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August 6, 2009 Minutes CITY OF DENTON CITY COUNCIL MINUTES August 6, 2009 After determining that a quorum was present, the City Council convened in a Special Called . Work Session on Thursday, August 6, 2009 at 9:00 a.m in the Council Work Session Room at City Hall. PRESENT: Mayor Burroughs; Mayor Pro Tem Kamp; Council Members Engelbrecht, Gregory, Mulroy, and Watts. ABSENT: Council Member Heggins 1.The Council received a report, held a discussion and gave staff direction on the 2009-10 City Manager’s Proposed Budget, Capital Improvement Program, and Five-Year Financial Forecast. City Manager Campbell stated that the presentation today would be a planned detail discussion about the operating and capital budget for 2009-2010. In terms of the background and strategy for the proposed budget, the process done this year showed how fortunate the City of Denton was. Denton was not laying employees off, not closing facilities, not abandoning commitments to employees, and not ignoring partners in providing social services to citizens. Denton was making choices and setting priorities. Staff took as much input as possible, evaluated the citizen’s survey, mixed in state mandates and tried to strike a balance which would result in a document that everyone would love and would hate at the same time. Bryan Langley, Director of Finance, presented the proposed budget. Overview and Purpose - (1) discuss key assumptions for the general fund; (2) discuss budget reductions recommended in the General Fund; (3) present General Fund supplemental packages recommended for approval by the City Manager; (4) review proposed FY 2009-10 five year- financial forecast; (5) discuss 5 year CIP plan and future GO/CO bond issuances; (6) provide key budget information for other funds; (7) discuss budget recommendations for Utility funds; and (8) next budget steps. Property Tax Rate - no tax rate increase was proposed. The proposed tax rate would be $.66652 with a 2.5 cent operations and maintenance tax rate increase planned for FY 2010-2011. Appraised Value Changes - values were discussed for the past 5 years. The figures included $4.8 million in exemptions related to historical landmark designations. Council Member Mulroy stated that the Manager’s Message indicated that the appraised value changes were 1.7% off due to the loss of Presbyterian Hospital from the tax rolls. During construction that organization received a sizeable tax abatement. He asked if there were any qualifiers that the organization had to remain on the tax rolls. Langley stated that he was not aware of anything. Council Member Mulroy stated that Presbyterian received a tax abatement on sales tax. He questioned if there were any qualifiers to connect such agreements to have to stay on the tax rolls. He asked what was the agreement, what was the amount and felt that there was a need to look at future agreements to include such a clause. City of Denton City Council Minutes August 6, 2009 Page 2 Certified Appraised Value- the certified appraised values totaled $6.328 billion. The 2009 certified value increased by $37 million. $279 million related to new construction; $242 million related to decreased appraisals for existing property. Council Member Mulroy asked for a breakdown of the $279 million and $242 million in terms of categories of residential, multi-family and commercial. Truth in Taxation Information - the Property Tax Code mandated the calculation and publication of the effective and rollback rates. The Tax Code also mandated various hearings and publications related to these rates. The effective tax rate was estimated to be $0.710766 and the rollback tax rate was estimated to be $0.749135. Since the proposed tax rate did not exceed the effective rate a vote to consider the tax increase and a public hearing on the tax rate would not be necessary. If Council recommended a tax rate greater than the effective tax rate, these items would be required. Fund Balance - the Fund Balance was expected to remain above the target level. The long term financial plan recommended reducing reserves to the target level over the next few years. Council Member Mulroy asked for a report going forward on the resources of the ad valorem taxes and sales tax. Langley stated that to date the sales tax had not reached the projected budget level. Next year’s proposed sales tax was a 2% increase above that estimate. General Fund Expenditure Reductions Due to economic concerns, management requested 5% reduction options from each department. The proposed budget recommended $2.2 million in reductions for 2009-10 compared to previous forecasts. No layoffs or programs were eliminated and reductions were intended to promote efficiency while maintaining current level of services. Reductions were in addition to the 12 positions that were eliminated from the 2008-09 adopted budget. Fuel was also reduced by approximately $500,000. Mayor Pro Tem Kamp asked about the difference between travel and schools/seminars. Langley stated that travel was for out-of-town conferences or events. Schools and seminars involved more local events such as COG or something in the area. Mayor Pro Tem Kamp asked if there was enough left in the budget so that people would be able to attend some seminars. Langley felt there was enough left to be able to have people attend key meetings. City Manager Campbell stated that the intent was to make reductions but not affect services. Council Member Gregory asked about employees who had to maintain training or certification and would they have to pay that cost themselves. City of Denton City Council Minutes August 6, 2009 Page 3 Campbell stated that it currently was not required of employees and no one intend for that to happen. General Fund Expenditure Reductions – Building Inspections and Code Enforcement were proposing a reduction in travel and schools/seminars. The Library was recommending a $120,000 reduction in the purchase of materials. Council Member Mulroy asked about the per capita ratios for the nation and state in terms of materials volume. Eva Poole, Director of Libraries, stated that the libraries were expecting a great increase in use because of the economic downturn. A $120,000 reduction of the purchase of materials would have a direct and immediate impact on the libraries. It would mean less money for books and materials. Patrons would have to wait longer for fewer newer materials. Interlibrary loan costs would increase as Denton would have to borrow more rather than purchasing new materials. If older materials were not taken out of the equation, Denton would maintain a 2:1 capita per citizen. Council Member Mulroy stated that in the past, Council went through great pains to get caught up with the per capita formula and he wanted to maintain that. He hoped Council could find a way to reallocated resources to prevent the City in getting behind in the libraries. Langley continued that Parks would be reducing their budget by about $37,000. $20,000 of that amount was the elimination of the Kiwanis fireworks funding. Council Member Watts asked for the rational for that reduction and was it all or just part of the funding. Langley stated that the event used to be funded by HOT funds but a State ruling indicated that it could no longer be funded in that manner. The funding for the project had been in the Parks budget for several years. The elimination was the entire City funding to the Kiwanis. Council Member Watts stated that he would have a problem with the elimination of all of the funding at one time. That organization provided much support for the city and the services it offered the city. The event was a major fundraiser for other services the Kiwanis provided in the city. Mayor Burroughs suggested a matching funding situation such as a 50/50 deal. Langley stated that would be doable. Mayor Burroughs suggested that the Kiwanis might be able to get underwriting for fireworks from other organizations. Council Member Engelbrecht felt this was a major community event including surrounding areas. City of Denton City Council Minutes August 6, 2009 Page 4 Langley noted that Parks was also recommending revenue increases. They included various rental fee and program pricing changes, an increase in the athletic fee by $5 per player, providing additional space at the IOOF cemetery, collecting vendor permit fees from Jazz Fest and new fees for park rentals and special event applications. Council Member Watts asked what the vendor permit fees would generate. Langley replied about $18,000. Council Member Watts asked why the fee was not currently charged. Emerson Vorel, Director of Parks and Recreation, stated that as part of the City sponsorship, the fee had not been charged. The proposed fee would be $75 per vendor for the three days. Mayor Burroughs asked if there had been any public discussion with impacted people. Vorel stated that they had spoken to the youth sports and Jazz Fest. Mayor Burroughs questioned the impact of charging the fee. He asked if this fee would be competitive with other cities and not on the high end. Vorel stated that the fees were not at the top of the list and were in line with a majority of cities. Mayor Pro Tem Kamp stated that she had conversations with people on the committee and asked if there was a way to do the increase over a number of years. Mayor Burroughs asked about establishing a fund to go towards vendor fees to help. Council Member Mulroy asked if there had been any council action to not the collect fees. Vorel stated that there had been no prior council action; it was part of the city’s sponsorship. Council Member Mulroy suggested a total analysis of costs such as landscaping, trash collection, including hotels and how they increased in room rentals. This would help the Council decide if this was an equitable tradeoff. Council Member Watts asked if the vendor fees were being charged for other festivals. Vorel replied correct. Council Member Watts stated that Jazz Fest was the only festival not being charged the fees. Vorel replied correct. Council Member Gregory asked how the space was being increased at the IOOF cemetery. Vorel stated that there was an old building on the property which was removed which would provide additional space. City of Denton City Council Minutes August 6, 2009 Page 5 Langley continued with the Planning Department’s reductions. The major reduction was the elimination of the court reporter. Council Member Mulroy asked what would be done in place of the court reporter. Langley stated that new equipment was being installed in the Chambers. Mark Cunningham, Director of Planning and Development, stated that abbreviated minutes would be done and the video recording would be available if Council needed to review the meeting. Council Member Mulroy stated that Council read the minutes of the Planning and Zoning Commission meetings to get a flavor of the meeting which was very helpful when considering items. Betty Williams, Director of Administrative Services, stated that new software would web stream the meetings and the meetings would be time stamped so that someone would be able to go to each item on the agenda for review. Once the minutes were approved, an individual could pull up the agenda, the agenda item and the minutes together. Currently they planned to maintain meetings for a year at a time and would reevaluate after a year. Langley reviewed the proposed Police Department reductions. Council Member Mulroy asked about the reduction in community services. Roy Minter, Police Chief, stated that those were community related meetings and services provided. Council Member Mulroy asked if the reduction would affect the Department’s ability to interface with the community. Minter replied many meetings were now being sponsored by various groups instead of by the Police Department. Council Member Engelbrecht asked about reductions in contract service and medical services. Langley replied that the reduction dealt with contract services such as a racial profiling report and investigative analysis reports. There would still be money in that account, just not as much. Medical services dealt with sexual assault exams which most were repaid through the state but again, there would still be money in that account. Langley stated that the Fire Department’s recommended reductions dealt with a reduction in overtime. Council Member Mulroy stated that the Manager’s Message referenced overtime savings as it related to modifications to staffing. City of Denton City Council Minutes August 6, 2009 Page 6 Ross Chadwick, Fire Chief, stated that the recommendation, after a discussion with staff and a survey of staff on how to reduce overtime, was to have a reduction in the number of personnel on the engine at Station 7 when additional staff was needed at other stations. This would not affect the level of service or safety of citizens. Council Member Mulroy felt this was a step backwards on the goal of four man engine companies. Mayor Burroughs asked why the calls at Station 7 were so low. Chadwick stated that development was planned around the Station but had not happened yet. Council Member Mulroy asked why the national standard was a four man engine if there were not safety ramifications with a three man engine. Chadwick stated that the policy could be argued back and forth for both cases. City Manager Campbell stated that over the years that requirement had been debated and sometimes there was a failure to look at all the circumstances and type of equipment for the calls. It might not be more efficient and safe with 4 men as opposed to 3 men. Mayor Pro Tem asked if this was going to be just at Station 7. Chadwick replied correct and would not be all the time. Council Member Watts asked about the dollar amount with reduction of overtime. Chadwick replied $100,000. City Manager Campbell stated that part of the reduction was associated with the battalion chief and part with overtime. He would provide Council with the figures associated with each type of category. Council Member Gregory stated that as the staff was working on an overview of Arts and Jazz, they should include how big the city’s partnership was in terms of police, fire, and sanitation. That put the vendor fee in a different light. Council Member Mulroy suggested considering a centralized fund for promotional activities and then pay the department for the services provided instead of every director having money in the budget for these services. Langley continued with the Municipal Court, Municipal Judge, Airport, Streets, and Street Lighting reduction recommendations. Mayor Burroughs indicated that he would like to see the line item for street maintenance funding. City of Denton City Council Minutes August 6, 2009 Page 7 Jim Coulter, General Manager-Water Administration, stated that they would be contracting with a company to do anther street assessment to determine changes in the past five years. Mayor Burroughs requested that they show time lines where gaps were as was as done in the past. Langley reviewed Traffic reductions, Transportation reductions, Economic Development reductions, Cable TV reductions, City Manager’s Office reductions, and City Council reductions. Mayor Burroughs questioned the reduction of the council contingency fund. Council used that item because of an inability to fully fund organizations. This provided a relief value and provided a significant impact on these projects and programs. It was one of the few flexible options available to council and he would oppose that reduction. Council Member Watts asked what part of the travel budget was going down. Langley replied that the reduction was both the CMO and Council. Langley presented the proposed reductions for Facilities, Finance, Human Resources, Internal Audit, Public Communications, Non-departmental areas and Legal. Council Member Watts asked about the proposed consultant fee reduction in the Legal Department. Anita Burgess, City Attorney, stated that this would be an off-set for another municipal court prosecutor. Currently the Department was spending $45,000 for 160 hours for a contract prosecutor to act in absence of the existing prosecutor or when there were multiple dockets. Staff was proposing to hire another prosecutor and reduce consultant fees by that amount. Langley stated the General Fund reductions he detailed totaled approximately $1.3 million. An “efficiency team” would be formed to achieve additional savings over the next 12-18 months. In recognition of this approach an additional $500,000 in savings was projected. General Fund Recommended Supplemental Packages Langley stated that the following items were the supplemental packages recommended by the City Manager. (1) Building Inspections - add a health inspector and Laserfiche; (2) Code Enforcement – mowing services, public relations campaign and substandard structures program; (3) Planning – Laserfiche, neighborhood outreach program, Historic Landmark Commission funding and Projectdox. $507,250 in funding was recommended from the Non-Airport Gas Well fund. Council Member Mulroy questioned the use of non-airport gas money for these projects. In the past, these funds were used for one-time only expenses which might not be appropriate for Planning. City of Denton City Council Minutes August 6, 2009 Page 8 Mayor Burroughs felt that the non-airport gas well money usage needed to be included in the budget due to policy issues. He felt there were other potential policy issues on what the funds could be used for instead of the recommended usage. Langley stated that the budget document projected revenue and expenses at end of this year showed $3.9 million in non-airport gas well funds that could be used for any purpose. The policy was to use these funds for non-reoccurring and development services. Using these funds as proposed would leave $2.6 million in the fund. Mayor Burroughs felt there were significant policy issues associated with the usage of these funds because of usage allowed. City Manager Campbell felt this might be a subject for the next work session or a special work session. Council Member Watts asked for more information on what Laserfiche would accomplish for the Planning Department. Langley continued with the supplemental packages for Parks. The majority of the funding for these packages was coming from the Parks Gas Well funds. Gas wells on park property allowed for the money to only be used for parks activities. Council Member Engelbrecht requested more information on the parks grant and proportion of how money was allocated to airport, non-airport and parks gas money. He also requested more information on the parks soccer fields. Vorel stated that federal dollars were used to purchase North Lakes Park. There were two wells off of park property but were drilling horizontally into the parks. There were very tight restrictions on revenues from minerals on property purchased with federal park grants. It was not relative to the size of the grant. Any minerals gotten out of park property had to be used in the parks. Council Member Gregory requested a summary of money for mandatory park dedication and whether it could be used for the Senior Center. Vorel stated that it could not be used for the Senior Center but could be used for park development. Council Member Watts asked about the water slide replacement. Vorel stated that staff was recommending not to repair the existing slide but replace it. Council Member Engelbrecht requested information on revenues generated by the softball fields in conjunction with the maintenance of those fields. Langley reviewed the Animal Services recommended package which included intranasal bordetella at $10,432. City of Denton City Council Minutes August 6, 2009 Page 9 Mayor Pro Tem Kamp stated that Animal Services had requested FTs that were not recommended. She understood that the current shelter would be in operation for another one or two years, but to keep in mind that once the new shelter was opened, there would be a need for more personnel. Langley continued with the supplemental packages for Fire, Municipal Court, Police, Streets, Transportation and Legal. The City Manager’s proposed budget included $517,100 and 8 FTEs in approved supplementary packages for the General Fund. Compensation – The 2009-10 budget included a lump sum increase of 2% which would not be added to the base pay. The five year forecast included an average 2% in base pay increases each year beginning in 2010-11. The budget also included step increases for police/fire and assumed a Meet and Confer agreement would have the same compensation terms as civilian employees. Council Member Mulroy asked for a comparison of TMRS and other cities. He asked if the increases were still merit based. He questioned if the lump sum was covered as the direct hire contracts were on a contingency basis and had a percentage covered. Langley reviewed the proposed 2009-10 General Fund long term plan. General Obligation Debt Service fund - no tax rate increase for the GO debt service fund was recommended. A 2.5 cent tax increase was planned for the general fund in 2010-11. Lower property tax growth assumptions had a significant impact on debt service capacity. Appraisal growth assumptions mirrored those in the General Fund with a 0.6% growth in 209-10, a 0% growth in 2010-11 and a 4% growth in 2012-14. Future size and timing of a GO bond election would be dependent on economic factors with a 2012 election most likely. An additional $10- $15 million in debt may be needed in the near future for the City’s local match on TxDOT projects. These projects had potential of providing tremendous leverage for the City’s investment. The GO debt service fund proposed long term plan was also reviewed by Langley. Other Key Funds included health insurance, Non-Airport Gas Well fund, Airport Gas Well fund, Parks Gas Well fund and other fund information. Health Insurance fund - health insurance was expected to increase at a rate of approximately 10% per year with only 6% cost increases included in the long term financial plans. 9% was included in the 2009-10 budget. Staff recommended absorbing the additional costs by pursuing an employee health services clinic to provide employees and the City an opportunity to lower costs while maintaining quality services. Increases in insurance co-pay costs for employees related to specialists/ER visits were also recommended. Employee insurance premiums would be increase by an average of 8.5%. The rate structure would be aligned with the cost to the plan. The exact cost to employee costs would range from $28-$32 per month with additional increases likely in future years. The Audit/Finance Committee recommended a target reserve balance of approximately $1.4 million. GASB 45 funds were recommended to be included in the Health Insurance Fund balance to effectively manage costs and quality. Mayor Burroughs stated that there had been no increases in the past several years. City of Denton City Council Minutes August 6, 2009 Page 10 Langley stated that the because of the new self-insured plan and because of new plan, the city absorbed the rates for good public relations. Council Member Mulroy asked how involved was the Employee Health Insurance Committee in this process. Langley stated that they appeared to be on board with the process. Mayor Burroughs asked about potential partners with a health clinic such as the County, DISD or the universities. Langley stated that there was some possibility but the question was how much control the City would have because if the City partnered with a larger entity it might become their plan instead of the City’s plan. Non-Airport Gas Well funds – this fund was expected to end 2008-09 with $3.9 million in unrestricted fund balance. Of that, $1.2 million needed to be transferred to the Parks Gas well fund in 2009-10. Council previously directed staff to only use these funds for non-recurring items that aided development activities. However, the funds could be spent for any Council authorized purpose. The 2009-10 budget included $539,250 in funding for Building Inspection and Planning software systems which would aid in future development activities. Airport Gas Well Funds – the Airport Gas Well fund was expected to end 2008-09 with $2.5 million in the fund balance with funds only spent on Airport activities. The 2009-10 budget included $1.465 million in funds for airport projects. Parks Gas Well funds - $1.2 million needed to be transferred to the Parks Gas Well fund from the non-airport gas well fund. Funds could only be spent on park activities. The 2009-10 budget included $1.25 million in funds for water works slide replacement, soccer field improvements and Senior Center land acquisition. Other Funds - Tourist and Convention Fund - the HOT committee recommended a 2% decrease for all organizations and no new organizations would receive funding. Other newly budgeted funds for 09-10 included the public education grant and the McKenna Trust Fund with other funds possibly to be recommended in the future. Utility Fund Recommendations – the Public Utilities Board reviewed the financial plans for all utility funds. Staff recommendations did not include any utility rate increases for 2009-10 but did include an increase in the franchise fee from 4% to 5%. A proposed 2% lump sum compensation increase was uniform across all funds. Electric Fund – there was no base rate increase proposed for electric utility customers. FTEs would be increased by 4.5. Expenditures were reduced in response to slower growth and revenue projections with only a portion of reserves appropriated for 2009-10. CIP projects included the construction of a new covered parking building and renovations of the communications area. City of Denton City Council Minutes August 6, 2009 Page 11 Water Fund - no retail rate increases were proposed for 2009-10; however, various fees and wholesale rates may be modified. Due to slower growth, revenues projections had been lowered and expenditures were reduced to recognize lower revenues. There was a proposed net reduction of 2.5 FTEs. The proposed budget included $27 million in funding for the Lake Lewisville Water Treatment Plant rehabilitation. Other CIP projects were delayed due to lower expected growth and revenue. Wastewater Fund - no wastewater rate increase was proposed. Due to slower growth, revenues projections had been lowered. There was a net addition of 1.5 FTEs. Major CIP projects included Pecan Creek Interceptor I, Pecan Creek Interceptor II, Service Center renovation and sewer line replacements. Solid Waste Fund – there were no proposed residential, commercial or landfill rate increases for 2009-10. Various fees might be modified with the Public Utilities Board recommending any adjustment to Council in August. No new FTEs were proposed. Slower growth and economic challenges had impacted revenues with expenditures significantly reduced. All budget categories were reduced with the exception of insurance. Six replacement trucks were included in the proposed budget which was half of the normal replacement rate. Six replacement trucks would be delayed at least one year. Langley reviewed the next steps in the budget process noting that there would be a budget th discussion on August 18 with no meeting scheduled for August 11th. 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. Council did not meet in Closed Session. With no further business, the meeting was adjourned at 1:30 p.m. ____________________________________ MARK A. BURROUGHS MAYOR CITY OF DENTON, TEXAS ____________________________________ JENNIFER WALTERS CITY SECRETARY CITY OF DENTON, TEXAS