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11/14/1998 City CouncilEDMONDS CITY COUNCIL APPROVED Budget Workshop Special Saturday, November 14,1998, Council Meeting ELECTED OFFICIALS PRESENT STAFF PRESENT Gary Haakenson, Council President Art Housler, Adm. Serv. Director Dave Earling, Councilmember Doug Farmen, Accounting Manager Tom Miller, Councilmember Paul Mar, Com. Serv. Director John Nordquist, Councilmember Ron Haworth, Fire Chief Michael Plunkett, Councilmember Robin Hickok, Police Chief Dick Van Hollebeke, Councilmember (arrived 8:05) Jim White, Councilmember (arrived 8:05)' Jana Spellman, Recorder Council President Haakenson called the meeting to order at 8:03 a.m. COUNCILMEMBER MILLER MOVED, SECONDED BY COUNCILMEMBER NORDQUIS.T TO APPROVE THE AGENDA, MOTION CARRIED. Mr. Haakenson explained that this session would be started with Mr. Housler's answers to the questions that Council asked at the Tuesday, November 11, 1998, Council Meeting. During and following this presentation there would be a question and answer period for individual Counciimembers. �. cs n _ ; _ x' �*`d' .� rd• '�"' Z ,..�- r' z?� � � ;rq^°^� s r r ' PESE1 TAIOI�BY STAER�� , `%5xa5� pa �Kp� ra FSa7 aX�r a r Mr. Housler, Administrative Services Director, handed out a packet which addressed the concerns the Council expressed during the presentation of the 1999 Budget at the November 11, 1998, Council Meeting as follows: 1. Review information given to the Council at their Retreat last February that framed the issue and concerns about the potential for declining revenue beginning in the year 2000 and 2001. 2. Explain the process in configuring the 106% tax increase. 3.. Review the change in the law that restricts us from collecting retroactively the percentage of the 106% that is not taken.this year. 4. Year -end projects show a $1.3 million cash carryover which is redistributed in the. budget. How was that money allocated? Edmonds City Council Budget Workshop Approved Minutes Saturday, November 14, 1998 Page i 5. How are the contracts negotiated with other entities, such as the Town of Woodway? How did the City arrive at a contracted number for a year of service? When the contract figure is put together does it include a portion of the bonding? 6.. Has staff thoroughly reviewed the income sources? This includes any fees, personal services, permitting issues, etc. How does the City anticipate using the savings from refinancing bonds? 7. Provide the figures for the total property assessed valuation of 1997 and 1998. 8. If the Council does not vote to exceed the IPD, how much money would have to be cut from the budget? And, if the Council voted just to go to the IPD, how much money would that represent in property taxes? 9. What services levels would be reduced, and how they would be reduced, in increments starting at 3 %, 5 %, and 7% of the total budget? 10. Explain how property taxes revenues are calculated. Explain the issue of allocating changes in the Fire Department. for EMS versus suppression. He explained to the Council that he would give basic answers to questions asked with attachments by way of further explanation. Mr. Haakenson asked for clarification regarding the ending cash balances looking to the years 2000 and 2001. He stated that as the budget process was started this year, the ending cash balance for 1998 (or the beginning cash start for 1999) appeared to be relatively low and as the process proceeded, more dollars were found that may not necessarily be expended in the 1998 budget which increased the beginning cash balance for 1999. He asked Mr. Housler if this was a correct assessment and received an affirmative answer. He wondered if this would apply to the beginning cash balances in the years 2000 and 2001 which would then make the figures for those years somewhat misleading. He again received an affirmative answer. Mr. Housler stated that he could only remember a few years that 100% of the budget was expended. Mr. Haakenson asked if the figures presented as starting cash balances for the years 2000 and 2001 were the worst case scenario and Mr. Housler agreed. During the explanation of item #2 of Mr. Housler's packet, Council President Haakenson asked Mr. Housler if a home valued at $240,000 in 1998 tax dollars would pay an extra $30.24 in 1999 taxes. Mr. Housler stated that was correct. He also asked if that would be $30 more than last year's taxes and Mr. Housler said yes. Mr. Haakenson clarified that those taxes were also at the 6% level and Mr. Housler agreed. Councilmember Earling then commented that he had read that the Snohomish County Council approved a 6% property tax increase and wondered how that would impact the City of Edmonds taxpayers. He requested Mr. Housler provide him with more information regarding the increase in taxes to the citizens of Edmonds that might occur from the County approving a 6% County tax increase. Edmonds City Council Budget Workshop Approved Minutes Saturday, November 14, 1998 Page 2 Mr. Haakenson replied that he had a tax breakdown of a typical Edmonds' taxpayers total property tax bill of which only 22% is City taxes and l l% goes to the County. Fire Chief Haworth clarified this issue further by stating that those outside the cities would have a higher rate of increase than those that live within the cities. Mr. Earling stated that he would still like an answer from Mr. Housler. Mr. Earling asked Mr. Housler if City Attorney Scott Snyder would be clarifying the issue of recouping back taxes for the City Council. Art Housler, stated that in addition to clarification by Mr. Snyder, he would be looking to other sources for clarification as well, i.e., County Assessor, State Department of Revenue, and Attorney General's Office. Mr: Nordquist notified Mr. Earling that he had spoken with Mr. Snyder and Mr. Snyder was in the process of preparing a memo for Mr. Earling for Tuesday, November 17, 1998. The Council requested a more detailed response to item #4 of Mr. Housler's packet. Mr. Haakenson asked the Fire Chief if during the budgeting process he added some items that were previously missing from the contracts negotiated with other entities (item #5 of Mr. Housler's packet) specifically the Town of Woodway contract dealing with fire suppression/EMS services. Fire Chief Haworth indicated that training and administrative costs have been added. Mr. Haakenson asked if the formula had been updated and Chief Haworth indicated it has. Mr. Housler agreed to bring any unanswered questions back to the Council by the next budget workshop on November 19, 1998, or earlier if possible. Mr. Mar, Community Services Director, then spoke to the questions asked in item #6 of Mr. Housler's packet. Questions from Council were addressed as they arose. Mr. Housler continued with the second part of item #6 regarding the use of anticipated savings from refinancing bonds. Clarifications requested by the Council were addressed as they arose. Mr. Housler then briefly touched on item #7 and referred to the attachment included in the packet. Mr. Haakenson stated that because the Council had just received the information regarding item #7 that there would be more questions during the November 19, 1998, Budget Workshop. Item #8 was discussed briefly with questions answered as they arose. Edmonds City Council Budget Workshop Approved Minutes Saturday, November 14, 1998 Page 3 During the discussion of item #9, Councilmember Miller stated that his main concern was the ending cash balance and would like to see the ending cash balance increased. He is interested in seeing what staff can do to reduce expenditures to increase the ending cash balance. Mr. Mar informed Councilmember Miller that the Mayor needed to be involved in this decision - making process. Councilmember Haakenson asked if Mr. Housler had programs in place to cut spending in the event a recession occurred. Mr. Housler responded in the affirmative. Mr. Miller stated that he would like to be able to explain to the citizens why the City of Edmonds is anticipating a 9.1% increase in the budget when the rate of inflation is 3 %. Mr. Haakenson asked Mr. Miller what percentage increase he would like to see in the 1999 budget. Mr. Miller indicated a 7% increase. Mr. Haakenson pointed out that this was a $400,000 cut from the 1999 budget and clarified that the Mayor and staff would have to come up with prioritizing the lower cost centers and that is where the $400,000 cut would come from. Mr. Housler agreed. Mr. Housler referred to the process used last year indicating that a 1% decrease across the board was taken instead of a cost center cut which was presented to the Council but not approved. Mr. Haakenson asked if Mr. Housler would have a brief discussion at the cabinet level with the idea of looking at the lowest priority cost centers and come up with an answer to Councilmember Miller's question. Mr. Earling asked that both ways of cost cutting be brought to the Council, i.e., percentage cut across the board and cost center cuts. That way the Council would have two pieces of information to look at and then make a decision. Mr. Miller agreed that is what he would like to see happen. Mr. Haakenson asked Mr. Van Hollebeke if he still had a question that he would like to have answered regarding property tax — 3% vs. 6 %. Mr. Van Hollebeke replied that he felt this was a concern of the citizens, i.e., how is the increase going to affect the individual citizen. He asked how the Council/Administration would respond to the question of raising the taxes 6% when the inflation rate is 3 %. Council President Haakenson replied that he felt not only was it a responsibility but a need do prove to the Council and the citizens that there is a need to go over the 3% rate of inflation. Chief Haworth explained to the Council when the Federal and State government puts out a mandate, these can drive up costs of operation. These then have to be included in any budgeting process. Mr. Haakenson asked whether these costs were reflected in the Fire Department's budget. Chief Haworth said yes. Chief Haworth continued that some of the increases that are Edmonds City Council Budget Workshop Approved Minutes Saturday, November 14, 1998 Page 4 asked for are not all the City's fault. These increases come from areas which are not controlled by the City. Mr. Van Hollebeke stated that he would like something verbalized in the public hearing so that the citizens understand what the Council has to consider when deciding whether to levy a 106% tax increase. He would like to see a physical description explaining to the citizens in lay terms the rational for increasing the 1999 budget anywhere from 3% to 6 %. He indicated this should happen during a City Council Meeting. Mr. Housler indicated that he would do that during the November 24, 1998, Council Meeting. Mr. Nordquist indicated that he would like to hear the justification for the Cost Centers and how they were structured and the priority within those centers. He feels there are some major expenditures that possibly could be held over until another year. Mr. Plunkett asked Mr. Housler if during the budget process the Council was bound by ordinance to look at Cost Centers only. Mr. Housler replied in the negative. Mr. Plunkett gave the example that if there was one too many administrators, in the Council's eyes, could that administrator be eliminated from the budget. If there was a budget surplus, if there was additional revenues, all those things could be looked at completely void of knowing or understanding what a cost center is, could it not? Mr. Housler said absolutely. Chief Haworth then explained item #10 to the Council. Mr. Haakenson informed Chief Haworth that he had asked for that explanation due to a citizen request. Mr. Haakenson asked Mr. Housler if he had anything further to discuss. Mr. Housler indicated that the last thing to be discussed were the 1999 Budget change requests that had been asked after the preparation of the preliminary budget. At that point Councilmember Plunkett asked for clarification from Mr. Housler regarding Item #2: - unanticipated revenue increase of $74,300 Item #6 - refinance and therefore a savings to the budget of $15,300 Item #7 — Referendum 49 — Sales tax equalization — that will be an increase to our budget and unallocated money at the present time of $13,000. Mr. Housler clarified these points. Mr. Plunkett then asked if these funds were coming into the budget unallocated and Mr. Housler replied they were. Mr. Housler wanted to remind the Council in the Preliminary Budget $155,000 was for the Council Contingency Fund. He pointed out that the Council had approved an expenditure of $34,000 for an ADB consultant and that there would be a $6,000 credit coming back for unexpended .amounts from Economic Development. He indicated the balance at present is $128,000. Edmonds City Council Budget Workshop Approved Minutes Saturday, November 14, 1998 Page 5 Mr. Farmen then addressed the requested changes to the 1999 budget from staff. Council had no questions. Mr. Haakenson informed the Council and staff the next Budget Workshop would be Thursday, November 19, 1998, at 5:30 p.m. in the same room of City Hall and asked the Council if they had any questions they would like to ask staff and have them reply by that meeting. Mr. Miller asked about the sales tax revenue regarding the Chase Lake Elementary School remodel and construction that will be occurring. Mr. Housler stated in 1999 the City would be receiving approximately $12,000. He stated in the year 2000 that about would be approximately $150,000. Councilmember Miller asked if these revenues were in Mr. Housler's revenue forecasts and Mr. Housler replied they were. Mr. Plunkett asked how many interest bearing accounts the City has and how many make funds available to the General Fund. Mr. Farmen replied to Mr. Plunkett's satisfaction. Mr. Plunkett directed a question toward Mr. Housler regarding Public Safety. He stated that in a newspaper article the Mayor reported that there was an increase of $806,890 in Public Safety. He asked, "Could we increase Public Safety police and fire to $806,000 and not increase property taxes from a budgetary point of view ?: Mr. Housler replied, "Absolutely not unless you cut something out." There was some confusion surround Mr. Plunkett's question. Mr. Plunkett restated his question, "From a, not policy, but from a budgetary point of view could we fund an $806,000 increase, police and fire, and not increase taxes. ?" Mr. Housler indicated that would require some cuts. Council President Haakenson stepped in to clarify the issue. Mr. Haakenson couched the question as follows: "If we stay at the 3% level or 0% and don't increase taxes at all" ... Mr. Plunkett then interjected, "would there still be enough money available ?" Mr. Haakenson said the answer to that would be it is not a yes or no answer. He then continued the answer to that would be sure we can do it but we would have to cut somewhere else. Mr. Plunkett indicated he understood. Mr. Haakenson indicated a large cut would have to be made somewhere else. Mr. Plunkett indicated $342,000 would have to be cut somewhere else. Mr. Haakenson then reiterated that was a lot to cut. Mr. Haakenson and Mr. Plunkett discussed Mr. Plunkett's question further with Mr. Plunkett agreeing that Council President Haakenson had answered his question. Mr. VanHollebeke asked the Council to consider increasing the sidewalk, bikeways portion of the budget up to a total amount available of $100,000. This has been discussed in two of the Committee meetings and the Committee would like to see this increased. Mr. Van Hollebeke indicated that would be an additional $60,000 increase. Mr. Earling indicated that each of the Councilmembers is going to have to set out any additional requests like Mr. Van Hollebeke's in order for the Council to debate them and indicated if additional money is allocated for one source it has to come out of another. Edmonds City Council Budget Workshop Approved Minutes Saturday, November 14, 1998 Page 6 Mr. Nordquist had a question about the 116 Fund which was answered. Mr. Plunkett asked what procedures are followed for Councilmembers to make requests concerning the budget. Mr. Haakenson replied that any and all concerns they have regarding the budget should be addressed during the budget sessions indicating that all questions need to be answered before the Public Hearing.. Mr. Plunkett reiterated at any time he could bring his thoughts regarding the budget, he needs to bring them up and put them on the table. Mr. Haakenson replied affirmatively. Mr. Haakenson indicated that was what the work sessions were for. Mr. Earling complimented the staff for their efforts in compiling the answers to Council's questions. He then commented on Mr. Plunkett's question regarding the Mayor's presumption that the property tax increase is tied to public safety. He stated that one could go through the whole book and find a series of perceptions, one thing tied to another, just as any of the Council might build an argument for. He stated he thought one of the beneficial parts of the budget process is that just because the Mayor ties these two items together in an impassioned way doesn't necessarily mean that he (Mr. Earling) agrees with it. Mr. Earling continued that the bottom line for him in going through a number of budgets is that you allocate the amount of money that is available establishing a realistic balance as to how you are going to spend it. He suggested it was a combination of 8 people plus the staff of setting the priorities and coming to some agreement on it. He indicated he doesn't disrespect what the Mayor said but stated that he is looking a bottom line numbers not where anyone thinks the numbers should be or should not be allocated. Mr. Miller inquired about the Councilmatic bonds and received a satisfactory answer from Mr. Housler. Police Chief Hickok briefly addressed the 800 megahertz. Mr. Haakenson did not see a need for Mayor or Council reports. There being no further business, the meeting was adjourned at 9:55 a.m. BARBARA S. FAHEY, MAYOR c:wordata/jana/1998Budget WS for 1999.doc SANDRA S. CHASE, CITY CLERK Edmonds City Council Budget Workshop Approved Minutes Saturday, November 14, 1998 Page 7