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HomeMy WebLinkAboutCity Council Meeting - Council - Minutes - 09/30/2014 i KENT " Kent City Council Special Meeting Minutes September 30, 2014 The workshop meeting was called to order at 5:08 p.m. by Council President Ralph. Councilmembers present: Ralph, Boyce, Berrios, Fincher, Higgins, Thomas, and Ranniger. Mayor's Presentation of the Preliminary 2015 - 2016 Biennial Budget. - Mayor Cooke gave an introduction of the budget. She noted that because of the City's capital constraints the City has to work hard to balance the budget. However, she noted that her preliminary budget incorporates efficiencies and is sustainable. Mayor Cooke discussed general revenue assumptions and said General Fund revenues are projected to increase 7.45 percent in 2015 compared to the adopted 2014 budget. She also projected another 2.8 percent increase from 2015 to 2016. She noted that the City's largest revenue source, property tax, is capped at 1 percent aggregated growth plus new construction, which has become stagnant. However, she pointed out, the City maintains $7 million in "banked capacity" in its property tax levels. Banked capacity is the amount of revenue the City could levy on property owners, she explained. By policy, she communicated, the City has elected not to collect the full amount available, thus reducing the tax burden of Kent property owners. She continued and discussed the Real Estate Excise Tax (REST), sales tax, streamlined sales tax revenues, the B&O tax, utility tax revenues, and other budget revenues and expenditures, She communicated that the B&O tax which, even if increased, is still lower than most other jurisdictions in King County and will add $3.4 million annually to support debt reduction and general government services. Mayor Cooke recommended the formation of a transportation benefit district (TED) to implement a $20 vehicle tab to raise funds for Kent roads. She discussed City salaries and benefits and that they total 64 percent of the General Fund or 48 percent of the total budget. She highlighted that there will be a cost of living increase of 2.2 percent in this budget which means an expenditure of just over $1 million per year. She communicated that the Public Employee Retirement Services (PERS) costs are estimated to increase by nearly 30 percent and have a $1.2 million impact to the City for the biennium and as far as healthcare there will be no increase in costs in 2015, but a $300,000 increase j in 2016. She announced the following departmental budget proposals; the Finance Department is proposing four new positions for the B&O effort at a cost of $411,000 which will be offset by B&O collections, the Police Department requests a $300,000 increase for personnel, Parks requests an increase of $215,000 related to new public standards for indigent defense caseloads and $90,000 in 2016 for part-time temporary employees. She stated that the human services rate for 2015 is $7.19 per capita, which is sensitive to the CIP and will change accordingly. For 2015, the Human Services program will generate $873,000 for grants, but staff costs aren't offset. She added that cultural arts programs are funded at $2.00 per capita. Continuing, she announced that Information Technology has been granted a license for operating a radio station and $119,000 for a new multimedia position. She explained that all expenses to run the radio station are paid from sponsorships. Economic and Community Development proposes a $212,000 budget increase for personnel, she said, which is offset by permit revenues. Public Works' budget includes a $200,000 increase for equipment and tools and the Human Resource Department budget Kent City Council Special Meeting Minutes September 30, 2014 includes an $80,000 increase for temporary staff through supported employment and high school summer interns. Mayor Cooke added that the Neighborhood Grant Program also includes a proposal to increase its budget by an additional $25,000 in 2016. Mayor Cooke continued and discussed the City`s debt and internal borrowing. She said internal borrowing is appropriate and is a common method governments use to fund relatively low cost projects. This type of borrowing is faster and much cheaper than either a traditional bank loan or selling bonds to raise capital, she explained. However, it is in the City's best interest to repay these loans in order to apply funds to operating costs. She noted that her budget includes two General Fund transfers, one in 2015 of $1.6 million and a second in 2016 of $1 million to offset Capital Improvement Fund debt. She also stated that her preliminary budget includes $19 million in new projects in 2015 and $15 million in 2016 to replace and repair Parks lifecycle projects, Kent Commons roof repairs, IT lifecycle software and hardware replacement, street asphalt overlays, and water, sewer, and drainage utility projects. Mayor Cooke also noted that the preliminary budget includes $300,000 for the Valley Communications Center in 2015 and another $300,000 in 2016. In conclusion, she said the 2015-2016 budget honors the Council's adopted policies, establishes a $1.5 million Contingency/Emergency Fund, and a Capital Reserve Fund made up of $250,000 annually. Council President Ralph thanked the Mayor and the City staff for the presentation and all the hard work relating to the preliminary budget. Chief Administrative Officer Derek Matheson communicated that the next step is for the Council to deliberate on the preliminary budget at future budget workshops. Council President Ralph noted that the budget workshops will be held every Tuesday in October and possibly November at 5:30 p.m. Councilmember Ranniger stated that there is a goal called foster inclusiveness and the Police Department has done some of it through its community meetings. She asked what else has been budgeted to foster inclusiveness in the community in this preliminary budget. Mayor Cooke replied that there aren't any additional funds to do anything at this time. She said there will be discussions in the future. Councilmember Ranniger said there has been a small allocation to celebrate diversity, but nothing regarding inclusiveness with the community. Chief Administrative Officer Matheson replied that the City staff can report back to the Council concerning this item. Councilmember Berrios asked for more clarification on what Councilmember Ranniger was asking to see reflected in the budget and she replied that the community has asked for conversations concerning social justice and equity. She commented that she 2 Kent City Council Special Meeting Minutes September 30, 2014 doesn't know exactly what it would look like, but there needs to be courageous conversations about the topic. She added that when the strategic goal of fostering inclusiveness was generated it was during the recession and the "RESPECT" training was given internally, but it wasn't supposed to stop there. The community was to be incorporated and the conversations were to continue moving forward. Mayor Cooke suggested a meeting between her and Councilmember Ranniger to communicate about this. She added that she doesn't know what department would handle this or where would the funding come from. Councilmember Fincher communicated that she would also like to be invited to the meeting, Councilmember Higgins confirmed that the "RESPECT" training expenditure cost $40,000 per year for three years. Councilmember Boyce inquired how much would the typical Kent taxpayer would have to pay if this budget was approved. Council President Ralph continued and asked for a full breakdown on how the budget would affect the average Kent residential and commercial taxpayers. Councilmember Boyce confirmed with BeMiller that two B&O tax audit collectors were hired and there is a proposal to add four more with this budget. The four new collectors would become the City's tax audit team in order to cover the full tax and licensing spectrum, BeMiller further explained that the two employees are currently verifying payments and ensuring they are correct. He added that there have been audit calls made to businesses which has resulted in $250,000. However, there are some businesses that still haven't paid their B&O taxes yet. BeMiller pointed out that a high level snapshot of the changes to the budget is on page 2. He summarized the major changes in this budget from the 2013 - 2014 budget. Councilmember Berrios verified that the four person team will bring in $400,000, but would cost $410,000. Council President Ralph also noted that there is already $300,000 that is in the B&O tax fund for this. BeMiller communicated that the revenue they bring in will cover their expenses and that there is a significant workload. Councilmember Higgins confirmed that there will be an issue with the workload if the four positions aren't approved. Councilmember Higgins communicated that there isn't a line item in the proposed budget for a franchise fee or an increased utility tax. He inquired if the Mayor prefers a franchise fee, a utility tax, or a TBID. BeMiller communicated that whichever solution the Council comes to can be incorporated in this budget or done through a budget adjustment at the beginning of next year. 3 Kent City Council Special Meeting Minutes September 30, 2014 Councilmember Higgins confirmed that Mayor Cooke is recommending the TBD and the utility tax. She added that at the time of preparing this budget the utility tax and franchise fees were only being discussed. She noted that it was decided not to be included in the numbers, but she supported both. She noted that the list of projects can be better addressed with the funds from these two proposals if they are adopted in the budget. i Council President Ralph asked for the B&O rate changes and the comparisons to be added in the budget document. Councilmember Berrios inquired what the B&O would pay for and BeMiller stated that $410,000 would be for staff and the remaining $3 million B&O funds would go to the General Fund for operating expenditures. He added that the $3 million hasn't been broken down and applied to B&O projects yet. Councilmember Berrios communicated that this is paying down some of the debt and asked for a specific breakdown of what the B&O is paying for. BeMiller replied that it is to fill the $2 million debt and to pay for General Fund funded functions of the City. Councilmember Berrios noted that there were discussions about tapping into the reserves and it wasn't mentioned in the preliminary budget presentation. BeMiller communicated that it is estimated to use $250,000 in 2015 and $400,000 in 2016. It is estimated because if General Fund revenues come in at or below budget and expenditures are at or below budget you would have revenues available from the previous year to utilize. He stated he is hopeful that the General Fund won't be tapped into. Councilmember Berrios communicated that somewhere we need to specifically state what B&O is paying for. BeMiller confirmed that it is going to streets and that the team will be fully funded by B&O. He also verified that the enforcement of the B&O collections isn't currently being done. Mayor Cooke suggested the Council have a separate meeting to discuss B&O. She discussed several topics concerning B&O taxing and businesses operating without paying B&O taxes. She stated this needs our attention and the City is in jeopardy of being inappropriate in assessments because there isn't a team able to do the job right. Councilmember Higgins said that the current B&O projects are continuing and this represents funds that haven't been allocated. Councilmember Fincher said she wanted to know who the City is collecting from and how many have paid. Matheson replied that the City knows there are some that aren't in compliance because the State issues licenses and the B&O returns don't show they are all paying. Councilmember Boyce inquired how the City knows that six employees is enough and BeMiller communicated the current level of two employees definitely isn't enough and he isn't sure six will be. However, he communicated that the work that the six employees can do will incorporate business license auditing, too. 4 Kent City Council Special Meeting Minutes September 30, 2014 Matheson communicated B&O rates and averages statewide. He also noted that the Mayor's suggested rates are still less than the state averages. Councilmember Boyce verified that the cities of Auburn and Federal Way don't have a B&O tax. He also confirmed that Renton is in the process of imposing one in their 2015 budget. Council President Ralph communicated that this will be the first item on the list of concerns for the Council and highlighted that it will be discussed at the October 14 meeting. She also expressed concerns with penalties. Councilmember Ranniger communicated she is concerned about having a police bond, � a B&O increase, and a potential car tab all in one budget cycle. Councilmember Berrios communicated that the Council needs to know what local jurisdictions are currently doing, not what they are proposing. He also inquired about business licensing and what happens when a business doesn't have a license. He asked what the current protocol was for ensuring businesses have Kent business licenses. Mayor Cooke replied that the City doesn't have staff for that and there is no protocol. She noted that this is why we are setting up for a tax office. This is for the City to have a person who goes around and visits businesses to determine if they are licensed, etc. She said the City needs to get their house in order when it comes to determining who has what, Councilmember Higgins communicated that the integrity of the B&O is important and it needs to get fixed. He added that the Department of Revenue doesn't share their lists with cities and that is an issue, He said he wants to start legislation to fix that. Councilmember Fincher asked if other neighboring cities have been checked to determine how they determine businesses without licenses. Matheson communicated that the enhanced collection system will look to determine best practices around the region and further develop a program that ensures all businesses are complying with City regulations. Councilmember Boyce asked Mayor Cooke if there was any thought to cutting costs and she replied that cutting costs has been the mode of the City for the past several years. The City has reached a state now that nothing can be reduced without eliminating programs. However, when programs are cut, there will be a cost to doing it. She noted that when it comes to healthcare, employees took some responsibility and cut costs themselves. She noted that the Finance Department is already thin and being thin equals mistakes and as far as IT, there are tons of IT items that have been put on hold relating to the Council goal of connected communities. The top priority is to reduce internal debt and this budget does that without effecting current service levels. i BeMiller pointed out that the list of adds from departments were in the millions and they simply weren't approved. 5 i Kent City Council Special Meeting Minutes September 30, 2014 Councilmember Boyce asked why the Neighborhood Program wasn't allocated funds in j 2015 and Mayor Cooke responded that it was put into the 2016 budget because she couldn't remove the program since the neighborhoods have done great work with the grant funding they have received in the past. Barbara Lopez, Financial Planning Manager replied to Councilmember Higgins that the requirement for 1 percent of the utility tax fund to get the General Fund balance to equal 10 percent of the budget is no longer needed. j Councilmember Berrios discussed the reallocation of the $675,000 from the General Fund into the utilities fund and confirmed with Matheson that it would be $675,000 for three years. BeMiller discussed payments of $609,000 to reduce the liability insurance rate and $400,000 to reduce the worker's compensation. This reduction of the rates charged to departments for those services reflects $1 million per year and the Mayor suggests that savings be applied to the CIP. He noted that the CIP is underfunded by $5 million and this works to replenish it. Councilmember Higgins verified that the two transfers and sale of the Grandview will fully replenish the CIP. Council President Ralph confirmed with BeMiller that the reductions are derived from revenues that have accumulated into these funds over time to meet projected expenses. The projected expenses came in lower than what the City projected and there is a cash balance available in both of those funds that can be used. Councilmember Berrios inquired about $250,000 for indigent defense and Matheson noted that it is included. He noted that $1 million is also being allocated to the parks lifecycle and asked if the funds from a property sale can be allocated to the CIP fund and confirmed that they could if it is a General Fund property. BeMiller clarified that the proposed $2.1 million property sale is, in fact, a General Fund property. Councilmeber Ranniger asked about the radio station and Matheson communicated that it would be a neutral program and sponsorship would pay for it. Ranniger rebutted that there would need to be a person collecting sponsorships so she is concerned about this. i Council President Ralph discussed the positions added in the Economic and Community Development (ECD) Department and verified that there was one person added and the rest were temporary employees. Economic and Community Development Director Ben Wolters communicated his department is based on a 75% cost recovery policy and at the end of 2014 the cost recovery percentage will be around 90%. However, in 2015 it will revert back to 75%. BeMiller communicated that permit fees will be increased and those funds are included in the budget numbers. He noted that the additional permit revenues for 2014 are $1.2 million over projected revenues right now and estimated at $250,000 in 2015 and 2016. 6 Kent City Council Special Meeting Minutes September 30, 2014 i Councilmember Higgins asked about property tax banked capacity and noted that every year the City gets its 1% from the Eyeman initiative and the amount that could be realized is $7 million. BeMiller clarified that the City is currently imposing less than the allowable rate to taxpayers. Matheson communicated that cities are watching the legislature and the streamlined sales tax (SST) could be revoked which would cause the cities to maximize the allowable property tax rate. i Council consensus was to do departmental reports on October 14. Councilmember Berrios appreciated the effort and said he wants to feel confident and get information that will allow him to make informed decisions concerning the budget. The schedule was reviewed and specifics concerning the upcoming budget meetings were discussed. The meeting adjourned at 6:44 p.m. �r `, % z r`` Ronald F. Mcooi`e, MMC City Clerk I I �I i 7