Council Study Session

MINUTES OF THE GILBERT TOWN COUNCIL, IN SPECIAL MEETING FOR A STUDY SESSION, TUESDAY, APRIL 26, 2022, AT 5:15 P.M., GILBERT PUBLIC SAFETY TRAINING FACILITY, ATLAS AUDITORIUM, 6860 SOUTH POWER ROAD, GILBERT, ARIZONA COUNCIL PRESENT: Mayor Brigette Peterson, Vice Mayor Aimee Yentes, Councilmembers Scott Anderson, Laurin Hendrix, Yung Koprowski, Scott September (appeared virtually), and Kathy Tilque COUNCIL ABSENT:None STAFF PRESENT: Town Manager Patrick Banger, Town Clerk Chaveli Herrera, Town Attorney Chris Payne, Office of Management and Budget Director Kelly Pfost, Fire Chief Jim Jobusch, and Police Chief Michael Soelberg CALL TO ORDER OF SPECIAL MEETING Mayor Peterson called the meeting to order at 5:17 p.m. AGENDA ITEM 1. Discussion of FY 2023 Preliminary Budget. Office of Management and Budget Director Pfost provided an overview on the Fiscal Year (FY) 2023 Preliminary Budget, first highlighting Gilbert’s many recent accolades including #1 Best Place to Live in Arizona, #1 Best City for Remote Workers, #1 Most Caring City in Arizona, #2 Best City for First-Time Homebuyers, #1 Most-Prosperous Large City, and #2 Safest City in the United States. She said Gilbert was a fabulous community with good high services and good expectations. She stated as part of Gilbert’s budget process, the Town used zero-base budgeting and discussed the results, stating there were $560,000 in additional savings for a total since 2018 of $9.2 million of taxpayer savings. She said the departments that participated were several of the General Fund Departments, Wastewater and Fleet, and the Self-Insurance Funds. She discussed increases in the zero base of Fleet and Self-Insurance with their base costs providing just their regular level of service, increases with the operation and maintenance (O&M) costs in Fleet, and then self- insurance that included cancer insurance for the firefighters that was added to that area. Director Pfost outlined the budget process including the budget kickoff last September, the analyst review in December 2021, the Executive Team Deliberations between January and February, the Town Manager Review in March, the Council Study Session, Preliminary Budget Adoption in May, and Final Adoption in June 2022. Director Pfost reported that approximately 76% of the total $68 million budget would be recommended for a total budget of $52 million. She explained they did their best to manage the balance of funds and providing services, and provided a summary of the budget. First, she advised there was approximately an additional $7 million across all funds to cover an additional pay period for the next year, as roughly every 14 years there are 27 pay periods rather than the typical 26 pay periods in the budget cycle. She also noted the balance of one-time and ongoing needs, cost escalation—particularly in Enterprise Funds that were reflected in supply and tipping fee increases for the Neely Greenfield Wastewater Treatment Plants—and department requests for what they needed in order to continue to provide their services with the increased costs if they were not part of zero based. She noted the greatest area of focus for the General Fund was to maintain service levels and there was a $2 million amount associated with new service levels, particularly for the Mobile Computer Devices replacement in the Police Department. She emphasized there were a lot of replacement needs and maintaining service levels for the Streets and Enterprise were most of the costs considering industry escalations and Gilbert’s residential and business community growth. Director Pfost reported a total of 107 Full-Time Employees (FTE) positions were requested, but only 79 positions were recommended for funding; the majority of the recommended positions being in the Police and Fire Department areas to keep up with additional services due to population growth. She explained that the Gilbert FTE per one thousand population was compared to other communities’ last year figures, as they were also working on their budgets, for comparable data. She stated that Gilbert’s FY2022 FTE per one thousand was about 5.89, with Chandler being the next closest at just over 6. She explained that comparing the requested FTE positions and population projections for the next year based on the last 18 months would result in a ration of about 6 FTE per thousand populations. She noted that was still on the low end of the spectrum across the Valley for how much staffing there was compared to the population services that existed. She noted one of the large areas of change was in the capital improvement area and explained that the last year had approximately $425 million of planned projects and approximately $360 million of the preliminary budget was carry forward of those multi-year projects. She added that the new projects were mostly in the areas they were bonding which made sense for the fact that there was now funding to work on those projects. She detailed the streets improvements was a total of $193 million and about $200 million streets bonds were being issues so they would begin those projects. Director Pfost highlighted $400 million of new water improvement projects were mostly associated with the North Water Treatment Plant rebuild which would be going into the main construction phase and issuing more contracts, thus needing more of those funds. She noted not all the money in the next year’s budget would be spent, but the full amount was always budgeted to ensure projects could be completed even though projects took years for completion. She pointed out that the non-CIP area has about $57 million but reiterated approximately $7 million was associated with the 27th pay period for the next year. She elaborated that enterprise funds and internal services were most of the changes as the Town was taking the General Government, or risk insurance, into its own fund, which was being reported in the internal service fund, which it had not been reported there in the past. She also noted that the internal service fund was budgeting a higher amount—of approximately $3 million—for health insurance, dental, and workers compensation claims. She added that there was an additional $1 million increase in the fleet area to help staff with the growing number of vehicles and parts and labor costs increases. Director Pfost reported that the debt service line was $14 million higher, and that debt was associated with the new transportation bonds. She referenced the Water Resource Municipal Property Corporation (WRMPC) Bond item set for the Regular Council Meeting and noted any necessary changes from that meeting would be reflected in the budget. She noted the CIP area was about $625 million higher compared to the previous year and highlighted the property tax levy proposed was $29.6 million, which was the amount of debt service payments that would need to be covered in the next year. She added that did reflect the decreasing tax rate of the last couple decades that used to be around $1.15 per $100 assessed value, which was down to $0.99 per $100 of assessed value for the fifth year in a row. She stated that was in alignment with what was told to voters when about the transportation bonds, and the intent was to keep the $0.99 property tax rate and be able to repay that debt. She summarized the next steps, including an opportunity for questions and answers, direction from Council to be incorporated into the preliminary budget set for the May 17th Council Meeting, and a Public Hearing for budget adoption on June 14, 2022. Councilmember Hendrix joined the meeting at 5:30 p.m. Councilmember Koprowski noted that the Gilbert Capital Improvement Plan (CIP) listed new projects’ full cost amount within the first year, she asked if that was a common practice for other communities. Director Pfost responded that the practice was somewhat unique to Gilbert and was in place to ensure full budget amounts were allocated to projects appropriately for project completion and transparent fund tracking purposes. Councilmember Koprowski asked how much of the total budget would go into reserves or carry-over funds. Director Pfost explained that transfers into reserves were made to maintain a minimum fund balance that consisted of three-months of operating and one-year of debt service; additionally repair and replacement funds were set aside to ensure infrastructure maintenance, and she could provide the totals to Council at a later date. Vice Mayor Yentes remarked on the $7 million going to the University Building one- time project and if the amount covered the remainder of the outstanding debt services or what the status was after that amount. Director Pfost stated there was an additional amount of $7 million going to a sinking fund saving money to be able to pay the university debt early, but there was currently not enough to pay off the debt and the fund was not callable until July 1, 2025 so no early payments could be made prior to that time. She added that she believed the debt amount was approximately $33 million at the time and that they were making good progress at a total of $12 million, including the discussed $7 million, saved up. Vice Mayor Yentes referred to previous years’ investment income between $1 million to $1.5 million and asked why 2022 and 2023 were projected to be $500,000. Director Pfost addressed the question by stating investment incomes were always projected low to capture changes in the economy, but rates typically came in higher than projected and were anticipated to go up in the next year resulting in a higher amount. Vice Mayor Yentes asked for confirmation that two ambulance vehicles were to be purchased to be put into circulation. Fire Chief Jobusch clarified that the request was for two replacement ambulances for the two reserve ambulances that would be replaced, and one additional ambulance would be purchased to allow for a 50% backup rate for ambulances. He added they were currently facing issues with downtime and maintenance and needed to ensure there were enough ambulances. Vice Mayor Yentes asked how old the ambulances being replaced were. Chief Jobusch stated they were about five-years old but noted they were stock ambulances and did not come with the safety features they provide in the other ambulances and were not as flexible for use in transporting. He elaborated that they were trying to make their fleet the same and going into reserve ambulances would essentially downgrade the service they provided. Vice Mayor Yentes asked if the new ambulance to purchase was factored into the case study and if there would be an update regarding the upfront investment. Chief Jobusch noted the replacement costs would come from the replacement funds and the new ambulance would come from operating costs over the approximate eight-year timeframe. Councilmember Tilque asked what they typical lifecycle of an ambulance was. Mayor Peterson highlighted the first two ambulances referred to were not standard ambulances as they were purchased for the pilot program and were not the same as the other ambulances purchased since then which provided services. Chief Jobusch responded that the ambulances proposed for purchase were expected to last from seven to ten years depending on the amount of services provided and the mileage placed on the vehicles, he noted they were the same type of ambulance purchased the previous year. Vice Mayor Yentes commented there was a small amount budgeted for a crime lab and assumed it would require a substantial investment in ongoing years; she asked if there would be additional Study Sessions on the matter and if the project scope determination would be a policy driven for being handled internally or via a partnership. Police Chief Soelberg responded that no funds had been committed to the crime lab project at that time beyond the $135,000 needs analysis included in the 2022-2031 CIP. He projected that additional information on the crime lab would likely be presented at a Study Session during the Fall and the next Spring Financial Retreat would include further exploration into the financials. Councilmember Anderson asked if there was a graphic to show the year-by-year amount the Town saved by practicing zero-based budgeting, as he would like that added to the presentation so the general public could see what the savings were every year. Director Pfost mentioned there was not a graphic in the presentation but it would be added to the preliminary budget presentation so the public would have the opportunity to review that data. Councilmember Koprowski asked if there was a project shown in the CIP for a future year but was not funded, what was the appropriate time and process for Council to give the direction to ask the project to be removed. Director Pfost responded that the current Study Session was an appropriate time for the Council to give Staff direction if there was a specific project they wanted to discuss or have removed so those changes could be reflected in time for the preliminary budget. Councilmember Koprowski stated that Council had received messages from residents of the southern region of Gilbert regarding Hunt Highway. She added that the Hunt Highway project had been added to the General Plan and the Transportation Master Plan years prior, but since then there had been a lot of regional projects—such as the State Route 24, Ocotillo Road, and Ocotillo Bridge projects—so she proposed the Hunt Highway project be removed from the CIP of the funds could be reevaluated and put toward a project with greater need. Councilmember Tilque commented that she had a differing view when considering the casino being built off the Highway and Gilbert Road. She elaborated that though the casino was not being built in Gilbert there would possibly be additional growth on the Reservation side of the road which was out of the Town’s control, her concern was that by removing the project, Gilbert Residents would interpret that as a guarantee that the road would not be evaluated in the future. She added that she understood Councilmember Koprowski’s point of view but removing the project would pose a challenge for a future Gilbert Council and removing a project 10 or more years in the future could send the wrong message as if it would not be a point of discussion in the future. Councilmember Anderson reiterated that the project was at least 10-years in the future and there would be time evaluate the situation and move it out further if needed. Vice Mayor Yentes stated she did not want to halt the conversation if a resolution could have been reached, but she would like to see the project either removed or put in a way-future-years status. Mayor Peterson agreed with Councilmember Tilque’s comments about concern with removing a project that was listed as a placeholder for such a long time, especially considering the upcoming casino and other changes outside of the control of the Town. She added that she felt removing the project now would be a shock to residents if the project were reintroduced to the CIP in the future. She asked for confirmation that there were no funds allocated to the project at the time. Director Pfost clarified that there were no funds allocated to the project in the current time, but a projected $78 million to $80 million in unidentified funding in the 10+ years out range and funding would need to be identified to move forward. Mayor Peterson responded that could end up being regionally funded or combination of other things so they did not know what it could potentially look like; she reiterated her hesitation with removing such a potentially large project from the scope. Councilmember Koprowski offered her perspective knowing the land use history and ownership and knowing there would be alternate routes serving the region, but that no longer seemed a viable route considering property needs of the watershed off the mountain, drainage improvements and other capital improvements. Mayor Peterson stressed she would need additional information on the matter in the form of a presentation to justify good reason to remove the project to avoid residents from feeling a sense that the project would not come up again. Councilmember Koprowski encouraged collaboration with the Citizens Transportation Task Force to identify priority of immediate need in the Town to potentially provide direction to Staff for exploring long-range needs allowing for recommendations for project shifts or changes related to the new changes to the region. Mayor Peterson concurred with Councilmember Koprowski’s statement. Councilmember Tilque commented that she felt those conversations could happen over the next year and though they would not impact the upcoming 2023 budget, it was a good idea to look at the longer-term projects and felt a list of issues could be put together in time for the summer to provide direction to Staff. Mayor Peterson advised the Council to direct their questions and issues to Director Pfost so she could delegate the evaluation of projects; she noted the evaluation of projects was constantly being moved forward or back and described the process as trying to fit the correct pieces in a large puzzle. Councilmember September commented on the residents’ concerns about the incoming casino and upon looking at reports and studies he did not see the benefit of the project. He added that fitting less pieces into the budget puzzle might be easier than finding a way to make more fit; he proposed an opportunity for Staff to provide pros and cons of the project to determine if it needed to be on their radar at all. Mayor Peterson responded that she agreed with many of his points but was concerned that the casino construction could result in unforeseen issues, so she was hesitant to remove the project from the CIP until the casino was operational. She noted there would be traffic changes to Hunt Highway regardless and reiterated the need for compiling a list of questions and concerns for Director Pfost’s evaluation. Vice Mayor Yentes referred back to the previous discussion of the proposed crime lab, noting the substantial amount of funds budgeted in 2027 in the CIP sent the wrong message as no policy discussions had been had about determining the project direction. Director Pfost explained that some projects were listed in the CIP for future planning purposes and their funding amounts were based on best guess estimates. She added that the project description mentioned a need for project design and construction study and was aware that those aspects and direction from Council could change the project’s budgeted amount, but if Council did not want to consider the crime lab at all then Staff should be made aware so it could be removed—or left in place—to allow them to prepare for future planning possibilities. Vice Mayor Yentes pointed out that should the Council decide they did indeed want a crime lab, the budget would potentially not reflect an accurate amount if they decided they wanted to pursue the project with a private provider rather than within the Town alone. Councilmember Tilque asked if it was possible to color-code or highlight the project within the CIP to note that it was a placeholder and no official decision had been made on the project since the crime lab was new and Council had only been given one presentation on the topic to that point. She added that she wanted to address Vice Mayor Yentes’ concern that the public may believe a decision had already been made on the topic as it was listed in the CIP with a budgeted amount. Mayor Peterson agreed that there was a significant challenge in identifying a project as a placeholder in a document as large as the CIP, but noted that Chief Soelberg had presented on the crime lab a couple times before putting them ahead of the game in identifying the project and that Councilmember Tilque’s point about the project being clearly designated as not funded was important. Chief Soelberg commented that the situation was similar to how the Advocacy Center in the CIP forecast was listed as a project four to five years out and had the opportunity to get alternate funding through CARES Funds, which served as an example of how it could be extracted. Director Pfost advised that additional language could be added to the project description published with the CIP while in the early stages to clarify that the project was not final nor the full scope of the projected contracted out or built by the Town determined. She added that she believed the project was currently budgeted at a middle cost option with partnership potential funding offsetting some of the costs and revenues that were coming in, so they needed to consider how to put a middle range option for planning purposes to give a best guess or options for moving forward. Vice Mayor Yentes expressed her frustration with understanding the placeholder, but not feeling the appropriate level of vetting had occurred to determine if the project was even in the ballpark range and felt that the project was somewhat decided at the Staff-level that the project was assumed to happen. She posed the question to the Council of whether from a policymaker standpoint, considering elections and potential policy changes every couple years, that the appropriate level of investment would be communicated to the public in four to five years when it was unknown who would be driving the policy decisions. Mayor Peterson disagreed with the sentiment that the project had not been sufficiently discussed to earn a placeholder spot on the CIP, she noted the crime lab had been presented to the Council previously and they had discussed it or it would not have been listed in the CIP as a placeholder at all and could expect it to be removed from the CIP. Town Manager Banger followed up to specify that anything listed in the five-year projection budget documents were not formally approved; the only items approved were those in the next fiscal year and any of the projections could change in those future years as they were forecasted scenarios. He added that they could provide clarity that the project was just a placeholder and not an indication that a decision had been made, and they could continue to evaluate the potential project and consider a number of different paths for forecasting purposes over the next five years as factors of decisions made by the elected board. Councilmember Anderson commented he understood that Vice Mayor Yentes was asking for a policy discussion to be had before the project was formalized and he was in favor of that idea as it was not clear enough to the public yet what the money was being put in for. He recognized discussions had in the past on the project but noted that additional formalized discussion may require a policy item designation for a more solid footing to add something to the CIP for transparency to the public. Vice Mayor Yentes stated she did not have an issue with the items being listed, her concerns laid with the allocations themselves as she did not feel the previous conversations regarding those items resulted in specific conclusions that would justify the determined amounts for future funding. Councilmember Tilque shared that the basis of her though process originated with the logistics of matters, so she was compelled to try to find a way to fix the issue. She agreed with Vice Mayor Yentes’ thoughts and commented that it was not often projects of that magnitude were presented to the Council approximately a year before discussions about the project are had, however she expressed the importance of having numbers in place in order to present the budget. She elaborated that they had not yet had the discussions to start allocating dollar amounts to the projects and asked if there was the possibility to list the projects in the funding cycle without dollar amounts as Vice Mayor Yentes suggested. Director Pfost explained the intention was to list projects from their best understanding of Council direction; she stated they may have misunderstood direction from the Spring Financial Retreat as they picked a middle option to present. She added Staff could list a design amount rather than construction costs until that was decided. Town Manager Banger confirmed that was an option. Director Pfost elaborated that placeholder amounts listed could and should be more reflective of where Council was in the decision process, and they would continue working on moving forward the options the Council was most interested in seeing progress. She reiterated that Chief Soelberg would provide additional information regarding the crime lab later in the year, and at a future point the construction amount or full amount could be added for the next year depending on what the Council preferred. Councilmember Koprowski supported Councilmember Anderson’s proposal to have a more formalized discussion to set the Council’s direction and commented that she did not feel that the Council had given a very strong direction prior to that point. Mayor Peterson pointed out the issue with a formalized discussion was the fact that the preliminary budget was set for the next Council Meeting, therefore there was no time for discussion prior to that. Town Manager Banger asked for clarification if the concerns of the Council were the public’s inferred perception of Councils’ endorsement of the items in the budget document with the five-year planning window but were willing to leave the projects in the CIP without specific dollar amounts for further discussion and direction from the Council. He affirmed he thought that was an appropriate approach as the five- year projections were part of an anticipatory process that sometimes did or did not come to fruition but was done for all departments Town-wide. He reiterated that the projects’ budget forecasts could be removed from the budget document, but the projects themselves could remain in the CIP—as was commonly done with projects across the Town’s departments—and could be further explored with continued discussion with and direction from the Council. Mayor Peterson agreed that the Council’s feedback was understood, and they could move forward in the proposed direction. She reiterated there was no time for additional policy discussion prior to the next Council Meeting and Director Pfost would likely not have additional time to spare as she prepared the preliminary budget for that meeting. Mayor Peterson directed additional comments and concerns to Director Pfost between then and the next scheduled Council Meeting. Councilmember Tilque noted the reminder that Chief Soelberg would present additional information in the fall which would allow for additional discussion and transparency with the community. Vice Mayor Yentes commented there were a couple additional projects that would benefit from additional conversation, such as the transit stations, and would entertain those discussions as part of the current Study Session conversation. Councilmember Tilque highlighted questions regarding AZ CARES Act monies and asked if Director Pfost had suggestions from the Gilbert Council Subcommittee on AZ CARES Act to discuss. Director Pfost responded that the Subcommittee had consensus for funding the $1.3 million dispatch expansion and discussions revolving usage for Public Safety or Fire Department overtime expenses, potential non-profit support, and being able to sunset the General Government System Development Fee (SDF) early. Councilmember Tilque asked for clarification. Vice Mayor Yentes responded that there were additional suggestions brought forward by Staff, which included the use of CARES Funds for retiring the Government System Development Fee, additional costs associated with the expansion of the Police Dispatch, and the additional cost for Fire Department overtime, utilizing CARES funds rather than a General Fund contingency. Councilmember Koprowski clarified that the Regular Council Meeting Agenda allocated General Fund monies to cover the Fire Department overtime, but the Subcommittee felt the overtime closely fit the intended purpose of the AZ CARES Act funds. Mayor Peterson thanked the Staff for the time and work that went into the preparation of the preliminary budget and the corresponding Council Meeting. She stressed the importance of the preliminary budget meeting as the budget amount could not be increased after that point. She asked Director Pfost if she had been employed with the Town when the CIP and Budget were combined. Director Pfost confirmed the CIP and Budget had been together since her employment with the Town. Mayor Peterson explained the CIP and Budget presented together was a lot more difficult for Staff but was intended to promote transparency with the public. She thanked Director Pfost for her time and efforts. ADJOURN Mayor Peterson adjourned the meeting at 6:07 p.m. ATTEST: ___________________________ ___________________________________ Brigette Peterson, Mayor Chaveli Herrera, MMC, Town Clerk CERTIFICATION I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Study Session of the Town Council of the Town of Gilbert held on the 26th day of April, 2022. I further certify that the meeting was duly called and held and that a quorum was present. Dated this __________ day of ______________, 2022. ___________________________________ Chaveli Herrera, MMC, Town Clerk