Finance Director Stacey Lemos gave an overview of the recommended budget for the FY 2011/12.
Ms. Lemos stated that the budget was balanced at $94.1M which reflected a 19% or $22.1M decrease from the previous year. She also presented slides that broke down town funds by allocation. The largest was the General Fund at $34.7M which included contingency reserves.
Ms. Lemos stated that there were a number of measures that were taken to balance the budget which included:
General Fund
- Eliminated funding for Coyote Run
- Personnel reductions
- Summer recreation program reductions
- No employee pay raises for the third year
- No health insurance increases
- Deferred capital asset replacement of vehicles and phone system
- Use of Bed Taxes
- Increased cost recovery from utility funds
- Utility tax increase
Highway Fund
- Lowered pavement preservation budget from $1.2M to $800K
- No employee pay raises or health insurance increases
- Use of Bed Tax contingency reserves which offset the additional State sweep of HURF taxes
Ms. Lemos reviewed the General Fund revenues and expenditures by category which equaled $25.7M. The largest revenue category was local sales tax at 51% and the Police Department produced the largest expenditure at 47%.
The Finance Director reported that Bed Tax Fund revenues were budgeted at $900K and represented a 5% increase from the previous budget. Ms. Lemos stated that $675K were projected to be transferred to the General Fund and the remaining funds were for economic development marketing and agencies.
Ms. Lemos affirmed that the Water Utility Fund budget was at $13.9M, a reduction $1.1M from the previous year that included debt service, Operations & Maintenance, and capital outlay savings.
Ms. Lemos provided a pie chart of the Capital Improvement Plan (CIP) expenditures that totalled $14.3M and showed that the largest category was road expansion at $7.9M which included the Lambert Lane widening project. She reviewed $1.2M of inter-fund transfers that were included within the budget and explained what funds were impacted.
Ms. Lemos articulated the recommended changes before Council approved the Tentative/Final Budget which included:
- Bed Tax Fund - amended to show TOTAL incoming bed tax revenues and related transfers out to General Fund
- Consolidated Capital Asset Replacement Fund (CARF) and Steam Pump Ranch Fund with the General Fund to comply with GASB 54 compliance
- Added $25K dollars grant capacity for Parks, Recreation, Library, and Cultural Resources from Keg Steakhouse for playground equipment
Ms. Lemos related some final notes to the Council regarding budget approval and adoption dates. She reminded the Council that the Tentative Budget set the maximum spending limits for the town, but that changes could be made that did not exceed the limit and that the budget could be amended throughout the fiscal year.
The Finance Director requested direction from Council regarding:
- Continued use of Bed Tax Fund reserves for the Highway Fund in the amount of $385K
- Discussion of .25% sales tax increase on June 15, 2011 agenda
- Confirmation of Tentative Budget adoption on May 18, 2011 agenda
- Staff direction in any other areas
Vice Mayor Snider asked what the impact would be of using the $385K cash reserves in the Highway Fund instead of the General Fund.
Ms. Lemos responded that the cash reserves in the Highway Fund were slated to be used for pavement preservation purposes and roadway maintenance and if those funds were used the balance would be drawn down to $3M. She also explained that internal cash reserves would be used to pay up front for the Lambert Lane widening project to bridge-gap the annual funding from the Pima Association of Governments, and that the Highway Fund was one of the contingency amounts that would be borrowed from.
Councilmember Solomon commented that the Council had reviewed the street maintenance analyis in a previous study session and inquired as to how the town could only fund it at $800K. He stated that the item needed to be funded at $1.2M and that the difference should be taken from the Highway Fund reserves or from the Bed Tax Fund.
Town Engineer Craig Civalier explained that the budget was based on state revenues and that the state had cut the town’s Highway User Revenue Funds (HURF) share by $360K.
Councilmember Hornat questioned whether the entire $800K came from HURF funds and Ms. Lemos explained that the total included $400K from the HURF Fund and $385K from the Bed Tax Fund.
Councilmember Hornat commented that whatever amount the Council decided to spend should be taken out of the Highway Fund and not the Bed Tax Fund, and that alternate sources could be looked at.
Councilmember Garner agreed that the money should not be taken from the Bed Tax Funds those funds were for economic development purposes and questioned Ms. Lemos on why the town was in the business of loaning money through the Water Utility Fund.
The Finance Director confirmed that the Highway Fund provided the inter-fund loan to the Roadway Development Impact Fee Fund of $400K with cash reserves, and would be reimbursed with interest from the Pima Association of Government’s (PAG) annual payment.
Councilmember Garner asked how funding at $1.2M would affect pavement preservation, and Mr. Civalier replied that funding in that amount would keep the town’s Overall Condition Index (OCI) at a stable rating. He also explained that all of the money received from the PAG for the Lambert Lane widening would go into the Impact Fee Fund and that reserves were needed so that the town did not have to borrow additional money.
Councilmember Solomon said that the Council was in agreement with the $1.2M figure and asked if a motion was needed to change the line item to that amount. Ms. Lemos stated that a general consensus from the Council would suffice.
Mayor Hiremath stated that it was also general consensus to keep Bed Tax Funds intact and to seek Highway funding elsewhere.
Councilmember Garner suggested that the amount should be taken directly from the General Fund contingency reserves rather than taking a loan from the Enterprise Fund and paying additional interest.
Councilmember Hornat commented on the consolidation of the CARF and Steam Pump Ranch Fund into the General Fund, and asked if the Council would see those as separate items on their reports.
Ms. Lemos responded that the activity for those items could be reported separately within the General Fund on Council reports.
Councilmember Hornat asked if the $7.9M in road expansion was all town money and Ms. Lemos explained that the town spent it out of their budget and then the PAG reimbursed the town in full.
Councilmember Garner inquired about the General Administration budget, and asked about an item under outside professional services in the amount of $35K.
Ms. Lemos replied that those items consisted of $20K for recycling services from the PPEP (Portable, Practical, Educational, Preparation) Inc. crew; $5K for the State of the Town address; $7K for costs associated with an intergovernmental liaison; $2.5K for a management retreat; as well as credit card fees.
Councilmember Garner questioned what services the PPEP crew provided, and Ms. Lemos answered that the PPEP crew came to town hall twice a week and emptied all garbage containers and recycling bins on town campus as well as the town’s trash receptacles along the multi-use paths.
Procurement Administrator Brian Garrity added that in addition to recycling and garbage services the PPEP crew set up facilities for meetings, and that there was a significant cost savings compared to having the janitorial crew perform those services.
Councilmember Waters asked what the Council expenditure regarding memberships and subscriptions entailed, and the Finance Director explained that it included $3.5K for the Conference of Mayors membership; $24K for the Arizona League of Cities and Towns membership; $31.5K for the Pima Association of Governments membership; $2K in dues for the National League of Cities; and $1K for Arizona Town Hall attendance.
Councilmember Solomon expressed that each individual Councilmember’s travel and training budget had been reduced from $5K to $4K and that he would like to see it reduced further.
Councilmember Garner asked for an explanation of the fleet costs in the amount of $94K as he understood that fleet maintenance was to be consolidated.
Ms. Lemos answered that the amount represented what the General Fund was transferring to the Fleet Maintenance Fund to cover maintenance costs associated with all town vehicles except for the Police Department’s.
Councilmember Waters asked for an explanation of the increase in Human Resources personnel costs and Ms. Lemos replied that HR staff had been reallocated to programs in the past and budgeted to those areas.
Councilmember Hornat questioned an $80K line item in the Cultural Resources budget and the Parks, Recreation, Library, and Cultural Resources Director explained that it was a split allocation between departments of staff time toward tasks for the Historic Preservation Commission and Steam Pump Ranch.
Per Councilmember Solomon’s request, Ms. Lemos stated that the town projected 35 single-family residential building permits in the budget and that the Construction Sales Tax was estimated at $2.2M, mainly due to the construction of the Oro Valley Retirement Center.
Councilmember Solomon asked how many single-family residential permits were pulled the previous year and Ms. Lemos answered that in FY2010/11 the town was trending at 30 for year-end.
The Development and Infrastructure Services Director explained that the grading and building permits for the Oro Valley Retirement Center had already been issued and the town would realize the $2M in construction sales tax in FY2011/12 since the project had already started.
Councilmember Garner referred to a memo dated 5/10/11 regarding a capital outlay purchase and stated that he did not believe that it fit the model of an emergency item. He also proposed to have Council bring back emergency items to make a decision on those purchases.
Town Manager Watson explained that it was the intent of the town Code to allow up to $50K per expenditure within each department and with the judgment of management, and that the amount had been lowered from $100K in the past year.
Councilmember Hornat communicated that as a matter of policy, emergency expenditures should be taken out of the contingency funds.
Councilmember Solomon cited the Economic Development budget and stated that the Metropolitan Tucson Convention and Visitors Bureau (MTCVB) and the Hilton El Conquistador had met with the town and had requested a larger contribution from the town because of the large amount of referrals and sales tax they had generated.
Mayor Hiremath stated that he had spoken with the Hilton and that they wanted to talk about a higher level of commitment from the town, but that a decision did not need to be made yet.
Vice Mayor Snider stated that the Hilton understood the town’s economic situation and was agreeable to waiting until the real bed tax revenues were in.
Councilmember Garner commented that the Hilton El Conquistador was a member of the MTCVB and contributed money to that organization. He stated that the bed tax revenues could be used on areas that benefitted Oro Valley directly, on future hotels and attractions, and for joint marketing efforts with Marana.
Councilmember Hornat stated that the Council would continue to work with staff on additional budget reduction opportunities throughout the year.
Mayor Hiremath remarked that the budget was balanced and that he did not see a necessity for the .25% sales tax increase.
Councilmember Solomon questioned the Magistrate Court costs and whether the town had ever increased fees to recoup those costs.
Court Administrator, Judy Thompson-Ng, affirmed that the court regularly adjusted their costs and mentioned that in the previous year, the Council had approved a security fee as an additional funding measure. She also stated that Pima County and the State set base limits on violations and only a portion of that went to the town.
Councilmember Garner asked if the $190K for citation collection was the amount the court collected from the state and Ms. Thompson-Ng explained that the state received 49% of all court fines and that the majority were law enforcement violations.