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HomeMy WebLinkAbout1999-01-05 TranscriptionJanuary 5, 1999 Council Work Session Page 1 January 5, 1999 Council Work Session 3:05 PM Council: Lehman, Champion, Kubby, Norton, O'Donnell, Thornberry ,Vanderhoef. Staff: Atkins, Helling, Karr, Yucuis, Mansfield. Tapes: 99-1, 99-2, Side 1. Budget Review 99ol S1 Lehman/I am sure the council would like to express our thanks to the city guys who worked their buns off.... Outstanding job ....You will communicate to them from us on behalf of all those folks out there ....This is the first of several meetings on the budget. Steve, would you like to kind of give us an overview of how .... Atkins/Before we start the budget, we want to make an introduction for you. Yucuis/I want to introduce Erin Herting .... City Controller .... Atkins/So you could see who she is .... Yucuis/(Introductions). Herting/It was nice to meet all of you. Atkins/Okay. I am going to give you a handout. This handout is a packet of the charts I am going to be using on overhead... make notes .... We have prepared and submitted to you a three-year budget plan that has been balanced for three years .... We use out budget document... extensively .... Both and accounting as well as a management tool. The budget has been balanced in accordance with the state law as it exists today .... The budget complies with the set of policies...we adopted about a year ago (See Chart #1- Budget Policy)... The only thing that might be a little off is our contingency account is just a skosh less than the 1%. Our credit rating- Tomorrow representatives from Moody's will be in town .... To do a credit review for us .... Champion/Steve .... You basically ... 16% money that is not designated for anything? .... Atkins/We have a contingency account that is for the unanticipated expenditures within the General Fund. We have a cash position in our General Fund and that is that cash reserve position ....We get paid twice a year ....We have 26 payrolls .... Disbursement lists ....And in accordance with what we do in working with our creditors, they like to see a healthy cash balance .... This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 2 Kubby/They get eaten down and then flushed back up .... Norton/ Atkins/On a certain day it could be very low .... Far healthier way to approach your budget. Champion/Have you ever had to borrow money to meet payroll? Atkins/No. Norton/ Atkins/We are going to talk about those .... We have some changes. Most of our effort... directed to the General Fund and the Debt Service Fund because they are the most regulated of our operating budget funds. This budget does not rely on the sales tax .... Our balancing process was a little different this year .... We noted... We do have some financial flexibility that we picked up this year .... One of the things that I wanted to do... highlight... major budget issues (See Chart #2 - Major Budget Issues) .... Flag these for you... walk through them. One is Extensive Capital Plan .... The extent of the debt needed and the tax support far exceeds what our original projections had been a year ago. That ability to do the work in a timely fashion and those projects that are creating additional demand for personnel .... Public Safety Programs .... Two major ones... six additional police officers ....Construction of our fourth fire station ....Fire code enforcement .... Parks Maintenance is a troublesome component .... I would like to have some discussion with you over the course of our review. Our parkland has increased about 80% over the last 10 years and we have not substantially increased the personnel to maintain that or develop that property .... It will require a comprehensive policy review .... We have a number of other parks projects pending. Thornberry/Does that include the... swing sets? Atkins/No, this is substantially the maintenance of the parks, mowing the grass and keeping it in a reasonable order that allows the public the ability to use it ....We have accumulated about an additional 500 acres .... Norton/Do we think three years as we look at each of these topics? Atkins/When I prepare the budget, we balance it for three years .... We do try to address them in a multi-year. Expanding Information Services, web sites and technological applications. Again, we have a presentation for you. There seems to This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 3 be an insatiable appetite for information ....A concern is the loss of M & E and how we are going to grow our tax base .... State policy... take away Machine and Equipment and we will reimburse for the short term .... Finally... Board and Commission Staffing and Support. I address these three .... Observations... Public Art Advisory Commission .... That is staffed by a director .... Historic Preservation, the interest is growing substantially ....Ten years ago they had an average of about 2 cases per year... now up to 20 .... PCRB, I think we grossly underestimated the impact on costs .... We will give you some specifics on that .... Those are just major issues .... I noted to you about financial flexibility .... That means we have got more money than we thought ..... It is substantially a General Fund issue. The expense side .... Specifically the issue that improves our financial position is the rollback (See Chart #3 - Rollback History). In the chart that I have for you, if you begin in '91, over the last nine years under percentage of change, you will see a steady decline in the rollback. In 1999... rollback factor of .549090. Each year .... It has declined. This year, for the budget we are proposing for you, there has been a reversal of that trend. Kubby/It is a blip. Atkins/It is a blip .... The trend stopped .... There are several factors that I think are important. One is that with that change, that increase in the rollback, it creates a new base for us. It pushes the tax base up... generates more income for the same tax rates. The other important factor is that it occurs in a non-reassessment year .... Larger declines are in the years where there is reassessment. The aberration is that the rollback factor improved and it was a non-reassessment year .... Kubby/ Atkins/It is significant to us in the sense that next year we would have a reassessment where substantially all the values would get pushed up. We have the rollback favorable and then we are followed by reassessment which will also push them up again .... Unless there is a bigger decline in the rollback ..... That base is improved substantially .... There was also in this budget no rollback of commercial and industrial property .... We have made the assumption the state will not make it any worse .... You all have read this .... Since 1997 342 apartment units in Iowa City have been converted to condominiums for the tax advantage. What we have is apartment owners converting apartments to condominiums and thereby instead of paying 100% of value, they pay the rollback value which is in the 50% range. These 342 units .... If this condo rule is changed, it could mean well over $100,000 in additional income in the General Fund. So it is a big ticket item .... This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 4 Lehman/Under the rules change that they are talking about, it will affect not only those that were changed from apartments into condos, but those that were built as condos originally .... That is a lot more that 300 units. Atkins/I am just taking this number... We would have to do some rather extensive research .... This has been kicking around for some time .... We have not seen a dramatic change in the rental market out there .... This is just simply going in the pocket of the landlord and those that have the traditional apartment building are being treated unfai~y. Norton/Will this be done in connection with some of the reassessment? Atkins/No, the reassessment is not related to this. This is an administrative rule .... That the state has the ability to change. That if you live in a condo .... Your taxes are going to go up .... That is your primary resident, you are entitled to the residential rollback. But if you own condos or apartments and rent them, you must pay the 100% of value because it is a for-profit business. Kubby/...they would still need a rental permit. Atkins/We have not dug into it, Karen. Kubby/We need to. Atkins/Absolutely .... I did a really quick arithmetic ....Well over $100,000 .... Lehman/The county assessor, because of the ownership .... Thomberry/You can have a condo owner that are truly condos. Atkins/If it is your primary residence, you are entitled to the residential rollback. Norton/ Thornberry/If you have done all of your homework... benefits of condo ownership. Lehman/We are talking about condos that are used as apartments .... Arkins/If you own a building and call it a group of condos and rent them out as apartments, you must pay as apartments .... Thornberry/This is a state function. Lehman/ This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 5 Atkins/We were seeing these conversions... we were not seeing a commensurate decline in rents .... Lehman/You care probably talking a couple of thousand units. Atkins/I have got to believe that there are a lot more out there .... Lehman/There are hundreds that have been built that way. Norton/Is this retroactive? Atkins/I have no idea how that is going to work .... Kubby/They were using the rules to their advantage .... Atkins/Changing the rules would improve our budget position substantially. Lehman/My understanding, the Rules Committee is meeting almost as we speak now .... First two weeks in January... wouldn't take affect until year 2000 .... Atkins/ Lehman/They did it obviously to avoid paying taxes. Thomberry/It was a legal loophole. Lehman/ Ashley/Moving on... rollback history... State legislative committees have met about uncoupling... agriculture and residential values .... Went nowhere .... We are going to go back at that one again. I don't expect any dramatic change this year. Kubby/That 4% cap on property tax increases. Is that a state? Atkins/Yes, statewide .... On the revenue side of the General Fund, in simple terms... with the rollback history and this current change in the rollback... we have approximately $300,000 in income in the General Fund that we had not anticipated in our projections that we prepared for you about 1½ years ago .... This year it is going to grow by $700,000 over the previous year because of the rollback .... That is the additional income in the General Fund. Norton/ This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 6 Atkins/For the last several years, people's property taxes have not changed .... Rollback changes that factor. We will get into that. Just to kind of give you...explain to you some of our budget policy issues, how we balance this budget .... I am going to start with payroll .... Our largest expense. I don't have a chart for this .... It is our largest operating expense, it is also the most fluid .... Collective bargaining, turn over, services added .... Payroll .... Track the most carefully .... In our budget planning we have allowed for adjustments .... Step increases .... Continue a responsible collective bargaining policy .... We have had a history of reducing our payroll for budget purposes .... 100% or full employment. The last couple of years we have edged that down, we have budgeted 99%, last year we budgeted 98.5%. This year .... Intemal factors, we tightened that down even more and did an extensive review of our turn-over .... In doing that we have budgeted 94% to 95% ofpayroll .... Remember, these are budget estimates .... There are some positions where you will not have any turn- over .... Others where it may be a little higher.., we have applied a 94-95% factor on payroll. We have not done that in our utility accounts. We budgeted 100% .... Thornberry/...do you also calculate in, for payroll purposes, the benhies that that retired person gets? Atkins/Yes .... We calculate that position will turn-over, compensation level of the person coming in at entry level... also... pay out accumulated vacation time .... Retirement benefits are paid by the state. Our pension plan... we take the money and give it to the state .... They run the pension plan for us .... Lehman/In previous years .... How close did we come using the 98%? .... Atkins/It is riskier but what we found is when we tracked it over a couple of years, our end of the year balance was actually higher than what we had anticipated .... Translate it into some budget flexibility ..... Lehman/Historically .... our actual costs have been in the 94-95% range? Atkins/Yes .... Norton/ Atkins/That is a rather dramatic policy .... Let's use that to our advantage .... Page 62...This is an example... Neighborhood Services... If you read her payroll .... We don't expect Marcia to leave during FY2000... hours budgeted for her in terms and part-time .... Applied the 94-95% factor .... Assuming we will have made it up somewhere else at other spots within the budget. This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 7 Kubby/ Atkins/We did it over 10 years and we have had turn-over rates as high as 7.5-8% .... We did it by employee group, by union representation, by department .... The bottom line is we felt that a 6% turn-over is not out of question .... Kubby/That is kind of an average .... Atkins/One of the factors within the Police Department is I know that by the year 01, I have got 8 officers that will be eligible to retire .... Lehman/6% turn-over rate. If we are budgeting 94%, that means that 6% of the positions .... Atkins/Historically that will happen .... Lehman/ Atkins/If we have 100 employees... likely 6 of them will quit or resign or will be replaced .... Norton/ Atkins/Some of our departments... very little turn-over... Very little turn-over in fire... All of our employees and all of our full-time equivalents. Champion/ Atkins/100% is the most comfortable. We believe that if we are going to take advantage of the improved revenue and we want to do some other things... it is a risk worth taking. Thornberry/6-7% turn-over, how does that measure among other cities? .... Atkins/I could not tell you .... Not is not an unusual number .... There is not right or wrong answer and there is no municipal average. Kubby/It does feel more risky to do it .... Taking as many capital projects out of the General Fund and putting them in to Debt Service .... Means that even closer to 100% of the General Fund is used for operations... ongoing costs that are annual costs .... Wouldn't mind taking the risk at 96% .... I think our history shows we don't have to be at 100% .... Norton/ ....95% seems like a nice number ..... This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 8 Kubby/ Norton/ Atkins/Let me kind of put the whole package together for you. We did some things in services, charges and commodities .... Thornberry/If it is a guess, it is very calculated and researched number ..... Atkins/ .... It is a comfort level .... I will give you sort of the note of caution. It is riskier .... If the economic conditions were to change... we will come back .... If we had an arbitrated labor settlement .... Could there be a change in the state law with respect to some particular labor law? Yeah, we don't see anything on the horizon. Bottom line is that there is an element of risk. We think it is a calculated one .... In here you will see certain budgets that are reduced more than 94-95% factor. The reason is we may have taken a proposed position out .... We can flag those for you. Kubby/Do you have any idea of what 1% of that payroll is? Atkins/Deb will make a note. We will calculate that for you .... 1% ofpayroll of the General Fund. Lehman/...We do have a contingency fund... Able to make the adjustment... Atkins/... 1% is $200,000. Yucuis/That would include benefits, too .... around $200,000. Norton/ Kubby/If most of the funds are operating fimds, that means a decrease in service or decrease in position to provide the same services. Lehman/ Atkins/Moving on ..... We believe it to be a risk worth taking ....We have history .... These are still reasonable sound budgeting practices ....If I am wrong, we have some fall back positions .... Attrition .... Borrow from reserves on short-term ..... Lehman/This position... collaborative effort by you and the staff.... Looking through ten years of numbers. This is calculated .... This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 9 Atkins/Collaborative? Well, no, not really. This is mostly Don and I .... Working these things through .... We remind them that payroll is the most fluid of all of their accounts. We do not allow transfers out ofpayroll into other operating budgets .... It is an internal control that we have. That payroll is tightly guarded by the Finance Director at my request. Lehman/Do you think there is a certain psychological advantage in using a 94% number instead of like a 98%? Atkins/No .... Lehman/ Atkins/ Champion/What about smaller departments? .... If nobody is gone from that small department? .... Atkins/Such as Marcia which is a one person office. We felt that to be fair we had to apply the policy globally .... At the end of the year, if that position is stilled filled .... We will meet the payroll obligation, transfer it from another account where it has had greater turn-over .... Champion/ Norton/ Atkins/You take all of the positions .... All gets calculated. We know you are represented by collective bargaining units we put a factor in there. Then when all of that arithmetic is done, we take it off. Norton/ Atkins/We are expecting that is what your payroll is going to be for your operation. Vanderhoef/ Atkins/Let me move on... This chart is on page 51 or use it in the packet I gave you (See Chart #5 - General Fund Proposed Budget for FY99 - FY02) .... There are other items... necessary for the functioning of governments .... Those are represented by commodities, services, charges and capital outlay. Much of our commodity expense is driven by the private sector. We compete in the private sector to purchase supplies and materials from vendors subject to the same pressures as any business .... Buy in large quantities .... Public bidding laws. We This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 10 have reduced commodities substantially ..... Read under Commodities .... You will see 1,170, ..... 1,050- is the amount of moneys that I have proposed in this budget for commodities. The departments requested 1,195-. It is approximately a 12% reduction. We have targeted that we wish to get out commodity expense... growth of 1% or less per year. That is difficult ..... We have found historically that the commodities that they do not spend the full amount budgeted. It is a historical factor. But what we did universally was take the 1,050, We decided that we would like to be able to settle the commodities expense somewhere in the neighborhood of between FY99 actual and this current budget year... If you look throughout the budget, you will see some... changes... one time expenses. So it is not a universal application... We very critically reviewed all of our commodity purchases. This will likely be an operational hardship. CHANGE TAPE TO REEL 99-1 SIDE 2 Atkins/Is that if the departments were interested in personnel, they were going to have to find ways operationally to help us justify adding additional people and this was one of the ways ....Creating an internal control group, in house, to ....Get over our bad habits. Kubby/ Atkins/ .... We have done very well on our bidding .... If we are going to stay within what is available to us under the 8.10 levy we have to find someway to attack this issue. Department directors are concerned .... Our experience indicates that if you looked back, our actual in '98 was $950,000 .... This current budget year we are operating at $1,170, Their requests were not substantially higher to begin with .... We were pulling it back to what we believe to be- Kubby/Can you give us some examples of what department heads have said they would do without? Atkins/ ....Make a note and I will get you some of those things .... Kubby/Until we know what is it .... Other things that affect services, I want to know that. Norton/ Atkins/For example, I need five copies .... Then we throw two away. We get sloppy in our behavior .... Departments are conscientious about their operations ..... Commodity items, Don. Yucuis/Paper, salt ....gravel, rock, sand ....Office supplies. This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 11 Kubby/Seems like a natural place to do belt tightening .... Discomfort will become innovation and efficiency ....I want to make sure what it is we are going to be tightening. Thornberry/Do you keep track of departments that stay within their budget and those that go out of their budget in these different categories? Atkins/Yes. Thornberry/How many of their departments went over their budget in commodities? Arkins/ ....I would have to look it up .... Yucuis/ Kubby/ Thornberry/ ....We have had pretty good weather the last five years. Arkins/ ....using inventory from a previous year ....Spend that and the accumulated amounts we have .... Thornberry/Can a department carry over? Atkins/Yes. Thornberry/ Atkins/They can carry over specific items with Don's approval. They have to ask for specific approval .... Yucuis/ ....'99 budget probably has some carry over in there .... Thornberry/ Atkins/Depends on the end of the year .... I don't like to get people in the habit of saying we have to spend it .... They have a line item amount that is available to them and they must seek specific approval to carry that over into the next FY .... Norton/ Thornberry/ This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 12 Atkins/We generally, as a matter of policy operationally, I have encouraged our departments to shrink their inventory .... No reason for us to spend money storing ....Working on our auto equipment garage... huge inventory .... We don't need to ....That can save us some money .... Let me move on to Services and Charges. This is a much larger account .... Big ticket items. Our electric bill is well over $1 million a year .... This has had a similar policy applied to it, not as dramatic .... I have proposed $5,358, Department requests was $5,867, and we are putting it somewhere in that 98-99% range. That is a reduction of about 8% or a 92% factor. That one .... Little more difficult to make reductions in. Mid America charges what they charge per kilowatt hour .... We pay for it .... Certain other fixed costs in there. There is a $40,000 study for a Parks and Recreation Master Plan .... Champion/ .... architect fees? Atkins/Normally what we do on an architect fee is we assign it directly to the project and that is a project cost once you have approved the project ...... Norton/How are they expected to conserve on services and charges? Atkins/It is simply a reduction in the budgeted amount asking ...the departments to make an effort on how to reduce. It is more difficult .....It is a much much larger number... Champion/Give me some examples about what is in there. Atkins/Legal fees ....PCRB legal fees .... Norton/ .....might deal with it in house... redistribution of work .... Lehman/Seems to me on this services and commodities, it seems to me that you are making our own bed and you are going to have to sleep in it ..... Atkins/But you also expect me to provide certain public services at a certain level .... And keep the troops happy and productive. Kubby/You say you budgeted at 92% of projected? Atkins/About 92% .... Kubby/ This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 13 Atkins/Minor efficiencies .... Go after utilities .... Little ways that you can go after it. It is not as easy to do... relying on an outside vendor. There are also some policy implications in here ..... Norton/There are also in house-outside decisions. Atkins/Absolutely ....Rather aggressive approach to our contracts with outside vendors .... Kubby/Conservation energy .... Senior Center .... Atkins/That is the kind of thing we have to be aggressive with out operational departments. Kubby/We have got a staff person already. Atkins/The next category of expense is the Capital Outlay. That can be anyway fm a lawn mower to a self contained breathing apparatus to a new desk chair. Most of our computers we have in our information services fund .... We can give you a list of all of the items that we approve. More difficult to reduce as a percentage .... We have reduced it substantially by either postponing some equipment purchases, putting them off.... A variety of things that we do. What we will also try to do... much of our heavy duty equipment .... Big ticket items. We may actually take a number of.... We try to use an underlying principle on capital outlays that the item must have at least a five year usable life ....We purchase over $1 million in capital equipment from our General Fund .... We thought about take a good bit of that... bunch of that all together, sell a short term note .... Transfer it to the Debt Service Fund. That would open up room within the General Fund .... Fire Trucks...w e already have depreciation accounts. Most of our rolling stock... depreciation account .... We immediately set money aside .... Good job about our rolling stock ....Our equipment is good to excellent and out folks take pretty good care of it. Champion/I don't think that is a lot of money for capital outlay ..... Atkins/ .... You need to hear the Debt Service discussion .... I also want you to know that a good bit of that capital outlay is safety related. I feel very strongly we are not about to buy junk equipment...employee safety .... We cannot place the employees in any kind of jeopardy. The concem that we have on switching it to the debt service is the competition for resources in Debt ....Does directly affect that Debt Tax rate and shifts it out of the General Fund. Kubby/Are you saying the proposed budget does that shift? This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 14 Atkins/It does not do that .... We will think about that .... Green machine... we are having trouble with maintenance .... The outfit we are dealing with. That is not in this budget. It is something we will consider. It is not the full $1 million .... Don is going to come up and give you the remainder of the General Fund Revenues .... Move on to Debt Service. O'Donnell/What is Misc. Revenue? Atkins/Misc. Revenue is ...Don will take care of it. Yucuis/What happens throughout the year is we get in additional money over and above what we have been budgeting for Misc ..... If you go through and see all the other revenue that comes in throughout the year it has been coming in about $300,000 or $400,000 more than what we have been budgeting. We put a line item in there to account for money that will come in but we are not sure what it will be. Adding to that tightness ....A lot closer to actuals. That line item this year, we have moved money .... FY98 Misc. revenue number is $68,000. We had originally budgeted about $468,000. So throughout the year we did pick up some other moneys and we moved that budgeted authority where it came in .... Norton/You said you have run $300,000 more than expected? Yucuis/We will anticipate an additional amount coming in .... Kubby/A couple of years ago .... We spent in on the front end. Atkins/We have made .... We have shown that we end the year in a better position than we originally anticipated and what we did was take the money .... We are not doing that twice. Kubby/ Yucuis/I am covering the General Fund Revenues...page 25 .... I spread it out into three different sheets .... Just to go over the total revenue for FY2000. General Fund Revenues total approximately $33.6 million .... Included in the FY2000 revenues are two pretty big one time revenues. We have $1.3 million for the sale of the peninsula land and $609,000 is the transfer from our employee benefits fund to cover the 27 pay periods. You have a handout of the overhead that is on the screen fight now. If you net out the one time revenues, totally $1.9 million .... Increases in revenue are listed up here. Property taxes is about $700,000, employee benefits transfer which is for the employers share of social security, police and fire pension, IPERS, health premiums is about $360,000. Our Road Use Tax transfer which funds out Streets and Traffic Engineering Division is This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 15 about $107,000 .... State and federal ftmding increases is about $73,000. Fine, permits and fees, $180- and all other is about $73- And that is your $1.4 million. Just a quick review of what is in your General Fund property taxes. That is the 8.10, the $.95 transit levy and the $.27 library levy. The $.95 transit levy, whatever is in that line item, the $1,640,000, we also have an offsetting expense that gets transferred out of the General Fund and into the Transit Fund .... following state law that says it has to be receipted into the General Fund and then transferred out .... Kubby/Can we go back to the increase in the General Fund Revenues? .... Sheet 1 in our packet .... The property tax increase... bigger base and bigger rollback. Yucuis/Correct. We are taking the maximum rates, the 8.10, .95 and .27 times our increased taxable assessed value. Kubby/The transfer is more because we are using that tax levy more for the actual cost of the employee benefits and it is getting transferred to the General Fund. Is that where that number comes from, the $306-? The employee benefits transfer? Yucuis/The increased amount, that is mainly just paying for, as salary increase, your social security and all of your percentages ....Will increase. Plus we have some new employees in there. Norton/That is so much bigger .... Than previous year .... Yucuis/Compared to the '98 actual? We didn't have very many new employees in '99 and we have also- Kubby/Are we using that levy more heavily this year than last? Yucuis/I think the main reason is the new employees. We are not planning on any increase in health insurance .... (All talking). Yucuis/That also has the 27 pay period in it .... Kubby/We are getting that much more Road Use Tax money? Yucuis/That should correspond to the budgets of Streets and Traffic Engineering. Kubby/Does that mean we are actually getting more Road Use Tax money? This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 16 Yucuis/This is just a transfer in from those two department costs .... The actual receipts in the Road Use Tax Fund are approximately $4.4 million. But what we transfer out is just for the cost of those Streets, Traffic Engineering and then also the one Forestry position. Champion/ .... General Fund receipts, what happened to that Insurance Tax we approved last year? Yucuis/The Tort Liability is a tax outside ....Not within the General Fund ....We keep track of it separately .... Kubby/Then the Fines, Permits and Fees... we are expecting to have more of those? Yucuis/In 2000, the main reason we are looking for is we have a recommendation from Parks and Rec to increase their fees and we also have a $33,000 grant from our Energy Conservation Fund .... That $33,000 is in those fees also ..... See a jump in Recreation fees in year 2000 and drop off in 2001 and 2002 because the grant isn't in there. Norton/ Thornberry/ Yucuis/One of the big areas in Recreation... If we have a wet and cool May and June, we could be $100,000 less in pool revenue because of that .... We have an Energy Conservation Fund ....We can allocate money for projects that will conserve electricity and gas ....That department or division will repay the Energy Fund over the expected savings .... years .... based on savings .... Norton/If one objected to certain kind of increases, they are built into so many places .... To adjust things. It gets locked in by the time we get a shot. Lehman/Magistrates Court .... 38% decrease in '99. Yucuis/The '99 budget is pretty much based on the '97 actual. And '98 actual we were very aggressive... City Attorney's office and HIS that do the enforcement .... Lehman/Are you saying the difference is in fines for Housing violations? Yucuis/That is an area that people would go to Magistrate Court and we fined .... Depends on what types of things do go to Magistrate Court. Lehman/$90,000 difference in one year. This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 17 Kubby/Pet at large is $90 now .... Lehman/ Yucuis/Part of it is the '99 is still our original budget estimate ....Not compared it to our actuals this year ..... Lehman/It goes up another 30% for the 2000 budget. Yucuis/...base it more on the '98 actuals .... We will take a closer look at that. Lehman/...percentage variation .... Yucuis/The state and federal revenue line item .... State population allocation and personal property tax replacement are estimated at about $950,000. That is the same amount we received from the state back in FY93. That amount has not changed since then. So approximately $950,000 has been collected since that time ..... They have not gone up at all. There has really been a slight decrease since '93. Norton/Which line are you looking at?... Yucuis/I am looking at Section 4, State/Federal Funding .... State Aid ..... Personal Property Replacement ..... have been relatively the same since FY93. We don't anticipate them going down .... Nor up .... Machinery and Equipment Credit from the state .... Will go away completely in FY2002 .... Suppose to be a reimbursement from the state for our lost M & E .... State law ....We will lose all of our M & E Credit. Norton/ Yucuis/They are not going to go up that much because it is an appropriation from the state. They cap how much money gets distributed to cities and counties. It may change some. Vanderhoef/ Lehman/ Yucuis/Population is factored in but it is only based on the amount that is appropriated .... The Police Federal Crime Grant... eight officers will end in FY2000. We have added in a new grant for six new officers .... Total of $450,000 and that is shown in FY2001 and FY2002. This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 18 Norton/That total of those does not include benefits .... Yucuis/I believe so. It is not 75% of total costs. It is 75% of just payroll and no benefits. The last item... Bank Franchise Tax and that is again a maxed out appropriation from the state ....Based on the profitability of our banks and savings and loan within Iowa City ....It has been all over the board on how much money we get. It has been a hard one to determine as far as revenue goes. Lehman/Do you have any guess on what is going to happen to Mercantile? .... Yucuis/...It is the profits within this location .... (All talking). Thornberry/If they take the local Mercantile Bank and they drop some services and add others... make the local chapter what they want. Yucuis/The total revenue state wide was approximately $30 million some for Bank Franchise Fee ....The appropriation is $8.8 million ....Balance goes into the state general fund .... Norton/ Kubby/Where does the other tax credit come in here that gets reimburse by the state? .... Yucuis/ .... more down in the Misc. line item .... $28,000 is for money and credits and $11,5- for military credit .... Flat amount .... The next set of revenues, Chargeback for Services...administrative attorney, cable t.v. and word processing charges .... Enterprise Funds... Fines, Permits and Fees. We talked a little bit about the recreation fees... all other fees are pretty much consistent with '98 actuals and close to the '99 budgets in most cases. Contractual Services and Hotel Motel Tax and All Other Income. Contractual Services is the University fire contract and also the Library and Senior Center contract with Johnson County .... Kubby/Where does payment in lieu of taxes show up in our income? Yucuis/Misc. Revenue .... This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 19 Kubby/Might be to highlight that somehow .... Nice to have a separate line sometime. I don't know .... Lehman/I would like to know that. I think we all would. Thornberry/That is not mandatory that they do fees in lieu of taxes .... Yucuis/I believe it is a certain percentage of just the city tax ....City rate times their... estimated taxable value of their property .... Mansfield/They are not required to do that .... to give us any payment in lieu of taxes. We have two forms... University fire contract is a payment in lieu of taxes .... And then the Greater Iowa City Housing Fellowship .... Only two sources that I know of. Thornberry/ Mansfield/The University fire contract is based on each FY operations for the Fire Department .... Operating cost per foot ..... and they pay that. The other one is strictly a voluntary contribution ....That is a gift. They have no obligation to give that to us. Lehman/Can't depend on that income. Mansfield/We traditionally don't budget that. We budget the University fire contract. Thornberry/It would be nice to see a line. Yucuis/We should be able to pull out that revenue line item .... Local churches pays us about $500 a year ...payment in lieu of taxes... over on Greenwood .... Down the street from Roosevelt School on Greenwood ..... Mennonite Church .... Kubby/Ask them to write a letter to all the other non-tax paying organizations .... (All talking). Yucuis/Hotel Motel Tax. The distribution on that is 50% police patrol, 25% Convention Visitors Bureau, 15% Mercer Park and 10% going to ScanIon Gym operations rather than parkland .... All that money stays within the General Fund. Vanderhoef/Where do we show the payment in lieu of land for our Parks and Recreation? This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 20 Yucuis/We have separate reserves outside of the General Fund that keep track of that .... I think we have six separate receipts that came in .... Vanderhoef/Do we have any idea on how much total is sitting in there for future use? Yucuis/My guess is less than $100,000 total .... depending on the location .... CHANGE TAPE TO 99-2 SIDE 1 Yucuis/And .... Interest Income, Misc. Revenue is where we account for that $400,000 extra that we think we will get in. We have a transfer in from the Health Reserve Fund, $200,000. 27th pay period is in the FY2000. $1.3 million for the sale of land and then the parking Fines transfer to the General Fund. If you look at FY98 the amount was $963,000 .... FY97 receipts didn't get transferred until July 1 so they show up in FY98 .... Norton/Health Reserve Transfer .... Any flexibility there? Atkins/My instincts say you could probably bump it a little bit. We have a sufficient reserve. Our expenses are just a tad bit more than our reserves .... Kubby/Should the numbers on page 51 and 25 be the same? Line items .... Yucuis/You will probably see a few differences in individual line items... grand total will be the same .... Minor changes .... Kubby/Thank you. Atkins/Next thing is Debt and it will take a reasonable block of time. [Council Break] Atkins/The next topic is the Debt Service Fund. Our capital plan as represented in this budget .... is extensive .... It is really big... expensive and extensive .... We believe this budget represents .... Translate those into financial implications. I do have one note for you. Parks and Recreation Commission took all of their Parks and Recreation projects and did a priority for us. I have not shared that with you .... They have a different idea on what is important than you do .... We are going to have to spend some time on the CIP. The Debt Service... you have a lot more discretion .... You have to decide a levy to generate the tax money to pay for the debt service. Our CIP is influenced by a variety of factors .... The amount of debt available, the 5% of assessed value .... Your own local policies .... 25% of our levy, no more than for debt purposes, our This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 21 credit rating .... what projects are pending .... We cannot forget stormwater .... And ultimately, the amount of taxes to be paid by the individual homeowner and/or business. (See Chart #6 - Capital Plan (Debt Service) for 99-00-01). In the current budget .... fight now... We had proposed... FY99 we would sell $11.5 million worth of bonds/debt. Actually it is going to be closer to $10- In the year 2000, it would be $7.5-. In the year 2001, it would be $7.5. These were projections. We have also projected the General Obligation (GO) debt be 20 year .... The new five year Capital Plan has the following debt schedule .... To do all of the things that you showed as priorities: in '99 it would be the $10-, 2002 $15 million; 2001 $11.5 million; 2002 $20 million; 03...was $6.5 million. Vanderhoef/Does this include the library? Atkins/No, it does not. In the year 2004 it is substantially what is left list. I didn't attempt to calculate the debt .... This Capital Plan, shown in the budget is substantially larger and thereby the tax rates and tax askings ....will also be up accordingly. Let me try to illustrate this in a couple of other ways. (See Chart #7 - Total Property Valuation). This chart represents the state law and that is you take your total property valuation .... permitted to incur GO debt up to 5% of that value .... Example FY2000 a property value of $2.423 billion .... could have GO debt of $121 million. We have debt as projected...$10 million, of $47,1-. That is 39% of our allowable debt margin. Previous 6-7 years it has been... at about 25%. So we are beginning to show... bump up. Norton/ Kubby/This does not include the expanded library. Atkins/No, it does not. How that will calculate out, we will get to that. What I want to show you is that with the program that you have in the book, we would be at .... 60% of our allowable debt margin. Under most calculations, that still allows you substantial room. If you would add a library/community events center .... that number goes to about 75% .... Our debt position is sound with respect to the allowable margin in which you have to operate but it is being bumped up dramatically. You can find this on page 33 of your budget .... Another way of looking at it is our 25% policy. In this budget year, FY99, we have a debt service levy of 1.868 which means we are at 14% of our policy position. With this plan, by FY03, we will have exceeded the 25% policy and you can see the size of the tax rate (See Chart # 8 - Total Levy). In that particular year. This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 22 Kubby/Do you have a percentage available with the library and community arts center? Atkins/What the 27% would go to?... We can calculate that for you .... A sales tax revenue bond, if approved... would pay for the library and community events center debt service. Is that counted against the... your allowable debt? I would think not. However, we are permitted to sell a GO debt which you could apply against that .... Pledge the property tax but retire it with then for sure it would be. Make a note, we will add that in and see what it goes up .... So the important point is that between FY92 and 99 we have averaged about 13% debt service levy to total levy. By 03 we will have doubled that. So it goes up dramatically. Norton/ Thornberry/ Norton/Earlier we could have started some water projects. Lehman/That water fund doesn't affect this... that is revenue fund. Water and sewer are not in here. Atkins/Chart #9 on Debt Service. This is to give you an idea on the amount of dollars that are being applied to debt, principle and interest .... This is what you have to pay. Year 2000 you would pay $4.353 million in GO principle and interest. If you kept the plan...accelerates to $8.3 million. Lehman/ Atkins/If you want me to run that number out .... If you sell that big bond issue, you have committed yourself to a long period to time at that higher tax rate .... What we did... used level principle and interest .... Now there are some variations that you can do depending on what your debt schedule is .... Kubby/ ....bond rating. Atkins/It will have an influence on it .... The faster you retire the debt, the better your credit ....Historically from 1990 through this year we have had 12 GO bond issues ....They have averaged $4.7 million .... We are jumping big time in that .... 12/89 through April/98 we had had 12 GO issues of $57.425 million for an average issue of $4.785 million per year. Norton/Are any of the bonds .... Could have been the other way around? Atkins/We will occasionally sale a GO bond to pay for a water project... lower interest rate .... Pledged the water tax... best borrowing .... This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 23 Norton/How much of this is that kind of manipulation? .... Yucuis/Look on page 102 of the budget, debt service fund summary of bonds that have been issued .... Amounts paid from abatements .... Norton/This is exactly what I wanted... make sure we understand .... Lehman/ Atkins/When we sell GO debt, we have got to obligate ourselves on how to repay it... pledge the property tax and pay if by way of utility revenue. The tax figures .... represent property taxes that must be levied to pay for the debt ....You have got to levy this level of tax .... Norton/ Atkins/The allowable GO is where you pledge the property tax. In that allowable GO we have sold GO for water and sewer purposes and we apply water and sewer revenues accordingly. But within our Capital Plan .... All property tax debt. Lehman/Look at page 102 and Chart #9 .... Total debt is substantially greater than the direct tax levy .... Kubby/Anything that we pledge property taxes for, weather or not they are paid from another source, is that calculated as part of our allowable? Atkins/Yes .... Kubby/ ....Then the sales tax bond is going to be part of that, too .... Atkins/We need legal .... It is a different piece of law, it is a revenue bond and you are pledging a different resource and it is a electorate voting. Yucuis/Karen, your sewer revenue bonds and parking revenue bonds are not calculated into your allowable debt .... It is separate. Kubby/What about those GO that are sold as GO but are paid back? Yucuis/Those are in the allowable debt. Norton/... 5 %... Atkins/That is state law, 25% is the local- This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 24 Norton/ Atkins/The only thing you would be hurting is if you borrowed so much GO debt and the legal opinion came down that you had to apply the sales tax debt against that max, you couldn't do it .... Kubby/ Norton/ Atkins/I want to try to bring this down to how is it going to play at home. (See Chart #10 - $100,000 Home Value). All of you ...know that there is no magic to this. I took $100,000 value home. I assume it was going to increase in value at a rate of 5% .... I took it for FY99, current rollback, taxable value...current tax rate .... Person spends $721 for city taxes .... 40/40/20 rule: 40% city, 40% schools, 20% county and others .... If we approve this budget .... by FY03, that same home would be paying $1100 in city taxes .... Pick a number and I can run it for you .... Certain things that can occur. I wanted you to have a feel for how it plays at home .... The next chart (See Chart #11 - $100,000 Business) .... $100,000 business pays almost twice the taxes. This will also give you a little bit of feel for that condo thing ..... instead of $721, it is $1300 in taxes. Kubby/So the rollback did go back up to 100%? Arkins/Yes .... (See Chart # 12 - $100,000 Home - Taxes Paid For Debt). This budget plan, that $100,000 house today pays $721 or 14% of its taxes in debt or $101. With this plan, reasonable growth by the year 03, they would be paying almost three times that portion ....A substantial piece of that budget increase is directly related to debt .... Kubby/ ....Is there another three year budget where we have tripled the debt levies? Atkins/I don't recall it, Karen .... 25%, that proceeds everybody in here on how that policy came about. Marian, do you know? .... It just seems to have been there forever and that number has always been down in the mid-teens .... Kubby/This is really unprecedented. Atkins/ .... What I wanted to be able to show it to you... pages and pages of documents... Here is how it translates to the guy at home .... The question .... Can you support this level of tax and this level of debt? And most of all, will the community support it? ...I am of the opinion we are going to have to go back into that capital plan. This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 25 Kubby/ Atkins/I think we have to go back into the plan .... Folks taxes are going to go up anyway with the rollback factor .... You do not have to decide it tonight but I would like a discussion with you on just how do we get there. Do you give me a tax rate and I back into it? Do we go back and just redo all of the priorities? We can certainly stretch them all out ..... Thomberry/I think we are going to have to look at the CIP. Atkins/For tomorrow's meeting, I have a brief presentation... on the police officers, fire station and on Information Services .... Those folks are going to come in .... Three biggest personnel matters .... Don will do Utility Funds for you ..... Highlight some operations tomorrow... I think we have got to think about how to go after this Capital Plan .... You have a real short time frame on the tax rate because you have to have it done by March 15 .... We need that tax rate decision in a very short period of time. Champion/ Atkins/You can say the tax rate at some number and then we have satisfied the law .... You are also locked on that number and the debt that it will generate .... I would prefer that we have somewhat of a discussion on .... Go to our capital projects .... You still got to give me some guideline. I can go back and prepare one for you .... Champion/ Atkins/I need some policy direction. There are projects that are a public safety nature .... environmental .... They are projects that don't require personnel. There are projects that are of a economic development issue .... You need to kind of give me a little guidance .... Kubby/One year we divided the CIP into types of projects like new streets, reconstruction of streets .... We looked at the map .... Doing category by category and creating a timeframe with some of the categories .... Atkins/ Kubby/See how they all fit together ..... create a good priority. Norton/ This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 26 Atkins/Tomon'ow I would hope you can introduce topics to me .... We will give you those briefings .... Important thing is that it appears capital is something you are going to have to attack, really go after ..... Norton/What is your agenda again tomorrow? Atkins/I am trying to form an agenda with you all... Don needs to do Utility and Enterprise Funds ....We need to have a quick briefing .... I have Police, Fire and Informational Services available tomorrow to do that .... We have budgeted in here the Iowa Avenue parking garage .... You also need to meet with Boards and Commission .... The big thing is... capital .... I can go through the budget highlights... For example, we are adding two positions for the library .... We think we can justify our people doing the work .... Norton/Utility... budget highlight issues... then capital. Atkins/I want to have some idea on how you want to take on this capital issue before we leave tomorrow. Vanderhoef/ .... When we are looking at our total taxpayer bill, we need to have the numbers of the addition of the library/cultural center that goes onto their bill also. Lehman/That isn't going onto their bill if it goes by sales tax. Vanderhoef/Potentially it isn't .... Lehman/It won't go on their tax bill. Norton/ Vanderhoef/ Atkins/For example .... Don't presentation... If the sales tax were to pass and you apply the money for the water rate, here is what will happen to the rates. We can answer those questions for you. The library and the community events center .... new services, new expansion .... They all are sales tax related .... Lehman/We are better advised to go ahead and proceed on this as if there is no possibility of a sales tax and address the sales tax issues as they arise. Atkins/Personally I encourage you to do that .... (All talking). This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599 January 5, 1999 Council Work Session Page 27 Atkins/...If it were to fail and you choose to go after property tax funded library addition, I want to make sure we have taken care of that in the allowable debt margin .... Norton/ ....have some contingency plan .... Thomberry/ Kubby/ Atkins/The fire station itself is not a huge expense. However... staffing and proposing to locate in the noaheast part of town ..... Kubby/Tomorrow will we have information about where the calls are coming from? Atkins/Yes... Andy will be prepared to answer those questions .... They each have ten minutes ....To the point ....Tomorrow we will do the presentation, Don will be prepared to do the Utility ....I would like to leave tomorrow with a scheme on how we are going to go after capital projects ....I concluded what I was going to do today. Thank you. (All talking). Adjoumed: 5:35 PM This represents only a reasonably accurate transcription of the Iowa City council meeting of January 5, 1999 WS010599