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HomeMy WebLinkAboutMinutes - Finance and Bond Committee - 3/31/2008 Town of Oro Valley Finance and Bond Committee Special Meeting Hopi Conference Room 11000 N. La Canada Drive Oro Valley, Arizona Monday, March 31, 2008 6:00 p.m. SPECIAL MEETING CALL TO ORDER AT 6:05 p.m. ROLL CALL PRESENT: Tony Eichorn, Chair Chuck Kill, Vice-Chair Dan Toth, Member Peter Lamm, Member Bob Harris, Member STAFF PRESENT: Stacey Lemos, Finance Director Wendy Gilden, Management and Budget Analyst Art Cuaron, Finance Analyst Daniel Sharp, Police Chief Ainsley Reeder, Parks and Recreation Director Susann BeDell, Senior Office Specialist ALSO PRESENT: Lyra Done, Parks and Recreation Advisory Board Liaison Helen Dankwerth, Council Liaison CALL TO AUDIENCE — Doug McKee, Chairman -- Planning & Zoning Committee Noted that forecasting is difficult especially with current economy. No one knows how long the economy is going to be tough. Sometimes forecasters over-do with a forecast that is too low or too high. Continue to try and make your forecast as accurate as possible. The FY 2009 budget assumptions for residential and commercial development-- he hopes that these assumptions are being integrated with the development and planning and zoning departments to get an accurate idea of construction sales taxes and retail sales taxes. If that were done, those revenues would be more accurate. It is mainly a matter of when the stores are going to open and when the taxes are going to come in to the Town. He congratulates the Committee on the job they have been doing and hopes that it can fine tune the budget more. Noted that assumptions for construction sales tax there is no mention of any tax rebate for Sanofi Aventis that was delayed at the Council meeting. On local sales tax it shows a 5% growth for existing businesses and shows growth flat for the restaurant and bar existing businesses. He questions those assumptions with all the new capacity coming on line. He feels that new capacity will have a negative impact on the rest of the existing businesses. Need to take that into consideration. Surprised to see the Pima County Library district reimbursement as dropping this year from $690K down to $471 K. 3/31/2008 Minutes, Finance and Bond Committee 2 That has always been a controversial thing, how much we get out of the County. He is assuming that represents actual costs and hopes that if not, we can get the reimbursement back up. There is bill in Phoenix that is likely to be passed that will drastically cut impact fees that we can obtain from developers. From the time the development is approved, for the next 2 years we cannot collect any impact fees from them if they come in with permits during that 2 year period. It will hurt if it passes. Arroyo Grande annexation will bring our general plan into conformance with what the State plan is for the Arroyo Grande area. The way this has worked in the past is that they have tied together the general amendment, the pre-annexation and some re- zoning so tightly together that it is like one thing. There is some opposition to the annexation from residents. Hopefully, an economic evaluation of the annexation will be performed. One of the things that Planning & Zoning is planning is a citizens committee for review purposes and it would be advantageous for one or more Finance & Bond Committee members to volunteer for, or attend those meetings. Some potential problems that may arise are residents who are concerned about whether or not the annexation is going to increase taxes or decrease services for the same amount of taxes. It is advisable to become as familiar as possible with what is going on out there and factor it into the Town's 10-year plan - because as Chief Sharp mentioned, there are going to be front end expenses on it with no corresponding revenue coming from it for a long time. 1. APPROVAL OF MINUTES FROM THE FEBRUARY 25, 2008 MEETING MOTION: Member Bob Harris MOVED to approve the February 25, 2008 minutes. The motion was SECONDED by Member Toth. Motion carried 5-0. 2. DISCUSSION OF DEPARTMENT SERVICE LEVELS FOR THE UPDATE TO THE 10-YEAR FINANCIAL SUSTAINABILITY PLAN — PARKS & RECREATION AND POLICE PARKS & RECREATION —AINSLEY REEDER, PARKS AND RECREATION DIRECTOR Ainsley Reeder gave an overview of the Parks and Recreation Department noting there are five divisions consisting of: ■ Parks — employs 8.5 people who maintain Town parks, the Naranja Town Site, Town Hall, and bicycle oasis and public art areas. ■ Recreation Division — employs 7.5 people in-house for programs such as sports leagues, summer camp, winter camp, etc. The Recreation division also has 30- 40 independent contractors who run various programs such as Tai Chi and Yoga. ■ Bicycle, Pedestrian & Trails Division — employs 1 person. ■ Aquatics Division — employs 9.5 people who maintain the pool which is open 10 months a year. There are approximately 114,000 pool trips per year, which 3/31/2008 Minutes, Finance and Bond Committee 3 means each time a person uses the pool - that is considered one trip. There is a pool capacity number. • Administration Division — employs 3 people who provide all administrative and management support. The Parks & Recreation budget for FY 2008/2009 is remaining stable. They do not anticipate growth or loss. Potential new work rests with the following possible projects: • Naranja Town Site • Steam Pump Ranch • Honey Bee Village User fees for Town recreational facilities account for 16% of costs. Art Cuaron, Finance Analyst has completed an analysis of which programs recover what percent of costs and which programs do not recover or pay for themselves. Based on that information, a Fee Recovery Policy is going to be presented to Council next month. The Policy is in the first stages, so possible cost recovery is unknown at this time because the Policy is a philosophical position and is based on community benefits. If there is a very strong community benefit then the philosophical perspective of this policy is that those programs would be more likely to be provided with some or full subsidy. However, if it is a high individual benefit, that program is going to be recommended to be 100% self- sufficient. The first step is to see if Council agrees with that philosophy. Member Kill requested that the Finance & Bond Committee see the Fee Recovery Policy and give their recommendation prior to it going to Council. Ms. Lemos stated that the policy was going to Council on May 7, 2008. The Fee Recovery Policy will be put on the Agenda for the Finance and Bond Committee meeting for April 28, 2008. This is the general philosophy in the trade. Mr. Cuaron looked at a lot of exploratory work looking at other jurisdictions and parks and consultants that work with parks across the country to find a logical way of determining a fee structure program. Mr. Cuaron looked at the philosophy, not the actual costs of each of the other jurisdictions programs. Chair Eichorn asked about costs in Oro Valley as compared with other jurisdictions. Oro Valley charges more for summer camp type programs than other cities in Pima County. Chair Eichorn asked about the amount of programs offered by the Town versus the amount of programs offered by other jurisdictions. The Town of Oro Valley offers fewer programs than other communities in Pima County as we do not have the space or venues to offer additional programs. Regarding cost recovery of the proposed Naranja Town Site, Stacey Lemos, Finance Director stated that the annual expenditure costs are expected to be approximately 2.5M for the outdoor recreation element; the recovery fees/user fees would be approximately 1.3M and the Town of Oro Valley would cover 1.2M. There is a much higher expectation of cost recovery if that site is built since it will be fully financed by the Town. 3/31/2008 Minutes, Finance and Bond Committee 4 When venues are improved with Pima County Bond money, the Town is prohibited (by the Intergovernmental Agreement with Pima County) from charging more than the County would charge for a like activity in one of its parks. This is a restriction not placed on the James D. Kriegh Park. Currently, there is no discount for Oro Valley residents for recreational programs. Residents and non-residents are charged the same amounts for use of programs and venues. Chair Eichorn would like to see resident/non resident fee structure. Ms. Reeder noted that because the bulk of programming is independently contracted, this has not yet been pursued. Additionally, the Intergovernmental Agreement prohibits this at the Riverfront Park. Council Member Dankwerth noted that if the residents were going to be paying for the Naranja Town Site with a secondary property tax, that there should be no fees or reduced fees for residents so they are not paying twice. The total budget for Parks & Recreation is $2.6M. Recovery fees total approximately $400K; which means the taxpayers are funding the remaining $2.2M. At this time, there is no way to know how many Oro Valley residents use Town recreational facilities. The bookkeeping and payment systems are going online and next year we should know some of this information. Member Kill would like to see more of the fees shift on to the people using the facilities. The community would probably be better off to keep programs at a higher fee than to lose programs. Council Member Dankwerth noted that an alternative budget should be made for the worst case scenario if the economy gets worse, such as cutting non-essential programs. Ms. Lemos stated that the Town Manager is still working on the recommended budget. Regarding possible Steam Pump Ranch programs and who would be responsible for them, Ms. Reeder stated that consultants have put together various models suggesting different entities to maintain those programs and that each of them come down to the same amount of money to the Town of Oro Valley. The Parks division would need one full time position if there is a higher level of service anticipated at Steam Pump Ranch. There is a $1M Pima County Bond being requested for upgrades to James D. Kriegh Park. The lighting upgrade was picked by the County's subcommittee to be part of the bond issue. If this takes place, then the restrictions based on the Intergovernmental Agreement would apply to the entire James D. Kriegh Park. It should be taken into consideration that we will not be able to raise rates if that bond is accepted. POLICE DEPARTMENT — CHIEF DANIEL SHARP Oro Valley Police Department is continuing on as it has been in past years. Because Oro Valley Police Department has been so successful with addressing Town problems, it is not offered grant money or federal money for programs and training. Police Department's budget is $12.5M; 142 full time employees; 100 volunteers; there is no additional staff requested for FY 2008/2009. 3/31/2008 Minutes, Finance and Bond Committee 5 Police Department's focus is on training in-house management, ethics, inter-personal skills, etc. Current staffing level is 2.3 police per 1,000 residents. Last year's attrition rate was 2%. There is one position that is in the process of being staffed now and after that, the department is fully staffed. Challenge is continuing to provide full service as Town grows. 3. DISCUSSION AND REVIEW OF LAST YEAR'S FINANCIAL SUSTAINABILITY PLAN AND RECOMMENDATIONS TO THE TOWN COUNCIL Ms. Lemos summarized the updated revenue estimates outlined in the FY 2008/2009 budget packet for the Finance and Bond Committee's discussion and recommendations to the Mayor and Town Council. The draft budget for the General Fund and the Highway Fund are included in the packet. A correction needs to be noted on the FY2009 Assumptions sheet - the Utility Sales Tax sunsets in April 2009 with an estimated loss of $300K. There is a $4.5M gap in the General Fund at this point. This is a draft budget and is being constantly updated and changed. We have yet to receive any information on state shared revenues. The League of Cities and Towns is working on getting this information out to cities and towns. The growth assumption on State Income Tax is based on collections from 2 years prior. The Vehicle License Tax (VLT) is based on the population of the Town compared with other Towns in the County. Our assumption of VLT is based on the prior year's actual increase and keeping it at that level. It is assumed that state shared revenues will be declining in the next few years. We do not have many grant funded programs, they are usually tied to Police Department and Transit budgets. General Fund estimate is about a 2% increase over last year. The Highway Fund shows about a 25% decline due to the fact that we are heavily dependent on construction sales taxes and the HURF tax, both of which are likely to decline next year. At this point in the budget balance stage, we are not looking to have to cut staff or make a significant service level reduction. We are keeping status quo on staff and service levels. A main priority of the Town Manager is being able to fund a small cost of living / annual adjustment for the employees as well as being able to fund the step plan for the police officers as well as a small merit increase for staff on their anniversary date. Employer matching percentage of the public safety retirement is going up to 16% from the existing matching percent of 9%. That is about a $320K mandatory increase to the budget for the police officers through the public safety retirement system. Member Kill asked Ms. Lemos to bring the numbers for the police department for payroll, medical, retirement, taxes, anything non-payroll as a percent of payroll for the police department compared to staff. Ms. Lemos noted that the public safety retirement fund is trying to make up for 9/11/01 losses on investments. This is not a Union contract issue. This is a State retirement fund. The State mandates the costs for this fund. There is currently legislation being considered to allow the public safety retirement fund more flexibility in 3/31/2008 Minutes, Finance and Bond Committee 6 what they can invest in. The civilian fund of Arizona State Retirement System (ASRS) has had a yearly steady incline since 9/11/01, whereas public safety retirement has had small increases and now we have a large increase to make up for. Member Kill noted that these are the costs that are going to come back to haunt us. The legacy costs are going to be a problem in the future. Member Lamm stated that Arizona has been much more far-sighted than other jurisdictions and the private sector, as it requires funding now rather than pay as you go retirement fund. Member Kill stated that other than unions, towns, counties, U.S Government, there are very few funded pension plans out there anymore. He stated that you should let the retiree take responsibility for their retirement. Proposed projection for pay raises is 1 %%. It is proposed that civilian staff receive a merit increase of 4%. The Step Plan for the police officers is 4-5% depending on what step you are at. The way management and Council have approached this is they try to maintain comparability between what the police are receiving and what the civilian staff is receiving. Ms. Dankwerth noted that last year the police officers did not get a 5% step increase and a lot of the police officers are maxed out at their step. Member Kill noted that a lot of companies are freezing wages. Ms. Lemos noted that we are still trying to balance the budget and that we do not want to undercut services. Member Kill noted that as was mentioned earlier, the Town needs to have an alternate budget in case the numbers do not meet expectations. Something you can fall back on and not have to start from scratch. Member Harris stated 2009 and 2010 should be looked at in tandem so that you do not build up expenditures and then have to cut further the following year because revenues fall. Ms. Lemos stated that the Town has been looking at a multi-year budget and there are possibilities that may have to be put off to another year. Member Kill noted that private companies are laying off and for the Town of Oro Valley to keep the same staffing and service levels and spending at the same level does not seem to make sense. At least put a freeze in place. Ms. Lemos noted that the Town's goal is to not have a wide fluctuation in the budget in terms of laying off staff and instead to maintain staff during low periods so staff is in place to keep up with growth when the economy picks up. The goal is to keep things tight during low periods so that we will be prepared when things pick up again. There are approximately 450 employees including seasonal and part-time employees, water utility fund, Stormwater fund, transit fund. In the General Fund there are approximately 275 full time employees. A 1% increase in staff is projected and a 10% increase in personnel costs is projected. A 15% increase in medical plan costs is being projected at this time. The Human Resources department is looking into benefits costs and is negotiating those costs. The Human Resources department is also bringing information to Council regarding compensation information based on other jurisdictions. The Town is implementing wellness programs and trying to control medical usage claims to the extent it is possible. We contract with Lovitt & Touche and they go out to bid every year for health providers. Chair Eichorn noted that it is more than just the brokerage, it is trying to keep down the costs. 3/31/2008 Minutes, Finance and Bond Committee 7 Member Toth noted that the average age of retirees is 49 or 52 and the health plans are very expensive because people are aging out in them. Some states are delaying retirement until age 55 now so that you have to work longer because people are living longer and companies are trying to maximize the pension plans to get the younger workforce to pay in longer. Ms. Lemos noted that the State Retirement System has legislation going trough this year to change the number of points you get from 80 to 85, which is the number of years of service plus your age, in order to qualify for retirement. Member Harris believes that the municipalities should push back onto the State regarding the mandatory funding of the public safety retirement fund. Ms. Lemos noted that it is a contractual relationship the Town has with the State. Member Harris believes that if there is a 1°/0 increase in staff proposed it would be better for public perception to absorb the work with the current staff level. 4. COMMITTEE MEMBER/COUNCIL MEMBER LIAISON REPORTS Parks and Recreation Advisory Board (PRAB) Liaison, Lyra Done, stated that an educational piece is being presented at the Government Affairs Committee regarding the Naranja Town Site at 8:30 am Thursday at Fidelity National Title, 6860 N. Oracle Road, Ste. 100 — all are invited to attend. Council Liaison, Helen Dankwerth, noted she had nothing to report. 5. SCHEDULING NEXT FINANCE AND BOND COMMITTEE MEETING Next regular quarterly meeting scheduled for April 28, 2008 at 6:00 p.m. in the Hopi Room. 6. ADJOURNMENT MOTION: Member Toth MOVED to ADJOURN the meeting, SECONDED by Member Harris. The meeting adjourned at 8:50 p.m. Prepared by: Susann BeDell Senior Office Specialist