MINUTES
ORO VALLEY TOWN COUNCIL
STUDY SESSION 
February 23, 2011
ORO VALLEY COUNCIL CHAMBERS
11000 N. LA CANADA DRIVE
 
STUDY SESSION AT OR AFTER 6:00 PM

CALL TO ORDER - At 6:02 p.m.

ROLL CALL

PRESENT:
Satish Hiremath, Mayor
Mary Snider, Vice Mayor
Bill Garner, Councilmember
Barry Gillaspie, Councilmember
Joe Hornat, Councilmember
Steve Solomon, Councilmember
Lou Waters, Councilmember

Councilmember Garner attended the meeting via telephone.

1.

Discussion Regarding Proposed Reductions to Current FY 2010/11 General Fund Budget


Click here for item 1

Finance Director Stacey Lemos reviewed the General Fund Budget from FY2007/08 to FY2010/11 and its declining revenue history and stated there would be an additional $2 million projected drop for next year, which would bring the General Fund down to $24 million dollars in revenue.  She showed the Highway Fund’s history for the same four-year time frame and affirmed the Highway Fund is expected to have a $1 million shortfall for FY2011/12, for a total of $3 million dollars in revenue.   

Next, Ms. Lemos reviewed town staff cutbacks over the past two years, primarily in reduced staffing levels and consolidation of departments, increased use of volunteers and non-paid interns.  Other budget actions included a one-time use of federal stimulus funds for pavement preservation, bond defeasance, and extended use of the utility sales tax.  She stated negative impacts that had resulted from these actions included an increase in overtime costs, delayed customer service response times and lowered employee morale.  The Finance Director recapped the budget set for FY2010/11 and stated that $26.6 million was the General Fund’s adopted budget amount (which included a $900,000 use of contingency reserves for the town’s energy project), and that the budget was funded with projected revenues of $26.2 million and cash reserves of $344,000.  

Ms. Lemos discussed the mid-year budget projections and estimated that Oro Valley would be $1.8 million under budget and that actual revenues for FY10/11 were projected to be closer to $24.4 million. She stated that town Departments had already identified $1 million in savings within their budgets (through December), but that year-end expenditures were still expected to be at $25.6 million, leaving an estimated $1.2 million deficit.  She presented staff recommendations to close that deficit by reduced expenditures of an additional $300,000 and a one-time use of contingency funds in the amount of $900,000, which complied with the reserve policy and balance threshold.  She stated that some of the proposed reductions were additional vacancy savings, travel and training dollars, renegotiated leases and contracts, cuts to outside professional services and office supplies, and a reduction in purchases of library collection materials.  Ms. Lemos also commented on the impact those reductions would have on customers and employees.

The Finance Director stated that there were no additional cuts being recommended to the Highway Fund for the remainder of the FY2010/11, and that the Development and Infrastructure Services Department had already identified $130,000 in savings in reduced line items and outside services.  She cautioned that the pavement preservation funding levels needed to be addressed going forward because of the projected deficit to that fund if the town continued to apply $1.2 million each year with the projected revenues.  She moved to the Water Utility Fund next and commented that the fund was not at a deficit and that the Water Department had identified over $3 million dollars in savings for FY2010/11, primarily in delayed capital projects and a vacant position that had been held open.    

Councilmember Solomon asked each Department to review the General Fund reductions that were presented and explain what was included in that amount and the impact to services. 

Police Chief Sharp explained that his department’s $133,000 resulted from vacancy savings, replacement of officer positions at a lower salary, copier and lease savings, reduced ammunition purchases, and cancellation of remaining travel and training dollars.  He stated that service impacts included slower response times during training and shortage of officers in several units. 

Councilmember Waters asked about overtime expenses and whether or not reserve officers could ameliorate the problem. 

Chief Sharp explained that overtime hours had reached $54,000 dollars for year-to-date because the department was down about 20 positions from two years ago, and that only one of the five authorized reserve officers positions were filled because reserve officers were hard to get and costly to transfer in from other states.  

Councilmember Gillaspie asked if there was an option in any of the current intergovernmental agreements or contracts for redeployment of regional or federal task force officers back into the town.  

The Police Chief stated that task force members were utilized back into the town as time permitted, but that the revenue that paid their salary would be lost if Oro Valley took them off the task force completely.  

Councilmember Garner questioned the cost-benefit analysis of having officers on special assignments, and asked about utilizing the Municipal Operations Center for a substation or eliminating one of the current retail/commercial leases that were close to each other.  

Chief Sharp commented that the Sun City substation housed the police volunteers who completed the fingerprinting cards for the department which was a significant revenue source, and that he did not know the impact to the volunteers if they were not in close proximity to the substation.  The Chief also noted that the Tangerine station was full and housed the Emergency Operations Center, motors and patrol staff.

Councilmember Solomon asked if it would be more beneficial to the town to hire an officer rather than pay out in overtime expenses.  Chief Sharp noted that the overtime staffing hours covered 24 hours a day, seven days a week and that it would be impossible to plug in one person to fill all of the overtime hours. 

Councilmember Solomon also asked what impact the cost-saving measures would have on response times for priority one calls.  Chief Sharp stated that the Department continually adjusted to meet their goals, but that officers had to spend less time dealing with the calls themselves which left more follow-up for the detectives.  He noted that community policing included problem-solving and spending time with the victims as part of the service. 

Ms. Lemos spoke on the General Administration reductions and explained that $22,000 was in savings capacity that was budgeted for legal and consulting costs that effectuated annexations; $5,000 dollars was coffee service cuts;  $3,000 dollars was a reduction in recycling service visits; and the remaining amount was for restoration of Steam Pump Ranch (SPR), which could be taken out of the SPR fund directly. 

Councilmember Hornat asked if the Steam Pump Ranch fund had a balance in it and how it was acquired.  Ms. Lemos explained that the SPR fund was comprised of General Fund dollars for maintenance of the property and Pima County Bond Funds, and that the balance was somewhere in the range of $80,000-$100,000.

Development and Infrastructure Services (DIS) Director Suzanne Smith stated that her department had previously projected to save $300,000 for FY2010/11 because of vacant positions and reductions in operations and maintenance.  She explained that the DIS General Fund reductions included a cut to custodial service visits for all buildings for the remainder of the year, which saved $18,000, and that the impact from this cut would be felt most by the Library because of their public traffic and the Police Department because they operated 24 hours a day, seven days a week.  The second cut was to the Fleet Maintenance Program at a $3,000 savings for the remainder of the year, which included the transfer of the Police Department fleet back over to PD. 

Councilmember Solomon asked whether the PD’s shift of fleet maintenance last year resulted in a net savings or a cost increase to the town.  

Ms. Smith explained that previously each department had their own fleet maintenance budget which had been centralized into DIS along with the allocation of work, and that DIS had spent $5,000 in overtime pay for FY2010/11.  

Councilmember Garner commented that the fleet maintenance shift was made to eliminate duplication of efforts, and that no policy or procedure was changed to cut the Police Department’s volunteer assistance.

Vice Mayor Snider suggested that fleet maintenance should be looked at in detail to find the most cost effective method and the ramifications of the shift. 

Councilmember Hornat asked for the total annual savings if the PD fleet was shifted back to the Police Department and if there was a legitimate savings in transferring their fleet back to PD.  

Ms. Smith answered that if she used her current overtime costs to project savings, there would be an $8,000 extrapolation for a year. 

Police Chief Sharp stated there was an increase in overtime as a result of the centralization because of the demands on one employee traveling to various locations.  He noted that if the PD fleet maintenance was shifted back they would work to minimize overtime and have someone on site to supervise the volunteers, so he thought there would be better control at PD that resulted in a cost savings and not just a cost transfer. 

Councilmember Garner questioned why the police volunteers weren’t currently being utilized.  Chief Sharp commented that after the fleet maintenance program changed, the volunteers that were willing to shuttle vehicles dropped down to one.

Ms. Smith stated that the final reduction was the remaining portion of a program that had been absorbed in the Town Manager’s Office at a savings of $22,500 for the remaining fiscal year.  She also noted that the position would be added back into the FY2011/12 budget at $91,000 and there would not be a transfer of costs to the Town Manager’s Department as it would be eliminated for the current fiscal year.

Parks, Recreation, Library & Cultural Resources (PRLCR) Director Ainsley Legner reviewed her department cuts and stated that $15,000 in reductions was for the remainder of the year to the Library’s collection that consisted of books, magazines, etc.  She said that the impact to the Library would be the public’s increased demand for usage and to the aging materials collection.  

Councilmember Solomon asked if the town was reimbursed for collection materials purchased.

Ms. Legner explained that the total amount of reductions made would have to be $50,000 to realize a net of $34,000.  She stated that because of the $15,000 saved in the collection, there was a loss of $7,500 in reimbursements from the county and that the only other source of adding to their collections was through funding provided by the Friends of the Oro Valley Public Library. 

Councilmember Hornat commented that the $75,000 dollars budgeted for FY2011/12 was actually $150,000  because of the county’s reimbursement, and that Oro Valley was a lending library as part of a group that had access to materials in other collections.  

Vice Mayor Snider asked for information about the Friends of the Library and their funding relationship.  Jane Peterson, Library Manager answered that the Friends had raised $110,000 the previous year, of which $58,000 had been spent on the Library’s collection.  

Ms. Legner explained that the second cut was $28,000 in seasonal staff from the Recreation division for June 2011, which included the elimination of traditional summer camps in favor of park-based programs that focused on the pool.  She noted that the last decrease was in recreational supplies at a $7,000 savings, which coincided with the camp eliminations.  

Councilmember Waters questioned whether the town was engaged in a pool study, what the cost of the study was, and how it figured into the profit and loss.  

The PRLCR Director answered that a feasibility study was underway and that the Council would have results in April; that the cost of the study was $20,000 and no cuts had been made for that item; and that the consultant would speak to the Council about using the pool as an economic driver for the town.   

Information Technology (IT) Director Kevin Verville reviewed his $22,000 in reductions that consisted of a telecom contract renegotiation for $12,000 and $10,000 in outside professional services, mainly related to programming for the Permits Plus software system.  He stated that the impact of that would be delayed implementation of new reports related to the reorganization of the Development and Infrastructure Services Department. 

Councilmember Gillaspie asked if Permits Plus maintenance needed to be continued.

Mr. Verville answered that Permits required more than one full-time person to manage on a day to day basis.  He stated that the Database Administrator was responsible for all of the database applications and servers and that the outside professional services supplemented to what she provided to Permits Plus.  

Vice Mayor Snider asked if the reduction would cause a delay in permits being issued.  DIS Director Suzanne Smith responded that desired tweaks would not happen, but that it would not cause delays in the issuance of permits.

The Council’s budget cuts were looked at next and Finance Director Stacey Lemos stated that the $20,000  comprised a portion of each Councilmember's travel and training budget for the remainder of the year. 

Vice Mayor Snider asked for the total annualized figure that was budgeted for each Councilmember for the FY2010/11.  Ms. Lemos confirmed the amount was $35,000. 

Ms. Lemos reviewed the Human Resources, Finance, Legal, Court, Clerk, and Manager's reductions which represented $35,550.  She stated that HR had an $8,000 savings in recruitment advertising; Finance had a $3,000 savings in office supplies, postage, and travel and training; the Legal department, Court and the Clerk’s Office had the same savings and in addition, the Clerk’s Office had cut their microfilm budget; the Manager’s Office had an $11,000 savings in the Communications Administrator vacancy, office supplies, and travel and training. 

Vice Mayor Snider asked what the impact was of not microfilming town records.  Town Clerk Julie Bower explained that microfilming was required if an original document was destroyed, but that the Clerk’s Office kept permanent records in addition to scanning them.  

Councilmember Hornat asked to review the Communications position.  Assistant Town Manager Greg Caton explained that the $11,000 in savings was through May 1, 2011 and assumed a replacement at a lower salary. 

Councilmember Solomon commented that he was concerned about filling positions when there was a budget shortfall. 

Councilmember Garner commented that the reductions had stopped at the $900,000 mark and that he would have liked to have seen the town go further because the Council could put funds back in to the recommended cuts. 

Ms. Lemos stated that another option under consideration for FY2010/11 resulted from the cost allocation study that evaluated the charges to the utility funds for reimbursement of the services provided, which could be implemented at the Council’s approval rather than addressing further cuts. 

Councilmember Waters asked how sales tax revenues were shaping up for the fiscal year.
 
Ms. Lemos answered that retail sales tax collections were at projected revenues, but that construction sales tax dollars were below projections which caused the revenue shortfall.  

Vice Mayor Snider commented that she had asked the Finance Director to provide her with a table of general fund revenues on a percentage basis, and that Oro Valley’s local sales tax was on an upswing but that the state-shared revenues were not.

Mayor Hiremath recessed the meeting at 7:25 p.m. and resumed the meeting at 7:33 p.m.

2.

Presentation and Discussion Regarding Town-wide Telephone System Replacement Project


Click here for item 2

Information Technology (IT) Director Kevin Verville discussed the replacement of the town’s phone system and what options were available.  He stated that the town's system was 11 years old, based on 20-year old technology, and could not be expanded or upgraded to Voice Over Internet Protocol (VOIP).  He also noted that the vendor no longer maintained their contract or supported their product and the department had seen increased downtime due to repairs.  Mr. Verville stated that the town had planned for a replacement system in 2007 and a network upgrade was approved in the FY2010/11 budget, which was in the process of being completed.

He reviewed options and costs for replacement:
-  Keep the existing system, which was risky
-  Purchase a new system with capital dollars that would be managed in-house
 -  Have a hosted/managed system off-site  

Mr. Verville stated that staff recommended replacement of the current system with a hosted/managed system that had an estimated one-time capital cost of $100,000 for the puchase of phones and an estimated net monthly cost of $15,800.  He stated that there was no incurred maintenance costs for FY2011/12 until the third quarter and anticipated additional cost recoveries in FY2012/13.  Mr. Verville reviewed the implementation timeline if the recommendation was approved, and estimated that the hosted/managed phone system would go live in March, 2012.  He noted that additional costs of $47,000 would be incurred at that time.  The IT Director stated that the rough estimate in additonal costs for FY2012/13 was $62,600 and for FY2013/14 and beyond was an additional $72,600.

Mr. Verville described the benefits of having a VOIP system and a hosted system:
-  Reduced risk of failure
-  Minimized down time
-  Reduced administrative costs
-  One network to manage instead of two
-  Lowered carrier costs
-  Room for expansion and growth
-  Reduced energy consumption 

Councilmember Waters asked if the hosted/managed system option eliminated the risks that cropped up with the existing system over the loss of support from the manufacturer.

The IT Director stated that the biggest advantage of a hosted system was the managing company shouldered most of the risks and managed the hardware, software, updates, etc.  He noted that the only concern left to the department was the phone itself.

Vice Mayor Snider asked how the hosted system and T1 lines interacted with the Pima County Wireless Integrated Network (PCWIN).  Mr. Verville explained that they were all forms of communication and that the PCWIN project had potential lines that could be utilized for wireless connections instead of land lines. 

Councilmember Hornat asked if any of the replacement cost numbers were included in the $3 million deficit figure for FY2011/12.  The Finance Director stated that the $100,000 one-time costs associated with implementation were factored in as well as the recurring costs for five years.

Next, Councilmember Hornat stated that Qwest was the vendor the town was looking at for the hosted/managed system and that the risk was that lines could get cut.  He then asked the IT Director to give him an idea of what the length of the contract was.

Mr. Verville stated that generally hosted VOIP contracts were 3-5 years and that at the end of most contracts was the option to renew, and in some cases, the ability to walk away from the contract and look for a new vendor.

Councilmember Hornat asked if there were any penalties or any outs if the town decided they didn’t like the system.  Mr. Verville commented that if the town piggybacked on the state contract, there would be more outs than normal.  

Councilmember Solomon reviewed the Benefits slide and asked if the net additional dollar amount included the reduced administration costs, lowered carrier costs and additional IT time.  The IT Director stated that the amount shown was strictly the dollar savings from the contract renegotiations.

Councilmember Garner reminded the IT Director of his suggestion to look at the open market for VOIP systems from companies who had gone out of business.  He also asked about provisions, and whether it was possible to recoup some of the costs from the existing phone system.

Mr. Verville responded that the the viability of used or reclaimed systems had been looked at, but that there were very few large-scale systems available that were intact.  He also explained that the town’s system utilized 400+ extensions and the most that could be found in the market was 20-30 extensions, and that another $100,000 would have to be spent on reegineering the system.  The IT Director then clarified that other vendors in addition to Qwest were being considered, and that some trade-in value would be recouped but could not be determined until a full inventory was done.

Councilmember Garner suggested that the Procurement Division should participate during the trade-in negotiation to ensure the town receives fair market value for the current system.

Vice Mayor Snider stated that the one-time capital cost of $100,000 was eligible to come out of contingency funds and asked if the amount could be shared with other department’s contingencies such as the Water’s Enterprise Fund, etc.
 
Mr. Verville stated that each department would be paying their fair share out of their individual reserves, and that the entire $100,000 would not be coming from the General Fund’s contingency balance.

Mayor Hiremath questioned the one-time capital purchase of phones and inquired as to the possibility of going with an all-inclusive option due to obsolescence, and asked what the advantages vs. disadvantages were of purchasing phones.

Mr. Verville stated that phones had more longevity than computers and the average lifespan was 5-7 years on a VOIP system, which was shorter than the older private branch exchange (PBX) systems, but not obsolete.  He commented that it was a smart buy to purchase the phones up front, but that the monthly costs of an all-inclusive system could be added if desired.

Mayor Hiremath asked the Finance Director what the statute of limitations was on the one-time phone purchase, and questioned whether contingency funds could be used for this item in the future.

Ms. Lemos answered that the funds could be used again in five years if the system needed to be replaced.

Councilmember Hornat explained that the O&M cost difference between the all-inclusive option and the option with purchased phones was $36,000 per year, and that the town would recoup their money in 2.5 years.  He also mentioned that he was concerned about the increase in expenditures.

Councilmember Solomon agreed that it made sense to move on to a new phone system, but that money was not available for recurring costs.

3.

Transit Services Operations


Click here for item 3

Transit Services Administrator Aimee Ramsey reviewed the service options for the FY2011/12 budget and Coyote Run’s cost savings from the last three years.  She stated that the division started freezing positions in 2007 and that they had experienced 33.2% in staff reductions since that time, which had caused a shrinkage of service hours, capped ridership and eliminated next-day trips.  Ms. Ramsey declared that her division had utilized a Volunteer Driver Program which had seven drivers enlisted in it.  She affirmed that the legislation for Local Transit Assistance Funding legislation had been repealed, which had contributed up to $300,000 to the budget in past years.  

Ms. Ramsey explained the differences between the two transit services that the town offered (Sun Shuttle and Coyote Run), and stated that they complemented each other.  She then reviewed the proposed options:
 
Option A - represented no change to the service levels that were currently in place, but would require $393,000  from the General Fund budget.  

Option B - represented the elimination of Coyote Run services and continued operation of Sun Shuttle via an intergovernmental agreement with the Regional Transportation Authority (RTA).  Option B would require $225,000 from the General Fund budget.

Option C - represented the elimination of the town’s Transit Services Division and shifted operations of the Sun Shuttle to the RTA.  Option C would require $76,000 from the General Fund budget. 

The Mayor asked if the RTA could contract with the town to hire drivers from Coyote Run if the Council chose Option C.  Ms. Ramsey stated that would only be available through Option B as an all-inclusive service.   

Councilmember Garner asked about the reimbursement structure through the RTA regarding the additional drivers the town had hired, and about volunteers.  
  
Ms. Ramsey answered that Option A had 10.08 full-time employees (FTE’s) and no volunteers were included in that figure.  Option B reduced staffing levels to 7.4 FTE’s and represented a $50,000 transfer to fleet maintenance.  Option C reduced staffing levels to 0 FTE’s and eliminated $101,000 transferred to fleet maintenance. 

Councilmember Hornat asked the Finance Director which option had been placed in the FY2011/12 budget.  Ms.  Lemos stated that a transfer of $300,000 had been budgeted to Coyote Run.

Councilmember Garner asked how the options presented factored in revenue from town-owned buses.  Ms. Ramsey stated that there were costs and revenues associated with the buses being turned over to the RTA.  She explained that there would be costs associated with the rolling stock of the buses because that was the only thing purchased with federal funds.

The Mayor asked to have that cost amount brought back to Council.

Vice Mayor Snider asked for clarification as to what senior services would be available outside of the blue zone area that the Sun Shuttle serviced.

Ms. Ramsey stated that areas south of Ina Road and west of La Cholla Boulevard were serviced by Coyote Run to disabled and senior citizens.

Option D - represented discussions with the RTA for expanded Coyote Run services only and no financial maintenance costs.  Option D would require $76,000 from the General Fund budget.

Option E - represented further reduced services in Council's choice of additional zones, days or hours.  Option D would require $76,000 dollars in maintenance.   

Councilmember Waters asked what the Coyote Run usage was, the number of citizens who depended on the service and their frequency of usage.

Ms. Ramsey stated that seventy-five passengers a day utilized Coyote Run, and thirty-five passengers traveled outside of the area.  She also cited the number one reason tracked for needing service was for medical purposes.

Councilmember Hornat asked if service could be reduced to two or three days a week for $76,000 per year.  Ms. Ramsey answered that the $76,000 barely covered fuel and maintenace costs of the vehicles during a year. 

Councilmember Solomon expounded on ridership and noted that with Option C, 50% of the riders would be lost that traveled outside of the area.  He asked what the repeat ridership percentage was, and if the majority of trips were being utilized by a small percentage of users.  

Ms. Ramsey agreed that in general, transit users werer a small number that employed the service the most.

Councilmember Garner asked if there was an alternative means of transportation for citizens to use if the transit services were eliminated in areas.  

Ms. Ramsey remarked that the majority of areas had Sun Shuttle service available, but that the riders who used Coyote Run could not make the transfer to Sun Tran because of mobility issues, etc.

Councilmember Solomon asked if the area near the Northwest Hospital was available for expansion.
 
Ms. Ramsey stated that the elimination of Coyote Run, having an expanded zone would diminish quality.    

4.

Money Bags Squad Budget Recommendations


Click here for item 4

Finance Analyst Art Cuaron presented budget recommendations from the Money Bags Squad and stated that the actions recommended fell within their perview (i.e. no large, adverse impacts on staff or staffing levels).  He explained that the composition of the Squad included 13 employees from all departments of the Town, and they brought forward the recommendations that had received a majority vote.    

Immediate budget recommendations for FY2010/11 included:

Revenues - Enterprise Fund cost allocation/recovery study implementation with determinations from that study to be incorporated immediately to offset the budget shortfall

Expenditures
 - Reduce custodial services contract
 - Eliminate coffee service and purchase of other food incidentals (Kleenex, cutlery, paper plates, etc.)
 - Minimize food service at staff meetings
 - Institute cell phone stipend for eligible staff members
 - Reduced travel and training budgets
 - Reduced non-essential memberships and subscriptions

Kevin Verville, Information Technology Director, noted that the last time he looked the annual cell phone cost was close to $90,000.

Mr. Cuaron explained that the Squad had not focused on individual line items but had looked at a higher level, so the cost savings recommended were not a large dollar amount. 

Budget recommendations for FY2011/12 included:

Revenues
 - Increase retail sales tax
 - Increase utility sales tax
 - Increase business license fees
 - Increase user fees where appropriate
 - Implementation of Enterprise Fund cost allocation study
 - Implementation of liquor license fee
 - Implementation of commercial property rental tax
 - Pursual of naming rights at Town parks and facilities
 - Pursue advertising opportunities on Town website and facilities

Expenditures
 - Eliminate funding for staff holiday party
 - Reduce uniform budgets where appropriate
 - Eliminate stand alone printers and fax machines
 - Minimize overtime spending and encourage comp time usage
 - Offer voluntary severance/retirement plan
 - Implement formal volunteer program in departments that need assistance 

Budget Recommendations for FY2012/13 included:

Revenues
 - Implement property tax
 - Implement Enterprise Fund cost allocation/recovery study
 - Implement Utility Franchise fees

Mr. Cuaron reviewed the recommended Management/Policy considerations that the Squad supported which included:

Aggressively Pursue
 - Annexations
 - Grant opportunities
 - Marketing the Town as a means of economic development

Continue to pursue - Regional partnerships, and Review/implement uniform policies.

Mayor Hiremath thanked Mr. Cuaron and the Squad for their proposal and commented that a majority of the items proposed a morale issue, but things like comp time usage and a voluntary severance/retirement plan could be beneficial to both the town and employees.  

Councilmember Hornat suggested that the town become more aggressive in pursuing grant opportunities by adding a position to the Procurement Division that would coordinate with the different Department’s when they were applying for grants.

Councilmember Solomon stated that it was irrelevant whether or not employees supported taxes and noted that the Squad knew where money was spent that could be saved.    

The Mayor recessed the meeting at 8:54 p.m. and the meeting resumed at 9:04 p.m. 

5.

Discussion and Presentation Regarding Revenue Enhancement and Cost Reduction Options for FY 2011/12


Click here for item 5

Finance Director Stacey Lemos stated that her presentation was for Council recommendations to staff pertaining to future Study Sessions and how staff should address budget deficits for FY2011/12 and beyond.

She highlighted the main problems:
 - Estimated General Fund deficit of $3M dollars for FY 2011/12 which included funding of capital and asset replacement needs
 - Estimated Highway Fund deficit of $1 million
 - Future deficits projected for four years out

Ms. Lemos cited the cause of the deficits was due to low growth projected in residential and building commercial building activity, slowed economic recovery projections, limited growth potential from State shared revenues, and increased budget expenditure pressures.

Staff-recommended Solutions:

Short term 
 - New and/or increased sales taxes and fees
 - Core service prioritization/program reductions = reduced FTE’s
 - Evaluate service level standards using performance measures

Longer-term
 - Primary property tax
 - Utility franchise frees
 - Evaluate partnerships - library, transit, fleet maintenance
 - Actions/policies to stimulate economic development, create jobs
 - Annexations

Ms. Lemos reported that a new or increased sales tax action required public notice, which took about 5 months to take effect before revenue was realized by the town. 

The Finance Director reviewed the following options for closing the $3M dollar General Fund deficit:

Option A
-  2% Utility Tax Increase = $ 1.3 million
-  Cuts and Other Fees = $1.7 million

Option B
-  1% Utility Tax Increase = $650,000
-  Cuts and Other Fees = $2.4 million

Option C
-  2% Utility Tax Increase = $1.3 million
-  2% Commercial Rent Tax = 900,000
-  Cuts and Other Fees = $800,000

Option D
-  2% Utility Tax Increase = $1.3 million
-  .25% Local Tax Increase = $800,000
-  Cuts and Other Fees = $1 million

Option E
-  .50% Local Tax Increase = $1.8 million
-  Cuts and Other Fees = $1.2 million

The following options were given for closing the Highway Fund deficit of $1 million: 

Option A
-  .25% Local Tax = $800,000
-  Cuts = $200,000

Option B
-  1% Utility Tax Increase = $650,000
-  Cuts = $350,000

Option C
-  2% Commercial Rent Tax = $900,000
-  Cuts = $100,000

Ms. Lemos stated that she was asked to bring back the costs for providing a one-time employee bonus, which were not included in the projections for FY2011/12:

Employees w/Annual Salary of $60,000 or less 
1% = $118,000 ($87,000 General Fund)
2% = $236,000 ($174,000 General Fund)

All Employees
1% = $208,000 ($161,000 General Fund)
2% = $417,000 ($322,000 General Fund)

Vice Mayor Snider asked to see what the $3 million budget deficit was comprised of so the Council could make educated decisions regarding revenue enhancements and to ensure prioritization was given to the core services recognized at the Budget Retreat.

Councilmember Hornat asked to see what the program cuts were that totaled $2.35 million per year to determine what was viable.

Councilmember Garner commented that nothing should be left off of the table regarding non-essential services and that the town’s reduced population numbers should match the service levels.  

Councilmember Hornat referred to a handout and asked what the difference was between the budgeted amount of Full-time Employees and those that actually showed up for work in Town Hall.  

Ms. Lemos responded that vacant positions accounted for monies held in the budget and there were 5-6 vacancies during any time in the year.

Councilmember Solomon remarked that in 2001, $662 was spent per resident in the town and that in 2010, $662 was the projected expenditure per resident as well.  He said that spending levels were being maintained but that revenues had decreased.

Councilmember Garner asked to have benefits looked at and what the fair share is that employees are contributing.

6.

FUTURE BUDGET AGENDA ITEMS


Click here for item 6

Councilmember Hornat directed staff to forward the necessary items to implement a 2% increase in the Utility Tax for discussion at the March 2, 2011 Regular Session meeting, seconded by Vice Mayor Snider. 

Councilmember Hornat directed staff to bring forward a Council policy/resolution for discussion and possible action that provides that funded but unfilled FTE’s (full-time equivalent employees) will not be filled until approved by Council as a whole.  Any existing policies, directives, resolutions or codes to the contrary should be brought forward for discussion and action, seconded by Councilmember Garner.

Councilmember Hornat directed staff to bring forward for discussion and possible action any codes, policy, resolutions, or directives that provides that the Chief of Police reports directly to anyone other than Council as a whole.  Further, if no such code, policy, resolution, or directive exists, that a policy/resolution be prepared for discussion and action, seconded by Vice Mayor Snider. 

Councilmember Hornat directed staff to bring forward a policy for discussion and posible action authorizing Council to appoint one or two members of Council to be present at and privy to any and all communiques, discussions, or meetings involving negotiations or memorandums of understanding for Public Safety employees.  Any existing policies, directives, resolutions, or codes to the contrary should be brought forward for discussion and action of this point.  In addition, Council as a whole may wish to consider a permanent Council liaison for this purpose, seconded by Councilmember Solomon. 

Councilmember Garner requested that any authorized position that had been frozen for two or more years should be eliminated from the current fiscal year budget that the Council was going to be negotiating up front for the next fiscal cycle, and then if those unfunded positions needed to be filled, the Department heads would need to show where the money would come from, seconded by Councilmember Hornat.

Ainsley Legner, Director of Parks, Recreation, Library, and Cultural Resources, communicated that her department was going to present a recommendation for a fee increase after the pool feasability study results were distributed to Council.  She stated that the recommendations would have to be offered at a later date because of the timeline necessary for public notices.

ADJOURNMENT

MOTION: A motion was made by Councilmember Waters and seconded by Councilmember Hornat to adjourn the meeting at 9:51 p.m. 

MOTION carried, 7-0.