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Minutes 09-20-10 MINUTES OF THE FINANCIAL ADVISORY COMMITTEE MEETING HELD AT THE LIBRARY, 208 S. SEACREST BLVD., BOYNTON BEACH, FLORIDA ON MONDAY, SEPTEMBER 20, 2010 AT 6:30 P.M. PRESENT Don Scantlan, Chair Barry Atwood, Director of Financial Services Michael Madalena, Vice Chair George Feldman Glenn Jergensen David Madigan William Shulman Merline Pamplona Terry Lonergan, Alternate ABSENT Victoria Castello 1. Roll Call Chair Scantlan called the meeting to order at 6:30 p.m. The City Clerk called the roll. A quorum was present. The attendance is noted above. 2. Approval of Minutes of August 23, 2010 and August 30, 2010 Chair Scantlan requested the following correction to the second paragraph under Item VII. on Page 9 of the August 23, 2010 meeting minutes as follows: “The previous meeting revealed cost data would be plentiful, but there was no value-site side data to know what the community wanted.” Motion Mr. Madigan moved to approve. Mr. Jergensen seconded the motion that carried unanimously. 3. Update of 2010-2011 Operating Budget – Verbal Report by Finance Director Barry Atwood reported that the Commission has struggled with making decisions regarding the budget and the bottom line is they increased the budget by $150,000. There were some offsetting revenues that covered this increase. The Commission has proposed the same millage rate currently in effect which is 6.7626. Most of the adjustments in increases were restored positions. Many of the special interests did not want certain things cut and the Commission restored them. Although there were some deletions, the net effect was an increase of $150,000. 1 MEETING MINUTES FINANCIAL ADVISORY COMMITTEE BOYNTON BEACH, FLORIDA SEPTEMBER 20, 2010 It is anticipated that without inflation, there will not be significant increases in the operating expenses in next year’s budget. In the upcoming fiscal year, a major portion of the budget, approximately 35% to 36%, will be funded by transfers from other funds. This is unusually high. Several of these are one-time transfers that were set up when the Commission did not want to lay off any of the employees. Non-routine transfers cannot continue. The major transfers were from Utilities, Fire Assessment and Solid Waste. Any Public Service Tax received is available to the Capital Fund or the General Fund. On a number of occasions, there have been discussions by some members of the Commission regarding building a new Police station. Because the City does not have the cash to do that, the project would have to be bonded and that involves debt service. It would cost approximately $30 million and approximately 10% of that figure would be debt service. Approximately $6 million of the Public Service Tax was in excess of the current debt service. In summary, assuming consistent appraised value of all properties and flat expenses, the City would enter the budget with a $10.5 million deficit for Fiscal Year 2011-2012. This figure is several times the cost of total departments. Mr. Feldman inquired how much money would be raised if the millage rate were increased to 10%. An “off the cuff” estimate would be approximately $10 million. Mr. Feldman concluded that the Financial Advisory Committee’s charge would be to find revenue and cut expenses. It was realized that what needs to be determined are the programs and services the citizens want. There was brief discussion about whether or not to turn over Police to the Sheriff’s Office, Fire to County Fire or Parks and Recreation to the County. However, Chair Scantlan explained that if the City were to do that, the County would raise taxes because they are not budgeted to provide the City those services. Further, if they were to provide the services, the current level of service would decrease. Additionally, the City would have to pay the County to provide the services and the savings are only on management levels. Ms. Pamplona noted the estimated shortfall reported at the last meeting of the Committee was $17.4 million and now it was reported at $10.5 million. She questioned the difference. Mr. Atwood explained the $10.5 million is without increases and assuming the appraised values remain the same. Mr. Feldman said he noticed a discrepancy in the Business Tax side. It was his opinion that either the Business Taxes are not being collected or they are increasing. On the expenditure side, the Business Tax was 106%. There was also an increase on the revenue side. Mr. Atwood said he would investigate before providing a response. Chair Scantlan pointed out that he has been giving a great deal of thought to how this Committee would address questions to staff. He explained Mr. Feldman was referring to a chart and he suggested that the members, when using source data, make a copy of that data, write out their questions, and then give them to the Chair. Chair Scantlan explained that there are a lot of action items and if they remain in the minutes, they will be lost. It was his suggestion that an item be added to the agenda titled, “Action Item Updates”. These action items will be recorded. During this meeting, Chair Scantlan had 2 MEETING MINUTES FINANCIAL ADVISORY COMMITTEE BOYNTON BEACH, FLORIDA SEPTEMBER 20, 2010 already recorded one item, which was Mr. Atwood providing a reason for the difference in Business Tax collections. This item will be tracked on the agenda. Mr. Atwood explained that at this time last year, staff proposed a 5% increase in Business Taxes. At the appeal of a realtor, the Commission denied the request. Mr. Feldman inquired if the Committee was supposed to be looking at previous years into future years. Chair Scantlan said the Committee’s charge was to look at what Mr. Bressner wrote up in the back of this year’s budget that talked about various impacts. This would help to provide an answer as to what the Committee is looking for. Chair Scantlan referred to Mr. Feldman’s question about Business Tax and explained that in th looking at the Budget Summary from July 28 on revenues, he did not see what Mr. Feldman had referred to. Mr. Feldman suggested the members look at the expenditures for 2009-2010. Mr. Atwood confirmed the 6% increase in expenditures was for a staff of four plus a supervisor. Mr. Feldman was satisfied with the answer realizing that this had nothing to do with the actual Business Tax. Chair Scantlan spoke about how helpful it would have been for the members to have attended the first budget public hearing last week and he encouraged everyone to attend the next th meeting on September 27. Chair Scantlan said it was interesting to see how the Commissioners grapple with the concept of a tax hike. If this City moved forward with a 7.2% millage rate, there would have been a small number of residents who would have had an increase of less than $100. Chair Scantlan explained once the Committee brings forth its recommendations, the people will begin to line up behind the issues. Mr. Atwood pointed out that with the exception of one, all public comment came from employees who wanted to save their jobs. Chair Scantlan advised that there was discussion about the integration of the CRA trolley and the City’s Shopper Hopper. The CRA is spending money for a service that serves the City and some residents of the CRA, but it does not do what the CRA was created to do. Mr. Jergensen confirmed with Mr. Atwood that if the property values go down 8% to 10%, that would amount to an additional $3 million deficit. 4. Continued Discussion of Finance Advisory Committee Suggested Work Areas In Mr. Bressner’s attachments, there was an Updated Suggested Areas of Study for the Financial Advisory Committee from staff and there was one from the Committee members. FAC Member #8 indicated a change from the original document. Someone looked at the benchmarks between Boynton Beach and Delray Beach with respect to water service. Chair Scantlan was concerned about the $4 million difference because it did not indicate the difference in scope between Boynton Beach and Delray Beach. Also, he questioned whether the rates covered the personnel services. He wanted to ensure that when comparisons are done, they are “apples to apples”. He inquired how many residences are serviced with each of the City’s dollar amounts listed. 3 MEETING MINUTES FINANCIAL ADVISORY COMMITTEE BOYNTON BEACH, FLORIDA SEPTEMBER 20, 2010 Mr. Atwood explained that the City of Boynton Beach services significant numbers of residences outside the City limits. Mr. Atwood explained that when the water restrictions went into effect, the revenue went down. The City’s water cost is getting it to the faucet. The rates were set in reverse based on the fixed cost versus the variable cost. They were swapped around so that the consumption charge of water mirrored the variable cost of the Water Department. In setting the base fee, the consultant did not consider all the fixed costs that were incurred. Mr. Jergensen referred the members to Page 13 which provided an explanation. The City of Boynton Beach serves 97,000 which is comparable to West Palm Beach. West Palm Beach is spending $17 million and the City of Boynton Beach is spending $11 million. Mr. Jergensen felt the City was doing a great job. Mr. Jergensen did not understand the concern of FAC Member #8. Further, the rates outside the City limits include a 25% surcharge which is a benefit to the City. Chair Scantlan explained that the one item mentioned above was the only change in the areas to be investigated. However, he said what he committed to do was categorize the different groups. Some of the areas could be broken out as near-term and far-term, and/or revenue and expenses, and by department affected. He asked the Committee how they would like to categorize these areas. Mr. Madalena questioned whether the members had enough time to look at everything. Mr. Feldman asked if it could be broken down to revenue side or expense side. He would prefer to find revenue sources. Chair Scantlan said that would be his least favorite approach because sometimes revenue and expenses are related. There was discussion about the revenue that comes along with Parks and Recreation and the Golf Course; however, there are expenses also associated with these departments. If they are isolated, the “big picture” may be missed. Mr. Feldman felt when you get to the department, you can then pick a revenue or expense side. For example, he called PGA. They have an instructional facility in Port St. Lucie and one in Naples. It is revenue generating and it is a destination. He inquired why the City of Boynton Beach could not have a PGA teaching facility at The Links. Mr. Atwood explained that The Links operates in the black and it is an enterprise fund. Additional funds earned could be transferred to the General Fund. Chair Scantlan felt the near-term task is to prepare for next year’s budget. If there are issues that cannot be solved by February, they would be long-term tasks and they would not stymie the Committee. Mr. Madigan pointed out that everyone on the Committee is coming from a different discipline and everyone has his/her own way of solving problems. Mr. Madigan feels it is important to determine how the City can make more money from the assets held. He referred to the time when he was the Savings and Loan Administrator in North Carolina and explained that after the auditors would examine an S&L, three things were reviewed. The first was personnel. Therefore, Mr. Madigan took it upon himself to identify a freeze on filling any vacant positions excluding Police and Fire. Staff has already made this recommendation. The second thing to review was assets. What assets are marketable? He suggests selling the City-owned cemeteries and golf course or contract with private companies to operate them. Staff came back with selling the Utility, Solid Waste, Library and Parks and Recreation. The third thing to 4 MEETING MINUTES FINANCIAL ADVISORY COMMITTEE BOYNTON BEACH, FLORIDA SEPTEMBER 20, 2010 look at is debt (on and off-ledger). Mr. Madigan would like a listing of all on and off-ledger debt. When Mr. Atwood said the City has no off-ledger debt, Mr. Madigan disagreed and pointed out the $90 million for pension. On-ledger debt would be bonds and leases. Mr. Madalena suggested capping sick leave and vacation. Mr. Atwood confirmed the City does cap that leave. Mr. Madalena asked if a number on sick leave and vacation was available, and was advised by Mr. Atwood that it is included in the Annual Financial Report. The cap for vacation pay is two times the yearly accrual. Mr. Madalena said there are some private letter rulings with the IRS that allow municipalities to permit the employees to tax defer it. The City would save the FICA and Social Security. The City could put it into a 401(a) account for a pass through. Mr. Madalena has done this for school districts and he explained the savings, depending upon the unfunded vacation and sick leave, could result in millions by not having to pay the FICA and Social Security. Mr. Feldman requested the City’s assets be identified and a list provided to the Committee. Mr. Madigan inquired if the City owns parcels of land other than the CRA. The response was affirmative and parcels on High Ridge and Gateway Boulevard and nine acres in the Meadows community were identified. Mr. Madigan requested a list of City-owned properties. When Mr. Feldman asked whether the Chairman was going to put together a list of near-term or long-term areas of investigation, Mr. Jergensen suggested that the list be defined during this meeting to relieve the burden from the Chairman. Chair Scantlan agreed to review the list if there was time remaining after all agenda items had been discussed. Mr. Feldman advised that he was arranging a meeting with Jay Abrams who is the Chair of the Financial Advisory Committee with the City of Boca Raton. He has been on that Committee for six years. He requested the members of the Committee present him with questions that he can present to Mr. Abrams. Motion Mr. Jergensen moved to develop a list of questions to ask someone who is the Chair of another City’s Finance Advisory Committee. Mr. Shulman seconded the motion that carried unanimously. 5. Continued Discussion on Work Agenda of Financial Advisory Committee th Mr. Madigan announced the City Services Institute which will begin on Monday, October 4 and nd continues through Monday, November 22. He suggested every member of the Committee attend the Institute. Chair Scantlan recommended every member attend; however, he cautioned the members not to rely on the City Services Institute. After discussion, it was determined that the Committee had a great deal of work to do and because of other commitments, it would not be possible to change the Financial Advisory Committee meeting day in order to attend the City Services Institute. 5 MEETING MINUTES FINANCIAL ADVISORY COMMITTEE BOYNTON BEACH, FLORIDA SEPTEMBER 20, 2010 Chair Scantlan pointed out that there have been a number of department heads who would like to attend a Financial Advisory Committee to speak with the members. Mr. Madalena recommended identifying the divisions or departments representing the largest budgetary issues and have an open dialogue with them about how they will handle their budgets. He suggested starting with Police and Fire and then continue with the largest departments. The Committee decided to invite the following departments to visit with the Committee:  Human Resources/City Manager/Information Technology  Utilities  Public Works/Engineering  Police  Fire  Recreation and Parks  Library  Development The Committee discussed the length of time to allow for each department presentation. It was decided that two departments would be invited to each meeting and the Committee would keep one hour available in order to conduct other Committee business. The Committee agreed to meet one-half hour earlier at 6:00 p.m., and requested meeting in another location in case the meeting runs later than 8:30 p.m. It was decided that the next meeting would be held on th Monday, October 4 at 6:00 p.m. at a location to be determined. (The members requested consideration to meeting at Fire Station #5.) Chair Scantlan reconfirmed that Mr. Bressner would contact the departments and set up a ththst schedule over the next two months for October 4, October 18, November 1 and November th 15, beginning at 6:00 p.m. and running until 8:30 p.m. or later if an alternate meeting site could be located. Staff would be advised that the Committee is looking for a 30-minute presentation of roles, mission, functions and budget and then 15 minutes of questions and answers. When they make the presentation, they should be prepared to answer what they are doing now to improve their budgets. Mr. Jergensen referred to the discussion regarding the eight department heads who would meet with the Committee. He suggested the Committee provide them with a goal as follows, “What would the impact be if we cut your expenses 20%?” “How would that impact your department now and going forward?” This will make each department head bring something to the table. Mr. Feldman suggested advising the department heads that the City will be short $14 million. “How can you help us?” He further suggested asking them to give back a certain dollar amount. Mr. Madigan agreed with Mr. Jergensen. It appears there will be a 20% shortfall in 2011-2012. The question is, “Where can you cut your budget?” Mr. Feldman agreed with this verbiage. Mr. Jergensen pointed out that if the City were looking for 20%, what would the impact on the service level be to the City? 6 MEETING MINUTES FINANCIAL ADVISORY COMMITTEE BOYNTON BEACH, FLORIDA SEPTEMBER 20, 2010 Chair Scantlan felt Mr. Bressner should put something together to put out to the departments advising them what the Committee is looking for. The members were happy with the language suggested by Mr. Madigan and Mr. Jergensen. Chair Scantlan asked if any of the members had an opportunity to look at free, on-line surveys such as “Survey Monkey”. Ms. Pamplona responded affirmatively and acknowledged she put together some questions as follows: 1. Do you or a member of your household use City services? Yes or No. 2. What services/programs are you or a member of your household using? List included. 3. How would you describe your overall opinion about each of these programs/services? Very favorable, somewhat favorable, neutral, somewhat unfavorable, very unfavorable. Chair Scantlan said the term favorable is a quality question. To make this value-sided, it would be necessary to say “would you like to keep it or do you want to do without it?” 4. How likely are you to sign up for or use services in the next 60 days? Very likely, somewhat likely, neutral, somewhat unlikely, very unlikely. 5. Would you like the services that apply to you to continue? Yes or no. 6. Would you recommend these services? Yes or no. 7. Which of these places have you seen, heard or read anything about City programs or services? a) Boynton Beach TV, b) Funfare Magazine; c) on-line; d) Boynton Beach Forum; e) friends/family/colleagues; f) none of these; g) not sure 8. Comments? Thank you for taking time to complete this survey. Chair Scantlan thanked Ms. Pamplona for her efforts. He pointed out once the information is secured, the value-side of the equation can begin to be worked out. It is important to come up with a fact-based reason to keep or not keep a program. There have been previous discussions about putting a “heads up” in the water bill alerting the public a survey is coming. The actual launching will be tied to the water billing cycles. Mr. Feldman expressed concern that there were too many things happening at the same time with this survey and the meetings with the department heads. Chair Scantlan explained that was the reason for dedicating an hour of each of the October and November meetings to Committee business. In response to Mr. Feldman, Chair Scantlan recommended framing every function of the City to include Public Safety issues. He reminded the members of the four- minute response time by the Fire Department. Perhaps a question could be framed that says, “What are you willing to pay in your taxes for a one-minute fire response or a lower crime rate?” The members were of the opinion that the headline of the teaser for the survey should be bold to grab the attention of the citizens. Discussion ensued about the fact that the survey would be on-line. It was pointed out that many seniors do not have access nor do they want to go on-line to respond. Members felt it should be included in the water bill and could be 7 MEETING MINUTES FINANCIAL ADVISORY COMMITTEE BOYNTON BEACH, FLORIDA SEPTEMBER 20, 2010 returned in the water bill. Chair Scantlan said this would be discussed with Mr. Bressner. This item will be included on the next agenda. Mr. Atwood advised the City's Fire Assessment is currently at $3.7 million which represents 35% or 36% of eligible Fire expenses. If it went to 100%, it could be $10 million or more. This money can be used to support the Fire budget. Mr. Atwood explained the purpose of the Fire Assessment. Single-family residential property owners pay $68 and commercial pays by square footage. In Broward County, every municipality has a Fire Assessment and many are near 100% of expenses. Mr. Atwood explained that there are many areas in the City that do not pay any taxes and they receive these services. Without the Fire Assessment, there would be a discrepancy between those property owners and the owners paying taxes. Chair Scantlan commented that he cannot understand why this is not done for Police. 9. Adjournment There being no further business to discuss, the meeting properly adjourned at 8:30 p.m. tn. p~ 8