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02/05/2007 BUDGET TASK FORCE MEETING MINUTES CITY OF CLEARWATER February 5, 2007 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 Charles J. Rutz Task Force Member Jesse Sherman Task Force Member James E. Strickland Task Force Member Douglas J. Williams Task Force Member Also Present Tina Wilson Budget Director Patricia O. Sullivan Board Reporter The meeting was called to order at 6:03 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 – January 29, 2007 Task Force Member Williams moved to approve the minutes of January 29, 2007, as motion corrected: page 4, last sentence of paragraph six to read “It was suggested . . .” The carried was duly seconded and unanimously. 3. Questions/Discussion regarding January 29, 2007, meeting AND 4. Task Force Recommendations to Council – Open Discussion It was stated that City budgets should track the CPI (Consumer Price Index). Concerns were expressed that the City spends everything it receives and the entire budget has increased faster than the CPI. It was felt that City costs would continue to increase, matching increased revenues and that the percentage of the budget covered by ad valorem taxes also would increase. As new facilities are not proposed, Budget Director Tina Wilson said future budgets should more closely mirror the CPI. It was stated no new facilities should be built until the population increases sufficiently. It was requested that the Library, Police, Fire, and Parks & Recreation department directors report to the Task Force, and explain the reasons for the graphed comparisons of CPI increases with their budgets, identify, in writing, key factors responsible for budget increases, and suggest how to stop the upward trend. It was suggested that each department director Task Force – Budget 2007-02-05 1 report what cuts they would recommend if required to make reductions of 5% and 10% and the effect of those cuts on Quality of Life and Public Safety. Ms. Wilson said department presentations to the Task Force had compared budgets with the CPI. During the second cycle of Penny for Pinellas, City construction of new recreation centers and fire stations increased staffing requirements. Police Department salaries increase faster than the CPI. Library budget increases are close to the CPI. It was reported that the City Charter states that Health, Safety, and Welfare are City priorities. Concern was expressed that Parks & Recreation Department costs soon will outpace the Fire Department’s budget. It was suggested that residents may support increased public safety services if convinced there is no waste. Doubt was expressed that public safety currently operates at top efficiency. It was suggested that eliminating Fire Department take-home cars would save fuel and maintenance costs. It was noted the Fire Department’s budget does not reflect income that offsets some costs. It was suggested that the Parks & Recreation Department does address health and welfare issues. It was stated that the importance and affordability of recreation and the arts should be determined. The Task Force has been asked to determine which City services are essential and which are “nice to have.” It was felt the budget review process should be ongoing and it was suggested that the City hire an industrial engineer to determine the proper balance of assets versus leases, and employees versus subcontractors. Concern was expressed that the Task Force is only reviewing two-thirds of the City’s budget and received too much data to analyze City assets. It was stated that savings are always possible, once it is determined how much savings is required. It was suggested that all assets be reviewed in detail for return on investment. Frustration was expressed that the Task Force cannot determine which positions are unnecessary. It was suggested that some vacant FTE (Full-Time Equivalent) positions may not require replacement and other positions could be reduced through attrition. It was suggested that members review the parts of the budget that relate to their expertise and report their findings to the Task Force. Ms. Wilson reviewed the budget process, designed to eliminate “fat.” During meetings with the City Manager, department directors review all line items, comparing costs with previous years. Non-essential items are cut. General and Enterprise fund departments are charged for administrative expenses. The PILOT (Payment in Lieu of Taxes) paid by enterprise funds increased from 4.5% to 5.5% last year. Ms. Wilson will forward a corrected copy of millage assumptions in the budget forecast, which anticipates lower increases to revenue. Ms. Wilson expressed concern that legislative proposals to cap the City’s budget at 3% annually would tie the City’s hands, making it impossible, for example, to bond a reverse osmosis plant. Support was expressed for budget guidelines, not State laws. It was stated that the amount of the suggested cap is artificial as it is based on the Save our Homes cap. It was stated that taxes on some properties have more than quadrupled in the past few years. It was indicated that costs associated with higher taxes cause inflation as renters and business customers pay more. It was questioned how motivated the City is to make cuts and where the fault for higher budgets lies, as School Board and County budgets also have increased more rapidly than the Task Force – Budget 2007-02-05 2 CPI. It was stated that just because people are fed up with higher taxes does not mean they are too high, especially when compared with other cities. Concern was expressed that the current property tax system is unfair, as it creates disparity in the amount of taxes paid by commercial property owners and neighbors living in similar homes. It was suggested the Task Force review the entire benefit system, as salaries and benefits total 70% of the budget and these costs are increasing too rapidly and need to be curbed. It was suggested during union contract negotiations, that the City limit increases to 3% or 4%, as that is all it can afford. It was suggested that offering lump sum bonuses could hold down costs. It was stated that most employees in the country pay toward their health insurance. It was suggested that the City cap health insurance costs to 3% annually, with employees paying all additional costs. Concern was expressed regarding the huge multiplier cost of pension benefits. As most companies have dropped their defined pension plans and are moving to self-funded, self- directed plans, it was suggested that the current Pension Plan be terminated as soon as possible and replaced with IRA contributions. Concern was expressed regarding contracted salary structures. It was suggested that STEP increases be eliminated, as their cost is too high. It was stated that Human Resources analyzes pay levels and it was suggested that staff is not overpaid. It was stated that it is important that the City continue to be the employer of choice. It was suggested that all local municipalities would follow Clearwater’s lead if the City curbs its employee costs. Concern was expressed that employees of retirement age do not retire. It was stated that state governments experience significant savings by offering buyouts every five years. It was suggested that the City encourage retirement age staff, who receive higher salaries, to retire by offering buyouts. New staff could be hired at lower rates. While some experience may be lost, it was stated that it is not always needed. It was suggested that subcontracting should become a way-of-life with many City functions, as it would save money and allow flexibility in compensation. It was said this change would support many local small businesses. It was felt that the City must reduce the subsidies it pays. Concern was expressed that the proposed boat slips may need to be subsidized. Ms. Wilson reviewed corrected subsidy totals for Parks & Recreation Department facilities. It was noted that subsidies for the Harborview Center, Long Center, Ruth Eckerd Hall, and BrightHouse Field total $1.7-million annually. Ms. Wilson reported that subsidies for each City recreation center range from $250,000 to $400,000. A proposed CIP (Capital Improvement Project) for Joe DiMaggio has not been approved. It was stated that reported subsidies do not include facility-generated income. Concern was expressed that staff had found it acceptable that subsidies for BrightHouse Field were similar in size to those provided to Jack Russell Field and that subsidies to the Long Center were similar before and after the City took over facility operations. The City’s long-term contracted subsidy of Ruth Eckerd Hall was questioned. Ms. Wilson said the City budgets this subsidy each year. Concern was expressed that the City’s Task Force – Budget 2007-02-05 3 subsidy does not lower ticket costs enough to provide lower income City residents the opportunity to attend programs. It was noted the subsidy also covers costs related to concerts and drama classes for students. Concern was expressed that the subsidy is too high and that Ruth Eckerd Hall should not be operating at a deficit. It was stated that large corporations in major cities often support performing arts centers. No large corporation is headquartered in Clearwater. It was suggested that subsidies be replaced with an annual grant program that is not automatic. Concern was expressed that organizations count on subsidies as entitlements. It was felt that the Harborview Center should have more events booked so that the City’s subsidy could be reduced. It was suggested that the Harborview Center should be closed if it does not make money. The City Manager said the Harborview Center is not functional. When contracts expire, City Council direction is to replace the structure with a more efficient building. It was suggested that a hotel or condominiums with retail shops be built there. Concern was expressed that taxpayers fund duplicate recreational facilities in the City and on School Board property. It was stated that many schools lack facilities and public and private school students often depend on City recreational facilities for their sports activities. Concern was expressed that non-students could be excluded from school fields if use is restricted to after school student activities. The City Manager said the new school superintendent is more receptive to opening school property to the public. It was stated the School District has insufficient funds to pay teachers, much less operate recreational facilities. It was suggested that the taxpayer-funded County, School Board, and City together support recreation facilities. It was stated that the City could reduce its reserves. It was suggested that the Task Force review City reserves, which were not provided. Ms. Wilson said reserves are not budgeted. It was stated that the City has done a good job of creating reserves of between $7- and $8-million. It was said that reserves should be returned to the General Fund during the following year. It was suggested that the City maintain, but not increase, its current levels of reserves. It was suggested that the City adopt a policy limiting the use of reserves to emergencies, not operating expenses. It was suggested that the City’s downtown provide activities that attract teens, possibly by replacing the Harborview Center with a movie theater and attracting shops, appealing restaurants, and an arcade. The City Manager reviewed problems the City had encountered while working to attract a movie theater. It was stated the downtown offers nothing to attract youth. Concern was expressed the majority of downtown pedestrian traffic is related to Scientology and does little to support retail businesses. Support was expressed for making downtown into an economic engine that brings in increased revenues. It was suggested that hotels be constructed downtown, and that new development not be limited to condominiums. Concern was expressed that many downtown shops have no parking. It was suggested that beach resorts provide a destination for families. Concern was expressed that accommodations at beach hotel properties under construction will be very expensive. It was stated that the downtown and beach lack destination attractions. Concern was expressed that PSTA (Pinellas Suncoast Transit Authority) schedules and routes are inconvenient and inefficient. Task Force – Budget 2007-02-05 4 . . . Ms Wilson reported legislative hearings regarding new property tax proposals have been scheduled. The closest hearing is scheduled at Hillsborough Community College Dale Mabry Campus on February 15, 2007, from 6:00 to 9:00 p.m. People can-sign up to speak. On February 12, 2007, a joint meeting with the City Council and Budget Task Force is scheduled at 6:00 p.m. Member Rutz requested 15 minutes to review his analysis of the City's fleet and suggestions. It was suggested that his presentation be continued to February 20, 2007. It was suggested that open discussion with the City Council review philosophy, benefits, reserves, retirees, and CIP improvements. On February 20,2007, department directors will provide information as requested. Human Resources Director Joe Roseto also will be present. 5. Adiourn The meeting adjourned at 8:09 p.m. G)~m Chair Budget Task Force Board Reporter Task Force - Budget 2007-02-05 5