City Commission Workshop Meeting

APPROVED: 8/20/2013 City Hall City of Eustis, Florida 10 North Grove Street Post Office Drawer 68 Eustis, FL 32727-0068 Meeting Minutes - Final* City Commission Workshop Monday, July 15, 2013 5:00PM City Hall CALL TO ORDER: Mayor Muenzmay ACKNOWLEDGEMENT OF QUORUM AND PROPER NOTICE Present: 5 - Linda Bob; Albert Eckian; Michael Holland; Karen LeHeup-Smith; and Kress Muenzmay I. Workshop Item 13166 FY2013- 2014 Proposed Annual Budget Paul Berg, City Manager, opened the workshop and explained staff had obtained direction from the Commission during the strategic plan workshop and other meetings which was used in compiling the proposed budget. He stated that a decision would be made at the end of the meeting regarding the need for a workshop on Tuesday. Jim Myers, Finance Director, stated the proposed budget was prepared consistent with the Commission's previous directions. He reviewed the budget initiatives as follows:1) No staff layoffs; and 2) Millage rate adjustment to the maximum roll-back rate to fund the market pay adjustments, re-institute the merit pay adjustments and close the deficit gap as directed during the strategic planning. The Commission clarified they stated there would be no layoffs for the purpose of balancing the budget but there might be layoffs for other reasons and that the period for implementing the market pay adjustments had not been determined. Mr. Myers stated the budget does not eliminate any positions for the purpose of balancing the budget and that the period for implementation of the market pay adjustments was budgeted for a two-year period but that could be changed. The Commission discussed the confusion surrounding the use of "merit increases". Mr. Myers continued the budget review as follows: 1) the Capital Project Funds remain as included in the CIP and CRA as presented previously; 2) All Funds Budget Summary with a Beginning Fund Balance of $34, 108, 173 and Ending Fund Balance of $32, 724,220; 3) Total Reserves by Fund Type; 4) CRA Fund with an explanation of the projected increase in TIF payments and the planned projects; 5) Capita/Improvement Plan with 46 projects totaling $4,836, 943; 6) General Fund overview including the difference between recurring revenues and expenditures; 7) an overview of the General Fund; 8) General Fund revenues by department; 9) General Fund expenditures by department; and 10) General Fund budget variations compared to the current year's budget including additional expenditures for year 1 of 2 for the pay classification and merit pay adjustments, general insurance increase, FRS contribution increase, and miscellaneous cost increases with a net decrease to the operating deficit of $223,349. Mr. Myers provided a General Fund comparison of FY2012-13, FY2013-14 and FY2014-15 utilizing a multiplier of 2% in operating expenses for FY2014-15. He explained the purpose was to try and identify how much the deficit will be with an estimated $124,009 deficit for FY2013-14 and $357, 120 in FY2014-15. City of Eustis, Florida Page 1 Printed on 712212013 City Commission Workshop Meeting Minutes - Final July 15, 2013 The Commission discussed the deficit for the next two years asking what it would take to remedy that and noting that FY2014-15 did not show an increase in property tax revenues. Mr. Myers responded that some of the revenues may increase at a higher rate than 2%. The Commission discussed estimated property tax revenues from the Property Appraiser and comparisons with other area municipalities with Mr. Myers explaining that the increase in the City's property revenues was due to new construction and commenting on the improvement over the losses in previous years. Mr. Berg commented on the amount of new construction in the other cities and explained that the new construction in Eustis was offset by reductions in property values. He stated that much of Eustis ' new construction has not been added to the tax rolls yet. The Commission discussed the need to focus on the proposed budget recognizing the need to discuss how to improve growth at a later date. Mr. Myers reviewed a comparison of the actual reserve amounts versus the targeted reserve amounts noting that the actual reserve amounts include $1.4 million in debt reduction. He then reviewed the following items included in the budget: 1) Adjusted the millage rate; 2) Market pay adjustments; 3) Merit pay adjustments; 4) No layoffs; 5) No reductions in service levels; and 6) Closes the operating deficit gap. He then asked for direction from the Commission regarding the proposed tax rate and any further reductions in the budget which would probably have to include staff or services or increases in other revenues. He reviewed the current millage rate versus the three different roll-back rates and the amount of revenues for each. He explained the formulas for each of the roll-back rates. He explained the amount of increase in property tax that a home valued at $150,000 with $50,000 homestead exemption would experience based on each of the rates. He stated that the Commission needs to provide clear direction regarding the millage rate and any other considerations desired by the Commission. Mr. Berg reported on the status of the public safety pensions stating that the plan will remain the same for current employees and noting that new actuarial updates will be completed in October. He stated that a decision on the pension plan changes for new employees will need to be made and bargained under the collective bargaining agreement. He added that, if the returns are better than they have been, it would be a good time to adjust the retum on investment assumptions to lower the volatility. Mr. Berg then stated they are almost balanced between recurring revenues and expenditures. He explained that whenever a staff position becomes vacant it is re-evaluated for necessity and that policy will continue. He commented on the need for increased growth particularly in commercial and industrial development. He stated that it is not planned to request further increases to the millage rate as long as property values remain steady. He commented on efforts to continue economic development efforts for publicly owned properties. He reported on various economic development projects including: 1) the planned rail properties and getting city-owned properties back on the tax rolls; 2) building the City brand including additional live entertainment events at Ferran Park to attract people to Eustis as a destination; and 3) completing Palmetto Plaza and the Avenue Market Place with the goal of attracting use by local business and possibly increased investment. He reviewed the plan for increasing employee compensation noting that the increases could be phased-in over three years instead of two. He stated the increases would be based on evaluations and that employees not meeting expectations would either have to improve or be replaced. Mr. Berg then reported on recent discussions with the other cities and Lake County on renewal of the gas tax. He stated that the distribution formula may be changed to 5.5 cent based on population and .5 cent based on road miles but that it would be phased-in over three years. The intent would be to update the formula every three years instead of waiting every 15 or 20 years. He stated another possibility discussed was to add another 1 cent that would be dedicated to the cities. He explained that at the regular Commission meeting on Thursday, the Commission would approve the millage rate for the TRIM notice. He stated staff is recommending the higher of the roll-back rates in order to provide flexibility to the Commission in making their final decisions on the millage rate and budget. City of Eustis, Florida Page2 Printed on 712212013 City Commission Workshop Meeting Minutes - Final July 15, 2013 II. Commission Discussion The Commission discussed the following issues: 1) using the higher roll-back rate for the TRIM notice; 2) avoiding compression in the pay ranges and its effect on employee morale; 3) encouraging County enclaves to annex into the City; 4) the readability of the proposed budget; 5) implementing the pay range adjustments first and then re-instituting the merit plan; and 6) addressing the pay ranges so that longer term employees are compensated appropriately. They requested a clarification of how the pay increases will be implemented. Ann Isaacs, Human Resources Director, explained that approximately 110 employees fell out of the ranges. She confirmed that, if those employees' evaluations are good, they will most likely be . brought up to the minimum. If they did not receive a good review, they will remain out of the range . The Commission reviewed and discussed an example of how the raises should be implemented and how the merit increases should be handled. The Commission further discussed the following: 1) the proposed millage rate; 2) the need to improve efforts to increase economic development; 3) the possibility of commercializing the waterfront; 4) the possibility of reducing the size of some departments to assist in addressing the deficit between recurring revenues and expenses; 5) whether or not to spread out the pay adjustments over two or three years; and 6) the need to inform the employees once the raises are approved by the Commission. Thanks were provided to the Finance Department on their work on the budget and its readability. A request was made for a list of all employee positions showing the current wage for each position, the amount the position should be paid under the new pay ranges and what is proposed for each position. Ms. Isaacs stated that a list was prepared and provided to all of the department directors and that was how the aggregate figure was obtained for the budget. She added the merit portion was determined as a percent of payroll. Mr. Berg explained the process used for assessing the amount needed for the pay increases stating that staff went through every employee in the City. They identified how much each employee would need to be raised over a two-year period and that it must be backed up by an up-to-date evaluation. He stated that those employees already within their range would be eligible for a 2% merit increase based on their evaluation. He further explained that evaluations have previously been done on their anniversary date but this year all evaluations will be done at the same time with raises to be effective in October. If someone doesn't meet expectations, they will not be given a raise but will be given an opportunity to improve or they will be replaced. He stated each department head will write up their recommendations for individual raises based on their evaluations with final review by the City Manager and HR Director. He further explained that approximately 60% of the amount requested is for the range increases with only 40% to be used for additional merit increases and explained his recommendation to possibly spread the range increases over three years to allow more funds for merit increases for the longer term employees. The Commission further discussed the proposed pay increases and the process to be used. Mr. Berg explained that the cost to just bring employees into range is about $212,000 the first year and $208, 000 the second. The Commission discussed whether or not the taxpayers will support the millage increase, the amount of employee bonuses over the previous five years, and the need to provide annual raises rather than periodic bonuses to avoid future problems. The Commission asked how the City would handle new employees versus existing employees if the City has to hire a new employee at a higher rate with Ms. Isaacs explaining they would probably consider an "equity adjustment" to bring up the lower paid employee. City of Eustis, Florida Page3 Printed on 712212013 City Commission Workshop Meeting Minutes - Final July 15, 2013 III. Public Input- No one came forward IV. Commission Direction The Commission discussed the use of a two-year period for implementation of the pay adjustments and the need to evaluate and make a decision regarding the alternatives for construction of a second fire station. CONSENSUS: It was a consensus of the Commission for staff to utilize the 7.581 millage rate, for pay increases to be effective October 1st and implemented over a two-year period, and to cancel the Tuesday budget workshop. Mr. Myers noted that the Commission will officially approve the millage rate at Thursday's meeting for use on the TRIM notice. Mr. Berg informed the Commission that the League of Cities conference will begin the same date as the August 15th regular business meeting. He asked if the Commission wanted to reschedule the meeting. The Commission agreed to check their calendars and make a decision on the rescheduling at the Thursday, July 18th regular business meeting with staff to check in the interim with any affected applicants. V. Adjournment - 6:53 p.m. City Clerk Mayor/Commissioner *These minutes reflect the actions taken and portions of the discussion during the meeting. To review the entire discussion concerning any agenda item, go to www.eustis.org and click on the video for the meeting in question. A DVD of the entire meeting or CD of the entire audio recording or verbatim transcript of the meeting can be obtained from the office of the City Clerk for a fee . City of Eustis, Florida Page4 Printed on 712212013