City Council

MINUTES SPECIAL JOINT MEETING OF THE CITY COUNCIL AND THE FINANCE ADVISORY COMMITTEE CITY OF DEKALB May 19, 2014 The City Council held a Special Joint Meeting with the Finance Advisory Committee on Monday, May 19, 2014 in the Council Chambers of the DeKalb Municipal Building, 200 South Fourth Street, DeKalb, Illinois. This meeting was continued from the Saturday, May 17, 2014 Special Joint Meeting by a motion and vote. Mayor Rey called the meeting to order at 6:00 p.m. A. ROLL CALL: Deputy City Clerk Wright called the roll of the City Council and the following members were present: Mayor John Rey, Alderman David Jacobson, Alderman Bill Finucane, Alderman Kristen Lash, Alderman Bob Snow, Alderman Ron Naylor, Alderman David Baker, and Alderman Monica O’Leary. Deputy City Clerk Wright called the roll and the following members of the Finance Advisory Committee were present: Chris Fricker, Connie Golden, Mike Peddle, Gary Peele, Tom Teresinski and Mike Verbic. Absent was David Conlin. Also present were: Anne Marie Gaura, City Manager; Rudy Espiritu, Assistant City Manager; Wes Hoadley, Deputy Chief; Eric Hicks, Fire Chief; T.J. Moore, Public Works Director; Jeff Birtell, I&T Technician; and Diane Wright, Deputy City Clerk B. CONSIDERATION: Review of Proposed FY15 Budget Mr. Espiritu started with Fleet Replacement and enumerated the vehicles requested. Next, he discussed the Equipment Fund (which includes PC and server replacements); the only revenue is the transfer from the E911 Board for OSSI payments. Hotel/Motel taxes were discussed, along with monies set aside for the Chamber of Commerce and DeKalb County Economic Development Corporation. Mr. Peddle suggested breaking the line item to another level since it is varied and reflects a large amount of expenditures. Discussion continued regarding Roger Hopkins’ contract and the addition of a Community Development Director. Joint Special Meeting City Council and Finance Advisory Committee May 19, 2014 Page 2 of 5 The Transportation Fund was next discussed which is structured primarily for the contracted transit system. There are two changes: a grant primarily for a transit operation center and 50% funding for the GIS intern. The Community Development Block Grant (CDBG) and Foreign Fire were brought up but no discussion ensued on either item. Mr. Espiritu discussed the Internal Service Funds which is comprised of worker’s compensation and property liability and reflects a 5.1% increase. This increase maintains the $1 Million fund balance. Mr. Espiritu noted that the insurance premium will increase ½% for medical and 4.6% for dental. Mr. Espiritu explained the retiree phase-out of insurance. Mr. Espiritu next discussed Special Service Areas (SSA). Ald. Naylor asked if this is limited to lighting or can it be expanded into the Greek Area. Ald. Lash questioned transferring money to the General Fund. Mr. Espiritu explained that the City is administering these funds. He noted that the SSAs had fund balances and staff would only levy when there were actual costs. Mr. Espiritu added that staff will relook at levy. Ald. Jacobson referred to the Greek Row SSA. In 2004, when improvements were done it was in back yards and not necessarily in public ways. The SSA was formed to pay that off. He asked at what point it ends. Ald. Naylor replied if private property owners would put adequate lighting they wouldn’t have to do an SSA. Ms. Gaura asked Mr. Moore and Deputy Chief Hoadley to address lighting in the Greek Row area. Deputy Chief Hoadley stated this was a recommendation of the Police Dept. Mr. Moore added that Ald. Naylor is correct in his assessment. Ald. Jacobson argued that no other neighborhood pays for street lighting. Mr. Peddle stated that an SSA is used when the level of service provided to that area exceeds that which is provided City-wide. It is reasonable to charge operating as well as capital costs. Deputy Chief Hoadley said calls to Greek Row have been greatly reduced since the SSA. Ms. Gaura stated that staff will look at this SSA. Mr. Espiritu next discussed Debt Service Funds. Ald. Naylor asked where the airport bond is located and what type of bonds. Mr. Peddle stated that if they are not Government Obligation (GO) bonds, and you are paying higher interest rate, an option is to default on the bonds. Buyers have taken the risk although he does not recommend that. Mr. Espiritu replied they are GO taxable bonds. Ald. Baker suggested asking the County to pay for them. Mr. Espiritu stated that the 2005 bond will be paid off. There is a 2004 bond that will not be paid off until tax levy year 2019, which is the City’s FY 2021. Mr. Espiritu addressed the Police Pension and the Fire Pension Funds and noted that the City holds these funds in a fiduciary manner; it does not control these funds. They are called component units of the City, and the City has no legal authority over these funds. Ald. Baker asked how short we are based on where we levied before to cover entire pension amount. Ms. Gaura replied that would be difficult to estimate. Mr. Peddle noted that our levy only covers the annual normal cost of pension; the yearly estimate of what is being added to pension liability but no portion of that goes to catching up and funding at the desired level. Mr. Espiritu stated that when the actuary calculates yearly it is to get to the 90% level. Mr. Peddle stated that Council should know the normal cost of pension and what is portion contributed. Ms.  Joint Special Meeting City Council and Finance Advisory Committee May 19, 2014 Page 3 of 5 Gaura stated that the EPI report recommended that the City try to fund pensions by 75% in the next ten years. Mr. Peddle stated that you don’t want to make decisions that ignore future responsibility. Ms. Gaura said that the City is not fully funding all pension obligations for all employees. There is an additional $571,000 not being funded by property tax levy. Ald. Baker stated that we do not want to fall further behind every year. Mr. Teresinski noted that the City has fully funded obligations every year – including IMRF. The City has increased pension payments approximately 25% - 30%. Ald. Baker asked if we add the $571,000 into the levy, how much more will the levy be over last year. Mr. Peddle replied this would be an approximate 12% - 13% increase in the levy for pensions. Ms. Gaura stated that when you look at 2013, the requested levy was 6% - 10% higher than 2012. The actual increase for City portion was just over $25,739. Ald. Jacobson stated that the City justifies increasing the levy when property values go up. The issue residents have is their values are down 30%. Mr. Peddle said people are paying more and having lower property values. Mr. Teresinski stated that at the end of 2013 you had an unrestricted balance of $5.2 Million in the General Fund. At the end of 2014 you have projected General Fund balance to $5.8 Million, an increase of $600,000. The nine funds in 2014 have unrestricted fund balances of $7.8 Million, an increase of $1.3 Million. Mr. Peddle stated that the levy should be increasing with the amount of pension costs. Ald. Snow stated that we do not have to fund pensions out of levy, and we do not have to focus on that one issue – look at a package. Ald. Lash stated she didn’t understand the focus on the tax rate. She added she doesn’t care what the rate is; she looks at the dollar amount. She noted that her tax bill is the same. Ald. Jacobson replied that is because she is a first year homeowner. As long as EAVs go down, the tax rate will be outrageous, he said. Ald. Jacobson asked when was the last time we lowered the tax rate. Ald. Snow asked when was the last time we lowered services. Mr. Peddle stated the rates are set at the County level. If the economy recovers, the rates will go down, but property taxes will not. Ald. Baker stated the Council set it at a rate assuming the EAV would grow. This is pulling wool over the eyes of constituents by not covering pensions completely. Outsourcing at half the cost has to be considered, he said. Ald. Naylor commented that he did not think we are pulling wool over anyone’s eyes. Mr. Verbic stated that Ms. Gaura noted that the way we are doing business is not sustainable. He agreed, we do not want new taxes, but what do we do. He stated he was willing to do whatever it takes to become more sustainable. Ms. Gaura stated that the financial consultants spoke at the meeting with the Finance Advisory Committee and discussed different levels. This is a policy of the Council – either continue the way we are doing business or change. She added that TIF phase- outs have to be addressed – they are expiring in 4-6 years. In this budget over $1 Million is being transferred from TIF to other funds. It will be less when TIF expires. She asked where do we make up that balance. Mayor Rey stated we need to look beyond FY15 and look at where level of services need to be. He asked for general comments on FY15 budget at this time and comments on the short term. Mr. Teresinski addressed the airport. Ald. Lash stated that the City is alright in the short term; the budget has been reactionary rather than proactive. She noted we are meeting short-term Joint Special Meeting City Council and Finance Advisory Committee May 19, 2014 Page 4 of 5 requirements, but she is discouraged at how little we seem to be able to be proactive. She added she looked forward to comprehensive planning and what new positions can bring to the City. Ald. Naylor addressed goals: eliminate deficit between revenue and expenses from General Fund, provide funds for infrastructure. He added he can suggest several million dollars to eliminate some things. The $300,000 in Workman’s comp can be used elsewhere; reduce the fund balance to $1 Million, minimum. He addressed Police and Fire and noted those consume the majority of expenditures; 94% of their budget is staff. We have added additional people there and he doesn’t believe we have looked at their budgets that closely. He noted that Police have exceeded their budget by 10% and a good portion is overtime. He suggested having Police make adjustments to their budget and noted they should be held in-line. Also, he said, the Fire Department has a 5.8% increase. He stated that Chief Lowery said that overtime was incurred due to injuries; however, extra officers were added to staff, but they have not reduced overtime and need to control their overtime further. Likewise, he said, with the Fire Department; they did not reduce their overtime with the addition of personnel. Ald. Naylor suggested refinancing the balloon payment on the airport and paying it from TIF. Also, Ald. Naylor suggested looking at revenues - utility, ambulance fees, tickets and fines. He noted he could come up with a couple hundred thousand dollars. Ms. Gaura stated that they worked closely with the financial consultants and were very conservative on revenue estimates. We did not want to over-estimate revenues, she said. Ald. Snow stated that it appears we are only funding for current equipment and fleet purchases. He said he would like to see it funded with estimated depreciation so that money is there. He added he wants sustainable changes – if fund balances are reduced, that only helps for one year. Ald. Finucane stated he disagreed with Ald. Naylor on the airport payment. Also, he said, long- term we need to figure out if we are looking at completely funding pensions through property taxes. Ald. Jacobson stated it is frustrating to hear that we are in trouble, and to hear an alderman say pay interest on a long-term debt, raid our fund balances to pay for these things. That alderman has been here a long time. He added that he hoped we buckle down and insure long-term stability. We need to make good policy to sustain us long term, he said. Ald. O’Leary stated we have not raised taxes but have added additional fees to our community, i.e. crime-free, hotel/motel, admin tow. She added she is not seeing more revenue even though we have added these fees. How do we get more revenue without raising taxes, she asked. Additionally, she said, she does not understand funding for special projects and the Municipal Band. Motion to Extend Meeting At 7:59 p.m., Ald. Baker moved to extend the meeting past 8:00; seconded by Ald. Naylor. Motion carried on voice vote. Mayor Rey declared the motion passed. Ald. Baker stated that staff lied to Council in the past; there is now transparency. He added that previously it was never given the impression to Council that these funds were co-mingled. We thought the funds were fine. Now we are seeing the word “supporting.” He said that department heads used to sit around and try to figure out how to spend the money they had. He added he  Joint Special Meeting City Council and Finance Advisory Committee May 19, 2014 Page 5 of 5 disagreed with Ald. Naylor; whatever is supposed to be in there should not be touched by the General Fund. Mr. Peele stated that personally taxes are enough – we have to come up with ideas to reduce expenses. We need to come up with a plan and discuss it. He added that you cannot pick up pieces of the budget one at a time. Mr. Fricker complimented Ms. Gaura for bringing up restructure and some of the changes here. Ms. Golden stated we did speak about the workers comp and decided it needed to have a balance in that fund. The way it is presented is the way it should be. She agreed it was a good presentation on the budget and shows what needs to be worked on. Mr. Verbic stated this was a good presentation and each year he would look toward how he could contribute to a balanced budget, and will make that based on data. Our population remains flat while the call for services increases. He asked how do we compensate for those costs without raising taxes. Mr. Teresinski thanked Ms. Gaura for including the Finance Advisory Committee. This review is open and transparent; it opens up the entire process. He stated he was pleased to hear we will get together for strategic plan and sustainability. Mayor Rey thanked all for their input. He noted there are a number of areas that will be investigated. He stated the budget will have a public hearing on June 9th. Ms. Gaura stated that staff will add an item to the May 27th Council Agenda to address questions raised at the budget meetings. Also, she said, the public hearing and the first reading of the budget ordinance will take place at the June 9th Council meeting; the second reading of the budget ordinance will be on June 23rd. Additionally, she said that this was a team effort to present the budget. She acknowledged Mr. Espiritu for his role as Interim Finance Director. C. ADJOURNMENT: MOTION Ald. Snow moved to adjourn the meeting; seconded by Ald. Jacobson. Motion carried on voice vote. Mayor Rey declared the meeting adjourned at 8:12 pm ___________________________________ DIANE K. WRIGHT, Deputy City Clerk Approved by City Council June 9, 2014