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April 03, 2006 Minutes CITY OF DENTON CITY COUNCIL MINUTES April 3, 2006 After determining that a quorum was present, the City Council convened in a Closed Session on Monday, April 3, 2006 at 11:05 a.m. in the Council Work Session Room at City Hall. PRESENT: Mayor Brock; Mayor Pro Tem McNeill; Council Members Heggins, Kamp, Montgomery, Mulroy, and Thomson. ABSENT: None 1. The Council considered the following in Closed Meeting: A. Consultation with Attorney Î Under Texas Government Code Section 551.071. 1. Discussed legal strategies and alternatives regarding potential litigation concerning street failures in selected subdivisions. Following the completion of the Closed Session, the City Council reconvened in open session at 12:10 p.m. 1. The Council received a report, held a discussion, and gave staff direction regarding the CityÓs Long-Range Financial Forecast. Jon Fortune, Assistant City Manager, presented the Long-Range Financial Forecast to the Council. He stated that the responsibilities of the City Council Audit Committee had been broadened to include review of the five-year financial forecast. Fortune stated that at this point the financial forecast was not balanced. Many assumptions had been used in figuring the financial forecast. The forecast listed current revenue and expenditure assumptions and also included detailed reports on specific issues that impacted the CityÓs financial picture. The assumptions for the Ad Valorem Tax Î O&M Component of the forecast included an 8% growth in property taxes through 2008-09 and a 6% growth for 2009-10 and forward. No property tax rate increase except for CIP related $.02 of the potential $.04 tax increase for Debt Service in 2007-08. The forecast assumed no legislative changes to the tax cap on property homestead appraisals and no tax freezes for persons over the age of 65 and disabled. The forecast also assumed no new economic development agreements. Fortune stated the projection for Sales and Use Tax assumed a 2.5% growth net of existing economic development agreements. The current year-to-date budget was $409,000 over budget. The forecast did not include the impact of loss of revenue from the Fort Worth/Acme Brick agreement or the reclassification of gas well collections to a Non-Airport Gas Well Fund. It assumed no new 380 agreements. Fortune stated that there were two issues related to DMEÓs franchise fee payments to the General Fund: the method used to calculate DMEÓs franchise fee payment and the stability of franchise fee revenues to the General Fund because of the variable cost of natural gas, which was one of the factors impacting the Energy Cost Adjustment (ECA) rate. Currently DME pays a 4% franchise fee. City of Denton City Council Minutes April 3, 2006 Page 2 Fortune stated that the following assumptions were included in the forecast: ROI payment for all utilities was 3.5% of gross revenues. Projected ROI revenues to the General Fund assumed a 4.5% average annual increase over the next five years. No franchise fee or ROI payment from Drainage. No drainage fee payments from the General Fund. Fortune stated that they would continue the current debt issuance plan for the General Debt Service Fund. The forecast assumed an 8% growth in property taxes through 2008-09 and a 6% growth for 2009-10 and forward. Fiscal year 2007-08 assumed a $.02 cent tax rate increase Î the first tax rate increase incorporated in the 2005 bond referendum. The forecast assumed no legislative changes to the tax cap on property homestead appraisals or tax freezes for persons over the age of 65 and disabled. The forecast also assumed no additional abatements or rebates. Fortune stated that the General Fund currently budgeted an amount for salary savings. This was done in order to capture the dollars that would not be spent due to vacancies. The departments would like to use their salary savings but were not able to because it was a budgeted savings. It was staffÓs recommendation to no longer budget an amount for salary savings, but to establish procedures to ensure that departments used the savings for one-time expenditures because it was a one-time source of funds. Forecast Assumptions Highlights included: No gas well revenues for the General Fund, except those associated with fees and inspections. Merit increases and Civil Service increases for FY2006-07 through FY2010-11 were budgeted at 4% yearly. Some position changes were budgeted. No funding for existing progression plans. Health insurance increases at 3%. TMRS increase at 7% in FY2006-07 and at 6% in FY2007-08. Council Member Mulroy stated that during the budget process, salary increases should be the first line item considered instead of last as had always been done in the past. Other forecast assumptions were: Gas, oil and diesel increases. Utilities increases. Scheduled vehicle replacements only. Did not include funding for Meet and Confer. Did include O&M for CIP projects. Included increase in fund balance 0.5% to meet 14.5% goal. Several council members stated that the detailed reports on the specific issues presented with the financial forecast were very helpful. Council Member McNeill asked the Interim City Manager if the Council would be considering an ordinance redefining the duties of the Audit Committee. Martin stated that the Audit Committee had reviewed the ordinance and the Council would consider it an upcoming meeting. Fortune briefed the Council on the FY2007 Budget Calendar. Council Member Kamp left the meeting at 1:20 p.m. The Council was to have convened in a Closed Meeting to consider the following: A. Deliberations regarding certain Public Power Utilities: Competitive Matters Î Under Texas Government Code Section 551.086. City of Denton City Council Minutes April 3, 2006 Page 3 1. Receive competitive public power and financial information regarding the operations and long range financial forecast of Denton Municipal Electric; and discuss, deliberate, consider, and provide staff with direction regarding such matters. This item was not considered. With no further business, the meeting was adjourned at 1:25 p.m. ____________________________________ EULINE BROCK MAYOR CITY OF DENTON, TEXAS ____________________________________ JANE RICHARDSON ASSISTANT CITY SECRETARY CITY OF DENTON, TEXAS