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August 7, 2008 Minutes CITY OF DENTON CITY COUNCIL MINUTES August 7, 2008 After determining that a quorum was present, the City Council of the City of Denton, Texas convened in a Special Called Work Session on Thursday, August 7, 2008 at 8:30 a.m. in the Council Work Session Room at City Hall. PRESENT: Mayor Burroughs; Council Members Heggins, Moreno, Mulroy, Thomson, and Watts. ABSENT: Mayor Pro Tem Kamp 1.The Council received a report, held a discussion and gave staff direction on the 2008-09 Budget, Capital Improvement Program, and Five-Year Financial Forecast. Bryan Langley, Director of Finance, presented the budget information to Council. Overview and Purpose – The purpose of the presentation was to discuss key changes to the assumptions for FY 2008-09 long-term plan compared to the FY 2007-08 plan; discuss supplemental packages recommended by the City Manager; review the FY 2008-09 City Manager’s proposed budget and long-term plan; discuss the 5 year CIP plan and future debt capacity; discuss the proposed budget for other key funds; and present the utility fund long term plans that were recommended by the Public Utilities Board. Mayor Burroughs asked if the projections of upcoming major developments had been incorporated into the budget forecast. Langley replied that they were not part of the overall assumptions. Staff was being conservative with the budget figures. Mayor Pro Tem Kamp arrived at the meeting. Key Assumption Changes – The FY2007-08 assumptions recently revised the following key assumptions: reduced property tax growth assumption from 9% to 3.3% in FY 2008-09; reduced sales tax growth assumption from 5% to 2% for FY 2008-09 and FY 2009-10; used a phase in of the TMRS rate of 14.27% for FY 2008-09 and increased the rate by 0.5% for the next 8 years; and considered a fund balance level in a range of 12-15% Langley reviewed the long-term assumption summary and fund balance reserve. The fund balance had a higher beginning balance than previously forecasted. This was due to the inclusion of the motor pool funds after the motor pool was discontinued. Council Member Moreno asked if the cost of health insurance and other benefits were figured into the budget for the proposed increased staffing. Langley indicated that the benefit costs were included in the base figure for the cost of new employees. FY 2009 Appraised Value – the previous forecast had $6.516 billion in certified value. The actual appraised values totaled $6.291 billion which was a 3.31% increase over the 2007 value of $6.089 billion. The difference between the forecast and the actual value was $225 million. This represented approximately $1 million less per year in ad valorem taxes for the general fund. City of Denton City Council Minutes August 7, 2008 Page 2 Recommended Supplemental Packages - the City Manager’s preliminary budget included approximately $1.7 million and 10FTEs in approved supplementary packages for the General Fund in FY 2008-09. The packages included the Planning Department, Code Enforcement, Building Inspection, Library, Parks, Police, Fire, Airport, Traffic, and Administrative Services. Other projects were recommended for approval using one-time funds from bond interest income, gas wells, police confiscated funds, traffic safety funds, and FY 2007-08 budget savings. Council Member Thomson questioned the Airport recommendation of a business plan as to why the figure was less than the recommendation of the City Manager. The original request was $20,000 and the City Manager’s request was $50,000. Langley indicated he would check on the amount. Council Member Thomson questioned the funding for additional police officers and fire fighters. He felt that if additional officers were needed, then Council should try to fund those positions. Police Chief Minter stated that six additional police officers had been requested with two additional officers in the proposed budget. Currently there were 76 officers on patrol. He felt a minimum staffing level was 70 officers on patrol. The critical level where there would be a need to hire additional officers or shut down non-critical services was 60 officers. The two additional officers would be an enhancement to the department. Some of other positions requested were in the professional standards section to assist with additional services they performed. Those functions were currently being done by volunteers. Fire Chief Chadwick stated that the biggest issue in the Fire Department was overtime. The proposed positions would not impact service at all. The difference was either to add people or do overtime. Staffing levels were adequate at this time. Council Member Heggins asked about the full-time manager position at the Martin Luther King, Jr. Recreation Center. City Manager Campbell indicated that the Center was not ready for a full-time manager at this point in time. If programming increased, staff would come back to Council for possible additional needs. Mayor Burroughs asked why the lightening prediction system was a recommendation from the City Manager as opposed to a recommendation from the Parks Department. Director of Parks and Recreation Vorel stated that the recommendation allowed for a different method for funding. Council Member Thomson noted that the public art master plan was not recommended for funding and indicated that he would like to move that along. Vorel stated that there might be other funding sources that would fund that plan. City of Denton City Council Minutes August 7, 2008 Page 3 Meet and Confer Agreement - this was the final year for the meet and confer agreement. Langley detailed the pay increases for the police and fire departments and noted that actual increases for employees would be based on tenure in current positions. There would also be an additional increase to the Fire pension fund. Gas Franchise Fees - the City received 4% of gross revenues per the current agreement. The fee could be increased from 4% to 5% of the gross revenues. That would generate about $260,000 more than the current rate which would be a pass through fee to customers. The proposed budget included a 5% gas fee. Such a change would require an August ordinance to be effective st October 1. Other franchise fee rates would be evaluated as the agreements expired. GASB Statement Number 45 - Beginning in FY 2007-08, the City would be required to disclose liability related to Other Post Employment Benefits (retiree health care costs). The FY 2008-09 long term plan included $100K per year in GASB 45 funding for the general fund. Once more complete retiree cost information was available; the funding mechanism would be formalized. Building Inspection Fees - an increase in building inspection fees by approximately $500,000 per year was proposed. The fee changes would more accurately match the cost of services with the fee received. All fees were last updated in 1998 with some commercial fees adjusted in 2001. The increases would include multi-family building permits, certificate of occupancy permits and an increase in the irrigation permit fee. Other costs included in FY 2008-09 were fuel cost increases, compensated absences and salary adjustments for the alternate municipal judges. Other costs included in the Five Year Plan included the expected operation of the Public Safety Training Center in 2009-2010 and asphalt materials for street repairs beginning in 2009-10 ($500,000 was included in the FY 2008-09 budget using bond interest earnings). 2% differential – the 2% differential was how actual expenditures compared to how they were budgeted and would provide flexibility for organizational needs. This amount was incorporated in the proposed five year plan for FY 2009-10 forward. A $0.025 tax increase was proposed beginning in year 2010-11. Additional Items for Consideration - two additional code enforcement officers which included two vehicles; an additional internal auditor; an increase in funding to the Child Advocacy Center were items for additional consideration. The total impact in FY 2008-09 would be $1.2 million. An additional consideration was an increase the franchise fee to the City owned utilities by 1% over a four year period starting in 2009-10. Council Member Watts questioned if Council would be going around the original process set in place with the Human Services Advisory Committee if additional funding were provided for the Child Advocacy Center. Would it be setting a precedent for other groups to seek additional funding? He asked if there were a way to fund this project through normal process rather than opening it up through the budget process. City Manager Campbell stated that funding for this organization could directly be tied into assistance to the Police Department. If the agency were not providing the services, there would City of Denton City Council Minutes August 7, 2008 Page 4 be a level of service that the City would have to provide. This service was different from other agencies and their services. Council Member Mulroy indicated that he would like to defer the additional internal auditor position for this year as he felt there wasn’t sufficient ground work at this time for consideration. Long Term Plan Assumptions – the FY 2008-09 tax rate was recommended to remain unchanged at $0.66652/$100 valuation. The fund balance would be reduced by approximately $3.9 million in FY 2008-09 and would continue to decline over the planning horizon. If all other assumptions materialized, the tax rate would likely need to be increased by $0.025 in FY 2010-11. This assumed an additional $500,000 per year in supplemental packages over the FY 2008-09 recommendations. Council Member Thomson asked if a graffiti remediation fund was included in the budget. Langley replied that it was not included as a separate line item. Council Member Thomson questioned the increasing cart fees for recycling and what impact there might be when the Materials Recovery Center was completed. Vance Kemler, Director of Solid Waste, stated that fees were being adjusted every six months for fuel costs. The facility was currently under construction and should be completed in October. The City would get revenue from the processing of the materials and staff would have to see how this might help with fees in the future. Council Member Thomson asked about the fiber optic installation for traffic lights Jim Coulter, Director of Water/Wastewater stated that the installation would provide a hub around the community and would control the timing of the lights. Council Member Thomson felt that funding for this project would be appropriate from the non- airport gas well funds. Mayor Burroughs asked about a potential grant funding for this item. Coulter replied that this was a $1.3 million grant project and this would be matching funds from the City. Council Member Thomson stated that Council had wanted to use gas well funds for projects that would bring other funds into the community. If this project were a matching grant, the use of non-airport gas well funds would be an appropriate use. He also asked about the street lights costs. If LED lights used much less energy and if those types of lights were installed, they could be paid off by energy savings in 5 years. The retrofitting of the lights would be an appropriate use of gas well non-airport revenue. Coulter replied that they had looked at the possibility of using those types of lights but that the technology for the same amount of lighting was not there yet. Using that type of light would have lower illumination than what the City currently had. City of Denton City Council Minutes August 7, 2008 Page 5 Council Member Watts urged staff and Council to be mindful of potential growth and the use of tax incentives. Debt Forecast (GO/CO) – 2008 would have a bond sale of approximately $17.9 million and a sale in 2009 of approximately $25.7 million. Changes to the 2007-08 CIP included the Public Safety Training Center, US Highway 377 widening, FM 1839 design, intersection signalization, Prairie/Robertson Rail bridge and land acquisition/parking at Fred Moore. Added projects for the 07-08 plan included downtown master plan, park property acquisition, animal shelter/land, public safety radio antenna. Projects included in 08-09 were a fixed asset implementation system and a fuel facility. Future debt capacity was discussed as well as proposed vehicle purchases and other key funds. Utility fund long term plans – the Public Utilities Board had reviewed the long term financial plans for all utility funds. The exact structure of any rate increases would be recommended during future meetings with the Public Utilities Board. Electric Fund – the proposed budget included a no base rate increase for electric utility customers and a net addition of 4.5 FTEs. Water Fund – an overall 3% increase in water rates was proposed for the budget with a net reduction of 3 FTEs. Wastewater Fund - no rate increase was proposed with a proposed net addition of 1.5 FTEs. Solid Waste Fund - various increases in rates for solid waste were being proposed plus the addition of seven positions. Truth in Taxation Information - As the proposed tax rate exceeded the effective tax rate, a vote from Council was needed to consider the tax increase and a public hearing on the tax rate. Next thth steps included the August 19 vote to consider the tax increase, September 9 public hearing on th the tax rate and proposed budget, September 16 public hearing on tax rate and adoption of budget on Sept. 23 City Manager Campbell stated that additional work sessions had been scheduled but if not needed, other items would be scheduled for the meetings. 2. Closed Session A. Deliberations Regarding Certain Public Power Utilities: Competitive Matters – Under Texas Government Code Section 551.086. 1. Receive competitive public power information from staff in the form of a proposed operating budget for Denton Municipal Electric (“DME”) for the upcoming fiscal year, including without limitation, revenues, expenses, commodity volumes, and commitments, and the direction of DME; and discuss, deliberate, consider adoption of the budget and other matters, and provide staff with direction regarding such matters. City of Denton City Council Minutes August 7, 2008 Page 6 Council did not meet in Closed Session. With no further business, the meeting was adjourned at 4:55 p.m. __________________________________ MARK A. BURROUGHS MAYOR CITY OF DENTON, TEXAS ___________________________________ JENNIFER WALTERS CITY SECRETARY CITY OF DENTON, TEXAS