 percent. Champion/Yeah, I love you. Atkins/Well, thank you. (Laughter) Atkins/I'm not so sure I know what to do now. Lehman/We can't vote on that because it wasn't on the agenda, but the (can't hear--dust) sit on that one. Atkins/Well, add it to the list. What we have done is we've looked at our cash position. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January ! 3, 2003. January 13, 2003 Council Budget Work Session Page 25 Now we're not in as good a position in sewer, and we'll show you that and (can't hear) in water. Twenty percent cash policy--we've got great bids on our water project. Our schedule for rates were based upon one level. We got good bids. We think 5 percent we're comfortable with; we'll reassess it again next year. Lehman/I think this is really huge, because back in '93 when we first started this whole conversation about the water plant and the 20 percent cash accumulation, or whatever, and we gave a five-year projection, I think, where we said each year how much the rates were going to go up. And we said that after the last increase that at some point the rates should probably start to go down, and I think this is, really, it kind of says that we're going to do what we said we were going to do. Atkins/Well, the newspaper, Ernie--- Vanderhoef/(Can't hear) in '96 or '97 that we finally started doing the cash (can't hear) because that previous Council wouldn't do it. Lehman/Well, the decision was made though. Atkins/Well, there was a newspaper story many years ago about, that was very critical that we were--it was out of control. It was absolutely wrong. We challenged it then. We'll challenge it again. We believe these are good numbers and we can keep it--we can go with 5. I know it doesn't, you know, sound like a lot. But if we were, for example, if the investment were to improve, then it might allow us--but those are things we can't--so it's a fairly conservative approach but I think it's something we can recommend to you. Pfab/I have one question. Atkins/Yes, sir. Pfab/Again, was the way the money market cost, the market of money, does that have anything to do with it? Atkins/It had a little bit to do with it. The biggest thing was the great bids. Over the long pull, it was we just simply estimated the cost to be one and it came in less. Pfab/Less complication or just--- Atkins/A little bigger--no, we had a number of bids on all of our projects--- Pfab/But I mean was (can't hear) Atkins/There was a lot of competition. Pfab/These contractors weren't as busy? This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 26 Atkins/Tough to say. What's in their thinking is difficult to say and I will be the first one to admit, that there's always a little luck involved, yes. Kanner/The actual costs are coming in at the bid or under? Atkins/Under. Our bids came in under. It must have been private--- Kanner/(can't hear) applaud Shawn. Atkins/Shawn--yes, Shawn, you know him by reputation. Yeah, Shawn runs a tight ship. Kanner/Well, I visited a couple times. Atkins/OK. So those two items need to be added. You need to think about that. Now, I want to switch and give you a quick summary on debt. This again is in your book. Pfab/It's a handout also? Atkins/This is the handout that is not in your book. It's in your handout, that's right, that's your handout. We have a reduced CIP, Capital Improvement Plan, this year. The summary of the capital projects are in your budget on the cream-colored pages. I also have in your handout the summary of all of those projects on one page for working purposes. What I anticipate is that tonight we can discuss operations, but I wanted to give you a little heads-up on debt planning. Wednesday the staff will be here to take you through each of those projects, explain all the issues associated. We chose a reduced CIP for a lot of reasons. One is that we're coming on the heels of a really big bond sale a year ago, 29-plus-million dollars. There are enough risks out there that we want to be cautious about what we do with respect to our borrowing. Our position is such that we still believe that our credit analysis should afford us excellence in our credit rating. You will see in a moment that our debt capacity is satisfactory; that is, we have room if something were to be necessary in the future. The capital plan represented in those cream-colored projects is $31.7 million in general obligation borrowing as well as $7.1 million in TIF financing. TIF is a G.O. bond and it has to go against our capacity, and we have to identify it. It is repaid by the revenues from the project. No,v, we are averaging in our capital plan about $6.3 million in new debt per year or debt sale per year for the five years. However, there is some issues within our debt plan that I can't give you a yes or a no now, but I would sort of like your acknowledgment. Our road use tax looks good. We believe we might be able to put an additional $1 million against that 31.7 for the use of road use tax and still maintain our capital plan. Yes, sir? Pfab/Would you explain what you mean by our road use tax looks good? But what do Atkins/OK. In your budget--would you look up the page number for me? You'll see it in This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 27 your budget. Our road use tax end-of-the-year balances are such--OK, does that help you? That's what I'm talking about. Our end-of-the-year balance is such that we believe we can draw on that for the purpose of financing some projects and thereby not borrow. O'Donnell/So, in other words, there's (can't hear) Atkins/Yes, there is. Vanderhoef/One what? (Several talk) Atkins/And you'll see those numbers--the reason we believe that--if you look at it, you say, 119 is the page--I don't have it in front of me, but you should see that reserve position grow over the next three years. It's growing. Lehman/Right. Atkins/That's OK. Very nice. I've got it here. I'm pretty sure I've got it committed to memory, but it does grow. Mansfield/It goes from 2.1 to 3.3. Atkins/Yeah, OK. That's why we're proposing--we believe we could use monies in there. In fact, we may be able to use even more than a million. The second issue: in our budget planning, we looked very carefullly at our debt payoff. I ran a schedule and we are paying off debt at the rate of about 4.5 to 5.5 per year. So, if we're selling 6 and retiring 5, our new debt is about a million dollars. These are very rough numbers, but that's the thinking that--but we don't want to get much beyond that because then the debt begins to accumulate. We have a project in there for sure called Camp Cardinal Road and we'll vote it out Wednesday, where there will be a significant developer contribution. It is not shown in this budget. The reason I chose not to show it in the budget is it's subject to negotiations rather than tip your hand, but there will be a significant developer contribution. Pfab/OK. Atkins/Yes, sir. Pfab/I'd like to have you back up just a little bit. Go back to this road use tax. Atkins/Yes. Pfab/Is it the fact that we didn't spend as much money--we got more money in--or we were able to get better utilization of the money? This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 28 Atkins/All three. We got, it came in at the beginning of the fiscal year, you remember last year's budget we expected it to be down? It ended up coming in better because it's a per capita number. Let's say we projected it at $80; it actually came in at like $82. Pfab/OK. Atkins/So, that was just good fortune. And then as far as the capital projects that we did, we had a rather debt issue. We did not spend as much on road use tax to help support some of those street projects, thereby improving that position. Champion/We had some really good bids on projects that we did. Atkins/Yeah. Yeah, that all works to improve those--there's just a whole slough of factors that affect those end-of-the-year balances, and it's tough to kind of identify any one in particular. OK. So, we can hopefully reduce our average debt from about 6 maybe down to about 5.7, which comes very close to what we're paying off, and I'll show you in a chart right now how that--because I'm trying to slow down that growth in capital spending, not capital spending, capital debt, and still allow you to the flexibility to do a capital plan. The important numbers to look at here are fiscal year '03, '04, '05, and '06. And you'll see we level off that debt, 59, 60, 63, 59; now that's just how we have the debt scheduled in the plan and when it should be sold. We could have made that probably 60 percent by just kind of averaging it, but the important point is that we are not seeing significant growth in our debt capacity over the next four years, if you were to accept this plan the way it is now. If you tack any projects on, that will change those numbers. Are you with me? OK. That was a goal, trying to slow down the growth of the debt, let it average out over the next couple of years; we can take a brief--do a little catch-up with respect to improving our financial position then. Yes. Lehman/Now, ifI understood correctly, on the previous page you were saying that we were incurring debt at an average of about 6.3 million--- Atkins/Right. Lehman/...paying it off at about 5. Atkins/Yeah--4 1/2 to 5--- Lehman/If you look at this chart, we're going up an average of 3 million between '03 and '04, 7 million the following year, and 3 million the next year--- Atkins/OK. Lehman/...are significantly more than the 1 million--- This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 29 Atkins/3, 7 and 3--add them up, divide by--remember I said it was an average. I could give you 6 million a year each--- Lehman/No, no, no, but the increase of outstanding debt should average approximately a million dollars a year. It doesn't. You're going up 3 million from '85 to '88. If we're borrowing 6 and paying off 5, that's a million dollars a year. Atkins/Right. Go ahead, Kev. Lehman/Between '83, '85 to '92 is what, 7 million dollars increase in three years, which should be $3 million. Atkins/Go, Kevin. O'Malley/What's not factored in there is that TIF. Atkins/The TIF is in there, too. O'Malley/It's 7 million, which is not the payback by--- Lehman/ Oh. All right. Atkins/This is the, that--- Lehman/Where is the 7 million? What year? O'Malley/It's the '88 to '95. Atkins/Yeah, '88 to '95, '04 to '05? O'Malley/OK. Champion/'04 to '05? Atkins/All right. This is what's supported by property taxes. Wilburn/All right. Atkins/OK. O'Donnell/Fine. Pfab/Gotcha. Atkins/OK. Now. Then the next chart is a matter of policy and the same general principle was applied. We have the 25 percent policy. We try in those four years This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 30 to keep it 25, 26, 25, 26; I mean it's, I don't like exceeding it. But we're trying to slow--you can see the years of the big growth, and we're trying to slow that down. And the important thing is we still have room to meet an unknown challenge or take advantage of an unknown opportunity right now. We're at 60 percent. Would you turn the lights back on? Kanner/What is Coralville at? Atkins/Oh, don't hold me to it, Steve. I mean, at one time they were 90 plus; I think they're down to maybe 70s or 80s now, in there. I just don't know. Kanner/And what's the average across the state? Atkins/Oh, I couldn't tell you. Kanner/Are most of them at their Constitutional limit? O'Malley/I would think so. Atkins/I'd almost think so. O'Malley/(Can't hear) smaller city. Champion/If they're not growing. Atkins/Yeah. Lehman/You know, we did talk about that during budget at one time the last three or four years. It seems, if I recall correctly, we were significantly less than the average across the state even though it's across the state, they weren't at their max; but they were up a lot, 70 or 80 percent of their legal limits when we were down in the 30s and 40s. Atkins/We still have a lot of room; we're comfortable. But I also, you know, it works toward your favorable financial position is that you are up to there. OK. That summarizes the Operating Budget, and, Ernie, as I told you, there's just not a lot of room in there. I've identified what I think are the major highlights. The next review is the CIP scheduled for the morning of, Wednesday morning at 8:00 o'clock. In your packet you will have this. That is a list of capital projects that we will go through with you; those cream-colored pages are intended to be a summary of the capital projects, not unlike the Operational pages summary. There's a narrative. In the back of your budget is the more traditional--all of the information because we use it for management purposes. But that's the summary of the projects that we've been walking through. And then something that I want you to think about when it comes to capital projects--this, too, is also in your list-- that's Unfunded. But the important thing and I really encourage you to look at This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 31 those. There are projects in there that are reasonably popular. I'm looking at 20 and 21, Foster Road, Dubuque, Foster Road-Dubuque intersection; it is not funded. Lower Muscatine, Spruce, DeForest area, number 33, that's down by Kirkwood Community College--they're about to put up another building and I expect, yeah, it's go, go, go down there. And they have lots of traffic issues. Northside Market Place. Vanderhoef/That's in TIF district? Atkins/It is not. Not where--that's right outside the TIF district. The Sycamore-First, Dee, I am almost positive is outside. The piece of ground of what used to be the Hardee's was TIF. Vanderhoef/Mm-hmm. And that was what? Atkins/That's where the new academic building is going. Vanderhoef/I think Steve is bringing that to us at Economic Development--- Atkins/Oh, is he? I'm sorry--I wasn't aware of that. Vanderhoef/...that that might be something to add onto that district. Atkins/OK. North Marketplace, number 41; number 88 Sandusky Sewer--we tried to get that done a couple years ago, the neighbors objected to it. Now, we understand the neighbors are in support of it; it goes back and forth. Rick can explain that to you. And the e-mails are coming in fast and furious for the dog park. Yeah. You have that one. Kanner/Are they sending a dollar with each e-mail? Atkins/(Laughter) No, they're not. That would be nice, Steve, to come with that. Vanderhoef/Are they sending one to Coralville, too? Atkins/I haven't heard. Kanner/Maybe we should put that on the agenda for next week. geriously. About a joint park. Vanderhoef/Yup. Atkins/That's about it on the handouts. Vanderhoef/I think that's a good idea. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 32 Pfab/Yes. Lehman/Kevin, I have just a--and I don't know if this is a lot of work, forget about it--but on these capital improvement programs survey '03 through '07, there's (can't hear) a whole page. Some of these are strictly General Fund expenditures; some of these are probably consumer water expenses. Now those--at least from my perspective unless I'm mistaken--those that affect the budget are going to be those that are P.O. bonds. Atkins/In the cream pages we've identified the source of financing of all of those projects. Lehman/So if we just cross-reference--- Atkins/So if we just cross-reference them, you should have that. That list is just to allow you a working list when the staff's in here presenting. But the cream pages have a project description and the source of the fund. Lehman/But, for our purposes, it would be well for us to cross-reference those--- Atkins/Yes. Lehman/...to see how much, for example, of the Mormon Trek, $7.3 million project, is G.O. Atkins/Yes. Lehman/Because a significant portion of that is--- Atkins/Like in that case, it's also the sewer is proposed to be financed by G.O. because we do not have sufficient capacity in the Sewer Fund to pay for it. If you're going to build the road, you might as well build the sewer at the same time. Lehman/Is that going to be for the sewer project, does that get repaved with the sewer funds or--- Atkins/We don't have enough capacity in the Sewer Fund to sell any more major debt. Kanner/What's the capacity ofthat--- Vanderhoef/OK, what about revenue bonds? Atkins/It is, that's what it would be. Vanderhoef/It's called revenue bonds. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 33 Atkins/We have--OK, Kevin, ifI can remember how to do this--we have bond covenants in that we must have a factor of 125--1.25--that we must be able to show that we have sufficient revenues and we must be able to match that 125. We're at 126. We're comfortable. Lehman/The only way you could do that project is to raise the--- Atkins/Is to raise sewer rates and you don't want to do that, I assume. That's where it is. Now, does that mean there could be some tap-on fees and some other ways of going after it? Yeah. And you remember I mentioned that there are developer fee contributions and there's--you've got (can't hear) points in there. So, the Water Fund is solid. That's why we want to propose to do sewer. We're fine. I mean, there's nothing to be panicky about; but it just doesn't have much latitude in there. Pfab/OK. You mentioned--and I don't understand it--I'll see ifI do. You say that we have a covenant with the bond people that we won't go above 1 point--- Lehman/We'll go below it. Pfab/Oh, I see it. Atkins/OK. Pfab/Got you. The other way around. Atkins/Can't go below it. Then what happens when you're in audit and they see that number, and let's say it came in in our audit as 121. Well, that's a no-no. So what we have to do is during the course of the year, we've got to adjust our expenses and/or increase revenues to an amount to get that back to 125. That's the covenant we have with the bond holder. Lehman/My suspicion would be if you fell below that you almost, I mean, good conscience would almost require that you raise rates. I would think they would like to see that happen. Atkins/Or cut expenses. I mean, either way, Ernie, it has to work out that way, and you're right--you have a covenant and the bond holder can come back and say, you promised, and we'd say, yes, we did, and that would be taken care of. It doesn't happen very often, but we're close enough on sewer that we have to keep an eye on it. Yes, sir? Pfab/OK. But the other way, if we get to that emergency, say we get to 121--- Atkins/Yeah. Pfab/...and now does that allow, or is there any way that what we are doing in fact by This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 34 funding those sewer parts by General Fund, could we do that if that happens, say, OK, we'll put money in--- Atkins/Oh, sure. Any way you can get the covenant back up to the 125, the bond holder-- Lehman/(Can't hear) how you do it. Atkins/...the bond holder's not going to get excited about, just you made a promise to keep it at that number and we have an obligation to do that. I mean, we're not, the punishment for not doing it, Irvin, would be maybe down the road in a few years when you were getting a credit rating on a sewer bond, someone would pull that out and say you--- O'Donnell/You pulled a boo-boo. Atkins/...you pulled a boo-boo and then, if you didn't fix it, then it is a boo-boo. Champion/I don't understand though why, if we funded these projects, like the (can't hear) Atkins/Yeah, that's a storm one. Champion/(Can't hear) on the General Fund, why couldn't that be paid back when the Sewer Fund is in better shape? Atkins/You can. Oh, yeah. You could put some sort of, I assume, sort ora memo in the file that--- Vanderhoef/(Can't hear) Atkins/Yeah, it is. No, Connie, you chuckle but that's exactly what it is, is that as the fund improves, I mean, in theory, if the Sewer Fund is in trouble, Water Fund isn't great, transfer money from Water Fund. That's your choice. Pfab/So, in other words, it's a working capital, really? Atkins/Absolutely. it is very flexible. You get to make a lot of decisions around it, but, you know, for the purposes of the public, we'd like to maintain those funds separately. They stand on their own. We maintain they stand on their own. There's nothing illegal or unethical. It's just a way of addressing a financial--and sometimes financially you get a huge blowout of sewer and we have to go fix it and it's got to be taken care of. I mean, you're going to spend down your cash-- well, there goes your covenant. Well, the person looking at the covenant--what happened? Oh, here's our plan to repay it. Oh. It doesn't change their investment any. It just gets you later on if they come back. This represents only a reasonably accurate transcription of the Iowa City Council Meeting o f January 13, 2003. January 13, 2003 Council Budget Work Session Page 35 Kanner/What other project is contained in sewer that we're going to be paying, propose to pay with G.O., municipal? Atkins/I think that's the only one. Just give me a minute. Kanner/Lower West Branch? Lehman/But it would be in these yellow pages? Atkins/Yes. If you look under G.O. that includes Sewer--that's Mormon Trek. Vanderhoef/Does Scott Park Trunk sewer? Atkins/If, I believe Scott Park Trunk sewer is current cash. We have that one, because that's where we're spending it down. Steve, I'll check to make sure, but right now I'm pretty sure that's the only one because I remember specifically in my notes--I wanted to flag that for you because I knew there'd be some debate. Vanderhoef/How about the request that has come in from the County to go out to the site? Atkins/I'm not sure where that is. We got a letter from a supervisor asking us to consider it. The only member, do you know where it is because Dale's handling it? O'Malley/It is that I've left a voice mail for Don Hamey since he got back from vacation- Atkins/Has he called you back? O'Malley/Yeah, he never called me back. Atkins/We'll need to find out more about that. We have a general staff position that they're getting the old armory site and it had a value of like $1.5 million. The site they're giving up is like $700,000 in its value. And we've got those numbers--is that about right, Dale? I mean, the substantial difference--- Helling/It's substantially different, yes. Atkins/...and our point was why are you asking us to do a sewer for that project when it's all said and done, you head out with a significant increase in the value of your holdings? And we didn't get an answer there. O'Dormell/Good question. Atkins/I mean, we're not being glib about it but we just haven't got an answer on that, and you need to think about that before you choose to do it. Now,--- This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 36 Vanderhoef/Is that going--- Atkins/It's about $82 to $100,000 for that sewer. Helling/Eighty-two. Atkins/Oh, $82,000 for the sewer. Helling/Ninety. Atkins/Now there is some interest on their part in the land immediately south of the County farm, about opening that for park. There's a really neat piece of wooded property in there. But sewer has to go up through there to serve that portion which could be opened also for development. That sewer could also be hooked into that site for the armory of the Guard. So there's a lot of things that I can't give you answers on right now, but that's what's being talked about. Yes, Irvin. Vanderhoef/I think we ought to be getting information from the County sooner rather than later because I suspect that--- Atkins/That's what Dale is attempting to do, to find out where this thing is, because I didn't put it in the budget, becaue I wasn't sure what it all meant. Lehman/The ball is really in their court right now. Atkins/Well, they'd say it's ours. I think that it may require--knowing how the County operates--a couple of you may have to talk to a couple of supervisors and yeah. (Laughter) Kanner/Once we do have a concrete proposal we do owe them some sort of answer. Atkins/Yeah. I think we do, Steve. Yeah. And I think we're going to have to pose a number of questions when we do answer it. Yes, sir? Pfab/Doesn't the military aspects of it have any potential for Federal funding? Vanderhoef/No. Atkins/No. The Feds won't pay. They won't pay for the sewer. Vanderhoef/The Guard and Reserve do not have the capability to buy property for the armory. The Army Reserve has the possibility of buying the Federal (can't hear). Pfab/OK. So, is it to their advantage or are they willing to pay a higher rent to go out to the other place? This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 37 Vanderhoef/They mean that--nobody's paying rent. Atkins/There's no rent. They're just swapping land. Pfab/But the County gets no rent from, who owns the land down here? Atkins/Down there? The armory. The Guard. The Defense Department. Pfab/OK. So, the Defense Department wants to--- Atkins/They want to move out of there to a new site. Pfab/OK. So they want to (can't hear). So, but they don't want to pay their part of the tab Atkins/They don't do that period. Vanderhoef/They don't, the law doesn't allow the Guard to buy--- Pfab/What if they own it already? Vanderhoef/That was something a long time ago, and they own it. Pfab/Will they own the next one? Vanderhoef/If they swap it. Lehman/If they swap, but I think Steve's point was--- Atkins/I'm just saying I don't have the answers to a lot of these things. Pfab/No, ! don't either. I'm just trying to look at it, where, and you know, this isn't working--a great, maybe put a potty out their way--- (Laughter) Lehman/I think your point, Steve, was if they're swapping a piece of property that is much lesser value, the County certainly has the margin in there to provide the sewer and still be significantly ahead on the deal. If the $700,000 for the property and 1.2 or 1.3 million for the armory, they can put in a $100,000 sewer and still be $400,000 ahead than if they had to condemn or borrow the money to buy the armory. Pfab/But, why--- Vanderhoef/And that's--- This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 38 Pfab/What if somebody else would? Atkins/That's the question. Lehman/Well said. Vanderhoef/Help me one more piece. Atkins/OK. Vanderhoef/Everything on the north side of the Melrose is that our growth area or is that in Coralville's growth area--or where are we on that? Atkins/I'm pretty sure that's our growth area. Helling/The piece that they're talking about is actually in the City limits. Atkins/It's in the City limits. Vanderhoef/So, it's already--- Atkins/Can ! look at this other map--yeah, it's in the City, that's ours. Vanderhoef/OK. Atkins/Yeah. Lehman/It's just--- Vanderhoef/And there's developable property to the west of it? Atkins/And south. With the farm property. Lehman/It doesn't go very far west, I don't think. Atkins/I suspect you're going to, if they do it, you know, make some sort ora land trade for sewer deal with you, whatever, that they will likely pursue some sort of requirement for open spaces. There's a very heavily wooded tract of land in there that I think the County has some strong opinions about preserving, and I'd suspect we would have the same opinion as well. Lehman/Also, there's also a piece of ground cemetery. Atkins/Yes, that's in there is a cemetery there also. OK. Now, before you ask me any more questions, are we OK with the schedule that I gave you? I'm finished for Operations unless you have things--- This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 39 Lehman/We'll.just go and see. We got CIP--- Atkins/Tomorrow's, or Wednesday's CIP. Now Marian has a schedule that you need to take a look at. You got that, Marian? This is a new new one. We don't have to decide it tonight, but we ought to get this decided on Wednesday morning when you have your calendars, because of changes, and days a couple of you are out of town, when you get budgets approved, you know, all that type. Karr/This schedule reflects--a number of you had some scheduling conflicts, both personally as well as professionally. We also had some concerns about spring break, some holidays and then just the obvious constraints we had with the budget. So what I tried to do just to focus the discussion was take into account, knock on wood, everybody's schedule and pick out a schedule that enabled all the days off that I had heard about, allow the budget, avoided spring break, included the NLC, and there it is. (Laughter) Lehman/All right. Look it over and we can go. Vanderhoeff What a jigsaw puzzle. Karr/Well, we'll see. Champion/Did we already say the 27th and 28th on the budget calendar? Atkins/Yes. Karr/Yes. Champion/OK, then it must be OK. (Laughter) Kart/I didn't change any of January's; I simply identified some ofthe--- O'Donnell/ Atkins/I will try to schedule the best I can on the 27th. We'll try to get those schedules and times. We may meet here--we're going to try to shorten the time frame up, simply, so they make their presentation and you don't have to sit around while somebody doesn't show up, and I would encourage you to look at the community events and eight agencies. Kanner/What time are we looking at for the start of the January 21st? This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 40 Atkins/Oh, yeah, that's right. Kanner/Because I'm going to be coming in for that. Karr/On the 21st? Well, we don't--- Kanner/4:30, maybe? Karr/Well, we haven't, we'll be talking about that at staff meeting. We'll know better on Wednesday. Atkins/We'll know Wednesday morning--is that OK? Karr/We just really haven't talked about it. Atkins/Chances are, I would expect, 5:30--1 know that CVB wants to come in and do a presentation to the Council. Karr/On the 21 st? Atkins/Yeah. Karr/OK, because you've got a City Conference Board meeting, too. Atkins/And you have a City Conference Board meeting set up, so I think 5:30. Kanner/Well, that only, that gives us an hour until the City Conference? Atkins/Well, whatever time we schedule that. We may have to do it even earlier, if you're right. What time is your, what was your--4:00 o'clock? Kanner/Well, no, I was just (can't hear) 4:30, we had thrown that around. Atkins/OK. We're prepared to do whatever you want. Why don't you give us Wednesday morning? Vanderhoeff Can you get back in time for that? Kanner/Well, yeah, I think I would. Later would give me a little more time. Champion/Where are you coming from? Kanner/I'm going to the (can't hear) Champion/Oh, so you're a long way away. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003. January 13, 2003 Council Budget Work Session Page 41 Atkins/OK. We'll just plan on Wednesday morning and then we'll get the schedule mailed. Lehman/All right. Atkins/Thank you for your time. Vanderhoeff Thank you. This represents only a reasonably accurate transcription of the Iowa City Council Meeting of January 13, 2003.