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HomeMy WebLinkAbout1992-07-22 ccmSPEC ..~ - ~' MINUTES OF THE SPECIAL MEETING OF THE CITY COMMISSION BOZEMAN, MONT ANA July 22, 1992 *********************** . The Commission of the City of Bozeman met in special session in the Commission Room, Municipal Building, July 22, 1992, at 7:00 p.m. Present were Mayor Swanson, Commissioner Frost, Commissioner Stiff, Commissioner Vincent, Commissioner Knapp, City Manager Wysocki, Administrative Services Director Gamradt and Clerk of the Commission Sullivan. The meeting was opened with the Pledge of Allegiance and a moment of silence. Work Session - Review of City Manager's Budget Recommendations for FY1992-93 This was the time and place set for the first in a series of work sessions on the City Manager's recommendations for the budget for Fiscal Year 1992-93. Due to the fact that this is a work session, the minutes will remain quite brief, setting forth only the important issues. . City Manager Wysocki indicated that this work session will be spent in reviewing the preliminary portion of the budget recommendations, which is devoted to an overview of the entire document; and, if time allows, review of the individual budgets will begin. He noted that tomorrow's work session will be devoted to review of planning, zoning and related budget units. The City Manager reminded the Commission that this budgeting process will be culminated with a public hearing on August 24, and final adoption on Wednesday, September 9, at a regular . Commission meeting. City Manager Wysocki noted that at the beginning of this document is a copy of the Distinguished Budget Presentation Award issued by the Government Finance Officers' Association, which the City received for the Fiscal Year beginning July 1, 1991. He stated that this is the first .time the City has received the award; and it is one of 26 issued across the country to communities of this size. The City Manager then reviewed his letter of transmittal, which covers the first ten pages of the document and provides an overview and highlights of the budget. He noted that the City Commission budget unit represents a consolidation of three budget units--the Commission, Clerk of the Commission and the Band. The City Manager's budget unit includes funding for two new 07-22-92 Special ------------------------ ---- - - ~ . - 2 - full-time positions, one for Personnel Director and one for a neighborhood coordinator/grants writer. The Director of Public Service, Engineering and Snow Removal have been combined into one budget unit. The Building Maintenance budget unit includes the City Hall Complex, Carnegie Building, City Shop, Senior Center and Lindley Park Center. . Responding to the Mayor, the City Manager indicated that the City may utilize INTERCAP monies to fund the difference betwE{en the funds available and the actual cost of expansion of the Senior Center; and the Seniors will then raise the monies to repay that loan over the repayment period. The City Manager stated that in preparing this document, the mill levy has been held essentially constant, at 123.34, with a projected five. percent increase in the value of a mill. He reminded the Commission that Gallatin County has acted to continue the .4 percent local option vehicle tax; however, this source of revenue will terminate at June 30, 1993 unless the Legislature takes action to extend it. He then reviewed some of the other sources of revenue for this budget, noting that historical information has been included for many of them. City Manager Wysocki stated that under this budget, the City's staffing level would be .increased from 207.69 full time equivalents to 215.01 FTE's. He noted that the changes in staffing will be discussed more fully under each of the budget units. The City Manager noted that capital items are listed in the various budget units throughout this document; and at the back of the book is a listing of the five-year capital improvements program. He noted that in the project numbers, the first two numbers indicate the fiscal year in which the item was first requested. City Manager Wysocki stated that last year, the value of a mill was $26,280; and it was estimated at $27,600 for purposes of preparing this document because the actual value as not available when it was prepared. He then noted that the levy for the SID Revolving Fund has been eliminated this year, thus relieving taxpayers of the burden of supporting the Valley Unit Subdivision . SID bonds. The City Manager then stated the overall budget is projected to increase from $14.3 million to $14.8 million, which is just under a 3-percent increase. He also noted that the projected revenues for the General Fund are $119,247 less than the expenditures; and staff would recommend that those monies be taken from the capital projects reserve. City Manager Wysocki noted that the proposed budget does not include the addition of 07.22.92 Special -.....------. .. - 3 - a firefighter to assist in fire inspections, although that did recently surface as one of the Commission's top priority goals. He suggested that during this budgeting process, the Commission may wish to add that in, if they can find other areas to cut. He then stated that Pages 1 through 6 contain the Commission's top priority goals and a statement on how this budget addresses those . goals. Commissioner Stiff stated he has extreme concern about how the City has handled the decrease in the mill levy for the SID Revolving Fund. He noted that in FY1986-87, the City levied 19.31 mills; and as that levy has reduced, a portion of the levy has been shifted to the General Fund rather than the entire levy being reduced by that amount. He noted, therefore, that over the period from FY87 to now, 12.87 of those mills have been shifted to the General Fund. Commissioner Stiff also expressed his concern about the large unreserved general fund balance which is being carried forward. He noted that, upon checking quotes from Moody's Investor Service and Standard & Poor, which are the authorities in the bonding arena, he found that the balance usually should be at least 5 percent but not more than 10 percent. Ours total close to $2.6 million, which is over 50 percent of the General Fund budget. He then stated he does not .have a problem with a fixed asset reserve that can be used to fund equipment when funding problems occur within a fiscal year; however, he questioned the need for such a large reserve. He noted that last fiscal year, $.5 million was transferred from the undesignated reserve to the reserve for fixed assets because there was too much money in the undesignated reserve, a fact which he determined upon review of the City's Comprehensive Annual Financial Report for Fiscal Year 1991. He also stated he does not recall the issue of reserves being discussed and established by the Commission in recent years; and he is extremely concerned about the City's operating without a policy. He then stated he feels the City ought to decrease its reserves and provide some relief to the taxpayers through a reduced mill levy. Commissioner Stiff also expressed concern where property taxes have increased 25 .percent in the past two years, citing the desperate situation that a widow has recently found herself in because of that fact and health problems. Responding to Commissioner Stiff's position that the City is operating without the appropriate reserve policies in place, Director Gamradt reviewed the fiscal policies on reserves, as contained on Page 14 of the budget document. He noted that the City does have four reserve accounts, with specific policy statements for each, as follows: 07-22-92 Special --.--..- - 4 - 1. A designated cash flow reserve. This reserve provides funds to cover expenditures incurred during the period from July through November of each fiscal year, since property tax collections are not received until December. Averaging of expenses and revenues over a three-year period revealed that the City spends $744,000 more than it receives during this period; and that is the amount set aside in this designated reserve. . 2. A designated reserve to cover all accrued employee payroll benefits liabilities. The Director noted it is not likely that all employees will terminate or retire at one time; however, this reserve is important. He noted that conversations with Dr. Gil Crain, professor in governmental accounting at MSU and an active member in the GFOA, has revealed that the Governmental Accounting Standards Board (GASB) has established an accounting policy which requires this reserve. He noted the only reason it has not yet been implemented is that its implementation will result in many cities encountering a deficit position on their financial statements, which will in turn injure their bond ratings. He stated that as soon as practicable, the GASB will implement this policy; and the City's audits will then be subjected to the review. He noted that with this reserve in place, the City will not incur any adverse comments. 3. A designated reserve for equipment acquisition and replacement. There is no depreciation in governmental funds; however, staff does maintain depreciation schedules on the equipment. He then noted the importance of being able to fund the replacement of vehicles on a cash basis. . 4. An undesignated general fund reserve, typically referred to as a "rainy day fund" by the GFOA. Director Gamradt stated that this fund should be set at a level of 5 to 10 percent of the annual expenditure level; and the City has established an a-percent level. Administrative Services Director Gamradt stated that he has discussed these reserve policies with Dr. Crain; and he feels the City is on as sound a fiscal footing as possible. Mayor Swanson respectfully took issue with Commissioner Stiff's comments, noting that the Commission did, in fact, discuss and establish the a-percent reserve level last year. Commissioner Stiff stated the replacement of fixed assets in a businesslike, systematic manner is occurring; therefore, he does not feel that such a large reserve is necessary. He also expressed concern about the idea of borrowing monies for fixed assets, such as renovation of the Law and Justice Center, at a higher interest rate than the City's monies are earning, particularly . when the cash is available. Mayor Swanson countered by noting that many of the country's best companies borrow when they don't need to, holding their reserves until needed. The City Manager stated his difficulty in accepting the necessity of funding the payroll liabilities at a 100-percent level. He noted that he feels this is impractical; however, he noted it is one of the items on which the City's audit is conducted. 07-22-92 Special -.-.---.... - ,. --... -.--- -----.--. ..--.--...-...- -... -.......-------. - 5 - Responding to Mr. Brad Stratton, Director Gamradt stated that GASB is the national authority on which all financial statements for all governmental entities are prepared and reviewed. Break - 8:05 to 8: 11 D.m. . Mayor Swanson declared a break from 8:05 to 8: 11 p.m., in accordance with Commission policy established at their regular meeting of March 14, 1983. Work Session (continued) - Review of City Manaaer's Budget Recommendations for FY1992-93 Responding to Mayor Swanson, Commissioner Stiff stated the 25-percent increase in taxes between 1989 and 1991 included the street and tree maintenance assessments; and the actual increase was 25.5 percent. He noted this includes all of the property taxes, for the school district, county and city; and property values have increased another 8 percent this year. Administrative Services Director Gamradt stated that on Page 32, the summary of mill levies reflects a 2.5-percent increase for FY91, a 2.9-percent increase for FY92 and a proposed 4.9-percent increase for FY93. . Mayor Swanson noted that in the last few days, the City has received the certified mill value for the upcoming year; and it is $28,169. The City Manager noted that, unless the Commission adds items to the budget, the mill levies will be lowered slightly, generating only the total dollars anticipated in this document. Substantial discussion ensued on the rapid rate with which residential property values have increased over the past few years, the reasons for that increase, and the detrimental impact that has on the "little old lady" who wishes to stay in the family home. Responding to Commissioner Vincent, the Administrative Services Director estimated that breakdown of local property taxes at 50 percent for the school district, 25 percent for the county and 25 percent for the city, noting that is a pretty typical breakdown throughout the state. . Responding to questions, the Director stated that property taxes are only one source of revenue for this budget. He then noted that the increase in the value of a mill includes not only the 8-percent resulting from the reappraisal, but any new annexations and new construction as well. During this discussion, Commissioner Stiff once again expressed his dissatisfaction with the proposed budget. He then characterized it as being done with "smoke and mirrors", since much of the original 19.31-mill levy to cover the special improvement district bond payments for 07-22-92 Special -------- ----- -- --- - 6 - . Valley Unit Subdivision have been diverted to General Fund activities rather than resulting in a corresponding reduction in the mill levy. Mayor Swanson stated his disagreement with Commissioner Stiff, stating he feels the staff has worked diligently and with "incredible tenacity" over the past ten years to make the Valley .unit Subdivision a viable part of the community; and those efforts are now paying off. He further noted that staff has made every effort to prepare budget documents which are concise and clear, with no hidden items; and that has resulted in obtaining a prestigious award. Commissioner Frost noted that, statistically, new development does not pay for itself; therefore, all property owners bear a portion of those additional costs for services. Responding to Commissioner Vincent, the Director stated that the properties at January 1 of each year are the ones included on the taxes for the fiscal year beginning the following July. Commissioner Vincent noted that the School District has projected that the population at the high school will increase from its current 1,200 students to 3,000 students by 1997. He noted that, while it is possible to have a bulge in only a few grades, he would anticipate that this reflects a trend throughout the system and the community. . Mr. Don Weaver noted that in California, Proposition 13 was implemented to address situations similar to those being discussed. He noted that through that proposition, the property taxes on houses which had been in the ownership of a specific individual are artificially low; and new owners of homes are covering the difference created. Administrative Services Director Gamradt returned to the systematic review of the initial summary pages in the document, highlighting some of the fiscal policies contained on Pages 7 through 16. He noted that these include the expenditure of one-time revenues for capital assets or other non-recurring expenditures. He also noted that another policy is to estimate revenues in a realistic and conservative manner, thus avoiding the pitfalls that can occur when revenues are less than expenditures. . The Directorthen reviewed the fiscal policies under the header "debt management". noting that these policies essentially provide a matching concept between those who benefit and those who pay. He noted that short-term funding and cash are to be utilized for those items which do not have a long life or which are of benefit to today's residents; and long-term funding is to be utilized for those items which will benefit tomorrow's residents as well as today's residents. He stated that under these policies, it would be more appropriate to fund the renovation of the Law 07-22-92 Special - ---- -. 11 t \ .. - 7 - and Justice Center over a five-year period, given the type and extent of the work being done as well as the costs involved, than it would be to fund it out of the cash reserves which the City has acquired over the years. Responding to questions from Mr. Brad Stratton, the Director stated that the City has been _ncurring substantial increases in some of its costs, such as employee health/medical insurance. He then noted that over the years, the City has remained below the 1-105 cap, with levies falling from the 129.78 mills levied in FY87 to the proposed 123.34 for FY93. Mayor Swanson noted the extreme demands being placed on many City employees at this time because of the growth and changes that the community is experiencing. He then noted that one of the employees is suffering from exhaustion and was hospitalized. He stated it is important that the Commission also take this type of problem into consideration when reviewing this proposed budget. Adjournment - 9:00 D.m. There being no further business to come before the Commission at this time, it was moved .bY Commissioner Vincent, seconded by Commissioner Knapp, that the meeting be adjourned. The motion carried by the following Aye and No vote: those voting Aye being Commissioner Vincent, Commissioner Knapp, Commissioner Frost, Commissioner Stiff and Mayor Swanson; those voting No, none. ATTEST: O~J~ _OBIN L. SULLIVAN lerk of the Commission 07-22-92 Special -----