HomeMy WebLinkAboutCity Council Meeting - Council Workshop - Minutes - 11/06/2001 i
COUNCIL WORKSHOP MINUTES
NOVEMBER 6, 2001
COMMITTEE MEMBERS PRESENT: President Leona Orr, Tom Brotherton, Tim Clark, Connie
Epperly, Judy Woods, Greg Worthing, Rico Yingling
STAFF PRESENT: Mayor White, Mike Martin, Don Wickstrom, Fred Satterstrom, Katherin
Johnson, Steve Hamilton, Cyndi Wilbur, Chuck Miller, May Miller, Dena Laurent, Marty
Mulholland, Cliff Craig, John Hodgson, Jacki Skaught, Sue Viseth, Jackie Bicknell
The workshop began at 5:03 PM.
2002 Budget and CIP
Mayor Jim White —It's my privilege to present you the 2002 Preliminary Budget, which totals
$135,617,000 with about $65 million in the General Fund. It is balanced as the law requires and
maintains all current services despite a declining economy. It continues to emphasize public safety
while addressing our community's core issues of traffic and transportation, economic development,
and quality of life. Both the Kent community and the city's fiscal condition are changing. While our
population has grown to more than 82,000, our city revenues show that the local economy has
followed the national downward trend. While this pattern was evident throughout the year, the
decline has worsened since the terrorist attacks on September 11`h. For those reasons, this budget was
among the hardest to balance in recent memory. It does not include any new positions and I don't
• think it includes a tractor. This is very unusual. I have only had to do this once before. It
acknowledges the reality of our fiscal condition, despite this and other strategies used to reduce
spending.
Balancing the budget will require using $1.2 million of city reserves. This still leaves about $5.2
million in reserves. It's not my preference to see our reserves drawn down,but by conservative fiscal
management we've built these rainy day funds during the good years precisely for times like these.
This will allow the city to continue delivering the current level of service that residents have a right to
expect even during economic interruptions, and council is to be commended for what we've done
through the years to build these reserves. An issue of I-747 on the ballot today would further limit
the city's fiscal flexibility, if passed, and in keeping with my conservative approach to the budget
I've assumed the passage of 1-747,which limits property tax increase to 1% over last year for about
$197,000. If it fails, then I'll direct staff to reexamine our revenue options and we'll come back to
council and talk about that.
In the wake of the terrorist attack, the sales tax revenue forecast decreased for the remainder of 2001
to about 3.9% under budget. Sales tax also decreased for the 2002 budget by an additional $711,000.
No real economic growth was added. Also, I continue to recommend the 25% allocation of sales tax
to the Capital Improvement Fund to provide funding for the various capital projects. We just have so
many needs in those areas. We've increased our energy costs budgets and have passed through a
Metro rate increase to our wastewater customers. Other General Fund revenues were budgeted at
about the same level as 2001 with little or no increases for growth. This budget also assumes passage
• of the King County EMS Levy,which supports Kent services. Total General Fund revenues are
budgeted to increase 4.4% by 2002. The budget will provide what we call life cycle maintenance of
our buildings, parks, and streets. This will ensure that the investments we have already made in our
Council Workshop, l l/6/01 2
city infrastructure are protected and in some cases enhanced. I've included funds for replacement of
• police vehicles, fire, and maintenance equipment.
The budget also funds continuation of corridor projects and the second supply water project, a new
youth ball field, and infrastructure at Kent Station. It bolsters our self-insurance fund, as is prudent in
lean economic times. Additional explanation on how the budget responds to our strategic planning
goals is operative, the more detailed message at the beginning of the preliminary budget document.
We have carefully prioritized the unfunded budget requests and if revenues improve significantly at
some future date I may return to you with a proposal to add some or all of these positions to the
budget. Among those requests are 12%2 positions considered to be a high priority. They include six
public safety position police officers, two firefighters, one code enforcement officer, two and one-
half parks maintenance workers to maintain newly completed parks, two positions in public works, a
transportation planner, and a human resource specialist to help with the implementation of benefits
including PERS 3. Staff and I are available to help facilitate your review of the budget and to answer
any questions you might have. I'm proud of the City of Kent and what we have accomplished
working together, all of us, and when I say I'm proud of this council, I really am. Great folks to work
with. We've all worked hard to create a city that reflects the vision and goals of our residents and I
believe this proposed budget continues that tradition. Thank you for your attention.
Chief Administrative Officer Mike Martin—I've never been involved in a project that started out
with a premise of no new positions. It's really not a normal situation,but I think it underscores the
situation that we're in. I think if there were a theme to this budget,it would be one that it's
extraordinarily lean. Also, that it is very flexible. It's kind of a wait and see budget. Best indications
• are that this downturn is going to be with us for at least 18 months and as an organization you don't
like to think of losing revenue for that period of time, but if we do we are in a good position to handle
it. The thing that impressed me most during the preparation of this budget was that the members of
the organization came forward with proposals that I didn't have to parse through and look for a lot of
data. I did look for a lot of guidance to convey to our staff and others,just asking for advice. I'm
used to getting budget requests that require hours and hours and days and days, weeks and weeks of
trying to figure out what's real and what's not real. The departments all came through with requests
of the things they really thought that they needed. They knew in advance that I couldn't recommend
to the Mayor that these all be funded, but nobody griped about it.
I think that the message that I wanted to leave you with was that although we appear to be in
uncertain economic times, the organization is very healthy. It's in exactly these sorts of times that
you want to have a healthy organization,because they're flexible. They can hunker down when they
need to, they can take advantages of improvements in the economy and this is a great credit to them
and it's a great credit to the years that they've had the leadership that said this is the direction to go
in. There is an extensive budget message in the first part of the budget and the things that you're
used to hearing, I think verbally, are all contained there and a lot more. The budget document looks
quite good. There's a lot of real solid information there. We'll make sure it gets distributed
appropriately to the public.
Finance Director May Miller—I just have three points I'm going to make tonight. I'm going to go
over three key facts and then the process, the calendar, where we are, what's next. The Table of
Contents kind of shows how each section is grouped. Then comes the Mayor's letter and some vision
and calendars. Capital hnprovement Plan: This section is from 2002 through 2007 and includes not
only the current CIP money but also future bonds, LID's, grants. This is the long-term six-year plan
in all the capital areas. General Fund: Most of the staff is in this section and where the tax revenue
Council Workshop, ll/6/01 3
goes. Special Revenue Funds: Gas tax money and like funds. It is money that comes and can only be
. spent on roads and road-type projects or special money that is earmarked for, like the Youth/Teen
Excise Tax that was specifically set aside for that—money that is specifically set aside for specific
projects. We receipt it here and transfer it out either back to the General Fund where the staff is or
over to the Capital Projects where the money is spent.
Debt Service Funds: Has all the general government debt which include voted debt, councilmanic,
and LID debt. That does not include the water or sewer debts because they are business of their own.
They have their own source of revenue to pay their own debt. We try to group it so you can find
everything together in one place. Capital Projects Fund: This is just the 2002 portion and is just like
the street money, parks real estate excise tax or the capital money. Enterprise Funds: These are the
utility funds which include the Water Fund, Sewerage Fund, and the Golf Fund where they actually
collect fees,pay their own bills,pay their own debt and operate completely separately, like a
business. Internal Service Funds: These are funds are where we do work in the city, where we
maintain and buy all the vehicles, and then we allocate those costs out to the department. We have
our insurance, facility and fleet maintenance, and central service type functions where it's easier to
pay all the bills in one area and then allocate costs out. Trust and Agency Funds: These are two very
small funds. One is the Fire Relief and Pension Fund that was established many years ago before we
had our retirement and it still pays pensions of a few of those firefighters and we have to keep it
separate as a trust type fund. There is also a small economic development fund that is kept separately
for accounting purposes.
Statistics: There is a lot of comparison about what rate of property tax we collect, what percent of our
property tax bill goes to the city, county, and state. We've added some economic information. The
very last page you can see what the population is, how many employees we have. Just very brief
statistics. There are two pie charts on page 23 and they include all the funds of the entire city. Taxes
provide 47.1%of our money. Last year, taxes were 50.8%. The money we're getting for taxes is
actually going down. That means we're continuing to charge for services. 46.2% for salaries, last
year 45.8%. It's gone up as COLA's come forward—3.9% COLA last year. That drives the salary
side of the picture up. The service and charge allocation is the next largest area and that's primarily
the amount we pay Metro. It's also our own electricity and utility costs. The fund structure on page
35 shows what the total budget is and the different kinds of funds. The Capital Improvement
Program is six years and taking all the money the departments have asked for in six years, where is
the money coming from. General government, which is part of the Projects Forecast, is kind of
misleading. It is all the automation, which really benefits all of the projects. It shows we're quite a
balanced city and where the money comes from and also how the money is spent.
The General Fund section lists all the revenue. That is where we pay police, fire, parks, and street
maintenance, and 77.5% of that revenue is tax money. We are very dependent in the General Fund
on tax revenue. The sales tax in total is up 1.5%. That is projecting some recovery toward the end of
next year and looking back at this year's budget, it was quite lean. The biggest change is the Utility
Tax and that's not showing any rate increase for next year, only Utility Tax coming in at the rate it's
coming in right now. That's the significant portion of revenue that really helped keep the budget in
balance for next year. The usage would stay the same. No matter what we budgeted last year, it's
coming in about 20%higher consistently all year long. It will continue next year at that same 20%
. higher than last year's budget. We could have gone in and adjusted last year's budget,but we left it
the way it was. There is detail on pages ten and eleven that shows, on the graph,how it's been
coming in all year, every month, and year to date and all the individual taxes. How much we've
brought in through August, and we base the revenue for next year based on where we believe they'll
Council Workshop, 11/6/O1 4
really come in through the end of December, not based on budget but based on what we believe the
. actuals will be. Property tax, sales tax, and utility tax are the three primary taxes that provide most of
the revenue for next year's budget.
On page 21, look down the Budget Change column and you'll see that the major increase is in the
Capital Project area. That's the majority of the increase. Councilmember Rico Yingling—I want to
know why there's a difference between the total revenues and the total expenditures. How do you
explain the difference? Council President Leona Orr—You look at page 22 and all funds, revenue by
source, you've got $129 million, then all funds expenditures by object, you've got $135. You've got
those pages side by side and they don't match. Nobody who reads through this is going to know to
go back a page or forward a page. It needs clarification. Rico Yingling—Which is okay,but it
would suggest that we're going to draw down our balance by six million. May Miller—And, in some
cases we are. Some cases, like in transportation projects, we issue bonds. We have money and we go
ahead and budget and draw down. If you look at the total of the fund balance we still have a$24.751
million citywide fund balance. You can look and see in the areas where there is actually a draw
down of the fund balance.
Rico Yingling—On page 20 it indicates there's a$6.1 million reduction in the fund balance. May
Miller—And I think that's about what it runs every year. This year it is probably a little bit hard
because we have not had to pull down the General Fund balance ever. I'll get last year's to see if
that's about similar with last year. If you go back to the General Fund section on page three, this is
similar to the monthly reports we give you,but it shows the total revenues for 2002, 2001, and 2000 -
all comparisons so you can see how that's changed. It hasn't really changed that much from what we
. brought in 2002. On the Expenditure side, our salary has gone up because of COLAs, but the second
line down under that is some savings that the state put in. Retirement savings. They actually reduced
the retirement rates that the city has to pay and that achieved a savings of$400,000 and $800,000
next year, so we picked up a$1.2 million because of that. In addition to that, down towards the
bottom, we actually took advantage of deferring some equipment rentals, equipment replacement and
were able to transfer back $451,000 that we had set aside in Equipment Rental Fund, still leaving
them a$2 million fund balance,but deferring some of the replacement equipment. That is using $1.2
million of the fund balance,bringing it down to $5.2 million or 8.1% as opposed to the 10%. It really
shows that we put the money aside for a good reason.
Introductory pages 32-33. I can remember, it must have been 1982, we started out with $500,000 in
fund balance and we kept increasing that until we got to the 10%. You'll see we didn't achieve that
until 1998. We maintained that 10% and this budget is now pulling it back down to 8.1,but we still
have $5.2 million. hi addition to that, on the following page, there is still some money available,
$691,00 that we could use in the Capital Fund that's not budgeted. We're not recommending that
right now, but that is a possibility. There is some money that isn't budgeted for fire replacement that
we could use, and in addition to that, we could defer some of the sales tax maintenance and add
another million and a half or even some of the street gas tax that could be used for maintenance could
be applied to the General Fund. So on a real, real rainy day we still have 13.7% available and that's
what the bond agencies look at,not only what we budget in the General Fund, but where else do you
have available sources that you could pull on if you need to. I think we're in healthy condition. I
know that when I talk to the bond agencies before, one thing they really looked at is, if we're having
• downturns what are we doing about it? And,how we will safeguard ourselves against other events.
Rico Yingling— Is it the Capital Fund that is the other five point something million dollars that is
being drawn down? May Miller—In the Capital Improvement Fund, if you look at that
Council Workshop, 11/6/01 5
increase/decrease, you'll see all the bracketed amounts are what is drawing down the fund balance.
• Every year in the budget we always plan to draw down some of our beginning fund balance in the
General Fund, because what we try to do is have a really good year, have some money left over that
we can pull down. We would have pulled down a$1.6 million anyway and still been at 10%. Part of
our budget practice is to budget very lean and expect to bring in more money,which will start next
year, and we'll use some of our fund balance in the General Fund.
Rico Yingling -Why does it show the General Fund balance decreasing$2.9 million? May Miller-
Because we have money left over in the year and we always budget beginning fund balance to start
our budget. Rico Yingling-We've been saying that it was $1 point something million. This shows
that it's$2.9 million. May Miller-I can do a comparison for you. I think you'd have to go back to
that other page where the General Funding is. Mike Martin-Every year we draw down some
amount of the General Fund, even when we don't go into our reserves, and that amount might be$2
million for example in a good year and this year we drew down not only the amount needed to go
into contingency reserves of$1.2 million, but some amount in addition. But every single year we
draw down the fund balance because we overbudget to get us above the 10% contingency.
May Miller- If you look at last year's budget you'll see that we were going to drawn down the
General Fund fund balance by$3.761 million last year so we've improved that. That's being very
conservative and if you have money left over, you can spend it. Last year we were going to have
$3.7 million left over and still maintain a 10% fund balance. Mike Martin-If we wanted to end the
year with $6 million in fund balance, which is 10% and say last year we actually ended up with$8
million, we would draw down $2 million. In other words,we would go into fund balance for$2
• million, maintain that $6 million and apply the $2 million towards something else in the General
Fund. This year we went even deeper. We not only took off, we went into our contingency reserve
another$1.2 million. May Miller- Some cities move beginning fund balance and call it revenue. To
me it isn't really revenue and we like to put it at the bottom of the sheet, but it does cause some
confusion when we're doing a presentation. Rico Yingling-So you've really drawn down your fund
balance by$2.9 million, but $1.2 million of it was actually to go below the designated contingency.
May Miller-Exactly.
The only other pages that I want to go over are the calendar. In two weeks we'll be back to
Operations with the document and can spend most of the hour, or if you want to have a longer
meeting, going over the budget document, any division you'd like, section, revenue or answering any
questions. On November 201h, we will have a public hearing for the budget and the tax levy
ordinance at the council meeting. Budgets will be available at the City Clerk's office, Finance, and
the Library so the public can get them. On December 41h, at the Operations Committee again, we'll
be able to discuss the budget. At that time, we should have all the tax levy information, the final
assessed valuation, final new construction valuation and all adjustments, and we'll be able to bring
back a tentative tax levy ordinance for you to look at. We'll also know whether I-747 passed or
failed and we will be able to bring back information on that, what the options are. We have adoption
of the budget tentatively scheduled for December I 1`h and also the tax levy ordinance.
Leona-I would just like to say thanks to the Mayor, Mike, May for all the comments you made
tonight and for putting together a budget that does reflect what's going on but that doesn't take away
. from what we do as a city. I think it is important to do the best job we can as a city. I think as a
council we're going to have to be very cautious with the requests that we make of our staff, because
we know there are positions that are unfilled that we wish were filled. We know there are new
positions that are needed that will not be filled. I think that it's our responsibility to work the very
Council Workshop, 11/6/01 6
best we can, with the resources that we have available, and to be extremely careful when we go to
someone to make a request for something that's outside the scope of the normal work program that's
been designated for the following year. I hope we'll all take that into consideration as we look at the
future. I think its important for you, as staff department heads, to be able to say to us that this is not
something we can do right now. I think you're going to have to be willing, and you have our
permission I believe, to say to us this is not in our work plan. This is something that we might love to
see happen, or we might like to do, but we can't do it right now. We need you to be as honest with us
as you can possibly be if we come up with some brilliant scheme that just doesn't fit with what you
have available to accomplish what you're doing. We know you're all working very hard. We know
there are a lot of things that we would all like to see done that we can't always do. We need you to
work with us and let us know when we've asked for something that's just not going to happen. I
thank all of you for your cooperation in getting this document together. I think it speaks very well for
the city when we have the quality of people we do that are willing to compromise and come to
agreement and not ask for things when we know how difficult it is to get them right at this point. We
look forward to working with you. Hopefully in the next year things will improve. I was here when
they did layoffs and it was not pretty. It was very difficult for all of us and we don't want to see us in
that situation again. So, we'll hope for improvements, but we will make the best of what we have,
and thanks for all that you've done to get us this far.
Rico Yingling— Is the golf course going to make money next year? Mike Martin—The answer is
that next year, if we were to subtract the debt service out, the answer would be yes. We are still
carrying the debt service and that will still keep us below a positive cash flow there. Parks Director
John Hodgson—Operationally, it makes a$500,000 profit every year, or it has the last two years and
it will this year. This year, depending on how the last couple of months go weather-wise,we should
be able to make money that will even cover the debt service. Next year we're budgeting to have a
$200,000 profit, including the debt service, but we also have about a$400,000 operating loss from
three years ago that we're trying to make up and so we're cutting into that. May Miller—There is a
proposed rate increase in there that does boost the revenue for next year about $I80,000.
Rico Yingling—I'm talking about the total budget now, are their areas, programs, departments,
projects that have been slowed down, diminished, or eliminated? Mike Martin—I would say that the
prime example of that is what you see brought forward in what we're calling Tech 2. There were a
whole bevy of projects that were proposed to begin sooner, rather than later, and then we were
deferring for a long time where we're not doing anything at all right now. I'm not sure exactly what
we have in the Capital Plan. That's one of our assumptions when I mentioned that we were being
flexible. We can slow down or stop many of those projects. The Capital, in particular, we hope to
keep moving forward. We look at our infrastructure and we said that's our high priority. We have to
keep our infrastructure maintained and we've got to keep things in motion that are currently in
motion, particularly in the General Fund side. That's where we look at positions and some other
equipment and that sort of thing. If it was a high priority, we believed it, we just couldn't fund it.
Those are the things that we said we would come back mid-year or so with a proposal of what would
continue to be high priorities through the Mayor.
The workshop adjourned at 5:57 PM.
Council Office
2aa Floor, City Hall
220 4`h Ave. South,Kent, 98032
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