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HomeMy WebLinkAboutBudget Advisory Commission - 10/27/2009 APPROVED MINUTES BUDGET ADVISORY COMMISSION MEETING TUESDAY, OCTOBER 27, 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; Angie Perschnick, Recorder I. CALL TO ORDER/ROLL CALL Vice-Chair King called the meeting to order at 6:02 p.m. Commissioners Schultz and Muilenburg were not able to attend the meeting, and Chair Uram contacted Kotchevar to state he would arrive late. II. MINUTES A. BAC MEETING HELD TUESDAY, SEPTEMBER 22nd Vice-Chair King asked for any additions or corrections to the minutes. There were none. MOTION: Chacko moved and Agner seconded to approve the minutes from the September 22nd meeting. The minutes were approved 4-0. III. STAFF UPDATES A. COMMUNICATION Joyce Lorenz presented information relating to the Communications Department. They currently have three staff members, including Lorenz, the Communications Manager. Communications is responsible for marketing products and services (Parks & Recreation brochures and facilities, Wine Club and liquor stores, etc.); in addition, they handle internal and external communications, media relations and crisis communications, and City branding and image management (including the Life in the Prairie newsletter, edenprairie.org, City news and City TV, EPTV Budget Advisory Commission Minutes October 27, 2009 Page 2 16 on cable, the employee intranet, and Facebook). 94% of City residents read Life in the Prairie, and 97%rate it as "good" or"excellent." The recent addition of the City on Facebook has allowed the City to reach a younger demographic, and the site has 1140 fans currently. The Communications Department has implemented an integrated communications effort, and its goals include reaching the broadest audience, encouraging two-way communication, and fostering an open government. Proops asked about the printing expenses in the 2010 and 2011 budgets. Lorenz responded the majority of those expenses are for Life in the Prairie. Proops inquired as to the amount of duplication in copies of Life in the Prairie that are mailed to all City residents and included in Eden Prairie News. Lorenz clarified only two issues of Life in the Prairie are mailed to all City residents (one in January and one in July; these are required to be mailed to City residents since they contain financial and water reports). The other ten issues of Life in the Prairie are only included in Eden Prairie News. King asked if printing the Communications Department does for other departments is charged back to those departments, and Lorenz verified this is correct. Proops asked about the $74,700 in the Communications budget that goes to "other contracted services." Lorenz clarified the Communications Department hires outside graphic design services, and most of this money pays the main contractor they work with; he receives a retainer and payment for services, but Lorenz confirmed the cost is still cheaper than hiring a full-time staff person with benefits and office space. B. FACILITY INTERNAL SERVICE FUND CHARGES Kotchevar explained the purpose of the internal service fund charges include measuring the full costs of goods and services provided, more accurately measuring the cost of government, and using a common tool that is used by other local metro cities and recommended by the GFOA. Internal service fund advantages include giving staff more awareness of the costs of providing services, consistent charging to the general fund, and providing flexibility in decision- making (resources can be "saved" for later use). Disadvantages to the internal service fund include taking additional time to develop and implement cost allocation plans (this has been minimal), increasing audit costs slightly, and trusting staff responsible for internal service funds to manage resources appropriately. Chacko asked where the charges are within each division for the general fund expenditures. Kotchevar replied the charges are rolled up into each line item in the overall budget. Proops asked about number differences in the budget, and Kotchevar clarified the budget is always off somewhat between projections and actual numbers. Proops asked if the City brings heat pump replacement to the City Council, and Scott Neal explained he can approve any replacements or Budget Advisory Commission Minutes October 27, 2009 Page 3 maintenance costs under $15,000. Many items end up on the consent agenda for the City Council if they are minor repairs or replacements but somewhat more than that amount. The City Council members discuss projects that are very costly or out of the ordinary. Revenue is charged to departments to pay for projects. All divisions are charged to take care of the outside building (all divisions city-wide, not just in the City Center building). Scott Neal summarized the City is trying to emulate what private companies do regarding cost allocation. King agreed the internal service fund idea is a good idea, and it has been implemented in a way that generally makes sense; however, the mixing of capital and operating budgets is confusing to both King and Chacko. Expenses are ongoing, and capital is a one-time expense, so King and Chacko would like to see them separated out. Since department managers are held responsible for budgets, including capital expenses takes away a degree of control from the managers. Kotchevar clarified, although department managers do not have control over some expenses, they do have input. Kotchevar noted managers request budget items each budget cycle such as furniture which will impact their budget. Kotchevar explained fire trucks and other financed items are not allocated in this way. Neal noted the City could break out the debt aspect for fire trucks and other financed items separately from the main operating budget if the information was needed. Proops and King agreed capital and expense make sense to them as two separate funds, and then depreciation can be allocated (where money comes from). King added the all-in cost for items is clearer now that it was when the BAC started meeting a few years ago. The Internal Service Funds make actual costs clearer. Kotchevar noted the capital piece is all together in quarterly CIP reports in case that information is needed. IV. BAC PREPARATION FOR 11/17/2009 CITY COUNCIL WORKSHOP Proops asked when the BAC's formal recommendations will be made, and King responded the November 17th budget meeting with City Council is when the recommendations will be made. The BAC does not have any meetings scheduled before then. King asked what form the BAC would like for recommendations to take. Chacko mentioned that there were items to do from the BAC's last workshop with the City Council, and the group recalled the IT and Communications areas were the main ones the Council suggested the BAC review. Agner also recalled Kathy Nelson mentioned looking at areas to add to the budget if it was beneficial or could save money in the long term. King stated revisiting the August 18th memorandum to the City Council seemed appropriate as a place to start in preparing an updated memorandum for the City Council with the BAC's recommendations. The updated memorandum will be included with the Council packet that is sent out the Friday before the meeting. Proops handed out a yellow page with ideas for the types of suggestions the BAC could make. Neal mentioned a new legal prosecutor will be signed before the City Council Budget Advisory Commission Minutes October 27, 2009 Page 4 meeting on November 17a', and the contract is for a fixed fee of$180,000. The City's civil legal contract stayed the same. Although it is not in the budget yet, this will be a significant savings from the previous prosecutor contract. In response to Proops' concern about expenses relating to the Community Center ($281,000), Kotchevar noted most of the cost is wages and 2009 only reflects a partial year of data. King recalls revenue and costs were both increasing similarly (costs were driven by more classes with part-time staff hired), and most classes paid for themselves. King was satisfied with the explanations the BAC received, so he does not favor putting possible cost reductions for the Community Center in the memo. If Proops would like to look into the Community Center numbers more specifically, there may be something useful to add in the memorandum regarding specific expenses at the Community Center; Proops said he will do this. Neal noted the Community Center is revenue-driven, so reducing wages would most likely reduce revenue. Proops said there was a shortfall in revenue going into the budget cycle for the Community Center because of the $800,000 spent on renovations from previous years. King explained he expected costs to be upside down relative to revenue for a number of years after the renovation, and over time, the Community Center's revenues will likely increase to cover more of the $800,000. Agner asked if anyone looked into membership at the Community Center or Wine Club outside the City. Neal clarified Eden Prairie markets the Community Center to local businesses and in other cities in some ways (employees of local businesses receive resident rates and some employee discounts). King suggested the City could give free Community Center membership for one month for people who join the Wine Club. Neal is looking into the possibility of offering reciprocity agreements with other cities. King asked if the duty crew idea was approved by the City Council, and Neal responded it was not approved. Although the duty crew was budgeted for early on, City Council members have indicated they prefer not to approve it for the upcoming year. Proops said he would like for the Fire Chief to prepare a specific job description of what the duty crew will do for future consideration. Proops suggested looking at several options for decreasing the amount of funding needed in the short-term for the fire relief pension fund. Kotchevar clarified the City does not have an option to switch the amortization period to have a longer time period available to fully fund the pension. Neal added several local cities, including Eden Prairie, are requesting relief regarding pension funding from the state legislature in January 2010. Proops wondered if the rate of growth used in the fund (currently 5%) could be changed, and Kotchevar responded it cannot be changed. Proops asked about the mix of equities vs. bonds in the fund, and that is reviewed by the Fire Pension Board. The Board includes three elected City officials or employees, including the Mayor. Uram asked if Kotchevar was a non-voting member of the Board, and she replied she is actually a voting member. Uram was involved in some of the decisions regarding pension fund mixes years ago, and members do weigh options for what is most appropriate for the pension, which is a perpetual fund. Budget Advisory Commission Minutes October 27, 2009 Page 5 Proops and King inquired if the City had considered moving from a defined or fixed benefit plan to a defined contribution plan. Neal explained plan design is largely spelled out in state code;however, the City has a few plan options, including a defined contribution plan that officials could consider at some point. Chacko stated he is not comfortable recommending changing the pension benefit plan for a volunteer fire department. King said the City could look into the possibility of switching pension plans in the future as was done for PTO recently. It could be noted some members of the BAC wondered if a different mix of equities and bonds could be more useful. Losing less money on investments could help decrease the amount the City has to pay going forward. Neal suggested the more general the point can be made (regarding evaluating different pension fund options), the better. Simply exploring the change from a defined benefit to a defined contribution plan would be disruptive. Neal added the City has a low level of unionization currently. There are approximately 90 volunteer firefighters in the fire department currently. The City has started an aggressive program for firefighters to receive regular physicals and to work with personal trainers. King considers the $3,000 increase in fitness and health costs for the fire department to be justified based on Fire Chief Esbensen's presentation. Proops decided he is fine with leaving a review of these health care costs out of the recommendations too. King is okay with Proops' suggestion to question the significant tuition reimbursement increases ($24,000 increase). In response to Proops' question regarding the cost of severance, Neal responded the new severance program is expense neutral. New employees will not receive the deferred compensation match, so savings related to severance plan changes will be realized over time as employee turnover occurs. Proops would like to see more specifics used in place of the term"other contracted services." In the Community Center, it typically refers to referees, so he would like to see that term used instead. Kotchevar expressed concern the management of more codes in the system would be challenging. She also clarified the term"other contracted services" is used to reflect different types of contracted services in different departments, so it does not refer exclusively to referees. Neal said the City Council is looking for input from the BAC regarding the franchise fee. Proops and Agner stated they are against it because it seems to be another tax that is less obvious than other taxes. Uram stated he thought the franchise fee needs to be considered, and it could be made as transparent as the City wants it to be. Three BAC members stated they are in favor of keeping the utility franchise fee recommendation in the memorandum to the City Council (Uram, King, and Chacko), and two BAC members recommended removing the suggestion (Proops and Agner). King asked if the City has a hiring freeze currently, and Neal responded it does not. There was a hiring freeze from January through May 2009 when the City engaged in Budget Advisory Commission Minutes October 27, 2009 Page 6 reductions in headcount. One Community Services position was reduced from full-time to half-time. For revising the memorandum to the City Council, King suggested the BAC could recommend the Council consider: (1) looking into possible reductions in Council dues and subscriptions, (2) possible wage holding or reductions for Community Center employees, (3) reducing tuition reimbursement, and (4) implementing a hiring freeze. Neal added the City would most likely need to reduce services if an employee left at this point since some staff reductions have already taken place. Uram stated he does not know enough about the specific items in the City Council's subscriptions and memberships to recommend reducing those expenses. This amount of money is peanuts in a budget as large as the City's. Uram would favor suggesting that City staff find 1.5% or whatever percent from wherever it makes sense to remove from the budget. Chacko agrees with Uram that it makes sense to let Neal and the managers look into and decide where to make reductions. Neal said he will take a look at the City Council subscriptions. Proops expressed concern that the budget has increased. Proops stated the changes put into the budget so far are monumental, and it is late in the budget approval process now. Proops said he thinks the BAC is not doing its job if decisions regarding further budget reductions are just put back on Neal now. Chacko noted the BAC has more time to review the 2011 budget going forward. Proops wondered why the BAC members did not define recommendations and do more research into issues as the year went on based on thoughts Proops raised to the group in January. Further work was done to amend the memorandum for the City Council. The 2011 Proposed Budget section could include a target for budget reduction, and the duty crew would count as one reduction in the budget that was initially proposed. Proops would like to see the City continue with first class service but not include enhancements. This includes removing the two additional police officers that were requested and initially in the budget. King suggested a statement about opening the dialogue regarding the benefits structure since the City bears a great risk with the current pension plans. The BAC is pleased the City Council capitalized on negotiating for a significant reduction in the cost for the legal prosecutor. King suggested Kotchevar could send out the revised memorandum first to Uram to review and then to BAC members individually. Next BAC members will have an opportunity to review the memorandum and send their recommended revisions back to Kotchevar. Then Kotchevar can compile the final recommendations for Uram to verbally present to the BAC at the November 17th meeting. The meeting will start at 5:30 with food served at 5 pm. MOTION: Proops moved and Uram seconded a motion to approve the format of the letter as defined at the meeting subject to compilation by Kotchevar and revisions Budget Advisory Commission Minutes October 27, 2009 Page 7 suggested by group members individually. Proops moved and Uram seconded the motion, and the motion passed 5-0. V. CHAIR AND STAFF ADMINISTRATIVE ITEMS Kotchevar stated there is no regularly scheduled BAC meeting in November, but the third quarter financials are available if the group would like to meet to discuss them. The group decided not to add a regular meeting in November. BAC members decided December would be a good time to meet for the purpose of putting together the BAC's 2010 calendar. The BAC would likely go to the City Council in February with their work plan for the year. Kotchevar will follow up by email with BAC members and appropriate staff to determine a good date for the December BAC meeting. Neal said there is a public hearing on December lst, and the budget could be approved then or at the December 15th City Council meeting. VI. ADJOURNMENT The meeting ended at approximately 8:25 p.m. Chacko moved and Proops seconded the motion to adjourn.