City Council

July 9, 2024 Budget Session The City Council of the City of Idaho Falls met in Council Budget Session, Tuesday, July 9, 2024, in the Council Chambers in the City Annex Building located at 680 Park Avenue in Idaho Falls at 12:00 p.m. Call to Order and Roll Call There were present: Mayor Rebecca L. Noah Casper Council President Lisa Burtenshaw Councilor John Radford (Joined Virtually at 2:46 pm) Councilor Michelle Ziel-Dingman Councilor Jim Freeman Councilor Jim Francis Councilor Kirk Larsen Also present: Darin Jones, Human Resources Director Pam Alexander, Municipal Services Director PJ Holm, Parks and Recreation Director Wade Sanner, Community Development Services, Director Duane Nelson, Fire Chief Mark Hagedorn, Finance Manager / Treasurer Brooks Slyter, Assistant Finance Manager Bryce Johnson, Police Chief Jeremy Galbraith, Deputy Chief Chris Fredericksen, Public Works Director Stephen Borman, Idaho Falls Power Assistant General Manager Aleisha Stout, Idaho Falls Public Library Ian Turner, Airport Director Catherine Smith, Economic Development Administrator Eric Grossarth, Public Information Officer Margaret Wimborne, Chief of Staff Michael Kirkham, City Attorney Corrin Wilde, City Clerk Mayor Casper called the meeting to order at 12:06 p.m. with the following items: Opening Remarks, Announcements: Mayor Casper discussed the city’s approach to the budget process this year. She emphasized the concept of “adaptive management,” noting that the budget process has evolved and required the development of new ways to present information and data. She highlighted the council’s involvement in identifying priorities during an early retreat and how those priorities aligned with the goals of various city departments. Mayor Casper provided an overview of the upcoming budget planning activities, including a series of “Budget Tuesdays” where the council and directors would delve deeper into specific budget items, workshops on financing plans, and discussions around spending priorities and potential revenue sources. She encouraged both council members and directors to provide feedback and ideas for process improvements throughout the budget planning process. Finance Team – Workshop: Budget Overview: Pam Alexander opened the budget workshop by expressing gratitude to the finance division and professional accountants for their work on the budget and thanked the department directors for their help with the budget. She introduced the finance team present, including Mark Hagedorn, City Treasurer/Finance Manager and Brooks 1  July 9, 2024 Budget Session Slyter, Assistant Finance Manager. Director Alexander then outlined the workshop agenda, including a budget overview, revenue and expenditure forecasts, full-time equivalents, sustainability and financial pressures, inter- departmental allocations, and accounting standards. Mr. Hagedorn presented the 2024/25 Summary by Fund Type from the Budget Book (page 49), with general discussion throughout. Budget Book page 49 2024/25 Summary by Fund Type: • Total estimated revenue for the initial budget is $313 million • Current expenditures are $367 million • There's a $53 million delta between expenditures and revenues, funded by cash balance • This delta is primarily for enterprise funds to have capacity for capital projects throughout the year • For the general fund, there's a recommendation to use $1 million of cash to fund the ERP project • After allocating $1 million for ERP, there would be $660,000 left for council priorities • The $660,000 can be used in the general fund or moved to other governmental funds as needed • This approach allows flexibility without reopening the budget for new projects during the year Mark emphasized that building in this capacity, especially for enterprise funds, is important to avoid having to come back to the council to reopen the budget for new projects throughout the year. FY 2024/25 Forecasted Revenues – Revenue Summary Budget Book Page 27,44-45. Brooks Slyter presented a summary of citywide revenues, highlighting key changes from previous years to the proposed budget. She noted a drop in taxes and franchise fees, which was not actually a decrease but a categorization change. There was a significant increase in charges for services, primarily in enterprise funds like utilities. The proposed budget showed a large jump in intergovernmental revenues, with an expected $30 million for projects. 2  July 9, 2024 Budget Session General Fund – Revenue Data: Brooks Slyter presented an overview of the General Fund revenue data, highlighting key points: • Property Taxes: Expected to increase by 3% plus growth from annexation. • Intergovernmental Revenues: Projected to rise overall, but state shared revenues will decrease by $1.1 million. • Charges for Services: Expected to increase due to higher activity in the Zoo, War Bonnett, Civic Center and Community Development Services. • Permits and Fees: Projected to be higher, with development-related revenues exceeding expectations. • Interest Revenue: Anticipated to rise due to increased interest rates. • Contributions: Expected to decrease, mainly due to lower zoo revenue projections ($100,000 vs. $2 million last year). • Grants: Federal, state, and local grants, including ARPA funding, are expected to increase, with $5.7 million in ARPA funds projected for the upcoming year. • Payment in Lieu of Taxes: Expected to remain stable. Ms. Slyter emphasized that these projections are based on current trends and conservative estimates to ensure a balanced and responsible budget. General Fund Intergovernmental Revenue: Brooks Slyter discussed the special revenue funds, noting that impact fees are expected to increase due to changes in city growth and development. The Capital Improvement Projects (CIP) Fund shows a significant drop due to the completion of the public safety facility. Grant funding fluctuates year to year, especially ARPA funds, while contribution revenues are projected to decrease, including zoo revenues. Overall volatility is due to project- specific or tied revenue streams. Ms. Slyter emphasized that these changes reflect the completion of major projects and shifts in expected revenues, not overall financial issues for the city. Mark Hagedorn emphasized that building a good budget requires being very conservative when forecasting revenues. He stressed the importance of understanding where revenues come from, as this forms the foundation for balancing the budget. He says that the finance team spends more time scrutinizing revenues than expenses to ensure a solid budgetary foundation. 3  July 9, 2024 Budget Session Forecasted Expenditures – Expenditure Summary Budget book page 30, 44, 46. 2023 Actual 2024 Adopted Budget 2025 Proposed Budget • Expenditure Changes: Presented a citywide overview across categories and fiscal years. • Salaries and Benefits: Relatively consistent year-over-year with limited increases. • Interfund Transfers: Significant jump with $2 million for the ERP project. • Grant Expenses: Now broken out separately for transparency (Already been awarded). • General Fund: Biggest change in operational costs. • Temporary and Seasonal Expenditures: Decreased due to vacancies or turnover. • Position Reviews: No placeholder funding this year. • Debt Service Costs: Decreasing in the general fund. • Miscellaneous Category: Efforts to reduce its use for better expense categorization. General Fund Expenditures: • The largest change in the budget was in operational costs. • Personal costs remained relatively stable from the previous year's budget. • There were decreases in temporary and seasonal expenditures, as well as reductions due to vacancies and staff turnover. • Unlike previous years, there was no placeholder funding for position reviews in this budget. • Debt service costs in the general fund are decreasing. • Municipal services showed a $1 million increase, primarily due to allocating funds for the ERP project. • The non-departmental category, which includes general purpose revenues, showed minimal change. • Development services saw a decrease, mainly due to the completion of the City Works project. • Police and fire departments showed increases of $1.9 million and $1.6 million respectively, largely due to increases in their revenues. • Parks and Recreation saw an overall decrease in their budget, primarily due to the completion of some projects and one-time fees. Mr. Hagedorn discussed the FY 2024/25 Revenues vs Expenditures, providing a year-over-year comparison as detailed on Budget Book Pages 47-48. This budget year presented challenges due to changes in state revenues and departmental needs. Despite these challenges, the budget is in a better position than in previous years, thanks to collaboration with department directors. The general fund shows various increases and decreases across departments: Municipal Services had a $1 million increase, primarily for the ERP project; non-departmental revenues saw minimal change; Development Services decreased due to the completion of the City Works project; Police and Fire Departments had increases of $1.9 million and $1.6 million respectively, due to revenue increases; and Parks and Recreation saw a decrease due to completed projects and one-time fees. Special revenue funds and impact fee funds showed changes based on specific projects and revenue sources. Capital improvement funds generally decreased as projects were completed or wound down. Enterprise funds showed various changes: the wastewater plant saw a decrease as a major project was wrapping up; Power had an increase for planned projects; and Fiber Optics decreased due to the winding down of the fiber home project. Internal service funds for health insurance and risk management were being reviewed for potential adjustments. Mayor’s Office – Workshop: Review and Disposition of Council Priorities: Chief of Staff Margaret Wimborne opened the discussion by explaining that this year’s budget was largely driven by the council priorities set in February, noting a close alignment between these priorities and department directors’ goals. She mentioned that they are developing a spreadsheet to show how these priorities are being implemented over time. Margaret then provided an overview of how different departments are addressing the priorities: Public Works is focusing on safe streets and multi-modal street design; Municipal Services is working on 4  July 9, 2024 Budget Session a building stewardship plan; HR is exploring sustainable employee benefits options; Parks and Rec is considering a Community Recreation Center; the Fire Department is planning a new training center; Community Development Services is expediting application reviews; and the Police Department is renewing its focus on code enforcement. Ms. Wimborne stated that some priorities are already integrated into department operations, while others will require future requests. She highlighted specific budget items tied to council priorities, including new staff positions and capital projects, to help guide the council’s discussions during the budget review process. Human Resources – Workshop: Employee-Related Budget Considerations: Human Resources Director Darrin Jones discussed employee total compensation, focusing on wages, insurance benefits, and retirement. He proposed a 3% wage increase for employees, costing a total of $1,275,915, along with step increases averaging 1.78%, which would cost $779,884. Additionally, there is a 10% increase in health insurance rates, but the city will offset the entire cost increase for employees by using $167,000 from the health insurance sustainability fund. Retirement cost increases mandated by PERSI will total $576,034 for the city. Overall, the total increase to the general fund for all compensation changes is about $2.4 million, representing a 3.2% increase in general fund expenditures. Director Jones indicated that these changes are already built into the budget and aim to attract and retain talented employees while maintaining their purchasing power. He also noted that the city is covering the full cost increase for dental insurance, resulting in no additional health or dental insurance costs for employees this year. Finance Team – Review: Requests for FTE Employees by Fund and Department: Director Alexander, HR Director Darrin Jones, and Mark Hagedorn led a discussion focused on sustainable funding for staffing and capital expenses in the city budget. The finance team analyzes FTEs, revenue, and sustainability to balance staffing and capital needs, emphasizing the need to differentiate funding sources for capital and staffing. Wage increases were examined, showing variations between 2.8% and 4.5% in different categories. The importance of distinguishing one-time costs from ongoing expenses was emphasized. Benchmarking was proposed as a method to compare the city’s staffing and budget ratios with other comparable cities, though challenges in creating meaningful benchmarks were discussed, including the need for repeatable data and consideration of unique city services. The group explored various metrics for measuring sustainability, including employee counts, population ratios, and budget percentages, stressing the importance of using multiple data points to inform council decisions. The conversation concluded with a suggestion to prioritize fund requests based on alignment with city goals for future budget discussions. Mayor Casper advised council members to identify positions that align with their goals for the city during the fund request review. She suggested two options: prioritize a specific number of positions to fund or listen to all requests and keep mental notes. This approach aims to prepare them for the final budget discussion in two weeks, ensuring important positions are not overlooked. Council agreed to prioritize each request by department. City Attorney Michael Kirkham explained that misdemeanor prosecutions dropped during the pandemic, reducing workload, but as operations normalize, caseloads are returning to pre-pandemic levels. To manage this, they are requesting a second city prosecutor and converting a part-time administrative assistant to full-time, with the city needing an additional $37,000 for the prosecutor position due to labor inflation and $14,000 for the administrative assistant’s full-time conversion. Human Resources Director Jones stated that Idaho Falls has the lowest HR-to-employee ratio among the state’s 10 largest cities, with only 4 HR employees compared to the average of 8-9, and they are requesting an HR analyst to assist with various tasks, allowing HR managers to focus on additional services and initiatives. Chief of Police Bryce Johnson reported a 32% rise in violent crime from 2019 to 2023, straining the department’s response capacity, and they are seeking funding for 6 additional officers through a COPS grant, or 2 new officers if the grant is not awarded. Parks and Recreation Director Holm requested converting two part-time zookeeper positions to full-time, costing $15,821 per employee with benefits, noting 5  July 9, 2024 Budget Session that part-time positions are hard to fill and retain, and full-time zookeepers are crucial for animal care, with a budget increase of $31,642 requested to cover these changes. Council Discussion: The council prioritized personnel decisions and resource allocation, expressing concerns about over-reliance on grant funding. They considered funding police officers through reserves or general fund money and discussed funding for Human Resources, Legal, and Parks/Zoo staff, particularly the zoo budget. They explored reducing subsidies and finding alternative funding, such as increasing non-resident fees. The discussion centered on prioritizing and allocating limited resources across departments. The finance team will return next week with a plan. Staffing Requests: The council reviewed requests for new full-time employees across various city departments, including six new firefighters for the EMS fund, a facility coordinator for the ice rink and pickleball complex, a right-of-way inspector for the street division, and new positions in the water, sanitation, and wastewater divisions. Most requests were less than 1% of the anticipated revenue for the respective enterprise funds, potentially covering them without impacting the general fund. However, there was concern about pickleball revenue not fully offsetting the new facility coordinator position. The group also discussed pursuing government grants and the need for new network and traffic technician positions. The focus was on evaluating staffing requests and determining funding within existing budgets. Finance Team – Workshop: Interdepartmental Transfers using a Cost-of-Service Model: Mark Hagedorn and Director Alexander discussed interdepartmental lead the discussion: Central Services Allocation (34%): This portion of the budget covers essential services that benefit multiple departments. Examples include fleet facilities, GIS (Geographic Information Systems), engineering, building maintenance, power infrastructure (IF Power), dispatching, and insurance. The indirect cost allocation plan is used because it is not feasible to track every minute of time spent by central services departments on work for other departments. The indirect plan provides a more practical way to distribute these costs. The indirect cost allocation plan has two main components - overhead costs (like building electricity) that are allocated as a percentage, and direct costs that are allocated based on specific cost drivers like number of employees or budget values. Work Order and Service Transfers (66%): This category accounts for work orders and services transferred between departments. For services where departments directly charge each other, like fleet maintenance or engineering work, the full cost of providing that service is captured. This allows the city to understand the true cost of providing those services, which can help inform budgeting and decision-making. The challenge with work order systems is ensuring the right cost codes are used, as the onus is on the employee to properly charge their time. Mr. Hagedorn clarified that this isn’t a comprehensive list, and additional services (like parks landscaping and snow removal) could be included. Interdepartmental Allocations: When services are shared across departments, interdepartmental allocations come into play. interdepartmental allocations: Interdepartmental transfers and allocations are not a funding mechanism, but rather a way to properly account for and distribute the costs of central services provided across different city departments. The majority of the $19 million interdepartmental budget involves direct charges for services provided by one department to another, like fleet maintenance or engineering work. Approximately 34% of the interdepartmental budget is allocated through an indirect cost allocation plan, which distributes the costs of central support services like accounting, payroll, and IT. The indirect cost allocation plan uses established cost drivers and formulas to distribute these costs, rather than directly tracking every minute of time spent by central services on other departments. The goal is to have a fair, consistent, and equitable way to allocate these central services costs across the various city departments. Allocation Standards and Authorities: The Government Finance Officers Association (GFOA) advises that indirect cost allocation plans should be fair, consistent, reasonable, and rational. The federal OMB Circular A-87 provides detailed guidance, including the concept of an “allocation pool” that should not be self-allocated. Idaho state code requires distinguishing between ratepayers and taxpayers in cost allocations. The city uses these standards to develop and review its interdepartmental cost allocation methods. 6  July 9, 2024 Budget Session Departments use specific cost drivers for fair expense allocation. The Mayor’s office and Legal department estimate time spent, while the Council and Municipal Services Administration (MS Admin) use the prior year (PY) budget. The Clerk’s office considers agenda items, and IT splits costs between utility and general expenses based on billings and active directory data. Treasury allocates expenses based on 50% PY revenue and 50% PY customer count, Finance examines PY actual expenses, and HR considers PY personnel costs. These distinct approaches ensure fair distribution of expenses across departments. Charges for Fleet/Garage Services include direct costs and overhead for facilities and utilities. IT costs are allocated by usage for utility-based expenses, such as network infrastructure, and by the number of user accounts for security and Active Directory. Treasury costs are split equally between cash flow management and revenue collection. Finance costs are allocated based on actual expenses, with more resources dedicated to higher dollar items. The city employs various cost drivers and allocation methods depending on the nature of the central service provided to other departments. All Participants – Wrap-Up: Discussion, Information & Data Request, Next Steps, and Calendar: Mayor Casper briefly discussed next Budget Session agenda topics and a brief discussion occurred regarding agenda items for next Tuesday’s budget sessions. There being no further business, the meeting adjourned at 4:46 PM s/Corrin Wilde s/Rebecca L. Noah Casper Corrin Wilde, City Clerk Rebecca L. Noah Casper, Mayor 7