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1. 2008/2009 Budget ReviewCity of Post Office Box 1997 - Kalispell, Montana 59903-1997 Telephone (406) 758-7000 Fax - (406) 758-7758 TO: Mayor and City Council FROM: James H. Patrick and Array Robertson SUBJECT: Council Questions Concerning 2008-2009 City Budget DATE: June 5, 2008 BACKGROUND: During the last month, the 2008-2009 City of Kalispell preliminary budget has been presented to Council. During those presentations there were several questions that Council had concerning the budget. Council Budget Questions: Police -- "'It seems like the dispatch salaries are incorrect since there is approximately a $66,000 difference in last year's personnel services and this year's personnel services. How much of the dispatcher's time goes to dispatching compared to other functions?" Dispatch salaries were under budgeted for FY08 and will probably exceed budget by $25,000 which we anticipate covering with budget authority from vacancies in the police department. The FY08 budget was prepared prior to the union contract being settled. The dispatchers were one of those areas that received a market adjustment in most cases equivalent to $2 per hour. The part time personnel were not budgeted by the hour as they are now (the flat amount budgeted was inadequate). Dispatcher's time spent on dispatching depends of course on the call volume and/or major incidents on- going. On a typical day dispatchers normally spend about eighty percent of their time on dispatching, monitoring and answering radios, answering the lobby calls and individuals entering the lobby, and assisting the administrative staff and detective staff for dispatching their information to include running criminal checks, licenses checks, etc. Fire - "It seems that the 2008-2009 budgets do not reflect enough money being budgeted for personnel services." Salaries were reduced by $40,000 due to savings from vacancies as a way to reduce the budget. Additionally only 2% has been included for raises — the union contract has just started being negotiated. A budget amendment may be needed during the next fiscal year. Ambulance — "How do we handle the write offs in the ambulance fund?" Write offs for the past 12 months are $575,887. Of that amount, $433,151 was Medicare, Medicaid, VA, work comp, and bankruptcy uncollectible amounts. These cannot be billed. $142,887 of other ambulance bills have been turned over to the credit bureau for collection. The credit bureau pays 66% and retains 33%. Any agency we turn over collections too must be HIPAA compliant for medical collections. The Ambulance staff is looking into the possibility of filing liens against property as another option. Use of Impact Fees for Digital Radios - "How can we use Police and Fire impact fees for the partial purchase of new digital radios?" Impact Fees may be used to purchase any growth related item that has a service life of over ten years, and is on the Capital Improvement Plan. These radios are growth related since the City has grown and the ability to communicate with officers at the remote edges of the City needs to improve. These radios have a service life in excess of ten years. The impact fee committee does review expenditures. City Manager -- "The City Manager personnel services increased by $34,000?" The assistant to the City Manager position was only funded for one half of this year's budget since I was trying to conserve resources. The proposed budget has a full year's worth of salary budgeted as well as funds for any cost of living increases that may be approved. Impact Fee Fund -- "Are we using impact dollars to help pay for fire ladder truck?" The fire truck funding for $120,000 is anticipated to be spent this fiscal year (pg 67). We will adjust the budget before final budget if we need to carry over part of this budget. The debt service for the Fire truck is partially budgeted out of the same fund. Old School Technology TIF — "What are the cash balances in the Old School Station TIES? what are the differences between the amounts in the industrial and technology?" There are two TIF Districts at Old School Station which are Technology and light Industrial. They are not the same size nor do they have the same values. There are no businesses yet in the Industrial TIF. The increment shown is the increment on the newly improved land. The increment in the Technology TIF is higher since there was a partial building constructed as of December 2007. The tax assessment from December 2007 will be billed out this coming fiscal year. The increment received in these funds is being split between redevelopment and paying down the debt on the SID 344(operating transfer) as required by the bond. The $5,000 budgeted for redevelopment this year will not be spent by June and therefore it is included in the cash balance. The same is true for the Industrial TIF. The amount of tax revenue will be adjusted when we get our values from the State in August and the budget adjusted accordingly. Courtyard Maintenance -- "It appears that we are using our cash on hand for maintenance related expenses at the Courtyard Apartments. why don't we raise rents?" The City has no involvement with the operations of the Courtyard apartments. We budget and book their revenue and expenses once a year for the audit. We are carrying $205,000 in debt on the Courtyard apartments — paid by the Northwest Montana Human Resources from the rents collected. Airport TIF — This budget has $250,000 appropriated for redevelopment activity. $10,000 will be used for the fakers' request subject to Council approval, funding for phase two of the Community Center, and the remaining amount for land acquisition or other eligible projects which council approves. AFSCME wages -- "AFSCME employees' salaries appear to have taken a big increase. Please review and provide information on the City Shop, Street Department, and the Waste water Treatment Plant personnel." Council may have been given a sheet indicating the current wage formula for personnel in these shops. Attached is abetter comparison going back to 2007 and some brief explanations. We started contract negotiations in 2006 and did not complete them until after the 2007-2008 budget was adopted. The 2008 budget reflects a cost of living adjustment to the prior year's salary and did not reflect the total salary adjustment. The difference between the 2007-2008 and the proposed budget may seem larger due to that difference. Find Solutions — "Go back and look at other areas to cut." When I first presented to Council, the difference between revenue and expenditures was in excess of one million dollars and I was instructed to "pull a rabbit out of the hat." The preliminary budget reflects a budget that has reduced expenditures by approximately $400,000, recommends a Park Maintenance District to help fund Parks maintenance at approximately $435,000, moves an employee from a general fund position to an enterprise needed position, and uses approximately $250,000 in cash reserves. While this further reduces our reserves, it stabilizes services and gives City Council and Staff the opportunity to have several workshops on how to reduce expenses and/or raise revenues for our out years. The City General Fund Budget is more than 80% personnel services. To arrive at a budget that will start growing cash reserves again we must review and reevaluate staffing levels looking at positions on a case by case basis to determine the critical nature of the position and staffing needs. We cannot continue to reduce or maintain operating expenses. over the last several years, Staff has successfully kept 0&M as close to the preceding year as possible with larger increases in areas of capital equipment purchases. This in itself has reduced our capabilities since we continue to fall behind the rate of inflation. The level of service expectations will also certainly change and Council needs to advice staff on what is acceptable to Council. There are not many other ways within our power to raise revenues. However, our building permit fees need to be reviewed since they are extremely love and Council may want to consider taking operating levies to the public for fire and/or police. Note: all changes to the Preliminary Budget need to be made after public hearing to ensure that the public is looking at the document which has been posted on the website, provided to the Library and the newspapers. It's not appropriate to change the Preliminary Budget prior to the hearing. Respectfully Submitted, Amy Robertson, Finance Director ---- ----------- .. ................ . ....... ....... . .............. James Patrick, City Manager Union Personnel current City Shop 2007 2008 2009 Mechanic $ 13.17 $ 18.56 $ 20.30 Mechanic foreman $ 15.11 $ 20.16 $ 21.90 Mechanic $ 14.56 $ 18.96 $ 20.70 Street Dept. 2007 2008 2009 Foreman $ 15.46 $ 16.86 $ 19.29 street maint personnel $ 14.31 $ 15.12 $ 16.81 street maint personnel $ 14.31 $ 15.41 $ 17.49 street maint personnel $ 14.31 $ 15.06 $ 16.23 street maint personnel $ 14.31 $ 15.06 $ 17.24 street maint personnel $ 14.70 $ 15.37 $ 17.24 street maint personnel $ 14.70 $ 15.86 $ 16.46 street maint personnel $ 14.31 $ 14.80 $ 17.14 street maint personnel $ 14.31 $ 14.80 $ 16.33 street maint personnel. $ 14.70 $ 15.86 $ 16.14 TSS tech $ 17.03 $ 23.12 $ 24.45 TSS tech $ 15.21 $ 19.60 $ 20.84 TSS tech $ 17.60 WWTP 2007 2008 2009 Operator $14.31 $ 15.16 $ 18.29 $ 22.80 Operator $ 15.16 $ 18.29 $ 22.80 Operator $14.70 $ 19.32 $ 23.28 $ 23.93 Operator $ 19.32 $ 23.28 $ 23.93 Operator $ 20.05 $ : 20.05 Chemist $ 21.58 $ 22.60 $ 22.74 Chemist $ 22.60 $ 22.74 This schedule attempts to show the changes in salaries for union staff. At the time the 2008 budget was prepared the union contract was not settled. 2007 salaries were budgeted with a contingency which was not always accurate -- we amended city chop budget $27,000 this year. The difference in union salaries is approximately $11,000 and there is a $12,000 contingency due to a medical situation in that budget for FY09. Of the 10 street personnel budgeted for FY2008 only 2 remain - 2 moved to other departments and 6 retired or left the city employment. The difference in hourly union pay times 2088 hours equals approximately $35,000. The additional .3 FTE adds $18.000 and a $10,000 contingency would explain the difference from. 2008. WWTP operators were adjusted about $5 hour without union blessing due to staffing problems. The FY08 contingency for the contract was inadequate. The salary line item needed to be $42,000 more but due to vacancies no budget amendment was made. For comparison purposes the FY08 budget fully funded would have been $421,000 higher than published in the book. The FY09 change in union salaries adds about $23,000. The balance is due to contingency for merit adjustments for union and non -union staff. COUNCIL WORKSHOP June 9, ?008 . BeadcFet review There is insufficient time available to fully state my concerns oil this year's budget. I could easily spend an liour stating such conceiis. Instead, some of these concerns are written Herein and available to the Council and any person W110 WOUld be interested. 2. Examples of Concerns AccotIntim,z methods: 4- 1 - In the accoLInts of various departments some indicate income and expense, others simply show expenses wliicli requires the Interested reviewer to search elsewhere to find the possible income. 2- In the case of the Ambulance account there is no indication of estimated write-offs. Any cancellation of bills should be a Council _judgement and should be listed as all expense to folly disclose the ambulance operation. Impact fees: My concern is that Impact Fees appear to be de2eneratmor into another ``sltIsl1 fund". t appears that there is an attempt to find a ``WAY" to legally tise impact fees to balance a budget. Having. questionable expenditures from Impact Fees plays right into the hands of the many people wlio oppose Impact Fees. I have no doubt that the police and fire departments need reliable radios, bta buying u radios is a day-to-day operation. If there is a problem created because of distances to Old School Station or Silverbrook that slIotIld leave been disclosed dur1111a the annexation 2s or a roceedin p least it should leave beers known to the CoLDncil son-)etlme before budget time. u. I ]lave no dOLibt that a fire ladder truck, or any piece of equipi-nent or structure needed BECAUSE of gJ_0\N�t11, s110t11d cone from Impact Fees. The new fire station WZIS built because it was needed 30 years ago and was constructed before the implementations of the Qrowfli fees. 1 4 o not question that- some small percentage of the laclder truck coLIld corne from Impact Fees. but the uestion was what - c - p q peg cep to e pay t ct�Iai lv l e�� the need is now not ti��lien needed 5, 10 or 20 years from iioN, due to grow li. That question leas not been answered. New taxatiolz: The followm2 concei-n relates to the accotIntina method cited above about indicating sources of incorne. Dur1112 the Parks Department budcret review I asked t1le question --did an f~ y o . l e Parrs budget rely on a Parks Maintenance District for budgeting. The answer was NO. I later checked the General Fund incorne and there on page 8 is an item for $4,3?,QO0 from a Parks Maintenance Assessments". How are we supposed to approve a bud -et wlzen we don't 4 even know where the money 1-, i I l be spent? The Special Street Maintenance accot111t on pale 922 slzoN.N.s a carryover of S 140,000 and new appropriati.oll of S280,000 wilicli equals S420,000. Yet pane 91 shows pavement replacement funds of S?80.000. It appears there is an error- and/or a request for a 10% 111cl-ease III taxes in (1difitimi to the 10% ,;i-wited in 200712008 bm-gret j7em,- Again, How are we Supposed to approve a budget wlien vve doii`t even know �\ Here the money x ill be spent? U11known source of funds: The Courtyard Maintenance account has a cash draw down. When 1 asked the questioll about this situation the answer appeared to lust pass the problem off to Montana HLiman Resources. After again checking_ the draw down appears to be the c*ty's problem. I have no idea where the salaries for the two part-time dispatchers carve from last year. The explanation by the City Manager oil the June 5 rnerno illuddied the water even fLirther. Were part-time people's salaries paid in some other fashion-? Parrs Department lists seasonal salaries. Why drdn't the police budget also list a p8rt-tirne category? AFSCMExNvages: I lead a bard tirne trying to relate the latest pav raise by this union groLi ti�ith the increases p in salaries shown on the budget. I therefore requested a breakdown of the salaries (which used to be provided witli the bLidget) for three different Public Works account —central garage a Support ftind), special street maintenance (a tax statement fee fund) and the Waste Water Treatment Plant (W WTP ) (an enterprise fund). Analyzing the central garage salaries, with the.") employees being the same as last year, 1 found the Hourly hicr-ecrse to be S4.07/hr. But $2.48 of that was attributed to tools/boots and contingency for an increase of an actual salary of $1.591hr. There was back avllongevity increases in the 200 71?008 bLidget so the actual increase was somewhat less. The increases for special street maintenance was sirnilar III 11OLirly wasincrease. There as also an additional 0.30 employee which had to be figured. There were some interesting observations of which the CoLincil should be aware. I11clLided was $88,400 in hoLirly salaries for overhead of Nvhich S30,400 was for % roan -year for constRICtion inanagenient. basicallty) a growth activity rather then a operation and maintenance activity (altl-ioLigh there is some city construction but not like that of private enterprise). Do we need 17% overhead in a basically rowine operation? When 1 projected the part tirne employees to full time throLiglIOL1t the bUd!zet get an overhead salaries (only, not with benefits) of Sa28,000 charged to non- capped activities. 4 pp s. BLit that's not all the overhead in the special street maintenance accoLint. Administrative transfer is S51,?00 and data processing transfer allIOLIlIts to $10,900 The W WTP had similar increases as fay- as operation/maintenance personnel salaries. While there is lot of coilsti-Liction activity at the WWTP, the City is paving a private firm big bucks to supervise the constrUCtion. The question is: why do we need at t6.6ear for anti- ReManagerManagethe �VV `� � � y soLii ce TP . A4ain, overhead is $68,125, administrative transfer is $851900 and data processing transfer is $18,?00. In SU111mary by this analysis, I believe the enterprise funds and fee accoLtnts are beinc, used as '`slush ttindsto avoid the mill levy cap. We appear to be loading LIP the enterprise f i �. p p L ids With office ov-erhead and other expenses. Programs not to be cut: The City Manages- mentioned that to balance the budget the Citymade not be able to open pen tlIe s� =ii -iIII ii14.� pool. This is a common tactic -- threaten to cLtt highly popular ro2ran7 . P . � � p p p � s Perhaps ad�rist�� ei�ts in operations n-iav be possible. The pool has been, and niav alwa s be a service y ESSENTIAL to the well being of the public in general, �ust like our %-N,l�ole sv to � . �. � � s � � of Parks, If there is a shortfall in revenue collected from the amount needed to ay the bonds it certainly pay y is money,\\ -ell spent from the General Fund budget. Z 3. Recommendations It is difficult to make specific recommendations nor do I believe that the Council's job. When Council approved payment of bills, which was clanged to abolish this responsibility b p Y y the couneil in about 2003). there was more knowledore of specifics. Therefore, With these difficult ecoijoillic tines, I i-ecommend the Council direct the City Manager to prepare a new budcFet as follow s: 1. No new i- increase taxes fees or assessments that effect the existing tax avers ol- i-ate avers. Growth is to be niaiiaored on a case by case basis. 2. The 2008/2009 budget to be balanced in accordance with above includingsetting aside cash to rebuild the cash i-esej-ve in 10% incjiernents this eai- and subsecipent veal-s to an amount at least a ual to the budget ear 2006/2007 each rpoziarvp 3. Examine all M&o costs including .,,,....cjtY pavment of duessu.pplies and mate -ials vehicle urchasing and usage ' new-a'ecfs salaries existing recreation activities that aj-e real revenue losers etc. 4. If there is to be reduction -in --forces the reductions shall be made in the highet- aid overhead ex -son n el. 5. The budget foi- specific activities shad include the source of financing. 4. Stance on vote far hearing If the «word ADOPT appears M the ResolUti011, I can not vote to Fold a public hear'ilicy before a new budget is presented. The dictionary defines adopt � t" as to Grote to occe t. 4 I believe -the budget should be revised BEFORE it goes to a PL]blic hearing. The budget should be III st.Ic11 form that a person haviI1G.-- soMe knowledge of income and expense can Understandproposed. ��� - g what �s be���4 p�- oposed.