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FINANCE COMMITTEE 2010/03/15 Minutes The City of Lake Forest FINANCE COMMITTEE FY2011 Budget Meeting Proceedings of the March 15, 2010 Meeting 2:45 p.m. – City Hall Council Chambers I. Call to Order and Roll Call Chairman Grumhaus called the meeting to order at 2:45 p.m. Present: Mayor Cowhey, Chairman Grumhaus, Aldermen Novit, Widman, Goltra, Morsch, and Looby. Absent: Aldermen Hanrahan and Palmer. Quorum present. There were approximately 22 present in the audience of which 21 were city staff. Staff present: Robert Kiely, Jr., City Manager; Kathleen Reinertsen, Finance Director; Louise Breckan, Assistant Finance Director; Mary Van Arsdale, Director of Parks and Recreation; Ken Magnus, City Engineer; Ken Leone, Superintendent of Public Works; Michael Thomas, Superintendent of Public Works; Ramesh Kanapareddy, Assistant City Engineer; Carina Walters, Assistant to the City Manager and Diane Hall, Senior Accountant. Others: Alderman-elect David Moore. II. Consideration of Minutes from the Finance Committee Meeting Held on February 16, 2010 Alderman Looby made a motion to approve the minutes from the Finance Committee meeting held on February 16, 2010. The motion was seconded by Alderman Novit. The motion carried unanimously by voice vote. III. Overview of FY2011 Budget Mr. Robert Kiely, City Manager thanked Finance Director Kathy Reinertsen, Finance staff and all city staff that worked on this year’s budget. He said it was difficult this year as $525,000 needed to be cut from the FY2011 Budget. He asked that the Finance Committee hold their questions on personnel as personnel will be discussed in the executive session which follows this meeting. Mr. Kiely told the committee if they needed additional information about the FY2011 Budget to please let him know. Monthly Flash Report - Ms. Reinertsen believes that the revenue and expense forecasts are good estimates for the General Fund. However, there is continued concern with the revenues that are tied to the economy. The Water and Sewer Fund will meet the bond coverage requirements even though there is a $220,000 projected decrease in revenue. At 2:55 p.m., Alderman Hanrahan entered the meeting. General Fund Ms. Reinertsen reviewed the Five Year Fund Balance Forecast for the General Fund. Ms. Reinertsen reviewed the FY2010 Estimated Actual Revenues as compared to the FY2011 Revenue Budget schedule. She stated that after the pass throughs are eliminated, revenue is decreasing by .7%. However, the 30% reduction in the local share of the income tax revenue proposed by the State of Illinois has not been deducted from this schedule. Ms. Reinertsen reviewed the FY10 Budget to FY11 Budget for Revenues. The decrease is almost $1.5 million for various revenues. Finance Committee Meeting Minutes – March 15, 2010 2 Ms. Reinertsen reviewed the Five Year Payroll Forecast schedule for the General Fund. She stated that the medical and dental numbers were from the City’s consultant and the IMRF numbers were confirmed from a recent IMRF email. Chairman Grumhaus worked with Ms. Reinertsen to project the Police and Fire Pension future cost. Ms. Reinertsen added that they used projected investment returns to determine the Police and Fire Pension future cost. The General Fund total salary and benefit expenditures decreased .2% from FY2010. The Parks Department was transferred to the Parks and Recreation Fund to increase operational efficiencies but the increase in pensions offseted that decrease. At 3:07 p.m., Alderman Palmer entered the meeting. IV. Review of Operating Expenditures - General Fund Mr. Kiely reviewed the operating expenditure budget forecasts for FY2011 and FY2012. Mr. Kiely stated that the change in personnel made in FY2011 should level off the need to make cuts in FY2012, however pension and medical cost increases will have an impact. He stated that the core/elective exercise helped staff this year. He said that he will periodically update to align the priorities of the community to the dollars. Mr. Kiely stated that for the FY2011 Budget, there will be a new item, Performance Management standards, in the budget book. This program will provide the City Council and other stakeholders with reliable and pertinent information to make objective resource-allocation decisions and related strategic policy decisions. This program will also provide valuable data that department managers can use to effectively address community expectations and efficiently utilize all available resources. Staff was asked to identify three to five performance standards for FY2011. By November 1, 2010, the departments will be asked to expand to five to ten measurement standards. Mr. Kiely stated that this will be better understood in executive session but the City is always willing to partner with others. Mr. Kiely stated that the City must continue to live within our means. The credit goes to City Council and staff. FY2011 Budget cuts are painful and significant to us, but other communities are much worse. Going forward, we will need to ask if needed new services will have sustainable funding. This will be a struggle. Mr. Kiely mentioned the memorandum about building permit activity in the meeting packet from Cathy Czerniak, Director of Community Development. The decline in building permits has had a ripple effect in the city. Mr. Kiely stated: does the City Council need to make developments easier by changing building codes and possibly assisting developers. Mr. Kiely stated that the State of Illinois has very serious financial problems. He believes that municipalities for the next three to five years will need to be less reliant on the State. V. Review of Capital Expenditures (CIP) FY2011 Capital Improvement Projects – Mr. Kiely stated that projects that were not on the listing in November 2009 will be presented today. South Beach Access Road – Mr. Ken Magnus, City Engineer gave a power point presentation of the two areas of the bluff settling which will eventually lead to roadway failure. He is recommending an engineering study be done in FY2011. He stated that the City can shore up this area, pay for the engineering study and discuss again in November 2010. Finance Committee Meeting Minutes – March 15, 2010 3 Ring Road Intercept – Mr. Magnus showed the Committee a diagram of the slope intercepting the roadway. The road needs to be moved back from the slope per city code. He is proposing that an engineering study be done. Waukegan/Westleigh Intersection Improvements (left turn lanes on Waukegan Road and new signal) – Mr. Kiely stated that the plans have been finished for this project. The City has an IOU from the State of Illinois for $500,000 but it is unknown when the State will be able to pay the City. The remaining cost of the project of $1,100,000 is being shared 50/50 with the School Districts. However, the School Districts do not have the money at this time. The consensus of the Committee was to have staff report back on accidents at the intersection, investigate signage and see if the City could apply for additional grant money. Ad Hoc Parks & Recreation Report – Ms. Mary Van Arsdale, Director of Parks and Recreation stated that staff has been working together with the Parks and Recreation Board members on initiatives outlined in the October 2009 Ad Hoc report on operations and capital. She stated that together they are developing a framework to use to make decisions. Neighborhood meetings are being planned. She stated that in May, she plans to report back to the City Council on the direction they are heading. Other CIP – Mr. Kiely reported that the FY2011 $150,000 CBD train depot repair that was originally for painting is now planned for the roof. Ms. Reinertsen showed the Committee the Five Year Fund Balance Forecast for the Motor Fuel Tax Fund, Capital Improvement Fund, and the Park and Public Land Fund. She noted that the annual paving program listed in the MFT fund as a FY2011 expenditure is now included in the 2010 Bond issue. For the Park and Public Land Fund, impact fee revenue which was expected in FY2011 to pay for capital improvements may not be received until FY2012. However, the $510,000 of needed capital improvements will be funded by the 2010 Bond issue. The 2010 Bond issue will also be funding $1.5 million of the $2.8 million in priority #1 projects in the Capital Improvement Fund. 2010 Bond Issuance – Ms. Reinertsen showed the draft schedule for the bond issuance. The first reading of the bond ordinance will be at the City Council’s April 7 meeting. The bond issues are as follows: $10,000,000 general obligation bonds, $3,000,000 in taxable general obligation bonds (Recovery Zone Economic Development Bonds- direct payment) and $ 5,425,000 taxable general obligation bonds (Build America Bonds- direct payment). These bonds are funding the Western Avenue Improvements, various capital improvement projects, park and recreation improvements, CBD train station repairs, the annual payment overlay project and Municipal Services building. Mr. Ken Leone, Superintendent of Public Works briefly reviewed the Fleet Study Committee draft Report. He stated that the committee was created in September 2009. The Committee determined a vehicle utilization standard and created vehicle replacement guidelines. These were applied to the FY2011 equipment requests. The Mayor will be appointing citizens to a committee to review and validate this draft report. Tentative Capital Equipment Program – Mr. Michael Thomas, Superintendent of Public Works, reviewed the proposed list of $655,000 of capital equipment being purchased from the Capital Improvements Fund and the proposed $80,000 of Parks and Recreation capital equipment. For each vehicle being replaced, a Capital Equipment Replacement Form was completed. He reviewed the data on the form with the Committee. Finance Committee Meeting Minutes – March 15, 2010 4 VI. Other Funds Water Fund - Five-Year Fund Balance Forecast – Ms. Reinertsen stated that the revenues for FY2010 may drop more but she believes that the City will still maintain the 1.25 debt coverage. The excess revenue from FY2011 will be transferred into the Water and Sewer Capital Improvement Fund to fund the priority #1 projects. Proposed Rate Adjustment – Ms. Reinertsen stated that the water rate increase of 5% is planned for each of the next three fiscal years. First reading of the water rate increase by the City Council will be at the April 7, 2010 meeting. Membranes – Mr. Thomas stated that representatives from Aquasource came to the water plant. The representatives believe that air is causing the breakage of the membranes and not the cold water. When the water plant is turned off, air enters the valves and fills the pipes. A low lift pump would prevent the air from entering the valves and filling the pipes. The pump cost $160,000 and it is included in the FY2011 Budget. Another option is purchasing another membrane skid which would cost approximately $1 million. This has not been budgeted. Service line leak detection survey - Mr. Thomas stated that one of the final areas that staff is proposing to investigate is possible service line leaks. More specifically, these are leaks on a property owner’s water service line before the water is metered. The repair of a service line leak would be the responsibility of the property owner. Staff is recommending that those service lines that are not 100% copper be tested for leaks. This includes service lines that are constructed of iron, lead, brass, or any combination thereof. Staff is recommending that these lines be tested not only due to their age, but lines made of iron and lead will begin to fail sooner than those constructed of copper. The program would test 594 water services at a cost of $8,700. Mr. Kiely added that staff will work with the Public Works Committee because the cost to repair these service line leaks may be high so staff may be contacted by the property owner. TIF Fund - Close-Out Date – Ms. Reinertsen stated that the TIF will be ending December 31, 2011. Letters will be going out shortly to the taxing districts notifying them in advance of the TIF’s ending date so that they can capture the increase in assessment. VII. Future Studies/Considerations FY2010 Mr. Kiely reported that: East Side Train Station Renovation – The City is close to working out items with Union Pacific and Metra. IT Service Consolidation – The City is working on partnering with School Districts 67 and 115. Fleet Service Study – Please forward names to the Mayor. Grounds & Forestry Consolidation – This has been completed and it was a smooth transition. Senior and Youth Advocate Positions – United Way/Family Services – Over time, funding from United Way and Family Services will most likely decrease or cease. A decision will need to be made by the City Council regarding these positions. Finance Committee Meeting Minutes – March 15, 2010 5 FY2011 Train Station Enhancements (CBD & Telegraph) – The Committee held its first meeting. A grant has been filed by the City to pay for the underground pedestrian pathway. Refuse Collection / Compost – During FY2011, the Public Works Committee and city staff will investigate the potential of using 65 gallon wheel carts to further expand the City’s curbside recycling program. Also, the possibility of going to a once a week refuse pickup will be discussed. Storm – Sanitary Sewer System Status Report – The memorandum in the packet was for information only. There needs to be a decision made in November 2010 whether to continue using the ½% additional sales tax for storm sewer projects or use this money for other capital improvements. Chairman Grumhaus and Committee members expressed their appreciation to the staff for all of their hard work. VIII. Executive Session for Purposes of Discussing Personnel Alderman Looby moved, seconded by Alderman Morsch to adjourn the meeting at 6:15 p.m. and to go into Executive Session for the purpose of discussing personnel issues. The following voted “aye”: Cowhey, Grumhaus, Novit, Widman, Goltra, Morsch, Hanrahan, Looby, Palmer. The following voted “nay”: none. The motion carried unanimously. Following the Executive Session discussion, Alderman Looby moved, seconded by Alderman Goltra to adjourn the Executive Session at 7:22 p.m. and to reconvene back into Open Session. The following voted “aye”: Cowhey, Grumhaus, Novit, Widman, Goltra, Morsch, Hanrahan, Looby, Palmer. The following voted “nay”: none. The motion carried unanimously. IX. Other Business Alderman Morsch moved, seconded by Alderman Palmer to recommend a general pay plan adjustment of 1%. The motion carried unanimously by voice vote. X. Adjournment There being no further business, Alderman Morsch moved, seconded by Alderman Goltra to adjourn the meeting at 7:25 p.m. The motion carried unanimously by voice vote. Respectfully submitted, Louise Breckan Assistant Finance Director