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IN ACCORDANCE WITH PROVISIONS OF THE ARIZONA REVISED STATUTES AND THE FLAGSTAFF CITY CHARTER, THE SUMMARIZED MINUTES OF CITY COUNCIL MEETING ARE NOT VERBATIM TRANSCRIPTS.  ONLY THE ACTIONS TAKEN AND DISCUSSIONS APPEARING WITHIN QUOTATION MARKS ARE VERBATIM.  AUDIO RECORDINGS OF CITY COUNCIL MEETINGS ARE ON FILE IN THE CITY CLERK’S OFFICE.

 

 

SUMMARIZED MINUTES

JOINT CITY COUNCIL

AND CITIZENS’ BUDGET TASK FORCE

WORK SESSION

 

November 18, 2010

8:00 a.m.

 

 

A joint meeting of the Flagstaff City Council and the Citizens’ Budget Task Force was held on Thursday, November 18, 2010, convening at 8:06 a.m. in the Council Conference Room at City Hall, 211 West Aspen Avenue, Flagstaff, Arizona.

 

 

CALL TO ORDER

 

The meeting was called to order by Mayor Presler.

 

 

1.      ROLL CALL

 

The following were present:

 

 

 

Mayor Presler

 

Vice Mayor Barotz

Councilmember Babbott

Councilmember Brewster Councilmember Evans

Councilmember Overton

Councilmember White

 

Chairperson Paul Turner

 

Vice-Chairperson Mike Souris

Kurt Fenske

Kathrin Fox

Lee Harsh

Blake Nabours

Joe Ray

 

 

Also present were:

 

 

 

Kevin Burke, City Manager

Rosemary Rosales, City Attorney

 

 

WELCOME AND OVERVIEW OF RETREAT

 

 

Spending the public’s money is the City’s most important business.  It is 8 months out before the first day that the Fiscal Year July 1, 2011 through June 30, 2012 (FY 2012) will take effect.  This retreat is the first of three budget retreats that will be held to create the FY 2012 budget.  At the second meeting scheduled in February, the budget will be narrowed down and then it will be finalized in April.

 

 

The theme for FY 2012 is uncertainty, meaning that the budget can swing from one direction to another.  There have been signs that the economy may be recovering and there are other indicators that it still may go down.  The budget will be prepared to address both, while hoping for a flat scenario.  If the Council wishes to add something new to the budget, something else will have to be taken out.  Spending any new dollars will be a critical policy discussion.  One-time dollars are gone and the City is living beyond its means.  Triggers will be included in the budget.

 

 

INTRODUCTION OF CITIZENS’ BUDGET TASK FORCE MEMBERS

 

 

Jim Wine introduced all of the members of the appointment task force, noting that the group has met twice for a little more than four hours.  They have received the “Budget 101” overview of the  process, fund levels, and  Council priorities.

 

 

ECONOMIC UPDATE

 

 

Several economic outlook seminars were conducted this year.  The NAU group noted several positives in that hotel occupancy is up 2.1%; construction permits are up, (possibly due to stimulus monies), NAU enrollment is up; and sales tax had a slight uptick in the first few quarters of this year.  The housing market still has a 10-month supply.  The overall prospect is that the economy will be slightly better than last year, but not much.   Another presenter predicts that interest will remain low, unemployment will remain high, inflation is coming, and an even worse recession could follow.  A third presenter gave overview of state economic issues and cautioned that the recovery will be painfully slow, be mediocre, and take time a lot of time.  Banks need to loosen up on their fund balances.  Housing is the concern and there is no quick fix.  51% of the homes statewide are in a negative equity situation.  There could be a potential boom in 2014 and 2015

 

 

At the Government Finance Officers’ Association budget forum, it was disclosed that FY10 State general fund revenues declined by another 10.1% statewide.  Their 2011 forecast is a 2.4% increase and a 4.8% increase in 2012, but their presentation was before the November election.  They saw growth in individual income tax and corporate income tax, but that could be attributed to the change in the withholding rates in July that may have inflated the percentages.  There are 41,000 homes in Phoenix in the foreclosure process.  The potential shortfall to the state budget is $825 million due mainly in part to the failure of the November ballot propositions and lower federal matching funds.  New revenue forecasts are lower than predicted last spring.  Projected cash shortfall is $1.4 billion up to $2.4 million in 2014.  In the State general fund, education and medicare makes up 77% of the budget and if it drops below a certain level, the feds could cut back stimulus monies or eliminate them.

 

 

The finance officers were concerned over the continuing loss of good people as government markets shrink.  Confidence in the legislature has declined.  Delays in investments, infrastructure, vehicles, and equipment are occurring.  In future growth, public entities may not be able to compete for good people.  Creative ideas included joint ventures with other communities, contracting out services, renegotiating long-term contracts, different rates for non-residents and residents, revisiting replacement fleets, creating a new benefit structure, renegotiating memoranda of understanding with police and fire, revising overtime policies, eliminating  retiree insurance, and managing employee health care costs.

 

 

There is uncertainty everywhere and housing will impede the recovery.  Banks lending again could be a factor in the recovery.  Only one presenter talked about a future economic boom.  Post-election, there are concerns about the change in the State legislature.  If they delay payments to cities or eliminate state-shared revenues, the impacts will be farreaching.

 

 

GENERAL FUND CURRENT STATUS

 

 

Preliminary numbers are in for FY10 and the good news is that, tentatively, the City received about $1.5 million more than anticipated.  Year-end salary expense was over-estimated and some capital did not roll over.  However, the City has also received bad news and hopes to use the good news to cover the bad.

 

 

With Horizon Airlines, the airport had been self-supporting.  They now anticipate a $150,000 loss this year and bigger loss next year.  $500,000 in revenue was also lost with the change in fire contracts for non-residents.  The City will lose $500,000 in 2011 and $800,000 in 2012 from the fire contracts.  Building revenues and auditing fees didn’t come in as expected and about $1 million is needed to cover the loss in projections.  Midyear adjustments aren’t expected if the $1.5 million can be used offset the losses.

 

 

When budgeting for contingencies, $250,000 was allocated to local disasters, $650,000 for the Aspen Sawmill payment, and $600,000 for budget shortfalls from the state.  The $600,000 state contingency may be available to use somewhere else in the budget.  To help cover the airport shortfall, a $300,000 reimbursement on an airport capital project came in.  The sale of the Aspen Sawmill properties will also help.  With a $1 million contingency, one-time costs could be funded, the fund balance restored; further enhancements to Jay Lively bleachers could be made, fire trucks could be purchased, a buffer established for state-shared revenue shortfalls, or funding and incentives created to bring in a second airline.  The airport route has now been proven.

 

 

REVENUE UPDATES

 

 

o  

General Fund

 

·    

Breakdown of Revenues

 

General fund revenue sources are from sales tax, state-shared tax, franchise fees, property taxes, and other revenues.  When business activity goes up at this time, it simply means that the negative is less than the year before.  Earlier this year, the City began to experience a little bit of growth.  The chart over two years is a little more stable.  Year to date over the two–year period is balanced out with a steady decline.  But there are signs of life and it should get better.

 

 

 

·    

Local Sales Tax

 

Retail sales tax is going up by about $550,000 because, in FY 2012, the new franchise agreement fees become effective.  Everything else is anticipated to hold flat or increase moderately.

 

 

 

·    

Franchise Fees

 

Councilmember Babbott arrived at the meeting at 8:55 a. m.

 

The franchise agreement will become effective during the year and the cable company will have to pay a sales tax and then a 2% tax on their total profit which are two separate revenue sources.

 

 

 

·    

State - sales tax, urban revenue, auto lieu

 

Cities get a portion of the 5.6% state sales tax.  The City’s 1% sales tax is on top of that, but there will be no benefit from the 1% additional state tax approved by the voters.  This revenue is based on the census.  Currently, Flagstaff receives 1.2% of the state tax.  For every .01% decline, $37,000 in revenues will be lost.  Flagstaff’s population has not increased at the same rate as the other cities; and as a result, the City’s percentage is projected at a 3% decline.

 

Cities and counties get 15% of State-shared urban revenues and Flagstaff gets 1.25% of that.  Every .01% decline in this revenue due to population is $42,000.  By February, the City should know what its share will be.

 

The auto lieu is the vehicle registration fee, of which the City receives a percentage.  A decline has occurred because people aren’t buying new cars and growth isn’t foreseen.

 

 

 

·    

Building Revenues

 

Residential building revenues are expected to remain flat and commercial is anticipated to decrease.  There is a significant amount of unfilled commercial capacity based on excess space.  The situation will probably last about three years.  Northern Arizona plans to build another science and health building, two resident halls, and a parking structure, along with other growth that will bring in some revenue and they are confident that the projects will be budgeted for and built in the next three to five years.  The recovery won’t be quick with the City being $200,000 shy in its projections this year and the numbers being rolled forward into next year.

 

 

o  

BBB – Current Status

 

BBB revenues have been relatively stable.  There has been increased occupancy, but the hoteliers are charging lower rates for their room.  With increased enrollment at the university, more parents will be visiting and staying in Flagstaff.

 

 

o  

Transportation Tax

 

.721% of the sales tax goes to the transportation tax fund and 1% goes to the general fund.  In the future, the two will parallel each other. 

 

 

o  

HURF

 

Highway User Revenue Funds are collected by the State from an 18-cents-per-gallon tax, with cities gettng 13 cents of that.  Revenues are down because people aren’t driving as much or heading out of state as much and because cars are getting better fuel economy.  The percentage has stayed the same, but the pot has gotten smaller because of state sweeps.  The State has swept over $80 million for DPS and $40 million for state general fund.

 

 

o  

Water/Wastewater Revenues

 

The new rate changes will be effective in January.  Projections based on the rate changes and this year’s numbers are expected to hold flat.  A year after that, the inceases will show up.

 

 

o  

Environmental Services Revenues

 

The funds come from Solid Waste, Recycling, and the landfill along with other programs.  A rate increase went into effect in November and revenues are projected to increase as a result. Once commercial comes back in to the City, more natural growth should occur as the economy grows.

 

The Library is primarily funded by secondary property tax.  It is threatened more than other City departments because county properties have been declining more than the city’s.  For FY12, the fund revenue could decrease 5% with no impact.  If the cuts are more than 5%, the Library would have to make cuts to their programs or increase their rates to hold revenue neutral.

 

In sum, HURF funding isn’t looking good; BBB revenues are projected to be flat; the utility fund will have a rate increase going into effect mid-year; the airport fund has lost $180,000 per year, environmental services will have a rate incease; and Stormwater will institute the final year of is step increases.

 

The Federal Government has been trying to control inflation; and because the focus is more on the inflation side, there shouldn’t be a risk of deflation.  Energy and commodity costs are rising.  Economists are projecting low level inflation and most of the projects reflect that.

 

In looking at the balance points, city sales tax, BBB tax, utilities, environmental services, and franchise fees will all be on the plus side.  Construction and state-shared revenues should hold flat, but both are the big risk items.  On revenue streams where there is more local control, the City has better ability to stay on the plus side.  Those revenues without local control drive the negative side.

 

Important to the policy discussion is that the City 1% sales tax generates $13 million and state-shared revenues generate about $13 million.

 

The goal is to match ongoing revenues and expenditures and one time expenses to one-time funds.  In 2012, projections are to be $1 million out of balance due to decreasing ongoing revenues and about $1 million out of balance on one-times.  Staff is preparing for the worst case and the $1.3 million of one-times funded in last year’s budget are not in this year’s model. 

 

Last year’s one time expenditures included a position in the City Manager’s office, a budget analyst, .125% of the deputy city clerk position, elections, a meter reader position, a senior assistant civil attorney, a one-time code enforcement officer, a neighborhood intern, 10 firefighters, a wildland specialist, a Police Department calltaker, Council travel, United Way partial funding, Rural Policy Institute, a deputy court administrator, a court judicial specialist, CVB and Visitors Center, and Mountain Line passes.

 

There are seven stations in the Fire Department with an engine in each station, 3 people per engine, and three shifts a day for 24/7 coverage.  Station 7 has a fourth staff member who is a battalion chief.  Minimum staffing has been reduced from 22 to 21.  The long-term station relocation plan was to close Station 7.  Once Station 2 is built on Enterprise, the stations will be more equally spaced and Station 7 will be closed.  Rescues will be added to Station 1 and Station 2.  In looking at the 10 personnel funded by one-time monies, 9 positions will go away with the closure of Fire Station 7.  Response times can vary and nighttime responses can be quicker because there is less traffic congestion.  Firefighters work 48 hours on and 96 hours off which is standard in the industry.  Firefighters are paid to respond 24 hours a day.  Response times are a measure of performance.  If the 4-minute response time is sacrificed, negative things begin to happen.  With the relocation, Station 2 will be the busiest station responding to 40% of all alarms.  With six stations, it is logical for the busiest station to have an engine and a rescue.

 

Fire trucks and firemen responding to all 911 calls will be placed on the policy discussion list.

 

Mayor Presler asked for a legal opinion on the impact of the stormwater decision on cities and the state.

 

FINANCIAL S.W.O.T. (Strengths, Weaknesses, Opportunities, Threats)

 

Economical strengths include the university and community college, county seat, a tourism-based city, a regional medical center, geographically desirable location, quality of life, transportation corridor, diverse population, regional shopping hub, regional airport services, and a low unemployment rate.

 

Flagstaff has experienced 7 consecutive months of BBB growth with hotels seeing 5 months of increased occupancy and 4 months of growth in revenue available per room. The tourism stimulus program was $250,000 in one-times in FY09 and $100,000 in one-times in FY10.  Without the stimulus dollars, 235 jobs, $600,000 in local taxes, $20 million in tourist expenditures, and $5 million in lodging would have been lost.

 

Mayor Presler asked that the Budget Task Force be provided with the Runyon analysis of expenditures and benefits as a result of the stimulus program.

 

Occupancy increases is unheard of across the nation and in the state, but Flagstaff has experienced that.  The airport, for the first quarter the fiscal year, experienced a 1% increase in passengers.  US Airways now has 7 flights a day going out.  Grant opportunities to provide funding to secure another airline service in a community are being pursued.  The university is the largest employer in Flagstaff, followed by Flagstaff Medical Center, and then Gore.  Of the top ten employers, six are public sector employers.  Combined, these employers employ 12,000 of the 37,000 workforce employed.  Countywide, 57,000 people are employed.  Losses or layoffs and/or decrease in salaries plays into local economic conditions. 

 

Mayor Presler asked that the list of employers be distributed to the Council and Task Force.

 

Flagstaff’s unemployment rates, industrial vacancies, and office and retail vacancies are sgnificantly lower than the state percentages.

 

Mayor Presler asked for comparisons from two years ago, last year, and this year, relating to permits, business licenses, and similar activities that were pulled along with their corresponding sales tax numbers

 

Conversely, Flagstaff suffers from lack of livable wages, lack of citizen confidence in government at the state level, hiccups at FUSD, and the County’s recent tax levy.  High cost of housing, high cost of living, limited economic development tools, state-shared revenues, and public sector employment are other detractors from the local economy.  In terms of cost of living, Flagstaff is at 115%, with groceries at 105%, health care at 101%, housing at 144%, and utilities about equal.  Leakage has been another problem in the areas of clothing, shoes, furniture, and pet supplies.  Some of that should be remedied with the addition of another furniture store, a Walmart supercenter, and a second Home Depot.

 

Mayor Presler asked that Mr. Stigmon’s economic report on economic development be provided to the Budget Task so that they can identify the incentives that the City does and doesn’t have.

 

In terms of opportunities, the Wal-Mart supercenter has opened; the Aspen Sawmill North expansion has begun to unfold; Aspen Sawmill South should be developed; university and community college enrollment is up; two bond questions passed; the automall should develop; the Fourth Street corridor is being improved; USGS is expanding; a second airport carrier could be attracted to the airport; retail interest has increased; and the opportunity to take local control of a number of revenues exists.

 

REVENUE LOCAL CONTROL

 

The League of Arizona Cities and Towns has told municipalities that the Legislature may be willing to strike a deal for state-shared revenue and they want to know what deal Flagstaff would be willing to strike.  Because the Legislature has the votes to come after state-shared revenues, it might be time to talk local control and tradeoffs for that control.

 

Property tax, which can be increased by 2% per year, is the largest local component of the budget.  If full cash value of properties declines by 5%, any remaining buffer will be eliminated.  The current rate is $.6479; and, in a period of decreasing assessed valuations, if the City wants to keep revenue level, the rate will have to be raised.  There is a gap between net assessed and full cash value; and, if held flat, a rate decline in FY2012 will be experienced.  In FY13 and FY14, a rate increase will be required to hold revenue flat.  An increase in the tax levy by 2% would grow revenue by $200,000.

 

Should the property tax be increased, Councilmembers expressed a desire for a strategic plan about presenting it to the community and what a 2% increase means per dollar in an assessed valuation.

 

The Alliance for the Second Century is comprised of five public agencies, four of whom tax property.  If the community’s assessed valuations are going down and the partners are looking at increases to stay flat, each jurisdiction will increase their rate to generate the same amount or more taxes based on using up the 2% primary tax increase.  All of the jurisdictions will be looking at it.  In January, the County Assessor’s office will give the assessed valuation projuects and each jurisdiction’s property tax. 

 

Another revenue source within local control is the secondary property tax that is used for general obligation bonds.  That tax could be reduced in conjunction with a primary tax rate increase that would keep the rate stable.  Changing sales tax rates, transportation tax rates, or the BBB tax rate

requires voter approval; but eliminating exemptions does not.  Exemptions for residential rentals and food could be eliminated.  A use tax could be created and the service industry could be taxed, as well.  Other opportunities to enhance revenues could be reevaluated within existing state statute limitations on generating interest revenues; and user fees could be increased to 100% cost recovery.

 

Every 1% hit to the 15% in state-shared revenues allocation to all cities translates to a $400,000 decrease for Flagstaff per year. If the state puts cities on a delayed payment schedule, the general fund balance stands to be reduced by $5 million.

 

Major disasters are a threat to Flagstaff in terms of railroad, fire, snow, floods and, tornadoes.  Loss of technological industries is a threat.  The state budget is imbalanced with a $2 billion shortfall; grant funds and stimulus funds are drying up.  The census impact, delayed construction, and impacts to decreasing population all will take a toll.  A .01% loss in the percentage ratio of state population comparisons with other cities is a combined $84,000 decrease in state-shared taxes.  A decrease in the census percentage would be a double whammy on both state-shared revenues and state-shared taxes.

 

Loss of Horizon Air, debt service payments on Aspen, and cost allocations as a result of general fund allocations to central service staff have had a negative effect on the budget.  Additional budgetary risks could be the Presidio, sale of land at Fourth Street and Industrial to pay off debt on the Fourth Street Overpass, the Autopark development, and the sale of Fire Station 7 to balance the funds needed to build the new fire station.  20% worth of budget decreases in the years has been a detriment to the general fund.  To restore the fund balance will be $400,000 for every 1%.  The cost of living fund is gone.  In the past, savings from vacancies have been used to offset personnel costs but people are not leaving. In FY10, $200,000 in savings was used, but the money wasn’t there for 2011.  Health insurance could go up by 10%.  The turnover rate is down to 2% and there is minimal salary savings.  Last year, benefits were lowered and the savings were put toward retaining six positions.

 

There may be possiblities for striking a deal with the State on state-shared revenues.  The state has said that, as long as they share, cities can’t collect income tax.  Cities could ask to be held flat and let the State have the surplus until they make up their $1 billion deficit.  In other words, if they don’t cut cities and towns deeper, they don’t have to share growth.  If they stop sharing, then cities no longer abide by the strictures of the deal.  The problem, however, is that authority is one thing; getting the voters to pass a new tax is another.  Nevertheless, it is a tool that affords more local control.

 

The other discussion is expanding the sales tax base.  Years ago, when sales taxes came into being, commoditiies were 60% of the household budget.  Since then, commodities have switched places with services, and services are 60% of household budgets today.  Consequently, sales tax revenues have declined.  Cities could change what is taxed, expanding the base, and/or taxing more things at lower rates.

 

Mayor Presler asked for an analysis of numbers, what they mean to Flagstaff, and more information about a use tax, local benefits, and incentives.

 

Councilmember Evans requested a list of taxable services and items.

 

Because Flagstaff collects its own sales tax, all of the 1.742% belongs to the City.  State shared revenues would still be collected by the state even if the base is expanded as an alternative to decreasing cities’ shares.  However, if the City has a 2% sales tax and the state has a 4-5% tax rate, the overall rate would still be the same.  A 1% increase in the sales tax rate would offset state-shared revenues.  A portion of the tax collected goes back to the collector business to help offset the cost of collecting the tax.

 

The items that received unanimous or majority support from the Council were:

 

 

·   

Restoration of the fund balance to its previous levels.

 

·   

More local control

 

·   

Further exploration of a use tax

 

·   

Revenue enhancements with the exception of any currently exempted items

 

·   

Planning for a complete loss of state-shared revenues and a worst case budget scenario.

 

There was no Council support for increasing user fees.

 

Before the Council was willing to discuss a deal with the legislature, information will need to be developed on what the legislature might be interested in discussing.   There was general consensus to try to keep state revenues flat.  The City Manager agreed to speak with Representative Chabin to talk about his ideas and bring them back to the Council.

 

Request was also made to find the dollar amount in revenue streams from a service tax with exemptions.

 

Other ideas that did not receive support from a majority of the Council were:

 

 

·    

Using the $600,000 airline money to attract and retain business.

 

·    

Retaining one-time money.

 

·    

Third-party, non-profit partnerships to take over recreation activities and other city operations and maintenance.

 

·    

Reducing inventory of and selling it to the private sector.

 

·    

Using one-time expenditures for public safety.

 

BOND UPDATE

 

Implementation of the two propositions that passed during the November election has begun.  Assistance can be sought from the Water Infrastructure Finance Authority that will help on the water and sewer portion of the streets project.  The plan is to get 30-50% of the streets and utilities project on next summer’s schedule.  Staff would like to engage some focus groups to find out why the other two projects failed and then determine the art of the possible.  Tickets have outpaced City Court’s ability to process them.

 

Maintenance facility issues will need to be addressed some way, as well.  Staff will look at maintenance and resource sharing with partners like ADOT and members of the Alliance for the Second Century.  Even BNSF may be a candidate.   The most immediate decision is the tipping fee at the landfill.  A recommendation to retain the existing landfill tipping fee will come forward so

that the fund can continue to be built.  It’s not a new tax and could be an easy win by reducing the overall cost to the project.  In other words, it can be applied as a funding source for the municipal facilities maintenance center so that the question could go back to the voters for a smaller bonding amount.

 

FISCAL YEAR 2012 BUDGET INSTRUCTIONS

 

Departments have been instructed to put in a flat budget for FY2010, minus one-time expenses across all funds.  They have been told that if they want to make reductions in one place and additions elsewhere, that’s fine as long as the base budget remains the same.  The rest of the direction is for divisions to come up with a 2% add based on fiscal priorities and Council priorities, as well as a 3% reduction scenario.  Divisions cannot recommend across-the-board cuts to their employees, benefits, or compensation because that discussion cannot be held except at the organizational level.  Hiring frosts and a freeze will also help balance expenditures to revenues.  Layoffs will occur in October rather than July to give employees as much time as possible; but, the final decision will be delayed until there are better revenue numbers to make good decisions.  Large, incremental chunks of reductions based on dollar amounts can be provided to the Council.

 

FISCAL POLICIES

 

The City is living beyond its means because of deferred items and there is not enough money to preserve current service levels.  A priority list has been prepared for consideration.  To even preserve current levels, inflation must be addressed.  A fire station reduction is coming; and the Fourth Street corridor project and the hiring of downtown manager may require deferral.  The fund balance needs to be restored to 15%.  Priority two is to restore the pay cut of 1.2% and reduced benefits.

 

Flagstaff wages are on average 19% below its competitors and some positions are more than 19%.  The first thought it to get those who are more than 19% to the 19% level and then move all the ranges up in increments.  The merit would then be applied to get those positions that are below the bottom line at least to the starting point.  Because salaries have been frozen, many new people coming in are making the same rate of pay as those who have been employees for three years.  If the scales are all moved up, everyone gets a raise, but it causes more compaction at the bottom of the scale.

 

The mid-point of a position’s pay scale is compared to the midpoint of a similar position in other organizations.  19% below market means other organizations’ payscales on average are higher than Flagstaff’s.  26 benchmark cities throughout Arizona, Utah, and Nevada were used in the analysis.  A number of recruitments aren’t successful because qualified candidates don’t apply.  As the market moves, Flagstaff will be left behind because of the difference in pay.  Flagstaff’s 2% turnove rate includes retirements.

 

The No. 4 priority is to restore training budgets to 25% of the 07-08 level.  Previously, travel and training was an easy cut to make.  With an evolving industry, the City is getting behind the curve by not offering training.  This restoration would establish a minimum level.

 

A reimbursement policy for uniform allowances at 50% of the FY08 level is Number 5.  A policy change is the reimbursement of employees for the expense rather than giving them an allowance. 

Next is to restore equipment to 75%. Since fire equipment is very expensive, it has become important to put away a regular savings.  Priority 7 is to restore custodial services to 75% of its former level in order to take care of buildings.

 

Priorities 8 and 9 are to restore dependent subsidy and deferred compensation, respectively, and to restore a percentage of overtime.  The next priority is to determine ways to reduce energy costs which increase almost every year.

 

If the first ten priorities can be restored and there is capability left, it would be important to look at restoring cut services and adding new services.  12 through 19 are secondary tiers to some of the same things.

 

After discussion, the majority of Council agreed that restoration of the fund balance should be the number one priority, followed by energy savings measures for operations and maintenance.  Other priorities were named by individual members of the Council but did not receive majority support.

 

COUNCIL POLICIES/PRIORITIES/GOALS

 

 

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Establishing the Priorities

 

Cuts to budgets of more than 3% will result in wiping out complete divisions and entire bodies of services.  If such severe cuts must be made, the budget committee will have to make that decision.  If anything is added to the budget, a corresponding reduction will have to be made elsewhere in the budget.  Preliminary budget instructions to the organization reflect the Council’s policies established in the recently passed resolution.

 

Council was not supportive of adding the Native American Artisan Market and local art stimulus projects to the discussion.

 

With the cuts in Parks, the organization is now in the lowest service level categories.  There are costs involved with maintaining inventory and moving up one level of is $411,000.  The City will also absorb the maintenance costs for the south downtown improvement project.  This requires new money or some sort of trade-off.  These types of things occur throughout the organization.

 

On the other hand, the majority of Council expressed their desire to attact a second airline and to maintain goals that provide a return on investment.  Any grants that can be obtained to assist in those efforts are desirable.  There was also support from members of the Council (although not a majority) to maintain current inventory.

 

 

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Priority/Cost Matrix

 

TRIGGERS

 

The budget will contain both positive triggers and negative triggers that allow for budget flexibility.  Negative triggers have been the benchmark for the last three years.  When they occur, mid-year adjustments are made.

Relating to positive triggers and using 201 as a base, the new budget strategy is that the first trigger from building would go 75% toward fund balance restoration.  75% of auto sales increase would go toward fund balance restoration.  Other cities have been doing this for a while and it is a conservative way to start.  Conversely if there is a decrease, the entire decrease would go back to the general fund for reduction.  The same is proposed for state-shared sales tax with a formula of 50% going into ongoing expenses and 50% into one-time expenses.

 

Fiscal policies come into play when looking at a 2% trigger.  If the highest priority is to move one-times to ongoing, a 2% trigger would provide the flexibility to move things over.  In a typical year, about 95%-97% of the budget is exhausted.  At 3% below the current level, the question becomes one of laying off or freezing.  When the decision comes at mid-year, that deficit must be made up in less than six months.  It is food for thought in conversations to come.

 

 WASHINGTON, D.C., LOBBYING TRIP

 

There are sufficient travel funds available for all Councilmembers who wish to travel to Washington, D.C.  The lobbyist has indicated that depending on a lame duck session, there may be a need to come earlier than late February.  The feds didn’t pass their budget by the October 1 deadline and are running on a resolution.  If they pass lump funding along for projects, Councilmembers can go to lobby them right away for projects of interest.

 

If four Councilmembers attend, two groups of three (each with the City Manager or lobbyist[s]) would be manageable.  The purpose of the trip is to meet with Flagstaff’s federal legislative delegation.  Meetings are also scheduled with the Army Corps, transportation related agencies, the Federal Aviation Administration for airport capital improvement, the Forest Service, Bureau of Reclamation, Department of Commerce, and Department of Energy.  Councilmembers will be briefed with talking points ahead of time and the lobbyist will schedule the appointments.  Councilmembers are selected to champion issues.  Councilmembers may choose to break out into teams or simply go to the appointments as one team of six.  The City Manager will work with the federal lobbyist to see how the meetings will unfold.

 

Vice-Mayor Barotz asked to first see how the teams will be split up before deciding to travel to Washington.

 

ADJOURNMENT

 

The meeting adjourned at 3:25 p.m.