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HomeMy WebLinkAboutCouncil Workshop Minutes 01.24.2006 MINUTES COUNCIL WORKSHOP JANUARY 24, 2006 6:30 P.M. COUNCIL CHAMBERS A Council Workshop was held in the Council Chambers and called to order by Mayor Ken Olson at 6:30 p.m. on January 24, 2006. COUNCIL MEMBERS PRESENT: x Dick Fritzler _x_ Doug Poehls Kate Hart x Mark Mace _x_ Gay Easton _x_ Chuck Dickerson x Jennifer Johnson Norm Stamper OTHERS PRESENT: Mary Embleton Steve Klotz Jan Faught (6:43 p.m.) Sam Painter Scott Wilm Dan Koch Public Input (three-minute limiO: Citizens may address the Council regarding any item of CiO' business not on the agenda. The duration for an individual speakingunderPubliclnputislimitedtothreeminutes. Whileallcommentsarewelcome, theCouncilwillnottakeaction on any item not on the agenda. · Nolle Budget revenue nroiections: Solution for Ambulance Service snace issues: Comnuter system Perry Asher distributed copies of the information in his PowerPoint presentation to the council, and a copy is attached to these minutes. Now that revenue has been received, particularly property taxes, Perry wanted to review his November budgeting prognostications to update and to determine the direction for next year's budget. This agenda included: a review of what was discussed in November; the citfs current condition and what Perry thinks the revenue and cost projections are now; the ambulance space issue and some of the proposed solutions, including advantages and disadvantages for each; the recommendation for computer technology; and Perry's recommendations for each of the items. In November, he used averages to det~ntdne revenue figures for this year. He acknowledged that it looks like he was wrong, but he thinks the city will still be better than the budget estimated. Perry projected that revenue will be about $33,000 over the estimated 2006 year end budget. He also projected that expenditures would be about $62,000 less than anticipated. The projections are based on the revenues (51 percent of budget) and expenses (47 percent of budget) at this point. In municipal budgeting cash reserves are necessary as a hedge against unexpected expenses or downturns in the revenue stream. The city should keep the cash reserves at about twenty (20) percent. The city should have had $538,000 in the cash reserves at the end of last year; however, cash reserves Coune'fl Workshop Minutes of January 24, 2006 ended with $1,008,694. Perry had overlooked the fact that for this fiscal year, about $144,000 of cash reserves were used to balance this year's budget. That must be subtracted from the total, which leaves $864,298 remaining. In addition, the budget for this year was $2,838,833, which means there should be $567,767 in cash reserves at year end. Perry estimates that the city will probably add about $96,000 to the cash reserves at the end of this year, leaving a total of about $400,000 a~er subtracting the $144,000. Therefore, Perry anticipates that the excess cash would be about $400,000. He is certain about the $300,000, and the additional $96,000 is an estimate. Perry averaged the four percentages (2003-2005 percent change in actual revenues and 2006 estimated), which gives an average of 6.52 percent. The percentages for 2003, 2004, and 2005 percent change in actual expenditures and 2006 estimated produces an average of 6.23 percent. Each additional year adds up to more cash reserves. Two actual percentages, 10.85 percent and 11.77 percent, are really huge and there must be a unique reason why that happened. So in the chart, Perry lowered them 3 percent, making the 2004 Actual Revenue percent change at 8.00% and the 2005 Actual Expenditure percent change at 9.00%. His calculations produced a yearly revenue increase of 5.8 percent and an actual expenditure increase of 5.54 percent, which he recommended be limited to 4 percent when the budgeting is done. The percentages are averages of the previous four years which are projected into the future. Jenny expressed concern over estimating revenues at 5.8 percent increase, as proposed by Perry. In her opinion, 2 to 3 percent revenue increases are a better way to estimate, based on past history information she received from the Local Government Center and her preference for a more conservative approach for revenues. There was lengthy discussion regarding: Jennifer's conversations with Ken Weaver and Judy Mathre at the Local Government Center: averaging thre~-year revenues to predict future revenues; the option to provide a ten-year revenue average; the history and future trend of the mill levy; fees for services; an increased tax base; and the Wal-Mart that will be built in Laurel. Perry stated that the budgeting numbers are not in any way absolute, but it is a way to get some idea of where the city might be headed. The mill levy provides only about 40 percent of the budget. Jennifer reiterated her desire for more background information and her preference for a more conservative approach, to budgeting. Mayor Olson mentioned that the mill value decreased in 2001 and 2002, but it has increased for the last three years. The 2002 mill value was $6,067; the 2003 mill value was $5,819; the 2004 mill value was $5,615; the 2005 mill value was $5,696; and the 2006 mill value is $5,885. This presentation was regarding the General Fund, which does not include sewer and water rates. Mary explained that the mount of dollars that the city can actually collect in taxes has increased because Laurel is a growing community and 3 percent increases are guaranteed by HB124. For budgeting purposes, everything is estimated and things are not always certain. There was discussion regarding fiber optics infrastructure that was included in Laurel's mill value in the early 2000's. 2 Council Workshop Minutes of January 24, 2006 Mary explained that only about 25 percent of the General Fund revenue is affected by taxes and 25 percent is charges for services. There was a lengthy discussion regarding a previous council retreat when Ken Weaver questioned the amount of the city's cash reserves. Cities are encouraged to have cash reserves ofhetween 25 and 50 percent. Since there will be approximately $1 million in the city's cash reserves, a certain amount of money could be used for one-time expenditures for projects that need to be done. Mayor Olson encouraged the council to allow Perry to complete the presentation. Jennifer recalled that Nathan Tubergen projected two and three percent increases, which is more conservative. She stated that the amount of cash reserves can be evaluated yearly and the projects can be determined, but to predict very aggressive percent increases would behoove us to move away from a conservative financial man's 2 and 3 percent increases to say that the city is rolling in money. One thing Ken Weaver said to her was that, if you project that much percentage in revenue, he guaranteed that expenditures would go sky high. The trouble is that it is easy to get into trouble without conservative projections. It concerns Jenny that these percent increases are higher than the cost of living. She stated that these are very aggressive projections, and she is considering the long range effects. There was further council discussion regarding the projections. The council reviews the figures every year and adjustments can be made. The City of Laurel is allowed a 3 percent increase through the legislature. Atter subtracting the allowed 3 percent, the projected percentage is lowered to 2.8 percent, which is in the 3 percent area that Ken Weaver and Nathan Tubergen suggest. Jennifer stated her disagreement and frustration with the way this is done. Perry explained that another reason he proposed the 4 percent for expenditures is that the union contract requires a 3',6 percent increase for the union employees. Past practice has been to extend that to all non-union employees, and the labor force makes up half of the General Fund budget. Since 4 percent is only IA percent more than that, it seemed like a good number. In order for the city to make its commitments under the contract, it will need to look at 3IA or 4 percent increases. There was discussion regarding new commercial businesses and subdivisions that will provide a bigger tax base and will not need a lot of maintenance for a few years. Mayor Olson asked the council to allow Perry to complete his presentation. Perry explained six alternatives regarding space issues for the Laurel Ambulance Service: 2. 3. 4. 5. 6. Do absolutely nothing right now and do something later Rearrange space in the existing FAP building Purchase and remodel a building Coustruet an addition on the east side of the FAP building Construct a free-standing structure to the east of the FPP building Construct a scaled down free-standing structure Jennifer stated that a seventh alternative has been discussed at the Community Wildfire Plan meetings. The proposal is to build a fire substation in the vicinity of Airport Road, which would Council Workshop Minutes of January 24, 2006 alleviate the space issues for the ambulance. The proposal is in the Yellowstone County Community Wildfire Plan, which Jenny asked to be scheduled on the next council workshop to be presented for the council's approval. With this proposal, there should be more than enough room for the ambulance. ?,rty expla'med that the proposal would not address the need for a locker room with showers and a lounge room for the ambulance attendants to use while on duty. It might be poss~le to do some remodeling in the FAP building once such a structure was built, but it would provide more space but very little else of what is needed. Gay asked Scott if there would be any advantage to building a substation at the airport. Scott expla'med that the fire department needs to go north or the coverage area will be lost to Billings as it grows westward. The department can cover about 85 percent of the new subdivisions within the 5-mile radius. The subdivision on the east side of 72no Street is talking about petitioning to use the LVFD. Additional equipment would be needed. Only two or three firemen live on the east end of Laurel, so there would be considerations regarding manning a substation. If the department cannot cover everything within a 5-mile radius at the present depamuent, a substation is needed. Discussion followed regarding the space pressures at the FAP, the city shop, steel buildings, possible locations for a fire substation, and new subdivisions. Perry then reviewed the advantages and disadvantages of each alternative. · Alternative One: Do Nothing o Advantages: · Virtually no cost · Would allow to deal with Ambulance space issues in the wider context of all of the public safety space considerations o Disadvantages: · Leaves the Ambulance Service with the current space problems for three or four years · Alternative Two: Rearranging current building o Advantages: · Inexpensive- approximately $50,000 to $75,000 o Disadvantages: · Can only be a short-term solution · Does not create any net increase in space · Probably will not work because we already tried to shuffle the ambulances around and they do not fit the way they would need to in order to work · Alternative Three: Purchase and remodel existing building o Advantages: · Could be a great long-term solution o Disadvantages: · Cost - both of building and remodeling · Availability of building that can be used by the Ambulance · Potential for inheriting building problems · Alternative Four: Construct addition on east side ofFAl? o Advantages: 4 Council Workshop Minutes of January 24, 2006 · Could be a good long-term solution · Could save some money on construction o Disadvantages: · Construction costs · Additional costs of upgrading the FAP could be more than the cost of a free- standing building · According to Gary, there is c~tly no place in the FAP building for a handicap accessible bathroom, so it may not be possible to upgrade the building to ADA requirements. Alternative Five: Construct a f~ee-standing building east of FAP o Advantages: · Would be a long-term solution · Would provide Ambulance with almost everything they need to function o Disadvantages: · Construction costs ($300,000 to $400,000) would nse nearly all of the City's extra cash reserves Alternative Six: Construct a scaled down flee-standing building o Advantages: · Would provide Ambulance with much better work area than currently · May need some additional space in the future o Disadvantages: · Construction costs (about $180,000) is still an issue, but would be manageable Perry explained the other pressing needs, including a new ambulance, which would cost about $90,000. There is about $45,000 in the CIP for an ambulance, so an additional $50,000 would be needed. The second need is the computer upgrades and website development, which would cost about $18,000. However, Perry thinks the city could get by with $6,000 to $7,000 now and wait and do the rest later. The third need is the improvements in the city hall lobby~ The costs total about $7,000 more than is currently budgeted for building. The bids for the work will be presented to the council. Perry explained his recommendation for distr~ution of the excess cash reserves. This includes: For the Ambulance Service, a scaled down building for between $120,000 and $150,000; a new ambulance at $50,000; the firewall ($3,000) and website development ($4,000) for $7,000; and the city hall lobby remodel for about $7,000. The total would be about $214,000. Perry is confident the city will end the year with $300,000 in reserves, and if he is correct in his projections for the rest of this year, it will be more like $200,000. The $200,000 is in addition to the 20 percent that is needed to have a good, solid conservative cash reserve, and the city should end the year with $400,000 in excess of that. Perry explained the proposed directives for budget preparation for stalE. Limit total General Fund increases to four percent of last year's budget; Ensure that the use of any excess cash reserves are limited exclusively to one-time capital expenditures and not use them to balance the budget like was done last year; and complete Cost Allocation System prior to submitting Preliminary Budget, something that has been recommended for several years by the auditors. 5 Council Workshop Minutes of ~anuary 24, 2006 Perry expla'med his proposal to divide all departments into two groups -- line departments and overhead departments. He is working on this now and should have it ready by the time the Preliminary Budget is ready for the council's perusal. There was further discussion regarding the following: building a substation on land on Valley Drive by the water reservoir; the five-mile radius for fire protection; the next Billings substation locations at 56* and Grand and the Zoo exit; the completed upgrades to the city's water and sewer systems; the future upgrade to the storm drain system; the concerns that services offered by the City of Laurel can adequately keep up with the city's growth; the new subdivisions in progress or in the planning stages; requesting space for fire protection in lieu of park land from new subdivisions; the expansion of the Laurel Airport; the prospects for new commercial businesses in the City of Laurel; and impact fees. Perry will present information regarding impact fees to the council soon. Mayor Olson stated that the issue is where to locate the ambulance service, and he encouraged the council to consider authorizing expenditures to explore the options presented. There was discussion regarding the value of the needs assessment and the need to review the Capital Improvements Plan prepared by the department beads in 2003. At this point, Jennifer stated that she was unable to hear all of the council discussion and she expressed her frustration with the situation. She requested that hearing enhanced devices be installed in the council chambers. Mayor Olson stated that improvements need to be made to the sound system. The council workshop adjourned at 8:03 p.m. Respectfully submitted, Cindy Allen Council Secretary NOTE: This meeting is open to the public. This meeting is for information and discussion of the Council for the listed workshop agenda items. City of Laurel Financial Analysis Budget Retreat January 24, 2006 Agenda * The City's Current cond/lion and new revenue and cost projec~ons · Disoassic~ of possible Ambulance Service space * Computer Technology Recommendation and Costs · AA reccanu:'~endalions city of Lau~e~ Revenue Trend .~ma. lysis Revenue Analys~s Budgeting Trend $2,~55,273 ! $L234,14~ : $78373 $2,255,667 $2A26,109 $170,442 $2337,8~3 $~8L703 $243,870 Spendln~ Trend 20O2-20O3 $2.27L5~ $~.45,57~ -,~8,04~ 2003-2~4 $2~494A71 $2,4~9,977 $74A94 Cash Reserve Analysis 2 Cash Reserve Analysis * The City ended FY 2004-2005 with cash reserve balance of $1,008,694 * To bahnce the 2005-2006 Budget $143,7(12 of cash reserves was appropriated, leaving $864,298. · The 2005-2006 Budget ts $2,838,833. · To maintain a 20% cash reserve, the City should end the 2006/iscal year with $567,767 in reserve. Cash Reserve Analysis (~a) · However, I estimate that the Fiscal 2006 Budget will end with an additional $96,000 · This will result in a cash reserve of approximately $960,298 or an excess of $392,531 3 Ambulance Space Alternatives Rearraage space i~ exisling FAP h,ildtl~g Paecbase and remodel a building Const~ an addition on the ~side of the PAP Alternative One: Do Nothing Advantages: · Virtually no Cost · Would allow to deal with Ambulance space issues in the wider context of all of the public safety space consideralions D~advantages: · Leaves the Ambulance Service with the current space problems for three or fo~t years 4 Alternative Two: Rearranging Current Building Advantages: · Inexpensive - Approximately $50000 te Disadvantages: · Can only be a short-term solu~/on · Doesn't create any net/ncrease/n space · Probably won't work Alternative Three: Purchase and Remodel Existing Building Advantages: · Could be a good long-term solution Disadvantages: · Cost- both of building and remodeling · Availability of building that can be used by Ambulance · Potential for inheriting building problems Alternative Four: Construct Addition on ~.~Side of FAP Advantages: · Could be a good long-term solution · Could save some $$ on construction Disadvantages: · Consffuction costs * Additional costs of upgrading FAP - could be more than the cost of a free standing building 5 Alternative Five: Construct a Free - Standing Building ~.', of FAP Advantages: · Would be a long-term solution · Would provide Ambulance with almost everything they need to function Disadvantages: · Construction costs ($3130,000 to $400~00) would use nearly all of the City's exlxa case Alternative Six: Construct a Scaled Down Free-Standing Building Advantages: · Would provide Ambulance with much bettor work area than currently · May need some additional space in the Disadvantages: · Construction costs (about $180,000) is still an issue, but would be manageable Other Pressing City Needs * New Ambulance o Cost wifl~ current CIP Budget $50,000 · Computer Upgrades and Website Development ~ Total Cost - up ~o $15,0~0 · City Hall Lobby Improvements o Total Cost- Appro~mately $7,000 One Possible Distribution of Excess Cash Reserves