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05/02/2005 - Packet Tigard Budget Committee 2005 (Note: Items not completed at scheduled meeting will be held over to following meeting.) May 2, 2005 6:30 p.m. Library Community Room 13500 SW Hall Blvd. • Call to Order • Approval of Minutes • Discussion of Department Budgets o City Administration ➢ Mayor and Council ➢ City Management ➢ Human Resources ➢ Risk Management ➢ Information Technology ➢ General Government o Public Works o Library • Public Hearing on State Shared Revenues • Public Comment • Recess Meeting until May 9, 2005 Budget Committee Meeting May 2, 2005 Sign In Sheet 1 � 2. 3. T 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. City of Tigard, Oregon Budget Committee Meeting Minutes April 25, 2005 Members Present: Mike Benner, Craig Dirksen, Mark Haldeman, Sally Harding, Katie Schwab, Sydney Sherwood, Nick Wilson, Tom Woodruff, and Susan Yesilada. Members Absent: None. Visitors: Martha Bishop, Henrietta Cochrun, Mike Marr, Gretchen Buehner, and Lisa Hamilton-Triek. Staff Present: Roger Dawes, Maureen Denny, Tom Imdieke, Craig Prosser, and Michelle Wareing. Call to Order: Mark Haldeman called the meeting to order at 6:30 PM. Introduction: Mark Haldeman turned the floor over to Tom Imdieke to familiarize everyone on the new meeting room and facilities. Tom Imdieke announced that Irene Moszer had resigned from the Committee and relocated out of the area. As a result, this leaves a vacancy on the Budget Committee as well as Mike Benner's term expiring June 30, 2005. The City has been soliciting for Budget Committee membership and the deadline was April 22, 2005. The City received a total of three applications. The plan is for Councilor Woodruff and Mayor Dirksen to begin interviewing candidates as early as this Friday, April 29. Hopefully this will result in selecting two candidates that will fill the vacancies. Tom also discussed the packet of materials given to each member. The packet included copies of the proposed budget, minutes from last year's final meeting, PowerPoint presentations to be given during this evening's meeting, copies of the large charts and boards displayed in the room, and issue papers from the Departments that will be covered during the future meetings. Tom turned the floor back to Mark Haldeman. Election of Officers: Mark Haldeman stated that a new Chairperson and Secretary needed to be elected. Sydney Sherwood nominated Mark Haldeman for Chair. Nick Wilson seconded the motion. All were in favor of the motion. MSP Sydney Sherwood nominated Katie Schwab for Secretary. The motion was seconded by Mark Haldeman. All were in favor of the motion. MSP Approval of Minutes: Mayor Dirksen moved for approval of the minutes of May 24, 2004. Councilor Wilson seconded the motion. The minutes were approved. MSP Budget Basics: Tom Imdieke presented the Committee with a PowerPoint presentation called Budgeting Basics. The presentation covered the following topics: Oregon local budget law, What is a budget, Budget as an accounting document, Budget as an operational guide, Budget as a policy document, Budget as a communications tool, and budget structure. A copy of the PowerPoint presentation was included in the packet given out at the start of meeting. A second PowerPoint was presented by Tom Imdieke covering the financial condition of the City. Tom referred to the chart displaying what the City projected last year to be the financial condition of the General Fund at the end of FY 2008-09. This was based on the FY 2004-05 Adopted Budget and current revenue trends at that time. The General Fund would be in a deficit situation at the end of FY 2007-08 by approximately $318,000. If trends continued, the deficit would grow to $4.3M by the end of FY 2008-09. The City would have to take specific steps to address the deficit and possibly increase revenues or continue tightening the spending to prevent this situation. 1 The City revisits the Five Year Financial Forecast every year and updates it using current trends. The revised forecast is based on the FY 2005-06 Proposed Budget and trending out to FY 2009-10. Current trends are showing the General Fund would be in a deficit situation by the end of FY 2008-09 by almost $3M. There are many factors contributing to the change in forecast from last year. On the revenue side, the City has not seen a growth rate in revenues as hoped. Overall the City has seen a growth rate in General Fund revenues, including transfers, of about 6%. The forecast last year showed a growth of 12%. This is primarily due to a smaller growth in state shared revenues as well as property taxes. On the expenditure side, the proposed budget does include additional staff for the Library, Police Department, and Long Range Planning. However, the proposed budget does not include all of the FTEs that the Departments had forecasted last year for FY 2005-06; in fact it is six positions less. In addition, City Departments did not spend all of the spending authority it was given last year. This increases the resources available the following year in the form of beginning fund balance. These factors combined with tighter budgeting and forecasting, the City projects the General Fund will not be in a deficit situation until the end of FY 2008-09. Tom showed historical General Fund revenues and expenses, percentage changes, CPI percentages, General Fund operating expenditures by category, percentage change for Personal Services and Materials and Services, and Personal Service costs per FTE. Although Personal Services are still the largest expense category, the historical trends show the largest percentage change since FY 2002-03 has been in the area of Materials and Services. Growth in Materials and Services can change over time due to one time projects or cyclical expenses. The projected needs in terms of staffing show a steady incline in growth primarily in the areas of Public Safety. The Police Department is reflecting the need for additional 18 FTE in the next five years. The Library is showing approximate growth of 7 FTE in the forecast. Tom also responded to a question posed to him previously. The question was asked of what the relationship between the increases in current revenues to the increase in operating expenses with no change in service levels. This would be the difference between the current FY 2004-05 budget and the proposed budget FY 2005-06. The City's General Fund current revenues are projected to increase by 4.2% over the current fiscal year. This assumes no new revenue sources and excludes transfers between funds. At the same time, the City's General Fund operating costs are projected to increase by 11.25%. This increase assumes no increases or decreases in service levels or significant program changes. The disparity in growth between projected revenues and expenditures is being driven by limitations on property taxes on the revenue side, and union contract requirements, changes in required police retirement fund contributions, health benefits cost, fuel and utility costs on the expenditure side. Tom Imdieke presented graphs showing which City Departments budgets are being funded out of the General Fund. Although these Departments are being budgeted out of the General Fund, it does not mean they get all of their resources from the General Fund. In some cases, resources from other funds are transferred to the General Fund based upon the type of expenditure or activity. For example, Gas Tax funds would be transferred to the General Fund to support the street maintenance program in Public Works. The charts visually show to what extent a particular Department generates their own revenues, the portion of the budget funded by non-specific General Fund revenues, and the portion of having to dip into fund balance. The total amount of the General Fund operating budgets that need to be funded by the fund balance is $2.5M. Other graphs show the Utility Type (Enterprise) funds, Special Revenue funds, and Internal Service funds. Not all funds were shown, only the major operating or capital funds. Tom presented two pie charts showing how the overall operating budget of$33M is allocated by Program and Department levels. By Program level, the largest portion is made up of the Community Services Program which had 37%, which consists of Police, Library, and Social Services. Next is Public Works at 33%, Development Services Program of 16%, Policy and Administration of 13%, and General Government of 1%. 2 Tom Imdieke stated that the $2.5 million dip into the General Fund ending balances would have to be taken out of General Fund programs, dollar for dollar. Tom Imdieke said he will provide more specific information in a following meeting. Sally Harding asked where the significant increase in Materials and Services came from. Tom Imdieke reported that a good portion of the increase is coming from expenses that are always ongoing expenses such as the costs associated with the update of the Comprehensive Plan update and Downtown Revitalization. That's why we see such a swing in the graph from year-to-year. Tom also mentioned that the City is taking a hard look at how revenues and costs are forecasted and are tightening down for the next five year forecast. FY-2005-06 Budget Overview: Craig Prosser presented a third PowerPoint presentation that gave an overview of the FY 05-06 Proposed Budget which included the Major Issues, Council Goals, and Budget Overview. The overview gave a more detailed look at the Proposed Budget. The Proposed Budget reflects the direction of the City and the goals of the Council. Council Goals: Each January, the Council meets to set goals for the calendar year. This year, the Council adopted three goals. They are listed in the budget document(page 11). The Council Goals for 2005 are: 1. Revitalize Downtown 2. Improve 99W 3. Address Growth The proposed budget is designed to comply and make progress on the Council goals. Revitalize Downtown:To start working on the Downtown Plan, the City will need one new position in Long Range Planning in Community Development. There is money in the budget to fund Urban Renewal consultants to put together an Urban Renewal Plan to identify projects specifically for Tigard. Another aspect of the goal is Capital Improvement Projects including open space acquisition, streetscape design, and Right-of-Way acquisition for Burnham Street. Improve 99W.- 99W is State highway and is the responsibility of the State. The City will improve the highway as able. Capital Improvement projects include McDonald and 99W intersection, Hall Blvd and 99W intersection, Greenburg Road and 99W intersection, and a system improvement study. Address Growth: The City is looking at updating the Comprehensive Plan, which was adopted in the 1980's and has had some changes, but has not gone through major updates since then. The City is looking at one new position in Community Development to take the lead on putting together a program to update the Comprehensive Plan. The Plan will not include any unincorporated areas unless funding from Washington County is provided. The City is looking to acquire park land. There is $2M budgeted for acquisitions of various sites. Budget Overview.The City's operating budget is up 5.4%, and includes additions to Long Range Planning Division for Urban Renewal, vehicle replacements, two Police officer positions, and additional Library staff. The number of authorized positions is up 4.0 FTE and all positions are funded. COLA is built in based on labor contracts. Health benefits cost increase of 15% is built in. The Capital budget is down 27.5% which reflects a $7.6M decrease. Primary causes for the decrease are the completion of the new Library and the reservoir site acquisition and construction was spread over several fiscal years instead of budgeting in one year. The service impacts are as follows: 3 The Police Department has two new police officer positions. The Department is also catching up on vehicle replacements. The Library is adding 1.5 new FTE, maintaining Sunday hours, and has a limited increase in funding from WCCLS. Public Works is not taking over sanitary and storm sewer expansion area from Clean Water Services as budgeted in FY 2004-05. They will also identify non-SDC revenues to fund park land acquisition, development, and maintenance. Balance water purchases between City of Portland and Joint Water Commission to obtain necessary supply of water at the best price. The City wants to acquire a reservoir site and begin construction as well as continue with the Aquifer Storage Recovery project. City Administration budget includes increasing Cityscape to 12 issues per year, transfer in of one position from Public Works to Information Technology, and added costs for hiring the new City Manager. Community Development will increase staffing for Urban Renewal and the Comprehensive Plan update. An overview of the issue papers was given. The papers are for Recreation Grants, Right-of-Way Grants, Water Rates, Park Land Acquisition and Development, Library Operational Hours, Police Overtime, Urban Renewal, and Comprehensive Plan Update. The papers will be discussed during the Department's presentations. Craig asked if anyone had other issues they would like to have covered to notify staff and they will prepare any information. He asked they let staff know if advance of the meetings. Craig Prosser turned the meeting back over to Mark Haldeman. The Budget Committee has been requested to have a citizen member participate in the Committee for Citizen Involvement. Mark Haldeman had originally expressed interest, however due to scheduling conflicts he will not be able to participate. The meetings are held on a Thursday evening, every other month. If anyone is interested please contact Mark Haldeman, Craig Prosser, or Tom Imdieke after the meeting. Next meeting is May 2, 2005 and the City Administration, Public Works, and Library budgets will be presented. Also, a public hearing for State Shared revenues will be held. Public Comment: There was no public comment. The Budget Committee was recessed at 7:55 PM until May 2, 2005. 4 MEMORANDUM TO: Budget Committee Members Craig Prosser, Interim City Manager FROM: Michelle Wareing, Management Anal RE: Forecasting Process DATE: April 26, 2005 The City of Tigard's Finance Department uses forecasting software called Forecast Pro to forecast its revenues, personal services, and materials and services costs. Forecast Pro includes a variety of time series methodologies that are most commonly used in forecasting. The Forecast Pro software is designed to either choose the best methodology for the data provided or the user can choose which methodology Forecast Pro should use. The main assumption used in forecasting is that past historical patterns will continue in the future and no major, unanticipated events such as terror attacks or taxing authority changes occur. On the revenue side, forecasts are generated for the large, individual revenue line items for each fund. Data files for each of the large revenue line items have been created. The Data files include actual revenue history from FY 97/98 by accounting period (month) to current. The revenue history date files are used by Forecast Pro to forecast out over a selected time period. Depending upon the volatility of past history, different statistical models are run to obtain the most statistically accurate forecast. The forecasts provided by Forecast Pro are evaluated by Finance staff to make sure the forecast numbers seem reasonable. The revenue forecasts are then adjusted if necessary. Adjustments could be due to future fee increases, major development activity that is projected, but has not occurred in the past or other events that Forecast Pro cannot predict. Like revenue line items, data files for each division within the departments have been created that shows actual expenditure history from FY 97/98 by accounting period (month) to current. Forecasts are generated for each division's personal services and materials and services expenditures. Forecasts are not done for Capital Outlay costs as they are sporadic and unpredictable. Division staff is responsible for projecting Capital Outlay costs based on vehicle and large equipment replacement schedules and future needs. The forecasts provided by Forecast Pro are evaluated by Finance staff to make sure the forecast numbers seem reasonable. For Personal Services, an average per FTE cost is determined by dividing the Personal Services budget amount for current fiscal year by the number of authorized FTE. This V. average per FTE cost is then multiplied by the growth rate forecasted by Forecast Pro and the number of projected FTE needed in each of the forecast years. There is usually a different growth rate for each year due to the varying actual growth changes in the past. The reason for using a per FTE cost as the base is that Forecast Pro cannot predict future FTE needs. As the Division projects additional staffing in the future, Personal Services costs will need to increase and this way of forecasting captures those future costs. The downside to this process is that the average per FTE cost is applied to all new positions regardless of the positions classification. However, adjustments can be made if there is a significant difference between the average per FTE cost and the actual, current position cost. For Materials & Services forecasts, a baseline expenditure amount is generated for each division within the department for each year in the five year forecast period. Division staff are then responsible for adding to or subtracting from the baseline depending on needs that the forecasting software cannot predict. This could include professional contracts for new programs such as Urban Renewal or office furniture replacement. The baseline amount plus the additions and subtractions are summed up and this amount becomes the Materials & Services expenditure amount for the year. If the amount added is a one time expense, it is removed in the following year. If the amount added is to be continued, then a growth rate percentage is applied to the addition. The growth rate percentage is determined by the percentage change between the baseline amounts for each of the years. Once the total operating costs are forecasted, they are multiplied by an expenditure rate. The expenditure rate is based on actual expenditures as a percentage of budget. It is very rare that any division spends its entire budget. This assumption and averaged expenditure rate is carried forward in the forecast model. By forecasting for individual revenue line items and divisions, Finance staff is able to customize its forecasts. Prior to using the forecasting software, a set growth rate was applied to most revenues and expenditures. All though this is an acceptable way to forecast, it assumes that all revenue and divisions' spending and growth patterns are the same. This of course is not true. MEMORANDUM TO: Budget Committee Members Craig Prosser, Interim City Manager FROM: Tom Imdieke, Interim Finance Director RE: General Fund Analysis DATE: April 29, 2005 Please find attached an analysis of the City's General Fund showing the impact of the proposed program enhancements on the use of fund balance in order to finance them. This analysis was prepared in response to a question posed at the April 25 Budget Committee meeting regarding how the proposed budget changes are impacting the City's need to utilize fund balance to support the operating costs of the enhancements. General Fund Total Total Current Operating Transfers In Revenues Transfers Out Expenditures Use of Current (Operating with Operating (Operating with Transfers Fund Budget Revenue Support Only) Transfers In Expenditures Support Only) Out FTE Balance FY 2004/05 Adopted $16,405,935 $2,145,314 $18,551,249 $16,409,209 $3,198,056 $19,607,265 265.2 FY 2005/06 Status Quo $17,091,900 $2,353,897 $19,445,797 $17,264,410 $3,664,287 $20,928,697 265.2 ($1,482,900) FY 2005/06 Proposed $17,091,900 $2,385,250 $19,477,150 $18,145,495 $3,682,422 $21,827,917 269.2 ($2,350,767) FY 2005/06 Enhanced Portion of Proposed Budget $0 $31,353 $31,353 $881,085 $18,135 $899,220 4.0 ($867,867) Enhancements: Police-2 Positions Library-.5 Librarian Library-Library Services Supervisor Long Range-2 Senior Planners Equipment-Police Officers Police Motorcycle Library Book Budget Increase Parks Equipment Office of Consolidated Emergency Management Membership Long Range Planning-Urban Renewal and Comp Plan Update Support Long Range Planning (Temp Help) Vehicle Replacements MEMORANDUM TO: Budget Committee Members Craig Prosser, Interim City Manager FROM: Tom Imdieke, Interim Finance Director RE: Materials and Services Analysis DATE: April 29, 2005 Please find attached an analysis of the significant changes in materials and services costs for FY 2005-06 as compared to FY 2004-05. A brief explanation for the reason of the impact is given for each of the major expense categories. Significant Changes Citywide in Materials and Services Costs Expense Category FY 2004-05 FY 2005-06 Difference Comment Repair and Maintenance $737,043 $795,453 $58,410 Increases for street repairs and signs Small Tools and Equipment $272,998 $524,105 $251,107 Communication equipment for Police and Public Works (Grant Funded) Advertising and Publicity $107,666 $133,730 $26,064 Expanded publication of Cityscape; public notices for planning Fees, Dues, and Subscriptions $134,755 $211,254 $76,499 Emergency Management membership; League of Oregon Cities, and etc. Travel and Training $187,984 $210,873 $22,889 Funding for required certification training in Police and Building Computer Software $69,481 $93,166 $23,685 Additional licenses for maintenance management software Utilities $776,264 $821,307 $45,043 Projected rate increases Insurance $370,725 $427,804 $57,079 Property insurance increase Fuel $158,788 $154,172 ($4,616) Increase in per gallon cost included; overall budget reduction because of not taking over CWS service area Library Materials $291,450 $338,629 $47,179 Increased book purchase budget (will increase match from WCCLS) Total $3,107,154 $3,710,493 $603,339