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HomeMy WebLinkAboutBudget Advisory Commission - 08/12/2009 APPROVED MINUTES BUDGET ADVISORY COMMISSION MEETING WEDNESDAY,AUGUST 12, 2009 6:00 P.M., CITY CENTER Heritage Room 8080 Mitchell Road COMMISSION MEMBERS: Chair Don Uram, Vice-Chair Rick King; Commissioners: Annette Agner, Eapen Chacko, Jon Muilenburg, Richard Proops, Gwen Schultz CITY STAFF: Sue Kotchevar, Finance Manager; Scott Neal, City Manager; Tammy Wilson, Finance Supervisor; George Esbensen, Fire Chief; Angie Perschnick, Recorder I. CALL TO ORDER/ROLL CALL Vice-Chair King called the meeting to order at 6:02 p.m. Commissioners Agner and Muilenburg were unable to attend the meeting. Uram arrived at 6:47 p.m. II. MINUTES A. BAC MEETING HELD TUESDAY,JULY 28, 2009 Vice-Chair King asked for any additions or corrections to the minutes. No changes were recommended by Commissioners. MOTION: Chacko moved and Proops seconded to approve the minutes from the July 28 meeting. The minutes were approved with a vote of 3-0-1 with Schultz abstaining from the vote. III. 2010/2011 GENERAL FUND OPERATING BUDGET King stated there was a lot of interest in the Duty Crew concept at the last BAC meeting, and staff from the Fire Department attended the meeting to answer questions from a staffing point of view. They can also cover questions regarding the Fire pension funds. Proops asked about the volunteer firefighter standard of 20-25 per station, noting the City could save a significant amount of money by going from their current total of 95 volunteer firefighters to 20 per station (80 total). Proops also expressed concern about the number of City personnel that respond to 911 medical calls, including police and volunteer firefighters and medics. Esbensen responded to these questions during the relevant parts of the presentation. Eden Prairie Budget Advisory Commission August 12, 2009 Page 2 Philip Jones, President of the Eden Prairie Firefighter Relief Association (EPFFRA), spoke about how the association functions. Allodium Investment Consultants advise on the investment policy and recommend fund managers and diversification strategies. Jones clarified the EPFFRA manages pension funds for volunteer on-call firefighters, not full-time staff in the Fire Department. Schultz asked about the fund mix, and Jones explained the mix of 60% equity and 40% bonds is the diversified strategy chosen by the EPFFRA. Jones noted the investment policy of diversification prevents the EPFFRA from trying to time the market in the recent difficult and unusual economic times. King asked about the catch up contribution needed from the City to make up for 2008 losses. Jones commented the actuarial study used to determine the necessary funding catch up amount was done at the worst possible time for the market(12/31/08) as required. At the end of 2009, a new actuarial study will be done to determine catch up amounts that may be needed during 2010. It was clarified that for the vast majority of paid-on-call firefighters PERA and EPFFRA do not overlap, so most firefighters do not receive both when they retire. It was noted other cities are also facing funding problems for their defined benefit retirement plans, and most cities are covering the cost with a levy or borrowing. King confirmed with Scott Neal the City of Eden Prairie plans to use general fund money to cover catch up costs for EPFFRA. Esbensen responded to Proops' previous question about the possibility of reducing the number of volunteer firefighters. He explained when there are fewer than 20 firefighters at a station, they do not receive enough response to calls when they are needed. The City currently has 23-24 volunteers per station, which includes command staff. History has shown these numbers are needed. Esbensen responded to Proops' question regarding the number of emergency personnel who respond to 911 medical calls by noting a matrix is used to determine the number of individuals who need to respond to each call. If someone is having a heart attack, several people are needed to manage the labor-intensive process of CPR, to provide reinforcements for CPR, and to gather medical information on the victim. A scale based on experience is used to figure pay rates for on-call firefighters, and the top rate per call is $9.50. It is difficult to find people who are willing to be on-call, and that is one advantage of the Duty Crew concept. The Duty Crew would add predictability for firefighters as to when they are actually on duty, and it also adds predictability and consistent performance for the command staff so they know some individuals who will respond to each fire during off hours. Firefighters would sign up for Duty Crew shifts at least thirty days in advance so they could plan around work more effectively. With heavy traffic, it takes longer to get to fire stations now than in the past. For safety reasons, all firefighters go to the station before the truck goes to the site of the fire (except commanders who go sooner). During the Republican National Convention, Eden Prairie tried out the Duty Crew for its firefighters. The response time from the time a call was made to the time fire trucks were on the scene to fires decreased from an average of 7:03 minutes to 4:48 minutes. There are usually about four or five significant incidents per year where the City's firefighters need to be able to respond very quickly, and the Eden Prairie Budget Advisory Commission August 12, 2009 Page 3 airplane crash and fire that happened today is an example of a significant fire-related incident for this year. Esbensen acknowledged this is a difficult year financially for the City,but he is also looking at recruiting new firefighters in April 2010 to maintain the 95 volunteers they have now as retirements occur in the next couple of years. The Duty Crew strategy makes it easier to recruit firefighters, and some surrounding suburbs like Minnetonka use it also. It is more family friendly as firefighters are planning their lives. King asked how Duty Crew hours would contribute to on-call volunteer requirements (currently firefighters are expected to respond to 40% of calls outside their normal working hours). Firefighters would work approximately 10.3 hours per week on average if the Duty Crew were in place. Two Duty Crew members would staff each of the four fire stations during off hours (nights and weekends) for shifts ranging from four to eight hours. There are nine full-time fire employees who are on site during regular business hours from Monday through Friday. The cost to add the Duty Crew for half a year is $120,000 in addition to the costs already in the Fire Department's budget. That includes wages only since there are no benefit cost implications. Under the EPFFRA, volunteer firefighter retirees can receive benefits starting at age 50 after 10 years of service. Schultz asked about the possibility of volunteer firefighters arriving separately at a fire site to save time. Esbensen responded accidents are much more likely to occur if firefighters do not arrive together on the truck and do not know exactly who is on site at the fire. Also, there could be two events in a short time, and staff is needed to respond to each emergency. In response to a question about the number of firefighters who show up at sites after hours, Esbensen responded at least half do. The City has 89 firefighters now, and they needed all 74 who arrived on site last week at a fire since it was very hot outside. Firefighting is an extremely labor intensive job, and taking frequent breaks can decrease the chance of firefighter health emergencies or deaths. Proops asked if a more flexible policy was needed for the equipment purchased by the Fire Department since he thought trucks were replaced every 20 years regardless of condition. Esbensen clarified staff evaluate their trucks regularly, and some trucks are replaced sooner and others later than the 20 year average. The Public Works Department tracks the information. Proops confirmed they were able to use trucks for longer than 20 years if the trucks were in good condition at that point. After the BAC asked its questions for the Fire Department, Scott Neal explained several other staff resources were available to answer questions about the operating budget. Jay Lotthammer answered questions relating to the Community Center and Parks and Recreation. King noted questions were raised about the status of the Community Center's budget at the previous BAC meeting. Lotthammer confirmed revenue is outpacing expenditures. Utility costs are high for the pool, ice, gym areas, and conference rooms, but Lotthammer thinks there is room to increase certain fees somewhat in the near future. This would allow the gap to decrease between revenue and Eden Prairie Budget Advisory Commission August 12, 2009 Page 4 expenses as more revenue comes in and costs remain fairly flat. Two significant areas for revenue growth include ice rental and room rentals for training events and business meetings. More revenue could be raised from increasing membership fees and from classes offered at the Community Center gym. King asked Lotthammer if the City could contract and control costs further. Lotthammer responded City staff members have decreased lighting and have more initiatives related to 20/40/15 planned that will decrease costs. Proops asked about the costs related to contracts with volleyball and softball officials. Lotthammer explained the City charges significantly more money for adult sports than the cost of the sports themselves, so this is a profit area for the City overall. Proops asked why golf is offered, and Lotthammer clarified there is a demand among Eden Prairie residents for all classes and programs that are offered in the City's Parks and Recreation brochure. If a program is not profitable, it is reviewed and may not be offered in the future. The cost recovery goals average 120%, and only a couple of programs have not met their specific cost recovery goals (and by small amounts). In addition, several concerts have been cut to save money this year, and fewer therapeutic recreation programs are offered than in the past. There is no clear-cut standard for deciding to reduce or eliminate program offerings, but City staff analyzes and review these metrics regularly. Neal clarified two classes were canceled recently because the minimum number of participants was not reached. Proops asked if cost recovery includes administrative costs, and Lotthammer responded only direct costs of the programs are considered in cost recover calculations (administrative costs are not included). Next the BAC asked Rob Reynolds some questions related to the Police Department's budget. Reynolds was asked what metric he looks at to decide to add two more officers. He replied his first objective is to restore steps and base pay increases. For the new positions he has requested, one reinstates the officer lost in the budget in 2008. By 2011, another new police officer is expected to be needed or the City may need to cut services. Thus far in 2009, there has been a 12% increase in police call volume compared to 2008, and over 61,000 calls for police service have come through during 2009. Reynolds clarified he does not expect approval or denial of his two position requests at this time. He thinks it makes sense to discuss the issue in a year. Chacko asked how many officers respond to calls, and Reynolds said they have 65 officers in this capacity currently. Schultz asked about the impact for the Police Department of losing one officer last year. In addition to responding to calls for service, officers handle proactive activities and some of those have had to decrease. The commercial vehicle enforcement role was eliminated, but this person also handled calls and there is a great need here currently. Schultz inquired about the revenue lost from the elimination of the officer's work. Reynolds responded it is difficult to track that number since it would include fines not collected and preventative work. The result is there are currently trucks going through Eden Prairie that are not being inspected now to determine if they comply with weight restrictions. This impacts the condition of roads in the City and increases the need for repairs. Weight limit enforcement saves money on road repair. Eden Prairie Budget Advisory Commission August 12, 2009 Page 5 Proops asked how the new computer radio system installation is going, and Reynolds responded it is going well. The target date for completion is November 9, 2009. Reynolds is watching employee morale closely since that is a concern with wage freezes. It is too early to know how Eden Prairie police salaries will stand compared to other cities that may increase wages in 2009. Reynolds stated it would be good to maintain the base pay increases that are planned for 2011 for employee morale. Reynolds said the City needs to get back to business as usual as the economy improves. Proops noted Eden Prairie is usually above the market in police pay. Reynolds explained the top local police departments are usually fairly close in pay (around 1-2% difference), so Eden Prairie is not significantly above market. No one is retiring now due to the economy,but it is tough for the Police Department to stay at their target number and keep up with retirements that are expected in the near future. Around 30-33% of the City's police force is at that age where officers usually leave the profession. The City is not in a hiring process now for more officers, but they may need to be soon. King asked if the Police Department is at a disadvantage for hiring now compared to unionized forces under contracts. Reynolds responded the City is not at a disadvantage now,but they could be in the future if no wage increases take place for a couple of years. Neal noted the PTO conversion presentation requested by the BAC is being prepared for the September BAC meeting. The topic of electric franchise fees was raised. If a flat franchise fee were added to all utility payers in Eden Prairie (including non-profits) as a street light utility, that money could go into the general fund. Currently non-profits do not contribute to street light utility fees. To collect a franchise fee of about$875,000,residential customers would pay $2.50 more per month, small commercial industrial organizations would pay an additional $4.50 per meter each month, and large commercial industrial organizations would pay $10 more per meter each month. The City may do this because it spreads the cost for street lighting over a much larger base of users. Neal said the process could complicate everyone's utility bill,but a 5% franchise fee could be collected and returned to the City. MAC would be impacted by the electric franchise fee, and that includes fees that would be paid by small hangar owning customers and large customers as well. Uram asked Steve Sinell about his expectations for the 2011 and 2012 real estate market, especially the commercial market. Sinell stated we know these cycles do not last forever, and it is likely the commercial real estate market will stabilize by 2011 and start making a comeback. There was a decrease in the City's residential tax base of 4.6% between January 2008 and January 2009, and it is likely there will be a decrease of around 5% for the residential tax base in 2009. Although there was not much change in commercial real estate prices, they declined in the last part of 2008. Sinell explained retail is the real wild card since indicators predict this sector will tank. Residential properties constitute the largest piece of revenue for Eden Prairie. In the past, some types of properties would increase when others decrease, but this market has affected all types negatively. Overall Eden Prairie has lots of good buildings and locations for development and redevelopment when the economy recovers. Uram wondered if the next budget could be as challenging Eden Prairie Budget Advisory Commission August 12, 2009 Page 6 or more challenging than the current budget. Sinell noted it is good that the vast majority of residents have not been complaining about their taxes staying the same (instead of decreasing) during these tough economic times. IV. BAC FEEDBACK FOR 08/18/2009 CITY COUNCIL WORKSHOP King moved the BAC on to preparing for the upcoming City Council workshop by asking Scott Neal and Kotchevar if there were any changes for the preliminary budget. They confirmed there are no changes from what the BAC saw previously. Neal added the purpose of the joint workshop on August 18 is to set the maximum levy (the top parameters), which need to be set by September 1st. The BAC will have more time this fall to decide on recommendations to the City Council for the budget, and those recommendations can be made later in the fall before the final levy is set in December. Proops commented that Neal has done a great job of handling the 2009 shortfalls, and the City is in a great cash position now;however, Proops thinks it would be good to defer some capital expenditures and projects to reflect the economic situation. He suggested the money in the Community Development Fund could be moved to the Budget Stabilization Fund (BSF). Proops referenced a handout he developed showing areas where he thinks the City could consider cutting costs. Neal noted the City has largely adopted the concepts Proops outlined in the handout for the severance fund. Neal said the City paid out around $2 million in accumulated vacation liability (at current pay rates instead of higher future rates),but some vacation liability is ongoing. Proops inquired about the costs of City Council dues and subscriptions. Neal explained the City dropped out of one large group last year and will continue to re-evaluate the need to maintain current memberships going forward. Regarding Proops' recommendation to reduce legal fees, Neal noted the City is in a bidding process now so he cannot comment on specifics. In response to Proops' inquiry, Neal explained the General (1104) category includes customer service, front desk, printing/copy shop, and long-term administrative absence coverage; 3.5 FTE are included in this budget category. The category "Other contracted services (1106)" is the communications group, and printed publications such as "Life on the Prairie" are included here. Neal noted the City's bill for unemployment compensation to be paid to the state has increased. The Deer Consultant(1341)refers to the City's deer management program. The category "Other assets (1208)"refers to public safety,radio communications equipment, and related costs; Neal has worked on repurposing this number during the last budget cycle. The City is improving cost allocations by charging back facilities costs so other departments can justify and be accountable for these costs. Kotchevar mentioned the City transferred money from the CIP to the General Operating Budget so they could charge back departments for what they use. The use of these Internal Service Funds improves the way the City does business. Proops asked if the Senior Center capital costs will show up in the facilities budget, and if the Senior Center will pay for building improvements out of its budget. Kotchevar explained the budget should stay fairly stable Eden Prairie Budget Advisory Commission August 12, 2009 Page 7 over time for various departments since improvements will be charged over a five year time period (the same amount would be expensed each year during the period regardless of when the project is actually to be completed). This holds true if the City is paying cash for the improvements;however, if debt is issued, capital expenditures will still be tracked but not in the general operating budget. Proops suggested tracking and accounting for revenues and expenses by area (cost center) so that the PNL for the Community Center could be clearly shown if requested. Proops noted not all expenses are included so it is difficult to determine the true cost of the Community Center. Kotchevar responded the City has improved its cost tracking significantly. The Internal Service Funds seem fair and reasonable; they are useful but not perfect(the 80/20 rule). There may be a delay,but costly activities such as making lots of copies will catch up with departments and be included at some point. Uram expressed concern about the significant use of the BSF during the next three years. Neal noted by the end of 2011, the BSF would decrease from$4.9 million to $1.092 million without the use of additional franchise fees discussed previously. King asked Neal if he will recommend the franchise fee, and Neal said he is not sure at this point but he will continue talking about it with City Council members during this fall. Uram commented that the BSF was set up to cover a few rough spots, not a significant economic downturn, and he would caution about using as much of the BSF in the future as we are using for this cycle. King said the franchise fee could replenish the BSF, and he noted public safety is the top goal, and fire response is important(including medical 911 call responses, in his opinion). King mentioned the Chamber of Commerce and Special Service District (SSD) generally seems to believe the City should pay for signage instead of a joint effort with City and SSD business funds. At this point,revenue from the SSD and from the City is not readily available, so maybe it is best to defer the MCA streetscape wayfinding project beyond 2012. When the economy is better, the City could come back to this project. Neal noted the City Council stated the Economic Development Fund money would be used for the MCA project. Neal noted the City Council could change the purpose of the MCA project money; however, the other CIP projects listed on Proops' handout are either required by statutory guidelines or contracts or delaying the projects would not help the operating budget(including the Cedar Hills Park Development Phase I, Utilities Garage Replace Roof, Water Main Relining and Replacement Program, Riverview Road, Eden Prairie Road, Singletree improvements, and Transportation Trails/Sidewalks). The Park Improvement Fund provides funding for the good faith agreement the City has with developers and neighbors in the Cedar Hills Park Development area, and Neal is not sure what value would be gained by breaking that faith. Proops asked how much money will be left in the CIP fund. The concept is justification, and he recommends deferring some projects and possibly eliminating others. Proops would like to slow down expenses in the CIP the way Neal has done in the general operating budget. Neal explained even if the City completed all the projects in the CIP, it would not impact taxes. CIP money was from either a bond issue or money that was Eden Prairie Budget Advisory Commission August 12, 2009 Page 8 already in an account, and the City has an obligation to use the money the way they agreed to for bond issues. The Economic Development Fund is the money that is not restricted for use (except by the City Council), and this money could possibly be used to replenish the BSF or for pension replacement. Proops asked about pension funding, and Neal answered pension funding may not continue to have a big extra obligation but this is unknown at present. King agreed some belt tightening has been done in the general operating budget, and he is pleased the BSF is being utilized. If money from the Economic Development Fund were moved to the BSF, it could always be moved back into the Economic Development Fund if that is what is decided when times are better. King and Chacko would recommend the City Council consider moving MCA streetscape wayfinding money from the Economic Development Fund to the BSF. Uram noted he would still prefer to see the City contain costs so money that may be added to the BSF is not spent down too quickly too. The run rate of spending is high, and the City is counting on money being in the kitty going forward even as it is being spent down quickly. King asked if the operating deficit for 2009 (3.5%) could be maintained for 2010 (which currently has a 4% projected operating deficit) and 2011 (which currently has a 5.3% operating deficit). Chacko mentioned the franchise fee is a vehicle the City could take advantage of since everyone is benefitting from street lighting (so it is a reasonable fee to add) and the fee could be used to spread the pain of the deficit around to more entities. Using the franchise fee would cut the BSF use in half,but the schools would need to increase taxes for the money and the City would pay the fee as well as other non-profits. MAC, the FAA, and individuals who use Flying Cloud airport would also have to pay the tax. King envisions a prepared document of a few pages for the August 18 workshop between the BAC and City Council. The BAC could say they see there is an effort to reduce costs in the City,but they are concerned about the increasing use of the BSF to balance the budget since this does not seem like a strong way to go and is not sustainable. Recommendations the BAC could provide to supplement use of the BSF include (1) taking money from the land sale and moving it to the BSF, (2) deferring more projects that do not affect public health and safety (such as MCA), and (3) reviewing the possibility of adding utility franchise fees. The BAC could also state whether or not they support the idea of a Duty Crew, or they could review this material and alternatives with staff at a later time. Proops would prefer to defer the Duty Crew for two years to see what happens with the economy between now and then. Uram said the continual review of operations is good so that operations do not continue to grow without revenues to support them. Proops wanted to present specific recommendations to the City Council, but King expressed it is fine if the recommendations are more general. Chacko does not want to see the BAC being the ones going after the projects specifically. King suggested Neal remove the word "enhance" from his goal of preserving or enhancing service levels. Chacko noted the recommendations Neal made in the budget flow from the goals he started with: preserving and enhancing service levels, maintaining flat tax and spending levels, among Eden Prairie Budget Advisory Commission August 12, 2009 Page 9 other goals. The shortfall created in efforts to reflect these goals results in the need for significant usage of the BSF. The BAC was in agreement they are not in favor of significant use of the BSF at increasing rates over the next few years, and they are interested in alternatives such as the franchise fee adjustment and the Economic Development fund transfer to the BSF. Schultz thinks the BAC has enough general recommendations ready to set the maximum levy, which is the goal of the August 18"' workshop with the City Council. Neal noted the budget can decrease over time between September 1 and mid-December after the maximum levy is set;however, the budget cannot increase from the amount approved by the City Council in September. It was requested Kotchevar add in a table to show the magnitude of spending from the BSF for 2009, 2010, and 2011. Schultz wondered if the Fire Department could find another way to add firefighters on the scene of a fire faster rather than the costly Duty Crew. This is an enhancement to current services, which is why the BAC is singling this issue out instead of some other topics. Neal explained if the BAC would like to learn more about the Duty Crew, this interest could be expressed to the City Council and the money could be included in the projected levy. Alternatively, if the BAC does not want to consider the Duty Crew this year, a recommendation could be made to leave the Duty Crew amount out of the levy and budget. The money for the Duty Crew is coming out of reserves. For now, the BAC could note this topic was discussed. V. CHAIR AND STAFF ADMINISTRATIVE ITEMS Kotchevar stated the BAC's next meeting after the Council Workshop on August 18"' will be on Tuesday, August 25. VI. ADJOURNMENT The meeting ended at approximately 9:02 p.m. Schultz moved and Chacko seconded the motion to adjourn.