City of Lawrence

City of Lawrence

MEMORANDUM

DATE: July 8, 2008

TO: Lawrence City Commission

FROM: City Manager David Corliss

Below are questions presented by Vice Mayor Chestnut along with staff response. The Vice Mayor’s comments and questions are printed in black.

CONSIDERATIONS FOR 2009 BUDGET DISCUSSION

I have a number of questions and comments in response to the City Manager’s recommended budget. I thought it best to provide these questions comprehensively to the City Manager and other commissioners in order not to duplicate staff efforts if other commissions have similar inquiries. I want to express my appreciation to all staff members who have participated in the development of a budget during these difficult economic times.

Spreadsheet roll-forward of projected fund balance

I spoke with staff on Friday about providing a sheet we used last year that rolls forward estimated fund balance with estimated expenditures for 2008 and estimated 2009 expenditures by department in order to understand our situation versus the 15% target for fund reserve.

Attached is a spreadsheet providing projections for general fund revenues and expenditures outlining impact on fund balance. This spreadsheet continues to be updated to provide detail.

Sales tax proposals

The sales tax proposals will be discussed at a later date. One proposal I made was to include a transfer from the general fund to the library fund if the sales tax for transit passed. This recognized the challenge for the library being totally property tax dependent for

funding. They will continue to have funding challenges as assessed valuation remains relatively flat. Was this considered in the deliberations?

We considered this issue and believe that the budget recommended is appropriate. The budget uses the slight growth in property tax revenues from the assessed valuation growth and the State payment for the slider in the amount of $32,179 to achieve the Library’s requested budget for 2009. The Library Director has been notified of this recommended budget

Solid waste rates and revenues

I would like to see a 5-year history of sanitation rates. The recommended increase should be considered in the context of rate increases made in recent history. I could not find any information to that end in the materials.

Monthly Solid Waste Rates History

year	Residential	Commercial
2000	$ 10.39	$ 15.13
2001	$ 10.60	$ 15.43
2002	$ 10.92	$ 15.89
2003	$ 11.25	$ 16.36
2004	$ 11.48	$ 16.70
2005	$ 11.71	$ 17.04
2006	$ 11.95	$ 17.38
2007	$ 12.19	$ 17.73
2008	$ 12.68	$ 18.44
2009 (proposed)	$ 13.19	$ 19.10

There is no split between residential and commercial revenues in the budget. However, the budget does split expenditures between residential and commercial locations. Is revenue split possible to understand the relationship between revenue and expenditure by each segment? That may also lend to a better understanding of reviewing sanitation rates. I am assuming the recommended increase is across all segments.

Yes, increases are recommended in 2009 for both residential and commercial customers. A four percent increase translates to an increase of $0.51 per month (present rate is $12.68 per month) for residential customers and an increase of $0.74 per month (present rate is $18.44 per month) in the minimum commercial rate.

The split between residential and commercial expenditures is based on the City’s accounting system. Different expenditures accounts are used for each division. 502-3510 is residential; 502-3520 is commercial; and 503-3530 is waste reduction and recycling. Page L-3 in the recommended budget shows a consolidation of expenditures.

As shown below, revenue accounts are not separated like expenditure accounts. It is possible to group these accounts. However, there is not a perfect correlation between commercial revenues and expenditures. To maximize efficiency of the routes and crews for example, many commercial dumpsters are collected by rear-load “residential” crews. Therefore, revenues are consolidated as shown on page L-2 of the recommended budget.

ACCOUNT	ELE	OBJ	ACCOUNT	2009
			DESCRIPTION	REQUEST
502-0000-330	10	00	TRANSIT GRANTS	0
502-0000-331	00	00	FEDERAL GRANTS	0
502-0000-334	10	00	HOUSEHOLD HAZARDOUS WASTE	0
502-0000-342	45	00	LATE PAYMENT INTEREST	2,000
502-0000-343	10	01	UTILITY BILLING CHARGES	7,618,335
502-0000-343	10	02	POLY CART RENTAL	165,000
502-0000-343	20	00	CONTAINER DELIVERY	0
502-0000-343	25	00	ROLL-OFF RENTAL	170,000
502-0000-343	30	00	ROLL-OFF DISPOSAL	1,430,000
502-0000-343	40	03	BULK PICKUP CHARGE	0
502-0000-343	40	04	TIRE COLLECTION	0
502-0000-345	00	00	MISC./BILLED CHARGES	160,000
502-0000-345	56	00	COLLECTION FEES	0
502-0000-345	85	00	SQG	2,000
502-0000-361	00	00	INTEREST ON INVESTMENTS	100,000
502-0000-362	00	00	BUILDING RENTAL	0
502-0000-368	00	00	SALE OF ASSETS	0
502-0000-368	10	00	SALE OF SCRAP	3,000
502-0000-371	30	00	SOLID WASTE REDUCTION	0
502-0000-373	20	00	REIMB. EXPENSES-OTHERS	0
502-0000-374	00	00	OTHER MISCELLANEOUS REV.	0
502-0000-374	10	00	RECYCLE SALES - ONP	65,000
502-0000-374	20	00	LANDFILL SITE FEE	0
502-0000-374	30	00	CARDBOARD RECYCLING	75,000
502-0000-374	40	00	RECYCLE SALES - OMG	0
502-0000-374	50	00	RECYCLE SALES - OWP	5,000
502-0000-374	60	00	MIXED PAPER (MIX)	0
502-0000-378	00	00	BAD DEBTS COLLECTED	0
502-0000-399	00	00	SALE OF SCRAP	0
*TOTAL BUDGET*				9,795,335

Roll off revenues and extra pickups have had a big reversal for the 2009 budget in revenues. I am assuming this is a change in classification of revenues. Can you provide some discussion of these items?

This was a linking problem in our spreadsheet. Some of the links for “roll off” and “extra pickups, miscellaneous” were transposed. The information shows amounts as they should have appeared.

	2007	2008	2008	2009
RECEIPTS	Actual	Adopted	Estimated	Budget
Sanitation Service Charge	7,212,174	7,392,000	7,392,000	7,618,335
Roll Off	1,596,908	1,620,000	1,620,000	1,600,000
Extra Pickups, Miscellaneous	358,969	488,000	488,000	477,000
State Grants	16,844	0	0	0
Interest on Investments	149,348	100,000	100,000	100,000
TOTAL RECEIPTS	9,334,243	9,600,000	9,600,000	9,795,335
Balance, January 1	3,276,396	1,507,415	2,888,553	1,604,652
TOTAL RESOURCES AVAILABLE	12,610,639	11,107,415	12,488,553	11,399,987

Public Parking

The City Manager’s letter mentions consideration of increases in parking rates. Based on review of the numbers, I would agree. The recommended budget for 2009 shows a $154k deficit spend prior to any transfers to the reserve fund for maintenance and repairs. Our ability to continue beautification efforts will be reduced without increased revenues. I would suggest staff recommend increases that they see as appropriate.

We agree that this fund deserves close monitoring and changes if deemed appropriate. We will concentrate on reducing expenditures, including transfers to reserve, prior to recommending a fee/fine increase.

It is unclear why we are projecting meter revenues to be less in 2009 than actual for 2007. Are we seeing a trend that suggests revenues might be very elastic based on rates? If not, do we have less metered traffic downtown? This assumption may require some review.

In 2007, we accounted for 13 monthly payments totaling $417,202, versus the normal 12. For the first half of 2008 parking meter revenue was only $175,000. In most years the first half revenue approximates 50% of collections. As a result, we may receive less than the $380,000 budgeted in 2008. In 2005 we collected $382,000 and in 2006 we collected $393,000. The 2009 budget was $390,000 in order to be closer to past experience.

Personal Property Taxes

As noted in the transmittal letter from the City Manager, assessed personal property is lower based on the exemption for new machinery and equipment. Has the state provided any offset to these revenues to date?

Yes, beginning in 2008, the State provides a “slider” payment to offset the mechanical and equipment property tax exemption. In 2008 the offset amount totaled $102,000. It is projected to total $252,000 in 2009. The money is allocated to the property tax supported funds in proportion to their property tax levies from the prior year (similar to motor vehicle taxes).

Debt Service

A-15 highlights expenditures by category. Debt service represents 15.6% of total expenditures for 2009 versus 14.4% in 2007. Do we have any estimates on what these percentages might be in future years? Does this have long-term impact on our bond rating?

The 2009 percentage is expected to be less than 15% in accordance with the debt service policy. Projecting future percentages is difficult as future debt service and expenditures are unknown. General obligation debt service expenditures are overstated in the 2009 budget in order to have a 5% budgeted fund balance in the debt service fund. This percentage was tracked in the CAFR’s (our financial report) statistical section, but is no longer required information.

The measure of “debt service –to-expenditure “was not discussed during Moody’s recent rating evaluation of our debt. A larger concern is debt as a % of assessed valuation, debt per capita, and the amount of planned issuance.

I would suggest that we consider this factor when setting a target for bonding expenditures in the bond and interest fund as well as utilities going forward.

The percentage of expenditures for debt service compared to total governmental expenditures is a factor that is included in the debt service policy for general obligation bonds. The coverage ratio is the primary method of evaluating revenue bond debt for utilities. The City’s Finance Director would recommend this method rather than using the percentage of total expenses as a factor when issuing revenue bonds.

Full-time Equivalents (FTEs)

A-19 displays a reduction in authorized positions for the 2009 plan. I would like to know by department and in total what is our current staffing expressed by FTEs. This analysis will give some insight into our current recruiting and possible discussion regarding staff levels.

Human Resources will provide information.

Performance Indicators

A review of performance indicators raises questions in several areas:

Ø Planning – Do we have any thoughts regarding the improvement of a 32% satisfaction rate for services? Other indicators are all fairly close to target. Are we measuring the right indicators that would tell us about the issues that are creating dissatisfaction?

The 2007 City of Lawrence Direction Finder Survey, conducted by ETC Institute, indicated a 32% satisfaction rate for planning / development services, 43% neutral to the question, and 25% dissatisfied with the quality of such services. It also ranked third in the list of city services that should receive the most emphasis over the next two years. Implementing the Matrix Study recommendations has and will continue to improve the satisfaction rate for these services; however, since the survey was completed, staffing has been reduced and several major components of the Matrix Study have not been implemented due to budget constraints. Staff is preparing a status report on the implementation of the Matrix Report for the Commission’s review and discussion.

The survey did not pinpoint the elements of dissatisfaction, some dissatisfaction may be related to processing delays and some is believed to stem from the decisions on the development issues themselves. Development projects are often at the forefront of community news. The survey may indicate dissatisfaction with the outcomes of proposals in many instances. However, we constantly strive to receive constructive comments on how the department can increase efficiency and more adequately respond to citizen expectations.

The next Direction Finder survey will let us know if we have made up ground on the satisfaction rate of the planning and development issues.

Ø Code enforcement – What are we targeting 400 blight inspections when the department did 680 in 2007? Is this a staffing issue?

Inspections are complaint driven for the most part, though inspectors and other city officers can and do initiate cases. The difference in the number of blight inspections targeted for 2009 reflects both the actual calls during 2007 and first part of 2008 and the reduction in staff to self-initiate a violation case. In 2007, two code enforcement officers were left unfilled, thus the number of self-initiated cases have dropped and the remaining three enforcement officers have filled in during periods of unfilled positions in other subdivisions of the department. Blight inspections are only one type of inspection performed by the Code Enforcement division and the workload is now being spread amongst three officers where five existed previously.

Ø Building safety – With low permit levels in recent years, why are we still at 52-53% on permits issues for residential and commercial applications? These performances are still well below our goals.

As the budget documents indicate, our 2008 and 2009 goals are to increase our performance in this area.

The reduction in permits for new structures is accurate. However, remodel and HVAC change outs remain strong. Additionally, staff expends a great deal of time counseling contractors and the general public on elements of the new ICC code and contractor licensing remains a very time consuming process. Several factors contribute to not yet meeting this goal at a higher rate. The Matrix Study recommended a Permit Tech position that was not realized but could substantially increase the effectiveness of the program by concentrating mainly on permitting and contractor licensing functions. Currently the plan reviewer position is responsible for meeting with walk-ins, answering phone calls and email inquiries, processing permits, and reviewing plans. We are striving to allow the plan review positions to concentrate more on plan review and less on the administrative processing of permits. Another contributing factor includes allowing incomplete applications upon submittal. This has been identified as a leading cause of delayed issuance and we are working with the LHBA to encourage more complete applications. The department plans on making a complete application a stricter requirement in the future to reduce the delays.

Ø HR – Turnover was 6.4% in 2007, yet our goal for 2009 is 8.5%. Are there concerns that need to be discussed?

While turnover in 2007 was 6.4%, the average turnover for a 10-year period has been 8.5%

General Overhead

We have $1,445k of contractual services expenditures going to outside agencies. Can we get detail of the balance that makes up expenditures for the balance of the $3,016k total?

The detail below includes outside agency and other funding.

DUES & SUBSCRIPTIONS including National League of Cities, League of Kansas Municipalities	45,000
PRINTING	2,000
OFFICE EQUIP	15,000
AUDITING (annual City audit)	30,000
OTHER PROFESSIONAL SERV.	30,000
STORM WATER (City facilities paying storm water fee)	47,000
OTHER CONTRACTUAL SERVICE	40,000
DISPATCHING	1,001,237
OFFICE LEASE	220,000
ART CENTER SUPPORT	90,000
DOWNTOWN LAWRENCE	42,500
ECONOMIC DEVELOPMENT	185,500
DOUGLAS CO VISITATION CTR	6,750
BIOSCIENCES	275,000
BOYS & GIRLS CLUB	143,722
HOUSING & CREDIT COUNSEL	17,100
HOMELESS	214,192
POSTAGE	110,000
LAWRENCE HUMANE SOCIETY	256,320
JAYHAWK AREA ON AGING	7,400
DOUGLAS COUNTY LEGAL AID	40,000
WARM HEARTS	6,000
THE SHELTER	32,000
DG.CO.COMM SERVICES	31,492
ECUMENICAL FELLOWSHIP	4,000
DG.CO. CASA	20,000
HEALTH CARE ACCESS	26,000
WTCS	6,000
VAN GO	35,000
BALLARD CENTER	7,500
SALVATION ARMY SHELTER	30,000
	3,016,713

Fire and Medical

We have an increase in contractual services from $867k to $1,020 that equals an 18% increase. What is driving this increase?

Attached is a memo from Chief Bradford outlining changes in contractual services.

Airport Maintenance

There is an increase of $18k in personal services that equates to an increase of over 40%. What is driving this increase?

Following the retirement of a long-time supervisor in the Street Division, the department took the opportunity to evaluate division functions, and assignments, realigning work loads and crews. Organizational changes were made that maximized the efficiency and accountability of existing staff members. Examples of changes included: transfer of operational responsibility for daily airport maintenance to Buildings and Structures, consolidation of sweeping functions with Levee and General Maintenance, transfer of pump station maintenance to Storm Water, and formal assignment of responsibilities for additional functions to Levee & General Maintenance crew (alley maintenance, parking meter sets, tunnel maintenance, guardrail repair, and so on). Personnel assignments were shifted between general fund divisions to accurately reflect assignment to specific functions, thus while the airport budget goes up, slight reductions are included in the personnel budget for street maintenance.

Guest Tax

The funding for DMI/CVB estimated for 2008 is substantially lower than the budget. Reserve funds have been increased commensurately. This trend is continuing for 2009. What was the change in assumption that drove this reallocation?

In 2008, an administrative policy dictated that $12,000 be allocated for Sister Cities and that $150,000 be allocated to the reserve fund. The remainder of resources was allocated in the budget to DMI/CVB. (As previously discussed, the revenue level budgeted was incorrect, resulting in an allocation that significantly exceeded the request from DMI.)

The 2009 budget reflects a deletion of the administrative policy. The budget as presented includes the request from DMI/CVB and the City Commission Committee recommendation for Sister Cities of $7,500. The remainder is allocated to the reserve fund.

The City puts money into reserve based on City Charter Ordinance 30. What is the current balance of the reserve fund? What do we estimate the balance to be at the end of 2008 and the end of 2009?

As of June 30, the current of the reserve fund is $288,219. Additional expenditures are expected from this fund, including transfers to City departments which have provided assistance to numerous community events (e.g. police/fire overtime, etc.).

Rental registration

It is unclear what our current cost is associated with the existing rental registration program for rentals in single-family zoned neighborhoods. Do we have current revenue and expenditures for this program? I am assuming revenue is approximately $90,000 based on stating we will generate $110,000 in incremental revenue by increases existing fees and creating new fees with this program.

Based on the City Manager’s memo, estimated annual revenue will be approximately $200,000. I want to make sure I understand the budget impact. Here is my estimate based on the memo:

Incremental revenue $110,000

New inspectors (94,000)

New admin staff (42,000)

Associated costs ( 8,420)

Cost for 2009 $(34,420)

Does the addition of personnel include costs for medical benefits, pension and other related benefit costs? Do you believe this deficit will be balanced in the future?

The estimated costs for additional staff include health insurance and other related benefit costs. In addition to inspection of the older structures, the additional staff will assist in inspections currently completed by the one inspector on staff.

Street Maintenance

I agree with the recommendation to ensure street maintenance expenditures are maintained at their current level. If the infrastructure sales tax passes in November, does staff believe these expenditures will mitigate in future years as problematic stretches of our grid are reconstructed?

Staff does believe that in out years we will see progress on our street maintenance goals if the sales tax passes coupled with continuing existing efforts.

The submittal letter commented on spending over $5 million on street maintenance. I want to make sure I understand where these numbers are derived.

The total amount of expenditures in the special gas tax dedicated to street maintenance is $2,953k and the amount in the general fund is $3,294k for a combined total of $6,247k. How is the $5 million plus figure derived?

See attached spreadsheet outlining street maintenance expenditures.

Special Recreation Fund

The recommended budget for the Arts Center scholarships and the arts commission total $51k. Is this comparable to 2007 and 2008?

The 2009 level of $50,500 is the same level as funded in 2008. This amount in 2007 was $48,400.

Bond and Interest Fund

The schedule on J-5 shows a roll forward of debt in 2007. Can we see that schedule for 2008 and 2009? The trend shows that we issued $14,190k more debt than what was retired during the year. I would like to know how much our $140,465k outstanding indebtedness will grow over the next few years. Does our legal debt margin take into consideration whether indebtedness is GO or revenue in nature? Have we considered the impact of water and wastewater project indebtedness if we move forward on the significant portion of the wastewater plant construction?

Attached is a summary of debt roll forward for 2008 and an estimate for 2009. The legal debt margin is only based upon general obligation debt and does not include specific revenue backed debt. The water and sewer rate model looks at the impact of future revenue bond issuance, as well as future operating revenues and expenses, when calculating coverage ratios of future revenue bonds.

Water/Wastewater Funds

I would request we break out the impact of moving expenses and merit increases for all divisions from administration in order to see the true year-over-year increase in personal services. I would also request a consolidation of all the divisions that roll into the water/wastewater division to understand the overall increase in funding for the entire enterprise year-over-year.

The budget recommends a 5% increase in water and sewer rates. Like sanitation rates, it would be helpful to have a 5-year trend on increases in these rates to have historic context. Secondly, do we have any information about rates in comparison to surrounding communities?

The Utilities Department will provide a response.

Public Golf Course

Based on the proposed budget, it would appear that we will show a small surplus for 2009 less contingency as presents below:

Revenues for 2009 $980,500

Expenditures less contingency 913,172

Surplus (prior to debt service) $ 67,320

Can you provide the annual debt service for the bonds associated with Eagle Bend, and the retirement date?

Eagle Bend debt will be retired in 2016. Debt service payments are approximately $290,000 annually and are currently paid through the sales tax reserve fund.

CIP

The list of all projects through 2013 does not appear in this material. Do we have a comprehensive list of projects and their score based on the scoring matrix on P-3?

Staff does not have a list of projects through 2013. These projects have not been scored.

I note that we have included the Carnegie Library project in recommended 2009 expenditures? Has this project been scored on the matrix? If so, how does it compare to others? Is the recommended list the highest scored projects?

None of the 2009 projects have been scored. The recommended list contains recent projects which have been discussed by the Commission. Additional Commission discussion and direction is needed regarding these projects.

The Carnegie rehab amount shown on P-4 totals $1,349k. There are no offsets for federal or state aid. Are we assuming the federal grant money will be foregone? If so, is there the possibility of reapplying for federal grant money at a higher amount?

The federal grant is approximately $90,000. We are working with the National Park Service to explain our delay in expenditure and whether we can extend the use of these funds further. There is always the possibility of reapplying for federal grant money and asking for more money.

Health Care

A memo was published on May 19, 2008 discussing different options for health care funding. It is unclear in the budget materials what option was selected and integrated into the recommendation. The committee laid out 3 different funding options. I would like to know which was selected.

Thank you for the time and effort spent to finalize the 2009 budget. I look forward to the discussions in the coming weeks.

See attached information on employee healthcare. The City Manager’s Recommended Budget includes option C outlined in the committee memo, however, as noted in Casey Toomay’s memo the City Manager’s recommended budget utilizes retained earnings to cover the 3% recommendation.