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HomeMy WebLinkAboutMin 03/19/03 Special MINUTES OF THE UKIAH CITY COUNCIL SPECIAL MEETING WEDNESDAY, MARCH 19, 2003 The Ukiah City Council met at a Special Meeting on March 19, 2003, the notice for which had been legally noticed and posted, at 3:05 p.m. in the Civic Center Council Chambers, 300 Seminary Avenue, Ukiah, California. Roll was taken and the following Councilmembers were present: Rodin, Andersen, Smith, Baldwin (arrived at 3:53 p.m.), and Mayor Larson. Staff present: Customer Service Supervisor Archibald, Customer Service Representative III Babcock, Public Utilities Director Barnes, Interim Fire Chief Cohn, Community Services Director DeKnoblough, Police Administrative Captain Dewey, Finance Director Elton, Civil Engineer Eriksen, Assistant City Manager Fierro, Risk Manager/Budget Officer Harris, City Manager Horsley, Purchasing Assistant Jenney, Associate Planner I Keefer, Purchasing Supervisor Kennedy, Public Works Supervisor Looney, Accounting Manager McCann, Customer Service Representative II Norris, Executive Assistant Riley, Distribution Engineer Sauers, Deputy Director of Public Works Seanor, Accounts Payable Specialist Sechrest, Public Works Director/City Engineer Steele, Planning Director Stump, Building Inspector Tuliback, Fire Marshal Yates, and City Clerk Ulvila. 2. PRESENTATION a. Presentation by Bryan Barr, League of California Cities Representative, Re~lardinq Status of the State Budqet Bryan Barr, League of California Cities Representative, advised that he represents 47 cities and works with legislators and cities regarding state and federal issues. Leave Our Community Assets Local (LOCAL) was formed a year ago by the League of California Cities' Directors for the purpose of counties and Special Districts to try to work together with Sacramento, and at times to combat Sacramento to keep funding sources and resources local. The coalition mission for LOCAL is to protect local services by protecting funding for local governments. He explained that the state budget deficit of $26-35 billion will probably last over the next five years and is the largest deficit seen statewide. A budget crisis increases pressure to cut or take local government funding sources. He noted that most citizens couldn't differentiate between what city, county, state, or federal government does. There is a need to put a value on those local services that might be taken away from customers. The coalition is actively engaged in budget debate and feels that some sort of local government finance reform needs to take place. The coalition's main objective is that local services should not be sacrificed to solve state budget problems. The vast majority of funds under the control of cities and counties go toward funding law enforcement, fire services, and health and emergency care. Most of the Vehicle License Fees (VLF) that still exists goes toward police and fire services. Since 1992, tens of billions of dollars of local government revenues have been diverted to the state Education Relief Augmentation Fund (ERAF) Fund. Annual ERAF contributions from local governments total $5.3 billion. He advised that we must protect local services and local revenues from further cuts. Of the 47 cities that he assists, three are on the verge of deficits, and one may declare bankruptcy within the next three years if VLF monies Special City Council Meeting March 19, 2003 Page 1 of 10 are cut. Not only are we dealing with losses in Transient Occupancy Tax (TOT), sales tax and other revenue sources, but we are also dealing with the threat of the state taking away funds. Since Ukiah is a member of the League of California Cities, it is part of the coalition. The Coalition recommends cities contact their local senator and assemblymember and let them know about the dire straights cities are in. He noted that Senator Chesbro sits as Chairman on the Senate Budget Committee and has been very understanding of the problems and is versed in local government finances. Assemblymember Berg has also been very helpful. Not only should we make our concerns known to them but we should also thank them for the work they have done on our behalf. He noted that May 14 & 15 are Legislative Action Days in Sacramento where people may speak to legislators about important issues, such as possible VLF cuts. He provided Council with a summary of the Governor's proposals and mid-year budget proposals and also the Senate Republican version of the budget, noting a huge difference in the two. He continued to discuss the state budget crisis and noted that the Senate Republican version of the budget has created a bit of an outcry because of the discrepancy in the General Fund, which is about $15 million less than the Governor's version. About 60% of the populace thinks it is a bad idea to increase the VLF, however, they need to be asked if they would like services reduced because of lack of VLF funding. He noted most would agree that it should stay in place so that the level of service can be maintained. He continued to discuss the history of how the VLF fee was created. He noted the League feels that once the "trigger" is enacted, there will be a lawsuit pending. Mayor Larson inquired if research has been conducted as to whether the public understands the affect of the VLF on local revenue sources. Mr. Barr replied that, based on polls taken, the public's knowledge of issues facing cities and counties is limited and the majority of the populace does not want the VLF fee increased. Additionally, the public does not realize the amount of local services they receive or impacts to local services if state funding is cut. LOCAL is trying to educate the public on what services they may lose due to VLF funding cuts. Councilmember Andersen inquired as to the $61 million that was actually cut from the $2.8 billion that is proposed to be cut, and if Mr. Barr envisions these proposals coming back again. Mr. Barr advised that those are rough figures and as far as the proposal coming back, it depends on the Governor's May revision. At the present time, it is uncertain what will happen. Councilmember Andersen noted that there are some initiatives in the preliminary stages to change the budget process, most specifically lowering the two-thirds voting requirements to 55% and inquired if the League or LOCAL would be involved. Special City Council Meeting March 19, 2003 Page 2 of 10 Mr. Barr advised that LOCAL has been asked to be involved and it will be addressed at their general membership meeting. The Senate Republican version of the budget proposed an initiative to cap any further reductions. That would have a significant impact and the League is looking at everything as much as possible. Councilmember Andersen inquired if there has been discussion about the way local government is funded via the initiative process. Mr. Barr responded affirmatively and explained that LOCAL has looked at it a number of times. He explained that local governments have been too good at their jobs in that when funding is cut, City Managers, Finance Directors, and staff have found ways of coping with the loss of revenue. This is a problem because Sacramento sees the situation in the light that municipalities will be able to deal with funding cuts because they will be able to solve the problem better than it can. Pre-Budget Workshop- Discussion and Direction For The June 2003 Budget Hearings City Manager Horsley explained that she and Councilmember Rodin attended a State budget workshop last week and found it informative. She discussed the loss of property tax revenue when Prop 13 came about in 1978. What saved the state at that time were the manufacturing and the cold war. In the early 1990s when the cold war ended and the State got in trouble, it initiated the ERAF shifts and took property taxes from cities and counties and gave it to the schools. Then the "dot coms" emerged and personal income tax and revenue was huge. When all this money was available, they increased their spending tremendously. Since that time, revenues have decreased but expenditures continue to increase. She addressed the issue of term limits and how some legislators think that someone else will handle the problem. She briefly discussed the budget problems of some cities to the south of Ukiah who are having huge cuts due to the economy even before state cuts have hit them. Their General Fund revenue has been reduced to such an extent that they have to lay off personnel and cut programs in order to balance their budgets. As of February 2003, the City of Ukiah's revenues are on target with fiscal year 2002/2003 budget projections. Since 1995, City staff has taken a very conservative approach to projecting revenues. However, based on our most recent assessment of the State's discussions, the City estimates a loss in post-reimbursements and COPS funding ($125,000), State-mandated reimbursements ($20,000), booking fee reimbursements ($65,000), and potentially, the motor vehicle license fees ($581,000). This is an approximate $210,000 to $791,500 loss of annual revenue to the City of Ukiah. However, the state has advised that the loss may be over $600,000, which may be for the next fiscal year. If the "trigger" happens and we get our full VLF, it will be a much better picture. Next year the City will be projecting flat revenues and is not going to show increases unless we verify the economy's improving. The areas of concern, which she addressed, were challenges related to covering salary and benefit costs, the increase in premiums, Special City Council Meeting March 19, 2003 Page 3 of 10 the Public Employee Retirement System (PERS) rates, and PERS retirement enhancements. She noted that management and directors took a 1% cut in salary this last year for their portion of this PERS enhancement. The total increase for next budget year's known Personnel related expenses are $324,330. For fiscal year 2003/2004, the combination of personnel related increases and potential State cuts equals a loss to the General Fund of between $434,330 and $1,01 5,830. Finance Director Elton explained that the City received monthly payments from distribution of the VLF and the last payment was in February. City Manager Horsley explained that she has provided cost reduction recommendations in her Staff Report to cover the potential $434,330 and $1,01 5,830 in expenditures. She went on to discuss how, since 1995, the City has made progress to balance its budget within four fiscal years. The public did not see the effects of these reductions as the majority of cost cuts were absorbed through Personnel. The City has continued to be very conservative in the seven years since experiencing those difficult times. The City Manager recommendations to cover some of these expenditures include: (1) hiring freeze on four positions and vacating one position; these cuts combined would save the City $238,000 the first year and $290,000 annually thereafter with the police officer position, (2) Reduction in conference and training expense of approximately $80,000 (3) refinancing of the loan for the Civic Center, saving $103,067, and (4) the School Resource Officer. She continued to explain each Department Director's expense reduction recommendations, for a total recommended savings of $173,112. Staff recommended cuts totalling $594,179, which leaves $159,849 to cover a portion of the $581,500 of proposed VLF losses and management cost of living increase, not yet negotiated. Staff is requesting Council's direction regarding methods of reducing the budget expenses or raising revenues to cover this potential $421,651 shortfall. She reviewed the list of 10 possible ways to further cut the City's budget that were included in her Staff Report. She recommended that based on what is going to happen this year and the following years, most likely the public needs to understand how it is going to affect them rather than the City taking care of it internally. There needs to be some visual loss to the community so that they will understand the impacts. She concurred with what Mr. Barr said, that most people don't even know what the funding is and they don't want their Vehicle License Fees increased. The public is not aware that the taxes they pay don't necessarily come back to the City. Mayor Larson inquired if the Community Service's budget assumes there would be no increase in school facility fees. City Manager Horsley explained that the Superintendent of Schools made the offer to reduce the facility fee about $20,000 if the School District would not have to pay for the School Resource Officer. She noted that the initial year of televising City Council meetings is estimated to cost $49,700 but subsequent years may cost $4,000-$10,000 depending on how much money the City wants to put towards capital cost replacement. Some of this money may be defrayed with the franchise fees. Special City Council Meeting March 19, 2003 Page 4 of 10 Finance Director Elton continued to explain the flat level of revenue sources estimated in the budget and responded to questioning by Councilmember Baldwin regarding showing a flat sales tax revenue over the next three years, by stating that it was felt that since there are so many unknowns at this time, it would be more conservative to keep it flat than to predict any kind of increase. He explained that generally, most of the current businesses don't individually contribute a significant amount of sales tax when talking about a potential $1 million level of concern. Typical business would probably provide from a few thousand to about $30,000 worth of sales tax revenue to the City. It is uncertain if that trend would continue for three full years. He noted that this plan does not specifically factor in Kmart's closing. Councilmember Rodin inquired if the City has a parcel tax. Finance Director Elton explained that when a piece of real estate is sold, either the seller or the buyer pays a tax to the City to register the title of the property. It was his recollection that it is $75 per parcel and goes to the City's General Fund. Councilmember Baldwin inquired about requesting staff to research the real estate transfer tax and what type of vote of the public would be required to increase that tax. It was the consensus of Council to direct staff to investigate the real estate transfer tax. Councilmember Andersen inquired about the function of the City's reserves and if there is any reserve the City could utilize to make up shortfalls. City Manager Horsley reviewed the budget documents related to the City's reserve funds that are used for specific purposes or projects. There was discussion of the Fixed Asset Replacement Fund and the Special Projects Fund. The Special General Fund and the General Fund Reserve accounts have no specific projects attached to them. She noted that the City desires to have a healthy reserve due to fluctuations as experienced in previous years. Upon questioning by Councilmember Andersen with regard to the practice of setting aside a certain percentage in the General Fund, Finance Director Elton explained that the City has not focused on saving a percentage of funds toward the General Fund, but rather what Council wanted to have done and staff recommendations. It is important to look at how volatile our revenue sources are and how much they can change from one year to the next. The more volatile, the more reserve should be planned. He responded to questioning from Councilmember Andersen with regard to spending reserve funds to make up for the deficit, by advising that it would be bad policy. The City should have the ability to respond on a short-term basis to any situation that may be presented by the State. Discussion continued with regard to the potential of using reserve funds to make up for the deficit. Councilmember Andersen inquired as to what type of assets the City owns that could be sold. Special City Council Meeting March 19, 2003 Page 5 of 10 City Manager Horsley discussed the properties owned by the City and the Ukiah Redevelopment Agency, noting that very little City-owned property is not in use. Councilmember Rodin was supportive of cuts that are apparent to the general public and not those that fall on the backs of City staff. As a general policy, it is important that the community sees and feels the impacts of the cuts. Councilmember Smith agreed and noted that while the total of recommended cuts did not include a dollar amount relative to the Community Outreach Fund, he felt it should be reviewed and possibly put on hiatus for a while. Even though his employer, UVAH, applies for funding every year, he felt that we have to acknowledge that the state budget crisis is going to affect all of us one way or another. Councilmember Andersen noted the frustration of Councilmembers when they have to decide budget cuts and not have any control over the money. He is interested in how the City can become financially independent and what we could do to not rely so much on grant funding, and if there is any way to raise revenue locally and keep it. He would be supportive of raising fees for pool use, community service programs, and would like staff to calculate percentage increases and how much money it would raise in those areas and report back to Council at the next hearing. Besides having staff look at increases to community services fees, he would like them to come back with a proposal for a complete reduction in the City Council's budget for salaries. He is interested in any proposals in the future for a "rainy day fund" for situations such as this and wants to see some sort of mechanism that we could contribute towards, not this year, but it needs to be put into place. He proposed a subcommittee of the City Council be formed to go through the budget and compile proposals. Mayor Larson explained that he does not want to see the City balance its budget on the backs of its employees again like it did in the mid 1990's and felt that it created long- term damage to the morale of staff. He was supportive of the need to institute a hiring freeze that allows for any justification on hiring a position that is staffed by only one employee. When employees leave the City's employment, replacement needs to be reviewed on a case-by-case basis. He agreed that there needs to be some sort of recognizable impact to the public with regard to budget cuts. In that respect, he felt that road maintenance and repair activities should be limited to fund 699 and other dedicated funds. He is not supportive of using General Fund money for streets. It was his opinion that the City needs to look seriously at closing the pool and that the Community Services Department should make a 100% return on user based services, such as recreation classes, with special attention that non-resident fees are covering those costs. He discussed negotiating with the School District sharing funding for the Police Officer who is stationed at the High School. The Community Based Grants should be placed on hold for at least six months. We need to let the public know that some services are being cut and it is tied into the State's decision to not reestablish VLF. Councilmember Smith discussed televising City Council meetings and it may be appropriate to put that project on hold for the time being since it would be a $50,000 increase. Special City Council Meeting March 19, 2003 Page 6 of 10 City Manager Horsley advised that the project might be financed through a Joint Powers Authority (JPA) for the cable franchise. Mayor Larson explained that City government's ability to educate the public as to where the money comes from and where it goes would be enhanced greatly by televising City Council meetings. There may be a need to commit a small portion of the revenue that cable television generates to a fund to support this project. The project may not occur for another year. Councilmember Baldwin was unsure if he supports the concept of "recognizable impacts" to the community. He discussed the possible closure of the CDF Air Attack Base in Ukiah and how that could be construed to mean that the state is leaving an impression on the people of Mendocino County so that they see a recognizable impact when the base is closed. He felt that raising fees are regressive and tend to hurt the poorest people the most. He thought the Golf Course should not cost the City any money in the future and that it must break even. In the future, Council might consider dollar increases rather than percentages to increase salaries. He would resist closure of the City pool. Councilmember Andersen stated that he would not be supportive of closing the pool because he feels it's a vital resource for the community. However, he could support a reduction in funding for the museum because he felt more people patronize the pool than the museum. He thought we should raise fees and he was supportive of closing City Hall during a specified period of time. He felt that the Community Based Funding goes a long way towards assisting some organizations. He requested an overview of the City's purchasing policy especially regarding office supplies. Purchasing Agent Kennedy responded by stating the procedures she follows with regard to ordering office supplies for the City and soliciting Request For Quotes from office supply vendors in order to achieve the best deal on a product. She explained that the current storage room for supplies is being shared with records storage and she is unable to order a full pallet of supplies at one time. The new facility will have more room for storing larger quantities of supplies and thus provide cost savings. She continued to explain the City's printing practices and noted that business cards are printed in-house and other items are sent out for quotes to obtain the best pricing. Councilmember Baldwin inquired about technology upgrading and replacement. Finance Director Elton stated that staff evaluates the needs on a case-by-case basis and there is some technology that is four or five years old, which is beyond the recognized life cycle although it is still functioning. Staff will evaluate the computer needs in light of the entire budget situation and not replace them, except in those cases where there is product failure or where the performance is so much below par that it seems we would have a better benefit return by replacing it than making due with what we have. Special City Council Meeting March 19, 2003 Page 7 of 10 City Manager Horsley discussed the City's recycling of computers within our own system. She advised that with the advent of war, the City's Police Department has established protocol for handling civil unrest, the potential for war, and are preparing for these events. She will be meeting with the Department supervisors regarding the utility system and security protocol. Mike McCann explained that he is president of the Boys and Girls Club and advised that the Club was invited by the School District to discuss summer programs because it is not going to run the summer school with up to 800 elementary school children this year. School Superintendent Brawley offered the Club the campuses at no cost if the Club could prepare a program so that children would be off the streets. As the City looks at the possibility of closing the pool, the Boys and Girls Club is discussing a program whereby it would house the children in the morning and take them to the pool in the afternoon. The burden on Community Services and the Police Department is increasing because of cuts that aren't in the City budget but are directly impacting those who are trying to balance the City budget. There will be additional burdens that will hit all of us pretty heavily in the next few months no matter what we do at the City level. Discussion followed relative to the expenses for maintenance and repair of the pool, such as the leakage of water and extra water and extra chemicals needed at the pool. The need to 'close the pool for repairs was also discussed. Councilmembers Baldwin and Andersen were supportive of minor fee increases in the Recreation Department and felt the pool is a community service and they are willing to subsidize it. Councilmember Rodin inquired about a sliding scale, based on income, for selling pool passes. There was a consensus of the City Council to make an effort to offset a major portion of the deficit at the pool. It was also the consensus of Council to look into the matter of closing City Hall either one day a week or one day every other week, and for staff to provide options to Council in addition to cost savings. With regard to the Community Based Grants, Council felt the need to consider this further before making a decision. Councilmember Rodin noted that there are a lot of mini grants available in the community through the tobacco revenues. Councilmember Baldwin recommended consideration of the differential in rates at the Golf Course for non-City residents. Mayor Larson advised that Council might prefer to increase the overall recreational fees and subsidize some of the pool losses out of it. Councilmember Rodin inquired if the City charges various service clubs, to operate and maintain the fields for sports programs for a minimal amount, and if so, perhaps the fee could be increased. Special City Council Meeting March 19, 2003 Page 8 of 10 City Manager Horsley suggested the option of allowing facilities such as Anton Stadium to be turned over to an organization or the schools. She noted that it would take a lot of money to rehabilitate the stadium and maintain it. Councilmembers Andersen and Baldwin voiced their interest in forming a subcommittee to review the budget. Mayor Larson noted that a subcommittee of more than two Councilmembers constitutes a public meeting and must be noticed. He thought the full Council should review the budget to become effective and did not see the need to burden staff with assisting a subcommittee. Individual Councilmembers should review the budget and form their questions. He referred to a statement by Mr. Barr in that part of the problem with the current crisis in California is that City Managers and Staff have done too good of a job in managing local revenues, resources, and delivery of services. Councilmember Smith was of the opinion that the process in which staff reviews the budget is more effective and they become the Council's subcommittee for analyzing departmental needs and possible cuts. Councilmember Baldwin was of the opinion that the problem over the past years has been that Council went through the budget rather quickly and felt that an alternative to a subcommittee reviewing the budget would be to set aside more time to review the budget. City Manager Horsley advised that it would be easy to schedule two to three full days for budget hearings. She explained how Council, in the past, has reviewed the budget. M/S Baldwin/Andersen to set aside at least two days to cover the budget hearings. Councilmember Smith and Mayor Larson preferred leaving it to Staff to determine how much time would be needed to review the budget. Mayor Larson noted that Council may want to hold another budget workshop between now and June as new information becomes available that may require some policy direction from the City Council. A further review of the budget process was discussed. The matter of Council being prepared prior to the budget hearings, such a conducting research and contacting staff with inquiries, was seen as a way to accelerate the process. M/S Baldwin/Andersen withdrawing the previous motion. Councilmember Andersen advised that the Chairman of the Senate Budget Committee, Wes Chesbro, would be in Ukiah on March 29th at 1:00 p.m. at the Todd Grove Room. The Ukiah Valley Democratic Club is hosting a budget update forum. Mayor Larson thanked staff for their patience. 4. ADJOURNMENT Special City Council Meeting March 19, 2003 Page 9 of 10 There being no further business, the City Council meeting was adjourned at 5:39 p.m. Marie Ulvila, City Clerk Special City Council Meeting March 19, 2003 Page 10 of 10