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HomeMy WebLinkAbout05/26/2020 Study Session Summary Minutes MARANA AZ ESTABLISHED 1977 MARANA TOWN COUNCIL STUDY SESSION 11555 W. Civic Center Drive, Marana, Arizona 85653 Council Chambers, May 26,2020 at or after 6:00 PM Ed Honea, Mayor Jon Post, Vice Mayor David Bowen, Council Member Patti Comerford, Council Member Herb Kai, Council Member John Officer, Council Member Roxanne Ziegler, Council Member SUMMARY MINUTES CALL TO ORDER AND ROLL CALL Mayor Honea called the meeting to order at 6:00 PM and directed the Clerk to call the roll. Mayor Honea, Vice Mayor Post, Council Members: Dave Bowen (Excused), Patti Comerford, Roxanne Ziegler,John Officer, and Herb Kai. PLEDGE OF ALLEGIANCE/INVOCATION/MOMENT OF SILENCE: Led by Mayor Honea. APPROVAL OF AGENDA Council Member Ziegler moved and Vice Mayor Post second the motion approving the agenda. Motion passes, 6-0. DISCUSSION/DIRECTION/POSSIBLE ACTION D1 Relating to Public Works; presentation, discussion, and possible direction regarding the draft Marana 2021-2025 Capital Improvement Program (Keith Brann and Scott Schladweiler) Study Session Summary Minutes 05/26/2020 1 Town Engineer Keith Brann presented a PowerPoint regarding the draft Marana 2021- 2025 Capital Improvement Program stating this presentation came before the Council in March 2020 just as the coronavirus had an effect on the world. At that time, the Town had a balanced Capital Improvement Program; however, some major changes occurred within the nation as well as within the town. Some of those change factors affect the funds used to fund the Town's Capital Improvement Program. The two main funds affected are the Transportation and General Fund. FY2021 Changed Factors Transportation Fund • Reduced Homebuilding and Construction o Currently, but are expecting to see a reduced construction for at least two (2) quarters of the fiscal year next year. • Estimated revenue FY21 is $1.4M o Also looking at coming out of this at a slower pace. They are projecting for this next fiscal year a reduction of$1.4M than what the Town had expected to budget for back in March. Mayor Honea asked for clarification on the $1.4M the Town would have normally expected to receive. Mr. Brann replied stating typically the Transportation Fund the amount that goes towards the CIP is $6M per year. There is approximately $8M collected in the Town and $6M makes it into the Transportation Fund. • Revenue for F22 onward also less o Looking at less funding going forward until the Town can be restored to previous levels. General Fund • Reduced sales tax collections o The General Fund for the Capital Improvement Program funds some projects. • Reduced state shared revenues Adonis Road Extension • Council direction to take over project o Based upon some of the recent actions that occurred with the Villages of Tortolita and the Adonis Road Extension Project, they are not able to construct the Adonis Road project at this time. Council has provided direction for Town staff to take on that project. o With less revenue coming in, the Town has also taken on another major project this year. Mr. Brann stated overall, the Transportation Fund has capacity to handle the project; however, we do have points in the five (5) year program where some projects will be Study Session Summary Minutes 05/26/2020 2 delayed. The Town has a pinch point in the program whereby funding is available today. As the Town moves forward with projects, those funds become depleted. This will affect FY2023 when the Town will likely see that pinch point before coming out of it. While the Town can take on a project or make that project happen, Town staff will have to shuffle the five (5) year program in order to make that happen. Other funds in the Town have been more stable. Water funds have been funded through user funds etc. Impact fees have been on track. However, like the Transportation Fund, the Impact Fee Fund will also began to diminish as we see less construction. FY2021 CIP Adjustments Projects Added Projects Shifted • Adonis Rod Extension - Silverbell Sidewalks P2 - Moore Road Rehab (GF) - Cortaro Road Rehab Projects Removed - Camino de Oeste South • Stingray Road - MPD Consoles • Joplin Lane - MPD Storage • Moore Road Rehab (DM) - Campus Improvements • Adonis Road Ext. Ph2 (CAP East)- MOC Parking Rehab • ADA Compliance (next 2 yrs.) - El Rio Preserve - CMID • Camino de Oeste South - CAP/NIA Allocation • Twin Peaks West - NW Recharge Facility - SCADA Mr. Brann explained that Town staff had shifted some projects to handle that pinch point issue, and shifted General Fund projects out one year as we are trying to reduce the expenditures on the General Fund for this next fiscal year. There projects that have been removed from the program. Those removed does not mean that those project would go forward, but rather outside of the five (5) year window that the Town program. Some of those projects may have been in year three (3) or four (4) and some may have been in an earlier program for earlier years. He provided detailed information for each of the projects listed within the PowerPoint. (A copy of the full presentation is available on the Town's website as well as in the Town Clerk's Office for viewing.) From a transportation standpoint, one of the biggest projects that has been shifted was the Adonis Road Extension Phase 2. The Town had this originally in Adonis Road with the agreement with the Villages of Tortolita that would go across from the Adonis Subdivision to Tangerine. During design of that project, it became apparent that the Central Arizona Project Canal was going to require substantial improvements across the canal. At that time, the project was broken into two (2) phases. With the Mandarina Study Session Summary Minutes 05/26/2020 3 settlement agreement, Town staff came up with an alternative--a stopgap alignment to skirt the west side of the CAP Canal. The ultimate roadway including crossing the Central Arizona Project was placed into the Capital Improvement Program. Now, that project will be beyond the five (5) year window. There are projects that have slid. The Silverbell Sidewalks that was the second phase of the sidewalk infill project, as they had completed the first phase this past year. The second phase would take this from the southern Continental Loop to Cortaro. That project will now move. A rehabilitation project that is a rubberized chip seal project that is part of the capital improvement that is part of the Pavement Preservation Program. The Town has shown that with the Pavement Preservation that is done for the town, there are minor, moderate and major treatments. When some of these roads advance to the moderate and major treatment, they go into the Capital Improvement Program. Mr. Brann continued stating running parallel to this is the Town own issues with revenue and funding. Marana also has the same issue that the state is dealing with. With regard to the state and the legislature in dealing with this pandemic, on thing that was in play is a $5M contribution from the state towards Tangerine Road. However, with the short legislative session, that does not look possible. Staff will continue to seek those dollars in the next fiscal year; however, at this time, it does not look favorable for that funding to come forward for FY2021. General Fund project: the Town has an ADA Compliance Program whereby throughout the Town every year upgrade and replace various handicap ramps around town, subdivisions, arterial and collectors to bring those up to the most current ADA Code. The Town will not be able to accomplish that in these next two fiscal years. Moore Road and Twin Peaks Rehab are some capital improvement projects that the Town is dealing with major pavement preservation. Those projects will be delayed for a couple of years. Other listed projects are new to the program, and will be delayed beyond the five (5) year program. Stingray Road that serves the Marana Wastewater Treatment campus, Camino de Oeste south is an improvement to bring the towns' few dirt roads up to a better road standard. That road would have to remain as it is until the near future. Joplin Lane connects the dots between developer-obligated projects. It is under obligation from the Cortaro Ranch development, the Linda Vista Villages development and the Lex Sears Development in that area. This project would have filled in the gaps, and therefore; is delayed as well. Town staff kicked out another project like the Cortaro Road Rehabilitation moving it forward by one year. Other projects that addressed the needs of the Police Department Study Session Summary Minutes 05/26/2020 4 as well as some of the campus facility projects, those projects were to be funded by the General Fund. Each is delayed by one year. Regarding the Marana Regional Airport, it is setup to be aligned with ASCEP. In the event that funding is available, the Town could leverage that funding; and use its own resources to bring this project forward and would try to accomplish those projects. No changes with the airport. Park Improvement Projects there were two projects that were funded by the General Fund. The El-Rio Preserve that is the CMID connection to create a turnout on the CMID line which would then be able to feed water to the El-Rio Preserve in times of low rain fall to keep the stocked with water. The Town has two (2) funding sources for this project. Approximately $58,000 is a leftover legacy payment from the mall side, which is from environmental restoration; however, the remaining funding would come from the General Fund. That project would be delayed by one year. El-Rio Parking Lot was a parking addition near the pump station to help with additional parking in that area. Mayor Honea inquired about the CMID hookup for El-Rio stating he knows there was aeration that needs to be installed in the pond, and the hookup to the CMID water source. He asked for the amount it would cost to hookup to the water source if the aeration were not done. If the Town has $58,000, members of the Council could speak with members of the CMID Board in an effort to get some water in there. He would love to see some water in there. If we cannot do the aeration, maybe the Town could do the hookup to the CMID if a deal can be reached with the CMID Board. Parks & Recreation Director Jim Conroy stated the $58,000 on the carryover is under $100,000, and the Town would need the full amount in order to do the turnout, and have the conveyance line to bring water into the reserve. The amount is $100,000 total, and roughly $40,000 short of that amount. Council Member Kai asked with the bank protection now completed, does that mean the Santa Cruz River will not go into the Preserve. Mayor Honea replied stating that is correct. He asked Town staff to do some research to look into a hard dollar amount for this project. Council Member Ziegler stated if CMID can join and assist the Town while still be made hold for their efforts. Vice Mayor Post inquired about the budget stating if the projections are lower than what actually happens, how flexible is the budget. He asked whether projects could be added back into the budget once it is adopted. Mr. Brann deferred to Finance Director Yiannis Kalaitzidis for a response the Vice Mayor Post inquiry. However stating his understanding of the budget is that the Capital Improvement Plan is part of the budget as a whole, and sets a cap. If revenues come in much higher, the Town may be limited in its ability to spend those funds. If the authority is there to spend the money, projects Study Session Summary Minutes 05/26/2020 5 can be moved around in the CIP. Vice Mayor Post asked whether Council is able to provide Town staff with the authority to spend those funds. Mr. Kalaitzidis replied stating one way to deal with that exact situation is to size our contingency appropriately for next year to allow for flexibility. Normally we have a contingency in the General Fund of $5M. If the Town thinks that there is that opportunity, and Town staff is planning to discuss with Council later, the Town can size its contingency to $5M or more than then the normal. Vice Mayor Post stated as an example Adonis Roadway. The Town has the item the budget for S4.3-$4.5M this year, as there are a couple of components. He ask what happens should one of those components does not come through, and the road is then $2.5M. He continued asking whether the remaining unspent funding is available for other projects on the list, or is that all that can be spent for the year. Mr. Kalaitzidis replied stating that budget capacity could be used for another project to come online. However, that $1M that was taken that year would have to be replenished in that following year to finish the Adonis project. The other situation would be, with Council approval, to utilize contingency funds for projects, as those funds are specifically for projects. Vice Mayor Post asked whether the budget provides flexibility to do this. Mr. Kalaitzidis replied stating ultimately, the budget will have a cap. It is just by the legislature that it is set; that is, once it is set within that, the Town could allocate budget capacity. Vice Mayor Post ask whether the Town would be setting the cap high enough in order meet any variables in our income. Mr. Kalaitzidis stated that is the plan of the Town. Vice Mayor Post stated he does not see that reflection within the budget. Mr. Kalaitzidis replied that information is not part of this agenda item presentation, that information is forthcoming in the next agenda item. Mayor Honea stated the reserve fund within the budget is typically set at $5M; however, the Council can elect to set it at $10M if it chooses to. That does not mean the Council will spend that much, but that it would provide the Town flexibility in its budget. Mr. Brann deferred to Water Director Scott Schladweiler to review the details of the Water Department. Mr. Schladweiler provided updates to the presentation provided to Council in March 2020. The first of which is the reallocation of the 515-acre feet of the NIA Priority CIP Water (referring to the PowerPoint Slide it is the first project listed). The Town received confirmation from CAP last month that contracts would be issued for the NIA Reallocation for calendar year 2021 for water delivery scheduled in calendar year 2022. This is why it was delayed a year, and the Town's first payment would be due in October 2021 which is the Town's fiscal year of 2022. Study Session Summary Minutes 05/26/2020 6 Also important to note is the recent increase in cost. The Town did not have the actual cost until last month, and presented by CAP at a stakeholder meeting. This is the total cost for the entitlement, or the allocation of the 515-acre feet of NIA water. With over $1M, the Town have been collecting impact fees on this since 2014 at a lower assumed cost as the Town had been waiting for it for several years. Over the next year, Town staff plan to update the Infrastructure Improvement Plan and the Impact Fee Study, as this is directly attributable to contributing to new growth. There has not been any updates to East Tangerine Pipeline, Marana Park Well, and the Potable Water System Master Plan Update. The NW Recharge, Recovery, and Delivery System Project is the collaborative effort between Metro Water, Town of Oro Valley and Marana to bring our recovered CAP water into our distribution systems. The total project budget remains around $9.4M. They have started designing this project, but a defined funding source is not yet identified. Over the first year or so, we would look to the General Fund to support the project until the funding source is identified. He reached out to Oro Valley and Metro Water to see if they would be interested and willing to delay construction for up to 12 months. This would push construction back to April 2022 and reduce spending of approximately $5-6M dollars over the next year and a half. The total cost of the project will remain the same; however, staff will delay those cost until a later date. Vice Mayor Post inquired about the funding source. Mr. Schladweiler replied stating they had been collecting fees on this project; Oro Valley has been collecting fees for a couple years now it is part of the resource fee. There are happy to delay it, as it gives them more time to collect fees. Vice Mayor Post ask whether that is their only source. Mr. Schladweiler stated they would need to finance a portion of it. He does not know if they decided on that. Metro Water will go out and finance a portion as well, but they are also collecting resource fees. Vice Mayor Post stated all of our partners are in the same position. Mr. Schladweiler replied stating they have collected more fees. Marana does not have a funding source at this point. As the project started a couple of years ago, Town staff were in discussions with the developer who was going to support a portion of it; however, that fell through. At this time, the Town is starting the project with seed money that came from a reliability agreement that was transferred to the Town for $550,000 of seed money to begin the design work on the project. Council Member Ziegler ask whether the Town has an agreement with Metro Water and Oro Valley that speaks to the terms, as Marana is now delaying the project. Mr. Schladweiler replied stating that through discussions with them the original plan was to have everything on line in 2023. However, it is slightly delayed until 2024. Marana has an IGA with all three parties. As an example, if one of the parties drop out, Marana would be responsible for updating all of the drawings and paying the consultant fees to get to the revised sizing required. The IGA does not provide for a specific cost Study Session Summary Minutes 05/26/2020 7 obligating the Tow of Marana, but rather it is our proportional capacity in how the other system will be operated going forward. Council Member Ziegler ask whether the drivers to the changes that are, being made is related to the Adonis Road Extension and the Coronavirus Pandemic. Mr. Schladweiler stated he could not speak to the Adonis Road Extension project. However, the NERDS and this project that is a portion of it as there would be a dependence on the General Fund for funding assistance. With the uncertainty of funding over the next year or two, the Town wanted to reduce that impact by delaying the start as well as finding a dedicated funding source for the project and continue to move forward with it. Mr. Brann continued stating in terms of the transportation projects, Council Member Ziegler's examples would be correct, as there was a diminishment of funding coming in and the added project of the Adonis Road Extension. Parks is a revenue-based decision of not putting additional pressure on the General Fund next fiscal year. Mr. Schladweiler stated the SCADA and Integrated Telemetry is an ongoing project that is covered by rates. The final project is the Sanders Road 24-inch Water Line there is no change in this project to the overall budget numbers. This project will be delayed until it is necessary to bring online. Town staff has been in conversations with some of the developers along the alignment who are looking to develop and look at alternate ways to get water out there possibly by using these funds or use of other options to get pipelines out there to service that area. Vice Mayor Post stated Council Member Ziegler brought forward an interesting question for him. He ask Mr. Schladweiler to identify the funding source for the projects listed discussed with Council. Mr. Schladweiler provided the following: • CAP Subcontract- NIA Reallocation: Water Impact Fees (clarified) • East Tangerine Pipeline Potential Impact Fee Project • Marana Park Well Water Infrastructure Impact Fee • Potable Water System Master Plan Water Infrastructure Impact Fee • Tangerine W, X-zone Booster and PRV Water Infrastructure Impact Fee • NW Recharge, Recovery & Delivery Funding source has not been identified • SCADA and Integrated Telemetry Covered by rates: Water and Sewer • Continental Reserve 24-inch Tie-in Water Infrastructure Impact Fee • Picture Rocks Interconnect Water Infrastructure Impact Fee • Sanders Rd 24-inch Water Line Water Infrastructure Impact Fee Vice Mayor Post ask whether the impact fees for the Continental Reserve 24-inch Tie-in were previously collected or new impact fees for this project. Mr. Schladweiler replied stating the Town started collecting those impact fees in 2014. These projects were already scheduled within the system since that time. Some of the projects have changed Study Session Summary Minutes 05/26/2020 8 in terms of price from 2014. There have been updates to the IAP, but the Town has already started collecting those. Mr. Brann commented on a previously viewed slide from March 2020 regarding the request of the Town for projects that will require use of funding from the General Fund. D2 Relating to Budget; review, discussion, consideration, and direction to staff regarding the fiscal year 2020-2021 Manager's recommended operating budgets for the General Fund, Bed Tax Fund, Highway User Revenue Fund, Water Operating Fund, Wastewater Operating Fund, and the Airport Operating Fund (Jamsheed Mehta and Yiannis Kalaitzidis) Town Manager Jamsheed Mehta provided opening comments highlighting the directions of Town staff along with accomplishments of the Town, and how the Town will move forward with next fiscal year budget, as well as commented on the future of special events for the Town of Marana. Below is a summary of the PowerPoint Presentation of the Manager's Recommended Budget. (A copy is available in the Town Clerk's Office for viewing as well as on the Town's website.) Overview • Accomplishments • Investment Summary • FY2021 Revenue Outlook • Selected Operating Budget Summaries • Next Steps Strategic Focus Area • Commerce o Carondelet Micro Hospital Opening o Dove Mountain Assisted Living Construction o Alicat Scientific Expansion o FL Smidth Krebs Expansion o PSE Archery - Dove Mountain o Bisbee Breakfast Club @ Downtown Marana o Airport activity; Grant Projects Economic Development Prospects • Community o Ina Interchange Completion o Water Quality Campus Construction o Public Safety State Accreditation o Make Marana 2040 General Plan o Adonis Wastewater Project Funding o Infrastructure Plans and Studies • Innovation Study Session Summary Minutes 05/26/2020 9 o Parks and Recreation Digital Engagement o Virtual Council Meetings o Business Continuity Tools o Street Pavement Condition Inventory o DSC digital inspections and reviews • Heritage o Marana Signature Events • Star Spangled Spectacular • Fall Festival • Holiday Festival • Founder's Day o Discover Marana Tours • Movie Familiarization(FAM) Tours • History & Archeology Tours • Recreation o Parks and Recreation Master Plan o Honea Heights Park o SUP Cal Portland Project o Special Needs Recreational Programming o El Rio Observation Deck Opening Recognitions • Top 10 Best Cities to Live in Arizona (HomeSnacks.com) • Top 10 Safest Cities in Arizona (Safewise) • PISCES Award for Adonis Sewer Project • Marana Cape Chase - Outstanding Adaptive Recreation Program • Digital City Survey Award • Water Quality Dashboard on the Town's website • Parks and Recreation Mobile App Future Development • PVB Fabrications Corporation HQ • Luke Automotive Dealership • Sol Dog Lodge • JD Russell HQ at AVQ • PSE Archery • Mandarina Development • Vanderbilt Farms Development Planning for Growth • Land Use Planning: o 2040 General Plan Study Session Summary Minutes 05/26/2020 10 o Land Development code o Parks Open Space Development Requisitions o North Marana Drainage Study • Infrastructure Planning: o Sewer Conveyance Plan o Pavement Preservation Plan o Airport Drainage Study o North Marana Drainage Study o Parks Master Plan Budget in the Time of COVID 19 • Methodology o Town budget preparation starts six to nine months in advance o CIP preparation usually begins in early fall o Operating budget target goals are set in November o In addition to internal budget analysis, the Town looked at sources outside of the organization to see whether there was any projection for this year's revenue, or future revenues o The Town has not received essential information from the State Department of Revenue o The League of Cities and Towns are doing its best, and the Town is awaiting their projections to be released o Marana connected with organizations that are tied to our local building and development industry and have been able to set new targets based on those conversations o Marana has been in constant contact with pier cities and towns; each community economic base is different o Economist at the state and federal level point to several recovery models, and maybe one of them is right; however, that will be revealed to us over time. o The general consensus; however, suggest that the recovery will be short and a quick recovery o The fiscal year 2021 will generate less revenue, therefore, we must plan for less expenses in a way that assures continuity in municipal services o As a result the beginning of the fiscal year in July, it will not be business as usual, we must cautiously open up expenditure budgets in the New Year and closely monitor activities all of the time. o From a legal perspective, the budget is expenditure authority. Very low number can cause Council to not avail of revenues coming in, and conversely a very high number budget expenditures will require the Town to defer those expenses or end up with a deficit Study Session Summary Minutes 05/26/2020 11 o Challenge is to find a happy medium so that in the event a better flow of revenue coming in that the Town will have the budget authority to use those funds. o Such an approach provides the flexibility that we are looking for. The improved revenue can be in the form of a resurgence in the economy sooner than we expect. It could be in a form of federal funds to local cities and towns, but is currently stuck in congress. o Fortunately, for Marana, our first three quarters in the current fiscal year more than compensate for the declining revenues in the last quarter of this fiscal year. o From a budget standpoint, the Town will end the year in the positive. • Request to Departments o Direction to all 15 departments especially those funded through the General Fund with an expenditure reduction goal that keeps essential services and essential maintenance that absolutely needed or required replacement, but does not impact individual salaries or benefits. o Every General Fund department participated in round of budget reductions, and we realized 12% reduction of expenses from the current fiscal year budget. That is more than $5.2M in cuts from the current fiscal year budget. o Certain expenses have been placed in a category call restricted budget. That means the Town will wait until to see how the economy performs and how revenues are coming in, before those expenses are allowed to occur. o The same applies to vehicle replacement, as the Town will look at the economic condition before ordering any vehicles or equipment. o Any vacant position will be held over for six months before considering any new hires from the outside. Some vacant positions that have been vacant for some time, the Town is not actively seeking a replacement of those. Those vacant positions will remain unfunded for 12 months. o These measures will keep Marana expenses in line with our projected revenues, as the Town need to look at everything including some of the big-ticket events. • Prioritization o July 4 Star Spangle Spectacular celebration planning for this event happens at least three months in advance, if not earlier. This year fireworks will launch from within Crossroads Park, as the property that Marana would normally lease is not available to the town this year. The fireworks will be enjoyed from spaces outside of the park area. The usual cost for this event is $97,000. Council Member Comerford ask how the decision was made to forego using the normally leased property for the fireworks celebration. Mr. Mehta stated the property Study Session Summary Minutes 05/26/2020 12 owner made the decision. If the property owner cannot accommodate the Town, then the next best place is within the park. When we take the celebration within the park, we are extremely limited in terms of accommodating the people and providing a safe place to enjoy the celebration. Council Member Comerford reminded Mr. Mehta to include the Council on these types of decisions, as they may be able to offer assistance with community partners. She expressed concern for the changes that have occurred with the special events process and naming conventions without having sought Council for its opinion. The special events are important to the Marana community, and state the caliber of the events have changed. Mr. Mehta continued his presentation related to special events as provided below. o Fireworks only for the July 4 celebration will cost $27,000. This will be a significant saving in the first few days of the fiscal year. o The fall festival another signature event of the Town. Council Member Comerford ask why the Town has stopped seeking sponsors for some of the special events. Mr. Mehta replied stating the Town has not stopped as the opportunities are there, as Town staff assist with plans, programming and incentives in support of the sponsorship. Council Member Comerford stated it is easy to write a check. That she and Mayor Honea has offered on several occasions to go out to solicit the community for donations, and Town staff turns them down each time. This is another example of staff denying Council the opportunity to assist. There are people in the community who wants to assist the Town; people may respond better to Council as opposed to staff. Mr. Mehta replied stating he has had a conversation with Mayor Honea, and the Town would welcome Council participation in some of these conversations to see whether we can acquire sufficient revenues. o The fall festival is the Town's second signature event and cost $48,000. Town staff recommendation is not to host this event. Mr. Mehta stated the two events (fall festival and the July 4 celebration) is happening before the Town can assess the economy at the end of the first quarter, he believes it is crucial to make these budget cuts up front in setting the budget. o The holiday event is the Town's third signature event held in December. The normal cost of the event is $95,000 approximately. At a minimum, he recommends spending half of that amount on the tree light show, and place the remaining amount in the restricted account. The Town can evaluate the revenues coming in at the end of the first quarter, and then Council can decide whether to hold the program as it normally would be after the first quarter. Study Session Summary Minutes 05/26/2020 13 Council Member Comerford asked how Mr. Mehta would suggest when to include the Council in its decision-making process. Mr. Mehta replied stating as soon as the Town has received the information, it would be forwarded to the Council for its decision. Mr. Mehta stated Founder's Day was a fully funded event for this year. Unfortunately, the Town did not move forward with hosting that event. Going forward, the Town will periodically provide the Council with a snapshot of the town revenues, as well as any adjustments the town can project to get us to the fiscal year. In the event the Town realizes its revenues are coming in lower than projected, the Town will hold its position on expenditures and restricted accounts. Next, the Town will look at its' budgeted expenses and determine what need to be deferred from both the ongoing and one-time expenses. In the event the Town observes revenues coming in even lower, the Town will begin to review those options in past years that this Council had applied over 12 years ago during the Great Recession. He continued stating the Town can look at service reductions to help reduce the cost. It could be targeted to certain areas where we could afford to reduce cost. The Town can also look at short-term furloughs as an example, not that it is being suggested or recommended. Council Member Comerford stated it is not an option in her opinion. She suggested cutting the salaries of management before moving forward with a furlough option. Mr. Mehta stated he is providing this information to Council so to explain the order of magnitude of the amount of dollars it would take in order to make up for the losses in revenue. That is, if in fact the numbers are so far off. Town staff is not looking at this as an option it is just being presented to Council. Council Member Ziegler expressed her disagreement with Council Member Comerford on the furloughs, as she herself was involved in a furlough. If Council has to go to that length, she has found that many employees (with her former employer) were very thankful for the furlough. She explained how that process occurred with her former employer. Employees were thankful that they were able to remain employed. Council Member Comerford stated her spouse had to take a 10% cut in his salary with his employer. She would agree with Council Member Ziegler comments if she felt Town staff were doing everything they could within the budget; she does not currently see that occurring. That should only be an option when the employees decide. There should be some accountability before the Town gets to that point. Mr. Mehta stated that in one of the presentation slides that Mr. Kalaitzidis will share with Council, the Town is projecting $2.9M in less revenue coming into the General Fund than the previous year. Assuming that the revenue reduction is not enough, and suppose that the Town will need to double that amount because of continuing revenue shortfall; then the amount when converted to staff time (holding restricted funds, not hiring new employees, keeping positions vacant, not funding positions); it is equivalent Study Session Summary Minutes 05/26/2020 14 to two and one-half weeks of a furlough out of 52 weeks. He is providing Council with a sense of scale of what this may look like in a worst-case scenario. Council Member Ziegler asked for clarification as to whether the two and one-half week is per employee or as a whole. Mr. Mehta replied that would be two and one-half week of an employee's pay that would be equal to five (5%) percent or less for the total cut. Vice Mayor Post explained this is his second time experiencing financial challenges with the town. He is in agreement with the special events. This is an area where the Town has had much success within. That is a great deal of money that can be used in other places. The last time the Town has had to restructure its special events because we did not have any money. However, the Town came back and presented events that worked best for the Town. He believes that is how the Town began using Cross Road Park and bringing businesses into the events. That misfortune lead to the success of having much better events. Perhaps this time, the Town can do the same in this situation. He asked how the Town has structured its budget without the benefit of having received information from the state. He asked whether the Town would be able to react quickly upon receiving the information from the state without having to make deeper cuts. Mr. Mehta stated he would first speak with Mr. Kalaitzidis; however, the Town has the Department of Revenue numbers, and the League of Cities and Towns would provide Marana with its portion of the state shared revenue amount. Vice Mayor Post replied asking whether the League would provide that information to the Town. Mr. Mehta stated the League would provide Marana with its annual amount the state would have identified either by phone or by mail. Vice Mayor Post stated it appears as though the Town is going into this budget season on a month-to-month basis. Mr. Mehta stated to set the budget by the time the Town presents the tentative budget on June 16; the Town should have some information from the League of Cities and Towns informing us of our portion of the state shared revenue. Mr. Mehta stated once the budget is set the Town is uncertain of the time when that two (2%) percent of the sales tax will be dispersed, as there is currently a delay. The delay is two to three months at best. The Town and Council will know the effect of July budget sometime in September or October. The Town's first quarter numbers will be an estimate for the month of October projection later this fall. The Town will have to make some intelligent guesses as to the assumptions. However, Town staff has looked at analysis from hotel or restaurants as there are organizations that are keeping track of those occupancies. That gives the Town an indication as to whether its projections are high, low or just right. Based on that information, Town staff makes inferences based on the sales tax. Each city and town are all experiencing the same level of financial challenges at this time. Study Session Summary Minutes 05/26/2020 15 In response to Vice Mayor Post question of how does staff know it is on the right track or not is part of the discussion that Mr. Kalaitzidis explained. The Town's contingency plays a big factor in this. Council Member Kai asked whether the Federal Census Count would be a factor in the amount the Town receives in state shared revenue, and how will the Town work through that. Mr. Mehta replied stating the official results of the census will not necessarily assist Marana with the state shared revenues. Marana's response rate is in the upper 60 or 70%, and the door-to-door process will begin from August through October. The data collection will likely get into the fall and winter season. Official census numbers from the federal side will not be available to Marana for most of this year. To the maximum extent possible, the Town will maintain a structurally balanced budget. That means ongoing revenues should ideally cover ongoing expenses. The Fund Balance Account will be used to support one time needs funding for projects and programs. Mr. Mehta reiterated if the economy rebounds the manner that the state and federal legislators are indicating, or if Marana receives the federal relief from the congressional bill, then the Town's proposed target for revenues is appropriate. Therefore, the expenditure authority is also appropriate. He briefly commented on the contingency fund account, and how the Town previously used it in the past to fund or complete projects. Mr. Kalaitzidis presented the FY2020/2021 budget stating the upcoming fiscal year may have some challenges as Mr. Mehta has stated. Below are the highlights of the PowerPoint presentation. (A copy of the presentation is available in the Town Clerk's Office as well as on the Town's website for viewing.) Economic Outlook • COVID-19 pandemic has caused unprecedented social and economic disruption o Never in our country's history have we intentionally pressed pause on the economy. o This is a health event that has really affected the economy rather than an economic event, which is different from 12 years ago. • No models exist to quantify the magnitude or duration of financial impact or the eventual recovery • Economist agree we are in a recession o Because the fundamentals of the economy were strong leading into the pandemic, the recession may be relatively short, with strong economic growth, IF; ■ We effectively handle the public health emergency and the reopening of the economy, and; ■ The Federal government economic policy and stimulus are effective Study Session Summary Minutes 05/26/2020 16 • Rebound expected to commence in the final two quarters of calendar year 2020 • Key to recovery will be effectively handling the health and emergency and reopening of our economy. Duration &Impact • Scenarios of Impact of COVID-19 spread o Control of Virus Spread vs. Economic Response • The best-case scenario is A4 on the top right where we control the spread of the virus and our economic response very effectively - under this scenario we would have a V type recovery. We would experience a sharp drop initially and a strong recovery quickly. This is possible as our economy was strong and this event is a health related event rather than an economic one. • However, if we stumble in our effectiveness of either our public health response or the economic policy, the recovery will be drastically slower. That is what is shown in all the other different scenarios. Economic Outlook • Real GDP (annualized rate) • The economy should be recovering • Annualized change would be a reduction of 21%-22% Town staff reported on May 5 that in the first quarter of this calendar year, we experienced a 4.8% contraction in the GDP. According to the Congressional Office, they are estimating that the second quarter when compared to the first quarter will contract by an additional 40%. As the second quarter compared to the 40% contraction to the third quarter, they are anticipating a 24% increase to the GDP. We did go down steeply; however, are coming back up. In the fourth quarter of the calendar year, which is the holiday season for us, they are anticipating an additional 11% increase in the GDP compared from the previous quarter. In the following year, they broke with the presentation and went to an annual GDP increase, which is why three (3%) percent increase is estimated for calendar year 2021 they are estimating a three (3%) percent increase that is higher than the two (2%) percent increase we have been seeing in recent years for GDP. Overall, what we are seeing here is that the economy should be recovering starting in the third calendar quarter of 2020, which for us is the first quarter of FY2021. On the federal level, we are seeing estimates that show there will be a strong recovery. Arizona Economy • State of AZ - April Forecast Versus Enacted Budget Study Session Summary Minutes 05/26/2020 17 • Staff presented the chart (slide) information presented to Council during the May 5 Council Meeting. • What we are seeing is the State Financial Advisory committee estimates for four (4) fiscal years including FY2020. o The yellow bars show the estimates prior to the pandemic, while the blue bars show the estimates due to the impact of the pandemic. o 2.8% in FY20 is a combination of 8.1% growth for three (3) quarters and (23.6%) decline in fourth quarter (excluding deferral) • These show a similar story where the state is projecting a large drop in revenue growth in the last quarter of the fiscal year then a recovery taking hold in fiscal year 2021 and rapid growth in FY2022 and FY2023. FY2021 Budget Outlook Mr. Kalaitzidis stated the Town is presenting its main operating funds, but not the complete budget, or the full dollar of the Capital Improvement budget in this presentation. The Town is presenting the General Fund, Highway User Fund, Bed Tax and Enterprise Fund. Those are the main funds that make up the Town's operations. The funds that are missing from this presentation that is scheduled to be presented in the Tentative Budget are the Debt Service Funds, the Grant Funds, CFD's, Transportation and Impact Fee Fund, and Self-Insurance Fund. Sales Tax • Change from FY2020 Budget: Decrease 9.4% or $2.5M o Retail: down 10% -Contracting: Unchanged o Restaurants: down 10% -Hotels: down 10% • Looking to end this budget year at$26.2M compared to $26.9M that the Town had budgeted for the full year. State Shared Revenues • Change from FY2020 Budget: Increase 1.6% or $208K o Shared Sales Tax: decrease by 10% - Auto Lieu: decrease by 10% o Urban Revenue: increase by 15% • Shared Revenue Estimates and Census:HB2483 Allows for an annual update of population by using the U.S. Census Bureau's estimate. Shared revenues presented here may change once final Census numbers are available. • State Shared revenues which are largely based on population growth in relation to other jurisdictions are also projected to drop by 10% except for Urban revenues as these are distributed based on income taxes from a couple of years ago (2019 for 2021). Study Session Summary Minutes 05/26/2020 18 • We continue to be one of the fastest growing municipalities in Arizona, so we expect this will continue to be an advantage for us in the upcoming year. • Based on our projections we expect to end the current fiscal year at $12.3m compared to 12.8 budgeted, while we expect an increase of $200 or 1.6% increase from the current year to $13m for FY2021. Licenses, Fees & Permits • Change from FY2020 Budget: decrease 9.3% or $454K o SFR FY2020 Budget: 735 o SFR FY2021 Budget 617 ■ FY19 through May: 705 ■ FY20 through May 726* (FY2019-2020 Actuals are estimates) • Good news as reported by Development Services Director Jason Angell, the Town has issued 39 permits thus far this month as of May 21. Estimating approximately 726 permits issued for the month of May. • Town will meet its estimated amount of 735 for this budget year; however, it is likely that the town may exceed 735. • We see some positive news in this area as we one homebuilder mentioned that they are starting to look at spec homes again. Budgeting for the Pandemic • Goal: Maintain services &the people that provide those services o With these reduced revenues in mind, the Town Manager's Goal was to maintain services and the people that provide those services while "living within our means" and allowing for maximum flexibility as we move into next fiscal year. • Maintain Structural Budget- ongoing revenues cover ongoing expenses o We looked to maintain a structural budget - where ongoing revenues cover ongoing expenses. To do that we asked departments to look at their budgets and requested that they reduce up to five percent (5%) of ongoing budgets were possible. • Limit use of one-time resources and preserve fund balance o In addition, we asked departments to limit use of one-time resources and defer new requests for one-time projects and programs including $1.750m in general fund projects such as Campus Improvements for $750K (MDP Console Modernization-300K, MPD Evidence Storage Facility Impov- 200K, ADA compliance - 200K, MOC parking lot reconstruction - $150K, El Rio Preserve CMID Connection - 158K). [Also reduced new one-time requests by departments from$3.1M, reduced to $1.5M after cuts]. • Allow for flexibility - restrict certain expenses, maintain sufficient contingency o Additionally, an important element of this recommended budget is to allow us to be flexible and respond to changing conditions next year. One Study Session Summary Minutes 05/26/2020 19 way to do that is to restrict certain budget expenditures (i.e. vehicle purchases, maintenance) and to allow for a larger contingency amount. o To allow for flexibility we have budgeted for expenses that are being restricted and cannot be spent until we get a better sense of the economy. If the economy is stronger than anticipated, then restricted amounts can be released and used, while a larger than normal contingency amount will allow larger projects to be addressed during the year. Conversely, if the economic impact is weaker than anticipated, then we still have the opportunity to use additional tools at our disposal at that time to respond appropriately. (Those tools might be a combination of greater use of fund balance, furloughs, and possibly even a reduction in services. By taking all these steps, we will allow for the most efficient response possible.) o We believe this recommended budget should allow us to be flexible and respond to changing conditions next year. If the economy is stronger than anticipated, then restricted amounts can be released and used, while a larger than normal contingency amount will allow larger projects to be addressed. Conversely, if the economic impact is weaker than anticipated, then we still have the opportunity to use additional tools at our disposal at that time to respond appropriately. Those tools might be a combination of greater use of fund balance, furloughs, and possibly even a reduction in services. The above will allow us for the most efficient response possible. Compensation & Benefits • Employee Compensation- $344,628 decrease o No merit increases planned for FY2021 o General Fund salary savings from hiring freezes and delays ■ One of the big area of investment is compensation and benefits. The goal was to control one-time expenses without affecting positions, and the Town looks to do this as the Town Manager has indicated. In looking at those positions that had not been hired, the Town met with those departments and indicated to them that we were not going to hire those positions, but rather use them as salary savings. Those open positions would remain as full-time equivalent positions listed, but those positions would remain open, and not hired. ■ Certain positions for some departments were informed that those positions would remain frozen for six months, amounting to additional salary savings. The Town communicated early in the process that there would not be merit increases for FY2021. o New positions in Water for new Water Treatment Campus operations Study Session Summary Minutes 05/26/2020 20 ■ New positions that are allowed are for the Water Department that were specifically mentioned in the rate study and approved by Council a few months ago. ■ Other pay and benefits: o Health insurance & other benefits: $180,367 ■ Marana experienced a 3.2% increase in its premiums for health insurance, compared to 3.7% last year ■ Included within the Manager's Recommendation this year, the portion that would normally be paid by employees (approximately $20,000 from the General Fund), the Town Manager is recommending this be absorbed by the town. ■ The Town of Marana that equals approximately $20,000 in the General Fund will fully absorb the full 3.2% increase. o Employee retirement contributions: ($31,533) o Worker's Compensation costs: (58,818) ■ We are also seeing slight decreases in overall retirement contributions and Worker's Comp costs in total. The Town is seeing the funding for PSPRS at 60%, as of the last numbers that Marana has available for ASRS for funding is 73-74%. That is a good number for ASRS. ■ The Town did not experience a big change ASRS and PSPRS rates for next fiscal year. Vice Mayor Post asked whether the Town has been able to catch-up with the outstanding balance in the retirement fund. Mr. Kalaitzidis replied stating the Town's ability to catch up with ASRS is not yet available to the Town due to the type of plan, as Marana contributes to a large pool and Marana does not have a specific identifiable plan. With PSPRS, the Town continues to take the steps that it has been taking before. In July before the Town contributes for the full year, the Town prepay. The Town takes advantage of that by catching up. However, in order to catch-up beyond that, there is an additional tools and steps the Town can take. That would require the Town for example, to contribute more money by taking some of the Town's one-time funds, and making a down payment against that liability. Vice Mayor Post ask how far behind is the Town in its payments. Mr. Kalaitzidis replied stating the Town is 40% behind from the unfunded liability, equaling several million dollars. It would be a large hit. However, just recently, the PSPRS system has hired a new actuary who will be coming in with some new suggestions, as well as some tools that the Town hopes to bring forward to Council soon as the budget process wraps up. Mayor Honea stated Marana is in better shape than most cities and towns as far as its PSPRS, as many communities are struggling to reach the 60%. Study Session Summary Minutes 05/26/2020 21 o Tuition Reimbursement program: $25,000 ■ This program was reintroduced and funded for the first time in the current fiscal year at$25,000. ■ As of this date, we have three (3) employees taking advantage of it. Expenses are anticipated to be around $4K with another$1,500 needed for next year based on current approvals. ■ It will be at Council's pleasure to provide guidance on the continuation of this program at its current amount of$25K or at a reduced amount. Council Member Kai ask whether the current funding of $25,000 has been budgeted for each year of the program. Mr. Kalaitzidis replied stating the Town had the policy in existence, but it had not been funded for several years. Council recommended $25,000 last year as funding for that program. Mayor Honea asked whether it would provide the Town any savings if the amount were reduced to $4000 or some other amount. If the amount remains the same, the Town would carryover an estimated amount of $21,000. Mr. Kalaitzidis replied stating Mayor Honea's comments are correct from a cash and budget capacity perspective by maintaining the full amount of $25,000. Those funds are not available to be spent on something else. In this particular instance, Council established this to be an ongoing expense. If for example the Council elects to reduce this fund to $10-$15,000, then the remaining funds can be set aside to be used in other areas for other ongoing expenses from a budget capacity standpoint. Council Member Ziegler stated it was her hope that more than three (3) employees out of 375 employees would take advantage of the program. For those employees who are taking advantage of the program, perhaps it would be best to reduce the amount of the fund as not many employees are taking advantage of the program. She recommended the fund be reduced. Vice Mayor Post stated this program was in effect 12 year ago, and it took Council Member Ziegler 10 years to have this program restored in the budget. He recommended the program amount be reduced to $8,000 that is double the amount that is currently being paid out to employees through the program. Council provided a consensus to reduce the amount from $25,000 to $10,000. That way the remaining$15,000 can be used for other ongoing expenses. Strategic Position Investment Summary: • Salary &ERE Investment: $162,732 ($81,366 salary savings) • Salary savings in General Fund: $576,271 o 4 vacant FTEs frozen, others delayed hiring by 6 months Study Session Summary Minutes 05/26/2020 22 Mr. Kalaitzidis stated additional resources and tools that are part of the Town's Strategic Investment have been reduced this year as Mr. Mehta had indicated. Departments requested 22 new positions. The Manager is recommending approving two (2) positions in the budget. The two positions are specifically allowed for two (2) reasons, 1) program revenues are associated with them, and 2) the positions were approved in the rate study by Council earlier this year for two (2) FTEs. The changes that both positions were Water Operators, the department decided that an electrician would be of greater value to its operations. Both of the positions are funded by user rates and by program revenues that are not sales tax or General Fund specifically from the Water Fund. Vice Mayor Post ask whether the Town continues to identify funding for the Water Treatment Facilities. Mr. Kalaitzidis replied stating the Town still has funding that the General Fund is providing towards the debt service payments. Vice Mayor Post asked whether the Town continues to look for additional funding. Mayor Honea replied stating it is his understanding that it is scheduled to be paid out of the Reserve Fund, the entire $2.2M. There are two WIFA Loans for sewer and water. Vice Mayor Post stated would the Water Treatment positions come out of those funds once the Town is able to locate a funding source, or will those positions continue to come out of the rates. Mr. Kalaitzidis replied stating the operators are coming out of the rates. They are coming out of the Utility Revenue that is built into the rate study. Vice Mayor Post ask if that is the case even though those positions are intended for those facilities, those positions are funded through the rates. Mr. Kalaitzidis relied that they are as it is generated by those funds. Mr. Kalaitzidis there is some uncertainty with revenues the department will freeze both positions for the first six months, and will not hire those positions until the second part of the year. In addition to the salary savings that are planned in the Water Fund, the Town also has salary savings that have been identified as part of the budget process for the General Fund. That is $576K resulting in several positions that will continue to be vacant for the full year, next year as well as other positions that the Town has identified as vacant or becoming vacant will be frozen for the first six months of the year. Council Member Comerford stated she does not understand the information presented as the budget numbers do not match, and does not make sense to her. Mayor Honea asked Mr. Kalaitzidis to provide clarification so that Council Member Comerford can follow along. Mr. Kalaitzidis explained the budget materials stating the amount that is budgeted on page 138 is the Town's Recommendation for the FY2021 budget that includes the two additional positions. That is what makes up the 377.35 compared to what this fiscal year Study Session Summary Minutes 05/26/2020 23 budget (FY2020); the Council approved 375 positions for this year. Council Member Comerford ask for the total number of current employees for the Town. Mr. Kalaitzidis replied stating the FTEs that Council approved...Council Member Comerford stated not approved. Mr. Kalaitzidis replied stating if he looked at those positions, he would have to take into account those people who are turning over that the Town is hiring. It is not a matter of him providing a number without having to review the Town's payroll numbers to determine the number of employees that checks are provided too. He does not have that exact number to provide at this time. The total would not be 377.35, as this is a full-time equivalency calculation versus the total the Town cut a check too. Mayor Honea stated that even though the positions exist on record, there is not an employee hired into the position. Mr. Kalaitzidis replied stating that is correct. The following positions are an example of that, Assistant Town Manager, Procurement Agent in Finance, Chief Building Inspector for Development Services, and Court Supervisor. Those four positions will remain vacant throughout the fiscal year. Their impact to the budget has been removed, as that is what makes up the $576K in savings. The other part is certain positions in departments whereby the Town is aware of its vacancy (for example, a police officer is retiring. Within MPD, there is a promotional opportunity that someone is taking of that position. The position that is becoming vacant will remain vacant for the first six (6) months of next fiscal year.), is an example of the hiring delay in this situation. Vice Mayor Post ask how the Town calculates this saving whether it is for this fiscal year or next fiscal year. Mr. Kalaitzidis it will be in next fiscal year since the savings will be applied to next fiscal year budget. Vice Mayor Post replied stating those savings will be applied to next fiscal year even though the request was made in this fiscal year, those positions were not filled, and those funds are saved. That the Town is applying the savings to next year budget as the opportunity to fill the positions occurred in this fiscal year budget. Those dollars are saved. He stated this could be confusing to someone reviewing this information. Council Member Comerford stated the information provided is confusing to her as she reviews the number of 363 actuals, and budgeted amount for FY2021 of 377. She asked for clarification of the number of employees that Town has employed. Mr. Kalaitzidis stated he would provide to Council the actual number of Town employees paid. The difference is the Town's payroll system pays individuals. Council Member Comerford stated she is trying to understand the total number of FTEs on record—363 or 375. Mr. Kalaitzidis stated the Town has 375 FTEs that approved in the Town's budget for FY2020. He would go back, count each FTE, and provide that information to the Council. Council Member Comerford stated the budget does not provide an actual number of employees for FY2020, but it does provide for FY2019. She continued to question the math related to the total number of employees for the Town. Study Session Summary Minutes 05/26/2020 24 Deputy Town Manager Erik Montague explained stating the scheduled that Council is reviewing, the amounts that are identified as adopted and estimated are generally the same number. For each year 2018, adopted an actual which are the 355.75 FTEs are the same both in the adopted and actual. The actual will often or almost always account for any change in position that may occur during the year because of a reclassification or some other shift. The FTE number, the bottom line number will not change. That requires Council approval and is set by the Council. Council Member Comerford thanked Mr. Montague for his explanation in providing clarity to her question. She asked whether the Town would be racing to fill vacant positions by the end of the current fiscal year. Mr. Montague replied stating the Town has begun vacancy management. That Mr. Mehta has already alluded to strategies that were utilized in the first rate recession or the most recent recession. He explained the purpose behind vacancy management stating when a position becomes vacant all positions are then thoroughly reviewed and identified as to whether those positions need to be filled as is, held, not filled, or delayed for a period of time or not filled at all. The Town has been actively managing vacancies for several months, and will continue to do that, as it is a key element utilized to determine when to move forward in filling vacant positions in this fiscal year. Mr. Montague continued stating the two positions requested by the Water Department are in an Enterprise Fund and are tied and supported by rates. Council Member Officer commented on the vacant positions stating the Town has 375 FTEs, but that the Town is only using 363 FTEs. The fund $576K is the salary amount for all of those positions. Mr. Kalaitzidis replied stating the 363 FTEs are not part of the salary savings. The 375 FTE positions is the starting point, as those are the total number of positions the Town is looking at this fiscal year that is producing this salary savings. Out of those 375 positions, the Town had decided to take four (4) FTEs and not hire them. Additionally, there is an additional three (3) FTEs in that $576K that are part of the are part of the total 375 FTEs that the Town will maintain as vacant positions for the first six (6) months of the fiscal year to generate that salary savings through those vacancies. The starting and ending point is still 375 for approved positions; the Town will not hire a few of them and delay a certain number of those. Vice Mayor Post stated for years the Town has requested positions and had not hired them. He asked what the Town's strategic position behind it. For example, the Assistant Town Manager position that has been open forever. Mr. Mehta replied stating the Town had an Assistant Town Manager up until less than a couple of years ago. The work demand was such that the current staff could handle the workload. That was a question that was asked of him last year, and he suggested the Town would move forward with it. Vice Mayor Post asked whether it is something that Mr. Mehta does to manage the Town positions that are available to the different departments in the event Mr. Mehta becomes busy. Mr. Mehta stated that does occur sometimes. When Mr. Study Session Summary Minutes 05/26/2020 25 Montague mentioned that there is a vacancy, it is not automatically filled. Between Human Resource, Finance and the Manager's Office, they meet to discuss the true need for the replacement. In some cases, the Town does not go forward and that funded FTE, stays vacant. Then, it becomes savings for a few months. In some cases, they may transfer that FTE from being filled for that particular title, and change the job description for a higher level or lower depending on the need for the position. Mr. Mehta stated the best opportunity to make adjustments within an organization is when that position is vacant. Then the organization can advertise it at the level they need to fill it. Vice Mayor Post stated as an example the Assistant Town Manager position asking at what point the Town recognizes that it is not a true savings, because the position has yet to be filled. Mr. Mehta stated it is an expense savings, because Council approve at that level, but never used those funds, thereby saving those funds. Vice Mayor Post replied stating those funds are saved by not funding a position. He asked when the Town recognize that a position no longer be funded or removed. Mr. Mehta stated that is true for some positions as well; however, the four (4) positions that Mr. Kalaitzidis mentioned will provide savings to the Town at this time. Vice Mayor Post stated Mr. Kalaitzidis had indicated that there are 22 positions unfilled positions in the Town at this point. Mr. Mehta provided a point of clarification stating there were 22 additional new FTE requests from different departments. They reviewed them, but had economic situation not occurred, some of those positions would have gone forward. As an example, last budget year the Town received over 20 requests for new positions from many departments. However, 11 were considered essential and brought forward to this Council for its approval. Every request is not met as those the Town review each of them before bringing the requested position to Council. Mr. Kalaitzidis continued reviewing the tools and resources by Town employees are all one-time expenses. Resources &Tools • Vehicles &Equipment: $1,271,817 o Mr. Mehta discussed how the Town would restrict the purchase of vehicles, and a great deal amount of the $1,271,817 deals with vehicle purchase and vehicle replacements. o Twelve years ago during the recession, the Finance Director at that time started a program of setting aside funds for the purchase of new vehicles. o Every department that had that vehicle was charged an annual amount over the useful life of that vehicle whether five (5) or seven (7) years. o At the time of replacement of the vehicle; that is, the cost benefit no longer remain, the funds were set aside so that the vehicle could be replaced without an unplanned expenditure to the General Fund and to operations. Study Session Summary Minutes 05/26/2020 26 o The majority of the $1,271,817 is for those vehicle replacements from funds that have been saved over the last several years. Even though those funds have been saved for the purchase of vehicles, they would only be replaced if it was not cost efficient to continue repairing them. o The Town has vehicles with high mileage; however, yet those vehicles continue to operate on the road without having to be immediately replaced. Council Member Comerford asked how many have put off purchasing a new car for a year or more, because we had an unexpected expense. She referred to the 15 requested new vehicles stating the amount is close to $1M, asking whether the engines in each of the vehicles have begun to seize. She asked what options were presented to Council as she only sees conclusions, but not options presented by the Town. The same is true in other areas of operations of the Town. Mayor Honea stated the vehicles on the list are vehicles that the Town would purchase for several different departments; those funds are currently in a restricted fund category. No purchases will be made until after the first or second quarter so to provide the Town an opportunity to see how the revenues are coming in. If the revenues are there, then the vehicles will be purchased. If not, then no purchase will be made. It is possible that some will be purchased, but not all of them. Council Member Comerford stated either the Town has the money or it does not. Mayor Honea stated the funding is there and is General Fund dollars. The Town has been saving those funds for five (5) years to purchase the new vehicles. Council Member Comerford replied stating despite those funds being that account for a purpose, the Town has not provided to Council other options for the use of those funds. That is where her frustrations are with the Town. Mayor Honea stated the Council approved the five (5) year plan. Vice Mayor Post stated he has had a conversation with Mayor Honea and he is in agreement with the Town. We cannot just stop buying and ensuring the fleet are traded out as needed. Council did not have an opportunity to review the budget that was requested this year, he asked Mr. Kalaitzidis what amount was originally budgeted for vehicles. Mr. Kalaitzidis replied stating the Vehicle Replacement Plan that is before the Council is slightly changed, as there are a couple of vehicles that have moved. Those are not being purchased for the police purposes by Special Revenue Funds including RICO for instance for police. The Police Department realize that there are vehicles that they need, and are willing to use Special Revenue Funds for the purchase of those vehicles. Additional vehicles have been restricted for HURF and has been set aside that will come soon, and a small number of vehicles were delayed completely. The list that is presented to Council recognizes that the vehicles listed and are before Council are reaching its useful life. If those vehicles were to fail during the year, the Town could have an officer filled Study Session Summary Minutes 05/26/2020 27 position, but not having a vehicle for that officer to do their job. In listing the vehicles, the Town recognizes it is assigning budget capacity, the ability to purchase these vehicles, but are restricting the purchase for now, but will purchase those vehicles under the worse circumstances. That is when needed for operations. However, if the economy improves, the Town could move forward and some or more of those vehicles listed. Vice Mayor Post stated he believes it is important to replace vehicles as the Town can, as it will be even more difficult to catch-up on the purchase next year. Council Member Kai stated as he is reading vehicles and equipment will be replaced based upon economic conditions. That is the bottom-line as he sees it. • Technology: o Ortho photography for digital mapping: $27,000 • To update outdated mapping information, used by multiple departments. o Cartegraph database analysis: $25,000 • To repair issues with the Asset Management System, used by multiple departments. o Carry over projects: Permitting, Business license, Utility billing systems • The majority of the funding this year is for carryover projects started in the current fiscal year, and need to complete next year. • Permitting and Business Licensing systems that will improve online functionality for customers and businesses • Utility Billing system is archaic and is prone to break down • Facilities: • As presented earlier by Mr. Brann and Mr. Mehta, almost all of the funds for new projects requested for FY2020/2021 was deferred to a future period. The only funds that are maintained in the current budget in this fiscal year is carryover funds that includes the below projects. o MMC Campus Waterproofing and Drainage improvements: $126,125 • As the Town needs to allow for the design of a comprehensive solution to a problem that was discovered as Town employees began to look further into, is bigger than originally thought. There is too much water saturating into the complex in several locations. o MOC fiber cabling repair: $22,000 • There is an issue where MOC is very close to not having any connectivity, and are down to the last strand to maintain connectivity for that complex. This is due to a persistent rodent issue. o Concession stand improvements: $10,000 Study Session Summary Minutes 05/26/2020 28 • These improvements are related to compliance concerns that must be addressed in order to keep the concession stand open at Ora Mae Ham Park. Vice Mayor Post inquired of the concession stand at Ora Mae Park asking Park & Recreation Director Mr. Conroy whether it would allow for cooking usage. Mr. Conroy replied stating the improvements are related to proper drainage of that area. The stand needs it, as it is associated with proper draining and cleaning. Pima County Health cited the Town last year, providing the Town one year to make those improvements. Vice Mayor Post asked whether the community would be able to use the concession stand once all repairs are made. Mr. Conroy stated in the interim, the concession stand could be used as the Health Department to provide a temporary permit. Mr. Kalaitzidis stated in addition to the projects listed, the Town has carryover from the current fiscal year including the Visitor Center Remodel, as well as the Court Jury Room. • General Fund Budget Summary Mr. Kalaitzidis having discussed the Town's significant revenues, and how the Town adjusted its revenues to reciprocate, he provided a quick review of the General Fund. • On the revenue side, the Town anticipates a reduction of 6.2%. • On the expenditure side, the Town anticipates a reduction of 8.8% • Budget is a structurally balanced budget. Ongoing expenses are covered by ongoing revenues • Personnel & Benefit expenses will slightly drop by less than$1M • Contracted Services and Capital Outlay are dropping significantly partially due to the deferral of projects, and projects completed in the current year (i.e. Remodel of MMC Building B, and HVAC Upgrades in the Chambers). Town staff were able to shift the cost of the Court Jury Room, which was budgeted mostly from the General Fund of the current year. The Technology Fund will contribute S400,000 towards its construction. A large portion of the final cost has shifted to a non-general funding source. • Operating Supplies and Equipment is an area that the Town is seeing an increase in the General Fund of$400K. The reason for that is the Town has $654,000, or up to $654,000 of anticipated reimbursements as part of the Marana Jobs Creation Incentive Program. Specifically that has to with the PVB Fabrication Headquarters construction as well as construction reimbursement sales tax for that project. Also included is the Dove Mountain Assisted Living Center that is currently under construction. Study Session Summary Minutes 05/26/2020 29 o Those projects took advantage of this program, and the Town does anticipate reimbursements occurring next year. • In the Transfers Out, the Town will have a reduction due to having completed the airport project that was funded to some extent in the current fiscal year with General Fund dollars to cover the Town's portion of that repaving project. • Fund Balance, the Town expects this year a $2.2M deficit. This is due to the use of one-time funds for one-time projects as well as the continued support of the debt service payments for the new water treatment plant. That would be $790,000 transferred from the General Fund to the Water Fund to cover the debt service payment for the $15M WIFA Loan used to fund the Water Treatment construction. • Operating Impacts on Reserves Mr. Kalaitzidis stated if the Town spent all of the $2.2M that is budgeted, and it receives all anticipated revenues budgeted, the Town would end FY2021 with an estimated $37.3M. That assumes that the Town will start FY2021, or end this fiscal year with $39.5M. That number is the beginning balance from this FY2020 that was $36.6M. During the May 5, 2020 Council Meeting, Town staff had estimated that its revenue would come in at $2.9M, higher than anticipated. The General Fund revenue would come in at 98% budgeted, while its expenses for the year would be 92% of the budgeted amount for FY2020. That difference would be an increase of$2.9M, which translate to an increase of its Fund Balance in the General Fund to $39.5M at the end of this current fiscal year. • Major Impacts On Reserves Mr. Kalaitzidis stated that $39.5M that this year was started with is presented with its different components including the minimum 25% reserve of revenues for the General Fund, as well as Project Carry Over (one-time funding for projects); Transfers to other funds for Debt Service or Operational needs; Restricted funds for Debt Service paid by and supported by the General Fund; new projects in FY2020-2021; and obligations that are due to the General Fund from Wastewater and the Airport. The Town estimates that it will end FY2021 with approximately $15.8M of unassigned funds. Those funds can be used to support one-time projects and programs. Council Member Kai inquired about the pre-paid expenses highlighted in the presentation. Mr. Kalaitzidis replied stating pre-paid expenses are supplies and inventory purchased in the current year. However, do to the accounting regulations, the Town is not allowed to expense those in the current year, but expense it when used. That would be in the next year. Study Session Summary Minutes 05/26/2020 30 Vice Mayor Post stated a short while ago the Town and Council entertained a sales tax increase. Council had not chide away from talking about it for the Water Treatment Facility, and the NERDS. The discussion at that time was for a minor increase, but that discussion stopped and had not come back to Council. However, it is affecting our budget this year and next year. There is $6M that will become payable for NERDS in the next two years he asked Mayor Honea whether the Town would use the General Fund to fund those projects. Mayor Honea replied stating the WIFA loans were paid this year with Reserve Fund dollars at $2.2M was withdrawn to pay the debt service. He understands Vice Mayor Post concern; however, the Town is in a tough position. He would not vote in favor of asking Marana residents for a tax increase this year, as that is his philosophy. Next year may prove to be an option if the economy comes back at .1 or .2 to pay for these necessary services. Vice Mayor Post replied stating that is a fair statement. At some point the Council will need to determine funding whether a minor sales tax increase for these projects. Mayor Honea stated he thought that this year Council would have had an opportunity to bring forward something; however, with the world's events, it has hampered those opportunities at this time. Vice Mayor Post stated that at some point the funding source has to be determined as the Town has many large-scale projects the needs to be funded. Council Member Kai commented on the projects that Vice Mayor Post referenced such as the drainage program and others that will take a lot of funding to achieve. Mayor Honea stated he believes that Council needs to start speaking with people in the community about the current state of the Town. The Town will need more revenues in order to handle the projects that it has. He thought this year would be tough to pose a tax especially during these tough times. Mr. Kalaitzidis continued stating the numbers presented in Transfers Out and the changing Fund Balance did not include the amounts presented earlier in the CIP presentation for the water project for the Northwest Recharge and Recovery Distribution System. Those amounts were constantly changing as the Town began to assemble the information. The Town started at $3M, and then it decreased to $2M. As Town staff prepared this presentation, the Town had conversations with Oro Valley and Metro, which would have reduced it further. As provided in the presentation, that amount was $700,000. The amounts presented in this presentation, does not include that $700,000 of contribution from the General Fund toward the project for next fiscal year. Vice Mayor Post asked whether the $700,000 amount that Mr. Kalaitzidis referenced is in addition to the amount. Mr. Kalaitzidis replied stating correct, as the Transfers would amount to S4.5M, and the changing Fund Balance would be closer to $2.9M of a deficit. Study Session Summary Minutes 05/26/2020 31 • Bed Tax Fund Budget Summary Mr. Kalaitzidis reviewed other operational funds stating the Town's Bed Tax Fund it is anticipating a similar decrease as the Town expected in the General Fund for revenues in this fund. o Sales Tax: Anticipates a decrease based upon decreased occupancy revenues due to the impact of the pandemic. • The Town will be able to break-even in this fund. However, made a few cuts, but some of those cuts were made as the Town expected the economy to experience a downturn, as well as expect the developer reimbursements to also decrease. The Town will experience savings in this fund. o Expenditures: This year the Town will have an increase to its costs. • Contracted Services, every five years the Town's State Land Lease payment increases. Contracted Services is increasing by $71,000 due to that increase. We are going from the current year payment of $575,000 to $633,000, as this is where the Town is seeing this increase. • The Town should end this fiscal year with $2M in the bank before the start of FY2020-2021. That amount equates to three (3) years of payments for the State Land Lease payment. • Operating Supplies &Equipment: Council Member Ziegler asked whether the State Land Lease payment is withdrawn from the Bed Tax Fund or the Hotel Tax. Mayor Honea stated it is the Bed Tax. Council Member Ziegler asked whether there is another fund that those payments are made— Bed Tax. Mr. Kalaitzidis confirmed that the payment is made from the Bed Tax. Council Member Ziegler stated the if the payment was not made from the Bed Tax, considering the one area of town we live within, Council made it clear that those payments does not come from the citizens' taxes that we pay. The Town needs to stay on top of State Land so to have an opportunity to renegotiate the lease payments. If the Town did not have the $600,000 to submit to State Land, to have to write that check. She wants to go on the record stating, just because those funds are not on the backs of our taxpayers in the Town of Marana, we need to stay on State Land to look for opportunities to decrease that payment. Those funds could be used in other areas in the Town of Marana. Council Member Kai asked whether the funds in the Bed Tax Fund comes from Ritz Carlton or all hotels around the town. Mr. Kalaitzidis replied stating all properties contribute to the Bed Tax Fund. Study Session Summary Minutes 05/26/2020 32 Mayor Honea stated the Bed Tax Fund is limited. It cannot be placed in the General Fund as the State has placed restrictions on the use of those funds. It has to be spent on economic development, tourism, or something that is geared to economic development and tourism expense. He stated the Bed Tax Fund allows the Town to use those funds to pay the State Land Lease. Funds from the Bed Tax cannot be transferred to the General Fund. Council Member Ziegler stated she understands the parameters of the use of those funds; however, feel as though they can be put to better use in the town, if the Town did not have the lease agreement. She does not want to give up on State Land at this time. Vice Mayor Post commented stating if the Town changed its focus on that State Land that instead of trying to do an in-run to work around the state to save some money. Rather, create some type of park so to attract more people and visitors to the Ritz Carlton so that more money can be made in the Bed Tax Fund. He asked whether the Town and Council are looking at this issue in the wrong way. This is something that the Town can consider at some point. • Highway User Revenue Fund Mr. Kalaitzidis continued stating this fund is used primarily for the maintenance of the Town streets. As provided by Mr. Mehta this program has not changed at all. With the revenues that are anticipated, even with a 10% increase next year, the Town will continue with its normal programming for Pavement Preservation. Unfortunately, the Town will not have received final revenue numbers until it has received final census numbers released as we still expect updated estimates from the State and the League of Cities and Towns. In this fund, the Town's expenditures decrease by over $1M. In last fiscal year, that is approximately the amount the Town carried forward of unspent Pavement Preservation funds expanding the money that the Town paid in the current fiscal year from the normal $1.250M to $2.250M. Public Works has indicated that the Town will be finishing that Pavement Preservation, and will spend the full budget capacity originally provided this year. That project is catching up and will be completed by the end of this fiscal year. Vice Mayor Post asked for clarification of the HURF funding as provided by Mr. Kalaitzidis stating the Town had $1M leftover from the 2020 budget asking whether this is what Mr. Kalaitzidis stated. Mr. Kalaitzidis replied stating 2019. Vice Mayor Post continued stating the Town has spent or will spend it. He feels not spending money, is saving money. It is saved in the short-term, but not long-term. He wants to ensure that the Town is spending those funds on Pavement Preservation. Mr. Kalaitzidis stated the Town is spending those funds on Pavement Preservation, that the project will likely be completed next month. Vice Mayor Post stated pavement preservation is an area that is difficult to play catch-up on. Study Session Summary Minutes 05/26/2020 33 Mr. Kalaitzidis stated capital outlay decrease to zero as Council reviews the details provided on page 28 of the budget book. The reason for that is all vehicle purchases have been suspended and placed into a restricted amount, and that amount appears in the Operating Supplies and Equipment fund. That is the reason why there is an increase for S465K in that line account. He explained the Town is taking the full S465K of vehicle replacement request that departments have placed in its budget, and are restricting it. If the state provides the Town with a one-time distribution as they have in the past, those funds will only be spent if the economy rebounds and comes in better than expected. Additionally, part of what makes up the change in Fund Balance of$587K deficit is that $465K in vehicles. The Town included this year $200K in the event the Town experience monsoon related damages. Marana had previously experience damages from the monsoon season; however, did not identify budget capacity. The Town ended up using budget funds that were originally set for program expenses to repair damages. For this FY2020 and will continue in the next fiscal year, set aside $200K out of Fund Balance savings in the event there is an emergency or damage during the monsoon season. That way, the Town does not have to take away from other programs. Council Member Kai ask how the $200K amount was determined for potential damages. He asked whether that amount was previously been spent for damages. Mr. Kalaitzidis replied stating the $200K is an estimate of repairs that the town previously experienced. Vice Mayor Post asked whether the Town had spent the $200K in the current fiscal year. Mr. Kalaitzidis stated the Town had not as it was spared of monsoon damage this fiscal year. Those funds were restricted in the current year and remains restricted. Mr. Kalaitzidis continued stating this fund is projected to end this FY2020 at $1.6M of Fund Balance. o Revenues: ■ Intergovernmental Revenues (decrease 10.0% or $364K): Based on Census and Town preliminary estimate. May change once final Census estimates are released. o Expenditures: • Contracted Services (decrease of 27.0% or $1.1M): Current year included carry forward funding for the Town's Pavement Preservation Program. • Operating Supplies & Equip (increase 98.9% or $465K): Includes restricted amount for several vehicles to be replaced if funding is available. • Water Operating Fund Budget Summary Study Session Summary Minutes 05/26/2020 34 o Revenue: • Charges for Services (increase 23.6% or $351K): Rate revenues are solely based on the existing rate structure plus new account growth. The Town raised rates in January 2020 based on a study approved by Council. o Expenditures: • Contracted Services (increase 36.0% or $198K): Includes restricted amounts for increased maintenance needs on the sanitary sewer collection system. • Operating Supplies & Equip (decrease 16.1% or $58K): Includes reduced electricity costs. Mr. Kalaitzidis stated the Town is experiencing a slight decrease in its revenues. Revenues in this fund are collected based on the existing rate structure, plus new town growth. The reduction that the town is seeing and charges for services is due to a combination of lower than anticipated account growth and rates revenue in the current fiscal year. However, in 2020, as well as a slight over estimation of the FY2020 revenues. The Town thought it would do much better than we are even though there was-an increase to the rate structure, as that explains the decrease in services. On the expenditure side, there is a slight increase because the recommended budget includes almost $200K as the cost for the new positions, as well as supplies to equip those positions. Additionally, there are restricted funds of $200K-$250K for different purposes; however, the main purpose is $213K in the event there are operational emergencies. There is also $25K restricted for a potential grant that the Town plan to apply for that will assist with water conservation efforts. Vice Mayor Post ask how the Town documents the transfers on the books relative to the Town Reserve Fund. He asked whether those funds are owed to the General Fund. Mr. Kalaitzidis replied stating it is not an obligation to the Water Fund. Vice Mayor Post asked whether those funds are gifted to the Water Department. Mr. Kalaitzidis stated that at this point those funds are gifted as it is set up. The Town is not setting a payable from the Water Fund to the General Fund. Vice Mayor Post asked if those funds are gifted (relating to the NERDS Project) that if the payment is made from the General Fund, not loaning those funds to the Water Fund, then is it not eligible for impact fees in the event Cascada moves forward. Mr. Kalaitzidis deferred to the Water Department Director Scott Schladweiler stating some of that Water Treatment Plant costs would not be eligible. Vice Mayor Post stated does that not include the NERDS. Mr. Kalaitzidis replied stating the NERDS is different. Vice Mayor Post stated if it goes up and the Town is making that payment, the Town is bestowing those dollars upon the Water Fund; then it is not eligible for impact fees. Study Session Summary Minutes 05/26/2020 35 Mr. Mehta responded on behalf of Mr. Schladweiler stating the Northwest Recovery Recharge Project the Town is beginning to identify General Funds for that project through the Town Reserve Fund. Ultimately, it will be part of the impact fee calculations. When the Town does that, is when the fund will recovery that amount. The initial gift is a loan. Vice Mayor Post stated if it is a loan, it becomes subject to repayment by impact fees. Mr. Mehta stated correct. Vice Mayor Post stated if it is not a loan, which he was asking; it is just a gift, it is not eligible for impact fees. Mr. Mehta stated correct. At the point in time when the Town fixes the new the Infrastructure Investment Program (IIP), the first thing that will be done is to identify a Development Impact Fee Program, the Town will have to identify the cost including all of the cost from the General Fund towards this project, and then recover those fees. Vice Mayor Post stated he want to understand specifically with this project that those funds are eligible through impact fees. In the end, that is a small amount for the number of homes built in that area. Mr. Mehta replied stating new development would take care of itself through the impact fees. Mr. Kalaitzidis apologized for his misunderstanding of Vice Mayor Post questions, as he was under the impression that the discussion was related to the debt service coverage from the General Fund. The amount of transfers that are in and presented here, similar to the General Fund does not include money coming from the General Fund for the Northwest Recharge Project. That amount would increase by $700K in the next presentation, as the Town moves forward with including that project. It would increase in the Capital Fund and not the Operating Fund. For this program, the transfers have to do with money coming in other funds to pay for debt service of water assets. The big one coming in is the repayment of the $50M, which is a transfer in of $790K from the General Fund. The amount shown as a deficit is a change in Fund Balance of $591K, which is consistent with the rate study that shows Marana goal was to achieve a positive number over the course of five (5) years. In reviewing, the rate study and the included schedule show an estimated deficit balance for FY 2021, the rate study assumed a deficit balance of $502K. Town staff is presenting $591K, as there is $200K in restricted amounts in the event of an emergency. The study did not include such emergency funding when developed, which is why the difference is shown. Vice Mayor Post asked whether the rate study include the payment for the Water Treatment Facility, as he does not believe that it was. Mr. Kalaitzidis replied stating it did not. Vice Mayor Post expressed concern that the rate study would be nullified because of not including the payment for the Water Treatment Facility. Mr. Kalaitzidis Study Session Summary Minutes 05/26/2020 36 stated if Vice Mayor Post is referring to the debt service payment, it was not included as part of the rate study. Increase of rates would have been too great to be included, as that is one of the reasons the Town excluded it. It is planned for the near future to be covered for funding outside of rates. Vice Mayor Post asked whether the transfers in include the payment for that facility. Mr. Kalaitzidis stated yes. Vice Mayor Post stated this Water Operating Fund would not be as bad with that removed from this budget. He asked what the payment budget is for the item. Mr. Kalaitzidis stated $900K. Vice Mayor Post stated that next year the Town would be short roughly by $400K. Mr. Kalaitzidis stated that is correct. Vice Mayor Post continued stating the Town could transfer in $700K. Mr. Kalaitzidis stated the payment would still need to be made so the in-flow would be less by (for example, $800K) so that $600K would increase by $800K thereby increasing the fund in the negative. Mr. Kalaitzidis stated without that obligation, the fund would look much better. • Water Reclamation Operating Fund Budget Summary o Revenue: • Charges for Services (increase 23.6% or $351K): Rate revenues are solely based on the existing rate structure plus new account growth. The Town raised rates in January 2020 based on a study approved by Council. o Expenditures: • Contracted Services (increase 36.0% or $198K): Includes restricted amounts for increased maintenance needs on the sanitary sewer collection system. • Operating Supplies & Equip (decrease 16.1% or $58K): Includes reduced electricity costs Mr. Kalaitzidis continued stating with the water rate increase that Council approved months ago, as well as new account growth, Marana is expecting to see a sizable increase in revenues in the next fiscal year of 23% or $351K. Although that is happening in this uncertain economic environment, the Town is taking some amounts that were requested by the department for increased maintenance on the sanitary sewer collection system, and are restricting some of those funds. The Town will wait to see whether some of those revenues come in as anticipated before those funds are released to the department so that they can move forward with some of the maintenance work. As provided in previous reports, the Town had anticipated seeing some savings on the electricity cost at the new treatment plant after one year. Now, one year later, the Town has taken advantage of that and reduce the budgeted electricity cost at the new plant for $70K from last year. Study Session Summary Minutes 05/26/2020 37 Overall, this fund is in better shape that once thought it would be at year-end. The Town is adding$180K to its balance at the end of the year. According to the rate study, the Town included a goal in this fund to have a minimum 60-day reserve for operation and maintenance. In the current fiscal year, the Town anticipated having approximately $63K of a deficit. Instead will end the year with a positive balance of $188K putting the Town closer to its goal faster than anticipated. The transfer-in of$809K is for debt service payments that are paid from this fund for the Water Treatment Facility. • Airport Operating Fund Budget Summary o Revenue: • Charges for Services (increase 6.2% or $21K): Based anticipated revenue growth o Expenditures: • Contracted Services (decrease 16.5% or S41K): Decrease associated with one-time projects completed in the current fiscal year • Capital Outlay (decrease 30K): One-time purchase completed in current fiscal year • Transfers In (decrease 28% or $58K): Represents what may likely be an ongoing, operating subsidy from the General Fund Mr. Kalaitzidis explained the revenue section of the budget stating there is a slight reduction of 4.2% or $17K. However, in reviewing the comments noted on the slide, it indicates that our charges will increase by $21K. That is because in the current FY2020, the Town had budgeted S45K one-time revenue, not an ongoing revenue related to the pavement project that was recently completed. When the Town removed that $45K and looked at charges and services, the Town still saw an increase. Much of the increase deals with parking revenues that were anticipated to collect from the commercial jets parked at the airport. In speaking with Airport Director Steve Miller, he indicated that by the holiday season the Town would see them vacated from the town's property. Expenditures have decreased slightly, mostly due to the Town having one-time expenses in FY2020 that were either completed as projects (purchases were made and maintenance completed), or was deferred to a future period and not included in FY2021. The transfers-in have decreased, as this occurs as the airport continues to improve its ability to generate sufficient revenues. The Town is able to reduce the level of support that is generated from the General Fund. Study Session Summary Minutes 05/26/2020 38 Mr. Kalaitzidis commented on the key dates that the Town plans to bring forward its budget for Council consideration of adopting the Tentative Budget on June 16, 2020 and its Final Budget for Council consideration of adopting on July 21, 2020. Council Member Comerford asked whether the Tentative Budget would look any different from the Manager's Recommended Budget presented. Mr. Kalaitzidis stated the Tentative Budget would include all funds, a complete budget with all debt service, the Community Facility Districts (CFD's), Special Revenue Funds that will show what the Town expects to receive in grants as well as a right-side contingency amount to anticipate the next fiscal year. Council Member Comerford stated the Town has not covered all of those accounts. She asked when Council would be provided with a review of the other fund accounts. Mr. Kalaitzidis stated historically the review of those funds occur on the day it is scheduled for adoption. Council Member Comerford asked what happens when the Council elects not to approve the budget that day. Mr. Kalaitzidis stated the budget would be scheduled to a future day and continued. Council Member Comerford commented on the day to adopt the Final Budget stating it is already late as the Town is in the next fiscal year. She stated part of her concern is that the Council receives the budget book after staff has been working on it for approximately six (6) months. That Council only have five days over a holiday to review the information. She expressed concern over the differing formats of the budget materials provided by the Town. She wants to understand the material. She has always understood Deputy Town Manager Erik Montague she does not understand the materials presented by Mr. Kalaitzidis. She does not want to offend anyone; however, stated that is why she requested budget materials weeks ahead of the meeting. Five days is not sufficient time to review 140 pages of achievements and anticipated projects as she has been here for it. She wants to receive the information in a manner that she can fully understand the material presented. She ask how soon can the Town provide the Tentative Budget to the Council for its review. Mr. Kalaitzidis stated the Town is working to get it to Council by June 16. Council Member Comerford replied stating that is the earliest that Council would have an opportunity to review the budget. Mr. Kalaitzidis stated the presentation would be on June 16. The Town would make every effort possible to complete the compilation of the document and present it earlier to Council. Council Member Comerford continued asking whether the timeframe would be more than five days for Council's review. Mr. Kalaitzidis stated he could not provide that information at this time. Council Member Comerford stated she would vote no on the budget, as she needs additional time for review. She stated the Town is not making this process any easier for the Council. The Town is late in dealing with the budget, and much that have been decided, but the Council had no participation. She will never provide the Study Session Summary Minutes 05/26/2020 39 Town with a rubberstamp of approval from her. If she had faith and trust in what the Town was doing, it would not be an issue. Council Member Comerford she needs to be able to read and understand each line, as she does not trust the information. She wants to ensure at all employees are taken care of, as well as the 50K people that the Council represents are being served properly. The budget approval is one of the biggest priorities of the Council. That does not mean a rubberstamp, rather to include the Council in the process. She does not understand the difficulties of the staff not being able to provide the Council with the budget materials at least 14 days in advance of the meeting. Vice Mayor Post asked Mr. Mehta whether it is possible for Council to receive the budget materials to Council two weeks before the scheduled meeting. Mr. Mehta replied stating if the Town kept budget adoption on the date that has been suggested by the Town, and then the Town could provide the Council with the Tentative Budget on or after June 10. It is not two weeks, but one week. If the intent of the Council is to receive the Tentative Budget a full two weeks in advance of the meeting, then the Town would need to change the date of the meeting from June 16 to the following Tuesday, June 23. That would be another option. Mr. Mehta stated the Tentative Budget sets the ultimate high ceiling for the funds. If Council feels that there are additional need for changes during the two weeks of review, the budget amount can only decrease, not increase that could occur in July 2020. Mayor Honea state with the Tentative Budget it only locks in the ceiling of the dollar amount that the Town can spend. Council Member Comerford stated when would Council have an opportunity to do that or have discussions related to the budget. Mayor Honea asked what specifically did she wish to discuss. Council Member Comerford stated special events and other issues. Mayor Honea stated he agrees with Council Member Comerford that he has had conversations with Mr. Mehta stating the budget information should have been provided to Council earlier. That is more of a policy than a management decision. However, the Town explained to Council during this meeting, and that no Council Member had disagreed. July 4 will be fireworks; the Harvest Festival will not take place this year, and the Holiday Christmas Tree Lighting—the town could end up doing the entire event. Council Member Comerford thanked Mayor Honea for the updates on the Town's special event stating that is just the way it is going to be, as Council will not have any say in the matter. That is the decision. That, Town staff explained its decision to Council, and Council accepts staff's decision. Mayor Honea replied stating he contacted Council Member Comerford several times to discuss the budget as well as explaining what the Town was looking at. Council Member Comerford stated Mayor Honea did not have to contact her. Mayor Honea stated he provided the information. Study Session Summary Minutes 05/26/2020 40 However, Council did not have the opportunity during this budget to provide its comments. It is a learning experience for the staff. If it should happen again, and he hopes that it does not...Council Member Comerford replied stating it will not happen again Mayor—it had better not happen. Mayor Honea stated the Town is at a point where the budget will be presented on June 16; that is three weeks from this day. He asked Council if they prefer to have the budget meeting pushed back to June 23 so to allow Town staff to provide Council with the budget information at least two weeks prior to the meeting. Alternatively, would Council prefer June 16 as planned. Council Member Comerford stated it does not matter to her at this point. Council Member Ziegler suggested moving the date to June 23. Council Member Comerford stated she is one person that if Council go alone with the date, then she would as well. Mayor Honea stated the Tentative Budget would move to June 23, and the Town will try to get information out to the Council two weeks before the meeting. The July meeting date would remain the same. Vice Mayor Post stated the July meeting date has to remain the same. Mr. Montague replied stating as a matter of state law the Town's final budget needs to be adopted by the end of July. Vice Mayor Post stated the July date is the unmovable date. Mr. Montague stated the budget has to be adopted by the end of July. Mayor Honea restated the dates of the meetings on the Tentative Budget of June 23, and the Final Budget will be discussed on July 21. Mayor Honea stated Council is trying to work with the budget presented by Town staff and we are uncertain of the amount of dollars the Town will have. When you are unsure of the amount, it is very hard to be definitive on what you are doing. His personal opinion that he partially agrees with Vice Mayor Post and Council Member Comerford; the Town's greatest assets are its employees. That does not include its parks, cars or anything else. It is his hope that the budget protects the people who prepares the budget for the Council and the Town. It is also his hope that the Town does not have to furlough its employees. He is not saying that he would not support it if it came forward, but hope that the Town does not have to make that decision. If vehicle purchases were delayed in all departments, in an effort to save Town employees and to keep from hurting employees and their families, he would hope that would be done. Council Member Officer stated he really appreciates staff's effort on the budget materials as it took him the entire five (5) days to review and understand the entire Study Session Summary Minutes 05/26/2020 41 book. He made an effort to contact Mr. Mehta on items he did not understand. Everyone in the Chambers prepare the materials for the Council. He would like Town staff to understand that Council are the ones that the public calls; they do not contact Town staff. That is the reason why Council has made the request to receive the information in advance. Five days to review the information was tough for him. He asked staff to be proactive in getting the information to Council soon rather than later. This is a tough time for everyone and with everything that is occurring around us, as well as, budget season. He encouraged staff to submit the materials to Council so that Council has adequate time to review, so that it makes it better for them when they agree with staff's proposal of the budget. Council needs the Town's help with this as the Town has done a great job in putting together the budget. Council Member Ziegler stated with nearly all department heads in attendance she thanked everyone. She continued stating she has never been through a pandemic, and thinks someone on television stated, "We're just winging it." She believes that is what the Town had done, although she does not want to sound cavalier about the pandemic or the staff's efforts. It has been extraordinary process, and thanked all Town employees for innovative vision throughout this ordeal. In a short amount of time, Town staff continued to serve the people of Marana with extra effort. EXECUTIVE SESSIONS El Executive Session pursuant to A.R.S. §38-431.03 (A), Council may ask for discussion or consideration, or consultation with designated Town representatives, or consultation for legal advice with the Town Attorney, concerning any matter listed on this agenda for any of the reasons listed in A.R.S. §38-431.03 (A). FUTURE AGENDA ITEMS Notwithstanding the Mayor's discretion regarding the items to be placed on the agenda, if three or more Council members request that an item be placed on the agenda, it must be placed on the agenda for the second regular Town Council meeting after the date of the request, pursuant to Marana Town Code Section 2-4-2(B). ADJOURNMENT Mayor Honea asked for a motion to adjourn the meeting. Vice Mayor Post, moved and Council Member Kai second the motion to adjourn the meeting. Motion passes, 6-0. Meeting adjourned at 9:29 PM. CERTIFICATION Study Session Summary Minutes 05/26/2020 42 I hereby certify that the foregoing are the true and correct minutes for the Study Session Meeting of the Marana Town Council meeting held on May 26, 2020. I further certify that a .uorum was present. AA. 44111. Cherry L. awson, Town Clerk 46, MARANA ESTABLISHED 1977 Study Session Summary Minutes 05/26/2020 43 9