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12/19/1992 City CouncilEDMONDS CITY COUNCIL APPROVED MINUTES SPECIAL BUDGET COMMITTEE MEETING OF THE EDMONDS CITY COUNCIL DECEMBER 19, 1992 THESE MINUTES WERE APPROVED BY THE CITY COUNCIL ON JANUARY 5, 1993 The special budget committee meeting of the Edmonds City Council was called to order at 7:30 a.m. by Council President Palmer in the Public Safety Building Conference Room, 250 5th Ave. N., PRESENT Laura Hall, Mayor Jeff Palmer, Council President Steve Dwyer, Councilmember Dave Earling, Councilmember Michael W. Hall, Councilmember William Kasper, Councilmember John Nordquist, Councilmember Tom Petruzzi, Councilmember REVIEW OF REVISED YEAR END FINANCIAL POSITION STAFF Art Housler, Admin. Serv. Dir. Brent Hunter, Personnel Manager Dan Prinz, Police Chief Bob Alberts, City Engineer Noel Miller, P.W. Superintendent Arvilla Ohlde, Parks & Rec. Mgr. Chuck Day, Accounting Manager Jeff Wilson, Planning Supervisor Tom King, Facilities Supervisor Rhonda March, City Clerk Barb Mehlert, Recorder Mayor Hall referenced a memo addressed to Councilmembers dated December 18, 1992 entitled "Packet for Saturday's Budget Meeting". Mayor Hall read the memorandum into the record. In the Mayor's 1 1 memorandum, the Mayor suggested tw❑ solutions to resolve the additional projected shortfall of $132,000: 1) Continue to use the operating cash reserve of $250,000, until revenues in 1993 ex- ceed expenditures and it can be restored; or 2) Use the Emergency Financial Reserve #006 as it ' was intended when it was established by the City Council in 1987. Mayor Hall recommended that whatever the shortage is be taken from the Emergency Financial Re- serve Fund #006. Mayor.Hall said the City Council also requested a contingency plan for various i levels in 1993. Mayor Hall outlined her contingency plan with the City Council. (Those Contingen- cy Plans are attached and labeled as Exhibit "A"). Mayor Hall said on Tuesday, December 15, the City Council requested a cursory tabulation of increases to the 1992 actual revenues in order to determine an amount for 1993. What was not considered in the tabulation was property taxes that were directly receipted into the Council Contingency Fund in 1992. The amount was $405,000. By considering this, the revenues for 1993 will be $12,726,180 instead of $12,376,900. Mayor Hall recommended the City stay with the $12.7 million budget level instead of the $12.5 million budget level previously requested by the City Council. Councilmembers discussed the various criteria for Fund 002 and Fund 006. Councilmembers discussed the Mayor's recommendation to use the Emergency Financial Reserve #006 to resolve the additional projected shortfall of $132,000. Council President Palmer said in order to adopt this recommendation, the Council would have to pass.a motion, as the Mayor's recommenda- tion does not meet the stated purpose of the fund. Regarding Mayor Hall's recommendation to use the operating cash reserve of $250,000 (Fund 002), the majority of the Councilmembers felt the City is unable to use that money for the shortfall, as the description of this fund in the ordi- nance mandates that the funds are to be used only in the event of delays in the collection of revenue, and Council President Palmer pointed out that it is not a delay in revenue, but a lack of revenue.Council President Palmer asked Mr. Housler if the State or the County has notified him or given him indication that there would be a delay in revenue, and Mr. Housler replied negative- ly. Councilmember Dwyer asked what the balance of Fund 002 and Fund 006 would be if the City Council adopted either recommendation. Mr. Housler replied $118,000 in Fund 002 and $103,000 in Fund 006. Based on past years experience, Councilmember Dwyer asked Mr. Housler how much of Fund 002 does the City usually go through at the beginning of the year until revenues begin to come in. Coun- cilmember Dwyer pointed out as the City does not have a cash carryover, Fund 002 would be relied upon to make payroll, etc. Mr. Housler said revenues do come in the first two weeks of January such as utility revenues. Councilmember Dwyer said it might be to close of call if Fund 002 is taken down to a point where the City might not be able to make payroll during the first payroll period of the year. Councilmember Dywer asked Mr. Housler with the revised figures on the property tax collections, in terms of real dollars, how much was the City short in 1992. Mr. Housler said the City was short approximately $800,000 for 1992. Councilmember Dwyer said it is his opinion that the City should have combined reserves and contingency funds which contain a total amount of at least what the City was short this year. Councilmember Dywer asked what the Mayor's recommendation is for the 1993 budget to make up for taking $132,000 out of Fund 002 or Fund 006 for 1992. Mr. Housler said there isn't a plan, however, he would recommend that whatever level the Council sets the budget at, any excess revenue be placed back int❑ the reserve funds. Councilmember Dwyer asked Mr. Housler if the City has a reserve ❑f 5% of the total budget ($12,500,000), which would be $625,000, set that aside in Fund 006 as a pure reserve fund, and that $625,000 came from what was left in Fund 006, after the recommended reduction of $132,000 as the Mayor is proposing, what would be the balance of the Contingency Fund be, and Mr. Housler replied $7,000. Council President Palmer asked the Mayor what her proposal is in the case where Fund 002 and Fund 006 are both ineligible in making up the shortfall of $132,000. Mayor Hall said she did not have the same interpretation of the funds being eligible. Councilmember Hall asked Mr. Housler if the nationally recommended reserve level of 5% to 8% is a combination of total reserves, including Council Contingency Fund, and Mr. Housler said it is 5% to 8% of expenditures. Councilmember Hall feels the 5% reserve recommendation should include all City reserves and not just specific reserves. Councilmember Dwyer said the City has never before been a position of having a zero cash carry- over. Councilmember Dwyer said if the City is again $800,000 short in 1993, and does not have adequate reserves, the City would be in a serious financial trouble. Council President Palmer said the City may have to look at temporary employee layoffs towards the end of 1992 for non essential services (General Fund) in order to balance the budget. Council President Palmer said this may be in the form of employees first requesting time off without pay. Brent Hunter, Personnel Manager, said this would not be passible due to union contracts, and the fact that if any employee is laid off, even for a day, all accrued leave pay would have to paid to that employee immediately upon layoff. Mayor Hall said she did not feel this measure would be necessary, as the City is not in an emergency situation. Council President Palmer asked Mr. Housler if the City is experiencing a financial emergency, and Mr. Housler replied affirmatively. Councilmember Petruzzi asked Mr. Housler what would happen to the City's Bond Rating if the City became unable to meet its -financial obligations. Mr. Housler said there is no doubt it would become a problem for the City to maintain the current Rating of A-1. Mr. Housler said a recent letter from the Rating Service indicated their concern that the City's cash balances are trending to be lower. As the Council wanted to know what the total salary amount is for the first 15 days of January,, the Council recessed at 8:30 a.m. in order for Chuck Day, Accounting Manager, to calculate the figures. At 8:55 a.m., the Mayor and Council reconvened in the Public Safety Conference Room. Mr. Housler said the total amount receipted through the Treasury Clerk's Office from January 1, 1992 through January 19, 1992 is $105,000. Councilmember Dwyer said based on this information, it is not feasible to use Fund 002, as there wouldn't be enough money in the Fund to make payroll on January 20th if no other revenue came forward. Mr. Housler said he and the Mayor both recommend using Fund 006 fund, as the City is in a finan- cial emergency. Councilmember Dwyer said the Administration has made it clear that they want to take money out of Fund 006 instead of furloughing people in 1992. Councilmember Dwyer said the money that would be taken out of Fund 006 in 1992 is still listed as being present in the Fund in 1993. Councilmem- ber Dwyer said the effect of this recommendation is a budget level between $12,300,000 and $12,400,000 listed on Attachment #4 of the packet which would necessitate employee layoffs in 1993, and would include all of Contingency Plan A ( 1-7), Contingency Plan B (8 - 23), and Contin- gency Plan C (24 through 41). Mayor Hall replied affirmatively. Council President Palmer asked Mayor Hall if the numbered items 1 through 43 are listed in de- scending priority, and Mayor Hall replied affirmatively. Councilmember Petruzzi said included in these items recommended by the Mayor are Fire Volunteers and Police Reserves, which cannot be cut from the budget. Councilmember Earling said one point of concern is that if the City does have a true reserve amount of 5% or $625,000, which is the minimum recommended national standards, it falls miserably short of the $800,000 shortfall the City experienced in 1992. Councilmember Earling said he wished the Council did not have to wait until December 19th to get a Contingency Plan from the CITY COUNCIL APPROVED MINUTES Page 2 December 19, 1992 Mayor. Councilmember Earling said the Council previously asked the Mayor for a Contingency Plan so something could be put into place well before December 19. Councilmember Earling said he finds it completely unacceptable that nothing has been done until today, especially in light of the fact that the Contingency Plan contains layoff recommendations. Councilmember Dwyer said the Mayor is recommending that items 1 through 41 in her Contingency Plan be placed into effect in the order prepared, as those items equal the budget figure request- ed by the City Council. Councilmember Dywer said'although he agrees with the numerical total of items 1 through 41, the Council does not have to make a decision now with regards to going all the way down to item 41, as the Council has the right and responsibility to get to the revenue figure amongst themselves. Councilmember Dwyer said he did not want to be placed into the posi- tion of discussing employee layoffs without ever discussing the entire organization, as is now the case. Council President Palmer clarified the Council is stopping at the numerical effect of item 41. COUNCILMEMBER DWYER MOVED, SECONDED BY COUNCILMEMBER PETRUZZI, TO TAKE $132,000 FROM THE EMERGEN- CY FINANCIAL RESERVE FUND 006 AND ALLOCATE IT TO THE USE OF THE GENERAL FUND FOR THE BALANCE OF 1992 IN ORDER TO ALLOW THE CITY TO MEET ITS FINANCIAL OBLIGATIONS THROUGH THE END OF THE YEAR. Under discussion, Councilmember Earling said he would vote for the motion, but finds it irrespon- sible that when the City knew in October that the budget was starting to fall apart, a Contingen- cy Plan was not put into effect by the Administration after several Councilmember requested a contingency plan. Council President Palmer and Councilmember Petruzzi concurred. Mayor Hall said the Council was apprised every step of the way. Councilmember Earling said every step of the way, the Council asked for a contingency plan. Councilmember Hall said he doesn't see how anyone could have perceived the financial problems the City would face in 1992. Councilmember Hall said it would have been nice to have a contingency plan at the beginning of the year to address a $1 million dollar shortfall, however, doesn't see why such a contingency plan should be formulated until it actually happens. Mayor Hall said if she could have done a better job in 1992, she would have. Mayor Hall said said the Staff has worked very hard formulating this budget. Councilmember Earling said he serves on the Community Transit Board of as the City's representa- tive. Councilmember Earling said mid -year Community Transit saw there was going to be a revenue shortfall and had in place, a number of contingency plans to meet whatever situation they would happen to find themselves in for 1992 as well as 1993. Councilmember Earling said months ago, the City of Edmonds began to see that revenues were not coming in, and it is the Administration's responsibility, not the Council's, to place a contingency plan into effect. MOTION CARRIED. As a procedural matter, COUNCILMEMBER KASPER MOVED, SECONDED BY COUNCILMEMBER HALL, TO EXTEND THE MEETING TO 10:00 A.M. MOTION CARRIED. As a citizen wished to address the Mayor and Council, COUNCILMEMBER HALL MOVED, SECONDED BY COUN- CILMEMBER PETRUZZI, TO ALLOW ONE MINUTE FOR A CITIZEN TO ADDRESS THE MAYOR AND COUNCIL. MOTION CARRIED with Councilmember Dwyer and Councilmember Kasper voting no. David Page, citizen and local business owner, said the Contingency Fund should be utilized. Mr. Page said the City needs to concentrate on building a higher and better and larger revenue base during 1993. Mr. Page said more emphasis needs to be placed on annexation. Councilmember Kasper said he has long stated the City cannot continue to run off the General Fund. Councilmember Kasper said the City is spending money for capital projects out of the Gener- al Fund because the City has been unable to get bond issues through, which is hurting the City financially. Councilmember Kasper said the City might as well go to the citizens and get a bond issue approved. At 10:00 a.m., COUNCILMEMBER KASPER MOVED, SECONDED BY COUNCILMEMBER HALL, TO ADJOURN THE MEETING. MOTION CARRIED. 7 . THESE MINUTES ARE SUBJECT TO yANUARY 5, 1992 APPROVAL. aura 'P9N..-Hal V, Mayor — RVonaa i. marcn, `w-Ly CITY COUNCIL APPROVED MINUTES Page 3 December 19, 1992 AGENDA EDMONDS CITY COUNCIL SATURDAY, ❑ECEMBER 19, 1992 7:30 A.M. - 9:30 A.M. SPECIAL BUDGET COMMITTEE MEETING LOCATION: PUBLIC SAFETY BUILDING CONFERENCE ROOM 250 5TH AVE. N., EDMONDS, WASHINGTON CALL TO ORDER - 7:30 A.M. 1. REVIEW OF REVISED YEAR END FINANCIAL POSITION 2. BUDGET COMMITTEE WORKSHOP ON PROPOSED 1993 BUDGET ADJOURN THE PUBLIC IS INVITED TO ATTEND PARKING AND MEETING ROOMS ARE ACCESSIBLE FOR THE DISABLED (An Interpreter for the hearing impaired is available with 24 hours advance notice to the City Clerk at 771-0245)