City Council Finance Committee Meeting

FINANCE COMMITTEE MINUTES March 9, 2017 The City Council Finance Committee of the City of Norman, Cleveland County, State of Oklahoma, met at 5:00 p.m. in the Municipal Building Multi-Purpose Room on the 9th day of March, 2017, and notice and agenda of the meeting were posted in the Municipal Building at 201 West Gray and the Norman Public Library at 225 North Webster 24 hours prior to the beginning of the meeting. PRESENT: Members Heiple, Castleberry, Chappel, and Mayor Miller ABSENT: none OTHERS PRESENT: Aleisha Karjala, City Council Member Bill Hickman, City Council Member Anthony Francisco, Finance Director Suzanne Krohmer, Budget Manager Jeff Bryant, City Attorney Gala Hicks, Director of Human Resources Terry Floyd, Development Coordinator Tim Powers, Director of Information Technology Robert Gruver, Network Support Supervisor Brenda Hall, City Clerk/Acting City Manager Susan Connors, Planning & Community Development Director Wayne Stenis, Planner II Shawn O’Leary, Director of Public Works Mike White, Fleet Superintendent Jud Foster, Director of Parks and Recreation Angelo Lombardo, Transportation Traffic Engineer Keith Humphrey, Chief of Police Carrie Evenson, Stormwater Engineer Scott Sturtz, City Engineer James Briggs, Park Planner Travis King, Fire Chief Chair Heiple called the meeting to order. Item 1, being CONTINUED DISCUSSION OF THE FYE 2017-2018 CAPITAL IMPROVEMENT PROGRAM BUDGET AND THE FYE 2019-2022 CAPITAL IMPROVEMENTS PLAN: Susan Connors gave the presentation. She stated that as of January 31st, the Capital Improvement Fund (Fund 50) was $655,000 in the negative. Per law, we must have a balanced budget, so we started looking at what scheduled projects we could cut and postpone. Our goal is Finance Committee Minutes March 9, 2017 Page 2 to try to be at a $1 million Fund balance for projects as we move forward into this next fiscal year, and she does not know of any additional overruns for this fiscal year. Picking up from the February 28th City Council Study Session discussion on the Capital Improvements Program Budget, we will begin talking about the requested new infrastructure for Fiscal Year 2018 by department. The Information Technology Department has requested City Data Center air conditioning replacement at $160,000 and a fiber expansion to the Water Treatment Plant at $55,000. The Fire Department requested two projects as well. They have requested rehabilitation, remodel, and carpet replacement at Fire Station No. 4 and a rehabilitation and remodel at Fire Station No. 2. The Police Department requests included: the exterior door replacement at the Norman Investigation Center (NIC); an Animal Welfare trailer carport; a security gate and lighting upgrade at the NIC: gate security pad and cameras at the range; and the Animal Welfare kennel shade. The Public Works Department requested a Traffic Management Center Study costing $100,000; Lindsey Street Interchange landscaping; State Highway 9 Multi-Modal Path Phase III; Imhoff Creek channel improvements; Constitution Street Multi-Modal path; McGee Drive sidewalks; Flood Avenue Multi-Modal Path; Fleet break room renovations; in-house oil analyzer; and Lindsey Street Vineyard Addition drainage design. The Parks Department requested new exterior doors at Whitter and Irving Recreation Centers, due to the existing doors being a safety issue. The Department Heads had a conversation about what projects were most important. Based on their recommendations, the projects proposed for funding are: the Lindsey Street landscaping and way finding projects; the City Data Center air conditioning; the recreation center door replacements, and the NIC doors, gate, and lighting. These projects will total about $427,000 and that will leave approximately $600,000 for other projects. Mayor Miller stated that if we did not set aside the $1 million for the Senior Center, then we would have $1.6 million to put towards capital projects out of the FYE 2018 budget. Connors stated that this was correct if the Committee decided not to put any of the cut projects back onto the list. She stated that we need to get the Committee’s recommendations for the FYE 18 budget. Mayor Miller made a plea to wait and not pull out $1 million from the capital projects for the Senior Center. She stated that we should wait and develop some kind of strategy that does not involve pulling money out of a capital improvement project every time one comes in under budget. If we make a strategy, people will know where we will take the funds, such as any Norman Forward projects with savings. At this time, we do not have this process in place and we need to develop a systematic way to go about this. Chair Heiple stated that he concurs with the Mayor on this statement. Member Castleberry asked if the project close out savings were already reflected in the numbers presented to the Committee. Connors stated that this was correct, and any savings are reflected in the fund balance. In 2018 we do have a fund balance of $2 million, but as we project out in following years we are in the negative. Member Castleberry asked if there was a possibility of using some of the contingency money from the Lindsey Street project for the landscaping and way finding for Lindsey Street. Finance Committee Minutes March 9, 2017 Page 3 Shawn O’Leary stated that the Lindsey Street landscaping and way finding project was referring to the area on the I-35 Bridge. He stated that we are getting the planters made, but that at this point there are no funds identified for plants to go into the planters, or for irrigation systems for those plants. We propose to put $85,000 of that Lindsey Street project towards plants for this project. This is not the public art portion of the project, and it is in fact the State portion of the project, not the City of Norman’s portion. We are considerably over budget on this project, which is why we have intentionally postponed this until now. We hope to make up this overage with savings in the future bond projects. We are $4 million over on the Lindsey Street project. When we look at the total bond program, which is $90 million, Lindsey is about $35-40 million of that. We hope to make up some of the overage on the Lindsey project in some of the other bond projects within that $90 million. One strategy would be to split some of the other road projects into two years to potentially receive more federal funds. Member Castleberry asked if we have already assumed that we have eliminated some of the FYE 2017 appropriations, such as traffic calming. O’Leary stated that this was correct. He stated that the list of projects presented tonight is our best recommendation on which projects need to be completed in this fiscal year. Member Castleberry stated that we have to look at which projects are more important than the Senior Center. We need to come up with a time table for the Senior Center project. This discussion was to look at whether or not we should put aside $1 million every year for the Senior Center, and maybe $1 million dollars is too much to put aside every year; however, we cannot tell the senior citizens that new carpet is more important than a Senior Center. We have to decide the priority of projects. Council Member Karjala stated that there are certain projects that we can make an argument for being more important than putting aside the $1 million every year, but most constituents would like to see more projects that involve sidewalks, alleyways, and those types of projects. Is there a way to rectify this budget list to include more items such as this? We have a sidewalk plan that we are not currently using. O’Leary stated that we do have a sidewalk plan that we are currently using, but that at the moment we are not currently fully funding this plan. Council Member Karjala asked what it would take to get this plan fully funded. O’Leary stated that this would cost several millions of dollars. We are currently spending about $200,000-$300,000 per year on the sidewalk plan. Member Chappel stated that the way he looks at this problem is that whether or not we get carpet does not mean we get to have the Senior Center. This is not a tradeoff because we will still be many millions of dollars short on funding a Senior Center. Council Member Hickman asked if in the future the staff could be clearer on what projects are intended to be funded and completed in the fiscal year, and not just receive a list of all the projects that are planned. This was confusing to him as to which items were actually being funded at this time. Connors stated that we were trying to give the Committee members an overview of the projects and what projects we were postponing. We were showing the Committee the projects that needed to be reduced in order to meet the funding goal of $1 million per year set aside for the Senior Center. Finance Committee Minutes March 9, 2017 Page 4 Mayor Miller stated that it was the request of the City Council for the City Manager and staff to go back through Fund 50 to find places that could be cut, moved, or saved for the Senior Center. O’Leary stated that this plan presented is about saving $1 million per year, which would end up being multiple millions of dollars in cut projects that staff still doesn’t fully have a grasp on as of yet. This presented list is just focused on what we know we would have to cut in FYE 2018. Council Member Karjala stated that there has to be a balance. She believes that a lot of these projects are staff projects that are aimed at things the staff has requested be done, but Council Members have to be able to justify these projects and the cutting of other projects to the voters. The budget is a tool that reflects our values as a City. We have to be able to take care of the government issues, but we also have to be about taking care of the everyday citizen’s issues as well. Those citizens do not feel the immediate effects of the “government projects”. She does not even think that the budget is transparent enough for the Council Members to understand, much less the citizens. Maybe we should go back and put the $1 million back into the Capital Projects and agree on a lesser amount like $250,000. Chair Heiple stated that we will never get a finished product out of City staff if we continue to micromanage this project to death. We must keep our expectations realistic. Council Member Karjala asked if it would be appropriate to go back and take a smaller amount, per year than the $1 million. Member Castleberry asked how the plan would be adjusted if we did decide to go back and set aside a smaller amount, perhaps $100,000, per year. Chair Heiple stated that $100,000 does not help or move us forward to solve the problem of funding a $9 million Senior Center. Council Member Hickman asked if the building security and access systems are on the list to be completed and if that is additional to the security projects that were suggested in FYE 2017. Connors stated that these are an additional $300,000 worth of new security projects for FYE 2018. Tim Powers stated these projects are for various controls, access control, gates, doors, and cameras for various City buildings. The NIC will be one of the projects recommended for FYE 2018 as well. A few years ago we had a company come in and do an assessment on what it would cost to get all of our buildings covered with security systems in this way. Their assessment, which was presented to Council in a report, said it would take a total of about $1.5 million, and we have planned to stretch this project out over a few years in order to keep the cost lower each year. The report on this project was presented to City Council a few years ago. Brenda Hall stated that it would be the same type of security system that we have in this main City Hall building, with the card key access and the security measures that we put into place. Council Member Hickman stated that he thinks we are spending $300,000 per year to make our public buildings look like prisons. He knows that we do need security, but he would like to know how committed we are to the $300,000 per year that would end up being a $1.2 million project. Is now the time to start this project when we might also have to remodel the current library? Tim Powers stated that this is exactly why the cost is spread out like it is. Council Member Hickman asked what the consequences would be if we delayed this project until FYE 2019. Powers stated that the things that are broken today would stay broken. He stated that the card Finance Committee Minutes March 9, 2017 Page 5 key system that we use right now is super old and can no longer be supported. This would have to be replaced first, and it would cost about $125,000. We were supposed to do $3 million over the next five years, but we proposed to reduce this in the Capital Improvement Plan just so we could go ahead and begin replacing the key card system. This would allow us to program who has the ability to get into what building. Robert Gruver stated that the current key card system is at least 15 years old and we have been gradually replacing that system. Buildings A and B are still on the old system and Building B’s cameras are not functioning correctly because they are 10 years old. The Fleet Management camera system is not up to par and is unable to protect the vehicles in the yard correctly. They also need some additional security on their doors. Chair Heiple asked Chief Humphrey to discuss our needs for security. Chief Humphrey stated that our system is behind the times, and the more we postpone replacement, the further behind we get and the more it will cost to replace. It is frustrating that the system is so old. Council Member Hickman (looking at the FYE 2017 Capital Budget document) asked about the item labeled Buildings and Grounds under the Security Projects that was for $50,000 in FYE 2016, nothing in FYE 2017, and another $50,000 in FYE 2018. Brenda Hall stated that all of that has been taken out of the currently-adopted budget and consolidated with this $300,000 total for security. Mayor Miller made a general statement stating that the Council is working on things that people have been working on for years. The allocations of funds in the budget are in response to projects that have been requested by Council and citizens for years and years and years. Member Castleberry asked if the $905,000 for improvements at Imhoff Creek, as well as some of the other projects listed would be included in a Stormwater Utility when we passed one. O’Leary stated that this Imhoff Creek project was always part of the Stormwater Master Utility Plan. Without funding for that plan passing, this has to be shown as a stand-alone project request. Chief Humphrey stated that when we did the renovation of the NIC, the security cameras were part of the effort to integrate into the City’s system. Council Member Hickman asked about the $100,000 for sign replacement for the Municipal Complex in FYE 2018. Hall stated that this is one of the projects that is on the list to be pushed out into future year budgets because it should be delayed until the renovation of the Complex. Council Member Hickman asked where that $100,000 went. Hall stated that it was pushed out to keep that money back to make up the $1 million for the Senior Center. Council Member Hickman then asked about the $475,000 item for the North Base Street Facility. O’Leary stated that this is a sand and salt storage facility. This has been in the program for about 9-10 years, but keeps getting pushed out into future year budgets due to being a big ticket item. This project would allow the City to do better snow and ice control with two salt storage facilities (the current facility is on Lindsey Street). Council Member Hickman asked if we have budgeted to order more product. O’Leary stated that he believes that it is a lower priority so he does recommend it to be postponed. Finance Committee Minutes March 9, 2017 Page 6 Member Castleberry asked why we need to purchase the oil analyzer. O’Leary stated that the oil analyzer would allow us to do oil testing to determine vehicle engine operational efficiency in- house instead of contracting out. Mike White stated that because they have to contract out, it takes about 3 weeks to get results. The savings on time and material would pay the purchase back fairly quickly. Member Castleberry stated that if we earmarked $100,000 per year for the Senior Center that would only be 0.8% of the annual budget. Chair Heiple stated that we have $4.5 million in GO Bond for the renovation of the Library for the Senior Center; cutting these projects is doing damage to our community and the budget process. Member Castleberry asked Brenda Hall if the City Council has already voted on whether or not to take the renovation of the existing Library off of the table. Hall stated that the Council has not yet decided that one way or the other. Council Member Hickman asked if the work on sidewalks on Classen up to Lincoln was included in the budget. Angelo Lombardo stated that yes this was a Capital Project that was being matched with federal dollars. O’Leary stated that this project is probably in the sidewalk repair plan. Hall stated that there is a gap in between where one end of this particular sidewalk ends and another begins. O’Leary stated that we will follow up on this problem. Council Member Hickman stated that he was frustrated that the sidewalks by McKinley, Adams, and Wilson schools were on the Sidewalk Plan and have been pushed down the priority list. O’Leary stated that the City has a ranking system that we try to use to assess the priority of our list of projects. The Flood Avenue and McGee sidewalks are on the plan list to be completed in FYE 2018. Council Member Hickman asked if the sidewalk construction from Lindsey Street to Elm is going to be considered part of the Lindsey Street project. O’Leary stated that they were not considered part of the Lindsey Street project as they are part of a Federal ODOT overlay project and it will extend to Elm. Council Member Hickman asked if the $250,000 for the Porter Street and Acres intersection is staying on the completion list for FYE 2018. O’Leary stated that we are recommending postponement for this project to save money in the budget. Council Member Hickman then asked if it was being postponed to put back money for the Senior Center or for something else. O’Leary stated that it was to save money for the fund balance in general because it is a big ticket item. We are recommending pushing this project back for one year to put more money back into the FYE 2018 fund balance. Council Member Hickman stated that he thinks this project should be put back onto the priority list for FYE 2018. O’Leary stated that if that was Council’s direction then it would be put it back into the FYE 2018 budget. Member Castleberry stated that if you put this project back in you have to take something else out. Mayor Miller does not think we should take any of this money for projects out of the Capital Projects Fund. She specifically does not want to take out the $200,000 Greenbelt Acquisition project because the City gets their funds for this project matched by the Federal Government. This money is also the money we use to buy out floodplain land. We need a strategic plan to fund the Senior Center that makes more sense than cutting projects that are needed. Finance Committee Minutes March 9, 2017 Page 7 Connors stated that we started this budget year $650,000 in the negative so we will have to make some adjustments to get the fund balance in the positive. If we put the requested $1 million back into the budget we could add some of these projects back in, but not all. Member Chappel stated that security is needed and is very important and delaying regular maintenance is a bad idea since things tend to get worse instead of better the longer you put them off. He supports taking care of the fund balance and coming up with a separate strategic plan for funding the Senior Center, as the Mayor has asked. Council Member Hickman stated that he is frustrated with the $2 million allocated for Buildings and Grounds. He does not see things like replacing carpet as maintenance. He thinks maintenance should be things like sidewalks, which he does not believe we are adequately funding to make Norman walkable. What can we do to put more money towards sidewalks? Member Castleberry asked if we added more money towards sidewalks, do we have the staff capacity to complete the additional work. Scott Sturtz stated that he believed that we do have that capacity. Hall stated that we needed direction from the Committee tonight on whether or not to take out the projects to put the $1 million back for the Senior Center, or do we need to find money for the sidewalk projects. Member Castleberry stated that he would like $100,000 per year put back towards the Senior Center. Mayor Miller stated that she did not want to take out any money at this time for the Senior Center. Member Karjala stated that she was unsure what she would recommend. Member Chappel stated that our first priority should be to the fund balance, not the Senior Center. Council Member Hickman stated that he would like to take the $100,000 earmarked for City Hall carpet and put that into the Senior Center, and he would like to take the $117,000 earmarked for the City Manager’s Office remodel and security and put that towards sidewalks. Member Castleberry stated that he believes we could use the $900,000 marked for Imhoff Creek because he believes that will be taken care of by a Stormwater Utility when it is passed. Connors stated that this list is not actually in the budget yet. O’Leary stated that we were not going to recommend funding the Imhoff Creek project in FYE 2018. Connors stated that we are recommending $427,000 of new projects be funded in FYE 2018. Chair Heiple stated that he agrees with Mayor Miller and Member Chappel that we do not need to take any money out of the Capital Fund for the Senior Center. Anthony Francisco asked if the clear direction for staff tonight from the Committee was to lower the amount every year for the Senior Center to $100,000. Mayor Miller stated that there was no consensus so she thinks that staff should make the decision on where $100,000 could be pulled from to put into a fund for the Senior Center and to look at Council Member Hickman’s suggestion of additional funding for the sidewalks. Hall stated that we should make some adjustments to the fund and have a study session soon to look over the adjustments. Connors stated that she understands the decision to be we will fund the list of proposed projects if we can, minus $100,000. The priorities are the sidewalk projects, and we would postpone the carpet and remodel projects. Connors stated that every year there is a list of requested new projects from departments. This year that request list totals $2.1 million, which we do not have Finance Committee Minutes March 9, 2017 Page 8 adequate funds to fully fund all the new requests. Due to this, the City Manager made a list of “proposed for funding” projects out of these new requests with the money that we do have available. With the Committee’s direction tonight, we will put the extra $900,000 back into the projects that need to be funded. At the next meeting we will have a final list of all of the projects that will receive funding in FYE 2018. Hall stated that we could tentatively come back at the Study Session meeting on April 4th to finalize the decisions and projects funded. Items submitted for the record: 1. Capital Fund 50 FYE 2018 Capital Budget FYE 2019-2022 Plan ****** Item 2, being SUBMISSION OF THE REVENUE/EXPENDITURE REPORTS Anthony Francisco made the presentation. He stated that there wasn’t really anything new to add except that the sales tax situation has declined a bit more than what was presented. The March Sales Tax Remittance (reflecting January sales) was down by 6.2% making us down by 4.47% as a whole for the fiscal year. That has been made worse for the General Fund due to the apportionment for the TIF. Where we were down 6.78% in the General Fund, we will now be down by 7.4%. Member Castleberry asked why the commercial use tax is down. Francisco stated this was due to the City not having as many large commercial projects this year. Chair Heiple asked why the recyclable materials sales are down 18%. Francisco stated that he does not know the reason, but maybe the market for recyclable materials is down somewhat. Council Member Hickman asked if Public Safety Sales Tax Fund money could be used for security projects that the Police Department requested in the Capital Fund. Francisco stated that they could theoretically be used for this purpose, but the status of the Public Safety Sales Tax (PSST) Fund is not positive either. Member Castleberry stated that we have to do Critical Capital Projects first, and then we can look at funding other PSST projects. Francisco stated that Council could define what a Critical Capital Need is; however, by ordinance you have to do what is considered a Critical Capital Need obligation first. Council Member Hickman would like for the Police Department to find $15,000 for the Animal Welfare adoption trailer carport. We could use some of the seizure funds to fund the Police capital projects, which would free up money for the carport and shades for the kennels at the Finance Committee Minutes March 9, 2017 Page 9 Animal Welfare Facility. Chief Humphrey stated that we could us seizure funds for the NIC security project, but we could not use those funds for the Animal Welfare projects. Member Castleberry said this was the first he was hearing of the PSST Fund being in trouble. Francisco stated that he has mentioned the trouble in every budget presentation we have made for the last couple of years. Once all of the Critical Capital Needs are completed and all personnel have been hired, it is projected that this fund would go negative in the end of fiscal year 2020. Member Castleberry stated that all funds are negative in out years. Chair Heiple stated that our sales tax collection is down, which means we will have to have some difficult conversations with the community about how we will fund infrastructure projects. He would like to hear what is happening with sales tax collection all across the state, as well as local. Francisco stated the regional economy shows that people are not spending as much as they have in the past, and a larger portion of the spending that they are doing is online where sales tax is not being collected. This is really impacting us, as well as every city in the region. We do project that this will start to turn around soon. He was surprised by the most recent collections report. Member Castleberry would like to know how we are certain we get our sales tax from food trucks as well as how we know we are getting the proper amount of use tax from commercial building projects. Francisco stated that the State Tax Commission has the responsibility of sales tax enforcement, but we do have the right to audit any of the sales tax returns and access to any business’s monthly reports. We also have the ability to pull a food truck’s permit if we are questioning the sales tax collection. The City tends to concentrate on larger businesses instead of the food trucks. Member Castleberry suggested that we implement a Standard Operating Procedure for large commercial projects to look and see if we are getting the proper use tax. Council Member Hickman asked how we know if the vendors at large venues such as festivals and in street closures are collecting sales tax. Hall stated that there is a special events tax permit that vendors are issued from the Tax Commission. Once the temporary vendors get the special permit, they have to submit their information to the City Clerk’s Office and the Oklahoma Tax Commission. The Tax Commission will send the vendor a letter if they find out that they are not submitting sales tax, but there is no strong enforcement of this. The Medieval Fair does a really great job of tracking and making sure the vendors are remitting sales tax. Council Member Hickman asked if we could only allow in-state vendors. Francisco stated that this would be very difficult for certain events. Items submitted for the record: 1. Monthly Financial Report 2. Appropriations 3. General Fund Transfers Over $50,000 between Expenditure Categories-FYE 17 February 2017 Finance Committee Minutes March 9, 2017 Page 10 4. Summary of Major General Fund Revenue Sources vs. Budget, FYE 2017-as of February 28, 2017 ****** Item 3, being SUBMISSION OF THE REPORT ON OPEN POSITIONS Gala Hicks gave the presentation. She stated that we are having a lot of retirements, which are opening up a lot of positions. Items submitted for the record: 1. Open Positions Report dated 3/1/2017 ****** Item 4, being: MISCELLANEOUS COMMENTS Member Castleberry stated that he appreciates the discussion that was had about how painful the cuts to the budget would be. Member Chappel stated that he thinks having discussions and exercises such as this one about the cuts to projects due to budget creates angst with staff as well as with project owners. Chair Heiple stated that the Council needs to be solid and visionary, as well as earn and maintain trust with the staff and the citizens. ****** The meeting adjourned at 6:39 p.m. ATTEST: Finance Committee Minutes March 9, 2017 Page 11 City Clerk Mayor