CITY OF PEORIA, ARIZONA PUBLIC SAFETY ADMINISTRATION BUILDING, PEORIA ROOM April 21, 2006 A Budget Study Session Meeting of the City Council of the City of Peoria, Arizona was convened at the Public Safety Administration Building (PSAB), Peoria Room, 8351 W. Cinnabar Avenue, in open and public session at 1:03 p.m. Members Present: Mayor John Keegan; Vice Mayor Barrett; Councilmembers Cathy Carlat, Patricia Dennis, Joan Evans, Vicki Hunt, and Carlo Leone. Members Absent: None Other Municipal Officials Present: Terrence Ellis, City Manager; Susan Thorpe, Deputy City Manager; John Wenderski, Deputy City Manager; Carl Swenson, Deputy City Manager; Mary Jo Kief, City Clerk; Constance Copeland, Assistant City Clerk; Jeff Tyne, Stephen Bontrager, J.P. de la Montaigne, Brent Mattingly, Sandy Teetsel, Jeff Tyne, Glen Van Nimwegen, Neil Mann, and David Moody. Audience: Approximately 8 individuals were present. Fiscal Year 2007 Budget Workshop STATE-SHARED REVENUE LEGISLATION Terry Ellis, City Manager, presented an overview of the current Legislative Session and legislation that may impact the City’s budget. He explained that the Legislature is discussing a state tax cut which will affect cities’ revenue. Mr. Ellis noted that the proposed City Budget is based on State-Shared revenue. If the Legislative action seriously affects our revenue, we may have to re-tool the budget. Mr. Ellis advised that Council proceed with the process and Staff will continue to update Council throughout the Legislative session. Discussion ensued regarding whether the property tax reduction would be a one-time reduction or an on-going reduction. Mr. Ellis responded that Staff would monitor the process and the City will react accordingly. NON-DEPARTMENT BUDGET Jeff Tyne, Budget Director, reported that the base budget for the Non- Departmental – General Fund is $10.9 million with $100,000 supplemental request. The FY 2007 Non-Departmental – General Fund total budget request is $11 million which is a 17.35 percent increase from Fiscal Year 2006. Mr. Tyne reported that $10 million was for internal service funds; this includes funding for information technology, program reviews, workshops, memberships, and Council District Funds. Discussion ensued regarding the City Wellness Program funding. Mr. Tyne explained that the program is funded by a transfer from the Human Resource Department funds. NOT-FOR-PROFIT FUNDING Vice Mayor Barrett presented an overview of the process for selection of Not-For-Profits to receive City funding. Vice Mayor Barrett outlined the 17 agencies and 18 programs that will be funded by Community Development Block Grant (CDBG) money which included: Arizona Action for Foster Children – Forster Children’s Welfare Arizona Bridge to Independent Living – Home Accessibility Boys & Girls Clubs – HVAC System Central Arizona Shelter Services – Equipment City Area Interfaith Services – Adult Day Health Services City of Peoria – Community Development Department (AQUA – Water Utility Assistance, Fair Housing Program, PAR (Minor Emergency Home Repairs) City of Peoria – Engineering – Handicap Ramps Civitan Foundation – Accessible Playground Community Services of Arizona (CSA) – Emergency Home Repair, First Time Homebuyer Habitat for Humanity – Land Acquisition Maricopa County Human Services - Transportation St. Mary’s/Westside Food Bank Alliance – Emergency Food Box Program West Valley Child Crisis Center - Counseling Discussion ensued regarding the reduction from the Federal Government of CDBG funding. Councilmember Dennis asked the public to contact their Congressman to lobby for increased funding of CDBG. Vice Mayor Barrett outlined the 18 agencies representing 20 programs to receive General Fund funding which included: Alzheimers Association – Support Services Arizona Action for Foster Children – Family Recruitment Arizona Rising Suns Track Club, Inc. – Children’s Physical Activities Big Brothers Big Sisters of Central Arizona – Community Based Mentoring Boy Scouts of America/Grand Canyon Council - Cub, Boy & Venture Scouting Boys & Girls Clubs – Summer Camp/Teen Center Central Arizona Shelter Services – Emergency Shelter Services City Area Interfaith Services- Information & Referral-Intake, Peoria Volunteer Home Services, Community Intervention Services Community Legal Services – Removing Barriers to Justice Foundation for Senior Living – Nutrition Services Grace Serenity Living, Inc. - Group Home Services Maricopa County Sports Commission - Support Peoria Arizona Historical Society – Museum Exhibits & Upgrades Prehab of Arizona – Victim Outreach Solecito Services, Inc. – Home Food Delivery St. Mary’s/Westside Food Bank Alliance – Home Food Delivery Theater Works – Open House Valley of the Sun YMCA – First Offender OPERATIONS/MAITENANCE OF COMMUNITY PARKS Mr. Tyne explained that Staff had prepared a follow-up report on the operations and maintenance of Community Parks. Phase II of the Rio Vista Park is projected to be completed in FY2007. Total costs for the Rio Vista Park is estimated to be $38 million. Community Park Two is expected to be completed in 2012 using general obligation bonds at a cost of $18 million. Community Park Three is to be located in the vicinity of Bureau of Land Management land and is estimated to cost $8.7 million; the majority will be funded by development impact fees. If a pool is incorporated in Community Park Three, an additional $3.5 million may be needed. In response to questions from Council, Mr. Tyne explained that citywide parks are not defined by geographic zones, but neighborhood parks are separated into zones. Discussion ensued regarding recovering direct costs and costs for park rangers, park maintenance and operations. Mr. Tyne reported that 46 percent of the operating costs for Rio Vista will be recovered. He noted that Community Park Two is not scheduled to include a recreation center; therefore, only 17 percent of costs are estimated to be recovered. J.P. de la Montaigne, Director of Community Development, discussed the increased costs associated with parks that include recreation centers. Councilmember Hunt asked why the park in the southern part of the City would have to wait until FY2010-2012 to be built when it did not include an expensive recreation center. John Wenderski, Deputy City Manager, explained that Council was presented with a balanced budget that includes on-going costs for the next five years associated with projects approved in this year’s budget and prior year budgets. Other capital projects approved in past budgets have consumed all additional revenues for on-going operations. Mr. Wenderski stated that if Council would like to add this park to the budget for this year, the City would have to find other capital projects to displace. He noted that Council may decide to reorder priorities next year. Mr. Ellis advised that if Council wished to change the five year forecast to move this park project forward, Council must reserve the funding now. Mr. Wenderski outlined a number of programs that compete for the Parks funding including: $3 million in operating costs for personnel in the Police Department, a Ladder Company in the Fire Department; operational costs for the new Fire Station; engineering costs, support for Council and the City Manager’s Office; increased fuel costs to keep the fleet open; and the costs to replace City equipment. SECONDARY PROPERTY TAX Mr. Wenderski summarized the secondary property tax rate and explained that by State Constitution the secondary property tax rate can only be used to pay the principle and interest of General Obligation Bonds. Staff has recommended reducing the proposed property tax rate by ten cents because the Constitution limits debt to six percent of assessed property value. The State Constitution also limits the amount that cities can spend on programs such as drainage and park programs to twenty percent of assessed property values. Mr. Wenderski explained that the increased costs for materials have impacted costs of capital projects including park construction and the water and wastewater treatment plants. Mr. Wenderski reviewed the projected assessed property valuations and reported that tax revenue may increase 30 to 50 percent because of increased property valuations. Revenue may outstrip the City’s ability to issue debt. Discussion ensued regarding why the City could not use excess tax revenue to fund additional park construction. Mr. Wenderski explained that the voters approved specific limits on specific categories of projects. Escalating costs have restricted the number of projects that could be completed within those limits. The debt service amount should match the outstanding debt and debt service payments. Money in debt service reserve accounts must not be held longer than two years. Mr. Wenderski explained that the State Constitution allows cities to adjust the tax rate to meet the General Obligation Bond Service. The impact to a median home value ($280,701) would be primary tax of $81.40 and secondary tax of $364.91 for a total of $446.31. Discussion ensued regarding comparing Peoria to other cities for debt service. Mr. Wenderski reported that this tax rate reduction would move Peoria to the middle of the range of other comparable cities. In response to questions from Council, Mr. Wenderski reiterated that the primary tax rate has a two percent per year escalator. Secondary tax rates are unfettered by any State restrictions so municipalities can meet the needs of the community to pay the debt service on bonds. Discussion ensued regarding the limits on the primary tax rate and the difference between assessed property values and full cash value of property. Mr. Tyne explained that residential property is assessed at ten percent of full cash value. Mr. Mattingly added that the total tax levy may not exceed the maximum allowed for the primary tax. Mr. Ellis described the potential legislative changes that may impact City revenues. Discussion ensued regarding the potential of the Legislature to reset the tax limit on the primary tax. Mayor Keegan declared a short recess at 2:10 p.m. and reconvened the meeting 2:25 p.m. Mayor Keegan summarized the prior discussion by explaining that the Government does not allow cities to collect money to fund a savings account. Mayor Keegan asked Councilmembers for their opinion on setting the tax rate at $.29. Councilmember Barrett stated that we are only permitted to collect the amount to pay debt. Councilmember Carlat added that Council has no other choice and cannot do more to alleviate the growth issues. Councilmember Dennis noted that the citizens expected more projects to be completed than the City was able to deliver and the Council must lower the rate. Councilmember Evans concurred. Councilmember Hunt stated that she hoped Staff would explain the situation clearly to the public. Mayor Keegan advised that Council will watch the payments and indebtedness on behalf of the public and will lower rates when necessary. CAPITAL IMPROVEMENT PROGRAM Mr. Tyne reported that the Committee who conducts an internal revenue and performance review has completed their latest report. Council had asked about the amount of one-time money available for funding non-budgeted items. Mr. Tyne stated that his previous estimate was low. The amount of funds from the sales tax and recovery revenue is now reported to be $300,000 in General Fund money. This will have no impact to ongoing budget items. Discussion ensued regarding street light status on 91st Avenue between Grand Avenue and Peoria. Neil Mann, Public Works Director, provided an update for projects in under-lighted neighborhoods. In response to questions from Councilmember Carlat, Mr. de la Montaigne explained the Right-of-Way (ROW) maintenance budget, and he reported that decorator items will come later. Discussion continued regarding additional funding for the design and landscaping for the ROW north of Union Hills to 95th Avenue and 91st Avenue to West Wing Parkway. Mr. Wenderski explained that art work is not part of this budget. Mr. Ellis reported that Council could direct Staff to work on these projects for next year. Discussion ensued regarding art projects and the branding issues for the City. Councilmember Carlat asked Staff to discuss art projects and branding at the next Council workshop. Councilmember Dennis stated that Council should also discuss whether the City will develop art projects by certain corridors of the City. Mayor Keegan asked Staff to add these topics to the Fall Council Workshop. Mr. Wenderski updated Council on the Butler Water Reclamation Plant. He reported that in the latest estimate the guaranteed maximum price had increased $18 million. He reported that concrete and electrical estimates were part of the changes. Staff was currently reviewing the new estimate to determine what else had changed. In response to a previous questions from Councilmember Dennis related to the half-cent sales tax fund, Mr. Mattingly reported that the following expenses currently being paid out of the half-cent sales tax fund could be General Fund expenditures: Sports Complex subsidy Economic Development Department operating costs Public Safety operating costs Future Ladder Company operating costs Communication System operating costs beginning 2011 Mr. Mattingly clarified that the operating expenditures as a percent of revenue for these projects would be 22 percent for FY2007. Mr. Tyne addressed the funding of the Wellness program and clarified that the program funding is listed as a fund transfer to allow better control of the program uses. Mr. Ellis added that the Wellness program saves lives. DISCUSSION ITEMS Mr. Tyne gave an overview of seven items that were brought up by Council for further budget consideration: Police Department Family Crime Unit Detective, Fire Department bullet proof vests, Fire Department request for a full time Public Information Officer, additional art projects, $40,000 for the West Valley Coalition for Luke Air Force closure issues, job reclassifications (two for the Fire Department and two for the Utilities Department), increasing the supplement by another $4,000 for an annual physical exam for department directors. Councilmember Hunt confirmed that the second art project for downtown Peoria was already in the budget. Mr. Wenderski and Mr. Ellis clarified that the operating budget is balanced although there is funding still available from one-time money. Mr. Ellis advised that if Council wished to fund additional projects or items for Public Safety, Council should direct Staff to use the half-cent sales tax revenue. If Council wants to fund Public Safety items from the General Fund, Mr. Ellis advised that Council direct Staff to rework the budget and come back at a later date. Mayor Keegan commented that the half-cent sales tax money has always been used to fund special projects not on-going projects. Once allocated, the funding is usually permanent. Councilmember Carlat suggested taking $100,000 in one-time funding to add to the Arts Master Plan for next year. Mayor Keegan explained that $100,000 had already been allocated to the Arts Master Plan. Mayor Keegan explained that this would be for another $100,000 contribution from the one-time money to obtain another art piece for City Hall. Mayor Keegan polled the Council for their support of not funding this additional art work for City Hall. Councilmember Carlat and Vice Mayor Barrett supported using the funding for the Arts Master Plan; Mayor Keegan, Councilmember Dennis, Councilmember Evans, Councilmember Hunt and Councilmember Leone supported funding the art work now for City Hall. Discussion ensued regarding priorities for funding additional supplemental requests. Mr. Ellis reported that the Police Department has suggested using the Forfeiture Fund to purchase bullet proof vests for the Fire Department. The Police Department would own the vests but the Fire Department would be given them for their use. Council agreed to set aside $40,000 as an estimate for Peoria’s share of the West Valley Cities’ Luke Air Force Base Contract. Mayor Keegan clarified that the amount was his estimate of the costs to be shared by West Valley cities; the total contract should be for under $150,000. Following discussion, Council reached consensus for funding the Family Crime Detective position. Councilmember Hunt asked that the request for a public information officer for the Fire Department come back before Council next year. Mayor Keegan explained that his original concern about a public information officer for the Fire Department had been addressed by Fire Department Staff. He was withdrawing the request as he now understood that those responsibilities were shared by two Battalion Chiefs. Vice Mayor Barrett cautioned about using half-cent sales tax revenue. Councilmember Dennis suggested that Council consider setting a policy regarding using the half-cent sales tax in the future. In response to questions from Council, Mr. Wenderski advised that if Council was within $23,000 of the one-time funding limit, Staff could work with those figures to balance the budget. Mr. Tyne clarified that two of the reclassification requests were already in the Utilities Fund so that there was only $11,000 to be adjusted into the budget. In closing, Mr. Tyne reported that on May 16, 2006 Council will be asked to adopt the Capital Improvement Program and the tentative budget and establish the maximum appropriation. Mr. Tyne noted that we are approaching the expenditure limits set by the voters with this budget. The Budget and Carryover of the Capital Improvement Plan increases the budget significantly. June 6, 2006 is scheduled for the adoption of the final budget and Council will conduct a public hearing on the budget and the proposed property tax. Mr. Tyne also reported that Council would be asked to adopt the proposed tax levy on June 20, 2006 and in between those dates Staff will advise Council about the Truth and Tax requirements. OTHER COUNCIL DISCUSSION/DIRECTION None. Adjournment: Being no further business to come before the Council, the meeting was duly adjourned at 4:36 p.m. ____ __________________________________ John C. Keegan, Mayor ATTEST: ______________________________________ Mary Jo Kief, City Clerk CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Budget Study Session of the City Council of Peoria, Arizona held on the 21st day of April, 2006. I further certify that the meeting was duly called and held and that a quorum was present. Dated this 20th day of June, 2006. (Seal) ______________________________________________ Mary Jo Kief, City Clerk