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HomeMy WebLinkAbout2010.0511.TCWSM.MinutesZ:\Council Packets\2010\R6-17-10\100511M.doc Page 1 of 12 TOWN OF FOUNTAIN HILLS MINUTES OF THE WORK STUDY SESSION OF THE FOUNTAIN HILLS TOWN COUNCIL MAY 11, 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. Present for roll call were the following members of the Fountain Hills Town Council: Mayor Jay T. Schlum, Councilmember Dennis Contino, Councilmember Henry Leger, Councilmember Dennis Brown, Councilmember Michael Archambault and Councilmember Ginny Dickey. Town Manager Rick Davis, Town Attorney Andrew McGuire and Town Clerk Bevelyn Bender were also present. Vice Mayor Cassie Hansen arrived at 5:35 p.m. AGENDA ITEM #2 – PRESENTATION AND DISCUSSION OF THE TOWN OF FOUNTAIN HILLS PROPOSED FY2010-11 BUDGET. Ms. Mary Martin, Accounting Supervisor, addressed the Council relative to this item stating that the purpose of this Work-Study was a review of the proposed budget for FY 2010/11 (presentation on file in the Clerk’s office). She discussed the process that the budget goes through. She stated that this was an outcome based budget, which meant that the process began with a review of the Strategic Plan, which led to a review of the Council’s goals for next year. The review of the Council goals leads to a prioritization of programs based on how closely they met Council’s goals followed by the allocation of available resources. Ms. Martin stated the Strategic Plan was recently updated form the 2005 version by the volunteer members of the Strategic Planning Advisory Commission (SPAC). She continued that based on citizen feedback to date the priorities were: Education, Learning and Culture Environmental Stewardship Civility Civic Responsibility Economic Vitality Maintain and improve community infrastructure Public health, safety and welfare Recreational opportunities and amenities Ms. Martin pointed out that from these strategic planning ideals the Council Goals were formed noting that these were specified in greater detail in the budget document (between the pages of 82-85). She highlighted items from each of the categories: Development of educational partnerships with Fountain Hills Unified School District, Ft. McDowell, and the Veterans of Foreign Wars Promote Wash protection and Storm water education Promote programs that support “Neighborliness” Develop programs that promote “Community Pride: Continue to promote the Downtown “Vision Plan” Pursue a fiscal plan to get us “back on track” with pavement management Continue to promote programs to create a safe and healthy Town Z:\Council Packets\2010\R6-17-10\100511M.doc Page 2 of 12 Develop an “urban trail system master plan” Ms. Martin reviewed some of the major issues that affected the FY 2010/11 budget as being: The National and Arizona Economic Recession Steeply declining General Fund Revenues Lack of a Diversified Revenue Base State Shared Revenues potentially at risk Changing Environment for Town Services (particularly the declining demand for building related services, and the increasing proportion of Public Safety as a share of General Fund Expenditures) Ms. Martin reviewed a graph that depicted a dramatic decline in General Fund Revenues from FY05/06 through next fiscal year (FY10/11); discussed the lack of a diversified revenue base, stating that two revenue sources represented 88% of the total General Fund Revenues: Local Sales Tax at 48% and State Shared Revenue at approximately at 40%; and stated that because of the economic situation at the State level there might be a great risk if the sales tax item on the ballot did not pass that the Town’s State Shared Revenues might be at risk. Ms. Martin discussed a graph included the budget document that showed the General Fund revenue sources ($12.7M - i.e. where the money came from), which included Local Sales tax (48%), Franchise Fee (2%), Charges for Service (3%), License/Permits (3%), Fines (2%), State Shared Revenue (40%), Miscellaneous (1%) and transfers (1%). She stated that in the past, building related serviced had been a significant revenue source for the Town. She discussed a bar graph that showed the revenue decline from FY 2004/05 through the proposed budget FY 2010/11 and another graph that showed the share of the General Fund expenditures for Public Safety increasing. She explained that because those departments were limited in how much they could be cut, Public Safety now represented 47.2% of the General Fund Expenditures as compared to 30% in FY 2006/07. Ms. Martin talked about the graph that depicted the uses of the General Fund ($12.7M - i.e. where the money goes) by departmental categories. Ms. Martin continued speaking to the process of balancing the budget. She stated that Town policy required that staff bring forth a “balanced budget” proposal. She said the Executive Budget Committee sought input from the various components in the community (i.e. Boards and Commissions, Department Directors, Town Staff, and held a public open house to seek the residents’ input). After those meetings took place the Executive Budget Committee came up with what they were going to do to balance this budget, she discussed those proposals as being: Reorganization of Town Departments : Community Services & Development Services - She explained the Community Services Department was a combination of two departments: Parks & Recreation and Community Center Departments and that the Development Services Department was a combination of Public Works and Planning and Zoning Departments Reductions in Staff from 81 FTE to 61 FTE Reduction in Service Levels in many areas Reduction in Construction Tax Transfer to Capital Improvement Project Fund Updating the Comprehensive Fee Schedule (with the addition of new fees and adjustment of others) Partial reduction in subsidies for Recreation and Senior Programs. Ms. Martin displayed the proposed new organizational charts for the two new departments and commented on a graph that showed what had happened since FY 2002/03 relating to staffing levels (115 down to 61). She discussed those areas that had positions eliminated: Public Information 1.5 positions eliminate = 100% Economic Development 0.5 positions eliminated – 50% Streets 2.5 positions eliminated = 23% Engineering 3.0 positions eliminated = 50% Z:\Council Packets\2010\R6-17-10\100511M.doc Page 3 of 12 Facilities Maintenance 1.0 positions eliminated = 29% Planning 1.0 positions eliminated = 25% Building Safety 3.0 positions eliminated = 50% Code Enforcement 1.0 positions eliminated = 50% Mapping & Graphics 1.0 positions eliminated = 50% Recreation 4.7 positions eliminated = 41% Community Center Ops 0.5 positions eliminated = 10% Senior Services 0.3 positions eliminated = 10% Ms. Martin spoke about the Comprehensive Fee Schedule and stated that it was normally adopted with the budget and included a few new proposed fees. She stated that all of the new fees were highlighted in the document so that they stood out for easy reference. The proposed new fees included: Annual Alcohol Permits Repetitive False Alarm Fees Fire Safety Inspection Fees Temporary Vendor Permit The proposed revised fees included: Adult Oriented Business Application & Licensing Encroachment Permits Ms. Martin stated staff was also proposing to reduce subsidies in some programs this year. She stated that in the Parks & Recreation Programs the proposal was to reduce the overall subsidy from 63.2% to 41.7%. She explained they were asking to raise the program fees so that the subsidy that the Town had for the expenditure side of the budget was reduced slightly. The total for Parks and Recreation Programs for next year after the changes to fees is estimated to be $106,905. She stated that in the Senior Programs area they hoped to reduce the overall subsidy from 52.4% to 43.9%. She noted that she had listed the various categories where the fees had been increased and what they were viewing were the new fee level: Memberships at $25 annually leaving the Town’s subsidy at $51,843; Home Delivered Meals category the per meal cost was being proposed at $8.50, leaving a subsidy of $18,664; and the total subsidies for next fiscal year for Senior Programs would remain at $84,222. Ms. Martin discussed the services level changes that were incorporated into the budget as being: Return of the Fountain to its full “run time” Continuation of the Community Service Contracts in the General Fund Elimination of the Public Information staffing Postponement of all Major Capital Expenditures Deferral of preventative maintenance Provision of custodial service in public areas only Reduction of Park & Median landscape maintenance Elimination of certain Town programs, e.g. “Concerts in the Park”, AveNews”, Oktoberfest”, Parking Lot Recycling, Paper Shredding Events, etc. Ms. Martin reviewed the different divisions’ operating budgets and the impact of budget changes from FY 2009/10 and FY 2010/11 as depicted on the next few slides. She noted that the Courts’ budget had actually increased due to a $40K grant to assist in subsidizing that increase. She explained the only items remaining in the Public Information Division’s budget were things such as dues that the Town would have normally paid anyway. Ms. Martin walked the Council through the funds that had both operating and capital components through the use of additional slides. She stated the two primary funds were the General Fund and the Capital Projects Fund, which encompassed 66% of the Town’s revenues. She discussed the HURF/Street Funds noting that the HURF fund would suffer from the loss of LTAF funding (approximately $114K) and that in order to save General Fund dollars, the traffic management program and balance of the median maintenance program had been transferred to the HURF Fund. She stated the median landscape maintenance contract had been reduced; that the Town’s support for outside Z:\Council Packets\2010\R6-17-10\100511M.doc Page 4 of 12 events had been reduced; and that the transfer of HURF monies to the CIP for pavement management had been eliminated. Ms. Martin discussed the changes in the Street Department Operating Budget. She reviewed the Excise Tax Fund (Fund 300) also known as the Economic Development Fund provided ongoing funding for economic development and downtown development. It also provided for the repayment of the Civic Center and Mountain Bonds. She stated that in 2010/11 one of the things that would be noticed was that there was a transfer from the Excise Tax Fund to provide start up funding for the Community Service Contracts in the General Fund. She stated the Downtown Development Budget was one of the few that was going up (up 52.7%). She explained that the bulk of the $340K was a transfer from the Excise Tax Fund to the CIP for Downtown Greening Projects and the Downtown Vision Projects. Ms. Martin discussed the Special Revenue Fund (Fund 400) noting that it was normally called the Grants Fund and that the monies that came into that fund had specific requirements about how they were spent (i.e. ARRA/Stimulus funding/MAG Grants and one-time grants, such as Energy Audits, Special Transportation Services and the Municipal Court Order of Protection Support). Ms. Martin discussed the Debt Services Funds explaining that they provided for the collection of revenues and for the repayment of principal and interest on various bonds. The bonds serve to pay voter approved General Obligation Bonds, Revenue (HURF) Bonds – were retired in FY 2009-10, Eagle Mountain Community Facilities District Bonds, and the Municipal Property Corporation Bonds for Town Center and the Preserve. Ms. Martin talked about the Capital Projects Fund (Fund 600) was the fund in which all of the projects valued at $50K or more were conducted. She listed the projects that were displayed on the slide, which were contained in the fund. She proceeded with the next slide, which showed the various sources of funding for the capital projects. Ms. Martin stated that one of the large issues when looking at the funding for next year’s capital projects was that there was no long term plan for funding pavement management projects. She said that pavement management each year competed for funding with all the other capital projects that were brought forward and proposed to the Executive Budget Committee. She stated the result of that has been the delay in road maintenance throughout the Town. In the past few years she indicated they had tried to breakup pavement management zones into two or three zones rather than do them a zone at time because they had not had the funding to do it. Ms. Martin displayed a graph that showed the pavement management projects that they were hoping to do through FY 2020 (blue line) and the red line indicated how much money was available to do that. She pointed to the fact that that that the gap was quite significant. Ms. Martin stated that because the Town had the large issue of State Shared Revenues as something they had to contend with this year and the fact that it was unlikely they would know the result of that until after the November election, it might be necessary for the first time to use Rainy Day funds if significant amounts of State Shared Revenues were taken away from the Town. She indicated there had been questions as to how that worked. She explained that the Rainy Day Fund had been created two years ago and has $1.3M in it. She said it was appropriated when the Council appropriated the budget because what the Council was appropriating was the assumption that State Shared Revenues would come in. So if it did not, the Rainy Day Fund might be used in lieu but it would still be a part of the appropriation that was made with this budget. Ms. Martin indicated that staff would need to come back to the Council and if they chose to use Rainy Day Funds to cover that budget gap; however, it would take a 2/3 affirmative vote of the Council to authorize the use of those funds. So if necessary, staff would come back and ask for permission to use those funds. Ms. Martin described the slide of the fund balance as a quick picture of what the fund balances were estimated to be at the end of this fiscal year. Ms. Martin provided an overview of strategies for the future stating that one of the things that both the Strategic Plan and staff believed strongly in was the need for the development of a long range financial plan. She stated that the plan should include things like revenue diversification, revenue enhancement, a comprehensive user fee analysis, a review of Town-wide subsidy policy development, expanded pursuit and use of grants, a review of Town provided “programs & services”, and a review of service “level” currently provided. Ms. Martin concluded by reviewing the remaining budget schedule for FY2010-11: Z:\Council Packets\2010\R6-17-10\100511M.doc Page 5 of 12 May 20, 2010 Council Agenda item on the budget for public input June 3, 2010 Council sets Maximum Expenditures Limit (adopts the tentative budget) June 9, 2010 Publish tentative budget in the newspaper June 16, 2010 Publish tentative budget in the newspaper June 17, 2010 Council adopts the Final Budget Ms. Martin pointed out that one more action would have to be taken, adoption of the tax levy. She noted that could either occur July 1 (if there was a meeting) or at one of the first meetings in August. She stated she would happy to answer any questions. Mayor Schlum thanked Mary for the presentation and reminded the public that there was a public open house immediately following the Council’s work-study session. Councilmember Leger stated that under the Capital Funds he had noticed that it had included the mill and overlay of Saguaro Boulevard and being that they were not going in that direction he asked if the expenditure would be reduced by $4.5M. Ms. Martin responded that currently it was listed as bonding of $4.5M and whatever was not approved in the budget process would be removed with the next version. Councilmember Dickey referenced the slide on page 41 of the presentation. She said that the Town’s budget was less than it has been and that those numbers were fairly high when looking at what they were suppose to do. She noted the Designated Unreserved Fund was to be 10% of the General Fund revenues average for the past five years and the Reserved Fund was to be 20% of the General Fund revenues average for the past five years. She commented that the Rainy Day Fund was kind of on its own because it was sort of a different animal. She stated that these three funds were suppose to add up or reach the 30% goal. She asked about what tools the Council had. She said that the first two funds added up to the 30% and that the Rainy Day Fund was in addition to that. She stated that the actual 30% was a very inflated number right now when looking at what the Town’s budget was. She explained she understood they were set up in order to get the Town through six months or a budget year and she did not know what or if there was a mechanism to look at these amounts, which totaled about $6.1M. Councilmember Dickey questioned since so many changes had been made what was available to the Council, if not now, in the future. She posed the question what if the budget went down again next year, then this became quite a lot of money to be untouchable when by our own policy it was way more than 30%. Ms. Martin responded that currently there was $5.5M estimated to be the General Fund balance, which was basically meeting the minimum requirements of that 10 and 20 percent. She clarified $5.5M was the estimated fund balance expected this year end and that the Rainy Day Fund was actually in a separate fund and that the General Fund contained the 10 and 20% portions. She explained that because of the way the financial policy was written it was the estimate over the last five years and so the dollar amount would continue to decline as revenues and expenditures continued to decline. She commented that if the Council wished to reduce them beyond this it would take a rewrite of the financial policy. Councilmember Dickey indicated she was coming out with more than the 30%. Ms. Ghetti stated that the fund balance policy was designed as a minimum with the three different components. She indicated these were standards that most governments ascribed to and had been adopted as a policy. She stated there was nothing in the policy that said to reduce the fund balance; however, what it did say was that if there was any surplus over and above what was required by policy, those funds could only be used for specific things that were non-reoccurring, such as debt payment or for a capital expense. Funds could not be used to supplement an operating budget. She reiterated that the 10 and 20 percent were the minimum, if they had more than that it was a good thing as far as keeping the Town’s credit rating up. The Rainy Day Fund could be used if there was a severe drop in revenue and that was the designation of a Rainy Day Fund. Councilmember Dickey asked about the Community Service Contracts and if the Council looked at changing the policy of how they were doing these contracts, could the Council potentially look at them as a one-time deal since they had intentions of changing how they were funded after this year. Ms. Ghetti responded staff would not recommend that because the Community Contracts were actually an operating expense. It was not a one-time unexpected unanticipated charge. She stated the Community Contracts were in the budget and adjustments were made (reorganization) and so now the Community Contracts were in the Z:\Council Packets\2010\R6-17-10\100511M.doc Page 6 of 12 General Fund budget based on what the Committee recommended and an additional funding source was not needed. Councilmember Leger asked Ms. Ghetti if she was looking for any recommendations or suggestions in terms of some of what was presented this evening most of which he stated he was comfortable with. Ms. Ghetti said this was a Work-Study Session and staff was prepared for feedback from the Council. She said staff realized that this was a working document and changes were likely to be made. Councilmember Leger proposed, with respect to Senior Services, to cap their membership at $15 with meals at a maximum of $7. He said those were suggestions or recommendations at this time and items that he would be proposing in the final budget if changes did not occur between now and then. He said it was his understanding with regard to Wash Management ($62K) that the Town was going to forego it and he felt those funds would give some wiggle room, and if it was not there, he suggested that perhaps they could find it elsewhere. Ms. Martin stated that the Fire Chief and the Public Works Director had looked at the washes because of the extreme rainy conditions had this year and the feeling had been that it would be dangerous to the community to not do a full wash maintenance program this year so it was reincorporated into the budget. Councilmember Leger stated that he was using that as an example of going back into the budget and looking for places. Mayor Schlum stated that the purpose of the Work-Study Session was discussion and not action as this was their brain storming time. Councilmember Dickey referred to page 23 in the presentation, regarding subsidies for membership and home delivered meals (HDM). She noted the subsidy for Senior membership was going to be $51.8K and the HDM program ($18.6K). She questioned if staff had a way of telling the Council what the delta would be if Councilmember Leger’s proposal was considered ($15 membership fee and $7 for meals). She asked if the Council made one of the changes, or if the membership fee was kept at $25, had there been any thought of scholarships for those who could not afford the $25 fee. She reiterated that she wanted to know what the subsidy would be if the Council went with the $15 membership fee and $7 per meal proposal. Mayor Schlum interjected that the Council had been benefiting from and struggling with the benefits of the new accounting program. He stated that many of these questions coming before them now would not be easy because they now understood the associated costs for all of the programs (hard and soft). He said they now realized that HDM were subsidized. In the past, Councilmembers had spoken out during budget times and stated that was something that they were not going to do. He indicated that part of the dialogue that took place in the Executive Budget Committee was that they could not assume that the Council wanted to subsidize this or other programs that might be considered a social service because the Town, in general, did not do social service programs. He explained that was why the Council was seeing this. He said there was a method of where those numbers came from because the numbers and the feedback received up and through this point were that the subsidy from Area Agency for the Aging (AAA) was not going up enough to cover the cost for folks that qualify for AAA where those folks were largely covered (grant from an outside agency). In general, they were looking for those that were buying the meals outside of AAA to pick up some of the balance for those so that the other meals could go out to those who could not afford them. He noted it had been a considerable jump but it all went back to understanding what the real cost was. He stated that no one was getting picked on as they went through the budget; he said the subsidy question would come up quite a bit because they now understood what that was. Vice Mayor Hansen agreed those were really tough questions. However, as they went through this and looked at the different things they were identifying as subsidy, she noted that the Council needed to factor in the group’s ability to pay. Somehow they needed to keep that out there. In looking at the difference between programs, such as sports activities, which were important but that was different than meals to people who could not afford them or who need them delivered. The Vice Mayor reiterated that would need to be factored in. Mayor Schlum pointed out that in a community such as the Town the parks and recreation programs, youth services and senior services were always subsidized. He stated that meals were not typically something that at Town our size would typically do; it would be something that the Senior Services did a good job of and the Town continued Z:\Council Packets\2010\R6-17-10\100511M.doc Page 7 of 12 to do a good job of. He stated the issue was now getting around the subsidy, and the question was that something the community was going to do. The Mayor indicated it looked like it was going to be necessary to some extent because the program was highly valued and that most here had been involved in one form or another on that program (HDM). He said his intent was to lay the groundwork because going into social services programs was clearly something the Town would not be able to go into in the near future because revenues were down considerably and he asked the question, was this really the role of government. Councilmember Dickey discussed page 43 of the presentation and said when they looked at that as a town-wide subsidy policy strategy for the future along with the community contracts she noted that they were all trying to get through this year. If they were seriously going to do something like this, then although they tried to avoid anything that shocked people into saying that on July 1 this would change (she indicated that this was almost like the transportation thing where if the Town could give them notice instead but here it was that they were starting right away that the Council would be doing a reexamination of how we do these subsidies and these contracts and things like that because as the revenue graphs showed things were not looking so good there. She reiterated that they needed to get through this year. She stated that the Seniors had indicated they were willing to go up some, they did not say no way or that they could not do anything, so she hoped there could be some compromise with the full knowledge though that the Town was working on some pretty drastic changes probably for the year after this. Councilmember Leger said along the lines of that argument he said there was a fine line with what was a social service and what it was not. He indicated that it was a matter of personal philosophy. He explained his methodology regarding the membership fee noting the Town had a commission that provided feedback that the membership might take a big hit if increased and indicated that he trusted their judgment because they were in tuned with what was happening down there. He said he was looking at this more from a business aspect than a social services perspective to say that the more folks enrolled in the membership and the more involved in the meals on wheels program the more capital the Town had in volunteerism and that they knew that all the people that volunteer in those programs also volunteer in other places. He said a number of members who joined the senior services also volunteer. If those numbers were ran, you would say the Town was making an investment and there was a return on investment in moving in this direction. He reiterated that was how he looked at it outside of the realm of social services. To the points made, if the Council was moving in that direction of non-subsidy, he said they should give Senior Services a heads up on that a year or two in advance so that they could become engaged in restructuring how they operate in terms of looking at grant funding, etc. He indicated he was not opposed to moving in that direction; however, he felt the budget numbers were a little extreme and pointed out they had received the Commission’s feedback. Vice Mayor Hansen said that in going forward she pointed out that this was an active Commission and they had been brainstorming with a number of ideas, such as adopting seniors and others. She commented that any help the Town could provide through the volunteer organization to starting ups some new programs to assist in that manor would be very helpful. The Mayor stated that for the Town to be as healthy as possible, the Council needed to make the right investments with the Town’s limited resources. He said they needed to limit the delivery of services by government so that they could have citizens delivering services to citizens, which in his opinion tended to be the best delivery method out there. He noted that this was the first year that the Town has had to engage the Commissions for budget information, other than fee studies, to help the Council with this because there had been a considerable revenue reduction. He pointed out that now the Council was not looking at reducing “nice to have” programs and acknowledged that the Commissions had been very helpful with that. Councilmember Dickey referenced page 28 in the budget regarding Capital Projects Fund (Fund 600). When talking about other ones such as Development Fees the first thing it said was that they were restricted funds, same for Fund 400 (Special Revenue Fund) and Fund 420 (Court Enhancement Fund); however, Fund 600 did not say that. She asked if the Council could use that fund for items other than capital projects. Ms. Ghetti addressed this question stating that the Capital Projects Fund was a restricted fund by Town Council resolution. She confirmed that the Council could unrestrict it, clarifying that the revenue source for the Capital Projects Fund was a portion of local sales tax. Ms. Ghetti stated that was the only revenue that the Capital Projects Z:\Council Packets\2010\R6-17-10\100511M.doc Page 8 of 12 Fund received. She stated that it was created by the Council by resolution to transfer that money; therefore, the Council could undo that but there would not be any funding or the capital projects. She stated it was a Council restriction and not a state mandated restriction although some were mandated by the grant or the government but this was a local restriction. Councilmember Dickey stated that during the presentation it was mentioned the transfer amount be changed to the Capital Projects Fund from 85% to 50%. However, she noted that the budget still said 85%. She asked if that needed to be changed on page 28. Ms. Ghetti clarified that what was currently in the budget was the adopted financial policies and that staff would bring back to the Council the proposal to reduce the construction sales tax as the Council had asked be done; when the financial policies were amended, the new policy language would be included in the document. She reiterated that what was in the budget was the current policy language; however, the budget numbers did take that into account regarding the transfer of money from the Capital Improvement Fund to the General Fund. She indicated that staff understood that had to be approved by the Council separate from the budget and the resolution amending the financial policies would be brought forward. Mayor Schlum said it was great how staff broke out the funds and how they were addressed as it helped them understand where the monies come from and where they could and could not be used. He requested that staff address information found on page 270. He said the HURF Fund (Fund 200) was pretty straight forward but asked staff to provide a higher level background for where the fund came from and where they could be used. Ms. Martin said the HURF Fund was also called the Streets Fund and the money was a distribution of funds by the State to be used for streets, road and transportation purposes. In response to a question from the Mayor, she indicated that most of the money came from gasoline tax so as that source of revenue had declined over the last few years so had the HURF monies. Mayor said that it accounted for roughly $1.3M this coming year in revenue and Ms. Martin concurred. The Mayor asked about Fund 300 stating that it had some greening dollars coming from it but that Ms. Martin had mentioned it funded the repayment of civic center and mountain bonds. He asked where did the money come from and where was it authorized to be spent. Ms. Martin stated the Excise Tax Fund was a percentage of the sales tax that was coming into the Town that was specifically set aside for debt service repayment and downtown development. The Mayor asked if that was the one tenth of 1% and Ms. Martin concurred. Mayor Schlum said that it was the .3% that went towards the civic center and mountain bonds and Ms. Martin said that was the debt service repayment. The Mayor asked what remaining amount could be spent for and Ms. Martin responded, under broad terms, economic development. Mayor Schlum asked about the $320K noted on page 106 in the budget. Ms. Martin clarified that the $320K was a transfer to the Capital Improvement Fund for two specific projects one being the Downtown Vision Plan Phase II (Avenue/Lakeside) with part of that was for the potential use of incentives for development on the piece of property next door. The second component was the Downtown Vision Plan Phase III for a downtown parking study that might also assist in the development of the property next door. The Mayor said the incentive had been typically been looked at as improvement of the sidewalk and Ms. Martin responded that it might include the Town participating in some component of improvement either to the sidewalks or the property. The Mayor moved on to Fund 410 (Public Art Fund) and asked if these were funds came in from commercial construction and were a percentage of the project’s cost, for which funds came in to the Town for the purpose of purchasing art. Ms. Martin confirmed that was correct and said that in lieu of providing public art the developer could chose to do a contribution to the public art fund. Councilmember Archambault pointed out a $10,350 transfer, which he noted was for the maintenance of the art pieces that the Town currently had. Ms. Martin said that was correct as the public art fund was restricted to the purchase and installation of public art but not for the maintenance of the art; therefore, the General Fund transferred monies to the Public Art Fund to pay for art maintenance. The Mayor continued with the Special Revenue Fund (Fund 400) and asked staff to explain this fund. Ms. Martin explained that this fund was basically a holding fund for grant monies. Because most grant monies had highly Z:\Council Packets\2010\R6-17-10\100511M.doc Page 9 of 12 restricted accounting requirements all of those funds were deposited into fund 100 and accounted for separately from other Town funds as the uses of those funds were restricted to the terms of whatever grant entity had provided the funds. The Mayor pointed out that was probably why the Town’s capital improvement budget was so high because it was largely grant monies flowing through the Town. Ms. Martin concurred and said that in the last two years there had been a significant increase in the size of the capital improvement budget because of grant funding. The Mayor asked for a ballpark of what the net capital improvement spending would be outside of grant monies from the Town’s savings from the Capital Improvement Fund and Ms. Martin responded the total amount that would come out of the Capital Projects Fund was $2,291,000 and of that $133K was the Contingency Fund. The Mayor asked what the rough balance would be and Ms. Martin responded that at this point staff would say the balance was somewhere in the neighborhood of $8M. The Mayor moved on to the Court Enhancement Fund (Fund 420). Ms. Martin stated this was a set aside of court fines and forfeitures for primarily technology improvements in the court system. She stated that if more detail was needed she would need to call upon Judge Armbruster. Judge Armbruster addressed the Council stating that the Court Enhancement Fund was created by resolution many years ago and it established a $10 assessment per charge, as was the case in other courts around the State, for the purposes of addressing court needs that might not otherwise be handled by a Town budget. He stated historically the Court, not just during his appointment in 2002 but prior to that his predecessor, had been very prudent in recognizing the value of having those funds available for court needs during difficult times. He stated that they had used those funds for those reasons that Ms. Martin mentioned. He explained that historically the funds had been used to purchase the digital recording system for the Court when moving into the new building as prior to that they had utilized a microcassette recorder. He noted that the preferred appeal record for any case from a limited jurisdiction court was a digital recording so they had had the ability to purchase that without using Town funds. He noted they also recognized the responsibility to the Court and court users of having appropriate and proper security and they had purchased a court security camera system as well as the fact they also had the opportunity to purchase the supporting hardware for the video conferencing that was used, which provided the ability to address post disposition cases for incarcerated individual without having to transport them to Fountain Hills as was done in the past, which he indicated had been happening for about five years. He said the opportunities to use the funds had been put to good use and stated they were fortunate to have those funds available. Councilmember Dickey said that over the last several months there had been some question about was there a difference if some got a fee or fine and was it based on a State Statute or city or town ordinance. If someone got a ticket that was $50 what did the Town receive and was the Town pushing one thing over the other in order to e a revenue generator. She said her understanding was it did not matter what it was because it was 40% that would come into the Town. She asked for clarification as there had been a lot of activity about speeding and parking tickets and things like that. Judge Armbruster said he recalled the question from another budget meeting and Ms. Ghetti had responded accurately that was a pretty close approximation of what the Town received and it was also correct that there was no distinction. He said the mandatory surcharges and fees that the Court had to add to any fine imposed as a result of the Legislature’s decision go to a variety of funds that did not benefit the Town of Fountain Hills and totaled 84% right now. He explained that the Court had a total of close to 84% of additional surcharges and fees that had to be added to every fine that went to a variety of sources. Councilmember Dickey referred to page 24 in the presentation regarding service level changes/issues and asked if those were already decisions that had been made as far as eliminating Concerts in the Park, Oktoberfest and that kind of thing or were those things the Council was talking about. She stated that she had not looked at everything in the book yet. Ms. Martin said that these were the items that had been eliminated from the budget, so they were not decisions that had been made inasmuch as they were assumptions that had been made to get the budget to balance. The Mayor referred to the bar graph on page 8 of the presentation regarding the decline in the general fund revenue. He indicated this was what he had been trying to illustrate just what they were dealing with here as a whole Town, where and whenever he had been invited to speak. He stated he tried to explain why everything was being reduced Z:\Council Packets\2010\R6-17-10\100511M.doc Page 10 of 12 pretty significantly including staffing as well. In going back to FY 2006/07 on the graph, he noted the Town’s budget was roughly $17M and this year it showed $12.7M. He said that a subsequent graph had shown that Public Safety had stayed roughly where they had been, which was around $6M, so the remainder was how the Town paid for everything else in Town Hall, which included staff, programs (seniors, youth streets, etc) and everything that the Town was required to do or that the Council felt the community would like to do. The Mayor referenced the bar graph and pointed out what the various General Fund balances had been over the years after the Public Safety expense had been subtracted. He noted that this year it would leave the Town a little over $6M and commented that had occurred over a short period of years whereby they had gone from $11M to $6M, approximately a 40% reduction. He commended Town staff for the tremendous job they had done even just this year in maintaining services and the quality of the Town as well as all the volunteers who had stepped up in light of the need. The Mayor stated that this was the challenge before them and staff had done a good job that the Council knew what was coming but this was also again why they would not be funding some things that some individuals might consider as needs as the money was just not there. Councilmember Dickey said that Public Safety, just to give the full story, contract last year for fire went down a couple hundred thousand and then they agreed to limit, even less than anticipated, how much it would go up and then the MCSO contract looked to be tens of thousands less. She pointed out that they had even done their share in coming down like that. She concurred that the part of the General Fund that was more disposable was shrinking. The Mayor stated that the Town was fortunate that Public Safety costs had not gone up but most people in the public would assume Public Safety costs, unless the level of services was reduced, would go up. He reiterated that the Town had been very fortunate with our service providers, in fact, this year they were trying to help the Town even further. Town Manager Davis explained that normally built into the Town’s contract with Rural Metro, for example, was the 3% annual escalator ; this year that organization had agreed to forgo that 3% and that had translated into about $85K, which was put back into the budget. The Mayor said that to break it out had helped the public understand when he had spoken with them as it illustrated how much of a struggle the Town had before them. The Vice Mayor referred to page 24 in the presentation regarding service level changes/issues and regarding eliminating certain Town programs such as Concerts in the Park and Oktoberfest. She asked if they were closing the door on partnership opportunities with outside groups, such as the Chamber for Oktoberfest as they had done a lot of it last year. She questioned if that meant, if the outside group wanted to do Oktoberfest the Town would be charging them to use the Park rather than making the contribution of letting them use the park for that event. She also discussed the Concerts in the Park and suggested that if there were some outside sponsors, as done with the Movies in the Park, that the Town have the ability to go work with that group and it was noted by the Vice Mayor that Bryan Hughes (Parks Supervisor ) affirmed that could still occur. The Mayor clarified that the Town’s ability to facilitate events was not eliminated. Mr. Davis said that was a good question and an opportunity to clarify if something was excluded from the budget it only meant that there was no funding right now in the budget to support that. He said staff would certainly continue to cultivate partnerships to do even more than was delineated in the budget, if possible. Staff would do as much as they possibly could. Councilmember Dickey asked if there had been any formal communication with those sponsoring organizations to just let them know that this was happening. Ms. Martin said that having met with some of the boards and commissions and other members of the public about stepping up, that they had been wonderful. She noted that everybody was out there recruiting their friends and neighbors to come up with donations to support various Town programs. She discussed the Special Revenue Fund and said that if the groups were able to bring in funds dedicated to a specific project that would be where it was accounted for in the Town budget. She indicated that staff tended to set aside some money for exactly that purpose. Z:\Council Packets\2010\R6-17-10\100511M.doc Page 11 of 12 The Mayor said he also mentioned to folks as to how the Town was funded and discussed the slide on page 9 of the presentation, Lack of a Diversified Revenue Base. He said it got people’s attention. He noted that everyone in Town paid a property tax in Fountain Hills if they owned property; however, none of it really went to the Town’s operations. He pointed out that only a small portion (approximately a tenth of a percent of what was paid on property taxes) went to pay Town debt but most of it went to agencies outside of the Town (i.e. school district, sanitary district, and others). He said this slide illustrated how vulnerable the Town’s funding sources to Town operations. Being almost dependent on sales taxes and as the economy goes up and down the General Operating Fund would go up and down and of course when it goes down to the extent it has then it was a dramatic impact. He said of course they were now looking at the State Shared Revenues, which made up a considerable portion of the Town’s operating budget, being considered perhaps at risk. The Mayor said they would need to keep an eye on that and keep working with the Town’s representative to ensure that they understood how important those funds were to the Town as 80% of all state sales taxes were derived from cities and towns and the portion coming back to the Town was probably less than what was being sent in. Mayor Schlum pointed out that the Town was quite lean and because of the Town’s reliance on what was spent in Town that also made it so important that citizens understand how important it was to support their local Fountain Hills’ businesses because those revenues stayed in Town. He said the dollars spent in Fountain Hills’ businesses did not just provide sales taxes but they also provided revenue for business owners that live in Town and who paid their staff who then in turn spent their money in Fountain Hills. He commented that it was really a compounded benefit and he reiterated it was important for folks to shop locally. Councilmember Dickey asked if the bed tax was not being considered at this time. Ms. Ghetti responded that the bed tax would come forward to the Council at the last meeting in June (June 17); however, staff had included that additional bed tax revenue in this budget because it would be in the General Fund. She commented that was assuming that the Council passes that resolution in June. The Mayor asked about the process regarding the next meeting on the budget. Ms. Ghetti said that the next meeting on May 20 was an opportunity for the public to come up and discuss the budget noting that tonight’s meeting was a work-study and they could not come up to talk about the budget. She commented that the public would then have had an opportunity to see the budget as it was on-line and then come to the next Council meeting. Then at the following meeting (first meeting in June) the Council was to adopt the budget maximum amount. She explained that once the maximum amount was set there would no longer be an opportunity to add anything to the budget without taking things away. Councilmember Dickey asked staff to explain the role of performance measures in the budget and how they were assessed, was there follow-up and how they related the budget document. Mr. Davis said there were two ways of approaching performance measures. One was an academic approach that told us how we were doing and what efficiencies were realized or not and the other part was that it allowed us to pinpoint to what degree we were achieving the objectives that the Council had laid out for us. Therefore, to the degree that the performance measures were closely tied to and related to your goals and objectives and organization’s mission the better you ought to feel about the direction that the Town was going. It was also the clearest and most transparent way to communicate to the public exactly what we’re doing with the dollars that had been entrusted to us. Councilmember Dickey said the other part to that was the regular assessments and asked Mr. Davis how that was incorporated that into his routine. Mr. Davis responded that performance measures could be used to benchmark performance against other communities’ performance and to identify whether we were falling behind in a particular area and how we were spending funds entrusted to us for road repairs or parks maintenance or other things. He said it was a dash board indicator of how they were doing as a Town and allowed for quick corrections to be made during the year. It also allowed for future extrapolations in those areas that needed to be monitored more closely and perhaps allowing us to prepare according to the indicator that this particular service or program was costing more and more. They would need to understand not only why but to prepare for those eventualities. He said performance measures were a great planning tool as well. Mayor Schlum asked if there any additional questions from Council or the Manager. Mr. Davis expressed his appreciation to all who had helped with the formation of this budget. He commented that the budget process started Z:\Council Packets\2010\R6-17-10\100511M.doc Page 12 of 12 early in the fall and so it was almost kind of an emotional thing to bring a preliminary budget to the Council because so much had gone into this (many meetings, hours of meetings, etc.). He extended his appreciation to the Executive Budget Committee, especially to those who volunteered their time (the Mayor, SPAC Chair Audra Koester Thomas and to the others who had helped to put this document together). He acknowledged that the budget was a product of many hands at work; a lot of flexibility and innovative thought had gone into it this year. He said that if you had a budget that equaled out to zero this year, for this year among all other years, a lot of creativity, innovation, and flexibility went into the creation of that budget no matter what town you were talking about; therefore, he applauded all who had helped and the Council who had given staff their guidance and for continuing to provide their guidance through the rest of this process. Mayor Schlum thanked staff and everyone associated with the process. He asked that as the Council went through the process and knowing that it was going to be difficult and that they were not all going to be happy, that they just go through it together. He said that if they were all together and had good, constructive, and respectful dialogue that they would end up with the best product possible at their last meeting in June. AGENDA ITEM #3 – ADJOURNMENT OF THE WORK-STUDY SESSION AND THE PUBLIC OPEN HOUSE CONVENED. Councilmember Archambault MOVED to adjourn the meeting and Councilmember Brown SECONDED the motion, which CARRIED UNANIMOUSLY (7-0). The meeting adjourned at 6:55 p.m. TOWN OF FOUNTAIN HILLS By __________________________ Jay T. Schlum, Mayor ATTEST AND PREPARED BY: _________________________ Bevelyn J. Bender, Town Clerk CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Work Study Session held by the Town Council of Fountain Hills on the 11th day of May 2010 in the Fountain Hills Council Chambers. I further certify that the meeting was duly called and that a quorum was present. DATED this 17th day of June 2010. _____________________________ Bevelyn J. Bender, Town Clerk