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HomeMy WebLinkAbout12-20-1999spSPECIAL CITY COUNCIL MEETING LONG-TERM FINANCIAL PLANNING DECEMBER 20, 1999 Auburn City Hall Council Work Area Minutes I. Introduction Mayor Booth called the special meeting of the Auburn City Council to order at 4:00 PM in the Council Work Area of Auburn City Hall. Mayor Booth and the following members of the City Council were present: Pete Lewis, Jeanne Barber, Gene Cerino, Fred Poe, Trish Borden, Sue Singer, and Rich Wagner. Staff members present included: Finance Director Diane L. Supler, Assistant Finance Director Shelley Coleman, Financial Operations Manager Sherri Crawford, Public Works Director Christine Engler, Parks and Recreation Director Dick Deal, Personnel Director Brenda Heineman, Assistant Fire Chief Russ Vandver, Planning and Community Development Director Paul Krauss, City Attorney Michael J. Reynolds, Assistant City Attorney Judith Ausman, Assistant Police Chief Marion Dukes, Municipal Court Judge Pat Burns, and City Clerk Danielle Daskam. Mayor Booth explained that this evening the Council will review materials prepared by staff on revenue forecasts and projections for the next three years and discuss the potential impacts of Initiative 695 (1695). Finance Director Supler explained that the passage of Initiative 695 represents a $700 million motor vehicle excise tax loss statewide. She quoted from a survey which revealed that a majority of the voters believe government should cut back on spending to meet the revenue shortfall rather than using existing reserves. The second part of the initiative requires voter approval of all new taxes and fees or increases in taxes or fees. Many questions remain regarding the full impact of 1695, and Ms. Supler noted that several parties have already filed suit against 1695. Special Meeting of the City Council December Z0, 1999 Page 2 Finance Director Supler reported on workshop she and other Finance staff attended recently regarding Initiative 695 issues. ^ recommendation from the workshop is to ensure that the Council listens to the voters. Mayor Booth recommended utilizing a citizens survey or questionnaire in order to receive feedback from the public on capital projects and service levels. Councilmember Poe requested that the Councilmembers have an opportunity to participate in formulating the survey questions. Finance Director Supler also discussed the effect of 1695 on future bond issues. Because the City cannot give assurances in the bond market, the City would pay more in bond insurance and bond issuance costs. It is uncertain how the bond market will respond to Washington State bond sales. Finance Director Supler explained that the following forecasts were prepared through 2003 assuming on estimated population growth in 2000 of 11.5% and approximately 4% for each year thereafter. She noted the first year's population growth includes the Lea Hill South annexation. Other considerations in estimating population growth included approximately 500 new housing units per year in Lakeland and approximately 300 other miscellaneous developments occurring in the city each year. II. Property Taxes Finance Director Supler explained the effect of 1695 on the property tax levy. Based upon an interpretation of 1695 by the State Department of Revenue, the City cannot levy above the 2000 levy amount in future years unless the increase is approved by the voters. Even though assessed values may increase, the levy amount must remain the same. The only increase in the levy amount that can be realized by the City is through annexation and new construction. Ms. Supler distributed a chart reflecting the 2001 through 2003 property tax estimates and calculations for levy rates. III. General Fund Finance Director Supler presented a handout on General Fund forecasts for 2001 through 2003. She explained that the focus of this evening's presentation would be on the General Fund since the General Fund will sustain the greatest impact from Initiative 695. The following assumptions were made in forecasting the 2001 through 2003 General Fund revenues: population increase of 11% in 2001, 4.4% in 2002 and 4.6% in 2003; ongoing grants; 1.25% increase in sales tax; and annual new construction of $80 million. Special Meeting of the City Council December Z0, 1999 Page 3 Expenditures forecasts were developed assuming a 2.8% increase in general expenditures and salary increases of 3% and regular step increases. Jail costs are estimated to increase in 2000 to $720,000 and future years' costs are estimated to increase at the rate of 6% per year. Ms. Supler identified the General Fund Non-Departmental expenditures to include salary/benefit retirements, pension benefits, long term health care insurance for LEOFF I, library debt service, Valley Comm debt service, Arterial Street commitments, ESAJfederal mandates, economic development, and fire equipment reserve. Based on the revenue and expenditure assumptions without using reserves, Ms. Supler revealed budget shortfalls in all years. Finance Director Supler presented a chart for the estimated General Fund fund balances through 2003. The charts reveal how the fund balances start using up the City's reserves. Finance Director Supler advised of other funding issues to consider for future planning: whether basic life support funding will be continued after 2000, the possibility that state shared liquor profits may be redirected to help fund the Municipal Research and Services Center; no increase in staffing in relation to annexations; and the need for greater use of technology. Assistant Finance Director Shelley Coleman reviewed the projected criminal justice funding. In prior years, the City received approximately $12,500 under Program 1 and approximately $18,500 from Programs 2 and 3. The passage of 1695 and the repeal of the MVET tax reduce available criminal justice funding by approximately thirty-three percent. The remainder of the funding comes from state general funds. IV. Capital Projects Fund Finance Director Supler presented the Council with the definitions of REET (real estate excise tax) 1 and REET 2. REET 1 is more flexible and can be used for library, administrative and judicial facilities, fire protection facilities, law enforcement facilities, as well as street, read, highway, sidewalk construction and repair, street lighting systems, traffic signals, bridges, domestic water systems, and storm and sanitary sewer systems. REET 2 is more for construction and repair of streets, roads, highways, sidewalks, street lighting, traffic signals, bridges, water systems, storm and sanitary sewer systems, and improvement of parks. Land acquisition for street, water and sewer projects is permitted under REET 2 but land acquisition for parks is not. REET 1 estimated beginning balance is $2.3 million with approximately $600,000 in 2000 revenues. A total of $960,000 will be expended in 2000; $860,000 for Special Meeting of the City Council December 20, 1999 Page 4 streets and $100,000 for parks. The ending fund balance is estimated at $2 million. Ms. Supler estimated that at the end of the year 2003, the fund balance for REET 1 would be $4.5 million. The City began collecting REET 2 taxes in 1996. The estimated beginning balance is $1.6 million. The estimated ending fund balance for the year 2003 is $3.5 million. Also contained in the capital projects fund (328 Fund) is the Boeing sales tax money, which has been collected over a five-year period. The City will receive the last Boeing sales tax distribution in the year 2000. The ending balance at 1999 is $1.7 million and combined with the downtown revitalization/economic development funds will bring the balance to approximately $2.3 million. The 328 Fund also includes accumulation of funding for acquisition of fire equipment and technology upgrades. V. Cumulative Reserve Fund Finance Director Supler explained the origin of the City's Cumulative Reserve Fund. The fund originated in 1989 with previous Councils setting up a contingency fund, which in 1994 was combined with other capital equipment reserves under the Cumulative Reserve Fund. However, the ordinance creating the Cumulative Reserve Fund did not specify the proposed use for the funds. The City Attorney has recommended the Council amend the ordinance establishing the Cumulative Reserve Fund to specify its use. VI. Capital Projects Finance Director Supler presented the following list of capital projects for Council's long-term financial planning discussion: Valley Comm (the City's commitment is $2.5 - $3 million), senior center, public safety building, fire station, 3rd Street, transit station parking garage, jail, golf course, and cemetery niche building. Councilmember Poe expressed opposition to the City contributing funds to the transit station parking garage project. Councilmember Lewis spoke in favor of improving the golf course clubhouse. Councilmember Poe spoke in favor of a private/public partnership to make the clubhouse improvements. Parks and Recreation Director Deal stated that a high priority for the golf course is to improve the parking. Councilmember Borden suggested holding another special Council meeting to discuss the potential for a new public safety building in more detail. Special Meeting of the City Council December 20, 1999 Page 5 VII. Adjournment There being no further business to come before the Council this evening, the meeting adjourned at 5:58 PM. Approved on the ~ -~ day of Charles A. Booth, Mayor 'Dan"telle Daskam, City Clerk