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HomeMy WebLinkAbout2010.0323.TCWSM.Minutesz:\council packets\2010\r5-6-2010\100323m.docx Page 1 of 15 TOWN OF FOUNTAIN HILLS MINUTES OF THE WORK STUDY SESSION OF THE FOUNTAIN HILLS TOWN COUNCIL MARCH 23, 2010 AGENDA ITEM #1 - CALL TO ORDER AND ROLL CALL Mayor Schlum called the meeting to order at 5:33 p.m. in the Fountain Hills Town Council Chambers. ROLL CALL: Present for roll call were the following members of the Fountain Hills Town Council: Mayor Schlum, Councilmember Contino, Councilmember Leger, Councilmember Brown, Vice Mayor Hansen, Councilmember Archambault and Councilmember Dickey. Town Manager Rick Davis, Town Attorney Andrew McGuire and Town Clerk Bev Bender were also present. AGENDA ITEM #2 – DISCUSSION RELATING TO THE TOWN’S FIVE-YEAR CAPITAL IMPROVEMENT PLAN AND FUNDING OPTIONS. Town Manager Rick Davis reviewed that at the last meeting staff had indicated they would be back before the Council this month to continue that discussion and to discuss strategies relative to funding of some of those capital projects. He commented that the project on the top of his mind was the Saguaro Boulevard mill and overlay. Ms. Mary Martin, the Town’s Accounting Supervisor, proceeded to walk everyone through the Town’s five- year Capital Improvement Plan (CIP) through the use of a PowerPoint presentation (copy on file in the Clerk’s office). She stated that the projects for the next fiscal year amounted to $13.5M and with anticipated use of the following funding sources: Economic Development Fund, Grants, Donations/Rebates, Stimulus/ARRA Funding, and the CIP reserves. She stated that there were two projects that remained unfunded at this time. Ms. Martin reviewed the projects contained within each of the funding sources: Economic Development Fund: Downtown Vision Plan (Avenues/Lakeside) $290K Councilmember Contino requested a breakdown of the $290K in writing. Ms. Martin stated that there were detailed project sheets on each of the capital projects and she stated she would provide those to the Council after the meeting. Councilmember Leger asked that Ms. Martin provide a high level overview of that $290K. Ms. Martin responded that $250K was the continuance of monies set aside for potential enhancement to the development of the property next door; $40K was for the potential of having to do a downtown parking study. Grants ($2.7M): Shea Climbing Lane $1.1M Shea Widening $1.1M FH Blvd. Sidewalk $354K Downtown Sidewalk $28K Photovoltaic Installations $47K Fire Station Emergency Generators $59K She noted that most of these were continuing projects. z:\council packets\2010\r5-6-2010\100323m.docx Page 2 of 15 In response to a question from Councilmember Archambault, Ms. Martin responded that there were two funding sources for the Photovoltaic Installation project (a grant portion and rebate portion) for a total of $80. Donations/Rebates ($283K): Downtown Vision Plan $250K Photovoltaic Installations $33K Ms. Martin explained there were two projects of which the Downtown Vision Plan was the greening of the downtown. She commented that the primary funding source for that project was donations and with the photovoltaic installations, the primary funding source was rebates. Stimulus/ARRA Funds ($3.1M): Shea Blvd. Gap Overlay $1.1M Fire Station #2 Relocation $2.0M Ms. Martin discussed the two projects above. She stated that the Shea Boulevard Gap Overlay project had been recently added as a result of having one of the stimulus projects come in with better pricing than was originally anticipated. Therefore, staff hoped to complete a secondary project through stimulus funding (a Shea Boulevard Gap project). The project would try to tie together the space between the two Shea Boulevard projects currently listed in the CIP. Councilmember Archambault asked for further clarification. Public Works Director Tom Ward explained the project would run from Technology Drive to Fountain Hills Boulevard adjacent to the Shea climbing lane (north side of Shea – west bound). He noted staff was looking to add the medians with landscaping along with the mill and overlay project in order to steer the traffic. CIP Fund ($2.1M): Shea widening project (matching funds) $480K Annual sidewalk program $292K FH Blvd. Sidewalk $192K Unpaved alley projects $135K Shea bike lane $75K Shea gap projects $65K Traffic signal upgrades $149K Parks master plans (2) $200K Voice/data upgrades $10K Fire station matching funds $229K Ms. Martin reviewed the projects anticipated to be funded from the CIP fund. She pointed out that the Council would see project listed in two places as the matching fund portion tended to come from the CIP reserves when a grant called for matching funds. Ms. Martin discussed the two short term funding issues for the following two projects totaling approximately ($5M). She stated the projects were listed in the CIP for next year; however, staff had not yet been able to designate a funding for them. Saguaro Blvd. Mill & Overlay ($4.5M) Annual Pavement Management Program ($500K) Ms. Martin displayed a few photos of Saguaro Boulevard showing the significant deterioration of the road. She noted that the Council saw the annual pavement management program every year in the CIP. She reviewed what the program was (the dividing of the town into segments in order to manage maintenance throughout the year on a regular schedule so that the pavement did not become significantly degraded and so all the roads were maintained in a reasonable amount of time to a specified standard). She discussed the proposed maintenance schedule and associated funding for the next five years stating that although the amount for FY2010-11 was a little over $500K, the five year accumulative total was a little over $5M. z:\council packets\2010\r5-6-2010\100323m.docx Page 3 of 15 Ms. Martin stated that a question came up at the last work-study session on the CIP as to what was the potential of using the CIP reserve fund to continue to fund these two additional projects. She reviewed what would happen if they chose to go that route, stating that the beginning balance that was anticipated at end of this year was $10M, $500K was anticipated in construction sales tax revenue for next year and $2.1M was expected to be used to fund those projects discussed a few moments ago, which would normally leave an $8.4M balance in that fund. However, if the two unfunded projects were to be included, it would leave a CIP fund balance of only $3.4M. If the fund balance was that low, the Town could not continue to fund the pavement management program for the next four years as there would be insufficient funds to do so. Councilmember Dickey questioned if Ms. Martin was saying we were not going to fund the pavement management project. Ms. Martin clarified that the $5M included the mill and overlay cost for Saguaro Boulevard and only one year of the pavement management project (only next year). Councilmember Dickey restated that would leave not even enough to do the pavement management plan and Ms. Martin confirmed that was correct. When asked for clarification by Councilmember Archambault as to what they were looking at Ms. Martin responded that in the unfunded projects only 1 year of the pavement management project had been included (@$500k) with the Saguaro Boulevard mill and overlay project (@ $4.5M); she was looking to fund only next year’s projects. Councilmember Archambault said if they budgeted $2.1M, that would reduce the CIP fund to $8.4M, which was confirmed by Ms. Martin. Councilmember Archambault stated that the Council had given authorization on an annual basis to use about $2 - $2.5M a year from the CIP to help partner up with grants and to stretch dollars. He pointed out that currently the $10M in reserve would only take funding out 5 years unless something started getting replenished. Councilmember Archambault asked if they funded only the pavement management next year would the balance in the reserve fund be approximately $7.9M and Ms. Martin stated that was correct. Ms. Martin discussed long term funding issues, stating that the capital improvement funds were insufficient to meet the long term infrastructure needs of the town without a dedicated source of funding and the infrastructure maintenance service levels of the Town would continue to decline. Councilmember Archambault asked if the Town could expect any LTAF money next year and Ms. Martin responded no. Councilmember Dickey interjected that it was her understanding LTAF had been discontinued. Ms. Martin reviewed long term funding options for Council consideration (i.e. Bond/debt service to provide funding for these types of projects). She discussed the type of bonds that could be considered, pointing out that one the Town had used in the past was highway user revenue bonds. The funding to repay the bonds would come from HURF funds; however, one of the downsides to that was it was a source of funding that was under the control of the State and that meant that at any time in the future the Town might not be able to count on those funds to continue to pay debt service. She confirmed that the funds were still available next year but they might not be available for the twenty years that the Town would need them for debt service payments. She discussed a second option: issue general obligation bonds, stating the source of repayment of general obligation bonds would be a secondary property tax. Ms. Martin stated the third option might be a combination of both revenue and general obligation bonds. The Mayor interjected another consideration, which was to use a combination that included cash. Ms. Martin explained about bonding and compared it to taking out a mortgage to buy a house. She stated the Town would take out a loan in the amount necessary to pay for the projects that were included in that loan, which might be projects such as the Saguaro Boulevard mill & overlay project. That loan would be required to be paid back over time, typically a 20-year schedule, and secondary property taxes would be used specifically, and only, to repay that loan. She reiterated that those funds could not be used for any other purpose. z:\council packets\2010\r5-6-2010\100323m.docx Page 4 of 15 Mayor Schlum asked what type of interest rates might be available and requested examples of other Town GO bonds. Ms. Martin stated that the rates changed rather quickly, although right now they were in a very good borrowing environment as the rates were lower than what they had been in quite some time. She stated there were also some stimulus related loan structures that were available through the end of this calendar year that the Town might be able to take advantage of. Mayor Schlum asked for a ballpark interest rate and Ms. Martin responded that the debt counsel had not included an interest rate in the schedule provided but that she could obtain that information and provide it. Mayor Schlum asked at what interest rate the Town had refinanced bonds. Mr. Davis indicated that he felt it was not out of line to anticipate an interest rate somewhere in the 5% to 6% range and the financial advisor had projected that type of range. Mayor Schlum commented that the options included combinations and possible inclusion of cash. Ms. Martin stated that was correct. Mr. Davis said that both of the bonding options would go to a general election. He brought forward another option, an excise tax bond, and said it did not consider the source as much as a HURF or Highway User Revenue Bond. He said that could be paid out of whatever general revenue the Town had at hand. This option did not require an election. He stated that when bonding you were trying to identify where the debt service would come from and right now because of the evaporation of the Town’s HURF revenue and the precarious nature of that revenue, it would be a difficult task to structure some type of long term bonding based on that revenue stream. He said the Town’s financial advisor (Jim Strickland) had advised that the Town look more towards an Excise Tax Bond if the Town wanted to do a Revenue Bond. However, that did not excuse the Town from the need to identify a revenue source. He stated that a General Obligation Bond entailed a secondary property tax that would have to be passed by the voters and that election would have to occur in November as would a HURF Bond election. He said if the Council were to choose either one of those three, given the nature to the Town’s budget right now, they would probably lean toward recommending a GO Bond for a project such as this; however, a combination approach might be what the Council would like staff to take. Ms. Martin presented various scenarios based on the size of the borrowing. Option 1: $4M bond issue, which would allow for the Saguaro Boulevard Mill and Overlay but not much else. Mayor Schlum asked for clarification regarding the reduced pricing mentioned by Public Works Director Tom Ward at the previous meeting. Mr. Ward addressed the Council relative to this stating that pricing (from Sunland Asphalt) was given that was just for the mill and overlay; however, the drainage projects, future signal conduit, ADA upgrades, etc. had not been included that went along with that. He indicated that staff had been working with Swaback regarding the intersection of Saguaro and Avenue of the Fountains to make those improvements through the Downtown Vision Plan since they would be in that area; therefore, since it seemed as though they were slowly adding things he wanted to hold onto that number of $4.5M. He commented on the fact that the price of asphalt had gone down but he did not want to underestimate anything at this time to be on the safe side. Ms. Martin stated that with Option 1 a $4M Bond Issue she had tried to give the Council and the public an idea of what this would look like in terms of a secondary property tax. She reviewed that a property assessed at $350,000 would have a 10% assessed value ($35,000) with the average annual tax over the life of the 20 year bond issue at $35 a year. Option 2: $10M Bond Issue. This would provide funding for the Saguaro Boulevard mill & overlay project and would also provide funding for the annual pavement management project for the next 5 years. She reviewed that a property assessed at $350,000 would have a 10% assessed value ($35,000) with the average annual tax over the life of the bond issue at $73.50 a year. Option 3: $20M Bond Issue. This would fund the Saguaro Boulevard mill & overlay project and the annual pavement for the next 10 years. She explained that because this was for long term funding this could typically be drawn down as needed over time instead of having the whole $20M come to the Town at one time. She reviewed that a property assessed at $350,000 would have a 10% assessed value ($35,000) with the average annual tax over the life of the 20 year bond issue at $122.50 a year. She said the Council might question how the Town should fund its long term streets/roadway infrastructure improvements. Ms. Martin explained that in the past it had been done on a year z:\council packets\2010\r5-6-2010\100323m.docx Page 5 of 15 by year basis and not looking for funding beyond next year’s projects. She said the second question it raised was should the Town’s citizens be involved in making the choices that would determine the pavement management service levels and funding sources for these projects and lastly, how should staff proceed. She indicated her willingness to answer questions. Councilmember Leger referred to page 4 (CIP fund) in the presentation and asked if those were the parks that they were looking to design for the schools. Recreation Supervisor Bryan Hughes responded yes and it also included the master planning of Four Peaks Neighborhood Park (two parks plus Four Peaks). Councilmember Leger asked if it was all for design costs and Mr. Hughes concurred. Councilmember Leger said that recently he had been made aware that the school had put off funding part of that project (the bridge) because they were under the impression that the Town would not be moving forward as quickly on these projects. Mr. Hughes said that was his understanding as well about the bridge in particular. Councilmember Leger asked about the fire station matching funds and questioned if the assumption was that they would be moving ahead to build a fire station. He requested that Fire Chief LaGreca address what the status was and if there was a drop dead date on that as they seemed to be holding funds hostage as they expected some positive results from the Feds. Fire Chief LaGreca addressed the Council and said that at this point they were still in the game although he was not sure of the status as they had not received any answers from FEMA when asked. He indicated that there were communities who had been awarded a grant and who were now backing away. The Chief reiterated that they had not received a “no” letter and were still in the game; however, he did not think it looked real good. He found it interesting as far as the economy went that building costs were lower at this point in time. He said he hoped to hear by the end of the year and stated he would keep the Council posted. Councilmember Leger stated he was trying to illustrate that there was close to $500K in those two line items that could possibly be utilized for pavement management. He said his question was “when was the game over” and if it were over at the end of this fiscal year, and those dollars were budgeted for fire for the matching funds they could work with that as it was still in the budget and move it over to pavement management. He said the same was true for the park design, if the Council decided not to move in that direction, and put it off for another year. He indicated that he was looking for some wiggle room. He thanked Chief LaGreca and Bryan for their input. Councilmember Dickey asked if the Fire Chief was not recommending that the Council look at the fire station unless the ARRA funding was awarded to the Town. Fire Chief LaGreca said that personally he would say that was a determination that the Council needed to make as the Town’s elected officials. He stated that he would bow to their wishes but the question came down to the chicken and the egg concept. He commented that road maintenance was extremely critical for them because bad roads damage their equipment, cost more money, but how do you weigh that against response time. He indicated that it came down to what was the most important thing to do with the limited community dollars moving forward. He stated that obviously he was biased but he served the Council and his job was to give the Council the best information and data available, which he felt had been done in this 7 – 8 year study. He stated the opinion that they were at the point both financially and response time to make a move on covering the south, southwest, and west end of our town. He mentioned that they had done a couple of creative things (one being the temporary ambulance service in that quadrant) but at this time of the year that ambulance was rarely there due to an extremely high ambulance demand throughout the valley, although this move had helped to mitigate the timeline situation. Councilmember Dickey asked if Fire Department’s original recommendation to build another station because of response time to the locations noted stood. Chief LaGreca said the entire issue was based on one thing only, response time. Councilmember Dickey requested that when they talked about all of these again she indicated that she wanted to look at the bigger picture. She said she knew of a request regarding reserve fund balance, designated unreserved fund balance and rainy day fund balance, and if this was not the time to discuss it right now she indicated the discussion could be held at another budget meeting pointing out that she did have questions about that. Councilmember Dickey indicated that if the Council would be looking at the budget as proposed by Councilmember Leger, she wanted to examine this as well at some point. z:\council packets\2010\r5-6-2010\100323m.docx Page 6 of 15 Mayor Schlum reminded everyone that the Council was not making any decisions tonight. Councilmember Leger responded to Councilmember Dickey’s inquiry. He indicated that he was on board with need for a fire station, fire station relocation, and diminishing response times. He commented on the interim plan that had been put into place that was life saving although it hurt the Town on the property side of it. He stated that this issue for him over the last two years had always been one of affordability and he said this Council had agreed to go for the grant funding from the Feds as it made the project more affordable. His suggestion was a gap solution for the next and he looked forward to the day when they could afford that fire station. Fire Chief LaGreca stated that was crystal clear and suggested that when talking about bond issues he took off his Fire Chief hat and put on his civilian hat (being a taxpayer in town) stating that it would not hurt him to tag this fire station on to one of the bonding options because $122 a year was like going out to dinner one night in Scottsdale or two nights in Fountain Hills and would not change his lifestyle. He said he would do his fair share to support the road, the fire district, and any other projects that the town deemed critical to our lifestyle. Mayor Schlum again referenced the CIP Fund (page 4) and asked if these were just for this year and Ms. Martin reiterated they were projects budgeted for next fiscal year. The Mayor stated that about 5 months ago they started having budget discussions commenting that they had indicated they would stay around the $2M for capital improvement projects as they knew revenues going into the fund were substantially less than that. He indicated that a decent savings existed and they had at that time agreed not to bring everything to a screeching halt but to definitely bring the throttle way back. He asked which projects were also funded through other means other than the Capital Fund. He asked if these numbers were the net from the Capital Fund following grants for sidewalks or other items. Ms. Martin responded that a number of these projects were also funded with other funding sources. The Mayor interjected asking if they had another funding source other than Town funds like flow through grants and such. Ms. Martin reviewed the list and identified those projects with other funding sources (i.e. Shea widening, grants plus CIP; Fountain Hills Boulevard sidewalk, grant plus CIP; Shea gap, CIP with stimulus, Fire station relocation, CIP with stimulus). The Mayor noted the Shea gap project was to be about $1M project and that the $65K budgeted was non-stimulus with funding coming out of the CIP balance. Ms. Martin agreed; however, she noted that many of the grants required matching funds or contained something not typically covered by the grant or stimulus funding. For example, some did not do the design component; therefore, it would be up to the Town to fund the design piece with the construction covered by the grant or a match was required for the entire project. She explained that in the past, the CIP had been stretched by using them as the matching source of funding either to do the design or the matching funds for construction. The Mayor stated the opinion that due to the economy’s continued state of decline, the $2M figure might have to be reduced, although he did not want to throw away grant monies by not fulfilling the Town’s 10% portion or whatever it might equate to. He asked if any of the projects would be at risk if the Council chose not to fund them this year. Ms. Martin replied that most of the ARRA projects were time sensitive, most of grant projects coming through MAG were time sensitive, and very few of the grants were not time sensitive to the point whereby if put off, the Town might likely lose the grant funding. Mayor Schlum asked if the Annual Sidewalk Program and the Fountain Hills Boulevard Sidewalk program were paid for substantially by grants or was the design paid for by grants. Ms. Martin clarified the sidewalk projects and alley paving project were entirely funded by the CIP. The Mayor asked if the traffic signal upgrades, park master plans, voice/data upgrades were at almost 100% out of the CIP and Ms. Martin concurred. The Mayor stated they were trying to get their arms around it. He stated the six projects he mentioned would be the ones he would recommend for reductions if reductions were made at all, because the other projects were leveraged against grants or stimulus funds coming in. z:\council packets\2010\r5-6-2010\100323m.docx Page 7 of 15 Councilmember Archambault referred to the three options presented (General Obligation Bonds for the Saguaro mill and overlay). He asked if they would be 20-year bonds and Ms. Martin said yes, for the most part. She noted that typically bonds ran 15 to a 20 year cycle. Councilmember Archambault reasoned that it did not make sense to fund annual maintenance for five years and pay for it over twenty years. He asked if there was a way to replace the LTAF monies that the Townformerly received with a possible revenue source for the pavement management program by way of telecommunication tax or some type of a municipal tax, which would be fairly incidental but equivalent to $35 per year per residence, to fund some type of maintenance. He noted that it then became a revenue source that was identified for a specific purpose. He proposed that the Council could decrease it as the economy came back to only generate enough revenue to do the maintenance so that they could stay on top of the streets. Councilmember Archambault stated the opinion that he did not see that as being as objectionable to some residents and pointed out that the Council had been discussing over the years how to diversity the Town’s revenue stream. He noted that the State was pulling revenue back more and more and he did not think it was out of the question to think that the HURF funds might not be in play next year if the economy worsened and reiterated that they needed to start thinking outside the box. He stated that this was one idea and there might be others that were incidental but would generate enough revenue to pay for the maintenance program. Councilmember Archambault stated the opinion that General Obligation Bonds would be needed for Saguaro Boulevard. He asked Public Works Director Tom Ward if that would take care of Saguaro all the way to Palisades Boulevard. Mr. Ward confirmed that it would take care of it all the way up to Fountain Hills Boulevard. Mayor Schlum asked that staff provide for their next discussion relative to the CIP Fund projects (shown on page 8 of the presentation) what portion, if paid for by grant monies, might be at risk if the project was not completed this year or it could be extended to the next year. Ms. Martin stated that the individual project sheets did give that type of detail and would be provided to the Council as it showed the five year history of what the funding sources were and the total cost of the project. The Mayor referred to a document in the packet that provided a breakdown although it did not show where the revenues were coming from. He asked how much was outstanding on the current bonds. Ms. Martin replied that the HURF Bonds would be paid off this year. Next year would be the first year that bonding for street purposes was completed and she proceeded to look up that figure in the budget. The Mayor noted that the Town has not had a bond released since the Mountains other than refinancing bonds. Councilmember Leger stated that the HURF Bond was coming due and asked if we were to project the same amount of money from HURF did staff know how much HURF money was being utilized on an annual basis against that debt currently. Ms. Martin responded the debt service payment was $110K a year. Vice Mayor Hansen concurred with the direction that the Mayor was taking on that. She asked the Mayor to review those six projects. The Mayor confirmed the following six programs: the Annual Sidewalk program, the Fountain Hills Boulevard Sidewalk, the traffic signal upgrades, the parks master plans, the voice data upgrades, and the alley paving. However, he noted that the Town might be at risk of losing some grant monies if extended. The Vice Mayor questioned if the item listed for the Fountain Hills Boulevard was for the cost of design. The Mayor concurred noting that he did not know what the risk was if the Town designed and did not build. The Mayor stated it was important to have the Swaback Vision Plan tied into the Saguaro Boulevard project so that the Town was making the most of that investment, which would include the pedestrian elements to get across Saguaro Boulevard. He pointed out that the Council had put the Saguaro Boulevard project off last year due to the economy. However, this was a year later and Saguaro Boulevard was not doing well given the rains that had occurred and he stated the opinion that the Council would have to look at that. z:\council packets\2010\r5-6-2010\100323m.docx Page 8 of 15 Mayor Schlum asked for comment on that project or any of the other elements. He pointed out that the pavement management project costs seemed to increase over years 2013 -2015 and asked why. Mr. Ward responded that would be working in Zone 1, which was a very large zone but was where the oldest streets in town were. He commented that it would appear they were looking at heavier applications for that area. Mr. Ward discussed the six projects that the Mayor had mentioned. He said that the alley paving was something that was related to the MAG IGA on PM10 measures but at the same time bids were being received on those projects at lower than anticipated. He indicated staff might want to look at reducing some of those numbers for more up- to-date pricing. Councilmember Leger asked if the costs relating to the pavement management were updated numbers or the same as previously presented. Mr. Ward said they could not project out too far as they were uncertain as to what would happen with the oil market due to volatility of the market at this time. However, many of the numbers had been updated. He pointed out that as they moved into the different zones with different quantities there might be different pricing. Councilmember Leger agreed it was difficult to do that out several years but he was wondering about projected costs for 2010/2011 ($515K) and how accurate that number was due to decreases in the cost of materials. He asked if they jumped on that project in the next fiscal year would they be looking at $515K if prices stabilized or increased slightly. Mr. Ward responded it could be reduced, but at the same time staff was being more innovative and looking at applications regarding that. He stated at this time he would hold to that number not knowing that the future was over the next 18 months. Councilmember Leger asked about the proposed product and Mr. Ward confirmed it was a less costly but was not more durable product than slurry seal. He explained that due to the condition of the asphalt, the pavement management index (PQI) was much higher in that zone because that asphalt was not as old as was the case in Zone 1. He stated that staff was looking hard to ensure that they did not spend anything that they did not need to spend and use a product that would take them all the way around to the next application in the next six years. Councilmember Leger stated that it would be helpful to the Council in their decision making process for staff to provide updated pricing if available and Mr. Ward agreed. Councilmember Dickey asked about the intersection of Saguaro and Avenue of the Fountains and whether the downtown redevelopment money could be used there since it was in the Swaback plan. Mr. Ward responded that he had talked to Mr. Davis about that and noted they had a proposal in from Swaback for that design. He stated they were looking at the possibility of using those funds for that and that the construction dollars had been worked into the $4.5M bond issue. Councilmember Dickey stated that she did not favor using that and would prefer to leave it where it was as it had a greater impact there rather than diminish the bond by that little amount. Mr. Davis said that staff had considered utilizing some of those funds for design purposes but had not considered that the construction should come out of that. He asked that the Council keep in mind the funding whether used for the project, which up to this point had been considered the property next door, or was applied to a way of leveraging participation in any number of projects that could occur in the downtown, that once those funds were gone, they were gone. The Mayor pointed out that any fund that they talked about taking money out of to fund things that might have been customarily funded out of that ,the Council needed to be clear on what the fund was put in place for, what the intention was, who was funding it, etc. He wanted to make sure they all understood from where it had originated or why it was originated. Councilmember Dickey clarified that she was not suggesting that because she did not think there was enough in there to really make a difference. She noted that she had been supportive of going ahead with the $4.5M Bond last time and indicated that she was again open to talking about any of these options. z:\council packets\2010\r5-6-2010\100323m.docx Page 9 of 15 Ms. Martin stated the Council had provided some direction and she asked the Council if they would like them to pursue the General Obligation Bond issues and to firm them up to get more information about what the impacts would be at the 5, 10 and 20 million dollar level and to bring back more concrete information. The Mayor referenced a statement made by Councilmember Archambault regarding not funding things over a longer period of time than what we would feel the benefit from. He noted that Saguaro Boulevard had lasted a long time and that made sense. He stated the opinion that he was not sure paying for the 5 year maintenance over 20 years made as much sense or if the Council would be as comfortable with that. Ms. Martin stated that one of the things that would likely happen with the 5 year bond issue was that at the end of the 5 years, staff would come back at that time and ask to do the next 5 years. She said that was why they had brought forward the 10 and 20 year options as it made more sense to fund street projects over the life of the typical street, which was 20 years, and to have funding drawn down as needed. Therefore, each segment of the road would have a 20 year life and a 20 year payback. Mr. Davis said there were certain advantages to bonding for 15 year periods or less. He reviewed a few of the advantages that the financial advisor had discussed. It was easier to find a buyer for the bonds with the bank assuming the role of the buyer in those circumstances as well as more favorable interest rates. The financial advisor had recommended not going out too far and had indicated that 15 years was the magic number or less. Mr. Davis said he was hearing that staff should look closer at the General Obligation (G.O.) option and reconvene with the Town’s financial advisor and obtain specific numbers for the Council relative to bonding at the three levels presented tonight. Mayor Schlum asked if the Council was uncomfortable with any of the options so that staff’s wheels would not be spun unnecessarily. Councilmember Archambault asked if staff could identify a different revenue source for street maintenance. Mr. Davis responded yes, that could be done. He said they would concentrate efforts on the G.O. Saguaro project and look for a separate mechanism or options for the street maintenance portion. Councilmember Archambault commented that options could include a 15 year bond as discussed for the 10 year maintenance project plus the Saguaro Boulevard project with an identified revenue source that paid the maintenance portion of the bond back. He stated the opinion that might be less painful than trying to find a revenue source that would pay the maintenance every year. He indicated that he wanted to see different options in those areas besides just a bond so that the Council had diversified options to look at. Mr. Davis stated that staff would do additional research. Mayor Schlum added that generally the budget had seen extraordinary change and because of the downturn in the economy everyone was sensitive to the fact that the citizens’ budgets had also taken a downturn. He pointed out that looking for more funding from other sources was looking for more funding from the residents at a time when it was not a comfortable time to consider that for many of the Council. He indicated that unless it was directly correlated to that service it would be difficult for him support a fee or a tax. Councilmember Dickey stated that maintenance had a shallow connotation as these projects were more than just sweeping the street and there was more hard value to them. With regard to the new normal, she said that went back to the fact that our folks had recognized that we had a problem long before this actual downturn so it was appropriate to look at funding that addressed “maintenance items” since we had a problem with that. Mayor Schlum stated that what they noticed during this economic downturn was what the new normal would look like once past build out as the Town did not have a real sustainable financial model with which to deal. He restated that he was sensitive to the consideration of increasing taxes or fees on people’s month to month outlay to pay for things that might be maintenance but it could be long term maintenance for streets. The Mayor indicated he would like to have better correlation between the expenditure and or tax and fee and the actual improvement or maintenance. z:\council packets\2010\r5-6-2010\100323m.docx Page 10 of 15 AGENDA ITEM #3 – DISCUSSION RELATING TO PROPOSED FUNDING OPTIONS FOR THE COMMUNITY SERVICE CONTRACTS. Deputy Town Manager Julie Ghetti addressed the Council relative to this item (PowerPoint on file in the Clerk’s office). She reviewed that three years ago the Town issued a request for proposal for programs that the Town did not provide. Those activities were tourism, youth arts, youth sports, and the food bank. The contracts were issued three years ago and all expire on June 30, 2010. She stated that the Mayor formed a committee to review the contracts and work forward with them. She thanked the members of the committee for their efforts and expressed her appreciation for their dedication as well as their input, which the Mayor echoed. Ms. Ghetti discussed the committee’s recommendations noting that the committee had come to a consensus that a dedicated fund needed to be created for these types of contracts as they did not want to compete with the General Fund every year in trying to fund these activities/services. The recommendation was to extend the contracts for one more year to create a new contract for the following year with performance indicators. She noted that all of the current contractors were interviewed and they had given the committee a proposal as to what they would require and what they would do for those funds. Ms. Ghetti summarized those agencies’ new funding level requests: Chamber of Commerce/Tourism $150,000 (Current funding level) Boys & Girls Club $100,000 (Current funding level) Fountain Hills Community Theater $ 80,000 Extended Hands Food Bank $ 44,000 Total $374,000 Ms. Ghetti discussed that the committee’s recommendation, which was to fund these agencies in a separate fund as a blended scenario. She explained the committee’s reasoning. One of the options was to increase the transient lodging (bed) tax to 5.0%. Ms. Ghetti noted that one of the challenges was that it was a revenue source from fewer than ten taxpayers so revealing the amount received from tourism could not be done. Therefore, the committee was proposing a blending option: increase the telecommunications tax from 2.6% to 3.0%; increase the transient lodging (bed) tax from 2.6% to 5.0%; increase the restaurant/bar tax from 2.6% to whatever was needed to make up the difference to get to that $374K; and a onetime transfer from Economic Development (Downtown Fund) of $50,000 to the Community Fund. Ms. Ghetti stated the last slide represented different scenarios using various rates and noted that the third one was what the committee was recommending to attain the goal of $374K; however, others had been provided. She indicated she would be happy to answer questions. The Mayor made the observation that it looked like the focus had primarily been on funding dollar amounts and potential sources. He asked if there had been any discussions on levels of service or return on investment (ROI) or town savings as he imagined that if the Town did not contract out for the services, then those services would have to be done in house. Ms. Ghetti responded that the committee had discussed that, but because of the timeframe allotted, there had not been enough time to come up with the process as well as performance indicators. Therefore, the proposal was to renew the contracts for one more year and to have the committee continue to meet and develop the performance measures so there was a way to evaluate the success of the programs moving forward. The Mayor commented that the requested funding levels were the same as the current year (FY09/10) for the Chamber of Commerce (tourism), the Boys & Girls Club, and the Food Bank. He noted that the Community Theater was $50K less and Ms. Ghetti concurred. Vice Mayor Hansen pointed out with regard to the Theater that when talking to Ross he identified the $80K as being specifically for their youth theater and that there had been some additional programs had gone into play previously and it was their desire to concentrate on maintaining the level of service for the youth theater. She z:\council packets\2010\r5-6-2010\100323m.docx Page 11 of 15 clarified that when talking about the onetime transfer from Economic Development, some committee members had preferred the transfer be an annual thing since economic development and tourism complemented each other. Therefore, to continue funding tourism efforts, which brought revenues to the Town, it should be an annual transfer of $50K. Mayor Schlum asked if that would be in addition to the bed tax and the Vice Mayor stated that was correct. The Mayor questioned if this would be a different fund and Ms. Ghetti stated that it would be a dedicated restricted fund where it would be separate from the General Fund. The revenues, if approved, would go into that fund and would not go back into the General Fund. Councilmember Archambault stated that the committee had talked at length about the transfer, beginning with the amount of $150K, which had been reduced to the $50K now being proposed. He stated it was his understanding that it had been a onetime shot although there had been numerous conversations and he had thought Julie had clarified that point at the end of the meeting. He discussed the danger of taking money from economic development and moving it to tourism as there was no measuring point or gauge that enhanced that fund; downtown development was dependent on construction and the Town did not have any construction going on right now. Therefore, if the $50K was moved per year it would just keep diminishing that number. He stated the opinion that it was wrong to take downtown development and move it to community contracts. Councilmember Archambault stated that he had taken the committee’s charge seriously, which had been to identify additional sources to fund community contracts, and that was not an additional revenue source. Mayor Schlum said that the committee’s charge was to look into the community contracts, not to find additional revenues. Councilmember Archambault interjected that he had been told they were to find outside revenue sources from the General Fund. Councilmember Dickey commented that she was not ready to look at any of the funding recommendations until they received the performance piece. She suggested that they might extend the contracts for another year under the same circumstances and perhaps change the amounts, if legal. She indicated that as far as looking at taxes to fund these things without talking about performance and what they wanted, she would not be ready to go to that without that piece. Councilmember Contino stated that project that they had been working on for the funding had gone very well and the $50K that they were talking about from the downtown economic development fund was in part due to tourism. He commented that they were trying to bring people in and downtown economic development was a standard part of that. He reiterated that they had talked about extending that $50K every year. Mayor Schlum said that raising fees or taxes to fund anything not directly related to, or that did not seem to have an empirical public benefit, would be challenging given the economy. He noted that people just did not have money to pay the extra dollars for things. He stated if there would not be performance indicators it would have to at least be related to those types of things. He indicated that if they had a choice to discontinue that program or to do it in-house, he would like to be provided with what that would cost; if tourism funding were eliminated or reduced, what would that mean for the future. The Mayor said the Boys and Girls Club funding funded primarily the teen center. He asked if that was not funded, the Town would need to do something for teens (what would that look like and cost). He questioned what would a reduction in services would look like if funded at a lesser number than this year. The Mayor continued asking similar questions relating to the Community Theater, noting that it was a youth oriented investment. He discussed that when the Town started to contract out for services three years ago with a more formal package process that allowed the organizations to realize three years of funding which allowed them to become empowered to make an investment in their facilities or do other things they generally had a commitment from the Town towards those functions. It also provided savings for the Town by not having to provide those services. He indicated that type of information would help him make his decisions (by understanding if reduced what would that mean to the citizens, the youth in particular, tourism and economic development, and how much would it cost if they worked to fund a contracted source or to be bringing it in-house, which he felt would be initially higher on the onset. He noted z:\council packets\2010\r5-6-2010\100323m.docx Page 12 of 15 the Council could have a discussion on raising telecom tax, bed taxes and other taxes although he did not know how fruitful that would be. Vice Mayor Hansen commented that Scottsdale had taken this route as they had just increased their bed tax to specifically support tourism. She discussed that when looking at the four different groups that each had evolved over the years and had filled a void in the community. Each group had indicated that if the funding went away, the programs would go away. She acknowledged that the economy was tight, but asked the question did the Town want to take ten steps backwards over programs that had evolved and that had served the community quite well for $374K. The Vice Mayor stated that as far as the performance measures went, the understanding was that because the committee had limited time that they did not want to just say that the funding had to stop. The committee had wanted to come up with a transitional method to keep the groups intact and programs going while the committee when to greater depths to come up with what the ultimate program would really look like. She proposed that would be a kind of extension of where they were right now, more than a brand new program. The Vice Mayor indicated the proposed funding was an attempt to get through the next year while the committee came up with the ultimate program. The Mayor clarified that he was not looking at getting rid of the programs as being an option and that each served a pretty good need in the community. He said that what was being looked at was changing their funding source from the General Fund to a new revenue source, which was something with which he was not comfortable. He indicated that when talking about the direct impact or fees related to those actual services perhaps the bed tax was in alignment with what he could potentially be comfortable with as that would fund the tourism. He stated that he was unsure of the other items outside of the bed tax such as the telecom as he was not sure how that fee increase could be rationalized. He stated his appreciation to the Vice Mayor on her take relating to the one year contract extension. Ms. Ghetti stated that she agreed with the rationale and nexus between the bed tax and tourism. However, the challenge was that they could not isolate the bed tax for tourism as that identified the taxpayers (fewer than 10); therefore, they had the confidentiality statute that they needed to worry about. Therefore, the approach had been to blend the revenue so they had ability to fund it without releasing that information. She pointed out that none of these programs were budgeted in the General Fund for next year, so if a new revenue source was not identified she did not know how the contracts could be fit into the budget next year. She explained that was why it was brought forward because they were getting close to finishing the budget and if the programs were to go away they would need to let the contractors know soon. In response to a question from the Mayor, Ms. Ghetti confirmed the contracts had been removed from the budget and that staff could not find a source of revenue to pay for them. She commented that they were struggling now to try to fit everything in. Councilmember Leger agreed with the Mayor that there was a direct correlation between the bed tax and tourism. He asked if there was a way to take, in the event the bed tax was increased, the bed tax and comingle it in another fund to mitigate the confidentiality issue. He gave an example of renaming the downtown development fund and comingling that .1% excise tax with the bed tax at a new level (i.e. 3%) and asked if that would legally take care of a challenge. Ms. Ghetti agreed it could be comingled but it would still be competing as there was no way to isolate the dollar number and say this much came in for tourism and this was the amount that would be dedicated to tourism. There would be two competing interests (one for tourism and one for economic development fighting over one pot of money). Councilmember Leger suggested renaming the fund and just making that fund a dedicated source for tourism so that you would not be getting into that discussion. You would be saying that tourism would be funded from Fund XYZ and that XYZ Fund would happen to be .1% excise tax plus bed tax with all going into the pot without disclosing exacting what you were spending in bed tax. He stated the opinion that this merited serious z:\council packets\2010\r5-6-2010\100323m.docx Page 13 of 15 consideration. He indicated that earlier the Mayor had been talking about unintended consequences. Councilmember Leger stated that by not doing something it cost more in the long run than paying for those services and he felt that was an important analysis. He discussed the Town’s culture and its aversion to a primary property tax (to support the Town’s operation), the fact that the State funding was diminishing, the possibility of the Council moving forward with a G.O. Bond, which had negative consequences. He asked the question what was really left to fund what we do other than sales tax revenue, which he noted was somewhat quasi dependable. He stated that every community had the same challenge and they were drilling down on tourism, which was key. He said to comingle a fund in order to come up with a dedicated fund in order to fund that he felt was extremely important. Councilmember Leger stated he was not negating any of the other deals there and that he would possibility look at other ways and even if they took another look at the General Fund. He said the notion of comingling, calling it something else, and making that the dedicated fund for tourism in his thinking, if the levels of funding were not unrealistic or the visitor’s bureau could start matching it with other sources, was something that could be managed and there would still be adequate dollars in there for economic development and they would not be robbing Peter to pay Paul. Councilmember Archambault discussed the various taxes noting that the bed tax would hit visitors and one of the things that the committee had looked at was how comparable Fountain Hills would be to the surrounding areas and stated the opinion that in raising the bed to 5% he felt the Town would still be competitive with the surrounding areas; with regard to increasing the restaurant and bar tax (option 4) that would make a $.12 difference in the bill, which he pointed out was a discretionary expense; and with regard to the telecommunication tax, the example given was on a $100 bill, of which the tax would be $.40. He stated those were the taxes that they (the committee) felt were not going to be huge impacts on the citizens but that would actually target more of the visitors especially the restaurant/bar and the bed taxes. It would help fund the type of services they felt this community needed to provide its citizens. Councilmember Archambault acknowledged that it was a quality of life issue and a question that the Council would have to answer. He said it could be argued that tourism went hand in hand with economic development and if the two were eliminated, you could watch the town shrivel up. He discussed the Community Theater and their representative (Ross) could describe how the community benefits from the youth theater as well as the Food Bank. He noted that the Food Bank’s annual budget was about $400K and they were requesting $44K, of which those served 50% were Fountain Hills’ residents. The Mayor interjected that for him that type of information was very helpful and commented that those organizations sometimes were able to leverage the Town’ contributions to get more in return for the community. Councilmember Archambault explained that the committee had said those were quality of life issues that the Council had identified in previous years, which they were trying to carry those forward while being very sensitive to the fact that they did not want to tax the residents; however, a separate revenue source needed to be identified because the Town just did not have it. The Mayor stated the opinion that he thought they were looking to carry these forward but he was not necessarily looking at new revenue sources. Councilmember Archambault reiterated that they had been trying to identify something and also put it into perspective. Councilmember Dickey agreed it was a quality of life issue and discussed a report that had recently come out for the National Council for Non-Profits on how the economy was really hurting that kind of thing. However, without the performance measures or some type of report it was hard to recommend a permanent revenue source in the form of a higher tax without knowing where they were going. She asked the questions would they have to go out for another RFP and would there be other entities responding to try to fill this need. Councilmember Dickey pointed out they were currently in a vacuum as to how they were making these decisions and she did not want to see any of them go away either; however, she asked if diminishing the Town’s support truly would make any of them go away. She indicated she wanted to understand that part and for that she would require more information (i.e. what would happen to the organizations’ programs without or reduced Town funding). She wanted to know what the amount had to be, what was needed, and discussed how the different scenarios z:\council packets\2010\r5-6-2010\100323m.docx Page 14 of 15 proposed different amounts. She asked if they moved ahead with a year extension, in perhaps a smaller amount, that they talk about some of these other ideas (i.e. looking at the CIP to determine what they did not have to do). She questioned how they would get through this year without taking these other steps first before they started trying to raise taxes without diminishing the value of any of these. Councilmember Contino concurred with the other councilmembers but stated what they had looked at was having a reporting pattern of where the money was going. He said they needed to look at how the money was being used for the amount of money that was given. He indicated there were ways that could be done as when he ran the food bank they had to disclose everything. Regarding the taxing aspect he did not feel this was hurting anybody in the general public. He commented on the fact that a local restaurant that he recently visited had increased their prices and asked if the Town was different than anybody else. Councilmember Contino noted that the committee had debated that for any more than what we had talked about going up on those little tiny percentages it did not bother anybody. In response to questions from Councilmember Leger Ms. Ghetti responded that the current bed tax rate was 3%, the current telecommunication tax was 2.6%, and the current restaurant/bar tax was 2.6%. Councilmember Leger stated he had a tendency to agree with Councilmember Dickey noting that he found it a hard to be going public for a tax to begin with let alone increasing fees to bring in additional revenue without any performance criteria or rationale. Because the Town was in extraordinary sets of circumstances with respect to budgeting and the economy, he asked as means of compromise would it be too much to establish performance measurements within 30 days. Ms. Ghetti replied it would not be too much to ask. She indicated that when the organizations made presentations they had been asked how they measured success. However, the issue was they would not have time to draw up contracts, go through the process, but the committee had planned on coming up with a revised scope of work with the existing contracts with what measures the Town would like to see but also ask them how they measured success so that measurement requirements were not given that they did not have. Councilmember Leger stated that outside the context of a contract perhaps it could be a memorandum of agreement whereby the existing contract was looked at for measurements and some measurements could be firmed up and perhaps Councilmember Dickey would be comfortable with that whereby there were some performance criteria. He indicated that the way it was presented it almost sounded like performance criteria was out the window. Councilmember Leger said he struggled without having performance criteria but if some adjustments could be made and then, as the Vice Mayor suggested, they could take the next year and really refine those, if possible. He stated he was not comfortable with going into an increase without some sort of memorandum of agreement as an addendum to the existing contract. Ms. Ghetti reiterated that it had been the committee’s intention to continue on, and if funding was approved for the groups by the Council, then the next step would be to go back to the groups and start working on the performance indicators. Vice Mayor Hansen stated that the Town has had these contracts for three years and those contracts currently had performance measures in them. She stated the opinion that the intent was to go forward based on the same performance measures and then fine-tune them over the coming year. It was not a case of going forward saying the groups did not have accountability whatsoever and the Town would just give them the money. She acknowledged that there was more comfort with the bed tax but if the restaurant/bar tax was looked at, for the tourism bureau it was not just a Fountain Hills tourism bureau but a regional tourism bureau with their increased advertising reaching a greater number of people (coming from Tonto Verde, Rio Verde and Fort McDowell) to the Town’s restaurants. The Vice Mayor stated that with all their efforts to bring the people to the Town it had certainly impacted the restaurants as well. She stated that a strong component of the tourism bureau was the relationship that has been built with Fort McDowell, which was another reason they would not want to fall back and diminish it in any way.