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2011 08 04 WS Minutes, SpecialMINUTES OF THE SPECIAL WORK SESSION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN August 04, 2011 The City Council of the City of Baytown, Texas met in a Special Work Session on Thursday, August 04, 2011 at 6:15 P.M., in the Council Chamber of the Baytown City Hall, 2401 Market Street, Baytown, Texas with the following in attendance: Brandon Capetillo Council Member David McCartney Council Member Terry Sain Council Member Scott Sheley Council Member Robert Hoskins Council Member Stephen DonCarlos Mayor Robert D. Leiper City Manager Kevin Troller Assistant City Manager Ignacio Ramirez City Attorney Leticia Brysch City Clerk Keith Dougherty Sergeant at Arms Mayor Stephen DonCarlos convened the August 04, 2011, City Council Special Work Session with a quorum present at 6:15 P.M., all members were present with the exception of Council Member Hoskins who arrived at 6:45 P.M. and Council Member Renteria who was absent. 1. DISCUSSIONS a. Discuss City of Baytown Fiscal Year 2011 -2012 Proposed Budget — Finance. City Manager Leiper presented this agenda item and began the Fiscal Year 2011 -2012 Proposed Budget presentation by outlining the major funds that the discussion would be based on including: the General Fund, General Debt Service Fund 2007 GO Bonds, Water and Sewer Fund, Utility Capital Improvements, Sanitation Fund, Storm Water Utility Fund, Hotel / Motel Fund, Central Services Fund, and Street Maintenance Tax Fund. He stated that the budget priorities for the year included enhancing public safety in Baytown, maintaining essential services, preserving the workforce and employee benefit programs, maintaining capital improvement and bond programs that are ongoing, continuing infrastructure maintenance and improvement, continuing economic development with a focus on redevelopment and TIRZ properties, and maintaining financial integrity by ensuring adequate working capital. City Manager Leiper continued with his overview and stated that the General Fund is proposed to increase by $3,077,064 to $64,179,340, which is a 5% increase. The vast majority of the increase being in personnel services, which is an increase of about $1.4 million. He also stated that the proposed budget has no property tax rate increase, does not include any Year -Five Bond projects, and has the maintenance and operations allocation of the Ad Valorem tax decreased from 58% to 54 %. The proposed budget also includes a 5.85% utility increase and contains no increases for sanitation, storm water, building inspection/permit, or Parks Department building use fees. City Manager Leiper then began to specifically describe the General Fund. Areas of increase in the fund include the hiring of two new police detectives, $100,000 of overtime for traffic enforcement, and step raise increases for police and fire departments. Also, the costs of workers compensation and health insurance have both increased. Lastly, he stated that proposed quarterly employee bonus payments will also increase the General Fund. Mayor DonCarlos asked if the new detectives would be existing officers. Mr. Leiper stated that they would and also stated that their promotions would not lead total decrease of officers, but lead to the hiring of two new officers, who would fill their former positions. Council Member Sheley asked why we don't use the $100,000 increase in overtime to hire an officer just for patrol. City Manager Leiper stated that these funds will already go towards the hiring of the new detectives. City Manager Leiper continued to say that the General Fund budget is a balanced budget. The proposed General Fund budget utilizes $5,078,030 in fund balance and has capital and non - recurring expenditures of $5,138,669. Therefore, the recurring expenditures are $60,639 less than the recurring revenues. City Manager Leiper described the breakdown of revenues into the General Fund as 43% from Industrial District payments, 16% each from the Sales and Use taxes and Property taxes, 7% from Franchise taxes, and 18% from transfers and other revenues. City Manager Leiper stated that assessed valuations are estimated to decrease 7.7% ($190 million) due largely in part to a Pollution tax exemption for industries. Property tax revenues are projected to decline 13% ($1,475,685) from the 2011 Budget. Ad Valorem taxes make up 16% of the General Fund revenues. He continued to highlight that Sales and Franchise taxes are also projected to decline and Industrial District revenues are projected to increase 8% over the current year which represents renewed contracts that have had their valuations increase. In reference to the Ad Valorem tax revenue collection, Council Member Capetillo questioned whether or not the City has improved in collecting back taxes. City Manager Leiper stated the City's recent collection of back taxes has been good considering the state of the economy; however there are still large amounts of outstanding delinquent taxes that have yet to be paid. City Manager Leiper also outlined the following general fund revenues in his presentation: Permits and Licenses -7.1% (- $71,202) Operating Transfers In 29% $974,457 Intergovernmental Transfers -27% (- $199,359) Charges for services <-I% (- $15,710) Fines and forfeitures 15% $295,640 Miscellaneous 7% $35,244 Mayor DonCarlos asked where the City was with increasing the charges for ambulance services. City Manager Leiper stated that the City added a billing clerk about two (2) years ago and since then has been maintaining the revenues despite reimbursement challenges with Medicaid and Medicare. City Manager Leiper then began the discussion on General Fund Expenditures and stated that a vast majority of expenditures are for Public Safety at 56 %, 23% is General Government, which consists of internal services and overhead, Culture and Leisure is 10 %, Health and Welfare is 4 %, and Public Works is 7 %. He went on to state that Personnel Services make up 72% of the General Fund Expenditures by type, while Supplies, Maintenance, Services, Miscellaneous, and Capital & Transfers make up 4 %, 4 %, 10 %, 1%, and 10 %, respectively. Specifically, City Manager Leiper then described the Employee Compensation and Benefits in greater detail and stated that the 2010 -2011 Budget did not include any salary increases and that the limitations of recurring revenues do not provide sufficient funds for traditional salary increases since these cant' an ongoing financial obligation. City Manager Leiper stated that healthcare costs are increasing and that employee premiums will increase about 10% to 20% depending on the plan and wellness program participation. The City's portion will increase $712,000. One graph showing General Fund Expenditures for ten years and one graph showing adopted budgets vs. Actual/Estimated Expenditures were highlighted next. The General Fund Expenditures graph showed that the expenditures for Public Safety have grown over the last ten years. City Manager Leiper stated that this is in response to what City Councils have told administration in regards to prioritizing Public Safety and most of the other categories have been held flat with some being well below any inflationary increases. He then stated that the next graph showed that the City has consistently stayed under budget and that the departments take pride in staying below their budgets. City Manager Leiper then began to discuss the fund balance and stated that the fund balance is the City's savings account. City Manager Leiper stated that the fund balance was used for the last hurricane that affected the City and that it is important for the City to have a fund balance. He stated that the proposed budget has budgeted for 75 days of working capital and that he is confident that short of a Category 4 or Category 5 hurricane, the City will end the next fiscal year with more than 75 days. City Manager Leiper also stated that the average homeowner in Baytown will pay $57 per month to support and receive City services such as: 24 hour police, fire, and EMS services, public health services, maintenance of all public streets, park facilities, library services, building inspections and permitting services, code enforcement services, and debt service for major capital improvements. The next portion of the discussion was on General Government. City Manager Leiper stated that the City Council budget would be discussed in greater detail. City Manager Leiper explained that the City Council budget is substantially the same, less a reduction in the travel and reimbursables line item. In total there is $14,550 budgeted for travel and reimbursables, which covers hotels, meals, and fuel costs for conferences such as TML. Mayor DonCarlos inquired why the Chamber Contracts were under the City Council budget. City Manager Leiper stated that he believed that this expenditure was something that was traditionally put under the City Council budget. City Manager Leiper then described the other sections of the General Government including: Administration, Fiscal Operations, Legal, Information Technology Systems, Planning and Development Services, Human Resources, and City Clerk/Municipal Court. City Manager Leiper stated that the structure of the City Clerk/Municipal Court will be changing with the Court moving to become a Court of Record. Council Member Capetillo stated that with the move he would like to see the Marshals under the direction of Judge Escalante. City Manager Leiper then discussed the City Facilities and Overhead segment of the General Government and stated that this section of the budget includes funds for utilities, copiers, maintenance, and other common City facilities. While the General Overhead section of this budget covers casualty insurance, the joint venture with Harris County for transportation services, and street lighting, which has $1,012,956 budgeted for 5,061 lights. Council Member Sain asked where the City will be accounting for the change in costs for voting. City Manager Leiper stated that if Council goes with his recommendation, the budget for elections would stay the same. Council Member Capetillo asked how the City budgets for a potential citizen initiative. City Manager Leiper responded by saying the City currently budgets for two full elections. Next, City Manager Leiper spoke to the Public Safety aspect of the General Government and stated that the proposed budget breakdown has Police accounting for 55% of the Public Safety budget and Fire, Communications, and Emergency Management, accounting for 38 %, 5 %, and 2 %, respectively. City Manager Leiper stated that the Police department has 181 FTE positions budgeted, which includes two (2) additional detectives and $100,000 in traffic enforcement overtime. He continued to say that the Fire budget includes 112 FTE positions, four (4) divisions, six (6) fire stations, and the administration facility. He stated that Fire Station 6 is getting a SAFER Grant to cover personnel costs in the amount of $215,030. City Manager Leiper stated Emergency Management has budgeted for five (5) FTE positions and stated that they are responsible for such duties as coordinating FEMA and Homeland Security Grants as well as operating the managing the ASK BAYTOWN phone line. Also as part of the Public Safety portion of the budget presentation, City Manager Leiper mentioned that Communications has 21 FTE positions budgeted and does all the dispatching for all public and emergency services. The next section of the General Fund that City Manager Leiper covered was Public Health. He stated that Public Health has 46 FTE positions in the proposed budget and that it includes the following sections: Environmental Health, Mosquito Control, Neighborhood Protection, Animal Services, and Emergency Medical Services. Public Works and Engineering was the next part of the General Fund presentation and City Manager Leiper described this part as being 7% of the General Fund budget and divided in the following way: Streets and Drainage, 41 %, Traffic Control, 27 %, Engineering, 21 %, and Public Works Administration, 11 %. He continued to state that Public Works has 35 FTE and Engineering has 10 FTE positions. The Culture and Leisure section of the budget was presented next and City Manager Leiper stated that the Library constitutes 40% of this section of the budget, while Parks and Recreation accounts for the remaining 60 %. Further he stated, Parks and Recreation have 40 FTE positions that are responsible for 47 parks covering 1,084 acres, two(2) water parks, events and activities, the Wetlands Education Center, and the Baytown Nature Center. He followed that by stating that the Library has 25 FTE positions in this proposed budget responsible for a program of public library services and resource access to citizens. Mayor DonCarlos asked whether or not the City has given any thought to updating and renovating the inside of the Community Center. City Manager Leiper stated that a project with that scope would most likely be a future bond project and that there are limitations with updating the Community Center being that most of the walls are load bearing. Therefore, City Manager Leiper stated that it may be more cost effective to build a new Community Center. Mayor DonCarlos stated that he would like for an upgrade of the center to stay on the radar screen for the City. City Manager Leiper then began to discuss the Debt Service Fund and summarized the fund as having $11,851,596 in revenues, which consists of taxes and transfers from other funds along with $11,581,596 in principal and interest payments and other fiscal charges leaving an estimated ending balance of $425,000. He stated that the Debt Service Fund is 9.5% of all the City budgets and that most of the Debt Service Fund expenditures are a result of the 2007 GO Bonds Program. City Manager Leiper explained further that in 2009 the City had their first tax increase due to the bonds. He described that the anticipated tax rate increase for 2009, 2010, and 2011 was $.064, $.08, and $.098, respectively, and compared that to the actual rates which were $.05, $.05, and $.05, for the same said years. He summarized the Year One and Year Two Bond Projects as the following: street improvements, Fire Station 6, communications improvements, matching funds for transportation projects, drainage improvements, beautification, and public safety improvements. City Manager Leiper stated that the Year Three and Four Projects include more street improvements, aquatics improvements, sidewalks near parks and schools, and beautification. The expansion of the EMS station on South Main, which was originally a bond project, is now a CDBG funded project. City Manager Leiper went on to discuss the Year Five Projects, which are proposed to begin in fiscal year 2011 -2012 and recommended that Council approve of changes to the plan which include moving the final phase of radio replacement ($1,150,000) to 2013- 2014, moving matching TxDOT funds in the amount of $1,000,000 to 2012 -2013, and moving $700,000 for implementing the aquatics master plan to 2012 -2013 and $1,000,000 to 2013 -2014. City Manager Leiper also proposed moving $1,000,000 for design/land acquisition for the 911 Center to 2012 -2013 and construction for the same Center to 2013 -2014 or later. Also, bond money for Baker Road construction and North Central Fire Station will be moved to future years of the bond program. City Manager Leiper presented two proposals: one that would see the Year Five Bond Projects go forward with the recommendation for a 3.5 cent tax increase and the other that would see all of the same projects completed minus the street improvements for a one (1) cent tax increase. City Manager Leiper recommended moving forward with the street improvements because if they go forward with all of next year's projects, the bonds issued would be over $18 million dollars. City Manager Leiper stated that the City really cannot do this, especially since they would need to start the Baker Road project which is over $6,000,000 and therefore, stated if they do the Baker Road project along with the North Central Fire Station project, he doesn't think the City would be able to do the $5,000,000 in street improvements and stay below the 10 cent target. Council Member McCartney suggested moving forward with the proposal to issue $5,000,000 in bonds for street improvements this year. Council Member Capetillo stated that the City is getting good bids for the street projects and stated that the City may be better off commencing with these projects. City Manager Leiper reminded Council that in 2007 the City surveyed streets that needed reconstruction and the total came to $60,000,000 worth of needed improvements. Council Member Sain stated that bad streets can lead to a perception of blight for the City. City Manager Leiper asked Council if they would like to see a technical adjustment on the bond program changes and members of the Council said that they would. He invited Mr. Gilbert Santana, Chairman of the CBAC to discuss the CBAC's view on the bond program. City Manager Leiper continued the budget discussion by presenting the proposed Water and Sewer Fund and summarized the proposed budget for the fund by highlighting the expenditures which are at $34,588,736, an increase of $1,888,140 or 5.8 %. He stated that the increase is primarily due to the increase cost of treated water and personnel costs. City Manager Leiper said the Water and Sewer Fund is an Enterprise Fund, which means it's essentially a fund that is run like a business. The operating areas are Utility Billing/General Overhead with 19 FTE, Water Operations with 35 FTE, Wastewater Operations with 49 FTE, and Utility Construction with 17 FTE. City Manager Leiper described Utility Billing and Collections as being responsible for billing for water, sewer, storm water, and garbage services as well as for the testing, repairing, and replacing of meters. He continued to state that the Water and Sewer General Overhead segment of the Water and Sewer Fund is just like the General Overhead in the General Fund in that they are expenditures that are not directly associated with any department. It also includes property and liability insurance, bad debt write -offs, and contingencies. City Manager Leiper then discussed the Water Operations component of this fund, which includes two areas: water distribution and treated water. He stated that water distribution is the operation and maintenance of 458 miles of lines, five (5) well sites, and eight (8) elevated storage tanks. The treated water aspects of the fund covers costs associated with purchase of treated water from BAWA, which is affected by the costs, associated with the City of Houston raw water rate increases. City Manager Leiper then moved on to discuss the Wastewater Operations and stated that wastewater collections includes the operation and maintenance of 430 miles of lines and 82 lift stations and the operation of four (4) wastewater treatment plant facilities. City Manager Leiper continued to describe the fund and stated that the pollution control aspect of the fund was for the monitoring of waste that enters the collection system from food, commercial, and industrial facilities. He reinforced the importance of this aspect of the fund by recalling past problems that the City had with waste, including grease, backing up lines. Lastly, City Manager Leiper described the Private Sewer Line Replacement Program (or PSLIP) which is in place to test and identify private sewer lines that may require replacement. Council Member Sain raised a question in regards to citizens' concerns about their water meters being read and asked if they may be broken. City Manager Leiper responded that the City does have a number of radio read meters that are broken, however he emphasized that the meters are still able to be read despite their malfunctioning radio terminals. Council Member Sain also questioned the appearance of the City's other water storage tanks and if there is a plan for them. City Manager Leiper stated that the painting of two (2) water towers will be happening soon, with one on Baker Road and the other one at Bayway. Council Member Sain said that in the past, Lee College has paid to have their logo on the tanks and asked if they were going to do the same for these two tanks. City Manager Leiper stated that the decision to put Lee College on the tanks would be up to the college. City Manager Leiper continued to discuss the Water and Sewer Fund, specifically the Utility Construction aspect of the fund. He stated that the tapping crew will install new water and sewer taps and replace failed taps. He stated that this part of the fund also includes $200,000 to continue the in -house waterline rehabilitation program. City Manager Leiper stated that in the older districts where two (2) inch lines are in the back of the house, a City crew will install six (6) and eight (8) inch lines in the front of the houses and install fire hydrants as well. Council Member McCartney asked where the City was in replacing old lines and if there is still work to be done. City Manager Leiper responded that there is a lot of work to be done and stated that the proposed budget has a capital expenditure that would expand the program by hiring a contractor to do $1,000,000 worth of work. City Manager Leiper then continued to speak to the rates for water and sewer which are proposed to see a 5.85% increase. He said that a residential property, within the City, and with an average 6,000 gallons of use will see their rates go up from $88.35 a month to $92.21 a month and that a property outside of the City with the same usage would, on average, see their bill go from $107.54 to $113.82. City Manager Leiper stated that the proposed budget for Water and Sewer Fund includes 83 days of working capital. Council Member Sheley asked how the City offsets the costs of breaks in water lines or when hydrants are opened to relieve the pressure in the lines. City Manager Leiper responded that those instances of unbilled water are the cost of doing business and that the expenditure is known to occur and is therefore budgeted for. City Manager Leiper then presented the proposal for $7.85 million in Utility Capital Improvement projects and highlighted the projects which included $1,000,000 for miscellaneous rehab and emergencies and $300,000 a piece for the evaluation of Slap - Out Gully and Hugh Wood Lift Stations. Also, City Manager Leiper stated that $4 million is proposed for collection system rehabilitation, $700,000 for Oakwood/Lee Heights system rehabilitation, $450,000 for the Pelly /Gulf Hill system rehabilitation, and $1 million for the water system rehabilitation. City Manager Leiper's presentation of the proposed budget moved to the Sanitation Fund and he stated that this fund supports 13 FTE's who are responsible for twice- weekly household garbage and heavy trash collection, weekly curbside recycling, monthly curbside brush collection, the recycling/junk drop off center on West Main, and a year- long pilot program for the larger recycling bins. He stated that there are no fee increases or changes proposed. City Manager Leiper stated that the Sanitation Fund has revenues of $4,503,035 and expenditures of $4,871,648, which include funds for contracted services, personnel, and other operating costs, capital and transfers out. City Manager Leiper then moved to discuss the Storm Water Fund, which he stated has projected revenues of $1,218,600 in drainage fees and interest on investments and $1,315,354 in expenditures, which includes money for personnel, operating costs, and transfers to the General Fund. He then stated that the Fund has four (4) FTE positions and that the City is required to have this fund due to the Federal Clean Water Act, which is administered by TCEQ. He explained that there will be no increase in rates and that the transfer to the General Fund is made to cover partial funding for eligible drainage activities as required by the Federal permit. The City's Hotel Motel Fund was the next fund to be presented and Mr. Leiper stated that the revenues into this fund are essentially flat at $678,335 and that expenditures are a little over a million dollars. He said that the proposed budget has an ending balance of $92,269 and that it makes up less than I% of the total City budgets. City Manager Leiper stated that because Baytown is a bay community, the City is allowed to spend 10% of the fund on beautification and the City spends 10 %, 3 %, and 77% of the budget on Arts, Historical, and Promotional activities, respectively. City Manager Leiper stated that the budget essentially keeps the funding at the same level as last year and that one change for $60,900 is for the hiring of a tourism coordinator. City Manager Leiper then moved to the next to the last fund for discussion, the Central Services Fund and stated that it is an internal services fund for the garage and the warehouse. He stated that fuel and oil cost increases account for the majority of the fund's increases and that there are eight (8) employees that work in the garage and four (4) employees in the warehouse. The last fund up for discussion was the Street Maintenance Tax Fund and City Manager Leiper stated that a '/% of sales tax will come back for re- authorization by the voters in November of this year. He stated that the estimated revenues are $2,305,000 and the expenditures include $2,343,569 in mill and overlay, $1,107,158 in crack and joint sealing, $748,830 in concrete street repair, and $500,000 in contingency. City Manager Leiper concluded his budget presentation and stated that there were no more special budget sessions planned, however he stated that he would be happy to set one up if the Council so desired. He then stated that there are budget discussions set for upcoming City Council meetings, leading up to a scheduled vote on the budget at the September 8`h regularly scheduled City Council meeting. Mayor DonCarlos asked Council if any member saw the need for another special budget session. Council members stated that they did not see the need. Mayor DonCarlos asked the City Manager to come back to him with justification for how Parks and Recreation will see increases in both Concessions and Rentals. City Manager Leiper said that he will have staff look at that and he will also bring to Council technical adjustments on the bonds and will look more in detail at the Aquatics Fund, and will bring Council a technical adjustment for the Court of Record costs and for pending litigation. 2. ADJOURN With thcre being no further business to discuss, Mayor DonCarlos adjourn ed the August 04, 2011, City Council Special Work Session at 8:40 P.M.