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HomeMy WebLinkAbout11/16/2015 Work SessionCity of Springfield Work Session Meeting MINUTES OF THE WORK SESSION MEETING OF THE SPRINGFIELD CITY COUNCIL HELD MONDAY NOVEMBER 16, 2015 The City of Springfield Council met in a work session in the Jesse Maine Meeting Room, 225 Fifth Street, Springfield, Oregon, on Monday November 16, 2015 at 6:00 p.m., with Mayor Lundberg presiding. ATTENDANCE Present were Mayor Lundberg and Councilors Wylie, Moore, Ralston, Woodrow and Pishioneri. Also present were City Manager Gino Grimaldi, Assistant City Manager Jeff Towery, City Attorney Mary Bridget Smith, City Recorder Amy Sowa and members of the staff. Councilor VanGordon was absent (excused). 1. Strategizing for Long -Term Fiscal Health Bob Duey, Finance Director, presented the staff report on this item. The City is beginning its third year using the methodology of priority based budgeting as a tool to help focus the allocation of available resources to those services that help most to advance Community and Council goals. For this annual budget process to prove successful it is important that the City has established long-term fiscal targets or performance measurements that support the long-term fiscal stability for both a consistent level of base services year after year and allow for expanded or new and innovative services be planned for in advance. This first work session is concerned with defining the elements that make up a fiscally healthy organization and to begin to identify how those elements could be incorporated into the strategic plan for the City. Council is being asked to provide input on draft Financial Management Policies prior recommended adoption at a later time. Transitioning from traditional to priority -based budgeting involves learning curves for annual budgeting as well as strategic planning, performance measurement, and evaluating long-term fiscal health of the organization. The ultimate goal is to be able to provide consistent services to City of Springfield citizens, now and in the future. In order to realistically assess that possibility, the City needs to objectively identify and establish its long-term fiscal health goals for 5, 10 or 20 years into the future. This discussion, the first in a series on Fiscal Health, is intended to introduce the importance of Financial Policies. Topics will include: • Defining fiscal health • Showing fiscal health's influence on the annual budgeting process • The City's current state of fiscal health • How financial policies steer future fiscal health • Review of updated financial policies document Mr. Duey introduced Paula Davis, Budget Officer, who has been lead in the Priority Based Budgeting and Michele Lewis, Budget Analyst, who has been working on the Fiscal Health. City of Springfield Council Work Session Minutes November 16, 2015 Page 2 Mr. Duey said the definition of fiscal health is: "A government is financially healthy if it can deliver the services its citizens expect, with the resources its citizens provide, now and in the future". The reserves in the City's General Fund are currently healthy, but the General Fund is not able to provide all of the services citizens want. He used the Ambulance Fund as an example of providing services, but not having a sufficient reserve. It is important to have financial health in order to know what to expect from year to year, and is also important from a credit rating standpoint. The City is susceptible with infrastructure costs, insufficient revenues, and personnel costs. He described each and how we have managed to get through difficult times. Long-term awareness and planning ensure our citizens continue to receive the services they expect. Mr. Duey discussed the Priority Based Budgeting (PBB) and how they have used that to work towards fiscal health. He reviewed how the PBB process worked and the steps Council took to get through that process. Council has done the PBB for two years. This year departments are rewriting the programs and costs of services to better fit what is currently being done. They will then be rated again to see where they fall. Mayor Lundberg said when PBB first got set up, she thought they would look at all of the services and possibly change some that could be done outside of the City, etc. She asked where that was in the process. Mr. Duey said that part of the process has been internal to this point. They have asked departments to do analysis on programs that fell into Quadrants 3 and 4, describe the service and how it fits with the Council goals, and if it could be served outside of the City. It is a difficult task, but they are working through the process. They haven't found anything to eliminate, but are looking at ways to make some of the programs more efficient. Staff is looking at programs in Quadrants 1 and 2 to find ways to make them more efficient, or determine if they need to increase the program. It will take more years to get really good at this process, but they are making progress. PBB didn't show what the citizens should be receiving that they currently are not, so they are looking at the fiscal health. Mayor Lundberg said she would be concerned if there was elimination of a program without Council input. She wants assurance those changes won't be made outside of Council. Mr. Grimaldi said any program change would be vetted through the Council. Mr. Duey said animal control was a good example of a program in Quadrant 3 or 4 that was very important to the Council. They are looking at ways to make the program more efficient or cost effective. Mr. Duey noted the three types of reserve: general reserve, contingency and capital. For reserve policies, they look at best practices (minimum and maximum reserve ranges and reserve replenishment). Staff is suggesting that each reserve consider a working capital reserve, contingency and general reserves. He discussed the four funds of the City: Building Fund; Ambulance Fund; Street System Funds; and General Fund, and charts of each fund over the last five years and looking ahead five years. Staff is starting to establish what each of those reserve funds should be to get the City through tough times. Councilor Moore asked about the chart for the building fund and growing the reserve in that fund City of Springfield Council Work Session Minutes November 16, 2015 Page 3 Mr. Duey said the City had done grown the reserves in the past, but had no policy in place to ensure adequate reserves in each fund. Councilor Moore asked if the reserve would be maintained at a set level until it was needed. Mr. Duey said it would be re-evaluated as they moved in the future to determine if those amounts were adequate. Councilor Moore confirmed each fund would have its own reserve. Mr. Duey said they have not had a policy in the past to know how much contingency is needed in each fund and how to respond to a downturn. There could be a time when they are overfunded in one area, so it is a balancing act. As an example, the Ambulance Fund is maintaining on its own and starting to build reserves, but in January another drop in Medicare reimbursement is expected so there would be a drop in revenue. He explained how that might be addressed. Councilor Wylie asked if some of these problems should be solved one at a time. Mr. Duey said nothing is urgent, but staff would like to have direction for the Budget Committee meeting during the Spring of 2016. The City is not unhealthy, but this is a good time to build on our strength, making prudent decisions. Councilor Ralston said the Ambulance Fund is one of the more important enterprises and should not be abandoned. He feels we have been cutting costs enough over the years. He would like to see what effect a $5 increase would be to this fund. The fee is reasonable and for a purpose. Mr. Duey said goal is to make this process interactive. He spoke regarding street funds and the funding gap the City is experiencing. Councilor Moore asked about `other reserves' that was listed on the Street Fund chart. Mr. Duey said that could be funds carried over for capital projects. The General Fund has always gotten special attention. The reserves have been maintained through staff reductions, service changes, etc. Staff wants to make sure they have direction to keep the General Fund healthy while maintaining stability. Whatever is done should be sustainable and maintain service levels. Mayor Lundberg referred to the General Fund drivers and that 81% is personnel costs and 10% is indirects and internal charges. In the non-profit world, they try to keep their administrative costs to 5- 6%. She used the Community Development Block Grant (CDBG) funds used for emergency home repairs as an example. Ten percent going to administration is a lot of money. She wants to take a look at those costs because they have to take funds from other services. Mr. Duey said the bulk of indirect costs are from stormwater, wastewater, ambulance and others considered enterprise. It also includes the cost of how much it costs to run the City in overhead and divided by FTE. Each employee has a certain share of those indirect costs. He explained further. The indirect cost to CDBG is 18% to run the program. The City caps the indirects from CDBG to the General Fund. Mayor Lundberg said she wants to point these things out for another discussion. She is concerned about how we are doing business. City of Springfield Council Work Session Minutes November 16, 2015 Page 4 Mr. Duey said he will do a written report on how indirects work. Councilor Moore asked about state shared revenues from liquor and cigarette taxes, and if we can anticipate funds from the marijuana tax. Mr. Duey said they anticipate funds, but have no idea how much. Councilor Moore said that might be a place we could see an increase. Mr. Duey said last week during the discussion about marijuana, Council spoke about dedicating those funds to a particular service rather than just the General Fund. Councilor Ralston said it might be helpful to separate indirect and internal charges. Mr. Duey said he could do that when he prepares follow-up information. Councilor Moore asked about the comparison with other cities regarding services provided by Albany and Corvallis. Mr. Duey said the comparison is not apples to apples. Some of the other cities might include a parks department. He spoke regarding financial policies and the document attached to the agenda packet. There are not many changes in the first part of the document. He asked for Council feedback. Councilor Moore asked about the self-insurance and if the City invests those funds in pool funds. Mr. Duey said so far, going with self-insurance has gone well, and reserves have increased since going to that program. They don't yet know the impact of the Cadillac tax or if we will owe anything. Staff is looking at other possible changes to keep from paying that and minimize impacts. Councilor Moore asked if the State mandate regarding sick leave affected the City. Mr. Duey said our employees are already covered. Mr. Grimaldi said the initial calculation shows we could hit the Cadillac Tax mark in a couple of years. Mayor Lundberg said benefits are part of the 81 % of personnel costs. Mr. Grimaldi said the City did not have a Cadillac version of benefits. Health costs are a major driver of personnel costs, but we are not at the Cadillac level. Over time, we project the City will reach the level for that tax as the price of the program increases. He explained that the Cadillac Tax is calculated based on total cost, not the benefit. The purpose of the tax is to fund the healthcare system. Councilor Wylie asked which fund property taxes go to when received by the City. Mr. Duey said most goes into the General Fund, some into the Fire and Police levies, and some into the General Obligation (GO) Bond. He described how we invest our funds and why we are required to do that. Lane County Assessor's Office transfers our taxes to the State pool account which pays .055%. The number one criterion for investment policy of General Fund dollars is safety. The Retirement Fund has different criteria. City of Springfield Council Work Session Minutes November 16, 2015 Page 5 Mr. Grimaldi said this discussion can be continued at another work session. Mr. Duey said he would provide a copy of the investment policies. Mayor Lundberg asked about transferring funds such as supplemental budgets. Mr. Duey said staff is looking into a new budget system that would reduce the number of funds from 44 to about 21. ADJOURNMENT The meeting was adjourned at 6:57 p.m. Minutes Recorder — Amy Sowa Christine L. Lundberg Mayor Attest: Amy SoIA@ City Recorder