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08/21/2008 CITY COUNCIL SPECIAL BUDGET MEETING MINUTES CITY OF CLEARWATER August 21, 2008 Present: Frank Hibbard Mayor George N. Cretekos Vice-Mayor John Doran Councilmember Carlen Petersen Councilmember Paul Gibson Councilmember Also present: William B. Horne II City Manager Jill S. Silverboard Assistant City Manager Rod Irwin Assistant City Manager Pamela K. Akin City Attorney Cynthia E. Goudeau City Clerk Brenda Moses Board Reporter The Mayor called the meeting to order at 8:00 a.m. at City Hall. To provide continuity for research, items are in agenda order although not necessarily discussed in that order. 2. Other Items on City Manager Reports 2.1 General Introduction – Bill Horne, City Manager City Manager Bill Horne thanked Council and staff for their efforts regarding the budget. 2.2 Presentation and Review of Updated Five-year Forecast – Tina Wilson, Budget Director Budget Director Tina Wilson presented four scenarios of the five-year budget forecast using the following assumptions. Expenditure Projections Employee Salaries Police & Fire are estimated at a 3.5% annual increase throughout the forecast. All other employee salaries are estimated at a 2.5% annual increase throughout the forecast. Medical Insurance Per the City’s insurance consultant, medical insurance costs could increase as much as 6% to 10% annually in the next few years. For the purpose of this analysis, staff used the recent OPEB (Other Post Employee Benefits) study trends, and medical insurance is forecasted to increase as follows: 2009/10 – 7.5% 2010/11 – 7.0% 2011/12 – 6.5% 2012/13 – 6.0% Council Special Budget 2008-08-21 1 2013/14 – 5.5% Property & Liability Insurance Estimates are forecasted to increase as follows: 2009/10 – 6.0% 2010/11 – 6.0% 2011/12 – 5.0% 2012/13 – 5.0% 2013/14 – 5.0% Pension The pension assumption is that the City’s ultimate contribution requirement is the 20+% plus an additional 2.3% for new regulation requirements, or basically 23% of annual pay. Estimates are forecasted to increase as follows: 2009/10 – 23.0% (from 13% of pay to 16% of pay) 2010/11 – 19.0% (from 16% of pay to 19% of pay) 2011/12 – 16.0% (from 19% of pay to 22% of pay) 2012/13 – 5.0% (from 22% of pay to 23% of pay) 2013/14 – 0.0% (remains at 23% of pay) Worker’s Compensation Worker’s Compensation costs are estimated at a 3% annual increase throughout the forecast. Operating & Internal Service Expenditures Operating and Internal Service expenditures are estimated at a 3% annual increase throughout the forecast. Debt Service Costs Debt service costs are projected taking into account all lease purchase contracts anticipated to be outstanding at the end of fiscal year 2007/08 and reflect the impact of current outstanding public service tax bond commitments. Debt service costs are forecasted to remain relatively stable throughout the five-year period, and do not reflect any major new bond commitments during this period. Transfers to the Capital Improvement Fund Transfers to the Capital Improvement Fund are forecasted as proposed in the current six-year Council adopted Capital Improvement Plan. Ms. Wilson said Analysis 1 reflects a 2008/09 budget at a tentative millage rate of 4.955 mills. Forecasted years indicate property tax revenues reflect roll-back revenue and $500,000 in new construction revenue each year. The total five-year budget deficit is projected at approximately $13 million. Council Special Budget 2008-08-21 2 Analysis 2 reflects a 2008/09 budget adopted at the current millage rate of 4.6777 mills and a further reduction of $2,712,670 in property tax revenues. The 2008/09 department expenditures reflect $2,712,670 in further reductions from the “Proposed Program Reduction” tiered worksheet. Forecasted years reflect property tax revenues at the roll-back revenue and $500,000 in new construction revenue each year. The projected deficit is close to Analysis 1. Analysis 3 assumptions reflect a 2008/09 budget adopted at a tentative millage rate of 4.955 mills. Forecasted years indicate property tax revenues reflect roll-back revenue and $500,000 in new construction revenue each year and assume a valuation reduction of 7% in FY ’10, 5% in FY ’11, 3% in FY ’12, 0% in FY ’13, and an increase of 3% in FY ’14. Property tax revenues are reduced to reflect lower values. The projected deficit at the end of the five-year period is approximately $18,000,000. In response to a question, Ms. Wilson said the analysis includes a 3% property tax increase for homesteaded properties. Analysis 4 assumptions reflect a 2008/09 budget adopted at the current millage rate of 4.6777 mills and a further reduction of $2,712,670 in property tax revenues. The 2008/09 department expenditures reflect $2,712,670 in further reductions from the “Proposed Program Reduction” tiered worksheet. Forecasted years indicate property tax revenues reflect roll-back revenue and $500,000 in new construction revenue each year. This analysis also assumes a valuation reduction of 7% in FY ’10, 5% in FY ’11, 3% in FY ’12, 0% in FY ’13, and an increase of 3% in FY ’14. Property tax revenues are reduced to reflect lower values. The total five-year budget deficit is projected at approximately $17 million. Ms. Wilson said property tax revenues are only slightly higher than three years ago. She said changes in services will be needed. 2.3 Health Insurance Update – Joe Roseto, Human Resources Director Human Resources Director Joe Roseto said health insurance is one of the most important benefits employees have. Humana’s renewal quote reflects a 43% increase in overall premiums. Humana offered one other option with a 9% increase in premiums. The benefits Committee and employee groups recommend the City go out to RFP (Request for Proposals) for health insurance alternatives. Kurt Gehring of the Gehring Group said the City’s claims experience has worsened since the beginning of the year. He said his firm has seen a blip in entities with higher claims than usual, probably attributable to economic stress. He said carriers want to maintain long-term relationships in order to make up losses. He said although the City implemented a wellness program this year, the anticipated reduction in City claims has not happened. He recommended the City consider alternative health plans including self-funding and/or opening a free-standing health/wellness clinic. He reviewed the benefits of being fully insured versus self-insured. He said it may be more advantageous to self-insure for groups in rural areas due to the lack of competition or carrier options. It may be more advantageous to fully insure due to aggressive provider network discounts in an area. In response to questions, Mr. Gehring said generally, wellness clinics are not staffed with specialists, however they can be customized. He said sharing clinics with other municipalities has not been successful. He said cities build the infrastructure and hire an independent operator. The independent operator hires the medical staff at a fixed cost and assumes liability for medical malpractice, etc. for the wellness center. The goal of the wellness clinic is to achieve zero costs over time. Employee incentives and how well the program is set up can affect the success of the clinic. He said clinics basically are a long-term shift of Council Special Budget 2008-08-21 3 healthcare dollars. Employees could visit their primary physicians or use the wellness center and take advantage of lower out of pocket costs. Mr. Roseto said the City has spent all the wellness program funds Humana provided. The wellness programs offered to employees were not mandatory. He said it generally takes three to five years to see significant health improvements after a wellness program is implemented. Humana’s renewal quote reflects their perspective that many of the City employees’ claims this year were for chronic conditions. He said once the City receives responses to the RFP, it will have a better idea of what path to take regarding healthcare for its employees. Discussion ensued with comments that employees should take advantage of wellness programs, that 15 high claims is not a large number compared to the total number of City employees, that self-insurance may provide the City with some continuity for wellness, and that preventive medicine is the way of the future. 2.4 Review of Further Proposals for Budget Reductions with Staff Three people spoke regarding budget reductions, requesting that library professionals decide where cuts should be made if Council decides to cut library services, and that bicycle police officers be reinstated in the Old Clearwater Bay neighborhood. Council recessed from 9:39 to 9:52 a.m. Discussion ensued with comments that Council is faced with making additional cuts or accepting the City Manager’s proposed budget, that taxpayers have indicated they want tax cuts but not at the expense of cutting services in their own neighborhoods, that additional cuts would be necessary next year if insufficient cuts are made this year, and that promises made by previous Councils have resulted in infrastructure that now needs to be funded. It was noted the City Manager’s recommended budget contains substantial cuts. Concern was expressed that citizens have requested more police presence, etc., and they are not ready for drastic service level reductions that could have a devastating effect on the City. Employees were commended for the tremendous amount of work they do for the community. In response to a question, Ms. Wilson said the proposed 1% salary savings is a result of open positions that have been frozen since January. She said most employees have chosen to keep their jobs due to the economy. The City Manager said although staff will implement Council’s direction regarding salary savings, in some departments it would be very difficult to achieve and would impact how quickly the City can get things done. Library Library Director Barbara Pickell reviewed proposed library program reductions. She said if the Library Webmaster is eliminated, the on-line request for books feature will still be available, however no program and event information or links will be available and the Library’s web page will be static. She said currently, all libraries are open 61 hours a week with two shifts. If the Library budget is cut staff, then number of hours open and services will have to be cut. She reviewed a schedule that would reduce hours but not totally close any libraries. In Council Special Budget 2008-08-21 4 response to a question, Ms. Pickell said the Programming Coordinator provides programming assistance for the galleries in the Main Library, including coordination of main events. The teen room houses computers, books, and music and offers programs specifically for teens. The proposed reduction in staff would necessitate closure of the teen room. In response to a question, Ms. Pickell said she would prefer to close the least used libraries in order to maintain quality service at other locations. Discussion ensued and it was questioned if there should be more City facilities with fewer hours or fewer facilities with greater hours. It was felt that if the current proposed millage rate is adopted, deeper cuts would be required next year, and that maintenance costs for facilities, pension plan costs, etc. will escalate. Finance Director Margie Simmons said all the assumptions provided by staff are based on a worst case scenario. Ms. Wilson said there is no mandate to further reduce the budget as the City Manager’s proposed budget meets all State obligations. She said cumulative costs in all categories were built into the proposed budget. Councilmember Petersen moved to approve a $300,000 salary savings. The motion was duly seconded and carried unanimously. Discussion ensued with comments that the Library Director should determine the services she feels would best serve the community. Councilmember Doran moved to direct the Library Director to find $400,000 in cost savings and keep all libraries open. The motion was duly seconded. Discussion ensued with comments that citizens need to see the impact of service level reductions this year, that extreme cuts should not be made this year just to teach the citizenry a lesson, and that as citizens voted for a tax decrease, increasing the millage rate is not reasonable. Upon the vote being taken, Councilmembers Cretekos, Doran, Gibson, and Mayor Hibbard voted “Aye”; Councilmember Petersen voted “Nay.” Motion carried. Parks & Recreation Parks & Recreation Director Kevin Dunbar reviewed proposed program reductions, including reduced cash contributions to AALC and PACT, elimination of two landscape division positions and a recreation programming staff assistant, reduced City-wide landscape maintenance, reduced hours at recreation centers, elimination of two landscape and trails team supervisors and related teams, reduced athletic office services, and elimination of a Recreation Support Technician for special events. Tier 3 program reductions propose reduced maintenance efforts at athletic facilities, no weekend events or tournaments, and elimination of holiday lighting. Discussion ensued with comments that only one landscape architect would be on staff due to budget cuts, that the City cannot enforce the Code if it does not maintain its own properties, and that tourism greatly impacts the City’s economy and provides jobs. Mr. Dunbar said the City uses landscape contractors, employees, and volunteers to control costs. In Council Special Budget 2008-08-21 5 th response to a question, he said reducing July 4 events even further would not cut costs for the event in half. Mr. Dunbar reviewed proposed facility hours at recreation centers. Councilmember Cretekos moved to approve all of the Tier 2 Parks & Recreation program reductions. The motion was duly seconded. Councilmembers Cretekos, Gibson, and Mayor Hibbard voted “Aye”; Councilmembers Doran and Petersen voted “Nay.” Motion carried. Public Communications Public Communications Director Doug Matthews said proposed program reductions include elimination of C-View TV programming. He said regardless of the proposed reductions, there would be ongoing costs associated with contract employees for coverage of meetings and for engineering equipment. He said currently, staff handles technical issues. It was remarked that C-View programming is a valuable tool to provide informational services to citizens. Councilmember Doran moved not to make any C-View program reductions. The motion was duly seconded. Councilmembers Cretekos, Doran, Petersen, and Mayor Hibbard voted “Aye”; Councilmember Gibson voted “Nay.” Motion carried. Jolley Trolley Discussion ensued regarding Jolley Trolley subsidies with a suggestion that a $25,000 reduction be made. Mr. Dunbar said the Jolley Trolley already indicated that anything less than a $150,000 subsidy would put them out of business. When reductions were made last year, they had to terminate service to Downtown. Councilmember Gibson moved to fund the Jolley Trolley at the $150,000 level. The motion was duly seconded. Councilmembers Cretekos, Doran, Petersen, and Gibson voted “Aye”; Mayor Hibbard voted “Nay.” Motion carried. Police Police Chief Sid Klein reviewed program reductions. Reductions proposed in Tiers 1 and 2 include elimination of six community policing officers and other staff support positions and reassigning duties to sworn officers. The front desk at the main station would close at midnight. Tier 3 reductions include elimination of $97,000 to fund CHIP next year. By partnering with the Pinellas County Sheriff’s Office to obtain a grant for a technology systems upgrade, the City will save $70,000 for professional/contractual services. He said City ordinance regarding taxi cab inspections needs to be changed. In response to a question, Chief Klein said without CHIP, he anticipates 100 additional homeless people a day on the streets. He said recently, there has been an increase in thefts and robberies. Council Special Budget 2008-08-21 6 Discussion ensued regarding a suggestion to eliminate all six community policing positions listed in Tier 3. Chief Klein said the six positions are sworn officers and could not be st eliminated through attrition by October 1. The City Manager said complaints from less affluent neighborhoods regarding the lack of a police presence could result if the community policing positions are eliminated. It was remarked that debate regarding Amendment One inferred that public safety would not be impacted. It was felt that if 21 Police Department support staff are eliminated, public safety would be impacted. The City Manager said department directors were directed to focus on overhead costs and efficiencies, not to reduce firefighter or police positions. Councilmember Doran moved to eliminate four community policing positions in Tier 3. The motion died due to the lack of a second. Councilmember Cretekos moved to direct the Police Chief to reduce his budget by $250,000. The motion was duly seconded. Councilmembers Cretekos, Doran, Gibson, and Mayor Hibbard voted “Aye”; Councilmember Petersen voted “Nay.” Motion carried. The City Manager reported that a position valued at $55,000 in Equity Services will not be filled. Tier 3 Tampa Bay Partnership Economic Development & Housing Director Geri Campos Lopez reported that staff is meeting with the TBP next week and will report back to Council regarding a potential $25,000 reduction to cities by the TBP. Consensus was to defer a decision regarding TBP funding levels until receipt of staff’s report. Pier 60 Discussion ensued regarding outsourcing Pier 60 operations. Marine & Aviation Director Bill Morris said the State regulates activities permitted on the site. In response to a question, Mr. Morris said Marina and Airpark rates are set according to the CPI (Consumer Price Index). Ms. Simmons said revenues generated from Pier 60 exceed expenditures, except for major repairs. She said funds are set aside annually for normal maintenance of all City facilities. Ms. Wilson reported that a major portion of Penny 3 dollars are allocated for facility renovations. Federal Lobbyist Services Council Special Budget 2008-08-21 7 It was felt that lobbyist services at the federal level could be reduced. Consensus was for staff to go out to RFP. The City Clerk reported that the RFP process cannot be completed st by October 1. Holiday Lighting Discussion ensued regarding holiday lighting with comments that holiday lights should remain in major tourist areas such as on the Memorial Causeway, in Downtown, on Mandalay Avenue, and a portion of Sand Key. Councilmember Doran moved to eliminate the $25,000 holiday lighting budget. The motion died due to the lack of a second. Harborview Center It was remarked that it was already decided that the Harborview Center is scheduled to close in January 2010 after the Florida Huddle. Summary Ms. Wilson summarized total budget reductions: 1) Set millage rate at 4.72 mills; 2) Salary savings of $225,000 for SAMP employees; 3) Additional 0.5% salary savings overall of $300,000; 4) Reduce Library budget by $400,000; 5) Parks & Recreation Tier 2 reductions of $2,498,820; 6) Police Department reductions of $250,000; 7) Fund McMullen Tennis Complex using $200,000 of General Fund Reserves; and 8) $55,000 salary savings for one abolished position in Equity Services. Mr. Roseto will provide an analysis regarding the number of potential employees that could be affected due to these reductions. He reported that currently, the City has 54 vacant positions. In response to a question regarding the City Manager’s flexible fund, which is used for miscellaneous items, Ms. Wilson said unused dollars remain in the fund. She said approximately $160,000 is in the account and $100,000 was budgeted for the account this year. Consensus was that funds in the City Manager’s flexible account that exceed $250,000 be placed in the General Fund. Councilmember Doran moved to reduce Councilmembers’, not the Mayor’s, travel and education budget by 20%. The motion was duly seconded and carried unanimously. Discussion ensued regarding freezing Councilmember salaries. Staff reported per the City Charter, Council salaries are set by ordinance. Council Special Budget 2008-08-21 8 It was remarked that beach lifeguards are being retained, no libraries or recreation facilities are being closed, and the City will continue to focus on tourism. Staff was thanked for their efforts regarding budget reductions. 3. Council Discussion Items 3.1 Efficiency Reviews This item was deferred to tonight's 6:00 p.m. Council meeting. 3.2 Zero-based Budqets This item was deferred to tonight's 6:00 p.m. Council meeting. 3.3 Other Issues - None. 4. Adjourn The meeting adjourned at 1 :07 p.m. ~~ --Mayor City of Clearwater Council Special Budget 2008-08-21 9