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07-13-2005 - Budget Workshop CITY COUNCIL OF EDGEWATER WORKSHOP JULY 13, 2005 5:00 P.M. COMMUNITY CENTER MINUTES CALL TO ORDER Mayor Schmidt called the Workshop to order at 5:00 p.m. in the Community Center. ROLL CALL Mayor Donald Schmidt Councilman James Brown Councilman Dennis Vincenzi Councilwoman Harriet Rhodes Councilwoman Judith Lichter City Manager Kenneth Hooper City Clerk Susan Wadsworth Legal Assistant Robin Matusick Present Present Present Present Present Present Present Present INVOCATION, PLEDGE OF ALLEGIANCE There was a silent invocation and pledge of allegiance to the Flag. MEETING PURPOSE The purpose of the Workshop was to discuss the FY 2005/2006 Enterprise Funds and General Fund. City Manager Hooper commented on the City switching from our old software to new software about a month ago. They sent out bills a month ago and they didn't do cut offs last month because they were new and they some people get them a little later on time. This month was the first cycle, which they did enact cut offs for non-payment. Our normal numbers are about 180 and he thought this time they were at 313 so it jumped up a couple of reasons. First nobody got cut off last month. He thought people in their state of mind were saying huh they don't care so nobody paid. They had some of that. The other was it was a new bill. They had to turn over to the back of the bill and the back of the bill has terms and conditions that clearly state that Page 1 of 1 Council Workshop July 13, 2005 they have 35 days to pay the bill. Yesterday, they had a major mess going on next door in which the citizens came in and were somewhat irritated because they didn't get a second notice. We never send a second notice. We have never sent a second notice. That's not part of how they have done it in the past. He and Finance Director Jon Williams looked at them. He didn't see any kinds of issues as far as errors there. The due amount was clear so he thought they just had a larger number. Part of it is what's going on with the new software program. He also commented on the radio control read with the meters. The new meters are much more accurate so bills are going up a little bit, which is exactly what was told. They had old meters. They were going to put in new meters and they were going to be very accurate. That's how the performance- based contract was going to work so they are getting some complaints. They are doing quite a bit of checking of meters. People that say they can't possibly be using that, they are going out and doing more rereads and more testing so all that's being looked at. He can tell them to date he hasn't found any issues. He found old meters, some old plastic ones that didn't work and some other kinds of old ones that read slow. They have some people that have had the same meter reading for five years, where it has just been in essence stuck. It reads the same thing. Some of that's occurring but they are looking into it. If somebody comes in and shows a problem, they are doing everything they can to work with them. They are not waiving fees but they are giving payment schedules and working the best they can with people to get them through this time period. Councilwoman Lichter stated she is on that same second cycle and yes there was a problem with the amount of money. These people have waited until the end of the second cycle or their time limit but she feels they have to have some compassion. She doesn't mean a break in the price if it is right but a little leeway in the timing until they get going properly. Some people don't realize exactly which date it comes in. He didn't know if they needed extra help in the front at this moment because Finance Director Williams is having to be there so much. City Manager Hooper informed her the cutoff day occurred yesterday. After that the next cutoff event. He thinks with the pres coverage they have a newspaper story today and they have a tv story tonight. He thinks those will be clear that they went out and looked at some bills and they Page 2 of 2 Council Workshop July 13, 2005 have a couple of individuals, one lady in particular that swears she paid her bill but they looked at it and the press said she paid it after the cutoff date. They will see some of that. It is typical and not unusual. He spoke of the other utilities also allowing a certain amount of days to pay it and if you don't something bad happens. Either you get a penalty, interest goes up or they cut you off. Councilman Vincenzi asked how many meters had been replaced so far. City Manager Hooper informed him there were probably a third of them. He has been told about 3,500 and we have about 10,000 meters. Environmental Services Director Terry Wadsworth confirmed it was 4,524 but that included some reclaimed as of four o'clock today. City Manager Hooper commented on the reclaimed and water meters being replaced at the same time. Councilman Vincenzi asked if the meters were because they replaced the meters. The people that are reporting the higher usage and if that was because of the new meter. City Manager Hooper informed him there would be a portion of that. He further commented on some of the other things that are occurring. Mayor Schmidt confirmed that when they are getting complaints they are going out to double check a meter. City Manager Hooper commented on the City checking as well as Johnson Controls. City Manager Hooper explained his whole purpose of tonight was to introduce them to the budget. He wanted to take them through it, talk about it but that it was more of a summary format. They have all the details that they want. If they wanted to talk to each individual department and spend time on those they could. He was going to summarize at the beginning. The whole goal tonight was to introduce the budget, convince them they need to advertise for millage on the 18th of July. It's on their agenda coming up. Set a maximum millage and once that maximum is set, they will do the same thing they did last year. They set a higher number and rolled it back some last year. This year the task is once they advertise they are going to be pushing on staff to fine tune this budget. The Council will tell him Monday night about the bank or not about the bank. The bank is not in this budget at this time so. Page 3 of 3 Council Workshop July 13, 2005 They have to be able to set the millage Monday night. He has it on the agenda as our current millage rate of 6.45. They have the ability to lower it but they can't raise it from that point. During the month of August, City Manager Hooper, Finance Director Williams and the departments will fine tune this. They will have better revenue projections. They will have some more FEMA numbers and they will hold their two public hearings in September. If they want they can have another work session in August if there is enough information to tell them that there is something that is new and worthwhile doing. City Manager Hooper informed Council he was going to talk first about FEMA. That's a big component of what they have in front of them. What Finance Director Williams has done is broken down into categories that FEMA makes them put all of the cost. On the screen was a summary of all three storms and it says they spent $5.8 million in debris and emergency pick up, emergency type of retrofit, any of the types of things that would be eligible through FEMA. They spent $5.8 million. To date they have given us $2,035,000 so that's slightly two fifths of what is owed to us. To be reimbursed is another $3.2 million. They felt pretty confident that that is there. The project forms that are described to them show what is expected to be reimbursed. There is going to be an appeal process because they have taken some streets, like Riverside Drive and called it a County Street that is just a plain error so those will result in some appeals. But he thinks those are very logical and fairly easy to convince. They have other fairly small issues, big dollars but small to explain where and why they did what they did. That's not unusual. Every city in the County as well as the County is going through this. We have an insurance claim of about $275,000. This is the shuffleboard courts and the building across the street. That revenue in so assuming everything comes in and that's a big if, on the $3.2 million that they owe us. The other part, they have the $2,275,000. The City could be at its minimum amount out of pocket is $275,000. That's a nice number when they look at what it has taken to go through the three storms. $5.8 million, most of that they entered into a contract with Crowder Gulf and some other debris haulers so most of that's debris. Some of it is manpower. Things that were done to clean roads, clean out drainage and do other functions but they have learned as well as everybody else how they maximize that. They contract and don't use their own staff to do any of that Page 4 of 4 Council Workshop July 13, 2005 work because it's not reimbursable. The importance of that is this budget is going to have a cash carry forward number. Some of this has already been paid. Some of this they are going to get reimbursed so as that number grows and materializes between now and September, there will be dollars that once they get it in hand, they can carry it forward into next year, which will help offset some of those costs. He can't sit there with a straight face and tell them how much that's going to be until they know really what FEMA pays. All he could tell them was they are out of pocket $265,000 which is the minimum amount. If they pay everything on there they are going to have a cash carry forward and it is their intent to dump it in reserves. We have been through year after year the reserves should be higher. We try and last year they spent all the reserves down to zero practically on the storm events. Councilman Vincenzi asked where the money came from that they had to payout? City Manager Hooper informed him mostly out of the reserves or out of the current budget, which means the reserves. They had a series of dollars budgeted in every department and they paid their people, the people have all been paid. The overtime that went in, that came out of the budget. Once that budget was eaten up then it went into the reserves to reimburse into that budget so the real answer is that it all came out of the reserves, anything over and above the budgeted amount that we had. Councilman Vincenzi stated well, not all of it. City Manager Hooper was saying that total cost was almost $6 million that we have paid out. Some of the debris hauling we haven't paid. For the debris hauling we've got an agreement that when we get reimbursed we pay them. What has been paid is they bought equipment and he sent people to go buy generators. They had staff time and a tremendous amount of overtime hours for pretty much every department. Those dollars have been paid so those dollars are out of pocket. That's close to a million dollars. If they allow him to round he would tell them that that's where the reserves have been depleted and that's where the numbers went to, all of those extra costs. Those are reimbursable costs they can get back. They will go back into the reserve account assuming they get it but he couldn't tell them it's there until they do know that they have at least an IOU or that kind of a check that they send us. Page 5 of 5 Council Workshop July 13, 2005 Councilman Vincenzi asked about the three million that has yet to be paid and how much of that is to be given to debris haulers and those that haven't been paid yet? City Manager Hooper estimated around $2.5 million of that. Councilman Vincenzi stated so there is only going to be about half a million going back into the reserves? City Manager Hooper stated between a half and seven hundred thousand. He asked Finance Director Williams if he thought that was fair and accurate. Finance Director Williams informed him yes. $2.9 million is what they are intending on receiving and that is about what they owe others. City Manager Hooper went over the budget summary. He highlighted some of what has gone into the thought process to make it occur. It's based on a revenue source of 6.45 mills. One mill brings in $801,000. This last year they had growth, two kinds of growth. One was just assessments that went up. The other was new growth. They had about a 15% increase in overall City values and we had about a 5% increase in growth values. Those are healthy numbers for both. In years past we have been about 1% and 2% for new growth and about 12 may be max on assessments so those numbers have grown and jumped and those numbers are really beginning to just increase. He then commented on getting new projects that come online. It takes a year and a half to two years before they actually see much in the way of assessments that come back to them as far as tax revenue. Those numbers are growing. A 5% and 6% growth rate is the highest or one of the highest in the County. They saw when this was published two other cities, New Smyrna Beach and Daytona Beach Shores had higher overall numbers but that's because of beachside condos and the reevaluation of that. He thought the growth rate was the highest growth rate of any city in the County right now. Those two things are working and working well. The growth rate is about half residential and half non-residential. Councilwoman Lichter commented on an article in the News Journal about the Industrial Park that all of the contracts were not signed. She asked if that was coming along. City Manager Hooper commented on the process they use. The contracts have been signed but they may not have had closing so that the money hasn't exchanged hands for the deeds. Every parcel we have is under contract and set to close in the next 30 to 60 days. He then commented on the Page 6 of 6 Council Workshop July 13, 2005 80 or so acres where they still have to do the infrastructure. City Manager Hooper stated the budget is also based on indexing of fees. When they brought Council the fees they said that annually they should adjust pretty much everything they charge by a CPI number. The CPI this year of April of 2005 is 3.5%. Construction cost is up some 40%. If they go out look at the cost of gas, concrete, steel, all of that so there is a construction number and a CPI number. The construction number is 3.5%. The ENR number they are still trying to get a better number. That's the number for construction for concrete and so forth. Their fees are going to adjust some of that. They did that last year. That was automatic that after they had done the rate ordinances that described how that worked instead of having major rate increases every fourth or fifth year, they do a fairly simple 2% or 3% per year. City manager Hooper then commented on some of the expenses that have grown that are very large such as the pension plan. The General Fund Pension Plan has grown about 40% more this year then last year. Part of that is a closed plan. It has about 65 or so members to it. That cost continues to escalate. They have advertised for a pension specialist to hire. They have looked very strongly at an agent of record to help figure what they do next. Do they close that plan? Do they put annuities into it so they buy it out? Do they open it so that it then becomes an active plan? That has been an issue and its costs are going up. The Fire and Police have gone up but theirs are maybe 10% so that shows you that there is a major difference. Councilwoman Rhodes stated that was her biggest question. City Manager Hooper stated the deal is it is closed. He is convinced that is the problem. It's a closed plan not taking any new people. More people are reaching that retirement age so that plan needs to be more liquid so they can payout those dollars that are due. Councilwoman Lichter thought there was an advisor at the moment. Councilwoman Rhodes stated she is the Chairperson and the last she knew they were looking for a different advisor. City Manager Hooper stated they have advertised but had minimal response. He thought they wanted to really interview the one that responded. He is looking to change Page 7 of 7 Council Workshop July 13, 2005 the investment companies. They are very unhappy with the way it is going and the lack of information. City Manager Hooper commented on other things have gone up such as benefit expenses. It's fairly a meager amount. It's 5% or so for insurance health coverage so that went up but it didn't go up a great deal. City Manager Hooper then commented on some new positions in the budget. He has a new water and sewer service operator because of the number of new customers. They are adding about 250 customers a year and they haven't done anything for about four or five years. An Administrative person in the water and sewer. Refuse they have talked. If they are going to pick up all this area to the south, they are going to have to add five new drivers and pick up guys. That's into next year. He wanted to talk to Council about a firefighter. They have approved to cut overtime. He and Fire Chief Barlow are working on another idea of adding a third one that would be able to put one on each shift. That's not in this budget. That's something he was going to spend more time on and maybe bring back to Council and see whether they want to do that or not. Mayor Schmidt commented on talking about possibly some of the bigger developments getting quotes on farming them out. City Manager Hooper commented on talking to several including the County. It is practically impossible for us to bill and do that and make consistency throughout the City. He thought it was a good thing to look at but once they got to the reality and practicality of it, they have had every hauler tell them they would do it but they wouldn't like the service and that if they like the current City service to expand it. If they want to save money, go out and advertise and privatize the whole thing. That is the two choices they really have. He further commented on still wanting to follow through with commercial. He also commented on what would be involved with expanding the City service. Councilwoman Rhodes stated don't mess with trash. Mayor Schmidt pointed out that with someone else it is only once a week compared to twice a week. City Manager Hooper stated it is whatever they want it. They can make the service equal. The more equal the closer the rates become. Page 8 of 8 Council Workshop July 13, 2005 Councilwoman Lichter pointed out they have gone through this subject the last 15 years she has lived in Edgewater and come to the conclusion that we are very fortunate with the quality of guys they have driving the truck and when they are there picking up. It is such a personal thing this way. She could make a list of ten things being the reason and their mentality that they keep with the City employees for the trash pickup. City Manager Hooper then commented on some of the capital projects. All the vehicles in next year's budget they are going to be looking to lease, long term lease, so that the maintenance issues are paid. A five-year lease, level load the payments and be able to get the maintenance and repairs done cheaper and more cost effective. Councilwoman Rhodes asked about using impact fees. City Manager Hooper informed her they couldn't use impact fees for vehicles unless it is new vehicles for expansion of services. City Manager Hooper then commented on the phone system. They have money in the budget for a phone system. They are going to help him answer this on Monday night whether it's a phone system here or Regions Bank but regardless they are going to look at a phone system. City Manager Hooper then commented on garbage trucks. He described for Council a clam truck and a semi-trailer takes the garbage from the transfer station out to the landfill. This has a half a million dollars in the budget for resurfacing as well as some utility expansion projects to expand the water system. They had the Quentin Hampton discussion of what all needed to be done down south about the sewer plant, the reclaimed system so it has some of those in it. Most of that is paid out of impact fees. They have a ParkTowne roadway for expansion in the new area. That's paid out of the sale of property up there and out of some road impact fees. He did not have any cost whatsoever in there for Regions Bank so this budget was presented at this point without that. They are going to decide that on Monday night. City Manager Hooper then commented on the General Fund. The book in front of them has about a three hundred thousand dollar deficit. Its expenses exceed revenues by three hundred thousand. Sounds like a big deal but at this point in time it's not a big deal. Usually when he presents it to Council it's a million or more. To him that Page 9 of 9 Council Workshop July 13, 2005 is very close. A little tweaking of revenue, little tweaking of expenses. It can be done and they are there. City Manager Hooper pointed out that stormwater is the biggest issue. They have heard him last year say that's a problem. This year it has grown to be a large problem. The deficit in stormwater, meaning the stormwater utility fees that they take in and what they pay for maintenance of the stormwater system. It's a $665,000 deficit. That money this year is coming out of the water and sewer system and coming out of the General Fund so there is a subsidy coming meaning that if they don't change those rates, they don't do something different or they say that they are going to subsidize it out of the General Fund, that problem is going to continue so that's a deficit. That's where three hundred and something thousand of their money from the General Fund went to balance the budget. City Manager Hooper stated Refuse is about a hundred and twenty thousand. That's out of the pension plan for the most part went up. When they did the rate study that system was balanced with a dollar a year of an increase. For the most part some of the fuel has gone up, the pension plans have gone up. Environmental Services Director Wadsworth mentioned it being the pension, some of the personnel costs and the slightly accelerated rate of growth from what they had in the study that was done on it. City Manager Hooper stated just the number of pickups. He thought it would be a balanced fund. Right now there are some expenditures in there that are a little abnormal with those trucks but leasing will make that a balanced fund. City Manager Hooper stated in summary that describes for them the overall situation and that the funds are pretty healthy. They have a reasonably close to balanced budget in every aspect, except for the stormwater. They've got FEMA that is out there for five hundred to seven hundred thousand that can be carried forward in their reserve if they pay. They have the resurfacing. They have capital projects and they have an essence of pretty much status quo business as usual. The park system and they got a lot of grants in there that are matched grants. Finance Director Williams has done a very good job of separating a whole section of grants so when there is a match they see it. He has done a good job of taking this budget and trying to match revenue from a department showing them how much that department costs. Page 10 of 10 Council Workshop July 13, 2005 Councilwoman Lichter asked if there were taxes out there that have not been paid. City Manager Hooper stated there was. He further commented on what occurs. He estimated they were at 3% or 4% as far as the taxes that have not been paid. Councilwoman Lichter asked what amount of money was supposed to be in the reserves? City Manager Hooper informed her $1.5 million. Councilwoman Rhodes stated it is supposed to be 15% to 25% of the budget. City Manager Hooper estimated there was about $800,000 or so there. If they get the $700,000 from FEMA they are going to be very close. He felt they would build back the reserves over time. They were hit with the million dollars last year out of the storm event. It's unrealistic to say they would put it all back in one year. It's going to be phased in. Councilwoman Rhodes mentioned not knowing if they are going to have a storm event like that again this year. City Manager Hooper stated they are going to do everything they can to build it as soon as possible. He didn't think it was smart to raise taxes to create reserves. He spoke of having other access to money. Councilman Brown felt the budget was put together as well as it could be. He didn't have anyone item to look at on this. He appreciated the amount of effort this has gone into it. When they get it all fine tuned, he hoped it would be good. Councilman Vincenzi needed more time to look at it. What he would like to do over the next couple of weeks was take it home and tear it apart and then come back with questions. City Manager Hooper explained the purpose tonight was to introduce it to them and explain it to them. He wasn't asking them to decide anything tonight. The next real decision is on the 18th to set the millage. Councilman vincenzi felt it was clear that there wasn't a lot of extra money floating around and that is holding it at the current millage, which is technically a tax increase. City Manager Hooper informed him it is about a 15% tax increase. Councilman Vincenzi stated so even though they aren't raising the millage it is still a tax increase unfortunately. City Manager Hooper stated the same revenue generation would be a 15% reduction in tax so that is how it is called a tax increase. Page 11 of 11 Council Workshop July 13, 2005 Mayor Schmidt asked roll back rate is? 5.6239%. if they know what the percentage of the City Manager Hooper informed him it was Mayor Schmidt agreed with Councilman Vincenzi. He thinks when it comes down to it they know no matter what on the 18th, when it comes to the bank and that, they don't want to cut services. Councilwoman Rhodes felt they needed to have a handle on the budget by Monday to know if there is anywhere in the budget that they can make that happen. Otherwise that shouldn't occur on Monday. City Manager Hooper commented on what his intent was for Monday with regard to the bank. Councilwoman Rhodes pointed out she loved the format of the budget because it answered a lot of questions she had. Councilwoman Rhodes asked about the retirement contributions? That is huge. City Manager Hooper commented on the summary sheet that shows the amount that the City pays in benefits. This is across all funds and they pay out in salaries $12.5 million and almost $4.5 million is in benefits. Councilwoman Rhodes pointed out she was talking about the difference from last year to this year. She wasn't saying it shouldn't happen. In her opinion it is a huge difference. She was curious why? City Manager Hooper informed her they are having them here on August 3rd. They are certainly invited to sit in and it's Principal coming and the main question that he has beat on him is they told them it wouldn't go up when they made some changes. Why is it now 40%? If the answer is it's a closed plan, they need to hear that and then start making some changes and correct that. Councilwoman Rhodes commented on the Executive Salaries for the City Manager and City Clerk? Why are they less in 2006 then they were in 2005? Finance Director Williams pointed out that last year they budgeted all their payroll costs using Microsoft Excel. They transferred over to the new system and they had a personnel budgeting model they could use. They generated the numbers and budgeted everybody and came out with the numbers and found out they are more efficient at budgeting using the new computer system than what they were last year. City Manager Hooper stated what is occurring is the police are going up 5%. That is their Page 12 of 12 Council Workshop July 13, 2005 union contract. Other unions have a different formula. Theirs is cpr plus 2. This year that means 5.5%. Department heads are at 5.5%. His was also at that same level. No one is going down. Councilwoman Lichter spent three or four hours today trying to go over the budget. The pension thing always stood out in her mind. She spoke of being good to the City workers. She thinks they respond accordingly. Councilwoman Rhodes agreed. Councilwoman Lichter commented on having to make a big decision Monday night. She mentioned items that are being purchased individually in each department such as nuts and bolts being ordered in bulk to keep costs down. City Manager Hooper commented on centralized purchasing. Councilwoman Lichter briefly commented on the beautification that has been done in the City. City Manager Hooper commented on the Council having discussions with each department head due to them putting their budgets together and knowing them better than anyone else. Councilman Brown commented on the condominium down south and having an impact figure of $800,000 or $400,000. Where does that go when it comes in and what do they use it for? City Manager Hooper informed him the water impact fees go to the water fund. The sewer impact fee would go to sewer fund. They will pay road impact fees that go to road impact fees, police and fire. They have a budget line item, a fund for each of those impact fees and they can only budget capital improvements that sponsor new growth out of those impact fees. City Manager Hooper further commented on fund balance. Councilwoman Lichter asked about the canals on the side of Mission Road. She asked if those were the City's responsibility? City Manager Hooper stated the road is still County. DOT has assigned that road jurisdiction to the County. The City takes care of outside the right-of- way. Those ditches are inside the right-of-way so that's the County's problem. Page 13 of 13 Council Workshop July 13, 2005 ADJOURNMENT There being no further business to discuss, the Workshop adjourned at 5:50 p.m. Minutes submitted by: Lisa Bloomer Page 14 of 14 Council Workshop July 13, 2005