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Approved Minutes - 2009-04-20 of LAKE()sip_ CITY OF LAKE OSWEGO CITIZENS' BUDGET COMMITTEE MINUTES April 20, 2009 Proposed FY 2009-2010 Budget \OREGo$ Chair Ron Smith called the meeting to order on April 20, 2009 at 6:30 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, Council President Katherine Shallenberger, Vice Chair Roger Hennagin Frank Bearden Kristen Johnson Kelly Calabria Sally Moncrieff Jeff Gudman Mary Olson Daniel Williams Bill Tierney Members excused: Gary Logsdon resigned 4-20-09 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 Chip Larouche, Chief Technology Officer Bill Baars, Library Director Jackie Rose, Library Youth Services Manager Jane Carr, Library Reference/Adult Services Manager Joel Komarek, LOIS Jane Heisler, Public Affairs Director LOIS Kim Gilmer, Parks & Recreation Director Gary Evans, Assistant Parks & Recreation Director Tom Mueller, Golf Course Manager Jerry Knippel, Special Projects Director Dan Duncan, Police Chief Guy Graham, Public Works Director Megan Phelan, Human Resources Director Barb Parr, Legal Assistant Fran Blake, Municipal Court Supervisor City of Lake Oswego Citizens' Budget Committee Page 1 of 9 Minutes of April 20, 2009 I. Welcome &Agenda Chair Smith opened the meeting. He asked Committee members who had attended the City Council's community roundtable open forum on the budget the previous Saturday to describe what they heard from the 15 citizens who had participated. Hoffman, Jordan, Shallenberger and Tierney recalled a wide range of comments and questions. Christie distributed a summary to the Committee II. Department Presentations City Manager, Alex McIntyre had consolidated the departmental budget presentation. He began by showing the organizational chart. He explained the City Council appointed the three charter officers: the City Attorney, the Municipal Judge and the City Manager. He explained how he had reorganized City operations. The Fire and Police Chiefs, managers of new, high profile programs and projects such as Emergency Management, Economic and Capital Development, Sustainability and the LOIS project team now reported directly to the City Manager's office. The Assistant City Manager is in charge of the City's other operational departments. McIntyre asked if the Committee members who had questions for the staff at the last meeting were satisfied with the answers they had received. Gudman confirmed that he had talked with Rouhier and was satisfied with the answer. Rouhier had clarified for Tierney that of the bonded debt that is outside of the legal limit, which makes up about 14% of a citizens' property tax bill, the City received 4% of bonded debt and it is used to pay general obligation bonds. Olson asked the City Manager to leave time for a discussion of financial policies at some point in the process. City Council Jordan Wheeler, Management Analyst, explained that the City Councilors were now categorized as "employees" and their stipends were accounted for under Personal Services. This was a proactive change based on the experience of other jurisdictions that were being audited because they categorized city counselors as contractors. During the questioning period, he explained the proposed budget did a better job of differentiating between City Council expenditures and City Manager's office expenditures. Related adjustments to line items such as Development and Training had been made to reflect Council expenses such as membership in the Oregon League of Cities and the U S Conference of Mayors. The Miscellaneous Charges budget had been increased to account for the cost of catering and televising more City Council meetings. He clarified that the cost of the City Council clerk was charged to the City Manager's office. City Attorney's Office City Attorney, David Powell explained his office served as the "general service law firm": for the City. The office consisted of the City Attorney, Deputy City Attorney, a legal assistant, administrative support and a part-time City prosecutor and they handled about 420 criminal cases a year. His office advised the City Council and City boards and commissions. One half- time staff position that was the planning liaison had been moved to the Planning department because they had not had as many Measure 37 claims to deal with as they had expected. During the questioning period, he clarified for Tierney that the Professional & Technical City of Lake Oswego Citizens' Budget Committee Page 2 of 9 Minutes of April 20, 2009 Services budget contained a contingency for outside services in the event of litigation. Last year little of it had been used. He clarified for Hennagin that most legal services were provided in-house, but the City had contracted with specialized outside counsel for the LOIS project, and human resources sometimes hired specialized outside counsel during labor negotiations. Those costs were not part of the City Attorney's budget. He said the City's insurer typically hired the attorneys when a tort claim was made against the City. He clarified for Jordan that the City had employed its own prosecutor for many years. He confirmed for Williams that the part- time employee got vacation and sick leave, but had not taken advantage of medical benefits. Tierney suggested "contingency" funds should be called out in a separate line item. Questions from the audience Eugene Dittler wanted to know how much the City's attorneys billed per hour for services. Hoffman explained they were paid salaries, and he estimated the cost might be about $60 to $70 per hour. He said typical outside counsel charged $220 to $250 per hour. City Manager's Office Assistant City Manager David Donaldson explained the reorganization meant he no longer served as Human Resources director because one had been hired, and he was now in charge of eight departments. The City Manager's staffing budget was larger this year because of the positions that had been created in or moved to the City Manager's office because they were important to the overall organization and achieving City Council goals related to sustainability, emergency management, public outreach and the special centennial celebration projects. He said the last snowstorm had demonstrated the City needed an emergency plan and manager. Jane Heisler's efforts were now focused on the LOIS project, so the vacant second Assistant City Manager position had been reclassified to Public Communications Manager. During the questioning period, he clarified that of two of the additional Full Time Equivalents (FTEs) in the City Manager's office were transfers from the Human Resources and Planning Departments. Gudman and Tierney observed the printing budget had gone up and asked if the City could use less paper. Wheeler explained that the City was printing more inserts each year but was distributing the newsletter electronically now. He explained for Gudman that the increase in Miscellaneous Charges reflected the cost of organizational memberships, which had previously been accounted for in other budget items. Gudman asked why the Professional & Technical Services budget was up and Wheeler said he would get more details for him. Gudman asked why the large jump in the proposed budget for Special Projects (to $360,000). Wheeler explained $100,000 of it was the cost of the 2007-09 FAN alley pickup project, which had not been expensed yet. $250,000 was for the Centennial Celebration next year. Gudman questioned spending such a large amount on a "celebration of ourselves" in the current economy. Williams asked how the amount had been arrived at. McIntyre said it was a "placeholder" based on his experience with similar celebrations. He said it would be an opportunity for the community to come together. It would be a yearlong celebration that included some major events and that would require a lot of concerted effort to be successful. He explained the cost would be reflected in the currently contemplated budget and the next budget because it took a lot of planning and there were "up front" costs. He said the City would engage an events coordinator and look for partners. Williams agreed the City needed something like that, but he cautioned that people would ask why the City was spending so much on it and the City should try to find partners. Jordan suggested incorporating it into regularly scheduled events, such as the Festival of the Arts and July 4th fireworks. City of Lake Oswego Citizens' Budget Committee Page 3 of 9 Minutes of April 20, 2009 Gudman questioned the need to establish separate new Special Projects line items for intergovernmental relations and accomplishing City Council goals if they were ongoing efforts. Wheeler explained this was to account for efforts to achieve new goals that were not yet assigned to a department and were to be shepherded by the City Manager's office. Gudman explained he wanted to ensure there was no "double budgeting" for City Council goals. Wheeler confirmed there was not. Tierney said projects in the Special Projects category should be explained in more detail so everyone would understand. The staff agreed to prepare a report and email it to the Committee members. Gudman indicated that would satisfy his concern that there was a "$250,000 placeholder" without any detail, and that he accepted the answer that there was no "double counting" for efforts to achieve Council goals. He commented that a lot of "placeholders" could add up to a lot of money. Hennagin agreed that a new City Council goal should be assigned to the City Manager's Office and budget. Economic and Capital Development McIntyre said this new department would report later. Finance Department Darin Rouhier, Finance Director explained that the Finance Department handles daily operations, accounting, financial reporting, utility billings, tracks the financial activities, manages debt payments and investments, and annually supports budgeting with monitoring throughout the year. He indicated that the 1.5 increase in FTEs was the result of transferring the costs of one finance position back from the utility departments, which were supporting the utility billing function, to more closely reflect utility costs after some changes; and a receiving a half time position from the building department to assist with a more comprehensive front counter. Finance oversees "fiscal entities- such as Assessment Project Fund; Bonded Debt Service Fund; Risk Management for insurance and other fees; the Streetcar Fund; the new Tourism Fund captures the new 2% increase from Hotel/Motel tax; and Non-departmental has the General Fund operating contingency, insurance reserve contingency and others. During the questioning period, Tierney wanted to know if contingency funds budgeted in individual departments were $10,000 or something larger. He also wanted to know if the operating philosophy was to leave them in departmental budgets instead of rolling them all into one citywide contingency fund to be managed. Rouhier said his philosophy was to have contingencies in the General Fund that had been defined by City Council policy to have a safety net or contingencies for reserves. He said allowing flexibility within individual department budgets was an approach that may prevent the need for Council approval on very small items that may come up, but Council may prefer to know about any changes not programmed in to the budget. Jordan asked why, on the Summary of Resources, the Hotel/Motel Tax was listed separately for 2009-10 and why the Intergovernmental component of the had gone from $100,000 to zero after the 2005-07 Biennium. Assistant Finance Director Carol Bryck explained that the Intergovernmental $100,000 was state revenue sharing money that had been moved to the Streetcar Fund. She also explained that the portion of Hotel/Motel tax revenue that was not mandated to be spent for tourism was put in the General Fund, but the 2% for Tourism was being tracked separately to ensure it would be used as intended. Also, she explained for Hennagin that consortium contributions to the Streetcar were expected to significantly increase because the City had billed consortium members for unpaid back payments. She confirmed that the City of Portland was participating. City of Lake Oswego Citizens' Budget Committee Page 4 of 9 Minutes of April 20, 2009 Rouhier explained the difference between "Contingency" and "Unappropriated Ending Fund Balance." Oregon budget law required a budgeted "Unappropriated Ending Fund Balance" to stay "locked up" through the entire current cycle. But it was possible to spend contingency funds. Any contingency not reallocated to be spent by the end of the year would be "booked" as part of the Ending Fund Balance. He clarified for Bearden that the City Attorney's office did not have a contingency fund, but they had budgeted an amount in Professional & Technical Services that they could use where often needed. Tierney suggested the City Attorney's budget should separate "Contingency" from Professional & Technical Services and that spending of contingency funds by individual departments should be controlled by the City Manager for large amounts so movement of the money would be more visible. Rouhier said the budget had a contingency for labor settlements. All bargaining units were currently in negotiations and none of them were settled yet. Past budgeting processes would have assumed some outcome and put those amounts into departmental budgets. But the budgeting team had put it aside in a contingency fund that could be allocated by the City Council after a settlement. Shallenberger said a small allowance might be acceptable to budget in a run rate manner as opposed to large contingencies. Tierney suggested setting a limit on individual departmental contingency budgets and anything over that amount would have to be approved by the City Manager. Jordan noted that is was necessary for City Council approval for use of contingency over a certain amount. Bryck clarified for Gudman that each fund could have a contingency, not each department. Gudman wondered if each fund might be tempted to maximize the contingency amount, and it might make more sense to have a citywide contingency fund. McIntyre advised that Oregon law required contingency amounts on a fund-by-fund basis. He reiterated that departments did not have contingency funds. He confirmed for Gudman that he and Rouhier were satisfied that the total of contingency dollars reflected what was best for the City. Rouhier confirmed for Olson that the City knew Risk Management expenditures would go up, but they did not yet know how much CIS would charge next year. Bryck confirmed for Olson that the Tourism Fund budget included Repair and Maintenance of the Iron Furnace. Fire Department Fire Chief Ed Wilson explained the City had a full service fire department that did a lot more than respond to fires and they served an area larger than the City because they had long- standing contracts with other areas and fire districts. Revenue came from property taxes and contract revenue was almost 15% of their$12 million budget. All 50 sworn personnel had at least basic EMT certification and 27 of them were paramedics. Every apparatus that went out had at least one EMT or paramedic on it. The budget eliminated one deputy fire marshal position in the Prevention Division. Currently there were about 2,200 inspectable buildings and over a third of them had not been inspected for five years or longer. It would be a challenge, but they planned to train more firefighters so they could inspect 900 — 1,100 of the inspectable buildings. Wilson said he supported shifting the Emergency Management Coordinator to the City Manager's office because it created better synergy with other major departments. He said when the economy improved he might ask the City Manager to add back the Prevention deputy. During the questioning period he confirmed for Williams that the Fire Marshal reviewed building plans and even though new construction activity had slowed there was still lots of remodeling. He related that he had asked the previous City manager for a third fire marshal position. He clarified for Hennagin that part Intergovernmental income was reimbursement from the County for providing services there. Income from other districts was listed under Sales & Services revenue. He agreed to offer the Committee more details about that income. He and McIntyre City of Lake Oswego Citizens' Budget Committee Page 5 of 9 Minutes of April 20, 2009 clarified for Gudman that the Repairs and Maintenance budget was up dramatically in this budget because now each department had to account for their own fuel costs, instead of transferring funds to Maintenance Department & Motor Pool to cover those costs. McIntyre confirmed for Shallenberger that the fire and police budgets planned for"cashing out" of benefits of employees they knew were about to retire, but a new leave reserve fund he suggested for a future year would ensure the City did not get caught short when others left. Wilson explained to Shallenberger that the department believed the South Shore fire station was in the right location, but it was at the end of its useful life and should be rebuilt. That decision would be up to the City Council. Williams observed the Professional & Technical Services budget had more than doubled. Wilson explained a large part of that was the cost of EMT recertification, which was required every two years. So the budged cost covered two years. He said he would provide the Committee with more details about this line item. He confirmed that the child car seat installation-checking program required fire and police overtime because the checks were typically conducted on a Saturday and not all firefighters were certified to do that. Jordan advised this was a valuable service because most child seats were installed incorrectly. But she was surprised to learn it cost overtime. She thought grants were available. Wilson recalled some grant money had been available for that about six years ago. Wilson described some scheduling arrangements the department used to try minimize overtime cost. He related that although alarm checks were typically done outside of typical business hours, the Department recouped their cost for that. He said it was likely there would be more overtime in the Prevention Division now that they down one FTE. Olson was glad to see the department was setting aside a reserve for equipment replacement. Rouhier explained for Olson and Hoffman that the Fire Department Contingency would not "go away" when combined into the General fund. He planned to explain how that would work in more detail during the financial policy discussion. Tierney wanted to know how stable the Sales & Services income was for fire contracts. Wilson identified several factors that indicated it would be stable for at least the next three years. He said the department planned to begin negotiating for increased rates. Tierney asked him to provide more information to justify the large increase in materials and services. Rouhier explained that the reserve for equipment would remain in the Fire Department budget. Wilson explained for Hennagin that Prevention Division reflect one FTE was moved to the Operations Division. He said he would provide more details on the estimates and FTEs. Human Resources Megan Phelan, Human Resources Director, explained that some of the human resources department responsibilities are for recruitment and selection, benefit administration, training, safety and workers compensation. The budget was lower because the Assistant City Manager position had been moved to the City Manager's office and Professional & Technical Services reductions include attorney services and labor relations consultants. She said the department employed an HR Director, an HR Analyst, an HR Specialist and a part time internship was funded by donations from the Robert Kincaid Memorial Internship program. During the questioning period, Donaldson clarified for Shallenberger that the average age of City employees was 46; the average tenure for union employees was 10.5 years; and the average tenure of management employees was 7 years. Phelan explained that Professional & Technical Services paid for attorneys and labor relations consultants. That cost was estimated to be higher for 2009 because the City was currently negotiating all three labor contracts. Contracts were typically for a two-year period. City of Lake Oswego Citizens' Budget Committee Page 6 of 9 Minutes of April 20, 2009 Gudman observed the City had sent PERS almost $4.3 million in June 2008. He wanted to know what the City would send to PERS in June 2009 and what the City's total liability to PERS was. He guessed that was in excess of$100 million. Phelan said she would provide that information. She explained for Williams that the large increase in Materials and Supplies accounted for items that had not been counted before, such as employee and volunteer recognition; extra publications and reports; and computer services or upgrades in her department. Tierney asked if there was a "rule of thumb" for employee benefits as a percentage of full-time salaries, noting that departments vary. Phelan said each jurisdiction established their own standard. She agreed to research the City percentages for the Committee. Information Technology Chip Larouche, Chief Technology Officer, explained his department supported the City's computer network and ran the copy center. He said most of the 1.2% budget reduction he proposed related to slowing down some purchases of software and software upgrades. He announced he no longer proposed to discontinue wireless support in City parks ($800 per year), or eliminate outsourced computer training for employees. During the questioning period, he explained that computers were replaced when they were about five or six years old and a "low- demand" computer might be used for as long as eight years. Gudman wanted to know if the department was systematically measuring the return in productivity the City got for the investment in computers. Larouche explained that if a department director said their computers were slowing the department down, that might indicate a computer needed to be replaced in that department after three years, but he looked for somewhere else to continue to use it. Gudman asked if the City was more productive because they were using computers? Larouche said computers allowed the City to do a lot more things and IT ensured the system worked. He clarified for Hoffman that the Professional & Technical Services budget reflected the cost of software licenses. Williams observed that budget had been cut in half, but the Other Materials and Supplies budget had been significantly increased. Larouche explained he had budgeted $100,000 for servers, backup resources and power supplies to support the network. The department heads budgeted for their own departments' computers, so that equipment was not in his budget. Library Bill Baars, Library Director, reported the Library had been ranked first overall for Oregon Libraries and had the highest per capita use in the state. It benefited from the services of 543 volunteers, donations from Friends of the Library, and two endowment funds. It would also benefit from revenue from the new, voter approved, County Library District. The Committee was scheduled to discuss that next week. He explained that they moved a 0.5 FTE unfilled position from Management to a Youth Services Division. During the questioning period, he clarified for Jordan that the cost of purchasing books was on the Library Print Materials line for each division. He said three-quarters of the 245,000 items in the Library were books. They also budgeted for Non-Print downloadable materials because they saved valuable shelf space. He said even though timber revenues had gone away there was still enough money for each city to receive $1 million capital for libraries for the next five years. Hennagin asked about the endowment funds that were accounted as both resources and requirements. Baars clarified for Hennagin that the Library was not dipping into endowment City of Lake Oswego Citizens' Budget Committee Page 7 of 9 Minutes of April 20, 2009 funds, but endowment income had declined. Rouhier pointed out that the crosswalk more clearly portrayed what was happening with the beginning and ending balances. Baars clarified for Johnson that the Library was "maxed out" on space. They were trying to fit as much in as possible and had removed study carrels to make more room for computer terminals. He clarified for Shallenberger that the Library did not track the cost of having staff available to help for computer users but they did track the cost of offering special classes. He said Friends of the Library operated the Booktique and paid rent of$1 per year. He said they transferred books to the Booktique to be sold, then the Friends provide the Library with programs and materials. He said they were trying to find a way to track the actual time staff spent at each Division desk. He clarified for Tierney that the Library had five managers; many employees were on-call, and most employees were part time. Lake Oswego Interceptor Sewer Project (LOIS) Joel Komarek, LOIS Project Director, said his team was 4.7 FTEs: two professional engineers, two professional communications staff and .7 FTE administrative support staff. The team had been formed last June. Most of the proposed LOIS budget was related to capital expense of Phase II (Lake Full). The bids had been opened and the project was to be completed June 2010. Phase I (Kelok Road) had been started and was to be completed by the end of the fiscal year. All three phases would be either completed or under construction during the next fiscal year. During the questioning period, Komarek confirmed for Tierney that the capital outlay included the cost of professional engineering design services and $26 million would be spent on the Lake Full phase though June 2010. He anticipated Phase III (Lake Down) would begin in October 2009 and be underway by the start of the 2010 fiscal year. $200,000 would be spent on that phase during the proposed budget cycle. Gudman asked what the total project budget was. Komarek said after the bids were opened the original estimate of$125 million had been changed to $110 million. That included contingency funds for all three phases to address conditions they did not anticipate. Gudman stressed the need to make the distinction between "budget" and "forecast." He suggested Komarek present a "budget" of"x" dollars and say everything else was an "estimate." He said the community would understand that, even if the City had to explain a change of scope changed the amounts. Jane Heisler explained the Lake Full budget was more certain now that the bids were in. The rest of the amounts were estimates until those bids were in. So the current best estimate was $110 million. Tierney asked where the proceeds from the bond sale were listed in the budget. Jordan noted that the $56 million proceeds was in the Public Works: Wastewater budget (see page 142). She asked the staff to provide a crosswalk between the LOIS project and Wastewater Fund budgets. Rouhier agreed to cross-reference that, but he noted that LOIS was not a "fund" that stands alone. Rouhier confirmed for Olson that the $12 million Revenue Bond Principal was to be used to pay off the 2007 bond issue. Municipal Court Donaldson introduced Fran Blake, Court Supervisor. She explained that the court dealt with traffic and municipal code violations and criminal misdemeanors. Donaldson reported that he and Blake were tracking violations, revenue and costs on a monthly basis to determine why court revenue was down by 14.7% from last year and had been declining for six months. City of Lake Oswego Citizens' Budget Committee Page 8 of 9 Minutes of April 20, 2009 During the questioning period, Blake explained the state legislature set the fine schedule and the City had to send a mandated amount of fine revenue to the state and county each month. She confirmed that the City allowed people who could not pay a fine to make payments. The City uses an agency to collect older past due amounts. Donaldson said part of his research would be to find out what percentage of fines were actually collected. Hennagin observed that in this budget the expenditures for Materials & Services was greater than the staffing cost. Donaldson explained that was where the Court accounted for the mandated requirements it sent the county and state ($268,000 of the total $319,000 for Materials & Services). The Committee members suggested showing the obligations to the county and state as separate line items. III. Public Comment Smith closed departmental presentations for the evening and invited public input. Carolyn Jones inquired about the Streetcar. She recalled that money had recently been allocated to repair a trestle and when she spoke to Metro staff they had inquired about which trestle. She also questioned how a single-track line would allow 10-minute interval trolley service. She worried money spent on repairing the trestle now might be wasted if the entire line and the trestles had to be rebuilt in the future. Jordan explained that Metro may not know which trestle, as the project would be funded by Tri- Met stimulus funds and it would pay for trestles and tunnels. Tri-Met would direct the repairs. The Trolley would not be running again until late summer because the trestle repairs were necessary even to support the existing Trolley. Hennagin explained that the 10-minute frequency would be met by constructing two sections of passing tracks at Willamette Park and farther north that would allow streetcars to pass each other. Jordan said the trestle improvements would need to make the trestles strong enough to hold a couple original, heavier, Trolley cars that the City of Portland would provide. The City Council was still looking into how heavy new streetcars might be and if it can be built to support them as well. Eugene Dittler asked if the Streetcar would be allowed to run empty. He observed the buses were crammed with riders. Jordan anticipated they would be on a schedule. IV. Adjournment Chair Smith adjourned the meeting at 9:30 p.m. Next meeting is Tuesday, April 28, 2009. Respectfully submitted, Kam Frederickson /s/ Kam Frederickson Budget & Financial Analyst PENDING APPROVAL BY THE CITIZENS' BUDGET COMMITTEE: 5/11/09 City of Lake Oswego Citizens' Budget Committee Page 9 of 9 Minutes of April 20, 2009