City Council

Mayor Mark S. Nexsen Lake Havasu City Vice Mayor Don Callahan Lake Havasu City Police Facility Councilmember Crystal Alger 2360 McCulloch Blvd North Councilmember Dean Barlow Councilmember Donna Brister Work Session Minutes - Final Lake Havasu City, Arizona 86403 www.lhcaz.gov Councilmember Jeni Coke Councilmember David McAtlin City Council Tuesday, May 6, 2014 1:30 PM Budget Overview & Budget Work Session 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL Present: 6- Mayor Mark S. Nexsen, Councilmember Crystal Alger, Councilmember Donna Brister, Vice Mayor Don Callahan, Councilmember Jeni Coke and Councilmember David McAtlin Absent: 1- Councilmember Dean Barlow 4. CALL TO THE PUBLIC Mr. John Heinze, Jr. addressed the Council regarding transit services. Mr. Heinze said he is disabled and transit is his only way of transportation. He said he is speaking today for all the riders that were unable to make the meeting. He added that a lot of people depend on public transit and the City Council needs to work harder to find a way to keep public transportation. Ms. Robin Colegrove addressed the Council and said there is a real need for those that are suffering from addictions. She said she has been around addiction her entire life and also a part of homeless shelters, recovery programs, as well as hospitals and education/juvenile systems for years. Ms. Colegrove stated that she is approached almost on a daily basis by people in need, and it is her goal and desire to help others. She added that she recently filed for a commission number for her organization “A Bridge in the Desert” and also has a business license to volunteer. Ms. Colegrove said her mission statement is “Start small and grow big,” as she believes that Lake Havasu City is a willing community. She read two poems into the record. 5. INTRODUCTION & OVERVIEW Lake Havasu City Page 1 City Council Work Session Minutes - Final May 6, 2014 City Manager Charlie Cassens welcomed everyone to the second in a series of work sessions directly focused on the preparation of the City’s budget for the 2014/15 fiscal year. He said today’s meeting is actually one of three meetings, if you include the City Council Retreat where the City Council determined their priorities and from that a list was created on what the City would like to do and can afford to do this fiscal year. Mr. Cassens reviewed the schedule for tentative and final adoption of the Fiscal Year 2014/15 budget. Mr. Cassens read the following budget message into the record: “It is our pleasure to provide for your review and approval the proposed operating budget for Fiscal Year 2014/15. These documents reflect our continued efforts to provide and maintain quality services, preserve the level of core services and, at the same time, reduce the costs to provide those services. The preparation of the budget is one of the most important tasks we perform each year. Similarly, the review and adoption of the operating budget is the most important policy decision that you, as elected officials, make in the best interest of the community. The proposed FY 2014/15 operating budget represents a sensible approach to balancing the City’s budget and positioning the City for long-term financial stability. What you see in the accompanying document incorporates the continuation of the City reorganization that reflects our ongoing effort to improve efficiency and reduce costs. The State of Arizona allows adoption of a one year budget; therefore, the presentation of this budget represents changes and adjustments to Year 2 of the City’s biennial budget. The biennial budget was seen at this time last year where, after consideration, the City Council adopted Year 1 (Fiscal Year 2013/14) and approved Year 2 (Fiscal Year 2014/15). Departments were asked to develop their budgets by reviewing what was approved for FY 2014/15 and make necessary adjustments to the approved budget. The departments did just that and identified increases or decreases to their line items. Throughout the budget workbooks we have added bolded columns or lines to identify and reflect any proposed changes to the budget that was approved last year for FY 2014/15. The accompanying colored pages indicate documents that were provided last year during the process of approving the FY 2014/15 budget and are included for your reference. Overall, proposed General Fund revenues for FY 2014/15 are projected to increase by $592,027 or 1.5 percent, over the previously approved FY 2014/15 budget. Department proposed operating expenditures in the General Fund reflect a 4.0 percent overall decrease for FY 2014/15 from what was previously approved for FY 2014/15. This is not only due to permanent cost reduction Lake Havasu City Page 2 City Council Work Session Minutes - Final May 6, 2014 measures implemented in recent years, but also asset maintenance items previously included in the General Fund being moved to the newly established Facilities Maintenance Fund. Included in this proposed budget is an amount equivalent to a 5 percent adjustment to wages and salaries on July 1, 2014. This is intended to address one of the priorities identified during the January 2014 City Council Retreat. Also included is the Budget Stabilization Reserve of $2.5 million that was prefunded in FY 2012/13 with a one-time inflow of funds from the pending termination of the City’s Employee Benefit Trust. As begun in FY 2012/13, we continue to include an annual contingency appropriation of $750,000 which exceeds historical spending and allows for unplanned occurrences. The use of contingency funds is allowed only with City Council approval. During the current fiscal year Council approved the use of contingency funds in the amount of $216,040 to enter into a contract for General Plan revisions. A general definition of contingency is when funds are appropriated as a backstop against circumstances that were unforeseen for various reasons. It is appropriate to draw on these funds to cover shortfalls that were unanticipated such as repairs or replacement of key operational items or equipment or to meet workload demand. We are targeting a General Fund balance that exceeds $13,000,000, as shown on page 36, in each of the next five years, demonstrating a positive long-range financial perspective. In addition, the Budget Stabilization Reserve of $2.5 million, which was prefunded in FY 2012/13, will be maintained over this same period. A General Fund balance that exceeds $13,000,000 is healthy by many standards, including both the 90 and 120 days operating cash test. Using this long-term approach to financial planning enables the City to realize the cost-saving benefits of the reorganization efforts over time and allows the necessary time for the asset management program to be fully implemented and refined. Like any plan, the proposed operating budget for FY 2014/15 is a guide and best estimate and is supported by projected revenue streams. The City is committed to continuously examining its service delivery methods and the means to analyze, pay for, and prioritize its needs. Authorized positions citywide are proposed to be 445 which is the same level included in the FY 2013/14 adopted budget. This level of authorized positions reflects a 17% reduction in staffing from a peak of 539 positions in FY 2008/09, and is a good indicator of efficiencies that have been put in place without a measurable reduction in service levels. Following are the major policy decisions and considerations contained in the Proposed Operating Budget for FY 2014/15: • Implement salary increases for employees. Lake Havasu City Page 3 City Council Work Session Minutes - Final May 6, 2014 • ASRS FY 2014/15 employer contribution rate of 11.60 percent compared to 12.54 percent included in the FY 2014/15 approved budget, a decrease of 7.50 percent. • PSPRS FY 2014/15 employer contribution rate (Fire) of 32.26 percent compared to 33.90 percent included in the FY 2014/15 approved budget, a decrease of 4.84 percent. • PSPRS FY 2014/15 employer contribution rate (Police) of 34.70 percent compared to 34.29 percent included in the FY 2014/15 approved budget, an increase of 1.20 percent. The “all funds” proposed operating budget for FY 2014/15 totals $76,118,568. This represents an increase of $2,195,502 or 2.98 percent over the FY 2014/15 approved operating budget of $73,923,066. Debt service, depreciation and contingencies for proposed FY 2014/15 totals $39,960,377. The proposed budget for FY 2014/15 also reflects state shared revenue increases of $409,982, or 3.1 percent, over the FY 2014/15 approved budget. Sales tax, the largest single revenue source for the General Fund, is expected to end FY 2013/14 at $15,730,181, which is $901,328 or 6.1 percent over the FY 2013/14 adopted budget. The FY 2014/15 proposed budget reflects a conservative increase of 4% over the estimate included in the FY 2014/15 approved budget. We are also committed to funding our Partnership for Economic Development (PED) and the Convention & Visitors Bureau (CVB) using proceeds from the hotel/motel and restaurant and bar tax. The City will continue to distribute funds based on actual collections of these taxes to the CVB and PED on a 75%/25% ratio, respectively. The FY 2014/15 proposed Community Investment Program (CIP) budget is $24,927,706, compared to $22,692,547 in the previous year, with water, drainage and general government projects making up the bulk of the projected expenditures. The proposed 10-year CIP plan includes multiple unfunded projects – during this work session a continuation of the CIP discussion will take place to determine changes to the project prioritization and funding levels. In summary, the budget document attached to this message represents a great deal of planning and effort. The result is a workable spending plan that is contingent on available revenues. The City is committed to keeping its cost of providing essential public services within the most reliable revenue streams and continuing to rely on innovation and planning to accomplish this objective. Increasing our ability to sustain City operations in the current economic environment will take creativity, innovation, enhanced technology, outsourcing and a great deal of perseverance. We wish to thank all the dedicated people of this organization, along with the department heads for their cooperative efforts in developing this budget. A special note of thanks goes to Senior Budget Analyst Stefanie Morris and Administrative Services Department staff for their dedicated efforts in the planning and development of this document. We would also like to thank the Mayor and City Council for giving us the opportunity to help lead this fine organization.” Lake Havasu City Page 4 City Council Work Session Minutes - Final May 6, 2014 6. BUDGET HIGHLIGHTS & PROJECTIONS Administrative Services Director Valerie Fenske said staff will be presenting some of the budget highlights and projections, as well as looking at some of the changes to authorized positions, focusing on general fund revenue and expenditure changes compared to what the City Council saw last year, budgeting trends, focusing on department budget reviews and changes to the individual departments, and finally continuation of the Capital Improvement Project (CIP) discussion from the April 15th meeting. Ms. Fenske reviewed the following: Authorized Positions • Proposed to increase from 442 to 445 positions Mayor Nexsen said it was his understanding that during a previous work session the City Council requested two full-time code enforcement positions. Mr. Froslie clarified that there will be two full-time positions for code enforcement; however, the reason why only one is listed is because one of the positions already exists and just happens to be vacant right now and that is why there currently is not anyone in code enforcement. He said the addition the City Council sees here is for one proposed code enforcement position in Fiscal Year 2014/15, and the existing position, that became vacant in February, will be filled in about two weeks. Mayor Nexsen noted that the schedule on Page 2 indicates that the proposed 2014/15 schedule, which includes all positions, shows one code enforcement officer, to which Mr. Froslie replied that was correct. He explained that there is one code enforcement specialist position proposed in 2014/15; however, the existing position that was recently vacated was a planning technician who handled all of the City’s code enforcement activity. He said the planning technician’s position was upgraded to a city planner, or a planner position, to provide a more senior level oversight of the code enforcement process. Mr. Froslie said the Planning Division will have a senior planner, a planner over code enforcement, and a code enforcement specialist. Mayor Nexsen said he was concerned that a building inspector or planner would be busy with other duties and not strictly dedicated to code enforcement. Mr. Cassens said the planning technician that vacated the position was not called a code enforcement specialist, and this position will be a code enforcement specialist. He said the City will be filling that position and adding another code enforcement specialist. Mayor Nexsen responded that he did not see two positions for code enforcement listed anywhere on the schedule of positions. He said Page 2 indicates that there will be zero code enforcement officer positions and one code enforcement specialist position in Fiscal Year 2014/15. Mr. Froslie replied that Page 2 is exactly what was discussed at the March 11th code enforcement work Lake Havasu City Page 5 City Council Work Session Minutes - Final May 6, 2014 session, in that the City currently has a vacant planning technician position that performed 100 percent of code enforcement in Fiscal Year 2013/14. He said that was vacated in February and at the work session in March he announced that the planning technician position had been upgraded to a planner position to provide senior level oversight of the code enforcement position. He said this position will be a dedicated full-time code enforcement position that will evaluate and re-develop the code enforcement process. Mr. Froslie said what is in the proposed budget is for a new full-time code enforcement specialist position. He reiterated that the code enforcement team will consist of a full-time planner and a full-time code enforcement specialist. Mayor Nexsen asked if the city planner position was going to be boots on the ground or boots in the office, to which Mr. Froslie replied that person will be boots on the ground. Mayor Nexsen emphasized that the planner really needed to be out in the field and not someone reviewing codes forever. He said he has received more complaints from citizens regarding code enforcement than any other topic, and what the citizens really want to see is two full-time code enforcement positions out in the field examining code enforcement violations. Mayor Nexsen asked why this position was being called a city planner if they are going to do code enforcement, to which Mr. Froslie replied that the recruitment was for a planner to place the position within the appropriate pay band to supervise a code enforcement specialist. General Fund Revenue Changes • FY 2015 approved $39,223,390 to FY 2015 proposed $39,815,417 Mayor Nexsen asked if the City Attorney could address developer rebates and what the City can and cannot do. He said recently there has been a lot of misinformation that the City should not be paying these for other purposes. City Attorney Kelly Garry said the developer rebates are rebates that are subject to retail sales tax agreements that the City entered into with various developers. She said when the City enters into those agreements we split the sales tax that is received, and the agreement is for public improvements that are made by the developer. She added that the developer makes those improvements upfront with the agreement that they will receive a sales tax rebate for those improvements that they make. Ms. Garry said those improvements are public improvements so they have to be made one way or another; therefore, the benefit of having the developer do it is that they do it upfront and it is a way to fund that. Ms. Garry said when the City makes those rebates back through the agreement that money is earmarked for that purpose so it has to go back to pay for those public improvements that were done by the developers. Mayor Nexsen asked who then owns the public improvements, to which Ms. Garry replied that the City does. Mayor Nexsen said basically the City is repaying the money that the developer fronted to make public improvements owned by the citizens, to which Ms. Garry replied yes, and added that it is very specific what those public improvements may be as they have to be for public infrastructure-based improvements. Lake Havasu City Page 6 City Council Work Session Minutes - Final May 6, 2014 Mayor Nexsen asked if the City was able to stop paying those developer rebates, to which Ms. Garry replied no, and added that the City would not want to because they are public improvements that are needing to be done for a public purpose, for a public benefit that the City would have had to invest in had the developer not come in and done that improvement upfront. Councilmember Brister said what she is hearing is that developers come in and pay for public improvements that the City gets to keep regardless of whether the developer stays in business and the developer receives a break in the tax. Ms. Garry clarified that it is not a break in the tax. She said for example, if a developer comes to Lake Havasu City and puts in water or sewer infrastructure improvements, they make that investment by putting those improvements in upfront and then when the business opens and starts collecting sales tax the City collects that sales tax and splits the tax according to the agreement. She said the amount agreed to goes back to the developer as a reimbursement for that improvement. She said the money is coming through the sales tax over time and is not coming from an immediate fund from the City. Ms. Garry added that there is more risk on the developer than on the City because they are usually limited by time or some other cap; therefore, they make that improvement and initial investment and then if that particular business is not successful and they are not able to raise the sales tax to reimburse themselves back over time that windfall goes to the City. Mayor Nexsen said he believes there is some confusion that the City is using sales tax generated from other businesses to rebate; however, the fact is that if the developer who put in the infrastructure cannot create new sales tax they do not get a rebate, to which Ms. Garry said that is correct. Ms. Garry explained that it is only the sales tax that is generated by that development and how it is defined in the development agreement. Ms. Garry said if the development fails to generate enough sales tax then the development is out that money and the City still benefits from that public improvement that was made. Councilmember Callahan asked for clarification on the fire revenue, to which Ms. Fenske said the largest piece of that decrease is due to the P3 Program that the City anticipated having in place and built into the forecast and now that it is not a viable project anymore it is being removed. Ms. Fenske added that there are a few other fire revenues that are smaller and a part of the overall number; however, the biggest portion of that decrease relates to the P3 Program. Mr. Cassens added that the community based program that was presented at the April 22, 2014, work session is not expected to add any expense or generate revenue. Ms. Fenske said going back to the developer rebates; she wanted to add that the City expects to see two of those paid off by the end of FY 2014/15, which shows that some are being paid off earlier than anticipated in the agreement. Lake Havasu City Page 7 City Council Work Session Minutes - Final May 6, 2014 Mayor Nexsen said on Page 10 the City made a large positive adjustment of over $3.2 million for sale of land, and asked for clarification on what land this was referring to. Mr. Cassens said it is a line item that has been included in the budget in the event that the City is able to sell City lands; one of those being Kiowa Ponds. He said this allows the City to account for that in the budget. General Fund Expenditure Changes • FY 2015 approved $43,195,423 to FY 2015 proposed $41,474,670 Mayor Nexsen asked if the $2.4 million for the Asset Management Program was originally in the City Manager’s budget and that is why there is a significant decrease, to which Mr. Cassens replied yes. Ms. Fenske explained that there is a page within the budget book that shows all of the variances and more detail by department. She said the City created a new fund specifically for the Asset Management Program to allow for a tracking mechanism so the City can fully identify how those expenditures are made and how funding will flow into that fund. There was discussion regarding the funding for Wayfinding being transferred from Community Affairs to the Capital Investment Program (CIP). Mayor Nexsen said after hearing the budget message earlier, is the City anticipating approximately a four percent increase in sales tax, to which Ms. Fenske replied that staff increased that item by four percent over what was previously anticipated. She said staff built in an increase for Fiscal Year 2014/15 originally and then an additional four percent was included on top of that. Mayor Nexsen asked what the estimated increase would be over the expected Fiscal Year 2013/14 actual, to which Ms. Fenske replied $314,000 is where the City expects to end the 2013/14 year. Mayor Nexsen asked for the percentage to compare what is expected in Fiscal Year 2013/14 to what is being budgeted, to which Ms. Fenske replied that it was right around two percent. Mayor Nexsen said his guess is that the City will do better than two percent, to which Ms. Fenske responded yes. Mayor Nexsen said his guess is that the Fiscal Year 2013/14 increase will range somewhere in the nine to ten percent. Ms. Fenske added that staff has looked at the numbers and tried to anticipate the increases over what was budgeted and whether to maintain the same projected level moving forward or is this just the “bump” coming out of the recession, and will the City continue to see the increases every year or will they taper off. Mr. Cassens said the question then is what percentage the City Council feels most comfortable with moving forward, to which Mayor Nexsen said there really is no magic formula, but typically to be conservative you would take last year’s increase and divide it by two, thinking that the City will only do half as good, and move that number forward. He added that anytime you do a projection you will probably want to factor out the best year, which for Lake Havasu was the year of the construction boom, because you are never going to see those increases again. Lake Havasu City Page 8 City Council Work Session Minutes - Final May 6, 2014 Budget Summary FY 2014/15 • Overview • Total Financial Resources “Where the money comes from” - $230,955,437 • Local Taxes FY 2014/15 - $26,705,306 • Intergovernmental Revenues FY 2014/15 - $20,879,437 • Total Expenditures “Where the money goes” - $144,614,880 Councilmember Callahan asked if the fund balance is what is carried over, to which Ms. Fenske replied yes for all funds City-wide. She added that there are large balances in some of the funds because the City is required to maintain certain balances; for example, in the enterprise funds that have borrowing related to them, which would be the water and the wastewater funds, the City has specific cash requirements. Mr. Cassens clarified that the Transient Occupancy Tax (TOT) is commonly referred to as the bed tax. He said the graph shows the local bed tax and the restaurant and bar tax pieces removed from the pie graph because they fund the Convention and Visitors Bureau (CVB) and the Partnership of Economic Development (PED), and the City cannot use those funds for operations or projects. Mayor Nexsen asked if the total budgeted expenditures included debt service, to which Ms. Fenske replied yes. She added that the water and wastewater service has debt service included within their numbers whereas the $239,996 is for General Fund debt service. Budget Trends FY 2014/15 • Operating Budget All Funds FY 2014/15 • Total Budget All Funds FY 2014/15 Ms. Fenske reviewed the bottom line being proposed for Fiscal Year 2014/15 after the proposed changes from the previously approved budget. She further reviewed the changes in the number of positions, salaries, benefits, taxes and insurance, and supplies and services for Fiscal Year 2014-15. Budget Manager Stefanie Morris stated that there are a few things that make up the increase, one being an increase in professional services of $600,000 which is related to election services and also some architectural surveying related to the Metropolitan Planning Organization (MPO) program. She noted that there is grant funded revenue that covers the MPO costs. Ms. Morris said there is also an increase of a little over $400,000 for the Community Development Block Grant (CDBG) expenditures that fall under professional services, and noted that there is also grant revenue that cover the costs. Mayor Nexsen pointed out that in 2012 there were 448 positions and today there are 445; however, the benefits, taxes, and insurance costs have increased $1.15 million from 2012 to 2014 with three fewer employees. Lake Havasu City Page 9 City Council Work Session Minutes - Final May 6, 2014 Ms. Fenske said the City Council will notice in the budget materials provided that the departments are listed in alphabetical order. She noted that the yellow pages indicate what was approved for Fiscal Year 2014/15 and the white pages show the changes or adjustments to what was approved. Ms. Fenske said on Page 32 the City Council will find the Facilities Maintenance Fund which is a new fund that has been created and projected into the five year forecast. She explained that staff discussed not putting anything into this fund for Fiscal Year 2014/15 but then laying out some charges to the departments moving forward. She said staff has also talked about rents and one thing that the City Manager has talked about is putting together a committee that will look at how this will be funded and what items belong in the fund. She wanted City Council to be aware that it is something new being proposed from last year. Mayor Nexsen said before beginning the individual department budgets he had a question regarding Page 24 because as of July 1, 2014, he does not believe the wastewater rate utility debt is $314 million, to which Ms. Morris explained that what staff included in the budget for the approved 2014/15 budget did not reflect the total de-obligation for those different loans; therefore, what is on the blue page is what was actually published in the document for the biennial budget and it is noted as number 4 to show that those are going to reduce. She said if you look at the white page, the proposed 2014/15 amount, it shows the true de-obligation. Ms. Fenske explained that because this document is prepared in advance sometimes the CAFR does not capture it accurately; therefore, there is sometimes a variance between the two documents. Mayor Nexsen said on Page 35, the projections for Fiscal Year 2015/16 and beyond, the City only uses $125,000 in contingency when City Council has agreed to $750,000, to which Ms. Fenske said in Fiscal Year 2014/15 the City wants to appropriate and budget the $750,000 even though staff does not anticipate spending that much. Mayor Nexsen asked if staff is then calculating the average of what was done in the past, to which Ms. Fenske replied yes because it is a more realistic projection. She explained that as staff gets into the actual years they appropriate for the higher level in the event that it is needed; however, in the out year’s staff tries to budget what is more likely to be spent. Mayor Nexsen asked for clarification on the approved and proposed totals for capital outlay, to which Ms. Fenske replied that the difference is due to the transfer of the Asset Management Program from the City Manager’s budget to the Facilities Maintenance fund. Mayor Nexsen said the City is currently working with the Water Infrastructure Finance Authority (WIFA) to restructure some of the sewer debt which is not as easy as taking $25 million and asking for it to be refinanced because there are about 20 moving parts. He said if the City can get WIFA to agree to certain things then the City will in turn; maybe agree to repay some of the really old loans from 2002. He said on Page 40 it shows the $2 million transfers to the General Fund, but what if the City is able to restructure some of the debt. Ms. Fenske replied that it would still show as Lake Havasu City Page 10 City Council Work Session Minutes - Final May 6, 2014 coming out of the IDD and transferring to the General Fund and then from there transferring to wastewater. Mayor Nexsen said he sees how the mechanics would work transferring the money, but was wondering how it would affect the General Fund. Ms. Fenske said if the ability is there to do that with WIFA, then the City will not be able to spread it out over three years but would rather be the entire amount at once. Mayor Nexsen said preparing those numbers and schedule may be something that staff may want to run and be prepared to have in case it can be done. Mr. Cassens added that a meeting will need to take place after the discussions with WIFA because it could put a ripple effect in all of the numbers that the City Council is seeing. He added that it is difficult for staff to plan for every contingency that may happen; therefore, staff will take things as they come and if there is a significant change to the revenue expenses as a result of the WIFA discussions then we will go through that exercise. Ms. Fenske said on the highlight and projection pages, Page 33 and 34, staff made adjustments to the end balances that are pretty large due to transit funds because staff reduced the subsidy from the General Fund but did not reduce any corresponding expenditures. She said this is one item that hopefully, as a result of today’s discussion, staff will have some additional direction on the transit fund. There was discussion regarding the capital outlay summary schedule on Page 15. Ms. Morris said the $1 million in capital outlay was only a placeholder originally for Fiscal Year 2014/15 and now it is identified by specific needs and is broken down by department and division. Mr. Parsons said he was before the City Council in January 2014 outlining what was going to be required at that time regarding the new federal transit program known as 5307. He said since that time the Federal Transit Administration (FTA) has finalized and released their circular, and he has been in discussions with the FTA and unfortunately it is just simply going to cost the City too much money to operate this type of system. He said the 5307 small urban program is meant typically when a transit agency transitions from a rural to a smaller urban program they are doing between 350,000 to 500,000 rides a year. He said Lake Havasu City is barely scraping by at 100,000 rides annually. He said it is just going to cost too much money to operate a transit system here if the City chooses to go down that road and there is no way around it. Mr. Parsons said transit has currently been operating on a shoestring with engines that are falling apart due to age, turnover in drivers, and no other “fat” to cut from the transit budget. He said transit simply needs more money to operate or a dramatic adjustment to the way the City provides transit service to the citizens. Mr. Parsons advised that he has been in discussion with people in the community and with Interagency about the possibility of operating a voucher system, where the City would provide transit vouchers and Interagency would qualify people to use those vouchers. He said the vouchers would be used on the local shuttle services for specific purposes at specific times. He said the City would still operate a curb-to-curb service for seniors and persons with disabilities and they would be qualified for that service. He explained that the City would operate the curb-to-curb service Lake Havasu City Page 11 City Council Work Session Minutes - Final May 6, 2014 Monday through Thursday, for basic need rides only to the grocery store, doctors and pharmacies. Mr. Parsons stated that the fee for the curb-to-curb service would be $2.50 and the voucher system, which would be qualified by income, would issue a $5 transit voucher to be used on a local shuttle. He said local shuttles run typically between $6 to $8 plus gratuity; therefore, that individual would be responsible for making up the difference between that $5 voucher and whatever that shuttle service charges. He further explained that the voucher would only be good for the same hours and same destinations that the senior and disabled service provides, as this is required by the Americans with Disabilities Act (ADA), which requires that whatever we provide for one we have to make sure that a person with a disability has access to that program. Mr. Parsons said anything above grocery and medical appointments is going to cost the City a lot more money. He added that right now the City can do the curb-to-curb service for seniors and people with disabilities for approximately $200,000 annually, using part-time drivers and managing the program using the management specialist position. He said staff was looking at using $100,000 a year for the voucher program, which at $5 a voucher equates to 20,000 vouchers. He said after speaking with Interagency about the voucher program, they are looking at a $20,000 administration fee to manage this program. Mr. Parsons said with the new program the City would be looking at around $320,000 to $340,000 annually, which is quite a bit cheaper than transit now which is a minimum of $800,000 annually. Mayor Nexsen said that the City needs to be able to help the most vulnerable in the community with their basic needs. Mayor Nexsen asked if there was anything the City could do in conjunction with the school district in terms of buses. He said he hears from citizens that the City has empty transit buses and asked if the City and school district can combine and create some sort of transit intergovernmental agreement that would be workable with the school district. Mr. Parsons replied no, not using any buses that are purchased with federal funds or operated with federal funds. He said the lobbyists, in Washington D.C., for the large transportation companies do not allow cities and towns to provide direct school bus service using federally funded buses or purchase or operate these buses because they do not want public funds putting them out of business since they contract with school districts across the country to provide service. Mr. Parsons said in Lake Havasu City the school district owns and operates their own buses. Mayor Nexsen asked if the school district could use their own school buses for public transportation since their buses are not federally funded, to which Mr. Parsons said he was not sure whether the school district or the City could afford to do that. He added that it would be more expensive than what the City is currently doing with the smaller transit buses. Mayor Nexsen asked why it would be more expensive if the City was sharing with the school district, to which Mr. Parsons said the school district uses their buses primarily for the middle school and the buses are normally full when they are being used at those specific times. Lake Havasu City Page 12 City Council Work Session Minutes - Final May 6, 2014 Mr. Cassens added that he met with the school district last week and there was some discussion regarding buses, not specifically on providing public transit service, but it was about special programs and the after-school program and the availability of the buses to provide for those new programs. He said bottom line is that the school district uses those buses for a lot of different things including outings, field trips, and games. Mr. Cassens said he did not know whether they would be readily available for service as a public transit system. Councilmember Alger said she thought using the buses for public transit was a great idea; however, she did not think it would be a good idea to put children on the same buses as transit riders as it may be a bit of a risk. Councilmember Alger asked whether the City has looked into contracting with some of the service shuttle companies to get a lower contract rate for a voucher system so that the City could completely outsource transit services, to which Mr. Parsons said staff held a meeting about three weeks ago and sent out invitations to all the shuttle companies, of which only two responded. He said one shuttle company commented that they would be willing to hold the fare at $5; however, it would be up to the drivers if they would be willing to give up gratuity because it is part of their wage. Mr. Parsons added that it does cost the shuttle companies money to operate. Mr. Parsons said the bottom line is that transportation service has not really blossomed in Lake Havasu City because it is all about what is needed in the community. Councilmember Alger said there are also a lot of expenses associated with weights and measurements and insurance requirements. She stated that she has also been working with a non-profit and has found that $5 is about the lowest the shuttle companies will contract with as well. Councilmember Brister asked how disabled would be determined, to which Mr. Parsons replied that the law states that a person with a bonafied disability is considered disabled. He said regardless of the disability they all have to be treated the same because it is mandated by federal law. He said today, with the curb-to-curb service, the City has a form that the person must have their physician complete. He explained that the form does not ask the nature of their disability but it basically says that this person has a recognizable disability to that position and that public transit or curb-to-curb service would benefit their life. Councilmember Brister said if the new transit system is only going to provide medical and grocery rides what about the people who need to go to the bank to get money to buy groceries. Mr. Parsons said there are really two answers to this: 1) how much does the City Council want to spend on transit, and 2) the City is going to really need to feel their way through this program as it is growing. He said another thing to consider is that the City also transports a small group of individuals to kidney dialysis two or three times a week and sometimes they do not get done in six hours. He said there is a new facility opening up soon that is supposed to double the size of their Lake Havasu City Page 13 City Council Work Session Minutes - Final May 6, 2014 capacity and he wonders how that will affect transit. He said that is a life necessity and with the limited ADA accessible vehicles within the City, outside from public transit, he thinks that is something the City needs to also look at. Councilmember McAtlin said if the City were successful in federal funding, for example LTAFF funding, would the funding be eligible to enhance this type of program, to which Mr. Parsons said absolutely. Councilmember McAtlin asked if the LTAFF funding could also be used for the voucher program, to which Mr. Parsons replied yes, if it is for public transit for the community it is an eligible expenditure. Councilmember Callahan asked if Interagency would perform the evaluations on who receives vouchers, to which Mr. Parsons replied yes. He explained that Interagency currently performs an evaluation on a person’s income and makes a determination of what services they are eligible for. He said the City would need to develop an agreement with Interagency; however, there are still some unknowns about the administrative costs but they firmly believe this is a do-able program. Mr. Parsons said the reason they went to Interagency is because they already have a program that qualifies people, there is no need to develop a whole new program or branch in order to make this program work. Mayor Nexsen asked if Interagency has thought about the fraud factor, to which Mr. Parsons said no matter what happens there is going to be fraud. He said the City saw fraud with the gold token program and they continue to see it now with the curb-to-curb service and with the free senior rides. Councilmember Alger asked for clarification on the amount that was budgeted this year for transit and the amount if the City was to keep transit service at the level it is today, to which Mr. Parsons replied that at a minimum the City is looking at a subsidy of at least $800,000 to keep services as they are today. He added that he would venture to say that amount will increase as the City gets more into the program because the City will need to purchase four new buses almost immediately at a local share of $50,000. Mr. Cassens said it is apparent that the City just can no longer afford to provide a conventional public transit service in Lake Havasu City without a substantial subsidy. He said as analyzed previously, it would appear when you look at the ridership patterns and numbers that the City is probably serving a population regularly of about 300 people in the community. He said through the discussions one thing that has stood out is that even though the City may not be able to provide a conventional public transit system, the City can still provide that service for those people that really need it and that is why the City took the idea to Interagency because they deal with people who really need it. He said he thinks it would be wise for the City to work with Interagency and come up with a mechanism where the city can live up to the goal of continuing to provide public transportation to those people who really need it. Lake Havasu City Page 14 City Council Work Session Minutes - Final May 6, 2014 Mayor Nexsen asked if the number of vouchers would be limited, to which Mr. Parsons replied that it was his understanding that Interagency would make that determination based on the person’s status. Mayor Nexsen asked if the City was only going to give a certain number of vouchers to Interagency, to which Mr. Parsons said yes because the City would have to budget for that number of vouchers unless the City Council was willing to put a contingency on that. Mayor Nexsen asked if the vouchers could only be used between 8 a.m. and 2 p.m., to which Mr. Parsons said yes due to ADA requirements. He added that there is no federal mandate that says Lake Havasu City has to operate a public transit system; however, there is a federal mandate that if you do provide a service, whether it is public transportation or not, that you have to make it accessible to a person with a disability. He said the service hours and purpose need to be the same. Councilmember Coke asked if Interagency was able to just assume the voucher system as a role that they do and the City just handle the rides for seniors and people with disabilities, to which Mr. Parsons said the City’s intention is to provide a grant to Interagency for this program. Mayor Nexsen said if the City is providing a grant funding to Interagency then why would they have to abide by the 8 a.m. to 2 p.m. for their program. Mr. Parsons said he is assuming it is because the funding would be provided by Lake Havasu City using taxpayer’s money. Mayor Nexsen asked if the City would be violating ADA requirements if they were to give funding to Interagency for the vouchers and let them design the program the way they best see fit depending on the needs of their clients, to which Mr. Parsons said he would not be sure that Interagency would not then be violating ADA requirements. Councilmember Alger said she believed the parameters would have to be the same on both sides. Mayor Nexsen said what he is hearing is that grant funding Interagency does not get the City out of the same level of service to the disabled even though they are two different agencies providing the service, to which Ms. Garry said she believes it comes down to making it accessible to a disabled person and so that is some of the hurdles that the City has to make. She said it would still be public funding so the City would not do that to get around ADA requirements. Councilmember Coke asked how citizens were going to be able to get to Interagency to pick up their voucher, to which Ms. Garry said by using the City program and Interagency program, providing what the City provides may be making it accessible to a disabled person. She added that she thinks it is hard to look at it globally than on a case-by-case basis on who comes forward with the need or desire to use that service and how that can be accommodated. Mayor Nexsen asked about the possibility of split shifts from 8 a.m. to 11 a.m. and 2 p.m. to 5 p.m., to which Mr. Parsons said it becomes difficult to find employees who are willing to work a four hour shift especially if it does not provide benefits. Mr. Parsons added that driver rotation is also very difficult because you have to have a commercial license with a P endorsement. Lake Havasu City Page 15 City Council Work Session Minutes - Final May 6, 2014 Councilmember Alger asked if there was a way the City could grant or donate to a nonprofit like Interagency to run a transit program, to which Mr. Parsons said after speaking with Interagency they just simply do not have the infrastructure to take on public transportation services. Councilmember Callahan said unfortunately this seems like the only viable option right now for making transit work. Mayor Nexsen said if the City were to add three hours a day would that cost an additional $100,000, to which Mr. Parsons replied yes; however, it would require a split shift for drivers and 12 hours a day when you factor in maintenance and safety checks that are required. He said the thing to remember also is that when you start adding more hours you start transporting fewer people per hour. Mr. Cassens said the shift from a 5311 to 5307 transit program is very troubling to him because he sees this as a step back for Lake Havasu City, a decrease in level of service and a much needed amenity for the community. He added that he feels it is important that if the City Council and staff can maintain the mantra that we are going to continue to help those people that really need help and also work with Interagency to make this new program work. He said transit has never made money; it has always been heavily subsidized at a little over $1.5 million each year. He added that in 1985 it was around $800,000 a year just for Dial-A-Ride service. He said transit is a matter of where the demand is, what money is made available, and what the appetite is of the governing body to put public funds towards providing transit service. Mr. Cassens said he would recommend the City work with Interagency, allocating the $340,000 to $350,000 towards a new program, and then continue to assess it at the end of each year. Mayor Nexsen asked how many riders out of the 100,000 riders annually are seniors and disabled, to which Mr. Parsons replied about 10,000 to 15,000. Mr. Parsons added that the rides that transit is currently providing are going everywhere. Mayor Nexsen asked if the Interagency vouchers would allow riders to go anywhere, to which Mr. Parsons replied no, they would be limited to medical and grocery trips only. Mayor Nexsen said what he is trying to determine is whether the City needs to provide additional money for more vouchers with the number of riders; however, he was not sure whether the number or riders would decrease with the rides being limited to medical and grocery. Mr. Parsons said he believed the number would decrease by taking away all the other trips that are non-medical and non-grocery related. Mayor Nexsen asked what the cost would be if the rides still operated 8 a.m. to 2 p.m. but the other rides were not taken away, to which Mr. Parsons said transit would be booked almost immediately doing curb-to-curb service. He said the City did away with curb-to-curb service in 2006 because we simply could not keep up spending over $850,000 a year especially in the afternoons when people could not be picked up within a 30-minute window. Councilmember Brister said she understands that there are people that need and use transit; Lake Havasu City Page 16 City Council Work Session Minutes - Final May 6, 2014 however, she could not see how transit service is able to continue as it is today. She said continuing to monitor transit service and see what can possibly be done each year is the only thing that they can do at this point. Mr. Parsons said between maintenance and staffing issues transit will need to almost immediately start cutting service because transit simply does not have the vehicles or personnel to continue to operate. He added that the City Council should consider changing transit service on or before May 30th to give riders enough time to adjust and find alternate transportation. Mayor Nexsen said the timing may depend on whether Interagency is ready to go with the new voucher program. Councilmember Alger said she would like to show as much support as the City did for the youth, with the skate park and for the amount of money that was spent on the skate park, for the seniors and disabled that are not able to afford transportation. She said she would like to explore the option of using contingency for additional vouchers. She said transit may have the same 300 riders, but she is sure the same 300 kids also use the skate park. Mayor Nexsen said he did not disagree at all with Councilmember Ager in that he too would like to provide for the most vulnerable. He said the thing to remember though is that the skate park was a one-time expenditure. Councilmember Alger asked if there was a way to table this discussion until the City was able to speak with Interagency to determine whether they are even able to take this into effect on June 1st. Mr. Parsons said staff can do that and added that he wanted the City Council to be aware that transit will be cutting service between now and then because they will not have the drivers or the buses to continue as they are today. He said the first route to be cut will be the route to the mall because it is simply too far and it costs the City the most to operate for the number of riders that use that service. Mayor Nexsen said he thinks there needs to be some transitional period where the City is just going to have to scramble. There was general consensus from the City Council to move in the direction that Mr. Parsons presented, funding $350,000 for transit and working with Interagency on a voucher system with the City providing rides for seniors and persons with disabilities only, Monday through Thursday from 8 a.m. to 2 p.m., for medical and grocery related rides. 7. DEPARTMENT REVIEW & DISCUSSION City Council Ms. Fenske stated that the increase in benefits is due to the change in health insurance coverage from single coverage to full family coverage. She added that the budget also included an increase of $2,000 for the Havasu Youth Advisory Council (HYAC). City Clerk Lake Havasu City Page 17 City Council Work Session Minutes - Final May 6, 2014 City Clerk Kelly Williams stated that most of the $200,000 increase to professional services is due to election service costs that were unanticipated for FY 2014/15. She said a portion of this increase is due to a fee increase and new fee from Mohave County and the remainder of the increase is associated for the Special Election for the General Plan update. Mayor Nexsen asked if the General Plan update would be included as part of the 2014 General Election, to which City Attorney Kelly Garry explained that staff did not think they would be prepared to include that as part of this year’s General Election. Mr. Cassens stated that he would be proposing to advance legislation that would allow the City to move it to the next General Election as opposed to holding a Special Election. He said it is obviously very expensive and did not feel a few months would really change anything with regard to the General Plan. Mayor Nexsen stated that the reason he was asking is because the consultant just started on the General Plan, which was anticipated to take about 18 months to complete which would push this to FY 2015/16. Mr. Cassens stated it was staff’s plan to complete the General Plan prior to that. City Attorney There were no comments. City Manager Administration Ms. Fenske stated that the reduction in the capital outlay line item is the transfer of the $2.5 million to the Facilities and Maintenance Fund. City Manager Community Affairs Mayor Nexsen asked with regard to the salaries line item if staff was planning on adding an additional employee, to which Mr. Cassens replied that the increase is due to the digital media position to bring the City’s website and digital communications into the Community Affairs Division from the Information Technology (IT) Division. Deputy City Manager Larry Didion advised that it would be a new position, to which Mayor Nexsen asked if it would be a new position overall for the organization or a new position within that department with the idea of moving somebody from the IT Division. Mr. Cassens clarified that it would be a movement of someone from IT into the department. Ms. Fenske stated that the budget also reflects a reduction due to transferring funding for Wayfinding into the CIP Fund. City Manager HR/RM Division There were no comments. Administrative Services Department Ms. Fenske stated that the reduction in salaries is due to the elimination of one accountant position. Lake Havasu City Page 18 City Council Work Session Minutes - Final May 6, 2014 Mayor Nexsen asked if that position was currently an unfilled position, to which Ms. Fenske replied yes. She stated that due to a retirement, staff re-evaluated all duties and decided not to fill the position so it would be eliminated out of the budget permanently. Administrative Services Department Information Technology Division Ms. Fenske explained that the $200,000 increase in the supplies line item was for technology infrastructure improvements that have been identified since this time last year. Councilmember Callahan asked for an explanation of the $200,000 increase, to which Ms. Fenske stated that it was more stability for the network, fiber work, and additional items that had been identified by staff. She added that those additional items included: a back-up system for disaster recovery for $35,000; additional servers for $15,000; VM Ware upgrade to the Enterprise System for $18,000, new switches and replacements for the network system for $12,000; and network monitoring tools for $19,600 to monitor traffic and activity on the network in order to balance the loads; additional network infrastructure support for $18,000; and ShoreTel upgrades for the phone system. Councilmember Callahan stated it looked as though there would be additional personnel, to which Ms. Fenske stated there were no additional personnel. She stated one of the employees would be moving over to web administration under the Community Affairs Division. Mayor Nexsen stated that he was following exactly what Vice Mayor Callahan questioned and that was staff is proposing an increase on the salary line of $37,292; however, there is an employee transfer to a different department. Mayor Nexsen said that reflects a 10 percent increase while losing one person, to which Ms. Morris replied that in the current budget year there are seven positions in IT. She explained that due to a vacant manager position, there was some interim shifting of responsibilities and during the middle of the year they ended up increasing the count in IT to eight but the increase in staff was not reflected in the IT budget, and that is why there is not a reduction of positions because the position was funded using salary savings from the vacant manager for half of the year. She advised that the $37,000 is truly just reflecting increases based on proposed employee increases and full staffing with the division manager on staff for the whole year and six support staff for a total of seven positions. Operations Administration Ms. Fenske advised that the salary reduction is due to a transfer of a project manager to Maintenance Services Division. Councilmember Callahan asked if the $136,000 decrease represented one individual, to which Ms. Morris replied that it included the project manager position that was reallocated to the Maintenance Service Division and the retirement of a high level employee. She added that position was budgeted at a lower level because the person that is retiring was at the top of their pay range. Lake Havasu City Page 19 City Council Work Session Minutes - Final May 6, 2014 Operations Airport Ms. Fenske stated that there is an overall reduction of $22,566 in total expenditures for this division. She added that there are increases but there is an offset that is related to the Community Investment Program. Mayor Nexsen said it appears that repair and maintenance increased four-fold, to which Ms. Morris explained that it included additional appropriation for the Asset Maintenance Program. Operations Transit Mayor Nexsen noted this budget had been discussed previously. Operations Maintenance Services Ms. Morris advised that a large component of the wage increase is due to the transfer of personnel from Operations Administration plus the proposed salary increases. She added that this department has 54 authorized personnel. Maintenance Services Division Manager Mark Clark advised that another major increase in the budget is a $375,000 increase in the pavement budget from $1.6 million to $1.9 million. Mr. Clark explained that you have to look at all three budgets; the Maintenance Services Division, Vehicle Maintenance, and the HURF Funds because there have been transfers between the positions. He said the Vehicle Maintenance Division showed there was a maintenance lead position being transferred to Vehicle Maintenance and added that occurred due to the reorganization. Mr. Clark stated that there was $522,000 of total increases between the three sections and of that $375,000 was an increase in the pavement budget, a 5.2 percent budget increase overall, but once you take out the $375,000 for paving it is a 1.5 percent increase total. He said you have to attach all three of the budgets because it really relates to the HURF funds as a budget allocation and not really a duty assignment change. He added that the other change was flood control that was in the Streets budget historically and has been moved to the Maintenance Service Division because they are both non-restricted funds other than flood control but separate from the HURF funding. Operations HURF Funded There were no comments. Operations Maintenance Services-Vehicle Maintenance There were no comments. Wastewater Division Mayor Nexsen asked why professional services decreased by $223,264, to which Ms. Fenske replied that contracted legal dropped from what staff thought might need to be spent in that category. Lake Havasu City Page 20 City Council Work Session Minutes - Final May 6, 2014 Water Division Councilmember Callahan wondered if the reduction of $42,713 in reimbursements was due to a personnel change, to which Ms. Fenske replied that it was due to a reduction in estimated payouts. Ms. Morris added that the reduction was based on anticipated retirements that were provided, but now that information has changed as well as a reduction in the anticipated liability for the other post employee benefits dollar amount. Councilmember Callahan asked if the additional $59,142 was budgeted for new personnel, to which Ms. Morris replied that there were no increases in authorized positions only salary increases. Mr. Parsons added that they are also creating a new utility supervisor position, and explained that the Water Division is a seven day a week operation and has been operating with just one utility supervisor for the treatment plant, distribution, and production and that is why the department is going back to two utility supervisors. Mayor Nexsen asked what projects made up the $1,844,524 in CIP, to which Ms. Morris answered that it includes some carry forward items from the current CIP that are re-budgeted for next year, and the other items are the Water Main Replacement Program and the Booster Station 1B replacement. Community Services - Administration, Building Planning & Code Enforcement Mayor Nexsen asked whether staff budgeted for the additional code enforcement person, to which Ms. Fenske replied yes. She added that overall a total of three position increases have been budgeted in this area. Community Services Aquatic Center Councilmember Callahan asked about the $30,400 reduction in the supply line item, to which Ms. Morris explained that it is a reduction based on supplies for building improvements. She added that under the line item for repairs & maintenance there is an $88,640 increase that is related to repair and maintenance for the Asset Maintenance Program. Mayor Nexsen asked what the $147,003 in debt service was for, to which Ms. Morris explained that it was related to the energy conservation measures. She said in prior years all of those were being paid out of the General Fund, and the Enterprise Funds were transferring into the General Fund to make their payments. She added that staff corrected the way it is being reflected so the Enterprise Funds are making their own payments. Ms. Fenske added that from an accounting and budgeting standpoint it is cleaner and easier. Community Services Recreation Division Ms. Fenske stated that there is an $80,000 part-time salary increase for new programs that have Lake Havasu City Page 21 City Council Work Session Minutes - Final May 6, 2014 off-setting revenue. General Government - General Services Councilmember Callahan asked for an explanation regarding the $153,507 increase in professional services, to which Ms. Morris replied that the increase for the most part was for contracted legal expenses. Ms. Garry added that staff originally budgeted for this item before recent developments in some of the litigations. She said some of those numbers may not be accurate moving forward. Mayor Nexsen asked if this number is expected to decrease, to which Ms. Garry replied yes. Tourism/Economic Development Fund Ms. Morris explained that the City anticipates receiving more revenue that will be passed on to the Convention & Visitors Bureau (CVB) and the Partnership for Economic Development (PED), and that is the reason for the appropriation. Miscellaneous Grant Funds There were no comments. The Debt Service Ms. Morris advised that this appropriation was for debt payments for any governmental debt. She added staff does not anticipate any changes. Lake Havasu City Improvement Districts There were no comments. Metropolitan Planning Fund Ms. Fenske stated that there have been various changes throughout this fund now that the program is up and running. Councilmember Callahan asked if the City would be receiving grant funding for these expenditures, to which Ms. Fenske replied yes. Refuse Fund Ms. Fenske advised that there are slight adjustments to the Landfill Closure Reserve and an increase to the interfund cost allocation. She added that they were mostly charges related to customer service and some other administrative costs to support the fund. Vehicle/Equipment Replacement Fund Ms. Fenske advised that there was a decrease to the Capital Outlay Budget reducing the overall budget by $213,500. Municipal Court Ms. Fenske advised that the Municipal Court is requesting to add a court clerk lead position which is reflected in the increase in salary line item. Lake Havasu City Page 22 City Council Work Session Minutes - Final May 6, 2014 Mayor Nexsen asked if that position was for the Veteran’s Court, to which City Magistrate Mitchell Kalauli said there had been a shift in duties and they are now requesting a court clerk position for the Veteran’s Court. He said there may be one other change in the budget, and explained that Mr. Michael Eigenbrodt, from Interagency, was applying for a Substance Abuse and Mental Health Services Administration (SAMHSA) grant for $400,000 over a three year period that is renewable. He said there is a period of time where they would like to get a counselor on board while they wait to see if they receive the grant funding. He said by July 1st they should know whether they qualify for the grant which would fund four positions specifically for the Veteran’s Court as well as other things. Judge Kalauli said staff would like to move forward with getting one person on board right away, and added that there are some Court Enhancement Funds available that may be possible to fund that position in the meantime until the grant funds are received. He said he spoke to Mr. Cassens about possibly increasing the grant amount that is given to Interagency to include that position and take that from that Court Enhancement Fund in the interim. He said this would not affect the General Fund budget. Police Department Mayor Nexsen wondered if the dispatch console would not be purchased or if it would be transferred to the Asset Management Program, to which Police Chief Dan Doyle explained that staff was going to replace the Motorola Gold Elite which is the base station at each dispatch console. He said the cost went up dramatically so staff decided rather than just replace that component to wait a year or two and then look at a major overhaul of the system. Fire Department Mayor Nexsen asked why the overtime increased so much, to which Ms. Fenske stated that was a movement between the salary line item that had previously been budgeted under the FLSA overtime which is time and a half. She said one hour had been budgeted in the full time line and the half hour had been budgeted in the overtime line. Mr. Cassens said in addition to that there is a $50,000 increase in overtime for the purpose of allowing the Technical Rescue Team and the Hazmat Team to do more training and provide the overtime to support that to get back into a proactive training program. Mayor Nexsen asked for the reasoning behind removing funding for the Lifepaks, to which Chief Mueller explained that after the City Council approved the purchase of eight Lifepaks last year it brough them up to where they needed to be; therefore, staff is holding off purchasing additional units until next year or possibly the following year. 8. CONTINUATION OF CAPITAL IMPROVEMENT PROJECTS (CIP) DISCUSSION Mayor Nexsen asked how staff had arrived at the percentage increase for salaries, to which Mr. Cassens replied that it generally represents a one-step increase across the board, somewhere around Lake Havasu City Page 23 City Council Work Session Minutes - Final May 6, 2014 4.7 percent. Mayor Nexsen said he thought there would be no more step increases, to which Mr. Cassens explained that in 2014 staff proposed an across the board one-step increase, and during this fiscal year staff is going to develop a pay for performance program. Mayor Nexsen asked the City Council if they wanted to discuss the CIP Program. Mr. Cassens advised that May 20, 2014, had also been set aside as an additional meeting date to discuss the budget if the City Council wanted to postpone discussion on the CIP. Ms. Fenske said after the CIP work session on April 22, 2014, staff had a general idea of how the City Council wanted to spend the $2 million. She said if the City Council wanted to postpone the CIP budget discussion until they have the opportunity to look at the overall operating budget and look at some totals in relation to the 90-days to 120-days fund balance to determine what can potentially be directed over to the CIP while still maintaining the fund balance. Mayor Nexsen said he also has an important meeting with State Parks tomorrow that may have a huge impact of where the City Council goes with the CIP budget. He added that if State Parks is not willing to go forward then the Havasu 280 Project funding may be mute. He said that was his only reluctance in making decisions on the CIP budget now. Councilmember Callahan said he agreed with Mayor Nexsen to wait and see what the outcome of the meeting is tomorrow. Councilmember McAtlin said one item that he thought everyone had agreed on would be funding the London Bridge Restroom Improvement Project. Mayor Nexsen stated that he also thought he had heard that the Wayfinding Project cost had been reduced. Mr. Doug Traub, President/CEO of the CVB, said two things have happened since the last time the CIP Budget was discussed: 1) thanks to Mr. Cassens and his efforts with ADOT they have fast tracked and approved all the language necessary to put a plan in place earmarking Lake Havasu City as the first community in Arizona to take advantage of Wayfinding, and 2) in light of Mohave County’s refusal to participate in the program, the CVB has reviewed the signs they are proposing to install and have tentatively identified cuts between $100,000 and $130,000. Mr. Traub said he would be meeting with Mr. Clark next week and will hopefully come back to City Council with a slightly reduced version of the Wayfinding Program. Mr. Cassens said Ms. Fenske and her team came up with a chart with $2 million dedicated for CIP funds projected out over five years. He added that would get the City through the first three years with no problems but the numbers go into deficit in the future years. He said staff has to forecast very conservatively and also base the budget on total expenses with a full roster of employees with the maximum amount of benefits. He said staff looked at the last five years and found that in general, the City only spent between 93 and 96 percent of the funds budgeted in a typical year. He added that this year staff expects that number to be about $1 million. Mr. Cassens said in essence that is a convoluted way of saying if you want to borrow against future anticipated expense Lake Havasu City Page 24 City Council Work Session Minutes - Final May 6, 2014 remaining revenues, and if at some point in the future it looks like those excess revenues are not going to be there, staff can switch course and divert revenue. Councilmember Alger stated in looking at the General Fund forecast and looking at the $2 million and $3 million dedicated, it looks like the fund balance of $20 million goes down to $10 million, $9 million, and $7 million over the span of five years. She said she did not understand how the City would be losing the revenue, to which Mayor Nexsen said it is because the City would be spending down the fund. Councilmember Alger expressed concern that taking away the safety net would not be a very smart idea looking into the future. Mr. Cassens said that is why staff did the five year outlook, and his question to the City Council is whether they want to push the envelope and be a little bolder with those anticipated excess revenues going forward. Councilmember McAtlin stated that most of the items on the list now and future items will indirectly bring in revenue. He asked if staff could put some sort of number to what type of revenue could be generated that may help during the CIP projects discussion. Mayor Nexsen said he did not want to spend the fund balance down to a low level but does not want a fund balance that keeps growing either. He said for him to commit today, he does not know what the next five years is going to bring to the City. He suggested looking out a year or two, and added that he agreed with Councilmember McAtlin to invest in those things that will bring additional revenue to the City because there is a clear payback. Mayor Nexsen said one of the things he talked to Mr. Cassens about is if the City can generate enough additional revenue should it be pushed toward wastewater to help keep the rates down. Mr. Cassens noted that Mayor Nexsen’s point earlier in the meeting was very true, after discussions with WIFA the City could be diverting any excess revenue toward paying off a couple of those issues. Mr. Cassens said he felt funding the Wayfinding project should be done because it will have a net benefit to the community. He added that it might not be $5 million a year but said he believed it would end up paying for itself and then some. He said the Havasu 280 project could be spread out over time, and added that there are some dynamic things going on with ASU in that respect and State Parks on the launch ramp facility. Mayor Nexsen said going back to Councilmember McAtlin’s comment about a return on investment; he would like to see something on Wayfinding more than just a guestimate. Mr. Cassens said with respect to the PARA Study Improvements, he would not know how staff would measure the return on investment there other than it is an infrastructure item, and the same with Site Six. Lake Havasu City Page 25 City Council Work Session Minutes - Final May 6, 2014 Mayor Nexsen stated that he thinks the first step with Site Six should be to find out what it should be, to which Mr. Cassens agreed, and added that a poll was done several years ago and the response was that people wanted a wonderful place but did not want to pay anything to use the facility. Councilmember Callahan said he agreed with Mr. Cassens that the PARA Study should not be overlooked because there are some valuable increases that could be obtained with improvements in that area of town. Mr. Cassens asked about the SARA Park athletic fields, to which Mayor Nexsen replied that his personal belief is that they are really important. Mr. Cassens said he would like to look into a sister study as well to determine the number of hotel/bed accommodations that would be needed. 9. ADJOURN Upon motion by Councilmember Alger and seconded, the meeting adjourned at 5:06 p.m. CERTIFICATION I hereby certify that the foregoing is a full and true copy of the Budget Overview and Budget Work Session Meeting Minutes of the Lake Havasu City Council held on the 6th day of May, 2014. I further certify that the meeting was duly called and posted, and that a quorum was present. ____________________________________ Kelly Williams, City Clerk Lake Havasu City Page 26