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2021-05-08 City Council - Full S Agenda-28571 2 3 4 o Agenda Edmonds City Council SPECIAL MEETING - COUNCIL RETREAT VIRTUAL ONLINE MEETING EDMONDS CITY COUNCIL MEETINGS WEB PAGE, HTTP://EDMONDSWA.IQM2.COM/CITIZENS/DEFAULT.ASPX, EDMONDS, WA 98020 MAY 8, 2021, 1:00 PM DUE TO THE CORONAVIRUS, MEETINGS ARE HELD VIRTUALLY USING THE ZOOM MEETING PLATFORM. TO VIEW OR LISTEN TO THE EDMONDS CITY COUNCIL MEETING IN ITS ENTIRETY, PASTE THE FOLLOWING INTO A WEB BROWSER USING A COMPUTER OR SMART PHONE: HTTPS://ZOOM. US/J/95798484261 OR JOIN BY PHONE: US: +1 253 215 8782 WEBINAR ID: 957 9848 4261 "WE ACKNOWLEDGE THE ORIGINAL INHABITANTS OF THIS PLACE, THE SDOHOBSH (SNOHOMISH) PEOPLE AND THEIR SUCCESSORS THE TULALIP TRIBES, WHO SINCE TIME IMMEMORIAL HAVE HUNTED, FISHED, GATHERED, AND TAKEN CARE OF THESE LANDS. WE RESPECT THEIR SOVEREIGNTY, THEIR RIGHT TO SELF-DETERMINATION, AND WE HONOR THEIR SACRED SPIRITUAL CONNECTION WITH THE LAND AND WATER. - CITY COUNCIL LAND ACKNOWLEDGMENT CALL TO ORDER/FLAG SALUTE LAND ACKNOWLEDGEMENT ROLL CALL COUNCIL BUSINESS 1. City Council Budget Retreat (240 min) ADJOURN Edmonds City Council Agenda May 8, 2021 Page 1 4.1 City Council Agenda Item Meeting Date: 05/8/2021 City Council Budget Retreat Staff Lead: Maureen Judge Department: City Council Preparer: Maureen Judge Background/History N/A Staff Recommendation N/A Edmonds City Council Budget Retreat Agenda Welcome - 5 minutes Introductions - 10 minutes 2022 City Budget - 10 minutes Review of the process we'll take today - 5 minutes Council roles and responsibilities -15 minutes - Review of last year's council priorities Councilmember priorities - 60 minutes Break - 10 minutes Budget process discussion - 40 minutes Two-year budget cycle discussion kick off - 5 minutes Biennial budgeting - 25 minutes Do we want to have a 2nd budget meeting this year to refine priorities? - 10 minutes Wrap up - 5 minutes Attachments: 2021 Retreat Agenda 2020 Budget Retreat Minutes Packet Pg. 2 CITY CO Welcome Susan Paine 5 mins Introductions Mike Bailey Councilmembers 2022 City Budget • - • Review of the process we'll take today Council roles and responsibilities Review of last year's council priorities 2022 Councilmember priorities Emphasize De-emphasize NNNNNBrea k...... Budget process review discussion Likes, dislikes, & deadlines for 2021 Two year budget cycle Biennial budgeting process Do we want to have a 2nd budget meeting this vear to refine priorities? Wrap u 4.1.b EDMONDS CITY COUNCIL VIRTUAL ONLINE BUDGET RETREAT APPROVED MINUTES July 29, 2020 ELECTED OFFICIALS PRESENT Mike Nelson, Mayor Adrienne Fraley-Monillas, Council President Kristiana Johnson, Councilmember Luke Distelhorst, Councilmember Diane Buckshnis, Councilmember Vivian Olson, Councilmember Susan Paine, Councilmember Laura Johnson, Councilmember 1. CALL TO ORDER/OPENING REMARKS STAFF PRESENT Angie Feser, Parks, Rec. & Cultural Serv. Dir. Dave Turley, Interim Finance Director Maureen Judge, Council Legislative Assistant Tom Brubaker, City Attorney's Office Scott Passey, City Clerk The Edmonds City Council virtual online retreat was called to order at 1:03 p.m. by Council President Fraley-Monillas. City Clerk Scott Passey called the roll. All elected officials were present, participating virtually. Mayor Nelson provided opening remarks; when he was a Councilmember, he also participated in and was a graduate of the Mike Bailey budget school. He enjoyed it and found it helpful to understand the roles of the legislative and executive branches and the importance of collaborating. This year there is a lot of interest in starting that process earlier; unfortunately, COVID-19 put everything on hold and has changed how things are done including the meeting format where it is challenging to have more substantive, in-depth conversations although everyone is getting used to this environment. Unlike previous economic crises, this being an ongoing pandemic, there is a lot uncertainty moving forward. As the Council looks at the budget and the projections, he encouraged them to take everything with grain of a salt, particularly projections, because in one moment things can be going great and cases are going down and the next moment, COVID cases start going up. It is uncertain whether more shutdowns will be required and potentially more loss of revenue or if things will improve. Fortunately, Edmonds has been able to weather the storm better than many other cities. He looked forward to working with the Council on the budget. Council President Fraley-Monillas thanked Mayor Nelson for his opening remarks. She thanked Mr. Bailey for agreeing to provide this training at the City's request. The City has four new Councilmembers who have not participated in a city budget before; she could not think of anyone better at doing budgets than Mr. Bailey. He is well known throughout the state for his work in budgeting and the City is lucky he could accommodate this training in his schedule. She also thanked Councilmembers for attending today's retreat. The priorities that the Council identifies today will be provided to the administration and once the Mayor and his staff have time to review them and see how they fit with their priorities, another meeting will be held with administration. Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 1 Packet Pg. 4 4.1.b (Mayor Nelson left the meeting at 1:08 p.m.) 2. Mike Bailey, trainer/facilitator for the retreat, thanked Mayor Nelson and Council President Fraley- Monillas for their kind words. He recognized several Councilmembers he has worked with in the past and welcomed the new Councilmembers. He noted the conversation for some will be redundant but it is also an opportunity to relevel set thinking so everyone is on the same page. He described procedures for making this as interactive as possible which can be difficult given the Zoom environment. He described his background, explaining he has been working in city finance for nearly 40 years; he is working with MRSC two days a week as a finance consultant, working three days a week as an internal auditor and on other projects with the Northshore School District, as well as doing other outside consulting. Mr. Bailey said he has facilitated many conversation like this over the years including 3-4 times with the City of Edmonds. Most recently he worked for the City of Redmond as the finance and IT director for 10 years, and had essentially the same job at Renton, Lynnwood, Everett, Wenatchee and Metro Park District in Tacoma. He has also worked with the Association of Washington Cities (AWC), Washington Finance Officers and National Government Finance Officers on a variety of things including a great deal of training. With regard to the approach for today, Mr. Bailey suggested beginning the conversation with some context, explanation of roles and process and providing an opportunity for Councilmembers to identify priorities for the upcoming budget. 3. REVIEW OF THE BUDGET PROCESS, ROLES AND RESPONSIBILITIES, AND "BEST PRACTICES" THAT RESULT IN THE BEST OUTCOMES Mr. Bailey reviewed: • Agenda o Effective fiscal planning: roles and responsibilities ■ Some terminology ■ Fund accounting ■ Requirements for municipal budgets ■ Key elements of budget best practices (aka: budget policies ■ Getting the most from your budget process o Introduction to goal setting for upcoming budget • A Budget Construct Finance Role (which resources) ° Operations Role (how, when & with what/who) W Policy Role o (what, how much & ground rules U *Government Finance Officers Association's (GFOA) Budget Peer Review Program Framework Roles of the Budget Makers o Policy makers (council) — make policy! ■ Provide policy guidance at the beginning ■ Confirms budget meets direction by adoption ■ Monitors for conformity and results o CEO/CAO (Mayors, city managers) — ■ Propose policy at the beginning Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 2 Packet Pg. 5 4.1.b ■ Develops organization strategy to implement policy o Departments ■ Develop operational strategy ■ Provide service (departments can be passionate about this!) ■ Accountable for "day to day" o Public —"stakeholders" ■ Observes results and "counsels" policy makers "Reporting Pyramid" Residents, business, mmunity \(edia Investors / outreach efforts) Council/ Po ' y/Accountability Commission (brie n s, reports, questions) Mayor / Manager Orgam ational Management Chief Executive Officer briefin reports, high level data Department Directors Functiona anagement (reports, mi level data) Managers / Supervi rs Program Man ement line item level ta, transactions Governmental Accounting Terminology o Appropriation — Legal authorization granted by council to make expenditures o Reserved Fund Balance — balance not available for appropriation because it is legally restricted o Unreserved Fund Balance — balance available for appropriation, may also be known as "ending" fund balance o Inter -Fund Transfer — Flow of assets (such as cash) without equivalent flow in return and without requirement to repay o Inter -Fund Loan — Loan mechanism authorized between funds if legislative authority adopts, provides for concise repayment plan o Budget Ordinance — The legal document that adopts the budget and sets the appropriation construct and limits What is "Fund Accounting"? o Government accounting systems are organized and operated on a fund basis o Used to segregate resources related to specific activities o Often used to segregate restricted resources o Defined as a fiscal and accounting entity with a self -balancing set of accounts Basic Fund Types General Governmental General Special Revenue Hotel/Motel Tax City Street (Gas Tax) Impact Fees Debt Service General Obligation Capital Projects Arterial Street (gas tax) Construction in progress Proprietary Fiduciary Enterprise Trust Water Agency Sewer Pension Storm Permanent Electric Golf Internal Service Data Processing Equipment Rental Print shop Unemployment Compensation Governmental Fund Types o General Fund (aka: Current Expense) ■ Chief operating fund of state/local government Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 3 Packet Pg. 6 4.1.b ■ Used to account for all financial resources except those required to be accounted for in another fund (everything not in other funds) ■ Can include sub funds (Contingency or Reserve Fund) o Special Revenue Funds ■ Account for proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes ■ Edmonds Examples: Hotel/Motel tax, Street (Street Construction) Funds o Capital Projects ■ Account for financial resources to be used for acquisition or construction of major capital facilities ■ Does not include capital facilities financed by proprietary funds/trust funds ■ Edmonds has a common capital project fund o Debt Service ■ Account for accumulation of resources for, and payment of, general long term principal and interest ■ Edmonds has debt service funds for its GO & LID bonds • Primary Resources of Governmental Funds o Revenue Types: ■ Taxes - Property Tax - Retail Sales Tax - Business & Operations and utility taxes, gambling, leasehold, motor eh fuel tax, etc ■ Charges for services ■ Licenses/permits ■ Intergovernmental state shared revenues and grants ■ Rental fees ■ Assessments • Proprietary Funds o Enterprise Funds ■ Operated/financed similar to private business, where intent of governing body is cost recovery ■ Account for operations financed through user charges ■ In Edmonds these are: Water, Sewer, Storm Water o Internal Service Funds ■ Finance goods/services provided by one department/agency to other government departments ■ Used to allocate cost of providing services to other funds ■ hi Edmonds: Fleet and Technology Funds • Primary Resources for Proprietary Funds o Revenue Types: ■ Charges for services ■ Connection fees ■ Sale of merchandise ■ Inter departmental costs ■ Rental fees ■ Assessments ■ Grants/loans/bonds • Fiduciary Funds o Trust & Agency Funds ■ Assets held by governmental entity in trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 4 Packet Pg. 7 4.1.b - Expendable trust funds - Non -expendable trust funds - Pension and Investment trust funds - Agency funds - In Edmonds this is the Fire Pension Fund Council President Fraley-Monillas commented she spent 33 years working in government. What is referred to in state government and she has seen in local government is what she calls slush funding. For example $100 is put toward a department and the use of the funds are defined, but when it is not spent, $20 of the unspent amount is put toward something else such as funding a project. It was her understanding from the presentation that whether that is allowed depends on how the ordinance is written. Mr. Bailey responded it is allowed to the extent it does not contradict what's in the ordinance. For example, when he worked for a neighboring city, there was a Councilmember who wrote numerous budget provisos. A budget proviso states things like I'm appropriating a $1000 but none of the savings from personnel costs can be used for any other purpose, it must be retained as savings and recaptured at the end of the budget year. Provisos are a way to provide additional restrictions on the ability of the administration to use those resources consistent with the ordinance. Mr. Bailey explained the most common example is savings from unfilled positions and staff may recommend those savings be used for some other need. That is permissible as it will not result in overspending the budget as characterized in the ordinance. For example using the savings from a staff vacancy to purchase a new computer for the new staff member would not be inconsistent with the ordinance and would be legally permissible. The way to prevent that would be via provisos. MRSC often receives questions about whether the mayor can move funds from one budget account to another budget account; the answer is yes, as long as it is not inconsistent with the ordinance and as long as it is not inconsistent with a budget proviso. Council President Fraley-Monillas said particular departments have underspent every year and then toward the end of the year, they want to transfer the money to pay for something else. This has been done on a continuous basis, not just one year. It was her understanding from Mr. Bailey's explanation that unless there was something indicating they could not shift those funds, it could be done as long as it fell within the ordinance. Mr. Bailey said the short answer was yes with two caveats. This issue arises often; MSRC is doing a series of webinars on budgeting. The second one on Tuesday addresses revenue forecasting and he was hopeful Mr. Turley planned to attend. The third is on pulling it all together and gets into the issues Council President Fraley-Monillas mentioned, the structure and approach. He advocated for a robust conversation between the administration and the Council about any significant adjustments that the administration plans to make. In Council President Fraley-Monillas' example where it has become routine that savings are re -prioritized into something else, Mr. Bailey pointed out it is a team sport and communication is essential including staying on the same page about rationale and having a conversation about it hopefully keeps everyone on the same page. At the end of the day, if the Council is concerned about that, things can be done such as budget provisos and tightening up the ordinance. Council President Fraley-Monillas said this occurs on a frequent basis, it is not just one department and it feels a little unethical and not transparent. Mr. Bailey answered it is legal, but it is important to have the conversation in order to stay on the same page and allocate resources into the things the City wants to pursue. Plans shift and change and there may be good reasons to do something different than what was discussed during the budget in October. It is still a good idea to talk about it, keep everyone comfortable and working together. He summarized it was legal but recommended it come back to Council for discussion. Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 5 Packet Pg. 8 4.1.b Stepping in for Finance Director Dave Turley or former Finance Director Scott James, Councilmember Buckshnis explained the City utilizes an amendment process to shift funds. The City's main budget has notoriously been under -budget 3%-5% every year and she has never seen a department not notify via a carryforward or a decision package when switching funds from one account to another. She was unaware what Council President Fraley-Monillas was talking about. Councilmember Buckshnis commented this year there was a movement to create a community fund using funds from various departments. She recalled a citizen requested the auditors look at that. She asked whether those transfer should go through the amendment process or was it okay to go through BARS so the auditors could see that it happened. Mr. Bailey answered the answer could be yes as a result of a policy the Council adopts regarding amendments. The Mayor has legal authority to spend money as defined by the ordinance. To the extent that the Council has adopted a policy and a practice that enables the Council to be come involved in those discussions at a lower level, that was within the Council's prerogative. Each city can determine what works best for them and document that in the form of a policy and adopt that policy so everyone knows the ground rules. Councilmember Buckshnis commented the City has adopted a fund balance and reserve balance policies and the City received a AAA rating. Councilmember Buckshnis referred to enterprise funds, and tremendous carryforwards on capital projects that balloon the budget. For example, the Dayton Street Pump Station; that project was delayed for a year for a new part or something and last year approximately $7.9 million was carried forward which inflates the budget. She asked if there was a way to manage that capital planning to discourage that such as not including money in the budget for a project unless it would be done within 1-2 years rather than extended into 3-4 years. Mr. Bailey answered that is a common problem. Redmond had a lot of capital projects that lingered well beyond the expected timeframe and funds have to be carried forward. Mr. Bailey explained the RCWs permit the Council to reduce an appropriation if there is basis for it. For example, if the Council gets word that a project will not be pursued within the fiscal year when funds are appropriated, the budget could be reduced if the Council wished. He sometimes recommends that because then the ordinance is adopted and the funds appropriated, the Council authorizes those funds to be spent. They must be spent within the context of the ordinance and therefore could be spent for something else within that fund. He clarified he was not suggesting that be done, but the Council could reduce the appropriation to recognize the project would be pushed into a future year. That would true up the budget to be more consistent with what is anticipated to occur. Councilmember Buckshnis recalled last year there was a shift from a major parks project into storm and everyone's upset that stormwater ratepayers will have to fund the project when it is not a floodplain project, but a marsh estuary project. She wanted everyone to understand more about the CIP/CFP and how that impact the budget. That shift put $16 million into storm that should have been in parks where it was in 2018. She questioned how Council could address issues like that. Mr. Bailey said like many other cities, it is not unique to Edmonds, sometimes the capital budget gets overlooked. Redmond made a change to work on the capital budget first because in the past it had been done at the end of the year and did not get the attention it deserved. Councilmember K. Johnson said she liked that, noting it has always been overlooked. Mr. Bailey said if a project is in the storm fund, then theoretically it should be paid for with storm rates. If not, it should be in another fund. He noted that was a generalization. To the extent the Council wanted to put more focus on the capital projects, it should be done first. He noted the first MSRC webinar he did was related to creating a budget calendar. Councilmember Buckshnis clarified the Council could re -appropriate and lower the amount and put the money back into the fund where it used to be. Mr. Bailey agreed the Council could always amend the Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 6 Packet Pg. 9 budget, but only the current year's budget or the upcoming budget. In other states, prior budgets can be amended, but that is not permitted in Washington state. Acting Finance Director Dave Turley referred to Council President Fraley-Monillas' concerns and asked whether an adjustment was required every time a project changed. For example, there is a street project for one mile of new sidewalks and two intersections. Partway through the year, it is discovered grant funds will not be received for one intersection, but because there is still the appropriation authority, staff wants to do two miles of sidewalk and one intersection. Staff makes the presentation to Council about the change; at that point the Council can say yes or no. The reason the budget authority can be moved is to avoid going to Council whenever a project changes and require a new ordinance. Mr. Turley commented there are funds that have ten projects and the projects change so much throughout the year that staff could be making presentations to Council every week to move funds from one project to another. That is the importance of high level policies; if there are good policies and staff understands the policies, funds can be moved in accordance with the policies that Council established. It would be a big waste of time at Council meetings if the budget ordinance were amended every time a project changed. Council President Fraley-Monillas said she would contact Mr. Turley offline about her concern. Mr. Turley said he was happy to talk to any Councilmembers offline. Mr. Bailey continued his presentation: • Key Elements of City Finance o Budgeting ■ Appropriation ordinance for immediate needs ■ Strategic planning (long term) o Reporting ■ Internal and external o Oversight (Internal Control) ■ Review ■ Monitoring ■ Policies Budgeting o Budget is economic plan that focuses entity's financial & human resources on the accomplishment of specific goals & objectives established by policymakers o Establishes annual (or biennial) expenditure levels for all departments & funds o Expenditure levels are called appropriations & represent spending limits The Council took a brief recess. 4. FINISH PROCESS REVIEW Mr. Bailey continued his presentation: • Budgeting Mission o Mission of budget process is: ■ Help decision makers make informed choices about provision of services and capital assets ■ Promote stakeholder participation in the process Source: National Advisory Council on State and Local Budgeting • Requirements o Fundamentally — Budget adopted prior to start of fiscal year ■ Steps: 1. Request for budget estimates (RCW 35.33.031) 2. Estimates filed with Clerk (RCW 35.33.031) Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 7 Packet Pg. 10 4.1.b 3. Clerk presents preliminary estimates to CAO (RCW 35.33.051) 4. CAO presents Preliminary Budget to Legislative (RCW 35.33.135) 5. CAO files "Final Budget Proposal" with Clerk (RCW 35.33.055) 6. CAO Files "Final Budget Proposal / Budget message" with Legislative (RCW 35.33.057) 7. Publication and conduct of hearings (RCW 35.33.061 & 057 & 071; also RCW 84.55.120) 8. Legislative Adopts a Budget (RCW 35.33.075) Sample Budget Calendar for Cities and Towns: 2019 Budget Calendar for Cities and Towns March - Pre -Budget Items August Council retreat Update and/or adopt financial policies Public hearings for capital facility plan updates Public forums or community outreach (ex: community priorities) Mayor/Manager communicates budget objectives to staff September Sept 10 Budget request to all department heads Sept 10-23 Department heads prepare estimates of revenues and expenditures Clerk prepares estimates for debt service and all other estimates Sept 24 Budget estimates from department heads filed with clerk Sept 25 Implicit price deflator calculated(only applies to cities of 10,000 + population) October Oct 1 Clerk provides estimates filed by department heads to Mayor/Manager showing complete financial program Mayor/Manager provides Council with estimates of revenues from all sources including estimates prepared by clerk for consideration of setting property tax levy Mid -Oct to Mid -Nov (suggested) Public hearing on revenue sources including possible increases in property tax November Nov 2 Mayor/Manager prepared preliminary budget and budget message. Files with clerk and Council. Nov 2-20 Publication notice of preliminary budget and final hearing Nov 2-29 Public hearing(s) on preliminary budget. Public hearing on revenue sources for levy setting Nov19 Copies of budget available to public Nov 30 Property tax levies set by ordinance and filed with the County December Dec 3 Final budget hearing Dec 31 Budget adoption Budget Policies o Sample topics to consider: 1. Type of budget (priority based budgets) 2. Duration (annual or biennial) 3. Use of one time resources / definition of balanced budget 4. Fund balance targets 5. Amending the budget 6. Budget calendar / approach 7. Fees / user charges Getting the Most... o Policy Elements ■ Strategic focus / alignment with policy goals ■ High level description of value delivered - Budget message Budget "highlights" section Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 8 Packet Pg. 11 4.1.b ■ Financial Policies ■ Operational Elements ■ Capital investments ■ Debt program ■ Example of Clearview, ON strategic goal budgeting old method (pre 2009) and new method (2009 — present) ■ Example of Managing for Results (Chester County) for priorities of transportation and growth and strategic goals for each Councilmember K. Johnson commented one of the problems she has found is sidewalks have not been prioritized in Edmonds and no money has been spent on sidewalks although transportation plans have been prepared with long lists of high priority projects. Mr. Bailey commented that was an example of a priority that could be identified in the next exercise. Councilmember Paine pointed out Managing for Results allows the City to provide a "scorecard" for the community with regard to results. For example if the strategic goal was to have 25% of Chester County resident workers to use alternative means of transportation to work, then progress can be shown to the community. Mr. Bailey commented that was evaluating strategic performance against strategic goals. Councilmember Paine said Seattle has used a scorecard method. She liked Managing for Results, commenting it was great for transparency. Mr. Bailey continued his presentation: o Operations ■ Translating policy guidance into action 1. Organization chart 2. Authorized employees (with comparison) 3. Department descriptions a. Or similar organizational unit information b. Goals, accomplishments, action plans, performance data o Financial Elements ■ Strategic Financial Plan 1. Sources and uses of funds (including the appropriation) a. Multiple years for comparison 2. Operating unit budgets (departments, divisions) 3. Description of revenues / basis for forecasts 4. Long range forecast (description and schedule) ■ Example FY 2018/19 Budget Summary for all Funds o Communication Elements ■ Organizational transparency (it's other people's money!) 1. Budget message (again) a. Also highlights 2. Clearly organized (include a table of contents / glossary) 3. Environmental scan (what's changed that you are reacting to?) 4. Charts, graphs • Reports — What to Look For o Budget comparison ■ How are year to date expenditures and revenue ■ estimates compared to budget appropriations? ■ Understand what the variables are o Fund balance Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 9 Packet Pg. 12 4.1.b ■ Do you have any funds with cash flow issues? o Debt analysis ■ Are you considering additional debt? ■ Are there interfund loans? ■ Do you presently reserve for future capital needs? MRSC Process summary o Pre -budget (spring/summer) ■ To do (recommended - Host a council retreat - Host a staff budget objectives discussion - Organize community priority forums - Update your capital facilities plan - Review and update financial policies ■ The down time in the budget cycle is the perfect time for getting your priorities and policies in order o Budget Estimate (summer/fall) ■ To do - Official call to budget - Revenue and expense estimates developed by a department head - Clerk compiles all estimates (including debt service estimates) and presents to Council - Host a public hearing on potential property tax increases ■ Provide staff with a budget information form to ensure clear and consistent estimates o Preliminary budget (fall/winter) ■ To do: - Filing of preliminary budget with budget message - Make preliminary budget publicly available - Host public budget hearings - Set property tax levies and file with the county ■ Use innovative and engaging outreach strategies to help your community understand the budget story o Final Budget (winter) ■ To do: - Adopt budget by ordinance - File final budget with MRSC - Make the final budget easily accessible to the public ■ Make sure the budget ordinance you adopt fits well with the budget document your leaders approved State Auditor's Office o State Auditor's Office (SAO) established by state constitution o RCW 43.09.200 states that SAO shall prescribe the accounting and reporting to be used by governmental entities o Center for Government Innovation "The Center" o Local Government Financial Reporting System (LGFRS) Resources o AWC (wacities.org) - workshops/training o MRSC (mrsc.org) - webpages & trainings ■ mrsc.org/financialpolicies ■ mrsc.org/budgeting ■ Call/email with questions o GFOA (gfoa.org/publications) ■ Publication series for elected officials Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 10 Packet Pg. 13 4.1.b ■ Best practice series o WA State Auditor's Office (sao.wa.gov) ■ The Center — performance@sao.wa.gov ■ SAO Helpdesk 5. COUNCIL PRIORITIES: "AROUND THE HORN" PARTICIPATION 1. WHAT WOULD EACH OF YOU HOPE TO EMPHASIZE AS A CITY IN THE NEXT BUDGET, AND Mr. Bailey invited each Councilmembers to share one idea for something they wanted prioritized or emphasized in the upcoming budget and something they would be willing to see deemphasized in the budget. He suggested Councilmembers briefly explain their proposal but not why it has merit. Councilmembers can ask clarifying questions but the intent is not to have a full discussion. Mr. Bailey said the Council's work is the most difficult part of budget. In fairness to those who are preparing the budget, in order to emphasize something, Councilmembers need to be willing to deemphasize something else. He compared the budget to a five -pound bag of potatoes; often there are ten pounds of potatoes to fit into the five -pound bag. The process includes picking and choosing which potatoes as well as paring down some potatoes to make them fit into the five -pound bag. While it's difficult at this point for Councilmembers to identify items they may be willing to deemphasize, it will be necessary in November/December. Councilmember Buckshnis commented the City's financials are in flux due to COVID; the City is going through all its union negotiations this year and have approved one. The Council will need to consider essential services and the impact they will have on the budget. Recent projections indicate the City has experienced only a 15% reduction due to COVID but the future is unknown. She asked whether Councilmembers have been cautioned about being in a recession and differences this year compared to previous years. Mr. Bailey suggested Councilmembers review the Budget Suggestions Book published by MSRC which helps to characterize what Councilmember Buckshnis mentioned. He commented revenues are guesses at this point and there is no sense of context now; this recession occurred at an unparalleled rate in history, some recovery occurred in May and June and now COVID numbers are trending upward which leaves a lot of unknowns. Councilmember Paine commented the rule of thumb is 75-80% of expenditures are allocated toward personnel costs; she asked if that was the case in Edmonds. Mr. Bailey answered that would be very typical. Mr. Turley said he would need to research that. The City has a lot of capital projects in the budget which can skew the numbers but often not all the capital projects are completed. Mr. Bailey said cities are in the service industry and compensation is the lion's share of the budget. As labor agreements are approved, they are built into the cost structure. Councilmember Olson asked whether core City functions such as public safety needed to be identified as priorities. Mr. Bailey said more commonly the discussion is about edits/changes. If Councilmembers are content with the level of public safety in the community and do not want it changed or further emphasized, it probably would not be mentioned. If a Councilmember wanted, for example, to further emphasize something, that would be mentioned as a priority. Mr. Bailey called on Councilmembers in seniority order, commenting Councilmembers could support something identified by a previous Councilmember. Council President Fraley-Monillas Priority: Hire a full-time social worker to create a department of its own (who they would report to would be determined) who would also supervise newly hired part-time staff. Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 11 Packet Pg. 14 4.1.b Deemphasize/Funding source: The City is losing the Police Department social worker (social worker is currently shared with Lynnwood and Lynnwood no longer plans to fund the position). Acting Chief Lawless recommended adding the Police Department's share of the part-time social worker to the full-time social worker so the cost would be an additional half-time social worker. The long term goal is to obtain grants to pay for the position. Perhaps the social worker could also do some community policing social work. She reminded that unless the City has an embedded social worker, people cannot enter the program in Everett related to homelessness. Mr. Bailey asked what would be different, what type of results would occur, as a result of Council President Fraley-Monillas' proposal. Council President Fraley-Monillas explained the City currently does not have a social worker other than Police Department's embedded social worker. Issues in the City include the mental ill living in private homes, the extremely poor and indigent who are seeking resources, and the increasing homeless population. Having someone to connect with those people would be beneficial to the City. Councilmember Buckshnis Priority: Fix the CIP/CFP to deemphasize a $16 million stormwater project and move it back into Parks as a nearshore estuary so it can be treated as a regional park. Councilmember K. Johnson Priority: Achieve more sidewalk projects within the City and base it on a priority and percentage. People often complain about their sidewalks. She has been involved in the City's transportation planning for the past 12 years; the City has studied and prioritized projects, but the City's policy only requires sidewalks on one side of the street. There is a list of short sidewalk projects to fix missing gaps as well as a list of long sidewalk projects, but the only way any sidewalks are built is associated with development or other capital projects. Councilmember Distelhorst asked Councilmember K. Johnson if she envisioned including the Complete Streets ordinance to fulfill the code and to include pedestrian and bicycle infrastructure with sidewalks. Councilmember K. Johnson answered she did not think so, the Complete Street ordinance is a separate thing. The City has done much better implementing bicycle projects through Bike2Health and Sound Transit funding, but there has been zero contribution from the City toward sidewalks projects. Council President Fraley-Monillas recalled the concrete crew that was hired was constructing sidewalks. Councilmember K. Johnson explained to Mr. Bailey that the Council decided if it was not possible to identify funding for sidewalks, the cost could be reduced by hiring a sidewalk crew to construct sidewalks. Two people were hired in Public Works, but she had not seen any evidence that any sidewalk projects were being accomplished and the crew was working on ADA ramps. She concluded she had not seen any evidence of any sidewalks even though the City has a dedicated sidewalk crew. Councilmember Olson said the sidewalk crew also paints raised sidewalks and grinds them down. Councilmember K. Johnson said that was maintenance and an outside contractor grinds those areas. Mr. Bailey observed Councilmember K. Johnson's priority was well stated — expanding the availability of sidewalks and pedestrian accessibility in the City. To that end, the Council may want to be clearer such as identifying all the gaps, identifying priority areas around schools or certain areas of the City so it would be possible to identify where progress could be made and has been made over time. Councilmember K. Johnson said the City has done an excellent job of identifying the sidewalks that need to be done in the Comprehensive Plan Transportation Plan element. Councilmember Paine asked if Councilmembers Buckshnis and K. Johnson had a suggested item to deemphasize. Councilmember Buckshnis said her deemphasis would be to take $16 million out of stormwater so utility ratepayers do not have to restore the marsh through their utility rates. Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 12 Packet Pg. 15 4.1.b When asked if she had an item to deemphasize, Councilmember K. Johnson said she has often wondered if sidewalks could be funded via Parks as sidewalks provide a recreational opportunity, but she doubted there was support for that. Councilmember Olson Emphasize: Overdue infrastructure repairs. The recent leak in City Hall is a reminder of how many things have been neglected. She wasn't surprised when she learned about the leak as that and many other things are overdue for repair. She feared the City was setting itself up for more expense long term if thing that need to be addressed are neglected. It is prudent to make repairs so they do not become more expensive. Deemphasize: To the extent the City may own capital assets that there may be an option to not own. For example, if citizens were open to the idea, having a commercial enterprise take over the Edmonds Museum and maintain its historic value. Old buildings cost a lot to maintain; the buildings the City owns need to be maintained, and privatization is an opportunity to offset those repairs. Councilmember Paine Emphasize: Hire a code writer for a three-year temporary position to help support rewriting a lot of the code that has been languishing and needs to be better aligned. Councilmember K. Johnson pointed out that was in the 2020 budget. Councilmember Paine said hiring a half-time person has been put on hold and it is difficult to find a half-time person. Good progress could be made by hiring a long-term temp for three - years. She summarized there has been frustration for many years with the land use code, the building code and other codes. Councilmember Distelhorst asked if zoning would be part of that as recommendations are expected from the Housing Commission at the end of 2020. Councilmember Paine answered it would depend on the list of priorities; she will leave that to the Planning Director. There has been a long-standing community need for a dedicated person to rewrite the code. Councilmember Buckshnis said a half-time person was included in the 2020 budget because that was all the City could afford. She expressed support for Councilmember Paine's emphasize and asked why she chose three years versus two or four or was three years suggested by Development Services Director Hope. Councilmember Paine answered three years was her suggestion; once a person started rewriting the code, it likely will take longer. The City tried bringing in a consultant and a half-time person but neither have worked. Even before COVID, Ms. Hope said it was very difficult to find a qualified person for a part-time position. Mr. Bailey pointed out the "how" was for someone else to figure out. What Councilmember Paine was seeking was to unravel the knots in the various codes and that is the policy request/priority she is identifying. Councilmember Paine Deemphasize: Some professional services which can be very expensive and reduce overtime costs particularly in law enforcement and justify the need for overtime. Council President Fraley-Monillas asked if the way Councilmember Paine proposed paying for the temporary person to rewrite the code was by reducing law enforcement overtime. Councilmember Paine answered her proposal was to reduce professional services and specialty services. Council President Fraley- Monillas asked if her proposal was professional services out of Police or the General Fund. Councilmember Paine hoped it was the General Fund but was likely Public Works. She did not have those details. Council President Fraley-Monillas asked about her proposal related to law enforcement. Councilmember Paine answered she was looking for opportunities to reduce overtime and to justify the need for the overtime Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 13 Packet Pg. 16 4.1.b budget. It did not particularly need to be law enforcement, but that was likely the largest bucket. Mr. Bailey answered unless Edmonds was unique, that was likely the case and worth looking at. Councilmember Olson suggested professional service be kept in mind during agenda planning; scheduling agenda items that include consultants at the beginning of the agenda. Councilmember Paine agreed. Councilmember L. Johnson Priority: 1) Expanding the human services department and adding a full time social worker at a minimum. The need already existed but is increasing due to the impacts of COVID-19 and the economic downturn. Keeping people in their homes, assisting those who are currently unhoused, and assisting those who are experiencing domestic violence. 2) She agreed with Councilmember Paine's emphasis on the code rewrite. Funding source: Half-time Police Department social worker and funds previously allocated for a School Resource Officer. Councilmember Distelhorst Priority: Increase community wellness efforts, reference City Council budget priority item 3 for 2020, human services department, and adding mental health, addiction and domestic violence. Funding source: Use current police department social worker funds. Council President Fraley-Monillas Emphasize: Reallocate staff to community policing along Highway 99 to facilitate a continuous police presence so they get to know businesses, residents, what's occurring, etc. Deemphasize: Cost neutral, already have two patrol cars dedicated to Highway 99. Councilmember Buckshnis Priority: Code rewrite. Councilmember K. Johnson Priority: Continue work on the 4'h Avenue Arts Corridor Councilmember Olson Priority: Put time, effort and possibly money into the parking issue in the downtown core where parking has been a challenge. It could include one-way streets with angled parking, a boutique garage, etc. There are expensive and less expensive ways to approach it. The prior Council supported Civic Park and although she was excited about the project, it may be a COVID issue and there may need to be discussions regarding whether the City can afford to develop Civic Park in the next two years. There are limitations on how the land can be used due to funding sources for its purchase; consider whether it could be used for unpaved parking on a temporary basis until the City can afford to develop it. Councilmember K. Johnson liked the suggestion for a parking study and pointed out the parking study that was not done was supposed to look at parking requirements for Civic Park and the Waterfront Center. Mr. Bailey reminded the Council was identifying the "what," not the "how." Councilmember Buckshnis asked whether a parking study would be valid during COVID and the Main Street closure, recalling parking counts done during COVID was a criticism of the parking counts on 9'h Avenue related to the Sound Transit bicycle improvements. Councilmember Olson said most of the cities in Europe who have had success with closed pedestrian areas have some sort of parking establishment such as a garage that supports the area. She was looking at this from a business support standpoint, ensuring Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 14 Packet Pg. 17 4.1.b whatever approach is selected makes people want to visit downtown as those businesses contribute to the City's budget. Councilmember Paine Priority: Consider opportunities to purchase open space or parcels to help supplement parks particularly near Lake Ballinger. As the City become denser, will need more open space for recreational activities. Councilmember K. Johnson expressed support for this priority, commenting in order to meet the demands for the Waterfront Center, open space acquisition was eliminated from the 2020 budget and possibly 2021. Councilmember Paine said she was never a big fan of the Waterfront Center. Councilmember Buckshnis asked if that would include purchasing the Unocal property if that was possible, noting it could be grant funded. Councilmember Paine answered by any means necessary. She was also interested in purchasing property west of Highway 99 as there is an abundance of need Councilmember L. Johnson Priority: Code update/rewrite of City Code, UFMP, Climate Action Plan, etc. and making that information more accessible to the community. Once the rewrites are complete, it will be beneficial to City Council as well as to community members as it is often difficulty to find things in the City's codes. Councilmember Paine suggested having public engagement in advance of the code rewrite. Councilmember Distelhorst Priority: Communications and public engagement. This is the first year the City has a part-time communications person. He works in communications and the need for communication and outreach compared to what is budgeted are not even close to what the City, Councilmembers and the community deserves. Deemphasize: Purchase of $55,000 trolley in 2021. Councilmember K. Johnson commented the purchase of the trolley is a priority for the Lodging Tax Advisory Committee (LTAC). One of the reasons is the cost has decreased by approximately one-third. Councilmember Distelhorst pointed out the cost of operating the trolley will still be very high and, due to reduced capacity on public infrastructure which he knows about from his day job, even a large trolley may only carry three people to meet current public health guidelines. Councilmember Buckshnis Councilmember Buckshnis said she did not want to overwhelm the new Mayor or identify so many priorities that nothing gets done. Mr. Bailey agreed the Mayor will not be able to do everything in his budget and while he will appreciate the Council's thoughts, to the extent that the list gets longer, it gets easier to say the list is too long and we can't deal with it. Councilmember K. Johnson Priority: Update the strategic plan to get projects and priorities in order and coordinate that with public. Mr. Bailey suggested combining this with Councilmember Buckshnis' priority regarding clarity around capital investments. Councilmember Olson Priority: Get historic protective status for the Edmonds Theater. When she asked people what is most special and important to them about downtown, the theater was mentioned most often. Without protection, similar buildings in other communities that are historical and everyone cares about have been redeveloped and a community uproar ensues. There are no grounds for an uproar if the public doesn't protect it. She was Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 15 Packet Pg. 18 4.1.b interested in determining the cost for the theater to commit to remaining the Edmonds Theater forever and obtaining protective status. She clarified she was not talking about the Edmonds historical registry which can be appealed, but real protective status that is a forever commitment. Councilmember Buckshnis asked if she meant the national registry, commenting she has a home that is on the national registry. Councilmember Olson answered national or state. Councilmember K. Johnson said there was a budget item in 2020 to hire two interns to pursue all historic building within the CBD. Due to COVID, that will likely be delayed to 2021. She agreed with Councilmember Olson's priority, commenting there are no protections with the local historic registry so pursuing state or national is a good idea. Councilmember Olson suggested it may be possible to accomplish that via a contract term on the property. City Attorney Tom Brubaker said King County has purchased development rights for agricultural land in south King County to ensure the land remains agricultural; a similar approach may be possible for the theater. Councilmember Paine Priority: Allocate funds in the budget for purchasing employees safety supplies such as masks, PPE, etc. Councilmember L. Johnson Priority: Infrastructure preservation and expansion to increase connectivity and safety citywide which includes trails, sidewalks, bike lanes, crosswalks, and 4-way stops near school routes. Mr. Bailey asked if she was referring to major maintenance or expansion of the infrastructure. Councilmember L. Johnson answered both, maintenance of sidewalks, expansion of sidewalks where possible and expanding trails and their connectivity, bike lanes and paying particular attention to routes around schools. Councilmember Buckshnis asked if that would be in addition to Complete Streets which focuses on schools. Councilmember L. Johnson said possibly an enhancement. Councilmember Distelhorst Priority: Multimodal City infrastructure. Piggybacking on Councilmember K. Johnson's comments about sidewalks and Councilmember L. Johnson's comments above infrastructure, develop the network throughout the City and ensuring all neighborhoods have connectivity and easy access for recreation, errands, commuting, etc. Council President Fraley-Monillas pointed out there are many areas east of Highway 99 as well as west of Highway 99 that have no sidewalks other than on the main streets; likely hundreds of miles of sidewalks would be needed. Councilmember Distelhorst pointed out there are bike lanes on the east side of Highway 99. Council President Fraley-Monillas agreed, commenting those bike lanes work well. Councilmember Buckshnis said Seaview does not have bike lanes or sidewalks. Councilmember Olson recalled when she was doorbelling, some citizens in Seaview said they did not want them. When communicating with the public, it is important determine whether citizens value what the City is offering. Council President Fraley-Monillas said sometimes when citizens don't want something, it is to protect their own property. The Council represents 42,000 people and needs to look at what is best for all and not what's best for some. Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 16 Packet Pg. 19 4.1.b Councilmember Buckshnis said she needed to leave by 4:30 p.m. and was concerned the Council had not discussed narrowing priorities. Mr. Bailey did not anticipate the Council would spend much time on that as it is not practical via Zoom. Unless there was something new that had not been mentioned, he suggested wrapping up the list. Councilmember L. Johnson commented the Council was prioritizing the list via piggybacking on other Councilmember's priorities. Councilmember Olson Priority: Rebuilding reserves. The City is living the value of having reserves. An earthquake was envisioned as the disaster when reserves were planned; that could still happen. Ensure there are funds in the budget for a continuing or new rainy day. She agreed mental health resources was a need in the community. Council President Fraley-Monillas cautioned only a few of the Council priorities will be included in the budget, usually no cost or low cost items. She recalled last year the Council identified $4-5 million in projects and most of them were not included in the budget. She appreciated the commonality among Councilmembers' priorities such as the code update, pointing out that has an associated cost. Continuing to identify priorities is fine, but many of them cannot be afforded in the coming year. She did not want Councilmembers to think all these items would be included in the budget, because that was likely impossible. Councilmember Buckshnis pointed out there the savings from several unfilled positions could be considered in the Mayor's budget. To Councilmember Olson, Councilmember Buckshnis said the General Fund policy requires reserves to be reestablished. She did not believe any of the reserve funds had been accessed yet. Councilmember K. Johnson Priority: Watershed planning for Perrinville Creek and Shell Creek. The City has done a good job planning for the marsh but these are important tributaries. This is not a high cost item, but it is a high priority for her and she wanted it on the list to ensure existing staff were working toward it. Students Saving Salmon are collecting data for Perrinville Creek. Councilmember Paine said the Mayor's Conservation Advisory Committee identified a system, Salmon Save, that looks at policies and procedures in the watershed including Perrinville and Shell Creek. Councilmember Olson There is only one hotel in Edmonds and they pay lodging tax. The need for more hotel space is being addressed by short term rentals such as Airbnb, VRBO, etc. and they should also pay lodging tax if they provide the same service, Councilmember Buckshnis recalled the Planning Board discussed that a couple years ago and there were few short term rentals at that time. She agreed they should be paying lodging tax. Council President Fraley-Monillas pointed out there are 6-7 hotels on Highway 99 that also pay lodging tax. Airbnb, VRBO, etc. may already be paying lodging tax. Mr. Bailey said the tax law does not differentiate between hotel or motel, it is all considered transient lodging. The Council may wish to discuss that. 2. WHAT WOULD EACH OF YOU BE WILLING TO DE-EMPHASIZE IN THE NEXT BUDGET See above. 6. DISCUSSION OF PRIORITIES AND NARROWING TO FOUR MAJOR PRIORITIES Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 17 Packet Pg. 20 4.1.b Mr. Bailey agreed some winnowing of priorities has occurred as Councilmembers voiced support for others' priorities. He noted it can be difficult for new Councilmembers who have assured their constituents they will make a difference and when they get on Council, find they are one of seven. Working through that can require patience and persistence. As the Council moves forward as a team, forming the collective voice of the Council and working with other teammates in the administration, it is important to get as many of the potatoes and the right potatoes into the five -pound sack. Council President Fraley-Monillas suggested Councilmembers email any additional priorities to Mr. Bailey and copy Council Legislative Assistant Maureen Judge. Mr. Bailey noted now is the time to identify priorities instead of in November. To the extent possible, Councilmembers should not disrupt that process as there are a lot of moving parts, but to the extent that a Councilmember needs to they should; it is a delicate balance. Council President Fraley-Monillas said she will forward this information to the Mayor. 7. FINAL REMARKS OF THE DAY Councilmember Buckshnis thanked for his help Mr. Bailey, commenting they go way back; the City's financials are patterned after Redmond. She encouraged Councilmembers to visit Redmond's website; they have great financial transparency. She hoped someday the City could move to budgeting by priorities, but not today. Councilmembers thanked Mr. Bailey. He invited Councilmembers to contact him via MSRC and to utilize MRSC's workshops and resources. The retreat was adjourned at 4:45 p.m. Edmonds City Council Budget Retreat Approved Minutes July 29, 2020 Page 18 Packet Pg. 21