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HomeMy WebLinkAboutMinutes - 3/11/2013 - Finance and Personnel Committee �� �wti.^, � .� v �+ � � McHe FINANCE AND PERSONNEL COMMITTEE 4:00 PM, Monday, March 11, 2013 Aldermen's Conference Room Call to Order Chairman Alderman Wimmer called the meeting of the Finance and Personnel Committee to order at 4:00 PM. Other committee members present: Alderman Jeffrey Schaefer and Alderman Geoff Blake. Also in attendance: City Administrator Derik Morefield, Deputy City Administrator pouglas Martin, Assistant City Administrator Bill Hobson, Finance&Accounting Manager Carolyn Lynch, and Executive Assistant Marci Geraghty. Public Input None. � Presentation and Discussion of Draft FY 2013/14 Budget Chairman Alderman Wimmer announced the purpose of the meeting was to review the draft FY 2013/14 budget and offered the floor to City Administrator Derik Morefield. Mr. Morefield informed the committee he asked Department Heads to submit conservative budget requests as the goal for FY13/14 is to have a minimum impact on municipal finances. He noted it is impossible for Public Works, Parks, and Police to budget $0 salary increases as they are bound by bargaining unit contracts however, supplies, contractual services, and equipment purchases have been held to a minimum as has been the case for the past five years. Mr. Morefield told the committee there was great coo��eration with the Directors to create this preliminary budget and all Directors are in agreement with his conservative philosophy to plan for minimal expenditures and revenues to ensure the city is running well within our means. Mr. Morefield provided a PowerPoint presentation to accompany the preliminary budget document. Overview. FYl2/13. Mr. Morefield explained the General Fund finances most of the city's operations and has the biggest impact in terms of revenues from sales, income, and property taxes. In FY12/13, the overall budget was approved at $37,236,000. Total revenues for the General Fund were budgeted at $17,666,976 and $17,629,740 was budgeted for expenses. To reduce costs (in addition to reductions made in previous fiscal years) a reduction of a 0.5 FTE position was made, and police pension and capital equipment funding remained the same. � Finance and Personnel Committee March 11,2013 Page Two `- Mr. Morefield said projections for the end of this fiscal year are all favorable and will end with Sales and Use taxes up $360,000 over the budgeted amount. Again, because the city budgeted conservatively it is not surprising revenues will be over budget. There was a slight decrease in the amount of fines, forfeitures, and revenue collected through Parks and Recreation programs. However there was an increase in other revenue sources. At the end of FY12/13, total revenues are projected to be $285,000 over budget. On the expenses side, there was an increase of $30,000 in personnel costs; $50,000 in additional contractual services; and, an additional $10,000 spent for supplies resulting in an overall projection of $90,000 over budget. Subtracting expenses from revenues, the net change in fund balance is +$195,000; ending the year with a total projected fund balance of$6,367,233. Mr. Morefield noted past Committee discussions recommended end-of-the-year fund balances to be in the 25%-30% range compared to expenditures. l�or FY 2012/13,the percentage of General Fund expenditures is 35.2%. FY13/14 Proposed Budget: Propertv TaY Revenue. Property tax revenue makes up 28.6% of the General Fund Revenue. Revenues are basically the same as they have been over the past two years and the Council froze the levy again far FY 2013/14. Sales Tax Revenue. State sales tax revenue makes up 34.5%of the General Fund Revenues. In FY13/14, $6,249,703 is budgeted, an increase of$376,205 from FY12/13. Mr. Morefield reported sales tax receipts declined from $6.9M in FY07/08 to $5.96M in FY09/10, which was a direct result of the economic downturn. This was followed by two years of approximate $100,000 increases in FY10/11 ($6.37M) and �. FY11/12 ($6.47M). The current fiscal year(FY12/13) is the first full year of state sales tax receipts after Wal-Mart's departure (FY11/12), which is estimated to close at $6.28M. While Wal-Mart's departure certainly resulted in reduced sales tax receipts, FY13/14 projection of$6.250M is only $80,000 less than the amount collected in FY10/11 -the last full year of sales tax collections prior to Wal-Mart's departure. Since FY 07/08, sales taac revenues have fluctuated. A downward trend began in FY08/09 and FY09/10, with revenue slowly increasing since FY10/11; leveling-out in FY12/13 and projected to remain level in FY13/14. Income Tax Revenue. Income Tax Revenue comprises 11.2% of the General Fund Revenue. Ms. Lynch stated it is best to be conservative when estimating income tax revenue because the possibility always exists that the State of Illinois will enact legislation decreasing the city's share of revenue. Personnel. The number of employees has decreased by 22 since FY07/08. In FY 13/14, 110 employees are budgeted. lJnless the population grows,the number of city employees is not expected to increase. Alderman Schaefer asked for a corresponding look at the actual General Fund salaries. He noted although the number of employees has been reduced by 22, the city is paying more in salaries. Mr. Morefield explained this is due mostly to the three collective bargaining units. The city has had two contract cycles since FY07/08. Even if the recession did not occur, salaries would have increased due to collective bargaining. And, the detail sheets by deparhnent show Police and Public Works have the most impact on salaries paid. Also, the negotiated increase for sergeants is reflected in the General Fund. Ms. Lynch noted had the city stayed at FY07/08 staffing levels, salaries paid would be significantly more than what is proposed for FY13/14. � Mr. Morefield said police sworn staff levels are approved at 51 however they are currently operating with only 44. The department has also introduced more programs with less staff. Finance and Personnel Committee March 11,2013 Page Three \.- FY13/14 General Fund Revenues. Total budgeted revenue is $18,091,598, which is an increase from last year of$424,600 with a 2.4% increase in revenues. Total budgeted expenditures of$18,062,555 reflect an increase in expenditures of$432,815 or 2.5%. Staff's goal is to keep revenues and expenses level in terms of amounts and percentages. The good news is we are in the black by $30,000—this is a balanced budget in terms of revenues and expenditures. There is a $497,900 increase in revenues in the proposed budget. Sales tax revenue is estimated to increase by$4l 0,244, and income tax will increase by$77,700. Staff estimates charges for franchise fees and fines will increase however other services such as park and recreation program revenue are expected to decrease. FY13/14 Genei•al Fund Expenses. Increases in expenditures budgeted for FY13/14 is $432,900. The main cause for the increase is salaries totaling $362,000 and $89,400 total for benefits. Mr. Morefield noted wages and benefits account for 75% of the city's operating costs. Contractual services, supplies, capital, and other experises have all been reduced in the proposed FY13/14 budget. FY13/14 Over�iew. Mr. Morefield identified the following items: • The budget is balanced and staff will continue a conservative approach to spending. • The city will replace vehicles and make general maintenance improvements to parks. • The City Council approved a long range CIP that includes ADA Accessibility and improvements to Fort McHenry; police vehicle replacement program, and Public Works and Park equipment � � replacement. • A step increase for non-bargaining employees is included in the FY13/14 proposed budget. For the past four budget cycles, step increases for non-bargaining employees were frozen. The average increase for non-bargaining employees over that time period was 1.375%, which varied from 0% to 2%. Basically, a non-bargaining employee's base salary is at the same level it was five years ago. Given the fact we have reduced the number of employees and asked employees to do more with less, it is important to provide this step, which does not include a "cost of living" adjustment, only a step increase. Alderman Schaefer noted last year, we budgeted an increase for all employees. Mr. Morefield said yes, non-bargaining employees received 2% last year however prior to the freeze this was typically coupled with a step increase. • A goal for FY14/15 is to revise the step system for non-bargaining employees to a CIP/merit based system for non-bargaining employees. Non-Bargaining employees would receive a CIP increase and based on a calculation of the employee's performance evaluation, could achieve an additional percentage of their salary. • In FY12/13,the Gary Lang, Inc. Sales Tax Development Agreement was activated. Based on the terms, Gary Lang, Inc. was due $295,000 in sales tax rebates from the period of September 1, 2010 to August 31, 2012. A total of$105,000 was paid to Gary Lang, Inc. in FY12/13 and they are still due approximately $180,000. The Lang period for collection is September 1 S` through August 31S`. The agreement states anytime after the start of our fiscal year or May lst, Gary Lang, Inc. can ask for a $100,000 advance on the amount the business will accumulate through August 31S`. On May ls`, we could owe him at least $280,000. The goal in the next budget year is to �.. have $180,000 available to pay him for what is due and budget $200,000 for what he will accumulate in the end of his next tax cycle,which is August 31 S`. Alderman Schaefer asked if the Finance and Personnel Committee March 11,2013 Page Four � plan is to pay him at least $280,000 by August 31 S` and Mr. Morefield answered yes, at least $280,000 and then he will be due whatever the difference is at the end of our fiscal year. Aldernian Schaefer asked if this is cross-checked against state of Illinois numbers and what is the length of the agreement. Mr. Morefield answered the term of the agreement is 20 years or when the qualified development costs are paid. However an additional dealership could be added, which would increase the term of the agreement. He also said the city has authorization from the Illinois Department of Revenue to obtain Gary Lang, Inc. sales tax data and development costs. To summarize, in FY13/14 the city will be able to meet the terms of the agreement and reimburse Gary I,ang, Inc. through funds budgeted in FY12/13 ($105,000) and by proposing funds in the FY13/i 4 budget($400,000)without the need to reduce the General Fund balance. � A project included in the CIP not funded in FY13/14, but one the committee should be aware of is the proposed aquatic recreation facility. The Parks and Recreation Committee discussed the project and a concept plan has been created for the center to be built on the Knox Park property. If approved in FY13/14, staff will request authorization to release money from the Recreation Center Fund to pay for design work. Alderman Schaefer said he is often asked if our revenues increase from one year to the next, why do we always have to spend it or budget to spend it. He also asked if any large areas of expense reductions are proposed in the FY13/14 budget. Mr. Morefield said we do not have to spend every dollar we collect. Increases in revenue could be deposited in the fund balance each year however this is really a reserve fund and not a savings account. A reserve is held for emergencies —any extra should be used to benefit the public, which is why we collect it. Mr. Morefield added people are also concerned about increases in their property taxes, which the Council has frozen for the past three years. The largest project in the CIP � that will be addressed in the future is the road program. Although there is not a large CIP project in the proposed FY13/14 budget, we will have to begin dedicating money from the General Fund for road improvements. Alderman Schaefer noted last year a capital expenditure line item for road improvements was included in the budget and he asked if there is a line item for roads in FY13/14. Ms. Lynch said in the past MFT fimds have been used to pay for road projects. In FY13/14,we are moving towards creating a true CIP where we will use General Funds to pay for road programs. Mr. Morefield added in the CIP, there is an unfunded item for $30M. The goal is to start funding that item for non-multiple-funded road improvements. Alderman Schaefer agreed the proposed budget is conservative. Alderman Schaefer asked if the proposed budget contains any major changes from last year. Mr. Morefield said no, all funds are basically unchanged from last year. Chairman Alderman Wimmer said the only substantial increase he saw was for garbage bags. Mr. Morefield said the Police budget comprises almost $8M of an $18M General Fund budget and therefore, that is where you will find most of the changes. However, the Police Department has done a great job of cutting back and identifying what they rea115 need to operate efficiently. Ms. Lynch noted in the past few years our health benefit costs have increased 5-6% compared to the industry average is 12%. Mr. Morefield stated a significant cost increase is reflected in the development expense line item in the Finance Department budget for the Gary Lang, Inc. agreement. Also, the Capital Equipment Fund was reduced slightly from last year. Alderman Schaefer asked where the savings for not replacing the Director of Parks and Recreation is reflected in the proposed budget. Mr. Morefield said we are currently without a Finance Director and will be without a Director of Parks and Recreation. Mr. Morefield said Bill Hobson will continue to oversee the P&R Department, which will result in the same quality of work, a bit more efficiently as there will be one less person in the chain of command, and a � savings in salary and benefits will be realized. However in the future, we may be able to add programming staff. Finance and Personnel Committee March 11,2013 Page Five `-- As for the Finance Department, Ms. Lynch is already doing the work of a Finance Director. The adjustments required for changes in these departments are far less than hiring a Finance and P&R Director. Alderman Sch�iefer asked when union contracts will expire. Ms. Lynch reported FOP Unit II will expire in FY14/15. FOP Unit I and Local 150 will expire in FY15/16. Alderman Schaefer asked about levying for NISRA. Mr. Morefield said this committee and the council will be asked to consider a levy for NISRA in the next budget and/or possibly increasing the tax levy. Increasing the tax levy by PTELL numbers would generate approximately $200,000 in additional funds. Alderman Schaefer said it would be a good idea to consider a NISRA levy and asked what would happen if we dropped out of NISRA. Mayor Low informed the committee the city is required to provide special recreation programs and if we dropped out of NISRA the cost would be 100% provided by the city. Alderman Schaefer asked if all city special recreation programs are provided by NISRA. Mr. Hobson said most are provided through NISRA or with assistance from NISRA. Ms. Lynch provided a brief overview of the remaining funds: Water and Sewer Fund. Spending requests for the Water and Sewer Divisions total $53M, excluding depreciation it is funded by operating revenues of $5.48M. Project revenues are based on the rate increase of 1.6`% approved in February 2013. Capital items are budgeted through the depreciation line and specific items to be purchased in FY13/14 total $310,000 and include three vehicles, an Aqua Tech, and a meter replacement program. Also, this is the first year bond payments will be made for the water treatment plant improvements. � Capital E�uipment Fund. A transfer of$346,500 will be completed from the General Fund to the Capital Equipment Fund for the purchase of seven vehicles including equipment for $281,521, and a paver for $65,000. A truck for $157,000 approved in FY12/13 has been re-budgeted because it will not be delivered before the end of this fiscal year. Revenues from the prior fiscal year will cover this expense. Ca itap 1 Projects/Debt Service Fund. The budget recommendation is $1360M. The roof and HVAC project for the Public Works building approved in the priar fiscal year is re-budgeted for $1.2M because the project will not be completed by the end of this fiscal year. A few smaller projects are included for a total of$160,000 paid through a transfer from the General Fund. All large street projects funded through the State Allotment or Federal funding were moved to the MFT Fund because they need to be tracked separately. Alderman Schaefer asked for details about the line item for parking lot improvements. Mr. Morefield said it is for Petersen Park and the tennis courts will be repaired at the same time. In the Debt Service Fund, we added the 2012 bond. Refunding the 2005 bond will save the city about$120,000 over the next 10 years. Utilitv Improvements Fund. The budget recommendation is $1.128M. The rehabilitation of Water Plant #2 is re-budgeted for $900,000, which is covered by a bond issuance from last fiscal year. Other budgeted expenses will cover a CWWTP emergency power generator for $90,000; a SWWTP chlorine contact gate replacement for $118,000; and a sanitary sewer rehabilitation program for $20,000. All of these projects are funded with capital development fees. Proprietary Fund. The cost for employee insurance increased 6%. MCMRMA Risk Management fees decreased $100,000 from FY 12/13. The IT budget decreased from last year. � Finance and Personnel Committee March 11,2013 Page Six ��-- Special Revenue Funds. No significant changes were made to these funds. Civil Defense increased slightly for repairs/upgrades to sirens. The Audit Fund increased by 2% due to the cost to perform the audit. The Alarm Board was budgeted for the first time and only monthly fees are budgeted in the contractual account. The Annexation Fund remains unchanged. As previously stated, state projects have been added to the MFT Fund. We are also transferring money from the General Fund to the Special Revenue fund to cover the cost of the crack-sealing pavement maintenance program. The renovation of Fort McHenry will be paid from the Developer ponations Fund. Alderman Schaefer asked how much is in the Developer ponation Fund. Mr. Hobson said there is approximately $1 M in the Developer ponation Fund for regular parks and approximately $4.1 M in the Recreation Fund. Fiduciary Fund. Employee Flexible Spending and Retained Personnel accounts remain unchanged from last year. We have two Revolving Loans currently on the books from which we receive interest payments. The Police Pension Fund is also unchanged from last year. Adjournment The Finance and Personnel Committee scheduled another meeting to review the proposed FY13/14 budget on April 11, 2013 at 4:00 PM. Alderman Schaefer made a motion, seconded by Alderman Blake to adjourn the meeting. Aye: Blake, Schaefer, Wimmer �.. Nay: None Absent:None Motion carried. The meeting was adjourned at 5:20 PM. Respectfully submitted, � ,�1� /� � I�l;�`�'""� Alderman Richard W. Wi er, Chairman �