Minutes April 12, 2005
CITY OF DENTON CITY COUNCIL MINUTES
April 12, 2005
After determining that a quorum was present, the City Council convened in a 2nd Tuesday
Session on Tuesday, April 12, 2005 at 1 :30 p.m. in the City Council Work: Session Room.
PRESENT:
Mayor Brock:; Mayor Pro Tem McNeill; Council Members Montgomery, Mulroy,
and Redmon.
AB SENT:
Council Members Kamp and Thomson.
1. The Council received a report, held a discussion, and gave staff direction regarding the
City's Long Range Financial Forecast.
City Manager Conduff stated that staff was not ask:ing for action at this meeting. This was a
long-range look: of at least 5 years and set the stage for a longer time frame than that. Staff was
seek:ing feedback: from Council on several issues. Formal action would be brought forward at
future sessions. The City's budget would be discussed through a forecasting process. There was
no process for the City to operate at a deficit level. All expenses were examined in order to
accomplish those things that Council had set as priorities. Operation and maintenance costs
associated with growth had added significant additional expenses. Staff had been intentionally
conservative in determining figures.
Council Member Thomson arrived at the meeting.
City Manager Conduff continued that the city budget was proj ected to be fully balanced
throughout all five years of the forecast. The recommendation was that 50 full time equivalent
positions be eliminated plus changes to benefit adjustments and other benefits such as health
insurance. Staff was also recommending that money be set aside for an efficiency study plus a
compensation and classification study. An outside expert would evaluate how the City's salary
categories were competing with other cities, which was a significant issue.
Council Member Kamp arrived at the meeting.
City Manager Conduff stated that he believed the recommendations were in line with what the
Council had directed.
Kathy DuBose, Assistant City Manager, stated that the proposed general fund portion of the
budget was $69.5 million, which was 20% of the overall budget. She presented the major
general fund departments. Growth assumptions for the next five years included an ad valorem
forecast at 8%. She presented a projection of the proposed tax rates for the next five years based
on 8% with no shortfall over the next five years. The assumptions indicated no appraisal or tax
caps would be put into place. She presented a comparison of the appraisal rolls since 1999 and
reviewed an assessed valuation increase comparison for 6%, 8% and 10%. The assessed
valuation was assumed to increase $336,000 per year as it had in the past several years.
Council discussion included:
.
What was the ad valorem growth in past years?
The validity of where the city was right now on the major departments indicated was
questioned. How did Denton align with comparable cities? Was the base line too much or
too less? Was the starting point where it should be?
.
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April 12, 2005
Page 2
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8% might not happen as easily as shown.
New "380" agreements were not incorporated in this analysis.
Should the forecast use a projection of7% instead of 8% or a declining percentage to be on
the safe side rather than over proj ect.
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Sales Tax Revenue
DuBose reviewed the sales tax revenue. When the budget was adopted in September, the sales
tax through July was budgeted at 12% with an estimated 11.7% to collect. The last two months
of year the sales tax figure dropped. The proposed budget and adopted budget were predicated
on 7.5% of the estimate, the effective increase was 9% over actual. She reviewed the sales tax
history for the last 5 years. The sales tax assumptions included that any shortfalls for 2004-05
would be addressed with salary savings and other reductions; a 2.5% annual growth for all five
years; and no additional sales tax sharing contracts.
Council discussion included:
.
The voters approved the half-cent sales tax reduction.
Denton was one of the few cities with a half-cent sales tax reduction as opposed to others
with a quarter cent.
Rebates for 380 agreements had not been in effect at this point in time.
.
.
DuBose continued with franchises. Electric, water and wastewater were based on utility revenue
projections. The gas franchise was based on a 5% and the drainage franchise fee was eliminated.
Other revenues such as fines, fees, licenses, permits and miscellaneous fees ranged from 2-5%.
The return on investment based on utility proj ections and the return on investment for drainage
was also eliminated.
Council discussion included:
.
Concern about not having any more 380 agreements - staff was not indicating to no longer
have 380 agreements rather there was no way to proj ect the impact of those agreements in the
future.
What was the sales tax history from the past years - approximately 5.5%.
2.5% growth seemed too small but if the growth were over that it would help with the
numbers.
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Gas Wells
City Manager Conduff stated that the current gas well policy was that all capital money
associated with bonuses, surface agreements and royalties were used for one-time uses. The
money was recognized in the year received and spent the next year. Royalty money, surface
agreements and bonuses from the wells at the Airport had to stay with the Airport. Money
associated from the park: wells was included in the 13% cash balance. Other funds such as ad
valorem for operation and maintenance, the use tax, fire inspection fee and platting fees were all
used to the offset expenses associated with the gas wells.
Council discussion included:
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April 12, 2005
Page 3
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The ad valorem should not be counted on as a constant.
Still in a net loss position - yes with the exception of the Airport.
The net loss should be just about over as the startup costs should be almost completed.
An alternative to consider was to put all the funds in a trust and use the interest to spend but
k:eep the principle in a fund.
Should the money be collected and not included in the accounting processes and at some
point use when need to - or put some in a special account.
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Consensus of the Council was to amalgamate (k:eep in the debt service revenue line but in a
separate fund so it would be lrnown exactly how much it was and wouldn't be spent to offset
debt service on a going forward basis) the ad valorem operation and maintenance, lease bonuses,
ad valorem debt service, surface agreements and royalties and electric bonuses. The fire
inspection fees, platting fees, watershed fees, use tax and road damage assessment would be used
to offset the costs of the wells.
Airport Gas Well Revenue
Mark: Nelson, Director of Airport and Transit Operations, stated that the airport gas well revenue
must be spent on the Airport. The revenue could be used to reimburse the general fund transfer
for the past six years. Once the revenue was used to pay back: the general fund, the six -year time
frame began. The revenue could also be used to finance one-time capital needs at the Airport.
Council discussion included:
.
Potential wells for the future - there were three additional wells with the potential of 4th well
plus the pooling agreements.
Wait until the capital needs were tak:en care of at the Airport and then start the six-year
reimbursement cycle.
Do not do anything to deteriorate the forward movement of the airport.
Current money could tak:e care of current projects.
Determine whether there was any flexibility to stop paying back: the general fund or once
started would all six years have to be done.
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Consensus of the Council was to tak:e a look: at some recapture and present some scenarios of
alternatives recognizing that it would not be a huge percentage of the total.
Personal Services Assumptions
City Manager Conduff stated that the operation and maintenance costs of the last bond issue for
proj ects such as the library and the upcoming new fire station presented a challenge on how to
finance in the existing base. Council had given staff the direction to look: at a reduction in
personal services. The decision was made that positions needed to be eliminated and the
elimination of those positions was done as fair and open as possible. The assumption was to not
include the public safety departments (police and fire) in the reductions. This was a general fund
issue so the utilities area was also not included. The reductions would also try and minimize
citizen service impact as much as possible. He reviewed a listing of the proposed employee
reductions and the cost allocation associated with those reductions. The services provided by
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April 12, 2005
Page 4
those employees would be absorbed internally with the expectation that there would be some
impact to the community based on the reductions. He would need to lrnow as soon as possible if
Council wanted to remove any of the reductions from the table. Outplacement services would be
provided to those employees whose jobs were being eliminated.
Council Member Mulroy felt that the tone set was a proper one with no mean spiritedness
intended. The growth in employees over the last ten years had surpassed 10% with a
disappropriate amount in general government. There were more bodies than needed for the most
efficient level of performance. This was a hard task: but must be done.
Mayor Pro Tem McNeill stated that as elected officials, they must look: at the bottom line. The
function being performed needed to be look:ed at as opposed to the actual employee. The
function of the job was the k:ey and not an employee performance issue.
Mayor Brock: felt that it was hard to judge whether a cut would be adequate or not as Council did
not lrnow how every department functioned.
Council Member Mulroy felt that it would be helpful to have a comparison basis with other cities
in terms of number of employees, etc.
Conduff stated that an efficiency study proposed for next budget year would help with that
comparison along with a compensation/classification study also proposed for next year.
Mayor Pro Tem McNeill ask:ed if the intent was to reduce services or to outsource.
Conduff replied both methods would be used.
Council discussion also included:
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Economic development and public information were areas that made people aware of Denton
and that the awareness was a positive one. The two areas were tied to the mark:eting aspects
of economic development and reductions in these areas should be carefully considered.
This would be a trial and error for effective efficiency and where this would equal out.
Why was the Utility Department not included in the reduction in force? Utility employees
were not paid out of the General Fund and reductions in that area would not help with the
deficit in the General Fund.
How many of the 51.2 positions being cut were currently vacant - approximately 22 were
currently vacant.
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.
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City Manager Conduff stated that the policy would be that to the extent possible alternative
employment in the organization would be look:ed at first for the reduced employees. There were
several current vacancies through attrition that would be made available to this pool of
employees. This group would also be given first opportunity to look: at vacant positions. Those
employees meeting minimum qualifications would be guaranteed an interview. It was not
mandated that those employees would have to be hired but would for sure receive an interview.
Employees transferring at or under the top salary grade would not face a reduction in salary.
Employees transferring with a higher salary than the highest step for the position would be
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April 12, 2005
Page 5
reduced to the top level of the grade. The outplacement program would involve a three-step
process. If a targeted employee were to leave between now and early July, he/she would be paid
for vacation up to 320 hours, sick: leave time up to 720 hours and severance pay based on
longevity. A targeted employee leaving after the July time frame but before September 30th
would be paid for vacation to 320 hours and severance pay based on longevity but not be paid for
sick: leave. A targeted employee leaving on September 30th would receive payment for vacation
up to 320 hours but no severance or sick: leave payment.
Conduff continued that the reduction in force would not tak:e care of all of the financials. There
were still some additional assumptions to implement. Those included only Civil Service would
receive step increases for 2005-06; the employee 5% benefit adjustment would be rolled into
salaries; a 3% average pay for performance would be given in the years 2007-10; the City's
contribution to health insurance cost would only increase 3 % annually; and a compensation and
classification study would be done between 2005-2007. The benefit adjustment would be rolled
5% from the benefits side to the salary side except for employees in the General Fund. Those
employees would have 4% of the 5% rolled into salaries and 1 % returned to the General Fund.
This would include police and fire employees.
Mayor Pro Tem McNeill ask:ed if the employee longevity pay would still be in effect.
Conduff replied yes. He also indicated that the city's maximum contribution to health insurance
would be 3 % with significant plan adjustments for employees for future years.
Mayor Pro Tem McNeill stated that if this plan were not done, a tax increase might have to be
considered.
Council Member Mulroy felt that this was a comprehensive first step that was well laid out and
which had to be done in order to adjust to the reality of the rest of the world.
City Manager Conduff stated that a resolution would be drafted for Council to consider in the
near future that laid out the three-step process for leaving and the benefit adjustment. It would
provide organizational documentation that Council agreed to this and that it did not go against
any statutes.
Public Safety Assumptions - Fire
Ross Chadwick:, Fire Chief, stated that it was projected that Station #7 would open September
2006. The full salary for staffing that station would be included in the next fiscal budget.
Discussions relative to hiring certified versus non-certified firefighters would tak:e place during
the upcoming budget meetings. There was a substantial difference between hiring a certified
versus non-certified firefighter not only in terms of salary but also in terms of efficiency as
certified firefighters could be on the job sooner with a longer probationary period on the job
rather than during training. Other considerations for the five year forecast included the purchase
of an engine and ambulance for Station #7, the training facility staffing and O&M costs, the
removal of an additional ambulance company at this point in time and the replacement of an
engine and quint.
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April 12, 2005
Page 6
Public Safety Assumptions - Police
Charles Wiley, Police Chief, stated that the five-year forecast for the Police Department included
additional police positions for 2005-06; additional positions for 2009-10, City Hall renovations,
and a public safety radio upgrade for 2007-08.
CIP Related O&M and O&M Assumptions
DuBose reviewed the CIP related operation and maintenance costs. The assumptions included
electric, water, wastewater and solid waste based on utilities proj ections; natural gas increase at
7% annually; gas, oil and diesel increase at 7% annually; supplies, maintenance and operations
increase at 2.5% annually
Vehicles and Eqillpment
Jon Fortune, Assistant City Manager, stated that the five year forecast for vehicles and
equipment included the addition of Station #7 fire engine and ambulance in 2006-07; scheduled
vehicle replacements, the replacement of a fire engine in 2007-08; the replacement of a fire
engine in 2009-09; and the replacement of a fire quint in 2008-09.
Other Assumptions
The human services budget would be decreased by $98,000 for 2005-06, which was less than the
current level; the drainage fee payments would be eliminated beginning 2005-06; and there
would be an efficiency study in 2005-06 along with a compensation and classification study in
2006-2007. Streets operation and maintenance costs would be increased over the next five years
and the fund balance would be increased Y2% annually until it reached 15%.
Unfunded Needs
.
Aquatic Center
Janet Fitzgerald, Director of Park:s and Recreation, reviewed the history of the Aquatic Center in
terms of revenue and expense. She also reviewed the funding for the development and the
agreement between the City and the DISD.
Council discussion:
.
What part of the capital expenses was shared with the DISD?
Percentage of time the DISD used the natatorium versus public usage.
If scheduling by the DISD was contributing to a loss of revenue at the natatorium, then the
DISD should contribute more.
Discuss with the DISD the possibility of changing the contract.
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City Manager Conduff stated that staff would prepare recommendations and bring them back: for
Council review.
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April 12, 2005
Page 7
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Street Maintenance
Jim Coulter, Director of Water/Wastewater Utilities, stated that there were still outstanding
issues with city streets. Even with the additional CIP money, there would still be funding needs.
Staff would be returning with funding options and alternatives on how to move forward over the
long term.
.
New Positions - Related to Growth
Except for fire and capital proj ect positions, new positions related to growth were not included in
the five year forecast. In the future, conditions might change and some positions might have to
be added back:.
Council discussed which departments were stressed most in past growth and required additional
employees. City Manager Conduff indicated that infrastructure positions associated with growth
such as planning and engineering were affected first followed by basic public service positions
such as police and fire. It was felt that some of the growth should pay for itself.
2. Suggestions for Agenda Committee on future agenda items and/or placement of items for
upcoming agendas.
No items were suggested.
With no further business, the meeting was adj ourned.
Euline Brock:
Mayor
City of Denton, Texas
Jennifer Walters
City Secretary
City of Denton, Texas