City Council

July 25, 2017 Budget Session The City Council of the City of Idaho Falls met in Special Council Meeting (Council Budget Session), Tuesday, July 25, 2017, at the City Council Chambers in the City Annex Building located at 680 Park Avenue in Idaho Falls, Idaho at 3:00 p.m. There were present: Mayor Rebecca L. Noah Casper Councilmember Barbara Ehardt Councilmember John B. Radford Councilmember David M. Smith Councilmember Ed Marohn Councilmember Michelle Ziel-Dingman Councilmember Thomas Hally Also present: Pamela Alexander, Municipal Services Director Mark Hagedorn, Controller Kenny McOmber, Treasurer Jackie Flowers, Idaho Falls Power Director Bear Prairie, Idaho Falls Power Assistant Director Brad Cramer, Community Development Services Director Randy Fife, City Attorney Kerry Hammon, Public Information Officer Kathy Hampton, City Clerk Mayor Casper called the meeting to order at 3:00 p.m. with the following: Opening Remarks: At the request of Mayor Casper, it was moved by Councilmember Hally, seconded by Councilmember Marohn, to change the agenda and have Idaho Falls Power Fees Discussion be presented first and to remove Priority Based Budgeting Update for discussion at a later time. Roll call as follows: Aye – Councilmembers Marohn, Dingman, Ehardt, Hally, Radford, Smith. Nay – none. Motion carried. Idaho Falls Power (IFP) Fees Discussion: Director Flowers stated, per IFP budget presentation on July 14, IFP had previously proposed a phased-in increase for the pending rate increase recognizing projected revenue would not entirely be covered by the Bonneville Power Administration (BPA) rate increase. She stated after IFP additional review, she believes any increase needs to occur in a single-phased approach. She stated BPA will notice their rates on July 26, with anticipation of a 6% increase from BPA = $2m. Director Flowers reiterated a 9% increase was absorbed in 2015, along with a rate reduction to customers, and she believes the City cannot absorb any BPA increase this year. She stated third party influencers include declining revenues, continual increase in transmission costs, and scheduling fees ($1.2m spending authority with The Energy Authority (TEA)). IFP influencers include capital improvements and declining loads. Director Flowers briefly reviewed IFP expenses by type: Power purchases from BPA and third party suppliers = 37.2% (third party expense) Fish and Wildlife (BPA) = 13.4% (third party expense) High voltage transmission to import purchased power = 11.7% (third party expense) Power lines, poles, transformers, and substations = 17.0% IFP owned and operated generation facilities = 8.8% Payment to City General Fund = 6.1% Customer billing, metering, energy efficiency, and customer service desk = 4.8% Administrative and general overhead = 0.9% 1  July 25, 2017 Budget Session Director Flowers stated power rate impacts are influenced by those who use an excessive amount of energy versus a typical customer. She reviewed the proposed rates/fees as follows: FY16/17 Proposed FY17/18 Residential – Monthly Charge $16.00 $18.00 Commercial – Demand Charge $7.25 $8.00 Small Industrial – Demand Charge (/kW) $7.00 $7.25 Large Industrial – Demand Charge (/kW) $7.00 $7.00 AMI (Advanced Metering Infrastructure) Opt $6.41 $6.56 Out – Monthly Charge Line Extension Fee for Single Family Home $1,100.00 $1,500.00 Electric Vehicle Charging Station – Monthly $20.00 Charge Residential Transfer Customers $0.03 added to the Residential Base Energy Charge through term per service agreement Mr. Prairie stated increases are based on the cost of service model, which are based on service and demands of IFP. Director Flowers briefly reviewed comparison of City electric rates versus other Idaho cities. Brief discussion followed regarding low rates within the State and additional services provided by IFP. To the response of Councilmember Hally, Director Flowers stated energy efficiency programs will be adjusted for the upcoming year but will not impact customers. Mayor Casper reiterated the IFP rate increase is due to an outside entity rate increase. She also stated discussion is occurring for additional customer services and programs. Director Flowers reviewed the IFP Municipal Equipment Replacement Fund (MERF). She stated adjustments were completed for IFP and believes the MERF is adequate, including the status of fleet and the formula used for equipment. Brief discussion followed regarding the 15th Street substation and the need to consider upgrades in the near future. 2017-18 Budget Overview, Trends, Forecasting, and Accounting Practices: Mayor Casper believes discussion is necessary regarding the operating budget and capital expenses as Councilmember Marohn expressed concern with balancing the operating budget. She stated previous budget documentation did not include growth money, and her intent is to always include growth money in budget considerations. This year, the growth money would amount to $506,645, which is a conservative estimate. Mayor Casper believes with increasing expenses, outside of the City’s control, it is necessary to take the growth money as she believes the growth money is an offset to inflation and expenses of the City. She believes there is growth in many forms within the City that helps to increase the tax base which then allows City services to be maintained without substantially raising taxes. Mayor Casper believes the only way to maintain a flat operating budget would be to hold costs flat or to cut services. She stated the City cannot control costs as costs will always fluctuate. She indicated she requested Department Directors to present a flat operating budget while keeping services flat, not keeping costs flat. She stated the Wages and Benefits increases, included in the proposed budget, were based on inflation increase of 2.5%, which amounts to $545,000. Mayor Casper stated the Finance Team reviewed the number of full-time employees (FTEs), created a $1.5m contingency fund, reviewed fees related to collection, reviewed property tax collection trends, and reviewed benefit payouts. Mr. Hagedorn reviewed the contingency fund, in the amount of $1.8m, which has been reallocated from savings within departments. He stated this fund has been created for unknown expenses within any department and is for spending authority only. Mayor Casper believes this fund should be carefully monitored and only used for necessities. Brief discussion followed regarding FTE reports, unassigned revenues, and property tax collection. Mr. Hagedorn stated cash collections will be budgeted in the next fiscal year which will follow the budgeting basis and will convert to accrual basis for financial reporting. Mayor Casper indicated, due to Councilmember Marohn’s request that all Departments review their operating budgets, review of Municipal Services and Mayor/Council budget includes a reduction of $100,000 to $71,000 for building infrastructure, a requested increase of $50,000 to Targhee Regional Public Transit Authority (TRPTA), a $6000 increase to Sister Cities budget for 2 delegates to Japan, and a $9000 increase for Council travel. Councilmember Marohn commended the Finance Team for comparison of revenue versus expenditures. Mr. Hagedorn reviewed the following: 2  July 25, 2017 Budget Session Projected Growth & Cash balance Total Budget Requests Total Variance Revenue Annexation as of May Funding Requested 2017 Budget $162,750,089 $506,645 $118,663,224 $281,919,958 $151,741,547 $45,233,856 $196,975,403 $84,944,555 He reviewed the Special Revenues Fund and the Capital Improvement Funds. Operating: Projected Growth & Total Funding Budget Requests Total Requested Over (Under) Revenue Annexation Budget $41,371,931 $506,645 $41,878,576 $41,692,992 $263,058 $41,956,050 ($77,474) Mr. Hagedorn stated the Operating budget is balanced with approximately $220,000 excess, although additional requests will exceed the budgeted amount. He briefly reviewed requested items that could be reduced, including ADA building costs, TRPTA, Sister Cities, Council minor equipment, Council travel, wage inflation adjustment, non- certified/board travel freeze, and/or $5/month dental cost share. Mr. Hagedorn stated there is more control over expenses and less control over revenue. After general discussion and comments, it was decided to reduce Parks and Recreation (P&R) Professional Services request by $25,000, reduce TRPTA request by $25,000, and reduce non- certified/board travel by $25,000. Councilmember Marohn reminded the Council this is only a tentative approval of a budgeted amount, additional discussion could occur for other/different reductions. Mr. Hagedorn stated there is not a preference to fund capital requests from the cash reserves. He believes there is a need to maintain cash reserves to cover unknown expenses in the previous year. Other options are to eliminate, reduce, or take the levy. He reviewed the following: Capital: Projected Growth & Total Funding Budget Requests Total Requested Over (Under) Revenue Annexation Budget $43,621,931 $506,645 $44,128,576 $41,692,992 $5,377,204 $47,070,196 ($2,941,620) Mr. Hagedorn reviewed the following Growth + Levy Rates with requested priorities: Growth Savings 1% 1.50% 2% 3% Cash Balance $200,000 $500,000 $650,000 $800,000 $1,100,000 Level 1 Priorities Code Enforcement Clerk 57,582 IT Servers 37,252 GIS Computer Replacements 13,000 Refrigeration System and Freezer 16,441 Playground Replacement Program $75,000 Civic Auditorium Funding 420,400 Education Center (no added cost) Heritage Park Split -2 years 500,000 Level 2 Priorities PIO Intern 21,668 Councilmember Hally is in favor of 1.5% levy increase and utilizing $500,000 from the General Fund. He believes money should be spent for parking and roadways at Tautphaus Park. Discussion followed regarding Heritage Park and the potential land swap of the Bonneville County 4H Building with the 911 Dispatch Center. Mayor Casper stated additional discussion needs to occur regarding any land swap. Councilmember Radford is supportive of the growth savings and 3% levy increase. He does not believe money should be taken from the General Fund to pay for capital projects which may indebt future Councils. Councilmember Ehardt prefers to stay level and is more interested in utilizing General Funds. Councilmember Smith stated due to donors contributing to P&R and the Civic Auditorium, he believes it would be ludicrous to not match those donations. He indicated due to the excessive costs of snow removal and the fire station, he does not believe a flat budget is probable. Councilmember Dingman concurred. Mayor Casper believes if any proposed increase can be demonstrated to taxpayers that the money is tied to specific things, those specific things are leveraging dollars. Councilmember Hally believes contingency funds should be attached to large items, including snow removal, Hitt Road, and Fire Station. General comments followed. 3  July 25, 2017 Budget Session At the request of Mayor Casper, Mr. McOmber stated that GFOA (Government Finance Officers Association) best practices states that two (2) months of expenses or revenues should be sustained in the General Fund. He stated, on average, the City spends approximately $4m-$5m monthly or $8-$9m at a minimum. Mr. McOmber stated the General Fund balance is currently at $4m. He indicted the City planned to go low, but not this low. He also stated most investments are liquid which could be used if needed. After further general discussion and comments, it was consensus of the Council to tentatively approve the budget cap/ceiling at $195,133,783, which is approximately $61,000 less than the previous year. To Councilmember Radford’s request, Mayor Casper indicated discussion is occurring regarding the formation of several committees to assist with future budget presentations. Councilmember Marohn recommended Council be aware of the five-year performa regarding capital and operational planning by Departments. He stated the majority of the budget is Enterprise Funds. General Fund budget amounts to approximately $45m, which is $3m less than previous year. After further discussion of additional priorities, there was consensus to add an additional $400,000 to the tentative budget cap = $195,533,783. Mayor Casper stated the July 26 discussion will include clarification of proposed fees and Priority Based Budgeting concepts. There being no further business, the meeting adjourned at 6:07 p.m. s/ Kathy Hampton s/ Rebecca L. Noah Casper CITY CLERK MAYOR 4