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HomeMy WebLinkAbout2002.1029.TCWSM.Minutes TOWN OF FOUNTAIN HILLS MINUTES OF THE WORK STUDY SESSION OF THE FOUNTAIN HILLS TOWN COUNCIL Nov October 29,2002 Mayor Jon Beydler convened the work-study session at 5:30 p.m. ROLL CALL-Present for roll call were the following members of the Fountain Hills Town Council: Mayor Jon Beydler,Vice Mayor Leesa Fraverd,Councilpersons Kathleen Nicola,Mike Archambault,Rick Melendez, Susan Ralphe,and John Kavanagh. Also present were Town Manager Tim Pickering,and Director of Administration/Town Clerk Cassie B.Hansen. AGENDA ITEM #1 — PRESENTATION BY TOWN MANAGER TIM PICKERING ON THE "TOWN OF FOUNTAIN HILLS GENERAL FUND — FINANCIAL CONDITION AND ACTION PLAN" AND DISCUSSION BY THE TOWN COUNCIL ON INFORMATION PROVIDED IN THE PRESENTATION. Mayor Beydler explained that the purpose of this work-study session was to provide Councilmembers an opportunity for in- depth discussion and study of specific subjects. Public comment was not provided for in this agenda. There will be opportunities in the future for the community to participate. Town Manager Tim Pickering began the presentation of the Town of Fountain Hills General Fund —Financial Condition and Action Plan by reviewing where the Town's finances currently stand.To date,this fiscal year's revenues are 2.6 million(26% of budget)and expenditures are 2.9 million(20% of budget). The first quarter shows a deficit of$330,000. One-time revenues are 25% of our budget and are not included. Projections for the upcoming fiscal year are revenues approximately of$10 million, expenditures of$15 million,a deficit of$5 million is anticipated.Mayor Beydler clarified that currently the Town has a negative cash flow of about$100,000 each month. One-time revenues from the present fiscal year are covering this negative cash flow. Other communities throughout the Valley are also experiencing financial difficulties. Some causes of the deficit are as follows: unfunded fire department expenses, reduced state shared revenues, flat state sales tax, slow economic recovery, continued Viiirdecline in building activity, and local sales tax refunds. Previous fund balances were reviewed by the Town Manager. Town's current fiscal year shows a fund balance of$859,612. Some major capital items that contributed to previous reductions in the Town's fund balance were the lake liner project, the community center and fire services expenditures. Last year's revenues were less than the previous year; revenue trend is flat, while expenditures are increasing. General Fund Revenues, Expenditures, and Fund Balance Chart and General Fund Ratio of Fund Balance to Revenues Chart were reviewed. GFOA (Government Finance Officers Association) recommends that a municipality has a minimum of 60 days fund balance. Funds are necessary in "savings" to handle unexpected items. Presently the Town has approximately 21 days of funds in "savings". Fountain Hills' large revenue sources are local sales tax, state income tax (anticipated to be reduced by $350,000), state sales tax,and building permits(anticipated to be flat). Preliminary options for solving the fiscal year 2003-2004 $4.9 deficit were discussed. Options were to increase the local sales tax rate by 1.1%, currently below average at 1.6%, (an additional $2.9 million annually to Fountain Hills), replace former fire district property tax rate of.97 (increase revenue by $2.6 million annually), reduce land preservation sales tax (increase revenue by $200,000), increase user fees, permits, licenses (approximately $200,000 increase), cutback services (15% of budget would bring in $2 million), sell assets (one-time revenues approximately $1.5 million) i.e. fire station land, Kiwanis building, land adjacent to community center, subscription fire service ($2.4 million-no research has been done), or impose a utility franchise fee(additional revenue of$350,000). Mayor Beydler asked if a 15% cut from the Town budget is feasible. Manager Pickering stated that this figure was an estimate and if this were a process that the Council was interested in pursing, a more methodical approach would be used. Councilmember Ralphe asked if community services expenditures should be re-visited. Pickering commented that if the ,,financial situation remains the same next year,the Town should not fund any charitable events. Kavanagh mentioned two other potential sources of income; i.e. a development fee for fire services, and possible revenue from the gaming industry. Mr. E:\BBender\Documents\Current Minutes 2002\Minutes\Budget Work Study 10-29-2002.doc Page 1 of 4 Pickering mentioned that gaming revenue should not be counted on as a revenue source. A special census is another option for increased revenue as the Town continues to grow. Councilwoman Nicola commented that a development fee for fire services might reduce the permit numbers further. She also Ilbrdiscussed subscription fire protection quotations that she obtained from Rural Metro on her own home. Mr. Pickering would like to perform additional research in this area before comparing different services to the homeowner. Ms. Nicola questioned if the amount was accurate for fire subscription service because the Town would be paying for its own subscription. Councilmember Kavanagh explained that property taxes are deductible and sales taxes are not. Councilmember Melendez requested that our Town Attorney be present at future council sessions. He was concerned that the Town was involved in a fire- related lawsuit and the Council was discussing fire protection services. Town Manager Pickering reminded the Council that this information was preliminary and discussed decision factors. Factors are the ability to implement, comparison to other towns, payment by those who receive service, timing, a long-term solution, diversification of revenue, periodic revenue stream, political feasibility, and contribution to solving the problem. A decision table and how the factors apply to each decision were discussed. About one-half of the Town's revenue is locally controlled, one quarter from state shared, and one-quarter from one-time revenues. Vice Mayor Fraverd asked what a good percentage of revenue would be. Town Manager explained that a lower percentage of revenues that the Town cannot control would be preferable. Fountain Hills sales tax rate of 1.6%and property tax rates are fairly low in comparison to other communities. Mr. Pickering compared options to assist in making decisions to increase revenue, using a numerical rating system and table. Mayor Beydler asked if we could look into privatization to save costs or increase revenue potential. Pickering explained that additional research would be required. Mayor Beydler asked if a specific revenue enhancer could be earmarked to the carry forward balance. Mr. Pickering added that Council could set policy to have a certain number of days of expenditures and earmark funds for the carry forward balance. 'Decision table scores were provided. Increasing local sales tax and utilizing designated sales tax rated fairly high. Next were a rroposed property tax and increasing permit fees, then imposing utility franchise tax, modifying fire service, decreasing expenditures,and last was to sell the Town's assets. The suggested action plan was discussed. Immediate steps to be taken are filling critical vacancies only and no new hires, reviewing all contracts for savings, delaying large expenditures, and researching revenue enhancers. Phase I(one to three month period - should be implemented as soon as research is completed) includes increasing the sales tax rate. Mayor Beydler was concerned that the increase in sales tax would affect local businesses. Manager Pickering commented that a study had not been done, but history showed that it does not have an effect. Increased sales tax should not have a large impact on consumers' decisions as to whether they should purchase something locally or not. This is just one phase in a myriad of phases that need to take place over the next year. Phase II items (in order of ranking) in cutting the deficit are; utilizing designated sales tax,replacing former fire district property tax, increasing permit, user fees, researching utility franchise tax, and considering expenditure reductions up to 15%. Councilmember Archambault asked if grants could be factored into the action plan. Tim Pickering explained that the Town should not be dependent upon grants to fund operations over time. He recommended that the Town hold off on filling a grants writer position because only critical positions should be filled on an immediate basis. This area could be researched at a later time when Town finances are in better shape. Mayor Beydler suggested that we consider expenditure reductions as an immediate plan. Councilmember Ralphe was concerned that a reduced designated sales tax would affect the Town's ability to pay the bond payments. Mr. Pickering commented that the tax rate could be set in the bond payment amount. Phase III (contingency action)includes subscription fire service and selling the Town's assets. Town Manager Pickering stressed that additional research is required. Additional work sessions,public forums,Channel 11,and intemet use will aid in getting the information out to the community. A blue ribbon panel could be set up to study options and make recommendations to the Town Council. Legislation will then be passed to enact or give direction, or place items on a Future ballot. E:\BBender\Documents\Current Minutes 2002\Minutes\Budget Work Study 10-29-2002.doc Page 2 of 4 Councilman Melendez asked the Town Manager to clarify, that at the end of this fiscal year, the Town would be more than one million dollars in deficit. Tim Pickering confirmed. The Town is taking in less revenue than the expenditures are costing. Vice Mayor Fraverd inquired about the decision timing of Phase II. The Town Manager responded that the Phase II time frame %Pols anticipated to be between one and six months. Two of the items may be placed on the May ballot,and those decisions have to be made in January. It will take approximately four months before any funds are realized in the account. Town Manager Pickering asked the Council to study the indicators, give feedback about when they would like to discuss the options again, and how to start to distribute this information to the community. Target dates need to be established. Time is of the essence in this issue. Mayor Beydler would like to schedule a Town Hall meeting to give the community an opportunity to become informed about the financial situation. Councilman Melendez also believed that it is advisable to hold a public forum as quickly as possible. Councilman Archambault would like to tighten the Town's expenditures as much as possible before the Council increases the sales tax. He commented that our sales tax rate was average,not low,and would like to see a short term increase in the rate. Councilmember Ralphe would like to get the public more involved, as the Town is spending their dollars. She asked that while the Town is beginning this process, is there any procedure that could be taken now to reduce the debt. Mr. Pickering referred to the immediate steps in the recommendations that were made previously in the meeting. The reduction of expenditures will not solve the long-range situation. The Town will still have services to provide, such as fire protection, and with sales tax flat, and permits and state income decreasing,it was not an easy solution to reduce expenditures. Councilmember Ralphe inquired about zero-based budgeting. Mr. Pickering explained that the Town takes a prudent approach on managing the current budget. Councilman Kavanagh wants to start the research process immediately. He commented that all other methods should be tried and fail before the fire subscription and selling town assets are implemented. Councilman Melendez suggested that a town hall meeting be scheduled during the week of November 11t. Councilwoman Nicola requested additional research information presented at the next Council meeting. She mentioned that the ire protection expense this fiscal year was not the cause of the problem, because the Town received over than $1 million from the County towards the $2.4 million expenditure. She commented that the Town could not designate primary property tax just for fire services by law. In her opinion, that was the reason the ballot failed last year. The property tax goes into the general fund and represents what the dollars are designated for. There are other Town needs which may require an additional property tax. Ms. Nicola would like the focus of the property tax not for fire services, but for quality of life issues that the public would like to fund. Tim Pickering explained that not having the funding for fire protection had caused the one-time expenditures to be spent. Fire protection is a cause for that expense. The community needs to know that the Town has now taken on the responsibility for fire protection and it has to be paid for. There are other expenses; yet the main reason for having the property tax is to fund the fire operation. Susan Ralphe asked for an analysis of the impact of proposed sales tax and property tax rates. Mayor Beydler is concerned about the financial future of the Town and the model that the Town has used for 31 years. Is it a bedroom community vs. a destination location,and where is it headed for the future. He would like to see a blue ribbon panel to envision the future and help the Town settle the debate as to how the Town is evolving. John Kavanagh commented that when considering the sales tax rate, property taxes rates should be reviewed to compare both categories and the total tax package. He requested that revenue estimates for fire development fees be reviewed at the next meeting. He agreed that there is a need for a citizen's blue ribbon panel, and that the property tax issue must be addressed by January. He suggested that the blue ribbon panel concentrate exclusively on giving advice on the issue of property tax,and place it on the next Council meeting agenda. LA Town Hall meeting to provide the information to the community will be scheduled on Wednesday, November 13th, at 6:00 p.m. E:\BBender\Documents\Current Minutes 2002\Minutes\Budget Work Study 10-29-2002.doc Page 3 of 4 Councilwoman Nicola requested that the Town call the proposed property tax, a "primary property tax", and not a "fire tax", a source of revenue to the Town to enable the Town to continue to provide the services. Vice Mayor Fraverd reminded the "buncil that the downtown consultant recommended reviewing impact fees on a regular basis. The Library was not a part of it Nkiwat that time, and she would like to see existing impact fees reviewed in the near future. Manager Pickering advised that he is required by law to analyze the impact fees annually during the budget process. AGENDA ITEM#14-ADJOURNMENT. Councilman Archambault MOVED to adjourn the meeting and Councilwoman Nicola SECONDED the motion. The motion CARRIED unanimously. Mayor Beydler adjourned the meeting at 7:45 p.m. TOWN OF FOUNTAIN HILLS l Jon eydler, hr ATTEST: (1.411/2A-4...�LJ Cassie B. Hansen, Director of Administration/Town Clerk • PREPARED BY: Susan Stein,Executive Assistant CERTIFICATION hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Work Study Session held by Nliothe Town Council of Fountain Hills on the 29th day of October 2002. I further certify that the meeting was duly called and that a quorum was present. DATED this 21st day of November 2002. 1,2,4_44.4 Cassie B. Hansen, Director of Administration/Town Clerk Now AABudget Work Study 10-29-2002.doc Page 4 of 4