Approved Minutes - 2009-04-13 OE LAKE°sip,
/W CITY OF LAKE OSWEGO
CITIZENS' BUDGET COMMITTEE MINUTES
April 13, 2009
Proposed FY 2009-2010 Budget
OREGON
Chair Ron Smith called the meeting to order on April 13, 2009 at 6:35 p.m. in the Santiam
Room of the West End Building, 4101 Kruse Way, Lake Oswego, Oregon.
Members present: Jack Hoffman, Mayor Ron Smith, Chair
Donna Jordan, City Council Katherine Shallenberger, Vice
President Chair
Kristen Johnson Frank Bearden
Sally Moncrieff Kelly Calabria
Mary Olson Jeff Gudman
Bill Tierney Daniel Williams
Members excused: Roger Hennagin and Gary Logsdon
Staff present: Alex McIntyre, City Manager
Darin Rouhier, Finance Director
Jordan Wheeler, Management Analyst
David Powell, City Attorney
David Donaldson, Assistant City Manager
Robyn Christie, City Recorder
Brant Williams, Economic and Capital
Development Department Director
Carol Bryck, Assistant Finance Director
Kam Frederickson, Budget & Financial Analyst
Ed Wilson, Fire Chief
Bill Baars, Library Director
Joel Komarek, LOIS
Jane Heisler, Public Affairs Director LOIS
Kim Gilmer, Parks & Recreation Director
Dan Duncan, Police Chief
Guy Graham, Public Works Director
Megan Phelan, Human Resources Director
I. Welcome & City Manager's Budget Message
Chair Ron Smith called the meeting to order at 6:35 p.m. He explained that state law required
public disclosure and involving citizens in the budgeting process. He advised that as the City's
fiscal planning board the Citizens Budget Committee had the authority to change the proposed
budget, including tax rates, the total amount of property taxes levied, and expenditure limits.
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Minutes of April 13, 2009
They were to forward the budget to the City Council by June 30th. Each Committee member
had an equal vote. Hennagin and Logsdon were not present, but each of the other members
present introduced themselves. Smith asked the Committee members to stay engaged,
respectful, open and focused.
Alex McIntyre, City Manager introduced the budget. He explained he had taken a new
approach to the budgeting process and the budget format to make the process more
transparent and the format easier to read and understand. He introduced and thanked the
members of his budgeting team and the department heads who had helped fashion the budget.
He said each department administrator would present that department's budget and explain
what the department did for the City. He pointed out that time had also been allocated for the
Committee to gain a good understanding of ten, high-issue, budget-driving themes that required
significant resources. He advised the budgeting process met the requirements of Oregon law
and the City Council had to approve a budget by June 30tn
II. Schedule of Meetings & Public Input Opportunities
McIntyre pointed out the proposed schedule offered opportunities for the public to weigh in,
starting with the Mayor's informal roundtable on April 18, then on the April 28, May 4 and May
11 Committee agendas. Citizens would hear the background and explanation of the budget at
those meetings and then have an opportunity to comment on it.
Committee members then discussed what were appropriate times to invite public questions and
comments, whether public input should be invited after presentation of a topic and limited to that
evening's topic; or if more time could be allotted at the end of each meeting or during breaks in
the meeting when the Committee members or staff would answer questions.
Smith decided to set time for citizen input related to the meeting's topic after the presentation
and Committee discussion at all Committee meetings, including April 20th. He also asked for a
recap report of the issues raised at the Saturday, April 18th roundtable discussions. Olson was
concerned that some citizens who could not attend all the meetings would not be able to ask
off-topic questions, Smith suggested they could ask questions, but they might not get an answer
until the particular topic was discussed. He said he would ensure public comments were
relevant and to the point. Jordan suggested scheduling an additional "open mike" forum for
comments. Smith suggested the Committee make space on each agenda for public input first
and wait to consider scheduling another forum.
III. Budget Changes and Highlights
McIntyre explained that he and the City Council needed to be able to be responsive to change,
especially in the current economic environment. The budgeting process the City had been
using was not transparent enough to the community. There should be more opportunity for the
public to get good information so they could ask meaningful questions and get timely answers.
He had made a lot of changes. The Finance Department used to develop the budget. Now the
City Manager's new budgeting team and the department administrators had an active role in
developing and communicating the budget. He proposed an annual budget that could project
ending conditions with more certainty than a biennial budget; that was more transparent; and
because he was using a new process with new "players."
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Minutes of April 13, 2009
McIntyre had consolidated five property-tax-funded funds (along with the Municipal Court Fund
and Planning/Building) into one General Fund to run the City. Spending would be more
transparent and the City Council would have more flexibility to shift property tax revenue to
where it was needed to accomplish their goals. Reserves associated with each of the funds
were also rolled into one large reserve account. He wanted to designate reserves to use to pay
for currently unfunded accrued leave liability and designate reserves that would grow large
enough over time to eventually pay for purchases of City vehicles and fire trucks.
Gudman agreed that the value of leave as it was earned was a cost of doing business and
funding accrued leave liability was reasonable. Shallenberger observed it was hard for a
department head to predict the effect on the department operating budget when accrued leave
had to be paid out at the time employees left. Jordan recalled that auditors had recommended
budgeting for accrued leave. Calabria questioned allowing money from the library fund to be
spent on a fire truck. McIntyre advised that the City Council could designate a reserve or
"undesignate" it at any time, and they had the authority to shift property tax money between
reserves. Jordan recalled it had been hard to move money between departments, even when
some departments had both a contingency fund and large reserves that were carried over year
after year. She said what was proposed was a more transparent way to show the public how
funds were spent and would allow the City Council to spend money where it was needed in a
public process. Olson agreed that consolidating the General Fund would mean that spending
would be easier to follow and understand. Gudman agreed the proposed roll-up of General
Funds was a very good idea.
Shallenberger asked what other items auditors wanted to see reserves for. Gudman noted the
$6 million post-employment healthcare plan liability was also unfunded and he thought the total
PERS liability might be in excess of$100 million. Rouhier said there were other items auditors
had commented on, but the City had such strong reserves that this was the extent the City
wanted to shield itself from risk by designating reserves. Tierney suggested that if there was to
be a budget policy to control the cost of unused leave there should be a policy related to the
cost of healthcare too.
McIntyre discussed new funds, departments and programs. There were two big projects. The
Lake Oswego Interceptor Sewer project (LOIS) would cost $125 million. The Lake
Oswego/Tigard Water Partnership project would cost $200 million (Tigard would contribute to
that). The City Council had already formed a LOIS team of five professional employees who
were to manage the project and facilitate communications. He asked for money for another
team of three to manage the Lake Oswego/Tigard Water Partnership program. The City
Council had created the new Economic and Capital Development Department and the Public
Works Department was now a stand-alone department. A Tourism Fund would account for the
percentage of Hotel/Motel Tax money mandated for that purpose by state law.
The budget document contained a "Budget Crosswalk" spreadsheet. It showed overall revenue
of approximately $75 million and expenditures of about $114 million. McIntyre explained the
budget was actually close to balanced, because most of the difference between revenue and
expenditures was $38 million in LOIS bond revenue that the City would receive, put in the
operating fund, and spend during the year. When asked, Rouhier explained the difference
between operating revenue and overall revenue was mainly the contribution from the City of
Tigard for the water project. He planned to provide the Committee with a more detailed report
on that.
Gudman asked why the City Manager's letter said the City was adding four employees, but his
summary to the City Council at their January goal-setting session said the City would add 10.5
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Minutes of April 13, 2009
employees. McIntyre confirmed that some had already been hired, some positions would not be
created or not filled, and there would be some layoffs. The LOIS team was technically 4.5 Full
Time Equivalent (FTE) employees and the Lake Oswego/Tigard water team was 3 FTEs.
Wheeler clarified the total "headcount" was 357.7 FTEs to serve a city population of 36,698.
IV. 2009-10 Revenues, Expenses and Reserves Overview
Rouhier pointed out that total revenue was approximately $75 million. Franchise fees had been
growing and investment income had declined dramatically over the past year, but property tax
was the biggest source of unrestricted City revenue. The budget did not change the current
property tax rate of 4.9703.
Tierney was concerned that counting "transfers" between departments as revenue would make
it appear the City was getting more revenue than it actually received. Rouhier explained that
was a function of fund accounting to track money from one fund to another so the City's cost of
providing a particular service to the community would not be understated and could be fully
recovered. For example the cost of providing wastewater management would include the cost
of internal services such as HR and GIS services. He agreed that kind of accounting tended to
inflate the budget and said he would try to fashion future reports in a manner that might
eliminate the confusion.
Rouhier advised that the net affect of each one-cent increase in property taxes was about
$56,000 per year, or about $3 per year for a house with an assessed value of$300,000. He said
the budget projected 3% growth in assessed value and slowing of new construction to only 1%.
Gudman questioned the new construction projection, because it was a one-third reduction in
previous years' projections, but permitting fees were down 50%. He asked the staff to verify the
current projection because it would impact property tax revenue. Rouhier said the budgeting
team had relied on the county assessor, who anticipated 1% new construction growth. He
pointed out the graphed breakout of a typical property tax bill that showed the City received 29%
of that revenue and part of it went to bonded debt service (see Page i-7). He promised Tierney
he would provide more information about what Bonds (Outside Tax Limits) were. He confirmed
for Jordan that the library levy was in the "County and Other General Government" category.
Rouhier pointed out changes in expenditures from last year (see the table on Page i-7).
Salaries, wages and benefits increased about 1%. An increase in Materials & Services was
primarily due to the cost of gearing up the LOIS and water projects. Tierney asked if the cost of
the LOIS and water project teams would be recorded as capital expense or operating expense.
Rouhier said most of the cost would be capitalized, but there were some administrative
expenses that would come from the operating budget. McIntyre confirmed for Williams that
the water project team would be dissolved at the conclusion of that project.
Rouhier explained the $40.5 million drop in reserves by the end of the budget year (see the
table on Page i-8). The General Fund was anticipated to drop due to use of capital and paying
for some positions in Planning and Building that were not funded out of current revenue. Most
of the overall drop was drawdown of Public Works reserves, which would start the year with
bond proceeds that would be drawn down over the course of the year to pay for LOIS and other
capital projects. He clarified for Williams that there was no need to replace reserves from bond
proceeds that were to be spent for their specific purpose during the year. He confirmed to
Jordan that the City might decide it needed to sell more bonds during the year and, if so, that
would be in a supplemental budget. It was not in the currently proposed budget. He advised
the City currently had a "cushion" over and above the minimum reserve balances City policy
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Minutes of April 13, 2009
mandated. (See the fund-by-fund schedule in the budget document for the minimums for each
fund.) The staff then distributed bound copies of the Proposed Budget 2009-10 to the audience.
Tierney and Williams asked if LOIS and water project funds could be segregated for discussion
purposes to make it easier to understand the rest of the budget. McIntyre agreed. Gudman
observed that LOIS was a capital project, and suggested that the money spent on it be isolated
in a separate capital expenditures line item and not included in city operating revenues and
operating expenses. Rouhier said that could be done, except for some administrative costs
associated with it. He explained that the budgeting team had segregated LOIS into its own
fund to make it more understandable.
Wheeler discussed the format of the budget binder and said the team's goal was to make it
reader friendly. McIntyre confirmed for Williams that the City would make copies of the
proposed budget available to the public in the meeting room, at City Hall, at the Library and
online.
McIntyre clarified that the Lake Oswego/Tigard Water Partnership was a "done deal," and the
Committee's role was to understand the background and reason for doing it and decide if the
numbers made sense. When Jordan asked if Lake Oswego and Tigard could form a joint team,
McIntyre explained that Lake Oswego was the managing partner and the City's team was
planning the entire project. Jordan suggested ensuring the message that was communicated to
the citizens of both cities was the same.
McIntyre confirmed for Tierney that potential "wage adjustments through the negotiating
process" were accounted for in a separate reserve account; were not reflected in department
salaries; and the 1.08% increase in Personal Services did not include those wage adjustments.
Gudman wanted the Committee to be involved in the quarterly review of actual budget results
by the City Council. McIntyre explained he had been hired by the City Council to manage the
budget and report back to them. He advised that it was the City Council's role to scrutinize the
budget and he was not sure what role the Committee could play, but he would be happy to
update them on a quarterly basis as well.
Gudman wanted the schedule to allow the Committee to spend the most time on the big
expense items, such as the wage adjustments reserve. McIntyre said the discussion of that
item was not in his presentation, but it was within the Committee's purview to ask about it. He
acknowledged the City was a labor-intensive organization.
McIntyre advised the Committee members to use terminology that was meaningful to their
audience and avoid spending a lot of discussion time on very arcane accounting issues they
might not understand. He suggested if they had technical questions they ask Rouhier during
the week so the budgeting team could provide answers in terms that made sense to everyone.
Williams said participants should ensure their comments were to relevant and to the point. He
explained that he planned to press the staff to clarify the probabilities, risks and relevant factors
whenever he read the words, "could likely."
Gudman said if he was the only member who thought the Committee ought to be fully engaged
in a monthly or quarterly review of results he would withdraw his request. But he wanted
discussion before the suggestion was rejected. Smith suggested the Committee postpone that
discussion until after they had addressed the budget. Then they could discuss what their role
was going to be.
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Minutes of April 13, 2009
Gudman observed the Financial Trends— Operating Budget graph on Page i-45 broke down
the total operating expenditures on a per capita, inflation-adjusted, basis. He advised that was
an excellent measure of how efficiently the City was using their operating dollars. He wanted to
know why that spending was at the highest level it had been in 20 years. Smith asked the staff
to come back with the answer.
V. Adjournment
Chair Smith thanked everyone for attending and adjourned the meeting at 8:15 p.m.
Respectfully submitted,
Kam Frederickson /s/
Kam Frederickson
Budget & Financial Analyst
APPROVED BY THE CITIZENS' BUDGET COMMITTEE: 4/28/09
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Minutes of April 13, 2009