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2004 08 02 WS MinutesMINUTES OF THE WORK SESSION OF THE CITY COUNCIL OF THE CITY OF BAYTOWN August 2, 2004 The City Council of the City of Baytown, Texas, met in work session on August 2, 2004, at 11:11 a.m. in the Hullum Conference Room, Baytown, Texas, with the following in attendance: Ronnie Anderson Sammy Mahan Don Murray Mercedes Renteria III Scott Sheley Calvin Mundinger Gary M. Jackson Bob Leiper Ignacio Ramirez, Sr. Gary W. Smith Council Member Council Member Council Member Council Member Council Member Mayor City Manager Assistant City Manager City Attorney City Clerk The meeting was opened with a quorum present after which the following business was conducted: Discuss the 2004 -2005 fiscal year budget. Mayor Mundinger reviewed the rules for participation. Each person is to participate. Be courteous and do not interrupt. Respect the views and opinions of others. Stay on the issues. Pursue the common good of the entire Council. Consensus is the agreement of the majority of the Council. Staff is guided by consensus. Gary Jackson, City Manager, presented an overview of the general fund budget. The proposed expenditures in the general fund are increased by $1,031,729 or 2.4 %. Enterprise funds are like business. The funds are operated from the special revenues dedicated to their operations. The revenues are rates and fees, not taxes. The general fund provides the basic operations that are funded in part by taxes, fines, grants, and industrial district payments. The general obligation interest and sinking fund provides payment of the debt service on tax - supported bonds. The hotel occupancy tax fund provides for limited purpose expenditures, as authorized by statute. The proposed reduction is due to the removal of the convention center debt financing. The debt is being transferred to the water and sewer fund to provide capital to pay for water and sewer projects within the original purpose of the certificates. Page 2 of 3 Minutes of the Work Session — August 2, 2004 The expenditures in the general fund from 1999 through 2005 were reviewed. No property tax rate increase is proposed. No fee, permit, or rental increase is proposed. Three new employees are proposed, PC Technician, VoIP Technician, and EMS billing clerk. Approximately $2.3 million of the fund balance is proposed to provide for capital and non - recurring expenses. The total of capital and non - recurring expenses is $2,831,973. The fund balance is proposed to be reduced from 92 days (current budget) or 109 days (current budget year estimate) to 84 days of working capital. Each day is valued at $122,000. The Council engaged in discussion of previous projections of revenues and expenditures in the general fund. Reductions in general fund expenditures and enhanced general fund revenues avoid adverse consequences of previous projections. The Council discussed the number of working days capital that should be maintained. Council discussed whether staff should be instructed to revise the revenue and expenditure projections based on the historic pattern of surplus funds at the end of each budget year. Staff explained that using fund balance created in the previous year does not equate to deficit budgeting. The discussion continued concerning the benefit of utilizing funds that will be in the fund balance to pay for current year projects. The Council discussed the possibility of deferring payments in the capital replacement fund in order to fund current year expenditures. Mr. Jackson reviewed the projected revenues. In the general fund, 40% will come from industrial district agreements; 22% will come from property tax; 16% from sales tax; 15% from other; and 7% from franchises. Assessed values are projected to increase by 3 %. The growth in the tax levy is projected to be 3 %. Sales tax is projected to grow by 0.7 %. IDA growth is projected to be 0.6 %. Permits and license revenue is projected to drop by 23.2 %. Transfers in are down by 4.6 %. Intergovernmental transfers are level. Charges for services are down 0.6 %. Fines and forfeitures are projected to increase by 8.5 %. Interest on investments is projected to be up by 12.9 %. Expenditures for public safety make up 52% of the general fund; for health, 2 %; for public works, 9 %; for culture and leisure, 12 %, and for general government, 25 %. Personnel expenditures account for 70% of the general fund and 45% of the overall budget. The salary ranges were last adjusted in 2000 -2001. Employees received at 2.5% increase in 2003 and non - collective bargaining employees a 2.5% increase in 2004. Collective bargaining employees received a 2.1% and a .4% increase in 2004. Alison Smith, Director of Human Resources, explained how "market" for employee compensation is calculated. After the study, it was found that the exempt employees were at 93% of market, non - exempt at 97% of market, Police at 94% of market, and Fire at market. The pay grade structure for non -civil service employees will be raised two grades. On January 1, each full -time non -civil service employee will receive a 3% pay increase. In Police, the officer tiers will be compressed from 13 to 10, ranking officers will top out in 10 years, rather than 15, and certification pay is adjusted and the additional pay for a field training officer is increased. In Fire, no adjustments are proposed. Any change will be determined through collective bargaining. Page 3 of 3 Minutes of the Work Session — August 2, 2004 Healthcare has a $381,000 deficit. A premium increase is proposed to provide an additional $60,000 from the employees and retirees and $170,000 from the City. Savings from the change in coverage will make up the rest of the deficit. Dental is under - funded by 57.9 %. The premiums will be increased 20% to provide employee funding of the program. The budget includes a proposal to adopt 20 -year retirement. The cost is $44,025 for the general fund and $12,884 for other funds. The retiree health package remains unchanged from last year. Council Member Anderson left the meeting at 2 p.m. The Council resumed the discussion of reserve levels and the use of the fund balance for current year projects. The discussion included the possibility of changing the policy on fund balance. Adjourn. There being no further business, Council Member Murray moved that the meeting adjourn. Council Member Renteria seconded the motion. The vote follows: Ayes: Council Members Mahan, Murray, Renteria, and Sheley Mayor Mundinger Nays: None. The motion carried and the meeting adjourned at 2:32 p.m. Gary W. Smith City Clerk