HomeMy WebLinkAbout2000-01-10 TranscriptionJanuary 10, 2000 Council Work Session Page
January 10, 2000 Council Work Session 9:00 AM
Council: Lehman, Champion, Pfab, Kanner, Wilbum, O'Donnell, Vanderhoef.
Staff: Atkins, O'Malley, Mansfield, Karr.
Tapes: 00-3, all; and 00-4 side A and part side B.
Budget
Lehman: Starting the budget process. And for the first, as I remember Steve, in the
past and I suspect this will be really similar-
Atkins: Yep.
Lehman: The first couple of meetings on the budget is pretty much going to be a
meeting for Steve who is going to try to walk us through what has been
proposed. I think it is probably informational for us more than anything
else and as far as discussion ofpfiorities and whatever we will reserve that
until we have gotten an understanding of the budget the way that it is laid
out. I mean, if you look through it at all you will understand that it is very
complicated so for at least the first couple of sessions Steve will kind of
walk us through it and I think any- I think he will answer a lot of questions
that we have. So, take it away Steve!
Atkins: I can assure you, particularly new Council members, that there will be
more than adequate opportunity for you to place your issues on the table-
those that you want to try to convince your colleagues of so if you can just
kind of bear with me will- I promise we will get you there. First of all
before we start, thanks to everyone last week for the concern and (can't
hear) week for me chasing around so I thank you for you thoughtfulness.
Things are coming together. Tough but things are coming together, so.
Okay, I think the first thing I want to do in introducing this to you is the
handout that you have in front of you and what I try to make a habit of is if
there is any handout that I will use in an overhead that you don't have I
can photocopy them for you. Just kind of hang on to them fight there and
you will be able to scribble your notes onto- you will see that that was not
in your budget document. In that we have three new council members, my
intent is to be as reasonably detailed as I can in order to get many of those,
particularly some of the more specific things answered right up front. And
as I would say to all of you, if I use a buzz word inadvertently please- "I
don't know what that means". Let me know because I occasionally will
say something that is a common language for us. The budget really has
two components: operations and capital. And you will see as I present it
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to you we will split it very deliberately. I think an important thing as we
begin the review is we have some agreement on ground rules. If we are all
over the lot we will never get it dealt with. And I have a couple of things
that I would like to- Number one: you don't have to agree or disagree
with me. My job by charter by law is to propose a budget to you. It is
your job to review that, amend it, change it, shape it, twist it, throw it out,
put things in as you see fit. But I have an obligation to put forth proposals
to you. It is your collective decisions that count. If I happen to say during
the presentation "you can't do that" please do not take offense. It is either
a question of law or policy. And I am not telling you that' s not
punishment but if I say "well, I want to add this" "I am sorry you can't do
that that's against the law". If I say "you shouldn't do that" that is an
expression in my capacity as your administrator to say "use caution, I will
explain myself'. If it is a risk you chose to take that is certainly up to you
but you will also know the cautions that I present to you. I believe that we
have sufficient sessions planned for us to debate, discuss, convince others,
do whatever you want. But we do have deadlines. And most of you are
familiar with that particularly from the candidate work sessions. There
will be certain major issues which I will call out separately. That is one
from my experience with previous councils with what I believed to be
some of your interests are and I will try to call those items out so that they
can be discussed and debated. IfI miss one, please put that on the table.
One of the things that happens, and I can answer most routine questions as
we move through here, if there is an issue that you are really, you know,
"I want to talk about" and it is a little out of the schedule I will record it.
So we will write it down. If someone wants to talk about water rates and
we are working on something else I will write "water rates" down and that
means that we are going to come back to that issue at a time when you
have those various budgets. "I want to see this project changed"- if you
think of it we write it down. Deb and Kevin will also be making notes.
So- or if we get into a discussion that appears to be long winded Emie,
like you said, we'd prefer you to say "there is obviously a substantial
difference of opinion, we will record it and come back to it". Other than
that, are we cool with how we will do her? Okay. I will use the budget
book a lot. I will call out the pages in that budget book and I will be using
them in overheads so if I say "turn to page-" that is the page I will be
working from. As an overview, we have prepared and submitted to you a
three year operating budget. We have also submitted to you a multi year,
in our case a five year capital plan. These budgets are all balanced. We
can't run in the hole. In accordance with state law, local policies most of
which are spelled out in this book. Our budget is a little more detailed
than most budgets you will find. To my knowledge we are the only city in
the state that does the three year multiple- multi year operational budget.
It has been balanced in accordance with state law but also we have certain
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information in the budget that we use on a routine basis day to day. It is a
management and accounting tool for us also. We refer to this document
during the course of the year. Now, when we balance the budget in
accordance with the state law, we are never sure what is next. They are
convening in session today, I think I have shared with you- we are never
quite sure what may come out of the Legislature that may have some
impact currently on the budget. I think I recall mentioning to you one year
we had actually adopted our budget, submitted to the state, we were
finished, Legislature continued in session and took something out in the
form of state aid that we had incorporated into our budget. We had to go
back and make amendments. I think this is going to be one of those "well,
what is next?". I think we are going to have that from this Legislature. I
am expecting them to probably take on the issue of public pensions. I am
expecting them to likely take on the issue of a property tax freeze. All of
those issues are pending and have a bearing upon how we went about
balancing this budget. I will point those out to you as we move through
this thing. As I said, it complies with your policies and those policies are
identified on pages 7 through 13 in the budget.
Champion: Steve?
Atkins: Yes?
Champion: I have a quick question. When you talk about a property tax freeze are
you talking about capital?
Atkins: Unfortunately Connie, the thought process we have, and this is in my
capacity as a league- board of director member, I am going up Thursday
for our meeting- that at least the Republican majority appears to be
interested in, and there appears to be some Democratic support- for rolling
all of our tax rates together into one tax rate. And if that is the case that
would severely limit our capital project ability. Our operating budget is
already very snug. Capital we have always enjoyed the ability if we are
willing to raise the taxes accordingly. And I will point that out to you as
we go through here. Also in your budget policy and it is in one of your- it
is in your handout. A couple of you may recall back in '97 when we went
through that extensive twenty year financial analysis, we made a number
of changes. At that time the Council adopted budget policies and I want
you to note that this budget again complies with those policies. We
balance our operating budget. Balance it, revenues and expenditures for
three years. We continue to have a multi-year capital plan. Our cash
reserves, which has a great deal to do with our credit rating as well as our
ability to pay our bills, is in compliance with those numbers. We have a
contingency account. We are to pursue to the fullest extent possible
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preserving our credit rating. Our credit rating of triple A is the highest we
can get. That would have no affect on our low-income programs. For
new Council members, we have a variety of low-income programs that
affect peoples' utility accounts. Parks and Recreation programs and things
of that nature. Wherever practical, the 8.10 the operating levy, which is
the snuggest, and the one that is most regulated. To try to shift expenses
out of that general fund to a capital budget- this year we made a very
dramatic change in that and we will show you that. And then the other
policies are indicated on pages 7 through 13 in the budget. The important
thing I want to mention to you on the cash reserves is while there appears
to be a lot of money, remember, we only get paid twice a year. Taxes are
due twice a year. We have twenty-six payrolls, during the summer time
you will see our expenses will spike dramatically. More often than not
what we are doing is paying contractors for construction projects. And
you will see that routinely on your agenda called "disbursements" those
numbers will change. We need that cash to carry us over those periods of
time. The next overhead I want to show you- next is an overhead I want
to show you- is intended to be something I want you to keep in mind as we
work through this budget. And I couldn't think of anything more exciting
to call it other than "Budget Issues". So, that is what we called it. A
number of the programs in the proposals substantially affect how we can
grow our tax base. While recent Press Citizen editorial commenting on
our economic development strategy, and we will make that a separate
discussion, has us going to hell in a hand basket that is simply not the
case. They missed the whole point of the economic development strategy.
It is a tax policy as much as it is an economic development policy. Our
building permit values are as good as they have ever been. The values of
property are as good as they have ever been. We minimize the use of
property tax abatements in our community. We don't run around tiffing
tax increment financing. We have substantially used it for housing. The
big trouble we have is state regulations. The loss of machinery and
equipment. While you don't think of us as an industrial community,
machinery and equipment was about 3 ½% of our tax base. If we were
able to continue to tax machinery and equipment it would mean an
additional almost $800,000 in general fund income. So that is what the
loss was. The second point is in follow up to our declining ability in the
general fund to absorb new programs. Of course, as I mentioned, if we
have a property tax freeze I don't know what is going to happen. If they
freeze the rates and give us an inflation adjusted amount of money that
will have a very chilling effect on our ability to do capital projects. Now I
know you are sick and tired of hearing me tell you about the general fund.
But that is the one that has- it is the highest profile. That is the one that
where, when we want to do things- that is the one normally that we look
to. And the ability to generate income in the general fund is severely
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limited. A third point as a budget issue is that you clearly are going to see,
in my mind and I in the time that I have been here I have not seen any
change- if anything it is going the other direction- is the state continues to
expand it's control over local finance. It is almost insidious. It is very
subtle but they go- about two years ago there was a comprehensive, and I
participated in it, committee- I participated as a league member in our sort
of oversight of it- of the Legislature that made dramatic recommendations
for improving the property tax system in Iowa. None were adopted.
Nothing. In fact, it went the other direction. Our ability to raise money
for the general fund is limited to the sales tax. That has been defeated.
Other income that we would hope to add to the general fund, linking back
to the original point, we have got to grow the tax base. State control over
this loss of machinery and equipment, roll back factor for residential- at
one time our residential roll back was 80%. It has now declined to 54%.
Lehman: Steve, that roll back- because I think the terms with roll back- you know,
you use the term declining roll back. What you really mean is the
increasing roll back.
Atkins: Okay.
Lehman: The amount of roll back- to me, it is..
Atkins: Is perceptive. I understand that. Yeah.
Lehman: The roll back-
Atkins: I am going to go through our history of that in a couple of minutes and I
think you will see how profound an impact that has- residential property
tax payers in fact for a couple years, the most previous couple years in
fact, the property tax is probably down in town. It went down. There is
the potential for a loss of property tax value through the deregulation
process that I think is coming with this Legislature with respect to utilities.
In the simplest terms, as we move toward deregulation over gas and
electric utilities, they are our largest tax payer in the sense of property
values. If they deregulate they have go to- the state- I mean, I can not
comprehend them doing otherwise, but they must be able to off set that
loss of revenue because they are going to be taking away the property tax
revenue of utilities and they are going to change it to a consumptive tax. I
know we don't like those but that is the way that it is going to be. What I
am afraid is going to occur and at least from what we have been able to
read about it is that the property tax has a value of here [and] consumptive
tax has a value of here. We are going to get what is less. Again, that is
going to have an impact upon our general fund. And then of course the
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possible freeze. In this budget we have proposed an extensive capital
improvement plan. To the extent of debt and the tax support needed we
will take you through that. It has substantially been very helping. We
have chosen, and the last year's Council chose the four year 40 million
dollar capital plan. We have made some amendments to that plan but we
are generally in compliance with that policy and you will see those
numbers [and] I think it will become very obvious to you. A note of
caution on your capital plan, and we will try to call these projects out,
wherever there is a project that creates a new demand for personnel that
new demand for personnel almost inevitably goes to the general fund.
Library staff, new fire station [and] things such as that which require
people to accommodate that capital improvement. Another thing to think
about is board and commission staffing. We have a community history for
which we should be particularly proud of involvement in our citizens. I
believe we have over 150 people that represent the City Council and
various boards and commissions. They have a fight to have whatever staff
assistance and we have staff people to each boards and commissions. The
difficulty is that that's also a hit on the general fund. The Public Art
Advisory Committee, something we recently created, is now staffed by a
department director and I think I shared that with you in the past. There
was a request for a quarter time person and I did not include it in the
budget. Historic Preservation, their role has continued to grow, the
number of projects they are involved in- similar request. I did not include
it in the budget. And of course the creation of the PCRB, we are fully
aware of the expenses associated with staffing that commission. I just
point this out to you that your boards and commissions are important to
you and the advice, policy advice, that they provide to you- but that is not
without expense. Simply creating them is one thing but if we are going to
make them effective we are going to have to support them. And we do
have staff people to do that. And finally fulfilling your master plans,
visions, comprehensive policy statements- we have a separate discussion
planned to show you the number of vision and policy statements we
currently have in place [and] some idea of what the cost are. Some of
them we have done very well in. Our downtown strategy, very expensive,
but we have done well, very well, in fulfilling that policy. Airport, we
have done very well in fulfilling that policy. One of the nice things about
the airport is that the feds are going to pay for 90% of the cost. It is when
it is all our out of pocket. I do have concems over the upcoming Parks
and Recreation master plan and the growing inventory of Parks and
Recreation land, facilities and how we are going to be able to pay for that.
That is again a direct expense to the general fund. And I will show you
my opinions on that a little later on. What these are intended to do is try
and give you some idea and what to think about as we go through our
budget presentation. Now, I am going to start off with the general fund.
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And the reason that I am going to do that, I think it is pretty obvious from
what I have just said, is it is our highest profile, it receives the most
publicity, it has often the most direct impact upon our citizen's businesses,
(that is they pay taxes), it finances the most services, it is the most
regulated, and it is the most volatile- subject to change. And quite frankly,
it the most difficult for people to understand. Our citizens are aware that
one property tax bill they got, remember the 40/40/20 rule, that is about
the simplest way that we try to explain the thing, but there is a lot of work
that is involved in getting to that point. If you would please, turn to page
18 in your budget. I want to take you through just a little bit of our
property tax values. Okay. I guess I am going to have to hold it. Page 18.
Important numbers for you to look at as you read across you will see the
very first set of lines: Description Fiscal Year 2001. That is the budget we
are working on fight now. In our property values in Iowa City, that is
100% assessment. It is 2,589,000,000. Got that number? That is assessed
value of the property in our community. However, the state by law
chooses to apply to residential, and this year to commercial and industrial,
a roll back. That roll back factor is .5485 for residential and .987. What
that means is the residential property in our town has a value of 1.668
billion dollars. But for tax purposes, that value is 914 million dollars.
They roll back the value. And on top of that, and we will do that in a
moment, they cap the tax rate. It thereby limits dramatically the amount
of monies that you have available, particularly for the general fund. Now,
to give you some idea on how profound that is, and remember 1% swing
one way or another is a lot of money. A 1% swing in your general fund is
probably in the neighborhood of $250,000 to $300,000 in income. I have
written at the top there where it says, above- it says 6.1% average. What
that means is that our taxable or our assessed value over the history we
have shown right here has grown at an annualized rate of about 6.1%.
That is very healthy. Twice that of inflation. The problem is, because of
the roll back, our taxable value is, and I showed it at 4% but it is a tad bit
less than 4%. Got those numbers? What happens is that you have a
disincentive to growth. Whether it be in value or in new construction. If
you look over where it says average of 5.7%, that is our average growth in
residential alone. Our commercial and industrial remains healthy in its
growth. The problem is it is not healthy enough to offset the decline that
the state implies by regulation. (Can't hear) when I talked about growing
the tax base, residential- and this sounds terrible- but it doesn't do you a
lot of good. We had an excellent year in residential property growth in the
city. But the unfortunate thing is that it is rolled back so severely that you
don't get the bang that you want for growth in your property tax. Now,
what we have then is because of the severity of the regulations is that it
has a very chilling effect upon your ability, or mine, to initiate operational
changes. I want to build a new fire station. That costs a million dollars to
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build it. You have the capital capacity. And to staff it requires nine
fire fighters. There is your dilemma. I want to expand the library. We
have the capital capacity assuming it is approved by referendum. But you
must add new positions. There is where your problem results. So, we
have good general growth in our tax base but all of the roll back, all of the
regulations, all of the caps diminishes that ability to use that tax base fully.
With me on that?
Wilburn: Do you know why there was a- they decided to roll back commercial and
industrial?
Atkins: You know, I don't know yet and we are trying- I have not figured that out.
They did it one other year. I don't think it is even on here. No, it is not.
They did it one other year in the time that I've- I take that back- back in
'99 they did it one other time. Deb or Kevin did you- were you able to
pick up any information on that? No? Okay, we will find out. I think it
had to do with utilities because that is commercial and industrial utilities
and are all kind of bunched in there. And, if we pulled out the utilities as a
separate number- I don't have it in front of me now- but I know
historically our utility values have done some declining and I suspect that
is what they went after. One, it could be part of the deregulation process
or maybe some quirk in the law. The bottom line is they tell you what the
number is and that is what you live with. Yeah, so I mean you can stomp
your foot but... If you feel better go ahead and stomp your foot because I
am not so sure it is going to get you anywhere. Okay. The next one that I
want to show you is from your handout and that is the rollback history.
Generally that should be pretty self-explanatory to you. Back in 1986 our
residential rollback- now remember how the rollback works. The rollback
is tied to the value of agricultural land in the state. The Farm Bureau has
been setting urban tax policy for years and they will continue to do that. It
was at the time when the farm economy was really in the toilet and there
was some compelling notion that we had to control urban tax policy. In
1990 was highest, lowest- however you want to look at it- our highest
rollback. Simply speaking, a $100,000 home in 1990 had a taxable value
of $80,000. This year in '01 it has a taxable value, and of course there has
been growth, of $54,000. And I will show you a specific example in a
moment. When we did last year's budget we had projected that we
believed that the property tax rollback factor would not change. We were
wrong. The state changed it. And in doing that that changed all of the
projections we had with respect to our income. Not your fault, not my
fault, nobody's fault. The state applies the formula and the formula is
what it is and we live with it. But that history of decline- we were
spending some time the other day, a frivolous moment, if that were to
continue we would owe the state money. Because if it got down to 0 well
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then there is no tax base and I guess you could go even further and that
would means that we would have to give- come up with money to give-
you understand what I am telling you. It is that that's sort of how
preposterous the whole thing is. Sooner or later the state, and it has been
at it for 20 years, has got to change that. We will see.
Pfab: I have got a question.
Atkins: Sure, Irvin.
Pfab: If you start out with a (can't hear) of a $100,000 house in 1986 at an
assessed value, what would the taxable value be today?
Atkins: We can find that out for you.
Pfab: I mean, just-
Atkins: I have a chart that shows that. I don't have that with me now but I can
take care of that. I understand the calculation you want and we will
prepare that for you. We have that, I just don't have it in front of me. If
you [would], turn to page 16 in your budget. What I want to do here is
give you a feel. Now, you have a tax base and the tax base when you
apply a tax rate generates income. You can see fiscal 2001. That is the
budget we are working on today. And it shows the income. If you can
read across we have a general tax levy of 8.10. You can see that number-
it is fairly- it is consistent. That is a maximum for operating purposes.
We have a 95 cent tax levy rate per transit. That is a maximum. We have
a tort liability. That is a payment of our insurance program of .221. All
still with me?
Vanderhoef: What is the maximum tort liability?
Atkins: There is no maximum however you can only tax to the cost expense of
your tort liability insurance program that you have. We have some room
in there if we were to stretch the definition. But if it costs you a $100,000
a year for tort liability insurance coverage you may levy a tax to pay that.
No more- you can do less, but no more. So it is capped in the sense of
what the expense is.
Kanner: Steve, so our expenses are expected to go down slightly from .222 to .2217
Atkins: Yes. It was just a modest- a very modest change. And a lot of that has to
do with exposure, how much insurance coverage, you know, we went to-
Kevin what are we? A $100,000 self-insured? We expanded our
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insurance- the liability on ourselves because of our cash position being
good and changed that just ever so slightly. In our projections we have it
bumping up just a tad bit. The program itself, Steve, when we changed it-
that allowed us to save a couple of bucks here. Okay? The next one is the
library levy of 27 cents. That is a maximum. That happens to be a voted
operational levy. The library did that, I believe, in '94. That is a max.
So, you have a levy of 9.541 for this year. Note [it is] about the same as
last year. So if your levy, or your rate remains the same, and your tax base
is having some troubles you are not going to be generating the same
amount of income. It is going to up a tad bit. This year we have done
something different. And I will explain it in more detail. We have added
what is called the state emergency levy. 27 cents. Emergency is their title
for it. I will go over that in a minute. Employee benefits levy rate of
1.993- that is a levy unlimited, however, you can only charge pension,
health insurance, and things of that nature. Our debt service levy is 2.988.
As you can see, our total tax rate last year was 13.851. It will increase to
14.792. The major increase is attributed to capital projects. That is debt.
Kanner: Is there a limit on the debt service?
Atkins: Yes there is.
Kanner: A maximum?
Atkins: And we are going to go over that too. Yeah, there is a limit on the amount
of debt you can enter into and that debt creates a debt service. A debt
service creates a financial obligation which translates into a tax. You have
got to kind of step through three things to get to it. It will become very
clear to you. Okay, page- the next chart I have, excuse me, is from your
handout and I want to do some comparisons so you can see what things
look like today and in the future. Okay. The important thing I want you
to note here is that we have some historical information. '98, '99, year
2000, and then we do our projections. If you draw a line right here, the
tax rate in '98 for operational purposes is 11.18. In '01 in this budget it is
11.80. The substantial change that has occurred is tort liability which we
chose to tax for, and we have added the emergency levy. Your tax rate for
operations has really substantially not changed much. The tax rate for
operational purposes as projected will increase from 11.18- and I have
taken it all of the way out to the year '04- to 12.05. Most of which is
directly attributable to two factors: employee benefits (pensions, health,
insurance, etc.) and the emergency levy. But our tax rate over that seven
year period has only increased 7 ½%. So it is not going up very rapidly.
Are you with me on that? Now take a look when you add capital in.
There is where it all changes. Our debt service rate in '98 was for the
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taxpayer $1.61. The debt service we plan this year is $2.98. And if you
adopt the capital plan without change it would grow to $3.89 because
when you make a commitment on a capital project to borrow money you
basically have a commitment for a period of- in our case, in most of our
projects- (can't hear). You borrow money for that period of time. This
does not include the library referendum. And we have a calculation for
you on that. What it does show, I believe in your tax rates, is that
historically the Councils have been strongly committed to capital projects.
But, it also demonstrates to you the lack of operational margin that we
have. It is not growing at a sufficient rate to offset inflation, let alone new
initiatives. That is why our general fund budgets are as tight as they are.
In fact, it becomes frustrating- I know it becomes frustrating for me
financially because I can't give you some flexibility. It also becomes
frustrating politically because, in effect, what it requires you to do if I
want a new initiative operationally I have got to get rid of something else.
And those are very painful decisions. Yes, Irvin?
Pfab: I have a question. You had mentioned that there was a rate change in the
operational budget. What was the number that you gave me?
Atkins: The operational budgets...
Pfab: No, the percentage.
Atkins: Oh, 7%.
Pfab: Okay, what does that ....
Atkins: And that is from 11.18 to 12.05.
Pfab: And what is the bottom- the same thing in the total?
Atkins: In the total from 12.79 to 15.94 is- it averages...
Pfab: Is that percent?
Atkins: Yes. It is 24.6% or about 3 ½% a year. But you will notice the capital is
up 2 ½ times. Are you with me?
Pfab: Right.
Atkins: 1.61, 3.89. So, I mean again, strong commitment to capital projects [and]
a good bit of it has to do with an older city. Storm sewers between houses
and things to fix old neighborhoods become very expensive projects. I
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have prepared this for you just to kind of give you a feel that the previous
Councils have also had somewhat the same dilemma that you are going to
have and that it is operationally we don't have a lot of room. And that
Councils, again, have traditionally concentrated on capital projects. Their
concentration has put forth lots of capital projects but in a commensurate
fashion. If you borrow money it raises taxes. It is a very simple
calculation for you.
Mansfield: Steve?
Atkins: Yes. Microphone.
Mansfield: Is it there?
Atkins: Tum it on.
Mansfield: Just one point for those levies that you are looking at. All of those are
pretty much at their maximum.
Atkins: Yes.
Mansfield: 8.10 and .27, those are your statutory maximums.
Atkins: Yes, gotcha. Thank you.
Mansfield: So, the are not going to be able to change them.
Atkins: Okay. Are you with me on tax rate comparisons?
Lehman: But I think Steve, am I correct- on page 18 let's go back. We will be
experiencing a 4% increase in revenue from our taxes even with the
rollback?
Atkins: It is a tad bit less than that but just about.
Lehman: Well, I mean, that is the number I think-
Atkins: Generally speaking. Yeah.
Lehman: Okay.
Atkins: But remember, built into that is growth.
Lehman: No, I know that.
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Atkins: New construction-
Lehman: Service more area-
Atkins: Absolutely. Okay. We substantially live on our growth.
Vanderhoef: So what does that translate in dollars to the general public?
Atkins: I don't know but I will look that up for you. That is so I don't forget- just
in case. I am going to go through general fund revenues- can you wait?
Can you hang onto that one? Because I am going to do revenues very
shortly Dee and I think that will answer that question for you. Okay, let
me try to put it in a little different perspective here to give you a feel. And
this is the last page of your handout. A house this year, this current budget
we are in fight now, of a $100,000 value and our housing stock generally
is a little higher than that now but for arithmetic purposes- when you take
the value of the house and you apply the current rollback of .564 you have
a taxable value of $56,400. We have a tax rate of 13.851. So, in your City
taxes you paid $782. You may have seen these in the press accounts.
Now, remember, and I always try and remind folks, 40/40/20. 40% of the
tax bill is the City, 40% of the tax bill is the schools and 20% is the
county. You can't do anything about that 60% as much as you might like
to. Of that 13.851 we had a debt service rate, and you can go back to page
16 and look it up, of $2.30. So, in other words, of the $782 in taxes that a
person pays on that house $129 or 16% pays for capital projects. This
year, again with $100,000, the tax rate generates $811 in City taxes but the
debt service tax rate goes up. So this year, assuming you approve the
capital plan, that person would pay $163 or 20% of the City tax for capital
project debt. With me? Our capital project cost borrowing etc. is growing
disproportionally to other expenses. Another way to look at that [is] your
City taxes increased from 2000 to 2001 by $29 while your share of City
taxes for debt went up $34. Again, pointing out, we virtually have no
margin to work in, in our operating budgets. Why I show you this chart:
one is to kind of reinforce what I have been crabbing about on operating
budgets but also the important thing to the tax payer is that a good piece of
their taxes goes fight back into investment. Direct investment in the
community: streets, parks or whatever. (changed tapes) Okay on that one?
Okay, now I would like for you to turn to page 22. Jim, I see you sitting
back there and you don't have a page 22 but I have an extra budget. No,
but you don't have this. Might be easier for you to read from one of these.
Page 22 in that book. That is what we are going to work from. If anybody
else shows up I don't have anymore, so. Okay. Page 22. I want to take
some time because this is sort of the bread and butter. We take as
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seriously our revenues as we do our expenses and this is your general
fund. Oops. (muffled). Okay. Let me step you through the money to the
general fund. We have categories of expenditures and I am going to take
that middle column as the one I want to work from. Where it says FY01
budget. That is what we are working on. You have an 8.10 levy [and] it
generates 14,600,000. You have a transit levy, you have a library levy,
you have a tort levy- this is for bookkeeping purposes and that is why we
have shown this number. So you have a property tax under those types of
levies. Remember, we use these for accounting purposes and state
reporting. Then you have a transfer to special revenue levies. When you
see that number 1.07454 or whatever that is- draw a line through that.
That is the computer calculating for us and it wasn't supposed to be there.
And draw it through the next one and the next right across from it.
Thanks. We have an employee benefits levy. You saw that earlier that
generates that amount of income. And we have an emergency levy of 27
cents that generates $489,000. That is new. Now, why the emergency
levy? State allows this levy for any governmental purpose. Basically use
it for anything you want. But there are strings attached. That allows for a
state review of our budget by something they call The City Finance
Committee. That simply means that state officials can appoint a
committee which they call this committee, this specific appointments,
come to town and go to work on our books. If they want to that is fine. I
mean, our books are audited and we have excellent credit. I don't worry
about that. But it is another level of state control.
Lehman: Do other cities use that levy?
Atkins: Yes. Well over a third of the cities in this state use the emergency levy. I
have been reluctant to recommend it simply by the nature of its title. Has
it been available to us in the past? Yes. The consequences of using it
severe? Probably not. But given the decline in the rollback, the loss of
machinery and equipment, there are a number of issues that led me to
recommend this levy. Some were financial and some were political. First
of all as a matter of just policy. We want to do certain things in our
community and we simply don't have the money. Secondly, voter
expression. You can interpret the sales tax defeat of something to the
effect that you will use the property tax to finance this local government.
So be it. If that is to be the case then we should use the available levies to
the fullest extent practical. Third point, it we have lost 3 ½% of our tax
base to machinery and equipment. You will see in a moment the state has
provided some reimbursement. The reimbursement next fiscal year. The
state's policy was that your economies, local economies- commercial and
industrial- will grow sufficiently to offset the loss of this revenue. I don't
know how you spell (sound) but that is what we think of that. I am
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convinced the reason that the machinery and equipment was taken off the
books was that the border states don't have one. That is it. States around
us don't have machinery and equipment. It is a good tool to attract
business and industry. But at the same point the border states don't have
as severe restrictions on tax rates, rollbacks and other things. I know of no
other state that has, for example, a rollback factor. I have never heard of
that till Iowa. That also brings up the next point- it is the loss of taxable
value. You will note in our numbers that adding the levy really barely
makes up for the losses we have had in rollback and other factors. There
is an expense side to this too. If we have a tax freeze and the calculation
that is being proposed by the state- if you are going to levy something you
had better do it now. Those communities which have kept their property
tax levies artificially low- if the tax freeze goes as it was proposed- are
going to get creamed.
Vanderhoef: If the tax freeze goes in this session-
Atkins: Yep.
Vanderhoef: -and this is proposed for our next budget-
Lehman: July 1.
Vanderhoef: -we can't...
Atkins: I don't know.
Vanderhoef.' ..add it.
Atkins: I just don't know Dee. Could they write into the law something that-
remember the sales tax calculations in 1985- I just don't know. My point
is that I get it on the books and it from a tax standpoint- yeah, that pocket
expense to the taxpayer is not that dramatic- remember, it is capital where
our tax expenses are. Excuse me- you were going to ask me something
else.
Vanderhoef: Yeah. Is there any way that our present budget could be amended to add
this in?
Atkins: No. Thanks, we were thinking about that. I appreciate the...
Vanderhoe~ ...but I would like to somehow or another.
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Atkins: We appreciate that quiet support. We were trying to figure that out and
no, it didn't work. No.
Vanderhoe~ ...at least lock ourselves into the right position.
Atkins: Another thing is that if it is deregulation of utilities- I don't know how this
new consumptive tax is going to affect that calculation at all. And, we
have needs. In this budget proposal we have certain staffing proposals.
What I did, for example, in the year '03 is I added $100,000 to the
library's budget in their personal services account making the assumption
they would have at least a foundation of some extra money. The
referendum passes, the library is built, and the door is opened. They are
going to need some more staff so I put $100,000 in. The commitment to
the Council, and this is for the three new ones, was that they would live
within the budget for the last three year budget. It didn't say anything
about this upcoming one. The library budget as an expense item is a very
conservative budget this year. We made very few changes in it.
Lehman: Steve, you put the personnel in '03 but you did not input the retirement of
bond?
Atkins: '03.
Lehman: Yeah.
Atkins: No, we did not put the debt in. My point is that if the referendum were
defeated then you would simply have your library budget projected for '03
would be overstated. But I have to show something in there. That was
one of the- you know, the criticisms is that, of me, is that they kept
complaining we don't, I told you, "we don't have room in the operating
budget". Well, by adding this levy and making some changes we can at
least pick up some room in the budget. So, I felt compelled to put that in
here. So that is in '03. So that is why the emergency levy. I don't like the
title.
Champion: Is the levy project specific?
Atkins: No.
Champion: Okay.
Atkins: Any governmental purpose. Connie, you could buy a fire engine as much
as you could hire librarians. I mean, that- it is a very...
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Champion: ...apply for it?
Atkins: No, what you do is we levy it, we notify them, and then the state at their
discretion can chose to initiate the city finance committee process.
Champion: Okay.
Atkins: Our, when we- again- checking around found that they had not done that.
I mean, that would be sort of the height of state regulation. I mean, that
basically says the state will come in and tell you how much money you get
to spend in your city and then they move back to Des Moines. Okay?
Yes, Irvin?
Pfab: You call it the state initiative- what was the other words to that?
Atkins: State emergency levy?
Pfab: No, no- what that triggers-
Atkins: What it means is called- what it triggers is something called the City
Finance Committee of the state.
Pfab: Okay. Alright, but don't they have their fingers all over the budget
anyway?
Atkins: Yes. This would be about as bad as it would get because that simply
means they could come to town and say "we don't believe you deserve to
have this levy. And here is our reasons why.". Now, I would do our best
to represent us and argue about that but the state would get the final say on
the thing. I do not believe it is going to happen.
Pfab: Well, does the city- does the state have any control over the budget as it-
without that?
Atkins: Yes, absolutely. We must-
Pfab: They are already in it?
Atkins: Tax rates, tax base and we must report the budget to them. One of the
difficulties that you will have is that you will be in the midst of your
budget process and we will tell you you have to declare a certain point in
time- and it is at that point we report to the state how much money we
would like to spend in various categories that they set up. And you can't,
remember, you can't go above it but you can always go below it.
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Vanderhoef: Is this a maximum number?
Atkins: 27? Yes it is. Okay. Now, moving through the next major revenue
category is the road use tax. In your budget it is on page 101. It is not
necessary- if you would like to look at it it is fine but the bottom line is
that road use tax is paid to the cities, the state collects a gas tax, the gas tax
goes to the state treasury, the state Legislature takes that gas tax and
carves it up into big pieces- I believe it is 20% for urban areas, some other
percent for farm to market roads in the county, some other percent for the
highway patrol, some other percent such as that- well, it gets down to a
number. And, our road use tax is [that] we finance traffic engineering and
street maintenance operations. So, they are in this budget from the road
use tax as well as capital projects. And the road use tax is $81.00 per year
per person based upon your most current census. So, we take 60,000
people times $81.00- you will get a number that is on page 101. Now, for
the purposes of the general fund budget, we don't use all of those monies.
So there is reserve positions which we use also for capital projects in order
to limit our borrowing. I will be showing you that as we move through
here.
Wilbum: Does the capital projects have to be limited to things related to road like
the building to house..?
Atkins: Yes. They have to be very specific. For example, five or six years ago we
took a run at trying to get some road use tax money directed toward
transit. State nixed it and said "no, you can't do that". Because, we
generally have had very good income stream from our road use tax. We
have done very well not only because of our population growth but in
general we have done okay. But it is restricted on what you can use it for.
Vanderhoef: Could it be used for Public Works campus?
Atkins: Yes, and we intend to do some of that Dee. State and federal funding.
State aid- now, the thing about state aid [is] it used to be something called
municipal assistance. It is number 4 on that page. Are you all with
me? State used to be called liquor profits and municipal assistance.
Remember the state changed liquor- the whole business of liquor
regulation etc. The bottom line is that the state provides us funding- but
the thing that is difficult is- read across: 629, 630, 629, 629, 629. It has
not changed in about 10 years.
Lehman: Does that mean liquor consumption is flat?
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Atkins: No. The state takes the difference. That number has been fixed for years.
It is not inflation adjusted. Personal property replacement. Some time ago
the state took away personal property taxes in Iowa. They have agreed to
reimburse us for that loss. Now, another one of my little "Ha!". What
they have done is they have fixed the number at 320 and it has been that
way for years. We don't anticipate any change. Library open access is a
direct prim. Machinery and equipment credit. In '99 we got 66,000 [and]
this year we get 115,000, this coming budget we are going to do real well
at 226,000 and then the bottom falls out. We loss that full tax base. As I
told you, I would rather have the tax base which is about $800,000 a year.
If we have the tax base, and it would be shown up in the property tax
portion. This is what they are saying- the state policy is that "you will
grow your local economy sufficiently to offset that". Police federal crime
grants- those numbers are pretty straight forward. That was the cop 's
grant that began about 4 years ago. We have hired a number of officers
under that project. Those monies are gone in '03- at least there is no
expression from congress that that money will be continued. Some other
grants that this police received- those are substantially for computers and
some other changes. And then the bank franchise tax. This one really
irritates you. Our banks in Iowa are very prosperous. At one time, we
used to get a percentage of the tax that the state put on banks. So, as
banks became more prosperous they paid more tax to the state. And the
way it worked out was that 55% went to the state [and] 45% went to local
govemments. But, it was growing all of the time. Legislature, in their
wisdom, decided "uh-uh: we are not going to share anymore". So, what
happens is that the 55/45 formula remains but they have capped the
amount of money that would be distributed. And they get all of the rest.
That is why 90-120,000 was a payment. Just the way the thing was paid.
But, it reads across at $90,000 a year. No change. The state pockets the
difference. The bottom line if you look at state and federal funding, from
FY00 to FY01, is actually down about 6%. One of the things that we have
said [is a] big difference between cities and schools [is] our budget is
maybe 4 or 5% state and federal aid [and] schools are probably closer to
50%. Particularly state aid. Yeah?
Kanner: Where is the CDBG in the home projects?
Atkins: That is not in the general fund. We book that as a separate fund and we
will be going over that. That is not in here. Okay. This is just what we
call the general fund. Administrative charge backs. What we do here is
an internal- any time, for example, that Kevin and Deb were involved in
the preparation of a bond issue for a water- we charge that time against the
water fund. We keep accurate- the point remains is that we do not want
the general fund to subsidize our other enterprise funds. And the city
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attorney does the same thing. Fines, permits and fees. Generally
speaking, if you read down, it has gone down just a tad bit. We have
found that we believe that our recreation fees were overstated and that 655
is a more realistic number. So you all know that all you need is a very
cool summer and you can watch the bottom fall out of recreation fees
because the kids don't go swimming. So, there is some volatility in that.
We do try to keep a policy that the fees charged are 45% of the cost of the-
and we are still pretty close to that. I think, I would suspect this Council is
going to have to deal with that policy because I think our fees are going to
be reaching the point where to get it back up there is going to be a little
pain involved. Not in this budget but in upcoming ones. Building permit
and inspections- running pretty consistent. Parking fines, that will decline.
One of the big reasons for the decline is that eventually Iowa Avenue will
go away. These are parking fines that are receded into the general fund.
Police services runs about the same. All of the rest of those generally run
about the same. I don't think there is anything in there that is particularly
profound. Also, you do know that building permits and inspections- the
building permit fees pay for the operation of building inspection. Housing
permits and inspection fees pay for about 70% of the operations of our
housing inspection program. Under contractual services, it is not real well
known but it is a hefty revenue item for us- we have a contract with the
University to provide fire protection to all University buildings within the
city. And, it is an elaborate calculation of square footage times, times,
times. It has been in place for many years. It is a very favorable contract.
We- and the University has always been very satisfied with the services
that we provide. That number is- that is the number that the University
pays us for fire protection. Johnson county contract- there is 2 contracts in
there. One is the library and the second one is the senior center. And that
is what the county pays us for their ability to access those two public
services that we provide.
Kanner: Just going back to fines and permits and fees...
Atkins: Yes?
Kanner: Are there state limits on what we can charge for some of these things?
Atkins: There are some state limits and some not. I would have to go through
them. For example, liquor license fees, Madan, I think are fixed?
Building permit fees [are] your choice. Library services your choice.
Parking fines, I think, are fixed at five dollars. Food and liquor license
permits: state.
Karr: Some of them we have flexibility on.
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Atkins: Okay. We can go through those for you. I would have to pull those out,
but there is some with flexibility and some that we don't have [it with].
Okay. Hotel and motel tax is the 7% tax. We have a policy in place on
how that money is distributed. We believe we have been underestimate-
we underestimated it last year. That is why we brought that number back
up. All other income- we invest our money. Now, I want you to read
down where it says "pass through grant for railroad and U of I". Our
fiscal year 2000 general fund revenues are overstated by 1.627 million
dollars because we have got to receive that grant. So, we book it in and
take it out. It is not available for you to spend. It is for projects that we
have in conjunction with the University and the railroad where we had to
be the grant recipient. We have to show it coming in but it goes right out
again.
Lehman: Is that the Iowa Avenue ....
Atkins: Yep, that is one of them.
Lehman: County, not Iowa Avenue.
Atkins: Now, one that I will call your attention to, you have been promising me
for years now, [is] we have 1.3 million dollars for the Peninsula property.
We were supposed to have that sold in '99. So, we keep booking that
because we used our general fund reserves to buy that property. Now,
since we are down to the point where this Council is going to decide on
developers and all of that sorts of things eventually, I am expecting that
each- that the developers are not likely to want to pay us 1.3 million bucks
upfront. So, I may have to adjust that but I want that shown as a revenue
because it is money due the general fund from when we bought that
property.
Kanner: Steve?
Atkins: Yes?
Kanner: Why is interest income going down significantly?
Atkins: Well, kind of-
Kanner: Aren't interest rates going up a little bit?
Atkins: I think we are kind of chicken. It is one of those things, Steve, that we
usually do pretty well but when they had the 1-Trust scandal back 5 or 6
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years ago and the state severely restricted our ability, for example- we
can't go out of, Kevin what is it? A county wide area?
O'Malley: Right. We can only invest in this county and adjacent counties.
Atkins: Yeah, and adjacent counties. We used to have insurance certificates and
things such as that. We have just been real reluctant to take any risk in
that line. If it comes in better that is all the better for us but because of the
restrictions they have on us we, you know, we can't buy stocks and things
such as that.
Lehman: Well, isn't this also- I would hope that is a bit of a philosophy being
somewhat conservative in our income estimates. That number for next
year is still in excess of what it was in '99.
Atkins: Yeah, I know. We- our investment policy is safety, liquidity, yield. We
want our money safe, we want to be able to get at it quickly, and then we
consider yield. Now there- you can change that philosophy. I really don't
think you should do that because we do okay. I mean, we do okay.
O'Malley: IfI may interject-
Atkins: Yeah?
O'Malley: -the other aspect of that is our fund balance reserves are slightly going
downward.
Atkins: That is true. I am sorry-
Kanner: Say that again please?
O'Malley: Our fund balance reserves- the money in our pocket is decreasing in the
out years.
Atkins: In the out years we have less cash to invest, therefore that would draw that
down somewhat too. Thank you Kevin. That is fight.
O'Donnell: Steve, I am always curious about miscellaneous revenue.
Atkins: Yeah. Who knows! I really- I mean, it is- you could get some kind of a
grant.
O'Malley: Reimbursement of expenses. Sometimes we- people run into our stop
signs and something that costs money.
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Atkins: Yeah, if someone whacks a stop sign, knocks it down in an accident we
are entitled to get our money back and the court will collect it for us and
we will put it in there. You know, those $10,000 stop signs. No, I am
sorry. Don't write that down. That didn't count. So, generally speaking,
that is your general fund revenue. It is a conglomeration of revenues. It
does not include debt. That is a whole separate issue that we will be going
over. But that is our day to day operations and if you look at those
numbers down there, there is not a lot of change folks. There is just not a
whole lot of room because while your tax revenue may go up and
someone may say "we are doing okay"- yeah. But other revenues within
the fund, if they have no growth in them, that just simply whittles away at
the ability to do that. Let's have a break because I want to move to
expenditures next.
O'Donnell: Back by 11:007
Atkins: No. You ought to be back sooner than that.
Vanderhoef: Oh, that is fine.
(several talking)
Lehman: Before you get started there is something that I want to bring up for
Council, and I mentioned it to you yesterday so this is something that I
think we need to give some indication to you and I don't want to spend a
lot of time talking about it other than see if [there is] any interest on the
part of Council. As we are all aware, the Englert theatre building has been
purchased by Kip Pohl and there has been an option extended by him to
the community folks for 6 months to raise the kind of money that it would
take to convince us to help them buy it- whatever. Purchase price is
$750,000. The selling price-
Atkins: That is what Pohl paid for it?
Lehman: That is my understanding. Selling price to the community was to be 1
million dollars with up to $100,000 given back by Mr. Pohl to the group
that is trying to buy the building. So, the cost to the community would be
a minimum of $900,000 and a max of a million dollars if they are able to
exercise that option. Mr. Pohl indicated to one of our folks last Friday that
if the City of Iowa City was willing to purchase the building and give that
same group of people the option, he would sell that building for $750,000
which is what he paid for it. It would save the community a minimum of
$150,000 and as much as $250,000. The only thing is that that would
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have- that has to be communicated to him within the week I am sure. He
has to know right away. If there is interest on the part of the Council- it
appears to me that we could step in and purchase that building and give
that group of citizens the option of buying it from us under the same
conditions that Pohl had and perhaps give him the option if they were
unable to raise the money a first fight of refusal should we decide to sell
the building. Now, they have raised $700,000, or pardon me, $70,000 to
exercise that option. I guess, if there is interest on the part of the Council,
I would like to see you pursue some details on that because it is something
that has to be done fight away if we are going to do it. I see it as being of
little or no risk to the city from a financial stand point.
Atkins: Ah, the little or no risk argument. I hear that a lot.
Lehman: Is there any interest in having Steve look at that and come back to us?
Pfab: I would encourage him.
Champion: I would too.
Lehman: The timing is such that- it is a historic building, there certainly has been
some concern about it being turned into a bar. This would protect the
historic nature of the building. It would prevent it from going into a bar
and it would enable the community to buy it for potentially less- could..
Atkins: Okay, could. There is a lot of 'coulds' in this thing.
Pfab: I know- but what I am saying is there an (can't hear) if something else
just happened and .....
Lehman: That is right.
O'Donnell: The safeguards.
Pfab: And maybe (can't hear) set a time-
Lehman: If we are interested- do we have an interest in pursuing this?
Champion: Yeah, sure.
Vanderhoef: Absolutely.
Kanner: There is an interest on my part I just don't like being pressured a week
saying- by people saying-
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Lehman: Well then we can forget it because this guy has got a million dollars
invested and he is going to find out this week if we are interested. Ijust
found out about this Saturday. The guy and Dick Summerwill- I talked to
him, Dick is on the committee. And if we want- if we don't want to do it,
it isn't going to do anything to interfere with what is going fight now. The
only difference is they will have to pay an extra $150,000 dollars.
Atkins: Can I ask a couple of questions? I will wait Irvin, go ahead. Bottom line-
the city buys the Englert for a price of what he paid for it-
Lehman: That is right.
Atkins: $750 and I will assume he will want his expenses covered. Alfight, so we
buy it and we now own it.
Lehman: That is right.
Arkins: We own a piece of property. We then put certain terms and conditions on
it for this committee.
Lehman: That is correct.
Atkins: Such as saying "you must raise x number of dollars within a certain period
of time or we will stick a for sale sign in the front yard and sell it".
Lehman: Giving him first option.
Atkins: Giving him first option. If he chooses not to exercise the first option, walk
away, then we own the property until such time that someone else would
purchase it.
Lehman: And we are able to sell it.
Pfab: Is there an income stream at all .....
Lehman: No, there is no income stream. And I would expect that the $70,000 that
were raised by the public on that option would be applied to that purchase
price and I also do not feel that that should necessarily- any portion of that
be refunded if they are unable to raise any more money.
Vanderhoef: I agree with that because if we buy it it goes offof the tax roll and so we
have some expense in there and we have the expense also of lost
revenue...
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Atkins: We have an opportunity cost. Yeah, we have an opportunity cost. Now,
this is not permanent financing?
Lehman: No.
Atkins: You tell me it is short term. You want me to arrange short term financing
to buy it for a period of time?
Lehman: Well, if the Council is interested in doing it.
O'Donnell: I would like some safeguards put into this to make sure that we don't own
the building.
Lehman: We will own the building.
Atkins: Oh, we will own it.
O'Donnell: I would like this to- I want to preserve the Englert theatre but I have a
problem taking it off the tax roll.
Champion: It would be off the tax roll if they buy it too. It is going to be non-profit.
Lehman: No, no it would be on the tax roll.
Atkins: Wait a minute. Now, if Kip Pohl buys it, it stays on the tax roll.
Lehman: That is right.
Atkins: If the not for profit buys it-
Champion: It goes off.
Lehman: No, I have seen their business plan, at lease the initial one, and that
includes property taxes. I don't know how that works out. That is a legal
question that Eleanor is not here to answer. I think it depends on how it is
set up.
Atkins: What is that noise? I am sorry. Oh, okay.
O'Donnell: It was me trying to breathe, I have got this ....
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Atkins: Oh, no I just I- I thought it was the machine. Okay. Alright, now, you
want us to buy this, to hold it, which bottom line allows them time to put
together financing? That is where we are going.
Lehman: They have that now. The only thing they would gain by this is the ability
to acquire the property for substantially less money.
Pfab: It is a $150,000 markup that is...
Lehman: A minimum.
Atkins: That is fight.
Champion: A minimum.
Vanderhoef: $200,000 actually.
Pfab: We don't know what his expenses are yet either, that ....
Atkins: No, we will figure that out.
Lehman: Well, there would be legal fees or whatever. I can't imagine- those would
be the same sort of expenses that would be involved in any sale of
property I am sure.
Kanner: The loss of sales tax for 6 months.
Lehman: We don't get that anyway. That is state.
Kanner: Not sales tax, I mean property tax.
Lehman: Property tax for the period of time that-
Atkins: I don't know how that works.
Kanner: 6 months.
Pfab: I would say pursue it.
Lehman: Well, we aren't saying that we are going to do it, we are just saying that
there is interest-
Atkins: The important thing is that the capital budget planning- $700,000 is the
maximum amount of money that we can borrow without a referendum
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requirement for a project such as this. But you are telling me this is a
short term financing which means I can get a short term note or use our
own reserves.
Lehman: Without-
Champion: It could be under $700,000 anyway. We would take the $70,000 they had
and-
Atkins: Okay. But you want us- because I need to, I am going to, write down like
a memo to you all so everybody kind of understands what--
Lehman: Figure it out and bring it back to us. If there is interest.
?????: I think he is saying "you figure it out".
Atkins: I am just trying to feel what the rules are so-
Champion: You don't want to administrate.
Lehman: We are not micro managing. Are there- alright, is there interest in
pursuing this? Not to say doing it but pursuing it and then-
O'Donnell: I would like to see it-
Atkins: Bottom line folks is we could possibly own a piece of property for some
period of time. That is a risk.
O'Donnell: That is what I don't want-
Atkins: That is a risk.
Vanderhoef: ...and some conversation...
Pfab: If we have $70,000 in the kitty that-
Atkins: My concern about the risk is that if we buy this and end of having to put
permanent financing in place I have got to change this thing.
(several talking)
Champion: No,. .... we wanted to see what they could raise in that 6 months or 7
months.
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Lehman: I think that is fight.
Atkins: Assuming you will establish one of the policies that you might make is
you will establish a goal for them that they have got to raise x number of
dollars. Now, I think it was expected by that group- hey Karen, you can
nod your head- it was expected by that group that hopefully the city was
going to put some capital money in but no operating money. We can't run
the thing-
Lehman: That would be explicit in anything we would do.
Pfab: Well, and some of the costs of carrying could be some of the funding.
Atkins: Yes.
Vanderhoef: Well that is part of that $70,000.
Atkins: That is an opportunity cost loss, you are right.
O'Donnell: And if you put a time period on this like 6 months do we extend it to a
year? Are we prepared to do that?
Champion: I think we need to wait and see what-
Pfab: I would say make it reasonable- not terribly short but not too much- I
would say nine months to a year- maybe 6 months, I am not familiar with
how-
Atkins: Do you want something- when do you need this?
Lehman: Well, would you call Mr. Summerwill? He talked to Mr. Pohl and my
understanding is if Pohl wants to hear back from us, sometime this week.
Atkins: So, the bottom line from Pohl would be he would accept maybe a letter
from you Ernie?
Lehman: I think a phone call followed by a letter confirming it would do it. But we
also- there are a couple of other- we also need to establish what we would
expect the public to raise and my- they have expected...
Atkins: That is a discussion that you all have yet to have.
Lehman: Yeah. But, I mean, if the thing is agreeable we can probably work out
some of the terms, the biggest thing is if-
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Atkins: What if it is just- we had a referendum on a community events center and
it got voted down. Now, we are finding a way to go buy another theatre.
Champion: For a lot less than the ....
Atkins: Okay, I was just- I feel compelled to point that out to you.
Wilbum: Just a couple of questions. If, we do end up with- if we end up losing the
risk and end up owning it have you given any thought to where [or] what
we might-
Kanner: Do with it?
Wilburn: No, no exchange in terms of- what are we willing to..
Lehman: I don't know that I am willing for us to own that building. I think that if
we can't- if the community is unwilling or unable to raise the kind of
money that it is going to take to match, and I would say the match would
probably be half of the $900,000 or $450,000, if they can't do that then we
would market the building. That is my opinion and there is 7 seven people
here.
Wilbum: And as we wait to see what memo is coming back to us I guess I would, in
terms of maybe we should think about the community's ability to- it is
impressive if they raise this that quickly but we have to remember that
there is some other major fund raising efforts going on in the community
fight now.
Atkins: Walkway.
Lehman: Steve?
Atkins: Senior Center.
Kanner: I think we should pursue this but I want more than a few days before we
are going to undertake this major risk that we are going to vote on
something- I want more than a few days when we get the information back
before we vote on it.
Champion: We are not going to have more than a few days.
Lehman: No, no- we can ask. My understanding is that we probably will have to
have a decision to him within the week.
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Atkins: I am assuming what I have to do this aftemoon is after we finish with this
is talk to Summerwill and Karin and I will get together and talk about it. I
need to write something down for you all to react to because right now we
are all bouncing around.
Pfab: I would say if you put a rough proposal through in an e-mail to everyone
and-
Lehman: We are going to be here tomorrow.
Atkins: We will see you tomorrow night anyway.
Pfab: Okay, that is fine.
Atkins: Yeah, we will see you tomorrow night.
Lehman: In the meantime I will-
Atkins: Is there consensus that I am to do this work? Do you want me to do that?
Lehman: I think it is Steve and you can talk to Dick this afternoon-
Atkins: I will do my best.
Lehman: Either have him call me or call Mr. Pohl and indicate that there has been
some interest on the part of Council. There is no affirmative move but
find out just exactly how quickly we have to let him know. Okay.
Atkins: Hey, Karin would you call Dick yet this moming? If I don't- Karen can
get the thing started fight now and then I will talk to you after lunch.
Lehman: Good. Sorry, go ahead.
Atkins: Okay. Now, real world?
Vanderhoef: That wasn't?
Atkins: That wasn't- no, no. It is all the real world. It is all perspective fight? If
you would please turn to page 23. Hit the lights. Page 23 is a summary of
the expenditures out of the general fund. The general fund expenditures
are, again, substantially those non-enterprise utility accounts: police, fire,
parks, rec., clerk, attorney, planning, street maintenance. Those are all of
the things that are in that budget. I just want to call your attention to a
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couple of things. As far as total expenditures are concemed, looking in
the middle column, it will read 33,675,000. It is down from last year's
budget by 2.7%. Remember, there is some abhorrations in there- mainly,
that one-time grant. The importance of showing you this number is that I
want to take you through a brief discussion because there are elements to
the general fund: personal services, commodity services. I think it is
important that you know how we got where we got because if you will
read across the 2000 budget to the '01 budget on commodities [are]
actually down. Capital outlay- down. Transfers- down. And there are
some reasons behind that and I want to take you through a brief discussion
about how that works. That is, if I can find my notes. First of all, the
question ofpayroll. It is our largest operating expense. It is the people
that work for this government. It is the most fluid. It has the most ability
to be changed. It also is the most difficult to change. When we budget in
our personal services we budget based upon the fact that we have
collective bargaining agreements in place or are in the process of
bargaining. We have been very fortunate over as many years as I can
remember- is that we reach settlement and in most cases multi-year
settlements with our employee groups. We are bargaining right now, as
you know, with police and fire. We are coming offof three_ a one year
and a three year agreement. We have allowed for adjustments in the
budget so that we can conduct responsible collective bargaining. Our
position in collective bargaining has been that we will pay a fair wage.
And that we will pay a fair wage comparable to all reasonable
circumstances. We don't plead poverty. We also, in budgeting, determine
whether there is going to be some tumover. Tumover simply means that
with 600 full-time employees that sometime during the year we are going
to lose people- quit, new jobs, retire, they are replaced. All of that has a
factor about it. And we generally assume it is in the neighborhood of
about 5% of our employment base will change during the course of a year.
We are currently in the process- in a very difficult employee market. We
compete just like the private sector. We, in fact- we have certain positions
that we have been unable to fill. Kevin has been trying to fill our
information services- the guy- the man or woman that runs the data
processing- for months and I think we have had half a dozen offers [but] it
seems like most times the University hires them away from us because
they can pay a premium wage. So, when we budget in payroll we don't
budget 100%. X number of employees times, times, times. You will
recall that last year we took some risk and budgeted 95%. That was too
big of a risk. We are okay but this year we are going to budget 98.5%.
So, we will reduce those budgets implying that there will be some
turnover. Now, ....
Lehman: Did we run around 98.5% last year?
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Atkins: No, we did it at- we haven't finished the year yet Ernie but we think we
should be okay. I can't believe we can do that two years in a row.
Lehman: No, no- but we were close to the 95% that we-?
Atkins: We don't know yet, we are not finished yet.
Lehman: Our best guess is?
Atkins: Our best guess is we are going to be okay, we are going to be close. It is
very, very tight. Too tight to take that kind of risk and as I told you, I
would come back to you if I thought it was too tight and I thought, I think
we made it too snug. But the point that I like to make in the payroll [is]
that it is important that we responsibly budget. I don't want to overstate it
and I don't want to understate it. And I think that we have done that. And
remember that these are estimates. Economic changes could occur, we
could have an arbitrated labor settlement- hopefully that will not occur-
our history has been that that's not the case. I am concerned about some
changes in the state law and this is a year for the police and fire and they
have a very strong lobby to consider changes in their pension. That
simply translated, so that you all- particularly new Council members- we
pay the pension bill [and] the state sets the law. We used to run our own
pension plans and they took it away from us a number of years ago. But,
our experience is that they do have a lot of control. Now, I would be
concemed also if they roll that number in the freeze. That could be very
complex for us. Yeah?
Lehman: Is that pension an employee benefits levy?
Atkins: Uh-huh, right.
Lehman: So it wouldn't affect the general fund?
Atkins: No, but it would affect people's taxes in the sense that if they pass a major
(can't hear) benefit. One of the things, for example, that is very irritating
about not being able to manage you own pensions as long, I think, as long
as we meet some state standard we should be able to do that on our own. I
think we can invest money and do as well if not better than they can. But,
there are little subtleties. For example, we pay a 17% factor for police and
fire into this pension plan (changed tapes) So what happens? Let's change
the benefits to fill that- and that is the problem that we have. Folks, there
is not a whole lot you can do about it but I wanted you to understand that
we take our payrolls and (can't hear) manage the closest. We do not allow
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payroll to be transferred to other line items. We run that very, very tightly
and I think we have to. But, a good bit of it when it comes to pension-
now, health insurance we have done very well. Our numbers have been
running fairly consistent for the last couple of years. If you will remember
about four or five years ago, I think, most of- Ernie- we had a real spike
that went up like 15, 18%. It has now leveled off. We are self-insured.
And those accounts remain healthy.
Pfab: Can I ask you just a question?
Atkins: Sure.
Pfab: What does it cost, either percentage-wise or dollar-wise, to have someone
administer that? Health benefit- the administration.
Atkins: Oh, the- I don't know- there is a percent. What is it Kevin? Do you
know?
O'Malley: (can't hear)...third party administrator, and I thought it was somewhere
around 5%.
Atkins: About 5%? Okay. It is about 2 million dollars a year in expense. We,
again, we try to track that one very, very closely. We can tell you that
during the course of the year we usually have at least one catastrophic
illness. Kevin has heard the plan of the fashion that we have a stop loss-
that we reach a certain point and insurance kicks in so that you don't get
clobbered. But generally speaking, those numbers have- and I am real
surprised because I do a profile of the employees every year, and we are
getting older. But, of course, that means we may be aging but that means
sometimes there is fewer kids and remember you have to factor all of
those things in when you are trying to manage your system. And ours is
doing pretty well. We have a lot of youngsters too. I mean, most of our
police officers are kids.
Champion:
Atkins: It is just that we have children close to their ages. So that is part of that
management process. That account in payroll- when it says 'personal
services'- that is everything that is factored into that.
Kanner: Steve?
Atkins: Yes?
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Kanner: How many temporary workers are included in that? What is the cost for
the temporary workers?
Atkins: I would have to break that out for you. I mean, we can do something for
you. We have, during the course of the year Steve, on our payroll
probably close to 1000 people. We have just short of 600 full-time. We
have contract employees that do Parks and Recreation programs. We have
a lot of temporary, summer, in fact, one of the things we have had to do -
we bumped our wage rates for our summer employees to the $8.50 and
$9.00 an hour just to be competitive. We do not pay benefits to those
employees. Permanent part-time, and there's a definition by law, we pay
pro-rated benefits for those people. That group of employees, the
temporaries, is very fluent - we'll have two hundred plus and maybe
during the course of the year we'll have a hundred back, and the next year
that hundred is gone - there's a lot of change in it. I need to know kind of
specifically, we do not pay benefits to those people though.
Kanner: Can I get (can't hear) breakdown of what we budget for them and
approximately how much we are paying for temporary workers?
Atkins: Okay. Kevin, will you make a note of that and we will take care of that
for you.
Kanner: Thank you.
Atkins: Again, there is law that governs that as well as our labor contracts restrict
how we use them. And so that all factors into making those decisions.
One thing about our pension I want to point out to you just as a reminder,
it is on page 99- you don't have to look it up. A number of years ago,
when the state took over our pension, we were fortunate that we had done
an extensive actuarial study putting in place the obligations on the part of
the city (can't hear) pensions for police and fire. Many cities did not do
that. When they took over the pension plan, they took our money. But,
they only took enough money that calculated out, based upon what they
were going to be doing, they being the state- to run the system. Bottom
line is [that] many cities had unfunded liabilities in their pension plans.
We did not. We were fully funded. When the Legislature finally shook it
all out we ended up with a very healthy reserve. And the policy position
we adopted about 7 years ago, I believe it was when they took the pension
over, we would spend down that reserve rather than tax. So, as you can
see, 3.230 by '03 we are down to 1.1. What that means is that, you see
transfers to police and fire- what that means is that because of our good
fortune and the smarts we had a number of years ago we had a cash
position that allows us to pay part of our pension cost from a reserve so we
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don't have to tax. Now, you will notice the number going down. The
reason it is going down is we are spending out of that account. So,
eventually, police and fire pensions will have to go into the employee
benefits levy. But, for the next at least 2 or 3 years we believe, and maybe
even longer- we thought we could make it last seven and I think we are
talking more like 12 because we have had some good investment income
in there. It is just something that I think is real important that saves us and
saves the taxpayer. Yes sir?
Pfab: Are there any limitations on where that is invested?
Atkins: Yes, there is state limitations on it.
Pfab: And basically pension parameters?
Atkins: The investment limitations are more based upon geographic and
instntment. We cannot- we can only invest our money in counties
immediately surrounding- around us. And we usually invest in fully
collateralized instruments. I mean, treasury bills and things such as that.
That is about the best that we can do because that is what the law says.
Lehman: How is this money accumulated in the first place?
Atkins: It accumulated over a number of years because we did an actuarial study
and found-
Lehman: Through how?
Atkins: So, what we are doing is saying the general fund took the hit 10 or 12
years ago [and] we are now- it is enjoying the benefit for the wisdom of
that decision it made a number of years ago. And, we said as a city, we
believe we have an obligation to fully fund these pensions. And that is
what we did.
Lehman: I understand that but I also, ifI am not mistaken, if we were not taking
money out of this reserve we would be then taxing for employee benefits
so in reality this fund- well it could be-
Atkins: It somewhat works that way.
Lehman: It could be used for whatever we chose.
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Atkins: No, no- it cannot. State law says that if you have money available in your
police and fire pension reserves after we take all of your money you can
use that- you understand.
Lehman: But you must use it for that?
Atkins: You must use it. We tried that.
Lehman: Question answered. Thank you.
Atkins: Okay.
Vanderhoef: Even though it was general fund money ....
Lehman: But it was earmarked for...
Atkins: Absolutely. Remember the lawsuit we had from police and fire? Well,
that was this debate. They said "that is our money" and we said "no it is
not- it is our money and that is how we are managing it". And we
prevailed in that.
Kanner: So, our actuarial rate was higher than the state's?
Atkins: No, our actuarial rate was for our police officers [and] our personnel. The
state took all of the police department and that changed all of the actuarial
rates. It then drove it down to a point, when you have a larger pool- we
had a larger reserve [and] that's how we got where we got. Okay.
Pfab: I have a question. Where can that money be moved to?
Lehman: Nowhere.
Atkins: Nowhere.
Pfab: No, no- I mean, it is obviously pension fund.
Atkins: Right.
Pfab: Now, where does- (can't hear) is there a general pension fund for the city
right now?
Atkins: There is but the state administers it. We don't run that. We pay°
Pfab: -feed the kitty of the state.
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Atkins: You got it. Feed the kitty of the state.
Lehman: I like that.
Atkins: More than feed the kitty- feeding the lion of the state. Okay, now- a
couple of other things: commodities and service charges. So you
understand that number- much of what we spend in commodities is driven
by the private sector. We go out and purchase supplies and materials on
the private market just like everybody else does. We have the same
pressures. We try to make the best deal we can. There is law with respect
to certain purchases where we cooperatively purchase. There are
cooperative purchase arrangements that we do at our on initiative between
other governments. We seek out multi-year contracts. For example, on
our paper products that we buy we do our best to try to lock up a price for
a couple of years. There is advantages to that. Commodities, as you will
note, are substantially at the same level. We have projected that there will
be some growth. But, generally speaking, the departments and their
operations have been, I think, reasonably frugal about the management of
that and as you will see, that number is actually down a tad bit. When it
comes to services and charges it is 7340- remember there is an abhorration
in there of 1.6 million dollars from that grant I talked about earlier. So, if
you take that out, we are talking about a number more like 5.6 million and
we are budgeting 5.9. Again, the same basic principles apply there that
apply to the private market when we go out and buy our goods and
services.
Kanner: What was the grant again Steve?
Atkins: The grant is that- remember under the general fund revenue 1.6 million
dollars for a railroad grant out west of town and that walkway that is going
to be built to the University. The University couldn't receive the money
[and] we had to receive it and send it back to them. So, that is what I am
saying- sometimes you will see these spikes and there is nothing we can
do about it because we use this as part of our management process so we
have to book that number. Capital outlay. Capital outlays shown in the
general fund are declining from 2 million dollars to $900,000. Well, that
is not completely correct. Capital outlays actually are more in the
neighborhood of 1.4 million dollars. And what we have done is we have
transferred $500,000 in capital outlay to debt service. Remember that one
of the policies was try to open up some margin. Now, capital outlay is
very difficult to reduce. We maintain an itemized list [and] it is not a real
flexible account, but there are certain items that, under a definition that we
provide, that we believe we can use debt- we have to borrow it [and] it
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does increase the cost a tad bit but it also gives us some margin in the
general fund.
Lehman: Is that for the next 3 years? That is why that number stays?
Atkins: Yes. That is why it stays the way it is. There are, for example- we will
buy some item that has normally, at least a five-year life. That big gang
mower- we call it a gang mower that the Parks Department uses- I don't
know if you know that- it is about $60,000 to buy one of those. But, since
it has a life of usually 5 or 6 years easily, we will buy that out of the debt
as opposed to taking it out of the general fund. And, we are trying to level
off those expenditures as well as give you some room within the general
fund. Yeah?
Pfab: I have a quick question.
Atkins: Shoot.
Pfab: For instance- approximately what is our cost of capital funds?
Atkins: For our capital outlay?
Pfab: Yeah.
Atkins: Normally, capital outlay- which is desks, chairs, lawn mowers-
Pfab: But the cost .....(can't hear)
Atkins: Oh, to borrow? The $500,000 on the debt to go out and borrow it, short
term note- 5%. Yeah, and that might be high. So, I would say for each
$500,000 we are going to spend $20,000 in interest expense. Yeah, we do
fairly well on that. Banks like us. They are willing to loan us money
because we pay our bills.
Pfab:
Atkins: Yeah, the (can't hear). I don't know if we will enjoy that benefit.
Pfab: Tax free.
Atkins: Tax free. I don't know if we- can you translate that? Okay- he is saying
yeah, we can translate that note into tax free.
P fab:
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Atkins: Yeah it is. So, that is how- that is why that number dropped. I don't
believe we are short changing our departments for operational needs.
There are some projects that we are working on fight now. For example-
Andy has scheduled- our self-contained breathing apparatus is a big ticket
item and we are planning to do a replacement and he was going to stage it-
said let's not stage it, let's go out and get all of this gear and get it at once
and he and Kevin are working on how to do it. But that alone is about
$100,000 and from my perspective we do not jeopardize the safety of our
employees- we will get the equipment that they need and do it all at once.
But it does get shifted over. Okay, if you would now turn to page 27.
This is last on the summary of expenditures.
Kanner: The contingencies, the Council policy?
Atkins: Yes. The cash balance- you see that number? $9,900,000, 10,700,000 in
2000, 9,700,000 [in] '01, 10,300,000 and then there is a slight decline in
'02 and more dramatic in '03. The further out you go the more difficult it
is to project that number. We are anticipating labor settlements. We are
anticipating inflation [and] things such as that. But, generally speaking,
that number- 31, 25, 18 averages out to 24.6%. If you ran it out for a
couple of more years I think we are very close to our policy of not going
below 15% but averaging out about 20%. If you read down, you can see
our cash flow needs, receipts, expenditures, short fall- those are averages.
That is that we get paid twice a year- we have got to have cash to do that
and we simply chose not to borrow. There is something called tax
anticipation notes. We chose not to do that. We chose to use our cash.
The fact that we do do this has a great deal to do with our credit rating
[and] that they look favorably upon the fact that we maintain reasonably
healthy reserves and we minimize our borrowing.
Champion: Where did that cast reserve come from?
Atkins: The cast reserve is accumulated over time Connie. For example, you will
note in some budget years our expenditures actually are greater than our
receipts. And the reason is that we use a little bit of that cash reserves.
There are some cities that just accumulate cash for the sake of it and have
huge reserves. We chose not to do that. We chose- in other words, we
can say in any given year "we are going to use a little cash" and that helps
draw down the tax rate. That allows- I mean, so it's a fairly complex set
of decisions on how we go about that. But, those numbers we are
reasonable with. At one time we were operating cash reserves less than a
million dollars and that is not healthy. For example, we have .... (turned
away from mic)...okay, and that was from '987 Yeah. The storm of '98,
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we still have not been reimbursed from all of the expenses we had. So, we
are going to go into our third budget year [and] we are owed $500,000.
Now, we will book it as an income but we have not been paid yet.
Because of our reserve position, if you remember what we did, we moved,
we hired- we did a lot of work and paid the bills and got it done. Your
cash reserve allows you to respond to emergencies. Yes, Ernie?
Lehman: Well, from this chart above, even our shortest contingency in 2003 is still
significantly more than the short fall.
Atkins: Yes.
Lehman: So that is ....
Atkins: Yep, that is right. Now remember there is a- we show cash balance both
as cash, and I call it assets- we are calling cash- 1.3 million dollars of that
is the Peninsula. I just feel compelled to remind you that that number is in
there also.
Champion: And soon we will have the Englert.
Kanner: Steve?
Atkins: Yes?
Kanner: Why on the bottom of that, I didn't quite understand, why we went from
receipts to expenditures of approximately two-thirds to receipts to
expenditures of approximately 50%? Why did it go down like that?
Atkins: You lost me. Help me out- give me a number. Like '99?
Kanner: '94 to '99 we went from 4-
Atkins: Oh.
Kanner: The percentage of receipts to expenditures, the ratio.
Atkins: It could have been the particular projects that had to be paid. For example,
in this period of time, the three months on September the 30- maybe that
year we didn't have as many capital projects. Maybe there were some
other circumstances that occurred. But remember, we- when we contract-
this is a little different- we have let a contractor build a water plant. You
have obligated the city, under our recommendation, to 25 million dollars.
We don't have that yet. We will be doing some borrowing when we
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believe the market is right and we will bring those things to you. But in
the meantime, that contractor is incurring expense in submitting bills to us.
We have to pay those bills. So, when we have to pay the bill we have to
go somewhere. We go to our reserve position. And that is why,
particularly in the warm weather, you are going to see that disbursements
will rise and then in the colder weather they will flatten out- unless we've
got a long-term project. It is going to vary from year to year. I mean, I
can go back and research what the circumstances were exactly for that
particular one, which I just simply don't know right now. But it is- we
have got- we have 26 paychecks that we have to issue. We get paid twice.
Contractors want their money. That is how it works. Okay. So our end of
year cash balances- generally we are okay. A little concerned about it
tailing off particularly since we added the emergency levy, but it also
begins to show you that- and we don't have a dramatic change in our
operating budgets. Okay. Ernie, what I have done now is I have taken
you through a summary of general fund expenditures and revenues. To
give you all a hint of what I would like to do- we have the enterprise
funds: parking, landfill, refuse, water, wastewater. You have at least
three, I think, major policy issues you have got to talk about- economic
development strategy, my concern for Parks and Recreation and their
master planning process, and the storm water management fee, which is
new. And you have capital projects. And you have boards and
commission review. For new Council members, Council invites board and
commissions to come and actually address you and talk to you about the
things that they'd like to see done. I can do almost any of those things. I
would like to do capital projects where I can round up staff- we can do
that tomorrow night if you'd like. When they are here- what we do is
"why are we fixing the Buffington Street bridge?" That is where you get a
chance to ask those kinds of questions. It is fairly informal. I have got a
presentation on the numbers so you know where you are going. That
doesn't take all that long. And then the enterprise funds, which are again,
independent of. I want to do this as you see fit. Or we can take a few
minutes today too and just answer some general questions. So, it is kind
of up to you.
Pfab: I have a question ......the three items that you want to do ....capital
projects-
Atkins: Oh. We have enterprise funds (parking, water, sewer). We have budget
policy issues that I think you are going to want to discuss in depth
(economic development, Parks and Rec, and the storm water fee). Capital
projects. And my suggestion to you on the board and commission is pick
a date so I can get letters out to them and my date I suggest would be the
25th of January in the evening or the 8th of February in the evening. I
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prefer the 25th because if you make any changes that gives us time to make
some. Those are the things that we are doing fight now. I have prepared
myself, I can move to any one of those topics as you see fit. I just want to
give you a break fight now-
Champion: It is a scheduled meeting?
Atkins: Yeah.
Lehman: Do we want to do the CIP tomorrow night? I mean, that is fine with me. I
don't think it makes a whole lot of difference.
Atkins: Okay, I am going to round- because I have to round up staff for tomorrow
night- but, our plan then for tomorrow night is we will be prepared to take
you through the capital plan. I think it is on page 120 or thereabouts.
And, I will do the tax stuff, not unlike what I just did for you: debt service,
previous policies. And then what I would like to do is I will have the staff
available [and] we will just step through the projects. Some of them are
real quick- you will move fight through them.
Lehman: I have a conflict- the 24th is a- 2 weeks from today we have a schedule of
8:30 in the morning budget meeting and I cannot make that meeting. I can
make it in the evening but Monday is-
Pfab: That is the caucus night also.
Lehman: Is it?
Pfab: Yeah.
Atkins: The 251h?
Pfab: The 24th.
Atkins: I am saying boards and commissions Tuesday night the 25th.
Lehman: I don't have a problem with that, I am just telling you I can't come on the
24th, which is a date that we have selected.
Atkins: Oh, okay.
Kanner: So, that is another issue-
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Atkins: If I can nail down board and commission because I need to get a letter out
to them right away. 251h?
Vanderhoef: Uh-huh.
Atkins: Okay, that is good. We are cool.
Champion: What time?
Atkins: 6:30. Here.
Kanner: Part of our regular schedule?
Lehman: It is on here.
Atkins: It is already on your calendar.
???: Capital is tomorrow night?
Atkins: So, board and commissions for the 25th. That is settled. Now, tomorrow
night, which is the 11th, capital projects.
Wilbum: That leaves us an hour today and we have to figure out what we want to
discuss?
Atkins: We can do several things, yeah. I am just trying to nail some of these
things.
Vanderhoef: Enterprise funds? Do you want to do those?
Atkins: I am prepared to do- to start you into the enterprise funds yet today. I am
prepared to do that...move some of them out of the way. Do you want to
deal with Emie's conflict?
Vanderhoef: Yes.
O'Donnell: ...was 24th.
Lehman: I- there is no way I can be here. Monday is not going to work for me.
Wilbum: Can you do anything Monday?
Lehman: Monday night, but that is caucus night.
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Wilburn: You can't do Monday aRemoon at all?
O'Donnell: Let's just reschedule.
Lehman: We will wait till tomorrow. Monday afternoon possibly. Would that work
for the rest of you ifI can do it? Alright- don't put it down. I'll check it
when I get back to the store.
Atkins: Alright, then we won't do anymore calendar stuff right now. But, I am - I
can get my letter out to boards and commissions for the 251h? YOU are all
cool with that? Okay, good.
Pfab: The only thing in question- if you have to be early...
Lehman: Well, it couldn't be before 2 or 2:30.
Pfab: 2:30?
Lehman: Yeah.
Pfab: And how long a session would we be looking at?
Atkins: Board and commission- that's the one are we talking about? The 241h?
They are as long or as short as you want them to be. I have got this
broken up into pieces.
Kanner: No, no. The 23rd. We had-
Lehman: The 24th.
Kanner: We have scheduled 3 ½ hours.
Atkins: The same way as you have today, yeah. It is up to you all.
Lehman: We can do three hours, three and one half-hours.
Atkins: You can end these any time you want. I have got it broken down into
pieces.
Kanner: So, for everyone 2:30 to 5:30 is a possibility?
Pfab: Yeah, that is okay with me.
Lehman: I want to check that when I get back to the store.
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Atkins: Okay, we will confirm that tomorrow. Okay. If that is the case, we have
done the overview, we have done the general fund, [and] we are going to
start on some enterprise funds and we will take it as long as you all want
to take it. Are we ready? The enterprising- page 28 is the summary, the
narrative summary of your enterprise funds. And I am going to start off
with parking since it is also the first one you have there. The parking
operational budget will be found on page 77 of your budget book. Okay.
Everybody there? Let me just tell you a few general things about parking.
Our analysis is really kind of simple- parking during the week is fine. Our
numbers are okay. [But] on the weekend we get clobbered. That is where
we are seeing the decline. I mean, those of you that have businesses in
downtown- the only thing that we can assume is that it has some bearing
on folk' s shopping habits. During the week we have a steady clientele-
students, folks work downtown. But our general assessment is that during
the week we do okay and it is on the weekend where we see the decline in
parking. And then, obviously, the revenue is associated with it. In this
budget, we have no increase in parking rates but we must watch it very
closely. We have an obligation for our debt on the new Iowa Avenue-
Tower Place Parking. And, we have a slight decline in our cash position-
on the surface it is nothing to get too excited about now. What we have
done in- yes, Irvin?
Pfab: Okay, are we going to call the ramp the Iowa Avenue Ramp...?
Atkins: It is going to be called- I call it Iowa Avenue. I can't get out of the habit
so forgive me for that. It is Tower Place and Parking.
Pfab: Okay, so I was thinking Linn Street but that is not ....
Atkins: Tower Place and Parking. I call it Iowa Avenue because everybody else
called it Iowa Avenue for a long time.
Lehman: Iowa Avenue certainly describes it.
Pfab: But, I mean, we might as well get into the right-
Atkins: When our folks down at our document services made up the new sign that
is what they made it- Tower Place and Parking. And so that is what it is
supposed to be. I apologize, I will get over that eventually. Moving on.
We have added into the budget for parking the cost of running Tower
Place and Parking and hiring the personnel. It is intended to generate
income sufficient to cover its operational costs, as part of a comprehensive
parking system. We have also offset that revenue by some of the declines
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that we expect to occur. For example, if you take meters off of Iowa
Avenue, thereby there is going to be less income. All of that has gotten
factored into the preparation of this budget. And there is one policy issue
of some consequence. And that is that we are no longer transferring
$90,000 to the general fund that is transit. When you look at the transit
budget, it is generally healthy- so, you will see that in a tad bit. There is
some increased federal aid- a couple of other off-setting expenses and
revenues. And the bottom line is that we believe that the parking fund
needs money.
Lehman: This is for debt service?
Atkins: This is $90,000, Emie, that was decided-
Lehman: I know what it was for- was it for debt service?
Atkins: And we need it for debt service and to also just- if we are not going to
raise rates, which we are really working hard not to get into a rate
increase, we need that. Now, this fund also has some respective
obligations on it that can get a little scary. We will need to talk through
those- not so much today but in an upcoming work session. And that is-
how do we intend to finance our share of the Near Southside
Transportation Center? It is a 12 million dollar project- 9.6 from the feds,
2.4 needs to come from somewhere. We believe that- and we have not
had time to do the details of it yet because we are just beginning the
process- the uses in the Near Southside Transportation Center (daycare,
we have a bank interested in moving in [and] those types of uses) that we
would probably be recommending to you not to sell the property but to
lease it. And then the income, because we get this huge federal grant, the
income would be additional monies for transit. That is not our law but
also practically speaking.
Lehman: Okay, now the difference- no, no I think I hear you because the difference
between selling and leasing- the revenue to the city probably won't be
significantly different because we would collect taxes. But by leasing it
we could put it directly into the parking.
Atkins: Directly.
Lehman: Which means-
Atkins: No, transit.
Lehman: Transit I mean.
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Atkins: Parking is allowed to have its bills paid but any income that that
transportation generates above, after paying the bills, must go to transit.
We believe that there is the potential that that could be a nice income to
the transit system.
Lehman: Which is different than collecting it in property taxes and then allocating it
to transit?
Atkins: Yep.
Lehman: In other words, you would be dedicating it to transit.
Atkins: Yep, it has to be dedicated to transit. This is funded by the Federal Transit
Administration. This parking ramp, daycare center, bus depot,
commercial center- whatever- it intended to be a transportation related
project and thereby- and I'll repeat it again- we've not done the
calculations. It may be a great number folks, it may not be. I just don't
know yet. But, by getting 9.6 million dollars, potentially, from the feds to
pay for it, our obligation is much smaller- but the benefit- we accrue the
full benefit of the 9 million dollar investment. It also could be used to
jumpstart some other commercial development that has been thought
about and planned for that part of town in our Near Southside Plan. I
think, folks, that your work session- your next work session- we have a
presentation planned. I, being gone last week, I got a little behind but I
think we have a formal presentation planned so we will take you through
more of what that is all about.
Lehman: A week from tomorrow?
Atkins: Yeah, the 18th. No, because we cancelled the 17th.
Lehman: Yeah, I know that but if we have time for it. Yeah, I don't know if we
have time or not but if that is a week from tomorrow-
Atkins: We won't do the agenda until Wednesday so I am saying that I know that
Karin and her staff and Joe were preparing something for you. Yeah,
Steve?
Kanner: Are you projecting a lower revenue rate, that you just told us about - lower
weekend usage for this new parking ramps? Is that part of that?
Atkins: Generally speaking, we try to factor some of that in there even though we
think Tower Place is going to be a more productive ramp than- but, given
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what we believe to be the usage in that part of town, it is likely to be off
on the weekends anyway because we think we are going to get a lot of
student traffic in there. But, that is factored in too. We really won't know
until we open the doors and just cross your fingers and hope for the best.
Champion: You wouldn't get a lot of night student traffic in there.
Atkins: I think we are going to do okay there. Yeah, Connie- Joe's gut instinct is,
and he budgeted like 80% capacity or something- I think Joe feels really
good that this one is going to be busy. So, okay. I also just want you to
tuck that away that the transit- the parking fund is going to take some hits
potentially from some other big projects coming down the pipe. But it
also, by doing what we are going to be doing, it appears we may have
some long term benefit to our public transit system.
Vanderhoef.' Could we have an update, at some point, on the parking- particularly that
weekend segment?
Atkins: Uh-huh. Just explain that in a little more detail to you?
Vanderhoef: Well, I am looking at it and in terms of "is this something that we need to
look at in terms of a policy change?". For parking fees and so forth on
weekends.
Atkins: Yeah, we have calculated some increase in parking fees and some things
like that but we did not put that in the budget because we are trying to stay
with what we were- but, yes we will do it.
Vanderhoef: I am thinking in terms of applying to increase-
Atkins: Yes, something a little cheaper to encourage folks to get in. Okay. Yes?
Kanner: On the operation for the parking system- so them all of the personnel
increase for Fiscal Year 01- is that for the new parking ramp?
Atkins: Yep- everything that we have projected in there is in anticipation of
opening a new parking garage. Okay, a couple of things on some budget
increases and decreases- for example, you will notice under transfers
under the City Manager Proposed you have 2.329 and that it increases to
3.751. Remember we sold some bonds the first year we will make our
payments- but then it drops down again because we sold those bonds in
anticipation that we are going to pay off another issue.
Kanner: Is that on page 77?
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Atkins: I am on page 77. Transfers.
Champion: Steve- my mind was totally blank, could you-
Atkins: Say that again?
Champion: My mind went totally- I did not hear a word you said.
Atkins: Oh, thank you. I appreciate your honesty. Under transfers, under as an
expense item, you will see 2.329? And then the next year it is 3.7517 We
sold bonds in anticipation of paying for Iowa Avenue Tower Place. So
that spikes that. But, it drops off the next year because we have other
bond issues we are paying off. The important thing here is to demonstrate
that when you commit to a capital and you borrow, it stays with you. We
have some issues that are being paid off- that is why it will drop back
down again. No problem. Also note under expenses, up above it says sale
of land, 1.72 million in '02. Got that? That is the sale of the condo space
in Towers. We have to show that we borrowed short term, not permanent,
and so when we sell that then that will get rid of that short term note.
Pfab: Where was that? What I mean? No, no I see- what was the item?
Atkins: We have for sale condo space in Tower Place.
Pfab: Oh, okay. I heard condo and I just couldn't-
Atkins: When we sell it it will be an income to us.
Pfab: I was trying to look for some condo living project and -
Atkins: Sorry about that. Now, there are some future issues about the parking
fund. Apparently, the library project will not cause the loss of Linn Street.
If we are going to lose Linn Street parking lot- and Westward Ho is your
current decision- if we were to lose that- that is a money maker. That is an
$80,000 a year money maker for us. So, if you were to change that policy,
remember that has a direct hit on this budget. Yes sir?
Pfab: I have a question and it is something that has been bothering me for a
while- no inference one way or the other. Does the Linn Street parking
take away- reduce the capacity of use for any of the ramps?
Atkins: To my knowledge, no, because what we did was that at one time that was
a permit parking lot and we transferred all of those permit holders into the
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Dubuque Street ramp and we have not seen a decline in our permit holders
to speak of, Irvin. So I think it was just moving them. There was some
grousing at first but what we tried to do by creating the Linn Street lot was
a reasonably high turnover lot where I know merchants downtown were
particularly supportive when we chose to do that. So, I don' t think so.
Pfab: Okay, as, let's say, over a period of the last 3 or 4 months- about what
capacity is that ramp next to it? Just in general terms?
Kanner: There about 20 or 30 non permit holder spaces in that fight? It wasn't all
permit?
Atkins: It was more than that. I think it was more than that Steve. I thought we
had a lot of permit holders.
Lehman: He is saying non-permit holders.
Kanner: Non-permit. About 20 or 30?
Atkins: That is about fight. I think- on the edge there, that is right. Right along
that edge in front of that first tier. That is correct. Okay. The loss of the
Iowa Avenue, the meters, there will be a decrease in ticket revenue. That
was a fairly high ticket. And we are expecting a good bit of that parking
to move into the new garage. Now that is good for parking, but that is bad
for the general fund because we transfer ticket revenue to the general fund.
If you will notice back in the general fund that we kind of kept that
number- it is just real hard to predict just yet on how that is going to
change. The, again, the parking fund- and I did not copy 78,79- those are
all capital accounts. Most of the policies remain- we still put money aside
for our bi-annual maintenance. We feel pretty strongly about that. We
have a few spots in town that we will probably be presenting to you over
the next year or so- some peripheral areas for parking, fielding some
neighborhood complaints about people camping out. I don't mean that in
the sense of staying there, but they just park all day. We may want to
create some turnover there. Now, that probably isn't going to be a big
ticket income item. North Clinton has worked fairly well. We had some
initial complaints and after that we are getting the turnover there that we
wanted and folks are happier out there. And the University was pleased
with that decision too. That is the parking fund. Okay? Let's talk mass
transit next. And in your budget that would be page 81. There are really
no substantial changes in the operations of mass transit. For new Council
members, we went through an exhaustive, extensive review of routes.
City Council approved those route changes, made some amendments, and
those are now in place and operating. If silence is something that is
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favorable, we have not had very many complaints about the changes in
routes. It seems to be working. The shuttle remains, and I think I sent you
an annual report on that. It remains free to the user at a taxpayer expense.
Our fare box revenue- at one time the Council, in the time that I've been
here, had a policy that the fare box revenue must be 40% of the operations.
We quickly realized that that was unrealistic. The policy was discarded.
But it is about 18% and unfortunately it is slowly declining as a portion of
operations, as you know, are subsidy to transit grew also exponentially
over the last ten years. Ridership- slow decline. We were at 1.5 million in
'96 and we are at about 1.3 million in '99. We have got a commensurate
drop off in SEATS also. SEATS has gone from 65,000 to 48,000.
Lehman: Why do we think we are experiencing this?
Atkins: Well, I think, you know it is difficult to say Emie. I think that we are
having some decline in ridership because of the shuttle. People can get on
and off of that thing so- I mean, we count them as human beings, but we
don't get the income from them. SEATS, I think, has been were folks
that- I forget the term, the mainstream- you don't need to ride SEATS.
There is a fixed route available to you. So, those numbers- yes, Irvin?
Pfab: My understanding is SEATS is not able to handle the capacity- they are
not covering the people- they are behind in the client demand.
Atkins: I will say it once. I do believe we can run it better- and we didn't get the
chance.
Lehman: But that is the sort of thing Mike that your committee- I don't know how
often you guys meet but...
O'Donnell: We are meeting about 4 times a year.
Atkins: These are the numbers that they gave us. I am just giving you a heads up
on that.
O'Donnell: You would think with the decline in SEATS...(changed tapes)...but we
are not seeing that.
Atkins: Well, you know- there is weather. Remember folks, back in the mid
eighties, we were at 2.2 million. So ridership has- I mean, ridership really
is pretty flat for the last 6 or 8 years. But the unfortunate thing is that your
expenses are growing. I mean, just inflationary adjustments for the thing.
I still believe we have an excellent public transit system. This year what
we did a little differently is I pulled out the para-transit budget SEATS just
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to show it as a separate item. I think that that is important that the public
be aware that that is a service we pay for. We don't provide it but we pay
for it. State grants under revenues are substantially unchanged. Federal
grants, that is the operational- a couple of you, remember about 4 years
ago-
Pfab: Where are you?
Atkins: Okay. I am under transit operations-
Pfab:
Atkins: I am sorry. State grants are substantially unchanged. Most of that state
grant is a nose count. So that is where the shuttle system helps us-
because we throw those numbers in and that is how we end up with those
monies. But again, no growth. Federal grants, operationally- about four
years ago the Clinton administration and Congress were locked in the
battle of taking away that transit aid, operational aid. And that was really
a major concern to us. Congress, for whatever reason, did a tumaround,
and the aid is in fact, showing a little growth. Our big concem in federal
aid, and it is not shown here, it is shown in capital, is that buses today run
at almost $300,000 a pop. And we currently get 83% federal aid to buy
those buses. If that were to go away, then we have got some real
difficulties. You will see in our capital plan, I think it is '02 or '03, we
have 6 buses going off line, 6 to be replaced and we have budgeted to
cover the replacement and we budgeted at the 17%, our share figure,
assuming the feds will continue. Yes?
Pfab: Grants are when you said 177 I couldn't remember...
Atkins: No, 83 and 17. Again, you will see that in the '02 capital plan. And it
shows our share is to be paid by general obligation debt. Transit levies-
the 95 cents. General fund is a piece of the 8.10 plus 27, the emergency
levy that 460. Yes?
Kanner: Why are you budgeting it to go down, the general levy, in '03?
Atkins: Let's see, now.
Kanner: You have it 460 in this...
Atkins: Probably because we are anticipating that the 95 cents is going to generate
a little more income. That could be one factor. The other factor-
This represents only a reasonably accurate transcription of the Iowa City council
meeting of January 10, 2000.
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January 10, 2000 Council Work Session Page 54
Kanner: The transit levy?
Atkins: Yeah, it will generate a little more income- so, what happens is that the
general fund fills the void Steve. And that number does have some
fluctuations. You will notice back here one year it was only 200,000, back
in '99. And that was the year, I think, that Joe completely changed the
inventory process out there. We got rid of a bunch of inventory, we didn't
but as much, and so thereby we used the general fund levy to plug that
hole. That is the difference. And it is going to vary from year to year. So,
I am assuming that Joe is saying that given time that that will decline a tad
bit. Because, you are still maxed out at 95 cents for the transit levy. You
can't do any more than that. Whatever that generates. Okay? Our reserve
position also remains consistent. It is declining as a percentage of our
total operational costs. I am not overly concerned about that reserve
position. It does give us some latitude, particularly if we get ourselves in a
jam any one year. And it is also a little fall back position if for some
reason they start tinkering with the capital for buses. Future issues- I think
I have already laid out for you. The Near Southside, I think we are going
to have to spend some time on that. I want you to remember that it is,
again, the Near Southside is a multi-use building and hopefully it will
generate income to transit [and] if it generates income to transit that means
it reduces, first of all, that general fund portion, which means that it
improves the general fund position for other things you might chose to do.
Para transit is our contract with the county. Yes?
Vanderhoef: On that Near Southside we also have income coming in as we build
community apartments because of the policy that they have-
Atkins: Yes, that is correct Dee. In fact, we own about 3 properties down there
that we have purchased. I assume that you are going to change that policy
position and that your preference will be to go to toward this
transportation center as opposed to another parking garage. You will see
in your capital plan an unfunded Near Southside parking garage. That was
further- Remember when we were going to do St Pat's and all- I assume
that is all behind us now.
Lehman: Those funds will go into parking and not transit.
Atkins: What is that?
Lehman: The fund that we have collected down there.
Atkins: The funds that you have collected would help pay the parking component
of this project. Part of our share, yes.
This represents only a reasonably accurate transcription of the Iowa City council
meeting of January 10, 2000.
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January 10, 2000 Council Work Session Page 55
Kanner: JCCOGS, in their book, said that one of the main factors for people
driving is the accessibility of low price parking downtown. I was
wondering if we could get- there must be federal figures saying that if you
raise so much the parking cost you will get increased ridership on buses.
So, I was wondering if we can get some of those reports of some sort.
JCCOGS, I would imagine, would have something about what our
increased ridership would be if we raised the cost of the parking a certain
amount. I also- I don't mean to cut and run on this one but that is
something that you guys are going to debate big time.
Lehman: That really is a policy discussion that probably we will do after budget.
Kanner: Well, this is something that I am going to be talking about, too, especially
since we are back $90,000. The proposal to cut back $90,000 from the
parking- bring it up to the transit.
Lehman: I understand that but the discussion relative to raising rates to increase bus
ridership is such a policy decision that it is going to involve a fair amount
of discussion.
Atkins: I hear both of you. That will certainly be on the table I suspect. We
believe the transit budget is, in fact I think it may be a tad bit over stated, I
think it is- we are going to go back and do a little bit more work on this
one- but these numbers I am very comfortable with. I thought I would see
a little more decline in the reserve and so we may want to make a few
changes with this thing keeping in mind that anything we really change
just improves our general fund position and the contribution we make.
Yes, sir?
Kanner: On- for personnel services- the amount stays the same [at] 48.25?
Atkins: Right.
Kanner: But there is some differences in titles and so forth. Can you just explain
that a little bit?
Atkins: Oh, a couple of things- we had a transit shop supervisor position. That
individual left. His responsibility was substantially supervising just the
shop. So, what we did was we created another operations supervisor
position who now supervises the shop but also has opening- I mean, has
more duties associated with it. The mechanic I is- that was a
reclassification from a I to a II and you will see down under II that we
increased that. Let's see.
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meeting of January 10, 2000.
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Kanner: Does this show slightly more pay that they are receiving?
Atkins: Yeah, the transit shop supervisor, and I don't know the numbers, maybe a
grade 10 in the operations and maybe a grade 11, but the person is
expected to supervise the shop as well as do other duties. That is not
uncommon. We bring those back to you and Council is familiar with
when we do that. The same with mechanic I. We may find the individual
actually doing a level of work that deserves the additional compensation
and so therefore we bring that back to you and ask for the amendment to
the paid plan. Those are things, Steve, that you would see routinely
anyway. I am looking at these [and] we have done these, I think. Most of
these have already happened .... did this earlier in the year. Okay. Is
there anything else in transit folks? I mean, in the capital budget we are
going to talk about it a tad bit. Would you all mind if we stopped right
now?
Lehman: I think it is a great idea.
Atkins: I am losing my voice. I got lots more to do if, I mean- we put a pretty
good dent in this today. Okay. Now, one more confirming thing- so
capital projects tomorrow night. Take a look at your capital projects. I
have something I want to hand out to you. Since we moved this up. This
is sort of a helpful memo. I hope it is a helpful memo. Current- the new
Council members have not seen this. Emie, Dee, Connie- I think you all
have seen- these are old memos that I redid. Okay, the bottom line is that
it is kind of to give you a feel for how we decide capital projects. There is
a list of criteria to sort of like help you think through why I like this one as
opposed to that one. And there is also the memo in there on storm water.
Remember that one? I know- you have got to do that because I've got to
propose a storm water fee. It is really- it is very easy reading and I know
you can get it done by tomorrow night but it is intended to just kind of
help you in the capital budget review process. I will give you guys one on
the way out here. If you don't mind, I am finished. Tomorrow night,
6:30, capital projects here. Thank you.
This represents only a reasonably accurate transcription of the Iowa City council
meeting of January 10, 2000.
WS011099