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Approved Minutes - 2009-05-13 OF LAKE°sip, 1, CITY OF LAKE OSWEGO CITIZENS' BUDGET COMMITTEE MINUTES May 13, 2009 �- Proposed FY 2009-2010 Budget �oREGON/ Chair Ron Smith called the meeting to order on May 13, 2009 at 6:43 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: None Staff present: Alex McIntyre, City Manager Darin Rouhier, Finance Director Jordan Wheeler, Management Analyst David Powell, City Attorney David Donaldson, Assistant City Manager Robert Galante, LORA Director Kim Gilmer, Parks & Recreation Director Brant Williams, Economic & Capital Development Director Denise Frisbee, Planning & Building Department Director Dan Duncan, Police Chief Guy Graham, Public Works Director Jerry Knippel, Special Projects Director Bill Baars, Library Director Ed Wilson, Fire Chief Chip Larouche, Chief Technology Officer Carol Bryck, Assistant Finance Director Kam Frederickson, Budget & Financial Analyst Linda Dickhous, Administrative Support I. Welcome & Agenda Chair Ron Smith called the role and highlighted the major agenda items. II. Approval of Meeting Minutes The vote on the Minutes of May 4, 2009 was postponed to allow more time for Committee members to read the draft. III. State Revenue Sharing Public Hearing City of Lake Oswego Citizens' Budget Committee Page 1 of 7 Minutes of May 13, 2009 Rouhier reported the City's share of state revenue sharing was to be $300,000 based on a per capita allocation method. He pointed out a state revenue sharing trend line had been included in the budget material. These were discretionary funds that could be used for any purpose. In recent years Lake Oswego considered it General Fund revenue. Public Input John Surrett, 1685 Edgecliff Terr., observed the trend indicated the City's population was almost flat. Rouhier confirmed the City had not grown much. Smith closed the public hearing. Hoffman moved to approve the proposed budget's use of the City's share of state revenue as undesignated General Fund resources. Johnson seconded the motion and it passed by unanimous vote. Smith temporarily adjourned the City's Citizen's budget Committee meeting at 6:49 to begin the LORA Budget Committee meeting with the same members. Smith announced the Committee was now acting in the capacity of the Lake Oswego Redevelopment Agency Citizens Budget Committee. Smith reconvened the City of Lake Oswego Citizen's Budget Committee meeting at 7:38 p.m. He suggested the members consider how to close the "gap." Rouhier observed that the Committee had reduced it to $807,000 so far, after reducing funding for the Centennial celebration by $79,000. Public Input Dan Vizzini, 13830 Verte Ct., LONAC representative, distributed copies of the official LONAC recommendations. He said in the future the budgeting process should factor in funds to accomplish action measures called for in the Comprehensive Plan, neighborhood plans, and other adopted City plans. Quality of Life Indicators should be used to guide investment decisions. During the questioning period, he clarified that the recommendations were not prioritized, and they addressed the handful of issues LONAC members felt were important. Gudman asked where they anticipated the money would come from. Vizzini explained that LONAC did not expect the City to accomplish them all at once, and it might take years to fund them, but they did want adopted plans capital projects to be added to the CIP project list. Jerry Wheeler, 35910 Blazer Trail, CEO of the Lake Oswego Chamber of Commerce, said the Chamber was working with the city to promote local business. They planned to hire a consultant to do the market research. He thought the streetcar and Foothills development would help downtown and that would motivate Lake Grove too. He recommended that the City make light industrial land available for former Foothills business and new businesses to move to. He said now was a time to plan for the future, not step backward. He urged the Committee to keep the economic development line item intact. It was an investment in the future. During the questioning period, he confirmed the Chamber and the City would form a private/public partnership to hire the consultant. He said the City should use City resources to bring more customers to the City; attract the types of businesses that would give the City "critical mass;" and motivate all areas of the City to work together. John Surrett, 1685 Edgecliff Terrace, suggested the City delay filling the economic development position for a year until the public/private partnership consultant recommended what was City of Lake Oswego Citizens' Budget Committee Page 2 of 7 Minutes of May 13, 2009 needed. He also suggested postponing forming the water project team for a year until the City saw how the tiered water rates worked. Matt Finnegan, 128 Condolea Drive, asked the Committee to follow LONAC recommendations related to neighborhood plan implementation. Smith closed the public hearing. Deliberations/Votes Hoffman moved to approve the City Manager's 2009-10 budget as adjusted by the staff on May 11, 2009 and as amended by the CBC to move $21,000 to the Parks & Recreation Department from the City Managers office Centennial Celebration budget; to reduce the Centennial Celebration budget in the City Manager's office by an additional $79,000; and to place $900,000 of City support to the Library in the Ending Fund Balance as a reserve for a future library facility. Johnson seconded the motion. During the ensuing discussion, Smith read aloud his May 12th email to the Committee. He wrote that it had been wrong and irresponsible for the Committee to vote the previous evening to reserve $900,000 for Library capital improvement when that action held back $600,000 to $800,000 from much needed areas. He urged them to reconsider the vote. Jordan argued that the City had more than enough money in reserves. They were not just for a rainy day. Some could be used to do things that would make the city better off in the long run. They could implement LONAC recommendations and fund sustainability projects and the Arts Council. She noted that two major paving projects the City would have done on its own anyway were to be funded by stimulus funds. Johnson suggested the Committee wait to see how the new one-year budget worked and then consider how to improve it next year. She stressed that it implemented City Council goals. She saw the need for a streets maintenance master plan in a future budget. She suggested the City Council might need to take more time goal setting next year. She said it was not fair to divert funds away from the Library this year. Moncrieff agreed with Jordan and Johnson. She stressed that City Council goals reflected what they heard citizens wanted them to do during an extensive public engagement process. She recalled that McIntyre had explained to them that every goal had a cost. She supported the budget as it stood. Bearden said he supported the budget. Gudman said he did not support it. He recalled that the City Council had not understood the cost because when they set the goals they had anticipated they would discuss the cost at the budget meetings. Calabria agreed with Gudman. She would not approve the current budget because she did not feel that was a responsible thing to do in current economic times. She wanted to give a tax break to citizens to offset the cost of increased utility bills. She said the City lost credibility when they bought the WEB and increasing spending would not help. The City should not increase spending and they should reduce the tax rate. That would be important if the City needed to pass a bond measure for facilities in the future. Shallenberger said the City could have a budget that did not dip into reserves. That would be a good message to send to citizens. She believed it could be reduced by a certain percentage across the board. Department heads would know what they could cut. She questioned why the economic development position should be "on the table" when there might be savings to be found in other departments. D. Williams agreed that the City Council goals were all worthwhile, but he questioned the timing. He recalled that Councilors justified funding them by saying that citizens they had talked to asked for them, but he observed that some citizens on the CBC did not think the time was right. Tierney said he did not support the current budget because it was "business as usual." He said City Council goals were adopted after he had served on the Council for only a few days. He suggested there might be other ways to achieve some of the City of Lake Oswego Citizens' Budget Committee Page 3 of 7 Minutes of May 13, 2009 goals without adding FTEs. Olson explained that she and Tierney were not advocating removing the economic development position from the budget, but waiting to fill it until the City and the Chamber created an economic development plan. She agreed with Smith that the contribution to the reserve for Library capital funding should be reduced to $300,000 to 600,000. She recalled others argued they did not want to reduce the level of service to citizens, but they were also willing to accept a lower score on the pavement condition index, which lowered the standards for streets. She agreed that the goal setting process might need to be started earlier next time in order to give the City Council time to consider the cost. She said she could not support the motion, but she thought the new approach and the work the budgeting team had done improved the budgeting process. Hennagin explained that because he had not been present to hear half of the presentations he might abstain. He said in many ways a City budget had to be "business as usual" budget in order to continue providing basic services. He said the new economic development position was important in the current economy. Hoffman related that he had discussed other Committee members' concerns with McIntyre and department heads and been satisfied with their answers. There were legitimate reasons for the transfers and why FTEs and salaries and benefits were higher. He said the City Council supervised the City Manager and they had told him they wanted the economic development position. Olson confirmed that McIntyre had addressed most of her concerns to her satisfaction and she did not want to micromanage his job. But she recalled that when the City Council set goals they had not known there would be a 30% rate increase in sewer service or that the City would be paying for financing the WEB for a few more years. She said it might be wiser to reallocate some of the money that would go to the Library to lower the tax rate, or pave more streets, or put away in case they were still paying for the WEB in 2012 and the interest rate went up. Johnson said it was not responsible to decrease the tax rate. She recalled Measure 5 had kept the city from raising tax rates even though property values had increased by more than 50%; the City received less state and federal funding; and the cost of asphalt had gone up. The responsible thing to do would be to build reserves. Smith conducted the vote on the budget and it did not pass. The results were 5 in favor, 7 opposed, and 1 abstained. The Committee then agreed to take a break in order to allow each member time to formulate his/her own suggestions about how to close the budget "gap." Jordan held there was no gap. The budget planned use of reserves that had been built up over time and over the minimum requirement to be used for strategic investments. She said a city's bottom line was not related to profit, but to level of service. Smith did not think it was prudent to tap into reserves and savings while there were so many economic unknowns. He suggested closing the gap by using $600,000 of the $900,000 the Committee had voted to reserve for the Library; using $120,000 of the proposed Centennial Celebration funding; and either taking the remaining $99,000 from reserves or letting McIntyre decide how to save that much. McIntyre advised the gap could be quickly closed by not investing reserve funds into capital projects. That would mean that Parks and other CIP projects would not get done in this budget year. However, Olson observed the gap was almost the equivalent of the $900,000 the Committee had voted use to start a Library capital improvement reserve fund. She said the Committee had essentially given that much in General City of Lake Oswego Citizens' Budget Committee Page 4 of 7 Minutes of May 13, 2009 Fund dollars to Library reserves even though the Library operating budget had been increased. She agreed with Smith that it was prudent to reduce the contribution to Library reserves. Moncrieff recalled hearing form citizens who wanted the Library expanded, Open Spaces maintained, good schools, and potholes to be filled, but there had not been a loud message from them to reduce property taxes and cut spending. She said this was the time to plan ahead, not cut back. Smith said qualify of life in the City would not be diminished if the city used County funding to replace General Fund dollars and ensure longevity of the Library and put $300,000 into a fund to build a new Library in the future. He questioned spending one-quarter million dollars for a Centennial Celebration while cutting a Fire Marshal position that the City needed to inspect buildings. When Gudman asked, McIntyre and Hoffman said bonding agents had told them they would be satisfied if the City maintained its current policies regarding minimum reserves through the change in management. After a short break, Smith asked each member to suggest how he/she would close the remaining $807,000 gap. Hoffman wanted to use 100% reserves. Johnson proposed to take $250,000 out of the $300,000 WEB Percent for Art fund and leave $50,000. Jordan observed the City was required to have General Fund reserves of$14.6 million but they had $19 million. She said the City was well run and had a very good bond rating and she did not hear citizens calling for reduced property taxes. Olson did not want to send the message that the City used reserves to balance the budget in current economic times. Olson indicated she could agree to reduce the Library capital reserve by $300,000 to $600,000. Shallenberger suggested that if 62% of City voters voted for the library district the Committee should put two/thirds of the $900,000 in the Library capital reserve and use the remaining one/third to close the gap. Others suggested 40°/o to 50%. Tierney suggested reducing Special Pay by $90,000 to keep it more in line with last year. D. Williams suggested eliminating the communications position to save $100,000 and reducing the Centennial Celebration fund by another$125,000. That left $25,000 for the celebration. Moncrieff wanted to add $115,000 funding for a Fire Marshall. Olson suggested removing $4,000 from the City Council department. Tierney clarified that he was suggesting saving $50,000 by not hiring the economic development manager until late in the year, after an economic development program had been fashioned. He also thought Parks & Recreation Management Services could be cut by $70,000. He saw no reason for expanding programs and increasing part time workers if that did not generate additional revenue. He said Public Works Engineering budget showed large increases in Personal Services at the same time it showed low increases in FTEs that could possibly be cut. Shallenberger suggested that rather than micromanaging the staff and going over the budget line by line the Committee could direct McIntyre to achieve a $250,000 across the budget (General Fund) reduction and not use reserves. Tierney confirmed the across the board reduction could replace the cuts he had just suggested. Gudman suggested adding $200,000 to the road maintenance fund. He also suggested recommending that the total number of non- City of Lake Oswego Citizens' Budget Committee Page 5 of 7 Minutes of May 13, 2009 utility FTEs had to say the same and McIntyre could decide where to cut 5.3 FTEs. He estimated that would save approximately $500,000. Rouhier discovered a problem that to only leave $50,000 in the Percent for Art Fund meant it would go negative by the end of the year. It needed the beginning balance, plus $90,000 to balance the $105,000 they would spend. Smith observed the WEB Percent for Art fund would be reduced $200,000. Smith called for a vote on using $500,000 to start the Library capital reserve fund so the City had $400,000 more General Funds to use. The action failed when only six members voted in favor of it, but seven votes were necessary to pass. Smith called for a vote on reducing Special Pay by $90,000. The action was approved when nine members voted for it. Smith called for a vote to not fund the $100,000 Communications position. The action failed when only four members voted for it. Smith called for a vote to fund the second Fire Marshall's position. The action failed when only six members voted for it. Smith called for a vote to cut the Centennial Celebration fund by another$125,000. The action failed when only three members voted for it. Smith called for the vote on the $250,000 across the board cut in the General Fund budget. The action passed when nine members voted for it. Smith called for a vote to add $200,000 to the road maintenance budget. The action failed when only two members voted for it. Smith called for a vote to take 5.3 FTEs out of the budget. The action failed when only two members voted for it. Johnson objected to the $250,000 across the board cut. She stressed the new one-year budget had already been cut a lot and it should be given a chance to work. It could be tightened next year, if necessary. Smith observed that after the across the board cut vote the gap was down to $417,000. He asked if the Committee could find $417,000 in savings? Jordan questioned why the Committee would reduce Special Pay and the WEB Percent for Art fund when the city might have to spend them. Hennagin observed it would be easier to revisit Library funding than remove CIP projects. Tierney still supported a 1% across the board cut. Moncrieff said it did not make sense to cut the Engineering budget, but add money to pave roads; or reduce the Parks programs budget but keep funding CIP projects to improve playground equipment. She worried the members were trying to cut things no one would notice so they would not have to touch "hot potato" issues like the Library, CIP projects or the swim park. Johnson questioned why they would require an across the board cut, but then add money for some projects. Tierney disagreed that the cuts would materially affect the Parks maintenance budget because a good manager could find one or two percent savings if he/she tried. Moncrieff said she supported Johnson's suggestion to allow the budget to work for a year and trust the department heads. Johnson moved to take the $200,000 out for the Percent for Art and $90,000 out of Special Pay. She calculated that $807,000 minus $290,000 was $517,000. She clarified her motion City of Lake Oswego Citizens' Budget Committee Page 6 of 7 Minutes of May 13, 2009 was to pass the budget using $517,000 from General Fund reserves. Hoffman seconded the motion. The motion failed by a 6:7 vote. Gudman suggested keeping the 2009-10 Library budget the same as 2008-09 using the County tax funds to free up $600,000 in City property tax revenue to be used elsewhere in the General Fund. Smith called for a vote on earmarking $600,000 for a Library building fund and using $300,000 to help close the $517,000 gap. The action was approved with nine voting in favor. Smith called for a vote on reducing the City Council budget by $4,000. The action was approved after ten members voted in favor. Johnson moved to make all the changes approved by votes and pass the budget as it was using $217,000 from reserves. Moncrieff seconded the motion and it failed with only five members voting for it. Smith observed the across the board cut of$250,000 that had previously passed closed the gap. Shallenberger observed that left the decision of whether to hire a communications person and how much to cut from the Centennial Celebration up to the staff and she thought that was appropriate. V. Approval of the City 2009-2010 Proposed Budget Rouhier summarized the changes: $200,000 was removed from the WEB Percent for Art fund transfer; reduce Library Contingency by $300,000 to set aside $600,000 for a building reserve; reduce Special Pay by $90,000; there was to be a $250,000 across the board reduction in the General Fund; and the City Council budget was cut by $4,000. Tierney moved to approve the budget as amended. Olson seconded the motion and it passed 8 in favor, 4 opposed, and 1 abstained as follows: Yes No Abstain Ron Smith Jack Hoffman Roger Hennagin Mary Olson Donna Jordan Bill Tierney Kristen Johnson Katherine Shallenberger Sally Moncrieff Frank Bearden Kelly Calabria Jeff Gudman Daniel Williams VI. Adjournment -- Chair Smith adjourned the meeting at 10:10 p.m. Respectfully submitted, Kam Frederickson /s/ Kam Frederickson Budget & Financial Analyst PENDING APPROVAL BY THE CITIZENS'BUDGET COMMITTEE: April 19, 2010 City of Lake Oswego Citizens' Budget Committee Page 7 of 7 Minutes of May 13, 2009