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04/17/2002CITY COMMISSION BUDGET WORKSESSION CITY OF CLEARWATER April 17, 2002 Present: Brian J. Aungst Mayor/Commissioner Whitney Gray Commissioner Hoyt P. Hamilton Commissioner William C. Jonson Commissioner Frank Hibbard Commissioner Also present: William B. Horne II City Manager Garry Brumback Assistant City Manager Ralph Stone Assistant City Manager Pamela K. Akin City Attorney Mary K. Diana Assistant City Clerk Brenda Moses Board Reporter The Mayor called the meeting to order at 1:07 p.m. at City Hall to discuss budget and finance policies, fiscal indicators, and highlight major issues. City Manager Bill Horne said a number of capital improvement projects are forthcoming. The budgeting process is beginning and the final document will be completed in September. Staff intends to provide the Commission with as much information as possible during the process. He said money appropriated but unspent would go into a designated reserve fund or retained earnings. Some programs may need to be cut to balance the budget. Mr. Horne said this budget would have a great impact on the City’s plans. Budget Director Tina Wilson reviewed the recommended changes and additions to the Commission Budget and Finance policies. She said some of the additional language references procedures already being followed. There was discussion regarding evaluation of fiscal conditions and financial indicators for the year ending September 30, 2001, significant financial issues for FY 2002-2003 budget, and the FY 2002-2003 budget calendar. Discussion ensued regarding unanticipated retirements and Human Resources Director Paul O’Rourke said staff does not poll employees to determine retirement intentions. If an unanticipated retirement occurs, sick and vacation time accrued is charged to the appropriate department. Appropriate funds would be moved into that department’s budget and an amendment would be made to the budget. Ms. Wilson said a few years ago, the City had funded a retirement pool to try to address unanticipated retirements, but the fund has since been depleted. Vacant positions generally remain vacant until those positions are funded. The purpose of the recommended change that the Commission maintain an additional General Fund reserve equal to ½% of the subsequent year’s budgeted expenditures to fund unanticipated retirements will provide a poll that will grow and will not impact the reserve in the General Fund. In response to a question, Ms. Wilson said she is comfortable with the reserve, which is now at 11%. Discussion ensued concerning the 10-year resurfacing cycle. Ms. Wilson said the Commission has historically recognized the 10-year cycle as an average noting not all roads need replacement every 10 years. Language regarding establishing a millage levy in order to maintain the City’s streets, curbs, and bridges has been added. Discussion ensued in regard to the rate schedule section and changes reflect the Commission review the rate schedule at a minimum of every five years. Language was added to the Health Insurance Stabilization Fund section. Ms. Simmons said small reimbursements from insurance companies go into this fund and are used for consultants and costs for health insurance rate increases. This fund is used as a budgeting tool to offset any large increases. Ms. Wilson recommended eliminating policies regarding PACT, Financial Support to Social Service Agencies, Filling Position of Retired Employees Still on Payroll, and Pilot/Seed Programs. It was noted these areas are addressed in other ways. Fiscal Conditions and Financial Indicators In response to a question regarding the user charge coverage indicator in 1997 being unusually high, Ms. Wilson said it would depend upon what methodology was being used that year. It was felt that user charges to cover costs to provide services should be addressed in the Commission’s visioning workshops. Community issues and quality of life programs must be weighed in government. Ms. Wilson said no targets have been established with respect to user charges. Expenditures Ms. Wilson said the City’s real net operating expenditures per capita when inflation is taken into consideration is less than in 1997. This is a positive trend and turnaround from last year's analysis. The improvement of this trend is due to 2001 census figures and slowing the rate of increase in the number of employees. In response to a question, Assistant City Manager Garry Brumback said it is difficult to compare expenditures including net operating per capita, employees per capita, etc. with other cities as their programs and services may vary greatly from Clearwater’s. He said he prefers to find a balance that works for Clearwater rather than compare. Ms. Wilson said it is necessary to monitor the area of fringe benefits due to increased medical costs. Regarding the City’s operating position indicators, only the Harborview Center Operations Fund consistently reflects operating deficits. Parks and Recreation Director Kevin Dunbar said staff is aware of the Harborview Center’s maintenance issues. The ongoing paint problem in the atrium may be resolved by installing a drop ceiling. This year, staff is projecting out the next 5 – 6 years’ operations for the Harborview Center and considering a CIP. Mr. Dunbar said bookings and usage are up significantly. Ms. Wilson said she would double-check the figures regarding the Harborview’s operating surplus for this year versus last year. Ms. Simmons said the City’s actuary stated that Clearwater has the best-funded Employee Pension Plan he has ever seen. The market plan exceeds the actuarial value. It is not anticipated the City will need to increase contributions above the current 7% of payroll, since the plan currently has a $15.2 million credit balance. In response to a question, it was indicated the credit balance could be used to level off fluctuations. Regarding the accumulated employee leave indicator, Ms. Wilson said the rate at which such hours are accumulated have been reduced in recent years and the cost is leveling off. Discussion ensued in regard to Capital Plant Indicators and it was indicated one-time projects could make the trend line look negative. In response to a question, Ms. Wilson indicated enhancements as well as maintenance are included in these indicators. It was noted there were a number of stormwater issues that needed to be addressed and the Gateway to the Beach spiked spending. A comment was made the Gateway to the Beach project led to economical development. In response to a question, Ms. Wilson indicated she was not sure regarding the negative trend in the depreciation expenses indicator as vehicles and equipment were being replaced on a routine basis. Regarding the residential development indicator, she said the net cost of serving residential development is generally higher than the net cost of serving commercial or industrial development. The City must be careful that residential development is not growing at a faster pace than commercial development. Assistant City Manager Ralph Stone said if the City fails to balance the two, the City would incur increasing service costs. Risk Manager Leo Schrader said liability and workers compensation insurance costs have remained static; property liability insurance costs increased significantly after the September 11, 2002, tragedy. Ms. Simmons said the City pays the first $500,000 of a claim and the insurance companies pay the excess. Ms. Wilson said medical insurance costs are increasing approximately 29%. Mr. O’Rourke stated medical insurance costs generally increase due to the City’s loss ratio and the health inflation trends. Staff hopes to discuss cost sharing and containment strategies with the employee unions. Ms. Simmons said approximately $1 million would come from the Premium Stabilization Fund for medical insurance costs if an increase is necessary. Mr. Brumback said there are three union contracts to be negotiated this year, several projects including a new Main Library and a Sand Key Fire station. These projects and issues will greatly impact the City’s ability to balance the budget. In response to a question, Ms. Wilson said she did not have firm numbers regarding property values from the County Appraiser’s office. Mr. Horne requested the Commissioners supply staff with areas of analysis they wish to have prior to their visioning workshops. He commended staff on their expertise. The meeting adjourned at 2:54 p.m.