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HomeMy WebLinkAbout2011.0510.TCSM.Minutesz:\council packets\2011\r6-16-11\110510m.docx Page 1 of 11 TOWN OF FOUNTAIN HILLS MINUTES OF THE SPECIAL SESSION OF THE FOUNTAIN HILLS TOWN COUNCIL MAY 10, 2011 * CALL TO ORDER AND ROLL CALL Mayor Schlum called the meeting to order at 5:30 p.m. held in the Town Hall Council Chambers. * ROLL CALL Present for roll call were the following members of the City Council: Mayor Schlum, Vice Mayor Contino, Councilmember Brown, Councilmember Leger, Councilmember Elkie and Councilmember Hansen. Town Manager Rick Davis, Town Attorney Andrew McGuire and Town Clerk Bev Bender were also present. Councilmember Dickey arrived at 5:32 p.m. AGENDA ITEM #1 – PRESENTATION, DISCUSSION AND POSSIBLE DIRECTION TO STAFF RELATING TO THE TOWN OF FOUNTAIN HILLS PROPOSED BUDGET FOR FISCAL YEAR 2011-12. Town Manager Rick Davis addressed the Council and stated that staff is nearing the end of the budget process but not quite there yet and said that the process began in August/September but it is really the beginning because this is when staff receives the clarification, direction and feedback from citizens and the Council that allows them to move forward. He stressed the importance of receiving input and direction and noted that staff is optimistic about their ability to put togeth er a document that is conservative, based on a new normal, anticipates a new economy that they are moving into and preserves some very critical service levels for the Town. He added that staff understands that the Council has not had the opportunity to review the proposed document for very long (nor has the public had a lot of time to look at this document) and so staff is proposing in a few more days to meet with the Council at additional Special Sessions, which the Council and public will receive notification on. He said that Ms. Ghetti will now walk the Council through each proposed section and encouraged the Council to ask questions and said that if staff does not have the answers, they will get them quickly. Deputy Town Manager/Finance Director Julie Ghetti addressed the Council and thanked the members of the Executive Budget Committee for their efforts in putting the proposed budget together. She read off the names of the Committee members and said that they would not be where they are at today if it was not for their hard work. Ms. Ghetti hig hlighted a presentation on the proposed budget (Copy available in the office of the Town Clerk) and noted that the economy continues to show signs of stability. She said that revenues include a proposed increase in telecommunications/utility tax (4%) and added that proposed General Fund expenditures increase less than 1% excluding Public Safety. She stated that the proposal incorporates the Council's goals and pointed out that the CIP budget is funded with construction sales tax that continues to deteriorate. Ms. Ghetti discussed long-term concerns and issues and briefly discussed all funds revenues and all funds expenditures. She summarized what is in the budget (no merit increases for staff; defrayed cost of benefits by reduced benefit to employees; a proposal to increase the telecommunications tax to 4%; an initiative for General Obligation bonds for $29.6 million; Saguaro Boulevard mill and overlay; $10.5 million of CIP funds utilized for capital projects over the next five years; a 20% reduction in community contracts; and a reduced transfer from the General Fund for the Community Center ). She also highlighted available tools to balance the budget (increase revenues and decrease expenditures) and discussed budget solutions noting that proposed solutions must be aligned with the following three principles: Be permanent and sustainable, preserve organizational integrity, and be equitable. Ms. Ghetti discussed revenue options, which include increasing the sales tax on telecommunications to 3.1% which would result in $275,000 annually and the fact that this would require Council action within 60 days advance notice to the pubic before consideration and 60 days after adoption to implement, increasing the sales tax to 3.6%, which would result in $550,000 annually (subject to same notification requirements) and increasing the sales tax on telecommunications to 4.0%, which would result in $750,000 annually (subject to the same time notification requirements); the fact that the third option has been included in the proposed budget; the effect on residents of increased telecommunication/utilities tax from 2.6% to 4.0%; various expenditure options including two that are part of the proposed budget (reduce community z:\council packets\2011\r6-16-11\110510m.docx Page 2 of 11 contracts by another 20% resulting in an annual estimated savings of $71,428 and restructuring the debt payment for the Community Center with annual estimated savings of $193,500); General Fund expenditures; Municipal Court expenditures; Administration expenditures; Development Services Expenditures; Community Services expenditures; Law Enforcement expenditures; Fire Department expenditures; other fund expenditures; Streets expenditures , and Downtown Development expenditures. Director of Development Services Paul Mood addressed the Council and discussed the 5-year Capital Improvement Fund (CIP) projects, and delayed CIP fund projects (a complete copy of the presentation is available in the office of the Town Clerk). He said that due to a lack of adequate funding, the Executive Budget Committee discussed moving projects out into the future and funding what they really need to do within the next five years. He displayed a chart that depicted proposed funding over the next five-year period and noted that it leverages a lot of matching Prop. 400 money, Federal funding and grants. He advised that the S6008 project (Annual Pavement Management) is currently funded for $2.4 million in CIP funds over the next five years plus $9.9 million in bond funds. He said that should the street bond not pass in November, the CIP fund will go up close to $4.5 million and will take away from a lot of other projects. He also discussed a list of projects that have been delayed and explained that the Ellman agreement contains a lot of drainage and traffic signal projects should the capacity from that development ever warrant them and noted that their agreement states that they are responsible for a portion of those costs. He discussed the projects that have been delayed and reported that the current Fiscal Year CIP has approximately $35,000 in it for downtown sidewalks and staff would like to propose that the sidewalk be finished on the south side of the Avenue just east of Town Hall. He added that there is also the property just west of Bashas on Palisades and he believes they can go out and get bids from local contractors to get that work done but they need to do it very quickly because they need to get the bids in and the work completed by June 30th. He advised that staff also moved out a project for the Saguaro Boulevard service road elimination and explained that the Town was not successful in obtaining a grant but will continue to look for opportunities should a grant come up agai n. Mr. Mood also informed the Council that the Fountain Hills Boulevard sidewalk was also moved out (from Cholla to Crystal Point) and stated that originally that was a sidewalk that would go all the way to Shea but they applied for a $1 million grant and received only $300,000. He said that they would have to spend approximately $280,000 of Town money to get $300,000 and he does not know if that sidewalk really warrants it so direction is needed from the Council on this issue. He noted that the project would actually go away because the grant has timing requirements so they can't move it out five years -- they could probably move it out one year and defer it and still get the grant but again direction on that is needed. He indicated his willingness to respond to questions from the Council. Mayor Schlum thanked Mr. Mood for his comments and said that he does have concerns about the $4 million plus that would have to be spent out of the CIP and Mr. Mood clarified that that would be over the next five year s (for pavement maintenance) if the street bond does not pass (no mill and overlay). Councilmember Dickey referred to the $35,000 for the downtown sidewalk project and Mr. Mood advised that that is currently programmed into FY 2010 and this is FY 2011-2016 and needs to be expended by June 30th. Councilmember Elkie, a member of the Executive Budget Committee, summarized what they are dealing with. He said that this year staff anticipated a shortfall (based on State Shared Revenues) of about $400,000 but it wound up being $915,000 -- so they are dealing with a $515,000 shortfall. He stated that staff discussed whether this would be short term or long term and noted that next year they will have to deal with the $915,000 as well so the shortfall, as Ms. Ghe tti stated, is a reality as far as year in and year out. He added that fortunately they only have to make up $515,000 this year but he would have that the discussion and direction to staff address whether they are looking at something this year that they are just going to fix because if they are going to do that they could just spend Rainy Day Funds and make up the shortfall (or do they want to look at something long term). Councilmember Elkie stated that discussion took place regarding using the CIP funds ($2.5 million) to pay down the bonds that they have presently -- there would be some savings -- and asked Ms. Ghetti to speak to that. Ms. Ghetti advised that staff contacted the financial advisors and talked to them about the feasibility of using some CIP funds to pay off the bonds early and asked if that would result in any savings and if so what the savings would be. She said that is an option and if they want to take $2.5 or $2.9 million out of the CIP funds to do that they would save approximately $300,000 a year in debt service payments that they could use in the General Fund. She added, however, that they would have to figure out how to replenish the CIP fund. z:\council packets\2011\r6-16-11\110510m.docx Page 3 of 11 Councilmember Dickey asked when staff anticipated the $400,000 initial shortfall this year, did they take care of that with anything that would be permanent (instead of looking for $915,000 worth of permanent cuts now to get them through pretty much forever) -- was that something that would be sustainable or was it all "let's do this to get through this year, etc.". Ms. Ghetti replied that back in December/January, because staff anticipated a slight bump in revenues, they also anticipated a slight increase in public safety contracts so they pulled every department down and said "this is wh at your department budget is." She added that the things that are being left out are maintenance items that they are just pushing off. She noted that they do have some permanent things in the budget as well, such as the staff layoffs that they don't see coming back. She stated that there are some maintenance things that they really need to do but were not able to do (they were not in the budget in January and they are not in the budget now). In response to comments from Councilmember Dickey, Ms. Ghetti said that the Executive Budget Committee talked about the different tax levels for telecommunications and what they came to an agreement on was they didn't want to solve the problem for one year. She stated that if they did not increase it enough and jus t met that amount they would be back a year from now when all those contracts and the cost of doing business go back up again. She advised that one of the principles they were following was that whatever they did had to be sustainable and they were looking at the long term and not just a one-year fix. Mr. Davis explained that one thing they want to be very careful about clarifying is that the proposal before the Council, while a longer term solution, is not a permanent solution. He pointed out that out beyond 2015-16 they begin to see a deficit emerge. He reiterated that this is a longer term solution but it is not a permanent solution. Councilmember Elkie stated that in the interest of full disclosure, during some of the discussions, based on the $12.1 million budget, he heard from some of the department heads that they are not doing some of the things that they would normally be doing year in and year out. He asked if some of the department heads could inform the Council what some of those things they are not doing are because of funding issues. Mayor Schlum said he thinks that is a great idea and noted that prior to Mr. Mood being with the Town the General Fund budget was between $17 and $18 million (several years back) and now potentially if there a re no revenue enhancements, they will be at $12.1 million. He added that if they take public safety out of that mix, roughly around $6 million -- a $17 million budget with $6 million out for public safety left them about $11 million to pay for all the thi ngs they are talking about in the General Fund -- that left $11 million several years back and now at $12 million roughly and $6 million for public safety they are now at $6 million to pay for everything else -- close to a 50% reduction in overall spending at the Town level for the operating budget, which are the things that citizens see and feel. He said there are a lot of things to b e said about that and obviously the staff needs to be lifted up for delivering a tremendous amount of quality services at about 50% of what they were spending several years back. He added that they also went from 88 full time equivalent employees to 61 so they said goodbye to a lot of Town staff. He advised that building demand slowed and a lot of people were removed in the construction related areas. He said that roads and parks still need to be maintained and services need to be delivered. He further stated that besides staff continuing to provide quality service despite all of the cuts, they ha ve also not received any salary enhancements for years and the challenge gets even harder this year. He noted that they got hit with the Census numbers which resulted in an approximate $900,000 surprise. He added that the Town will continue to grow at a slower pace than other communities so their share of the Revenue Sharing pie will continue to get smaller. He said that the Executive Budget Committee did some wonderful work but they are far from making any decisions on some of the more sensitive items. He stated that it will be good to hear from the department heads on things they have had to put off because of funding issues (what have they not been doing and what might they see in the future). Mr. Mood discussed the Streets (HURF) Fund and advised that staff had anticipated about a $100,000 reduction but were then hit with another $150,000 reduction on top of that. He said that the HURF fund pays for the general day -to-day streets operation and does not pay for the pavement management that is done in each zone every year (that comes from the Capital Projects fund). He noted that the cost is approximately $200,000 a year and there is about $100,000 in insurance and they pay part of the Attorney's fees because there is a lot of liability and contracts with the Streets Department (traffic signal maintenance, landscaping maintenance with the medians, etc.). He explained that before the HURF fund got reduced again there was a fairly balanced streets budget and what they had to do to make up the difference is make a decision not to fill the recently vacated position of Charlie Fleck (retired) who was doing the open space maintenance. He added that Environmental Planner Raymond Rees is taking over the wash maintenance and dam maintenance contract and z:\council packets\2011\r6-16-11\110510m.docx Page 4 of 11 mechanic Jeff Larsen is going to manage the open space contract with the medians. He stated that Peter Petrotta, who is a traffic signal technician and works part time, will probably no longer be with the Town after the fiscal year (that position will not be replaced as well). He said t hat hopefully they will work on an Intergovernmental Agreement (IGA) with the City of Scottsdale for backup purposes because they will be down to one traffic signal technician. He advised that they are basically maintaining the same level of service with less people. Mr. Mood reported that on the General Fund side in the Planning Department they had a half time planner retire, so that position did not get filled since less work is coming in (the Planning Department is basically down to one person now). He advised that most of the General Fund work that they have been putting off is facilities maintenance (he has a four - page "wish list"). He noted that the Town has a vehicle replacement fund but does not have an equipment replacement fund. He added that they probably have three quarters of a million dollars worth of chiller equipment in the physical plant that had maintenance funding cut and the equipment is getting up there in age (10 or 11 years old). He stated that they have roofs on some of the older buildings that are aging and they just keep doing patchwork on them -- at some point those roofs are going to need to be replaced. He pointed out that they did use some contingency funds to fix some pumps over in the physical plant as well as a couple of air handlers (one at the Library and one at the Community Center) but there are many more. He stated that there are numerous maintenance items that just keep getting pushed back so that they can run the facilities on a day-to-day basis. He stressed that at some point those are going to catch up with them. He added that they are not putting money aside for that so one day they will be back before the Council asking for contingency funds to do that work. He said that the staff does a good job but the equipment can only last and operate so long. He stated that the air conditioner at the Kiwanis building that cools the kitchen and restrooms, for example, is 20 years old and on its last legs. Mayor Schlum thanked Mr. Mood for his input. Community Services Director Mark Mayer addressed the Council and said that his department's situation is similar to Mr. Mood's situation in the sense that they have also been deferring maintenance on some of the parks. He stated that he had an opportunity to take the Parks & Recreation Commission on a tour of the parks yesterday and one of the Commissioners asked him about the condition of some of the poles at Golden Eagle Park. He explained that this is one of the items that has been deferred and said that some of them have rusted to the point that staff is concerned that they may not last another year or so, especially during high winds. He added that they have also been deferring some maintenance on a number of trees, especially the "high top" trimming, and noted that those are the o nes that are the most susceptible during high wind occurrences. He advised that staff would also like to be able to do some work/repairs to the Fountain Park lights, which they couldn't do this year, and said that funding for the work is not in next year's budget either. He informed the Council that they have a replacement shade structure at Four Peaks Park that needs to be replaced and staff has not been able to include that in the budget as well. He stated that looking forward, at some point they are going to need to prune the trees that have recently been planted through the Green Program. He said that there is no current funding for that and staff does not anticipate having any funding for that next year either. He advised that the above represents just a few of the items that staff put together for the parks but noted that there are many more items (they tried to list the highest priorities). Mayor Schlum thanked Mr. Mayer for his comments. Councilmember Dickey asked if the closing of Four Peaks (school) will have any effect on them. She said she knows they had IGAs as far as who did the lighting, field maintenance, etc., but wanted to know if there would be any ramifications as far as the budget. She added that when they talk about public safety, she wonders if having an unused building will impact that area. Mr. Mayer explained that under the agreement that the Town currently has with the School District the only effect that he can see is that park usage on the school side of the wash would be largely restricted during the day if there are any physical/educational activities taking place at that time. He said that in essence that largely will go away with the youths no longer being at that particular campus. He noted that the School District has indicated that it will continue to maintain the building and obviously that whole campus is a part of that entire project so assuming that they are financially able to keep up with the maintenance on the grounds, etc., he really doesn't anticipate any significant problems. Mayor Schlum said that he liked what Ms. Ghetti shared at the beginning of the meeting and added that he believes she answered a lot of the things on everyone's mind. He noted that the approach to the budget solutions has to be permanent and sustainable. He advised that he does not believe they are looking tonight for a budget solution -- it is just good for z:\council packets\2011\r6-16-11\110510m.docx Page 5 of 11 this year and something they will have to reformulate entirely next year because they do not expect revenues to jump tremendously or provide opportunities to do many of the things that were just mentioned next year or the following year. He added that this is the new normal and revenues are not going to be climbing and questioned whether they would climb as much as inflation and said probably not. The Mayor also discussed passing along more of the health care costs on to the employees. He asked if there are areas in the proposed budget that they can go over -- at least the high level where they are increasing their spending as a Town in the General Fund. Ms. Ghetti responded that the only area they are increasing spending in is in public safety. She advised that the other budgets have been held completely level both last year and this year and added that they have absorbed increases that would be in the employee benefits area --health care, no salary increases, and in landscaping contracts, etc. She noted that the changes made now will definitely affect levels of service and programs within the Town. Mayor Schlum asked that if the budget is not at $12.1 million but rather at the higher number she shared earlier, is that because there is a consideration of enhancing revenues by increasing the telecommunications tax. Ms. Ghetti replied yes and advised that staff included in the proposed budget a proposal for increased revenue in the telecommunications tax. She noted that staff also included a contingency in the General Fund in the event that (a) they do pass that tax and (b) they could come back to the Council and say, "okay the tax is coming in and it is what we expected it to be" and there might be some flexibility at that point to revisit any expenditures that have come up that they haven't planned for or weren't able to do. She pointed out that one of the things that they need to consider is that the issue of increasing the telecommunications tax is at least 120 days out from when the Council makes a decision. She advised that they have to notify the public 60 days before they make a decision to increase the tax and the n after the Council approves it there is a 60-day waiting period before it can become effective. She added that they need the contingency funds in case the tax is not approved or they cannot collect it until they are half way through the year. Mayor Schlum asked what the costs are going to be as far as public safety and Ms. Ghetti stated that the contract with Rural Metro has a 3% increase in the budget for three more years . She said that last year, FY 10/11, they did not charge the Town an increase but they will for FY 11/12. She added that the law enforcement contract is a full cost recovery, which means that whatever those costs are for the number of beats that they require, those costs are passed on to the Town (about a 5.5% increase for FY 11/12. She confirmed that they are not increasing spending in other areas in the General Fund. She noted that if they took out public safety, the proposed budget contains less than a 1% increase for all of the other General Fund areas (parks, everything). Mr. Davis advised that if there is any variance between line items this year and line items last year, it is not the product of their application of any inflationary factor (no anticipated inflation at all). Councilmember Hansen stated the opinion that it would be very helpful for the Council and the members of the community if, since staff has already made lists of things that they are deferring and having to go without, those lists are committed to paper -- a shopping list per se of all the things that they are going to be doing without. She said that she believes that would help to make it more clear what the community is giving up due to a lack of funding sources (even programs in Parks & Recreation -- the things that they won't have next year). Mayor Schlum stated support for Councilmember Hansen's suggestion. Councilmember Dickey commented that along with that there are also intangible things that are hard to put their finger on that they are not going to be able to do. She noted that one entity had called about doing a story on Fountain Hills and we have to ask ourselves "who do we call to meet with this person" because research has to be done and time spent. She said she believes it would also be good to show the intangible things (like the big meeting they had with the five communities, "The Arizona You Want," and it was an opportunity to compete in the State and attract people to the community and receive national exposure). She said that everyone is just trying to get by on a day-to-day basis so who would they get to do something like that and added that there are many other things as well (perhaps a sentence included in the list that Councilmember Hansen requested could get those points across as well). Mayor Schlum noted that the community has also been huge on volunteerism and there are many organizations leading the way in Town and facilitating/supporting those organizations. He said that they have seen more and more people step z:\council packets\2011\r6-16-11\110510m.docx Page 6 of 11 up and answer the call for more non -Town funded events. He said that that is an example of a positive thing associated with pulling back somewhat as it allows citizens to affect those things they value most. Town Clerk Bev Bender advised that there are no citizens wishing to speak at this time. (The Mayor said he noticed someone filling out a card so there will be at least one speaker at some point.) Mayor Schlum asked if the public will be able to provide comments at the next meeting as well and Mr. Davis said yes, staff would like to format the meeting much like this one. He added that he likes the idea of composing the li st as suggested by Councilmember Hansen and Councilmember Dickey. Mayor Schlum also encouraged members of the audience and citizens at home and throughout the community to continue to forward/bring their ideas to staff and members of the Council. Councilmember Hansen said that the proposed budget is on the Town's website. Ms. Bender advised that speaker cards have been received. Audra Koester-Thomas addressed the Council and said that she has not had enough time to look at the budget. She said that the schedule indicated that it would be on the website last Monday but she noticed that it had been posted to the site yesterday morning. She advised that she has just had a few hours to page through the document in order to provide some feedback this evening. She stated that she has more comments and reactions rather than feedback and expressed the opinion that there seems to be a lot of inconsistencies when it comes to the activities, outcomes and performance measures. She added that she thinks she sees a difference from last year's budget in that instead of programs evaluated in a budget outline (via program), this year it seems they are looking at it in a division concept format but each of the divisions use different performance measures or don't use performance measures or use outcomes or don't use outcomes. She said that half of the operating budget -- law enforcement, fire, EMS -- have no performance measures whatsoever. She stated that having been a part of the Citizens' Academy both the new Chief and the Captain provided some great information that she believes would be a great thing to put in the budget. She advised that personally she would love to see the Strategic Plan "front and center" in the document, however, she is not certain how it is being utilized in the budget itself. She noted that only a small number of specific 2011-12 Council outcomes or initiatives are actually cross- referenced throughout the budget (she had to do that by hand and they were few in number) and an even fewer perce ntage of those actually had costs or a funding source related to them. She commented that Councilmember Dickey referred to "The Arizona We Want" and said that that is one of the Council's initiatives and outcomes listed in the budget but she could not see it outlined specifically so she is not certain that they are just not being addressed or if they are buried somewhere else within the document so that is an inconsistency she was not able to follow. She stated the opinion that there is an inconsistent use of the telecommunications tax and the telecommunications and utilities tax and said she believes it is an increase of 4% to both (telecommunications and utilities privilege tax) and added that they often talk just about the telecommunications component but she believes it is both of them that are part of the proposed increase. She advised that she personally has a lot of local budget experience, even with the Town's budget process, but she is not sure that the general public or even she could decipher the information in order to provide feedback to the Council other than, "wow, our future looks really bleak." She stated that a couple of the suggestions that were brought up this evening are great and stressed the importance of talking to what the budget r eally means in terms of reductions or program eliminations and long-term solutions where there are program cuts and not just reductions for long-term revenue solutions. She advised against using the Rainy Day Fund for a long-term problem. Mayor Schlum said that now that the budget is on the website he hopes that Ms. Koester -Thomas will forward any additional comments she has on to staff or the Council before they meet again to discuss the budget. Andi Bell addressed the Council and said she has not read the 300 page budget and gives them a lot of kudos and respect for all the work that has gone into it. She said that she just has some questions that they might want to think about. She advised that what she sees is that on the one hand they as a Town are doing projects in conglomeration with citizens like the greening of downtown or the greening around the park and she thinks that is terrific but they also have an expense associated with their Parks & Recreation area that they pick up. She stressed that t hey are in a very difficult fiscal time and would like the Council to think about things such as adding sidewalks down La Montana. She stated that she lives down there and some people have been in the Town for 41 years and prior to incorporation people would be asked to donate to get plaques. She recommended not doing what they absolutely do not need to do. She said that safety is z:\council packets\2011\r6-16-11\110510m.docx Page 7 of 11 important and sidewalks, if they haven't needed them in 41 years maybe not. She added that she saw a budget in the amount of $122,000 for the Chamber of Commerce and stated that she has zero against the Chamber -- she is not a member but would like to know if the Town charges the Chamber for the six days a week a year that they get the Avenue of the Fountains and take business away from downtown. She stated that perhaps they could charge the Chamber for using the Avenue and ask them to show the public what businesses get in return for the $122,000. Frank Serpico addressed the Council and advised that he had a lot of questions that he would like to ask. He said that he would like to clear up one thing -- he is showing that there is a General Fund budget of $12.9 million and $17.3 for the capital expenditures and asked if that is correct. The Mayor said that Mr. Serpico should pose his questions and will be responded to afterwards. He added that his calculations show that the budget is $30.3 million and not the numbers that are being discussed. He asked as far as the 4% increase what the funds will be used for and what plan is in place to use those funds. He questioned whether the Council has ever thought about reducing spending as part of balancing the budget rather than taxation. He discussed people who are not in Town because they have left for the summer and own homes here and said they are being taxed but they don't have a vote and that sounds like taxation without representation. He asked how they were going to handle that. He added that he sees they have already had a 10% cut in funding across the board for staff and proposed that the Council increase that cut. He further stated that it is his understanding that the Town Manager is a front runner for a position in Oregon and said that he will have to be replaced. He noted that when that happens the Town can hire someone at a lesser salary. He added that as far as the vehicles go he would like to know if they have developed a depreciation schedule for that so that they can plan ahead. He also questioned how many staff members have private cars for their use that are furnished by the Town. Mayor Schlum thanked all of the speakers for their comments. Councilmember Elkie requested that a member of staff respond to Mr. Serpico's questions regarding private cars and depreciation schedules. Ms. Ghetti advised that there is only one staff member who has a private vehicle, a Town vehicle, and that is assigned to the Town Manager. She noted that that is part of his employment contract. She further stated that they do have an annual depreciation schedule that is called the Vehicle Replacement Fund so all of the vehicles and equipment are depreciated and money is set aside to replace them. Councilmember Elkie said that Mr. Serpico posed a question regarding reducing spending and what any additional funds will be used for and asked Ms. Ghetti to respond to those issues as well. Ms. Ghetti stated that spending has been cut from $17 million to $12 million and additional cuts can be made if directed by the Council but they are going to affect the public and will affect the level of service provided to citizens. She added that so far they have been able to make cuts without affecting the level of service and stressed that any additional cuts will reduce service -- either they will have to eliminate recreational programs, close parks or eliminate things like code enforcement. She said that there are no cuts that can be made that will not affect a program or a level of service at this point. She added that as far as the telecommunications tax, that is a proposal that is going to replace the $900,000 that th e Town is losing from State Shared Revenues that would be in the General Fund and would be used for things that Mr. Mood and Mr. Mayer spoke about -- things that they have not been able to do because of the impact they have had over the last few years. Councilmember Elkie requested that Ms. Ghetti speak to the numbers that Mr. Serpico brought forward and Ms. Ghetti advised that the $12.9 million is what is in the General Fund, which is the Town's operating fund. The total budget, as talked about at the beginning of the meeting, is $32 million and that includes capital projects funding, bond proceeds if the bond election is successful, grant funds of about $4 million to do Shea projects. She explained that there are other funds that come into the Town that are restricted to a specific purpose, i.e. if the bond is successful they have about $8.9 million programmed to do Saguaro Boulevard and that is the only thing they can do with that money. Discussion ensued relative to the fact that there are two budgets, the Capital and the Gener al Fund and what each is used for; the fact that sidewalks are done either through the use of grants or by developers; the Mayor's comment that if they go with the $12.9 million General Fund amount, that would include the telecommunications tax increase; the fact that it is assumed that government is spending the money and that is not the case; spending reductions that have been implemented including the elimination of staff positions; the fact that the Town does not have a property tax that funds Town z:\council packets\2011\r6-16-11\110510m.docx Page 8 of 11 operations; summertime and the Snowbird factor and Ms. Ghetti's comments that Snowbirds or part-time residents do not pay a property tax because the Town does not have one so they come in and have full protection of police and fire, use of the parks, etc.; the fact that if there is a telecommunications or utilities tax increase, even if they are not here they obviously will pay a tax on their water bill and other than part -time residents only contribute when they eat or shop in Town; the Mayor's comment that it is important and productive to obtain input from citizens; full-time equivalent staffing levels and Ms. Ghetti's comment that the budget does not contain any funding for staff increases for next year (they have gone from 88 to 61) and now with others leaving who will not be replaced they are likely to go even lower; the fact that they can always cut the budget if the Council so desires but it is going to affect programs, such as the elimination of recreation programs and the elimination of the program staff member who is tied to a person who performs other duties as well because fewer people are doing a lot more with less; Ms. Ghetti's statement that they cannot cut law enforcement or fire so what would be cut would be things like code enforcement, quality of life issues, park programs and reduced park maintenance, etc.; and the fact that these are the only things that they have left to cut and they would definitely affect th e public and will not solve the long-term problem. Mayor Schlum commented that Ms. Bell brought up monies for the Chamber of Commerce and noted that that is a contract for service (a community contract) and they are outsourcing work that the Town would otherwise do (tourism efforts, Town branding, visibility, etc.). Ms. Ghetti advised that the Chamber of Commerce provides reports as is required on a monthly basis regarding their activities and where money has been spent. She said that those reports are available for review. Mayor Schlum also brought up projects that come through as a result of volunteer efforts, such as the greening project that was previously mentioned, and stated that it was alluded to that the Town does not have a budget to maintain the trees once they start growing. He agreed that that will add a cost and asked sta ff to speak to how they go about considering those options. Ms. Ghetti noted that volunteers save the Town a large amount of money and they are very grateful for their hard work. Mr. Mayer addressed the Council and said that when they originally started to work with the Greening Committee one of the things staff asked was that the Council provide some initial funding to do the design work and that was what was originally done. He advised that one of the goals that the Greening of Downtown Committee has is to always try and raise enough money over and above what it costs to plant (to put a fund together) to help maintain the trees long term. He reported that approximately $200,000 has been raised to date and their efforts will continue. He noted that the y have another activity planned for a fundraiser and he received a telephone call today from someone interested in making sizeable donation. He added that they are also interested in pursuing some additional grants (they have received two so far). Mayor Schlum brought up the subject of public art and stated that dollars are contributed by private individuals to purchase art and give the art to the Town but the Town does have ongoing expenses associated with that such as insurance and upkeep. Mr. Mayer agreed and added that the public art program he believes is one of the great success stories in Town and said that the partnership that has existed between the Public Art Committee and the Town is something to be very proud of. He reported that they are now close to possessing more than 100 pieces of public art valued at more than $1 million and stated that the sculptures are maintained largely by volunteers under the SOS Program. He advised that the total investment by the Town has been pennies on the dollar. He reported that twice a year for a couple of thousand dollars the Town has someone who possesses the appropriate expertise remove all the wax and fix any pieces that need to be fixed (scratches, etc.) and rewax them. He said that that and any insurance costs are the only expenses to the Town. Mayor Schlum commented that when the stimulus dollars were being discussed a lot of citizens were rightly concerned because there were strings attached to some of the things (dollars that would be n eeded to fund efforts beyond the grant money). He said that staff is not going forward with funding potential grants where the Town would be paying even 50% because most of their grants are funded at 80% with a 20% Town match to build something that they would benefit from for years to come. z:\council packets\2011\r6-16-11\110510m.docx Page 9 of 11 Councilmember Leger thanked staff for their hard work and the presentation this evening. He said that he has a few points that he would like to clarify and a few comments that he would like to make. He stated that l ooking at the budget it appears that the Town's projected revenue for FY 2011-12 is $13.1 million and projected expenditures are $12.9 million, which provides a little "wiggle room." He added that they have a contingency fund in the amount of $313,000 so when he looks at the offset between revenues and expenditures and the "wiggle room" there is $500,000 and asked if that was an accurate statement. Ms. Ghetti concurred and advised that as was previously stated the reason that flexibility is in there is if the telecommunications tax is approved this will cover the time until the Town starts collecting it and an estimate for what that is going to be because they really won't know until they start collecting it. Councilmember Leger commented that the budget is based on a 4% increase in the telecommunications tax and noted that other options have been presented to Council to increase by varying percentages. He said that this evening Councilmember Elkie presented an idea that caught his attention -- the possibility of looking at the Town's capital fund and moving monies from that fund over to pay down the Town's debt. He stated that that is something that he would like to explore more. He added that he would like to know the pros and cons of doing that and no ted that he heard someone say this evening that that would be a $300,000 savings. He advised that he is not too comfortable with increasing the telecommunication tax to 4% and added that he might consider something smaller than that but he could not suppo rt the 4% particularly in view of the fact that the budget includes a street bond. He said that he would like them to take another shot at the capital fund -- the capital projects improvement fund -- and pointed out that they have a $50,000 expenditure for the design of Four Peaks Park. He expressed the opinion that this could certainly be deferred. He added that they have a $400,000 expenditure to replace the traffic signals at Palisades and stated that they just did some improvements there. He noted that they have a $125,000 expenditure for the Town's Centennial Circle and said he supports that project but believes that number needs to be considerably reduced. He further stated that they have an initiative for $1 50,000 for design of the joint parks as part of their partnership with the schools. He acknowledged that the schools are hurting and the design work would give them a jump start but said they are in a serious situation and believes that they must continue to tighten their belts -- these particular projects could be deferred. He advised that just those projects alone add up to about $800,000 and when he hears they need $2.5 million to pay down their debt, all of a sudden it could be reduced to about $1.7 million. He said that he would really like them to explore that alternative to see what it would do for them -- does the $300,000 that they would gain have unintended consequences -- he doesn't know. Councilmember Dickey said if the bonds don't pass they have to find $4.5 million more out of the capital funds and Mr. Mood advised that he didn't have the exact numbers in front of him but the pavement management program would be approximately $4.5 million over the next five years just to do what they have been doing all along and it would be approximately a total of $8 to $9 million over the next ten years. That would wipe out the capital projects fund without doing any other projects. The Mayor said that wouldn't address Saguaro Boulevard and Mr. Mood said no, they would just do the patching that they have been doing (crack seal, slurry seal and some surface seal). Councilmember Dickey stated that if they take money out of this to pay off debt and the bonds don't pass, that would increase by a lot what they couldn't do because this is a five year project -- it is not just for this year. She said that the SPAC Commissioner, Audra, had mentioned some things about the budget and stated that the budget is not in the final stage and if she remembers correctly some of the outcome performance measures for MCSO and Rural Metro were actually a little later than when they got this -- is there a chance that those things are still going to be added to this document. Ms. Ghetti replied yes, this is a working document and what staff was trying to do with the performance measures was tie them to the Council's goals but at the same time coincide with the performance measures that can be compared to other cities and towns, which is an ICMA standard. She added that they definitely want to tie it to the Strategic Plan and Council goals but at the same time be able to have this document and be able to take their performance measures and compare them to other cities and towns. She said that there are still a lot of pieces that are not in this document. Councilmember Elkie stated that he recalls a discussion regarding spending the $2.5M to pay down some of the debt and asked if there was some additional savings that the Town would realize beyond the $300,000. z:\council packets\2011\r6-16-11\110510m.docx Page 10 of 11 Ms. Ghetti advised that there would be a savings realized over the life of the bonds -- ten years or fifteen years -- approximately $300,000 of real savings. She added that the $300,000 a year would just be from taki ng it from one pot and paying off another pot. Discussion ensued relative to having a plan in place to repay the capital projects fund; the fact that the sales tax revenues that the Town earns over the course of the 12 months remain fairly static month after month and one would expect that in the winter months there would be a dramatic spike; performance measures on a variety of issues including making certain things more stringent (more accountability); a communication that Councilmember Hansen saw today that said this might be one of the last opportunities for people to comment on the budget; the schedule on Page 91 and the fact that it is a work in progress and not at all engraved in stone; the fact that citizens will have opportunities at a couple more meetings to provide input and all ideas are welcome; the fact that the Council just got the budget last Thursday night and some have not had time to get very far into it yet; the Mayor's appreciation for the three speakers who provided input this evening and his hope that more citizens will come forward at the future meetings; Councilmember Dickey's question about the money that is in the capital improvement fund and whether that is money that the Town invests and is the interest reflected in the revenue shown in the budget; Ms. Ghetti's response that they are anticipating increased interest in the General Fund that will come from the General Fund balance -- any idle funds will be invested so they can generate more earnings; the fact that the capital projects would have to be laddered so that whatever they weren't spending this year were invested; and the fact that interest income is reflected in every fund (interest earnings) -- the General Fund this year is under $10,000 and staff is projecting about $60,000. Mayor Schlum commented on the breadth of the budget document and it has been said that that is the Council's fault because they keep asking for different breakdowns and comparisons to be added. He said now that they have a programmed budget they are able to actually compare numbers so that is probably adding to the extent of the budget as well. He explained that it is not because they are spending more -- they are spending less -- but they are breaking it out in more ways. He stated the opinion that most of the changes he has seen represent improvements. He noted that they didn't talk about the Town's Moody's rating and that sort of thing and asked how they were doing there. Ms. Ghetti reported that staff met with the Town's financial advisors a couple of weeks ago and they were quite surprised that the Town was able to maintain its same rating with Moody's and that they did not have to cut into Rainy Day (one of the very few cities that has not had to cut into reserves for their operating budget). S he said she anticipates that with good leadership and policies that the Town's AA rating will continue. Mayor Schlum asked if they were going to be going over the fee schedule at the next meeting and Ms. Ghetti responded yes and added that they are hoping to conduct two more Work Study Sessions for the Council and the public and staff will go over the fee schedule as well as the pay plan even though they don't have any increases projected (they want to keep it up to date). Staff also wants to give a final Capital Improvement Plan budget and incorporate that into the budget document (right now they are two separate documents). The Mayor asked if Ms. Ghetti will need a committee to work on this with some Councilmembers serving and said he will look to staff to suggest which way to proceed with this. Councilmember Elkie thanked everyone who attended the meeting this evening and encouraged citizens to attend the next two budget sessions. Ms. Ghetti informed the Council that the next steps include: 1. Adopting the maximum as the tentative budget at the next meeting (May 19, 2011) 2. Adopting a resolution to notify the public regarding an increase in the telecommunications tax 3. Conducting two more Work Study Sessions prior to June 2, 2011 4. Fee Schedule 5. Pay plan 6. June 2nd adoption of the final operating and capital 7. June 16th adopt the tax levy z:\council packets\2011\r6-16-11\110510m.docx Page 11 of 11 Ms. Ghetti advised that staff was hoping to schedule the additional two Work Study Sessions on May 23rd and 25th but some of the Councilmembers have conflicts so staff will make themselves available on whatever dates a majority of the Council can get together. She confirmed that public input is encouraged at both of those meetings. Ms. Ghetti thanked the Council for the opportunity to address them and indicated her willingness to respond to any questions. Mayor Schlum thanked Ms. Ghetti for her presentation. AGENDA ITEM #2 - ADJOURNMENT Vice Mayor Contino MOVED to adjourn the meeting and Councilmember Leger SECONDED the motion, which CARRIED UNANIMOUSLY (7-0). The meeting adjourned at 7:09 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 Special Session by the Town Council of Fountain Hills on the 10th day of May 2011 held in the Town Hall Council Chambers. I further certify that the meeting was duly called and that a quorum was present. DATED this 16th day of June 2011. _____________________________ Bevelyn J. Bender, Town Clerk