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12/26/2006 BUDGET TASK FORCE MEETING MINUTES CITY OF CLEARWATER December 26, 2006 Present: R. Nathan Hightower Chair Herbert W. McLachlan Vice Chair Martin L. Altner Task Force Member Joseph W. Evich Task Force Member Isay M. Gulley Task Force Member Robert L. Longenecker Task Force Member Joyce E. Martin Task Force Member Jesse Sherman Task Force Member Douglas J. Williams Task Force Member Absent: James E. Strickland Task Force Member Charles J. Rutz Task Force Member Also Present Tina Wilson Budget Director Margie Simmons Finance Director Patricia O. Sullivan Board Reporter The meeting was called to order at 6:02 p.m. at the Main Library. To provide continuity for research, items are in agenda order although not necessarily discussed in that order. 2. Approval of Minutes – December 18, 2006 Member Williams moved to approve the minutes of the December 18, 2006, meeting, as motion submitted in written summation to each board member. The was duly seconded and carried unanimously. 3. Questions/Discussion regarding December 18, 2006, meeting: Finance Director Margie Simmons distributed and reviewed copies of her reply to a Task Force Member’s questions regarding the pension and retiree health insurance. It was suggested that the 401k plan, with only 77 employee participants, is not worth reviewing. It was commented that the majority of pension plan cost increases relate to rising money manager fees. Ms. Simmons said pre-employment physical examinations results cannot be used to exclude applicants but benefit the pension plan by identifying pre-existing conditions. 4. Staff Presentations: a. Insurance & Risk Management Risk Manager Sharon Walton provided a power point presentation. Staff estimates premiums based on actuarially determined claims experience, State assessments, and special and typical operating costs. The City is self-insured for the first $500,000 of losses. The Task Force – Budget 2006-12-26 1 greatest factors affecting the budget are actuarially determined claims reserves and insurance premiums: 1) Flood for A and V zone properties; 2) Storage tank liability; 3) Equipment breakdown/crime policy; 4) Marina operators liability; 5) EMS (Emergency Medical Services) coverage; 6) Excess Policy: a) Workers’ Compensation; b) Broad Liability Coverage; and c) Vehicles. Premiums, $359,000 for FY (Fiscal Year) 2006/07, have small annual increases; and 7) Property Insurance. The property insurance market fluctuates and prices are unstable. Market capacity may be inadequate to meet City renewal needs in April 2007, and, if insurance is available, it may be too costly. Ms. Walton reviewed the City’s layers of insurance. During FY 2002-05, City property insurance rates averaged $883,000 for an average total insured property value, less exclusions, of $291 million. Coverage for $409 million in total insured property values, less exclusions, in FY 2005/06 increased to $2,033,033, and $4.6 million is budgeted for similar coverage in FY 2006/07 ($2 million from reserves). To increase capacity, staff is considering moving its catastrophic vehicle coverage to a separate policy. This year the City must assume more of its first dollar risk as it will lose its $500,000 SIR (Self-Insurance Retention) in April and will be unable to purchase as much insurance as before. Less coverage may not equate to reduced premiums. Underwriters carefully consider risks and the area’s hazardous location and concentration of high values make it undesirable. In response to questions, Ms. Walton said while the City has issued RFQs (Request for Qualifications) and RFPs (Request for Proposals), few insurance companies are large enough to handle the City’s coverage needs. The City uses several national brokers to acquire a package. Discussion ensued regarding property insurance with recommendations that the City pool its insurance needs with other governmental entities to improve its ability to negotiate better rates or create a self-insurance pool that would drive the private market to be more competitive. It was felt the City should try joining with other municipalities before dismissing the idea. It was recommended that the City be innovative. It was stated that leaders from all Florida municipalities must be more proactive and pressure the State government and legislature to address the insurance crisis for the sake of all residents. It was stated that the City could never have adequate coverage for damages caused by a catastrophic storm. The City Manager reviewed City efforts to divest itself of surplus properties. Ms. Simmons said the City Council had voted against a suggestion to reduce coverage. Highest insurance costs cover wind damage. Insurance coverage excludes peril. b. Information Technology Services Information Technology Director Dan Mayer provided a power point presentation. The department’s mission statement commits it to serving the businesses operations of the City by providing enterprise-wide system solutions and high-quality customer service to ensure the efficient utilization of technology resources and public investments. Task Force – Budget 2006-12-26 2 Department administration, with 4 FTEs (Full-Time Equivalent), provides budget and resource oversight, project, contract, and vendor relationship management, centralized technology purchasing, policies and standards, and strategic planning and technical governance. Service costs are prorated, based upon a department’s size. Personnel costs account for 67% of the FY 2006/07 budget of $481,950. Systems & Programming, with 14 FTEs, provides system and database administration, application development, technical project support, web programming and maintenance, systems life-cycle management/planning, systems management and business analysis, ROSS Financials, Cayenta Utility Billing, Laserfiche Document Management, Accella Permitting and Code Enforcement, ESRI Geographic Information Systems, and PeopleSoft Payroll and Benefits and SPL Asset and Work Management, which are owned by Oracle, Inc. Personnel costs account for 67% of the FY 2006/07 budget of $481,950. Total system overhead, including FTE support, hardware, and software maintenance is calculated and charged to user departments based on one of four metrics: 1) head count; 2) PC (personal computer) count; 3) client count; or 4) budget. Unplanned programming service requests are charged to Capital Improvement Projects, when appropriate, or to the requesting department. Personnel costs account for 53% of the FY 2006/07 budget of $1,841,250. Network Operations, with 10 FTEs, provides local- and wide-area network administration, data center operations, helpdesk support, PC lease management, data storage and back-up, and network security. The system has approximately 1,550 named accounts and approximately 1,525 PCs and laptops in 58 locations on the wide-area network. The system has four terabytes of total storage. The primary standard is Dell for servers and PCs, which are leased on a three-year rotation. Microsoft is the standard for the operating system, database, and programming. Network maintenance, the helpdesk, and connectivity overhead is calculated and charged to departments based on the number of PCs, client users, or physical locations of the network. Personnel costs account for 27% of the FY 2006/07 budget of $2,328,350. Telecommunications, with 2 FTEs, provides voice line and PBX maintenance and administration, voice services billing services, cellular phone services, and pagers. The City’s telecommunications environment use NORTEL PBX and switches, Verizon - local line and long distance provider (State Contract), Sprint/NEXTEL - cellular provider, and approximately 550 Motorola phones. Maintenance and service costs are calculated and anticipated charges are placed in user department operating budgets. Personnel costs account for 13% of the FY 2006/07 budget of $1,141,210. Mr. Mayer said personnel costs, which are less than 40% of the department’s total budget, have trended down since 1999. Department costs, at 2% of the General Fund, are reasonable. The “Best of Breed” philosophy is used in the system and application selection process. Business plans for systems and technology are predicated on increased efficiencies, not increased revenue generation. Based on the private sector consumer experience, the City has informed citizens with high expectations of City service options. In response to questions, Mr. Mayer said the City compares bid prices with State contract rates. Reliability and response times also are important considerations. Standards must be maintained for the Police and Fire departments. Municipalities manage their technologies in a variety of ways. The City’s finance system cost significantly less than than the one used by the City of St. Petersburg. Technologies age quickly and leasing computers has Task Force – Budget 2006-12-26 3 improved security and reduced disposal costs. The IT department manages all system repairs and cell phone and pager purchases. Field technicians research issues via computer and all Police Department vehicles have computers. The library has more than 100 computers. Productivity is measured with benchmarks and established standards. City computers block some web use and prevent staff from downloading software. Assistant City Manager Garry Brumback said if computer system abuse is suspected, a report of staff activities can be pulled and monitored. In response to a question, Mr. Mayer said staff is in conversation with providers regarding the provision of WiFi. Mr. Mayer said the City of San Diego had outsourced its IT services due to the high cost of living there and the city’s resulting struggle to retain employees. Staff is considering the reduction of one IT administrative position. Staff relies on vendor support for maintenance rather than funding expensive positions. Staff does not maintain printers. In response to questions, Mr. Mayer said staff leases landlines. If cell phone coverage at a facility is adequate, landline use is curtailed. Most City telephones are analog/digital, with some IP. Local lines are used for backup. Infrastructure redundancy is necessary for public safety. System backups are stored off site. The City plans to repurchase Microsoft’s operating system. Within five years, however, another operating service option may be available. c. General Service – Fleet & Building Maintenance Operations Solid Waste/General Services Director Tom Downes provided a power point presentation. General Services mission statement commits it to provide quality service to all departments and divisions of the City. General Services focuses on efficiency so that users of building and maintenance services, fleet maintenance services, and radio communications can cost effectively service the citizens of Clearwater. General Services four cost centers are budgeted at $16,507,670 for FY 2006/07: 1) $508,930 - Administration – 3% of budget; 2) $3,693,580 – Building & Maintenance – 22% of budget; 3) $11,705,680 - Fleet Maintenance – 71% of budget; and 4) $599,480 - Radio Communications – 4% of budget. Administration, with 7.5 FTEs, provides assistance and support for the management, planning, personnel, finance, and budget decisions applicable to operations. All expenses are allocated to Building & Maintenance (24%) and Fleet Maintenance (76%), which then are passed back to the user departments based on services provided. Building & Maintenance, with 35.7 FTEs, performs repairs, maintenance, and custodial services for City facilities. Staff and contractual services provide maintenance and project functions. Funding for maintenance services is provided by fixed monthly billing. Funding for renovation and construction projects is provided by direct charges. Of $3,529,020 in annual billings, 71%, or $2,502,030 is billed to the General Fund. The largest General Fund departments are: 1) Parks & Recreation Department - 431,465 square-feet or 46%; 2) Library – 132,246 square-feet or 14%; 3) Fire Department – 106,639 square-feet or 11%; and 4) Police Task Force – Budget 2006-12-26 4 Department 102,640 square-feet or 11%. Building & Maintenance maintains a total of 1,442,180 square-feet, of which 64%, or 929,404 square-feet is General Fund. Fleet Maintenance, with 40 FTEs, provides maintenance and repair of vehicles and equipment to ensure maximum life, vehicle/equipment specification and procurement, emergency generator maintenance and installation services shared with Building & Maintenance, fabrication and outfitting of vehicles/equipment; purchasing, management, and distribution of fuel, and mandatory equipment and safety training. User departments provide all funding through fixed and actual charges. Of $11,362,878 in annual billings, 42%, or $4,822,625 is billed to the General Fund. The largest General Fund departments users are: 1) Police Department – 305 pieces of equipment (36%); 2) Parks & Recreation Department - 273 pieces (33%); 3) Fire Department – 117 pieces (14%); and 4) Public Services – 107 pieces (13%). Fleet Maintenance maintains 1,523 pieces, of which 56% or 846 pieces are part of the General Fund. Radio Communications, with 2 FTEs, manages the City’s 800 MHz radio communication system located at two City-owned, 300-foot towers. Radio Communications, installs, repairs, replaces and programs radios, and ensures compliance with radio communication laws. User departments provide all funding through fixed charges. Of $444,840 in annual billings, 73%, or $322,700 is billed to the General Fund. The largest General Fund departments users are: 1) Police Department – 662 units (76%); 2) Parks & Recreation Department - 119 units (14%); and 3) Public Services - 75 units (9%). Radio Communications maintains 1,243 units, of which 70% or 873 pieces are part of the General Fund. General Services fixed billing method: 1) Fleet debt during life of L/P contract; 2) Overhead expenses not recovered on Work Orders; 3) Radio (rate per radio to recover radio debt, maintenance, infrastructure costs); and 4) Building & Maintenance including HVAC based on A/C tonnage, general maintenance based on facility square footage, and specific services based on anticipated costs (custodial, elevator maintenance, etc.) General Services actual billing method: 1) Fleet maintenance - above fixed rates (parts, labor, fuel, tires, outside contractors) and 2) Building & Maintenance - time and material for construction and non-maintenance requests. In response to questions, Mr. Downes said Fleet Maintenance also maintains units from enterprise funds, such as Solid Waste, Water, Gas, etc. Fuel cost increases raised operating costs. The City’s quantity fuel discount averages $0.12 to $0.18 per gallon. By contract, the City has first rights to 80,000 gallons of fuel, enough to last almost one month. Mr. Downes reviewed City efforts to reduce fuel usage through the purchase of hybrids, and maintenance contracts to address battery issues. Larger hybrid trucks soon will be available. Each department was challenged to reduce fuel use, the number of miles driven, and the number of vehicles. Vehicle fuel consumption fluctuates as Police vehicles, for example, often idle, and other vehicles haul heavy loads. Budget Director Tina Wilson said annually, staff analyzes the operational costs for each vehicle. In response to questions, Mr. Downes said Building & Maintenance master craftsmen outsource major construction projects. During the building boom, contractual help was difficult to hire. The City also has licensed electricians and plumbers. A certified engineer runs the Task Force – Budget 2006-12-26 5 department. Building & Maintenance provides cost estimates to departments for projects they request, based on $30/hour labor charges. Mr. Downes reported the City outsources work it cannot perform for lower costs, such as pest control, carpet shampooing, window cleaning, and custodial services for the Municipal Services Building and City Hall. The Solid Waste and General Services departments were combined several years ago to reduce costs and address Solid Waste concerns regarding the speed of equipment repairs. 5. Task Force Questions/Discussion Concerns were expressed that the City seems to be self contained and self-sufficient while the private sector outsources most work, as repairing equipment, for example, is not the business of government. It was stated that contracting services provides the ability to change workers. Rather than managing people, successful outsourcing would require supervisors to become procurement experts. It was recommended that outsourcing cost comparisons consider staff benefits, not just salary. A comparison was requested that evaluates the cost of outsourcing work with doing it in- house. Mr. Brumback said the City had considered outsourcing fleet work and discussed the issue with other municipalities. He expressed concern that companies bid low until cities divest themselves of infrastructure necessary to perform the work, and then increase charges significantly. Certain repairs require certification. Quality and turnaround times also are of concern. Staff will research outsourcing in the State. The City Manager said the public is not forgiving of City excuses regarding poorly done outsourced work. Mr. Downes reviewed problems when the outsourced maintenance of generators and air conditioning systems was not done. All transmission work and oil changes are outsourced, based on City specifications. This work is easily inspected when vehicles are returned to the garage. Concern was expressed that the outsourcing of Parks & Recreation Department median maintenance did not result in a reduction of FTEs. The City Manager said landscaping needs in Clearwater had increased substantially since 2000. Ms. Wilson said department resources were shifted to new facilities. Discussion ensued regarding shifting some costs from the General Fund to enterprise funds. Ms. Simmons said staff tries to allocate costs where they belong so that expenses are reported accurately. She recommended that changes affect all enterprise funds, such as increasing the 5.5% in lieu of taxes paid by enterprise funds to 6%. Mr. Brumback said staff already is challenged to keep all costs down. Mr. Downes said Police Department vehicles, which have an image to portray, are cleaned at a car wash for a reduced rate. Departments, such as the Fire Department and Solid Waste, wash their own vehicles. In response to a recommendation that the City provide services to other government entities in the metro area, Mr. Brumback said the City bids on services. CGS (Clearwater Gas System) serves 17 municipalities and three counties. The Parks & Recreation Department serves residents outside City limits. Mr. Downes reviewed services provided to other municipalities. Task Force – Budget 2006-12-26 6 . . . 6. Information for next meetina For discussion on January 2,2007, Ms. Wilson requested that Task Force members review the packet of information on the Library and review the budget document section beginning on page 161. 7. Adiourn The meeting adjourned at 8:04 p.m. Chair Budget Task Force ~y~)2~ Board Reporter Task Force - Budget 2006-12-26 7