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HomeMy WebLinkAbout05/25/2004 Budget Study Session MinutesMINUTES OF BUDGET STUDY SESSION MARANA TOWN HALL MAY 25, 2004 PLACE AND DATE Marana Town Hall, May 24, 2004 I. CALL TO ORDER By Vice Mayor Kai at 5 :41 p.m. ROLL CALL COUNCIL Bobby Sutton, Jr. Mayor Excused Herb Kai Vice Mayor Present Jim Blake Council Member Present Patti Comerford Council Member Excused Tim Escobedo Council Member Present Ed Honea Council Member Present Carol McGorray Council Member Present STAFF ~,. Mike Reuwsaat Town Manager Present Jaret Barr Interim Development Services Admin. Present Frank Cassidy Town Attorney Present Lynn VVarde Documents Coordinator Present Jim DeGrood Executive Asst. to the Town Manager Present Roy Cuaron Finance Director Present II. GENERAL ORDER OF BUSINESS 1. Executive Session: Pursuant to A.R.S. § 38-431.03(A)(1) to conduct interviews with applicants for the Planning and Zoning Commission (Frank Cassidy) Upon motion by Council Member Escobedo, seconded by Council Member McGorray, unanimous approval to go into executive session was given. The time was 5:43 p.m. Vice Mayor Kai reconvened the study session at 5:50 p.m. with all attending Council Members present and seated on the dais. MINUTES OF BUDGET STUDY SESSION MARANA TOWN HALL MAY 25, 2004 2. Discussion of the Town's FY 04-05 Budget (Roy Cuaron) Mr. Reuwsaat began the study session and summarized the budget preparation process. He commented about the Towri s historical growth perspective and revenue and expense streams as well as examining the challenges being encountered with the tentative budget. He noted that, per the Council's direction, the challenge was to develop the upcoming budget and future budgets so that the operating revenues and expenses covered each other. He added that the proposed budget was aggressive in some areas, particularly with building and development fees, because it was expected that the northwest area would develop rapidly over the next few years. He said that additional efforts would be made to recover lost revenues that had not been collected in the past. Roy Cuaron addressed the Council regarding the proposed budget and used a slide presentation to supplement the distributed backup materials. He described the revenue forecast and said that there was an increase of $897,000, or 7%, in the general fund sales tax monies. He said that the total state-shared revenue estimation was up approximately 4.15 % and that building and development fees were expected to increase by 24% or $700,000. He said that part of that increase was predicated on the fact that Council would be asked to adopt a fee schedule more closely aligned with the surrounding municipalities. He pointed. out that the Towri s fee structure was found to be about 25% to 40% below neighboring jurisdictions. Mr. Reuwsaat commented that the development fee structure was adopted in 1995 and that the structure needed to be examined so that the costs of development were recouped in the planning process. Mr. Cuaron continued by saying that there were no other increases in permits, licenses, and fees categories except an anticipated decrease in investment income because of a decline in the fund reserve and an increase in the interest rates. Council Member Escobedo inquired about the business license fee structure and how it compared to other cities and towns. Mr. Reuwsaat replied that this was one of the areas that needed examination as well as the park fee structures. 2 MINUTES OF BUDGET STUDY SESSION MARANA TOWN HALL MAY 25, 2004 Mr. Reuwsaat said that the staff had increased the aggregate business license fee by $60,000 in order to account for the revenue received from the two sand and gravel operations during this fiscal year. He remarked that part of the Council's commitment to the sand and gravel businesses was to hire a code enforcement officer to keep the aggregate operations on par with each other. Mr. Cuaron stated that general fund recurring revenues were expected to increase by $1.6M from FY 2003, mostly due to sales tax and building and development fees. He pointed out that the Town was becoming more and more reliant on construction and development activity for its fiscal well being. He said that the non-recurring revenues were expected to drop $2.3M due to items not carried forward from last year's budget. He said it was important to note that there were a significant amount of court fines and fees that were not being collected. He explained that approximately $1.25M in outstanding fines and fees had been referred to an outside collection agency and that other monies were also being collected in-house. He recommended that a collections specialist be placed in the court administration and that the lost monies be addressed. . ~ Mr. Reuwsaat said that this type of debt due was fairly common. He confirmed that it was aone-time revenue but it was money due on a recurring basis. He agreed with the finance director that a collections specialist was needed in the court administration. Vice Mayor Kai asked how the delinquent court fines and fees were handled. Mr. Reuwsaat replied that an outside company performed the collection service for the Town. He indicated that it was wise to give an extra effort to collect outstanding fees every three to four years. He mentioned that he and Mr. Cuaron were working with the court on adjusting the fines structure. Mr. Cuaron continued by focusing on the sales tax aspect of the general funds. He explained that a 7% increase was expected over FY 04 and that sales tax accounted for 57% of general fund revenues and 62% of recurring revenues within the general fund. He said that the total sales tax revenues, including the construction component, accounted for approximately 80% of the Towri s general fund revenues. He pointed out that the two biggest industry groups were retail trade and construction. 3 MINUTES OF BUDGET STUDY SESSION MARANA TOWN HALL MAY 25, 2004 He said that retail trade was expected to increase by 8% with the addition of the Lowe's store and that a moderate figure of 5 % had been forecast as an increase in the construction category. Mr. Cuaron said that all industry groups were projected to increase approximately 3% with the exception of construction, retail trade, restaurant and bars, and the lodging industry. He described the State-shared revenue estimates to be around a 4% increase. He said that the building and development fees were increasing by 24% over FY 04. He said that the single-family residential market remained strong. He stated that there were no increases in the court fines and fees category as the department was not expected to meet its projected budget figure. He said that an amnesty program consistent with the State statute provision would be offered in the near future. Mr. Reuwsaat explained that if an amnesty program was begun immediately, in lieu of the State's legislative change for a one year period, any increase in the court revenues from collections for this fiscal year would go to the State. He said that the Town would not see any of those monies and that this was the reason the program was not being instituted at this time. He explained that the program was being recommended for next fiscal year. Mr. Cuaron continued by describing the breakdown of other miscellaneous fees and incomes and added that the Council had been very clear on what services the cash reserves could be utilized for, one-time non-recurring capital expenditures. He noted that historically the cash reserves had been used to fund parks projects and that the FY 05 budget included $825,000 for parks improvement projects. He said that the budget projections showed $2.2M in general fund reserves which included $1.9M for the Municipal Complex. Council Member Honea inquired about the original estimations for the municipal complex. Mr. Cuaron replied that the new building costs were $20M in total and that included the transportation funding as well. He pointed out that the transportation fund had continued to increase over the years and was currently estimated at $3.5 - $4M. He commented that the budget being presented would deplete the transportation fund reserve but that there would be several adjustments made to the CIP estimations, with one being the $1.2M being returned from the Tangerine Road project. He said that the transportation fund portion, which was not included in the $12M figure, would rise to ..,~ approximately $1.3M. He emphasized that the $12M was strictly general fund reserve. 4 MINUTES OF BUDGET STUDY SESSION MARANA TOWN HALL MAY 25, 2004 Council Member Honea said that this was an alarming feature to him and that he felt the general fund reserve needed to stay constant. He pointed out that the Town had depleted about 40% of its cash reserves over the last few years. Mr. Reuwsaat responded that this was why such stringent restraints on the proposed budget had been required. He said that from this budget year forward, the various categories would be individually broken out and more clearly illustrated so that the general fund reserve could be monitored separately from transportation related impact fees and construction sales tax. He said that the two most important directions staff would be working on was a 5-year CIP program that identified actual revenues and projects over a 5-year program. He indicated that future decisions regarding CIP projects would directly relate to actual revenues and future revenues. Council Member Honea continued inquiring about different projections associated with the municipal complex. Mr. Cuaron pointed out that the project had changed dramatically in scope over the years. He said that when the Town Council originally adopted the concept of the municipal complex, that the cost projection had been approximately $4M but that this figure was now up to $6M. Council Member Honea pointed out that this estimation was a 50 % increase in the original projection. He said that it was a beautiful project but that it was a cancer eating the Towri s general fund. He said that the Town was going to lose $140,000 per year because those monies would not be available as investment income drawing interest. Mr. Reuwsaat said that some of the costs were not just the new building but included the entire infrastructure for the Town center. He said that he strongly agreed that the general fund reserves needed to be preserved and rebuilt. He stated that this was the driving force behind the stringent restrictions on the proposed budget. Mr. Cuaron agreed that over the last several years the general fund reserve had diminished but said that the Town was still in good shape. He noted that the Town ought to implement some measures to increase recurring revenues or decrease operating expenditures. 5 MINUTES OF BUDGET STUDY SESSION MARANA TOWN HALL MAY 25, 2004 He said that the trend over the last few years was that the expenditures had grown at a greater rate than the operating revenues. He said that by taking the average growth rate of the unadjusted recurring revenues and the unadjusted operating expenditures, operating revenues were growing at a 6% rate and operating expenditures were growing at approximately 9%. He indicated that he did not think the recurring revenues, particularly the sales tax, would keep pace with the growth that the Town would experience over the next few years. He said that additional general fund recurring revenues needed to be considered or a cutback on expenditures was in line. Mr. Reuwsaat commented that this was the very reason this year's budget had been prepared to level out the gaps between monies coming into the coffers and monies being spent. He said that he was well aware that the growth chart predictions were unacceptable. Mr. Barr stated that he agreed with the Finance Director's assumptions but added that the State-shared revenues had not been factored into the equation. He commented that those monies were estimated at around $2M annually. Mr. Cuaron continued his presentation by reviewing the Towri s special revenues which included the transportation fund, enterprise funds, bond funds, and grant funding. He noted that these monies could only be utilized for their particular areas where applicable. Mr. Reuwsaat spoke briefly about staffing. He pointed out that each department head had been very prudent if new staff positions were needed. He commented that each new position had to be supported by revenues or be evident that it was a necessary position, from a service standpoint, after moving into the new municipal complex. He gave a quick overview of the added positions. The Town Manager continued by focusing on the CIP program. He explained that one of the differences in the past CIP projections and the new 5-year CIP projections would be the cost breakouts identifying specific areas such as operational costs, personnel costs, equipment costs, and special projects. The remainder of the study session included general discussion of a variety of topics including vehicle replacement estimations, employee benefits costs, and outside commitments such. as dues. 6 MINUTES OF BUDGET STUDY SESSION MARANA TOWN HALL MAY 25, 2004 XI. ADJOURNMENT Upon motion by Council Member Blake, seconded by Council Member Escobedo, approval to adjourn was unanimous. The time was 7:40 p.m. CERTIFICATION I hereby certify that the foregoing are the true and correct minutes of the Marana Town Council study session held on May 24, 2004. I further certify that a quorum was present. ~B'''`- y Warde, Docum is ordin or for the Town Clerk