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2023 08 15 WS Minutes, Budget MINUTES OF THE SPECIAL BUDGET WORK SESSION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN August 15, 2023 The City Council of the City of Baytown, Texas, met in a Special Budget Work Session on Thursday, August 15, 2023, at 3:38 P.M. in the Baytown Fire Training Center located at 7022 Bayway Drive, Baytown, Texas, with the following in attendance: Laura Alvarado Council Member Sarah Graham Council Member Kenrick Griffith Council Member Jacob Powell Council Member Mike Lester Mayor Pro Tern Brandon Capetillo Mayor Jason Reynolds City Manager Scott Lemond City Attorney Angela Jackson City Clerk John Stringer Sergeant at Arms Mayor Capetillo convened the August 15, 2023, City Council Special Budget Work Session with a quorum present at 3:38 P.M. All members present with the exception of the absence of Council Member Heather Betancourth and Council Member Sarah Graham who later arrived at 3:40 P.M. 1. CITIZEN COMMENTS Mayor Capetillo announced no citizen had signed up to speak. 2. DISCUSSIONS a. Discuss the City of Baytown Fiscal Year 2023-24 Proposed Budget. City Manager Jason Reynolds facilitated the discussion of the City's Fiscal Year 2023-24 Proposed Budget. He informed Council they would answer some policy questions,but the consensuses they would come to would not be binding. It would only help Staff get the policy pieces together. Mr. Reynolds first addressed the question: had sales tax predictions fallen short?He answered,no, they have not fallen short. Their sales tax has grown since 2004, but was somewhat plateauing at that point. Mayor Pro Tern Lester noted the Councils of the past requested to be conservative with the estimates. He gave kudos ton the Finance Department and explained that was why they have not over-projected. The Council Members then participated in an exercise where they were presented questions and wrote down their answers. As the recording of the meeting is only in audio,the responses captured were the ones Council or Staff verbalized.Those questions and answeres were provided as follows: City Council Budget Work Session Minutes August 15,2023 Page 2 of 3 In the next 5 years, where would you like to see the tax rate between a scale of 680 and 70¢? Council Member Graham picked the lowest numerical value. Mayor Pro Tern Lester believed they should lower the tax rate to the best of their ability but within reason for the operations of the City. Council Member Alvarado picked 700 to not disturb operational costs to which Council Member Powell and Council Member Griffith agreed. Mayor Capetillo shared he wrote down 710 as the City had needs. Mr. Reynolds noted their rate was currently at 750 and he described what that entailed in regards to their maintenance, operations, debt, and its impact to residents. With reserves, where would you like that to be on a scale from 60 to 90 days? Mayor Pro Tem Lester responded that he would like for their end of year target to be at 90 days. Council Member Alvarado, Council Member Powell, and Mayor Capetillo all answered 75 days. Council Member Graham answered 90 days, and Mr. Reynolds noted that 90 days sat better with bond rating agencies. It was also noted that a day for the reserves was equivalent to $330,000. How would you like to handle infrastructure: more cash focused, debt focused, or a hybrid? Mayor Capetillo believed they would have to do a hybrid. Council Member Graham commented she felt like this was a trick question because it would depend on what they would do. Thus, it would have to be a hybrid. Council Member Powell stated he preferred cash. Mayor Pro Tem Lester communicated that if it were a standard project for$3 or$4 million,that would be more for cash funds. If the project was to build a$15 to $20 million wastewater treatment plant, that would be long-term debt. Mayor Capetillo further clarified it would depend on their bandwidth. Council and Staff discussed the implications of the hybrid approach as that was the general consensus. For debt, would you like to use Certificates of Obligation (CO) or General Obligation (GO)? Council Member Powell stated he would never have an issue with a GO as that would be taken to the voters. However, Council Member Alvarado noted that if they had an emergency waterline situation, they could not wait to go to the voters. In regard to the answers the Council Members wrote down, Mr. Reynolds conveyed the majority agreed with having a hybrid piece. But, he rec- ommended for any water and sewer infrastructure replacements underground to go with COs. Council and Staff engaged in a discussion over the laws and implications of COs and GOs. Between 0%and 10%, how much does our revenue grow annually assuming we do nothing? The Council Members mused over this question,but Mr.Reynolds ultimately conveyed the answer was zero. If they did absolutely nothing, their revenue would not grow. Their expenditures grew 3% every year while Harris County Appraisal District(HCAD)numbers grew at 2%. Thus, at the very beginning, the City had an unequal balance on their growth chart. Mr. Reynolds explained that was why they had 3% growth built in to their budget every single year. With that ending the exercise, Mr. Reynolds addressed what had changed in their organization, such as their administration and long-range planning. He also assured the Council Members that the City was not in a doomsday scenario based on the lower-than-expected projections for their revenue sources. They still had time to make changes. On that note, Mr. Reynolds discussed over the policies that would help keep the budget on a sustainable path for the foreseeable future. • Reserves - Recommendation: 75-day fund balance (or a minimum of 70 days) with the intent to work up to a 90-day fund balance. City Council Budget Work Session Minutes August 15,2023 Page 3 of 3 • Tax Rate - Recommendation: Choose the lowest of the no-new-revenue rate or the voter ap- proval rate until they reached 680. After they reached 680, then work towards a half-cent decrease if they were able to with each budget. • Sale Tax - Recommendation: Hire an economic development team to grow sales tax revenue. • Revenue Acute - Recommendation:Fees,fines,and service charges increase each year with the Con- sumer Price Index (CPI). It would be reviewed every other year to ensure that the cost increases would not more than the cost to provide that service. Also, for debt collections, have a process in place to identify debts that could be written off. • Revenue Transfers - Recommendation: Continue how they operate with transferring other funds in to the General Fund, except with the Water and Sewer transfer of$1.5 million. It was noted that would need to be further discussion. • Expenses - Recommendation: Grow below revenue expense growth. In extraordinary cases, Council would allow an overage with the expenses being more than revenue. • Debt - Recommendation: Hybrid approach with debt and cash. However, the City would move towards General Obligation Bonds as the primary source for large pieces and Certificates of Obligations for water, sewer,and other small infrastructure projects. • Contingency - Recommendation: Be 1% of the budget moving forward. • Enterprise Funds - Recommendation: Be self-supporting and help from the General Fund should only be in an extreme case that Council would consider and vote on. Mr. Reynolds clarified he was not suggesting that they make these changes before next month. For the budget the Council would view tomorrow, if they wanted to make any dramatic changes, Mr. Reynolds asked they use 2024 to really look at the services they provided. At that time,they could then see what Council would prioritize or not. The discussion came to a close with Mr. Reynolds informing Council on what would be discussed at their next Special Budget Work Session. 3. ADJOURN With there being no further business to discuss, Mayor Capetillo adjourned the August 15, 2023, City Council Special Budget Work Session at 5:05 P.M. /�„ •,41 0 t. -/ g I a / cirri - G Angela 1.ckson,pty tj,e,'i' m City of Baytown .. x' ''‘ .«• 0 s