HomeMy WebLinkAbout06-27-2016 workshop minutes City Council of Peachtree City
Workshop Minutes
June 27, 2016
6:30 p.m.
The Mayor and Council of Peachtree City met in workshop session on Monday, June 27, 2016,
6:30 p.m., at City Hall. Attending: Mayor Vanessa Fleisch, Council Members Terry Ernst, Mike
King, Kim Learnard, and Phil Prebor.
The purpose of the workshop was to discuss the FY 2017 budget.
Prebor noted he would have to leave at 8:15 p.m.
City Manager Jon Rorie said the workshop would focus on the draft of the FY 2017 budget,
discussing what was in the budget and getting recommendations for potential expense
reductions. The draft budget currently showed a $163,000 use of Cash Reserves that Rorie
hoped to eliminate. Rorie said the Retreat workshop meetings had helped to build to the
presentation of the budget.
Financial Services Director Paul Salvatore noted the City's budget policy, which addressed the
concept of a baseline budget:
Budget Policy
The City's primary objective is to provide a standard of budgetary performance that
both staff and Council have endorsed and to provide budgetary decision making with
greater continuity, reinforcing the City's core financial values and preserving them for
successive staff and council.
• Baseline and Service Level Funding
The City's top program priority is to maintain existing service levels in all divisions and
departments. A baseline should be set and serve as an agreed upon point of departure
for subsequent budget discussions ie: a new facility or service. Any additional services
above the baseline shall be fully funded at the time of the adoption of the annual
budget and ongoing funding sources shall be clearly identified. Such ongoing funding
sources must be either new or increased revenues or clearly identified expense
reductions.
Salvatore explained that they might have to go above or below the baseline level, depending
on the situation. A new ongoing revenue source could mean the baseline should change, or in
the case of a recession, the baseline level would need to be lowered during the economic
downturn. A one-time revenue source should not increase a baseline expenditure. An ongoing
revenue source had to be identified.
Salvatore continued that the FY 2017 proposed budget was for $33,689,044. There would be a
zero millage rate increase, and $163,292 was projected for use from Cash Reserves. The current
budget (FY 2016) was $32,750,209 and expenses would be $33,519,598, with a Cash Reserve use
of $769,807. The FY 2017 proposed budget was for $33,525,752, with expenses projected at
$33,689,044. The variance in revenues for FY 2016 and FY 2017 was $775,543. The variance for
expenses in FY 2016 and projected expenses in FY 2017 was $169,237.
City Council Workshop Minutes
June 27, 2016
Page 2
The majority of the FY 2017 General Fund revenue would come from ad valorem taxes (38.9%,
$13,100,021). Local Option Sales Tax (LOST) revenue would account for 20.4% of revenue
($6,877,335). Other Taxes comprised 14.8% of revenues ($4,995,019), and Other Revenues were
11% ($3,719,042). Licenses & Permits provided 3.3% ($1,115,638), Fines & Forfeitures were 3.2%
($1,073,706), and Fund Balance was 0.5% of revenues.
Salvatore noted that the value of the City's Tax Digest was increasing after the drop that started
in 2009. It had remained flat in 2012 and 2013, and property values were now increasing,just not
as much as anticipated. The 2016 Tax Digest was just under $2,000,000,000. He continued that
the digest had decreased 10.1% between 2010 and 2012 (approximately$1,875,000,000 in 2009),
and there had been a 16.72% increase from 2013 to 2016. The largest increase was in 2014 at
9.79%. The increase for 2016 was 4.5%. The revenues from the Ad Valorem Tax were expected
to be just over$13 million in 2016.
LOST revenue for 2016 was estimated between $6.5 million and $7 million. Revenue from LOST
had dropped from over $7 million in FY 2007 to less than $6 million in FY 2009. The LOST
distribution had also been renegotiated during that time, which had contributed to the dip on
LOST revenue. Revenues from other taxes had increased from just under $3 million in FY 2011 to
an estimated $5 million in FY 2016.
Rorie clarified that there had been a double hit on the budget during those years, with the
decrease in the Tax Digest and the erratic nature of the LOST. The Council at that time had
been forced to make decisions on service level impacts, which had led to deferred
maintenance and capital expenditures. The two biggest sources of revenue had taken a hit,
and tough decisions had been made. The City was moving forward.
Fleisch noted that 2005 to 2007 had been the height of the real estate bubble. She asked where
the City was as far as recovery on the Tax Digest. Salvatore said the high had been just below
the $1.9 billion mark, and it had recovered.
Salvatore said he had revised the previous estimates for revenue for FY 2017, which had
included an increase of 2.5% in ad valorem taxes and a 0.25 mill increase that had been
recommended for property taxes for 2016, noting that the estimate had been $13,258,629. The
preliminary numbers for the FY 2017 digest had an increase of 4.5%, and they had looked at
eliminating the 0.25 mill increase, The revised estimate was$13.1 million, which was a change of
$158,608 (-1.2%). The proposed increase was eliminated, with approximately $160,000 to be
taken from Cash Reserves. The revised estimates for the other revenue sources included:
FY 2017 FY 2017
Previous Current(Revised)
Estimates Estimates Change %Change
Franchise Taxes $2,731,918 $2,644,991 -$86,927 -3.2%
Local Option Sales Tax $6,742,465 $6,877,335 $134,870 2.0%
TAVT $1,311,608 $1,253,700 -$57,908 -4.4%
Other Taxes $3,616,965 $3,741,319 $124,354 3.4%
Licenses&Permits $1,126,513 $1,115,638 -$10,875 -1.0%
Ambulance Fees $934,707 $879,169 -$55,538 -5.9%
Other Charges for Servic $1,337,407 $1,206,346 -$131,061 -9.8%
Court Fines $997,530 $802,753 -$194,777 -19.5%
Other Fines&Forfeiturc $173,764 $270,953 $97,189 55.9%
Hotel/Motel Tax $804,346 $932,557 $128,211 15.9%
Other $745,495 $700,970 -$44,525 -6.0%
Totals: $20,522,718 $20,425,731 -$96,987 -0.5%
Property Taxes: $13,258,629 $13,100,021 -$158,608 -1.2%
Note: Previous estimate for Property Taxes reflects a 0.25 mill increase,eliminated from Current
Total Revenues: $33,781,347 $33,525,752 -$255,595 -0.8%
City Council Workshop Minutes
June 27,2016
Page 3
Salvatore specifically addressed the title ad valorem tax (TAVT), saying this was a new tax that
would eventually replace the motor vehicle ad valorem tax. New car owners paid the one-time
title ad valorem tax upfront as opposed to an ongoing property tax that was paid each year.
Salvatore said that estimating the revenues had been difficult, and TAVT behaved erratically
similar to a sales tax. Car sales impacted the number. In the next four or five years, the property
tax part would go away, and only the TAVT would remain. Rorie agreed TAVT was a moving
target.
Ernst asked for clarification on what Other Charges for Services were. Salvatore said they
included revenue received for plan review, program fees for Recreation and Kedron Fieldhouse,
ambulance fees, intergovernmental grants, tower leases, and more. They were broken out in
groupings under the "Sources of Funds" tab in the budget document.
Salvatore then looked at the Expense forecast, pointing out that General Fund increases
averaged 19% for revenues and 18% for expenses over the last five years. Revenues had been
keeping pace with the expenses. Use of Cash Reserves had helped to close the gap and
balance the budget. The FY 2017 General Fund expenditures included 20.1% ($6,778,159) for
Police, 20.7% for Fire ($6,956,017), 18.3% for Public Works ($6,180,080), 6.2% on Buildings &
Grounds ($2,085,991), 7.4% for Recreation & Special Events ($2,488,884), 3.1% for the Library
($1,035,085), 4.2% for Administrative Services ($1,411,731), 4.4% for Financial Services/IT
($1,480,801), 8.8% on Debt Service ($2,965,946), 2.5% on Non-Divisional & Transfers ($842,656),
1.1% for Planning & Zoning ($379,386), 1.5% for Building Inspection ($490,270), and 1.8% for
Executive Services ($594,038). The total expenditures was $33,689,044.
For the average homeowner in the City (a property valued at $269,000), the taxes would be
$726.95. The breakdown of each tax dollar was 200 for Police, 210 for Fire, 180 for Public Works,
60 for Buildings & Grounds, 70 on Recreation & Special Events, 30 for the Library, 40 on
Administrative Services, 40 on Financial Services/IT, 90 on Debt Service, 30 on Non-Divisional &
Transfers, 10 on Planning & Zoning, 10 on Building Inspection, and 20 on Executive Services.
The City had been holding the line pretty well on its biggest expense - employees (60% of
budget), Salvatore said. Over the last five years, salaries had increased 5%, health insurance had
increased only 22%, the Defined Benefit Pension had decreased 8%, and other costs had
increased 9%. Total personnel costs had increased 7%. The cost of salaries had decreased
$263,954 (2%) from FY 2016 to FY 2017. Salvatore noted that several higher paid employees had
left during the year, and they had been replaced with new employees. Over a five-year period,
there had been a $541,046 (5%) in salaries. The following graph showed the trend:
FY16/FY 17 Change % 5-Year Change
Salaries(All) (263,954) -2% 541,046 5%
Health Insurance 275,023 9% 616,463 22%
DBPension (96,566) -6% (133,594) -8%
Total Personnel Costs (4,141) 0% 1,238,241 7%
FT Head-count -2 -1% 16 7%
PT Head-count 6 8% 4 5%
Rorie noted it was easy to take one snapshot at a time and focus on a single issue when revenue
forecasting. Personnel was the City's largest expense, and they needed to keep tight control
when expanding services for personnel, and they had to look at how all the pieces fit.
The lowest paid position in the City was approximately $47,000 (including benefits). Holding the
line was important. He added that staff had done things to really try to control the cost of
healthcare, and 22%over five years was good.
City Council Workshop Minutes
June 27,2016
Page 4
King said the increase over five years was $541,046 or 5% represented a 1% increase per year.
The pay raise a few years ago had been well worth the effort, and the expenses were still kept at
a 1%increase per year.
Prebor asked about the 22% in health insurance. Rorie noted the City was self-insured and
attributed the increase to the Affordable Care Act (ACA) and other factors. He continued there
was an increase of $275,023 in insurance costs from FY 2016 to FY 2017, asking Human Resources
& Risk Management Director Ellece Brown to explain the increase. Brown reiterated that the City
had a self-funded insurance plan, and the City paid every dollar of every claim. There was a
stop-loss of $90,000, and insurance kicked in at that point. With a fully-insured plan, everything
was insured. Last year and this year, there had been several large claims (claims that were half
the stop-loss or over $45,000) and six claims in excess of $100,000. Fifteen members had those
claims (the City covered 689 people, including family members). Those claims represented 400
versus the remainder of the claims. Brown reported that, generally, there were three high claims
per year. If the City were fully insured, the increases in health insurance would have been 10 -
15% annually, rather than 22% over five years. Self-insured plans generally had a 7% increase
annually. She continued that it would take about two years for the large claims to roll off and for
expenses to get back to normal. Brown continued that changes had been made on co-pays
and in-network out-of-pocket, and employees had contributed approximately$100,000 more for
health costs in the past year.
Salvatore said there had been a lot of discussion regarding defined benefit plans and defined
contribution plans and limiting the liability of the City. Staff had been discussing pension options
with the City's actuary and were considering a hybrid defined benefits/defined compensation
pension plan, which would be cost effective, Salvatore said. Mandatory employee
contributions were being considered as well as possible benefit variations. A meeting would be
scheduled either July 18 [sic] or August 2 to discuss the possibilities with Council, Salvatore said.
Salvatore added that the City had some good options to consider. Any changes had to be
implemented on a calendar year.
Rorie said the discussion was complex, and a workshop would be scheduled. He continued that
roughly 41% of the employees had been with the City less than five years, and 60%o had been
with the City less than 10 years. Sixty-four percent of employees contributed 2% or more of their
earnings to the Defined Contribution Plan. It might be a good time to look at a different plan
and the impact on current employees because of the vesting schedule at five years.
Salvatore discussed the use of Cash Reserves, noting City had a minimum requirement of 25%.
The Cash Reserves had been built up when the SPLOST funds had gone away so the City could
dip into them. The Cash Reserves would hold at 34%this year without a millage rate increase.
Highlights of the proposed FY 2017 budget included:
• General Fund expense increase of 0.5%from original FY 16 Budget
• No employee raises or other benefit enhancements
• No millage rate increase, but 4.5%digest growth (0.25 mill increase programed for FY 17
eliminated)
• Increased appropriations for insurances (health, worker's compensation and general
liability)
• Decreased cost of Defined Benefit Pension funding (-$100,000)
• Use of General Fund Cash Reserves of$163,292
• Included new General Fund funding for:
a Citizen Engagement Specialist $86,409
City Council Workshop Minutes
June 27, 2016
Page 5
o FCDA increase ($75K to $146K) $71,047
o PT Court Clerk position $20,332
o Portable Restroom (events) $35,000 (one-time outlay)
• Included prior General Fund funding for vacant:
o Public Works Director $88,932
o Assistant Police Chief $108,512
• Storm Water Fund included new:
• Heavy Truck Driver $62,085
• Maintenance Technician I $56,443
• Hotel/Motel Tax included:
o '/2/0 additional funding for Tourism Product Development from Convention &
Visitors Bureau (CVB)4%
o New revenue will replace CVB funding of:
• Amphitheater sponsorship $55,000
• Sports tournaments funding $45,000
• Christmas Lights $15,000
Brown said the cost of insurance (health, Worker's Compensation and general liability) for the
City was $4.6 million annually. There was an increase in property liability insurance this year of
approximately $50,000. There was also a $91,000 increase in Worker's Compensation, and
health insurance had already been discussed.
Ernst asked if the cost of insurance would go up for employees. Brown said it would not, adding
staff was only looking at changes to the Defined Benefits Plan. Insurance coverages would
remain the same.
Salvatore noted one of the auditor's recommendations had been to change the amount of the
Hotel/Motel Tax the City received so the City would keep the money and fund the
events/projects. The City Attorney was working on the amendments needed regarding how the
Hotel/Motel Tax was divided between the City and the Convention & Visitors Bureau (CVB).
Rorie discussed the proposed changes to the City's organizational chart, which focused on
Administrative Services, Public Works, Buildings & Grounds, and Planning & Zoning. The budget
would be impacted some, but the proposed changes would streamline the structure and place
accountability with who was managing the program. He continued that Public
Services/Community Services had previously become a super department and had included
Public Works, Engineering, Buildings & Grounds, Library, Community Services, Amphitheater, and
Recreation &Special Events.
Beginning October 1, Code Enforcement would move to Planning & Development from the
Police Department. Rorie said this provide unity of command in terms of the zoning issues Code
Enforcement dealt with. The Library would move under Administrative Services, and the move
had been discussed with Library Administrator Jill Prouty.
The Amphitheater would move to Recreation & Special Events. Rorie said Nancy Price,
amphitheater manager, was scheduled to retire in two years, so a succession plan should be in
place. Currently, the amphitheater operated with Price as the only full-time employee. Whether
the management was contracted out or stayed in-house, it was in the City's best interest to
have a succession plan moving forward.
City Council Workshop Minutes
June 27,2016
Page 6
Due to the downturn in the economy several years ago, the employees that took care of the
416 acres of parks in the City had been moved from Recreation to Public Works. The majority of
the functions of the Grounds division were parks and field maintenance. Those employees
would be best handled under Recreation so there would be unity of command.
The funding for the Public Services Director impacted the General Fund and the Stormwater
Utility ($88,000 was in the General Fund for filling the Public Services Director position on an
interim basis, and Scott Hicks had been doing that). The funding for the position had been
eliminated.
Rorie said there would be eight divisions with 25 departments, and the reorganization would
improve the effectiveness and provide unity of command so the resources were supervised and
managed and led in the appropriate department.
Rorie said he was recommending $210,341 in revisions and redactions to the draft budget,
including:
• Includes new General Fund funding for:
- Citizen Engagement Specialist $86,409
- FCDA increase ($75K to $146K) $71,047
- PT Court Clerk position $20,332
- Portable Restroom (events) $35,000
• Includes prior G/F funding for vacant:
- Public Works Director $88,932
- Assistant Police Chief $108,512
Rorie proposed the recommended Citizen Engagement Specialist position that was discussed
during the Retreat sessions not be filled at this time. He was not sure that was a good title. He
said it was not a bad idea, but the money would have to come from Cash Reserves, and those
funds should not be used to increase headcount. It would be an ongoing cost without an
identified funding source.
Rorie also recommended removing the Portable Restroom for events from the General Fund. It
had been in the Public Improvement Program (PIP), but it should not be a financed item. He
said the restrooms could be funded through the Tourism Product Development (TPD) funds that
the City received as its portion of the Hotel/Motel Tax. All of those funds were going back into
the maintenance and update of the recreation facilities, and they would get to a point where
the item could be funded by TPD funds instead of a cash payment from the General Fund,
which was more appropriate than using SPLOST funds.
A total of$210,341 had been stricken from the budget, which zeroed out the$163,000 from Cash
reserves. Council direction was needed on the $71,047 increase in the funding for the Fayette
County Development Authority (FCDA). It was a policy decision that Council should discuss and
debate. It was in the budget as a placeholder.
Learnard said there was no question that the FCDA should be funded. She hoped the cities in
the County would fund $246,000 on top of the $225,000 the County had budgeted.
King said he agreed with Learnard. The County had ignored and reduced the FCDA funding. It
was a county development authority, and the County would get as much as the cities or more.
It should be funded totally by the County, and King could not explain why the County had not
adequately funded it. It had to be done.
City Council Workshop Minutes
June 27, 2016
Page 7
Prebor said the FCDA was a County department, and the County would get most of the
benefits, and most county development authorities were funded at the county level. Peachtree
City citizens already paid $75,000 for a position, as well as County taxes. He would agree to stay
at $75,000 for the business retention specialist with some parameters of expectations. The City
already paid a portion of the tax money the County used for funding.
King said he did not disagree, but the City would not be taking that big of a risk. For every dollar
put into the development authority, citizens received back $182. Prebor disagreed, saying the
County should fund the whole thing and give taxpayers their money back.
Salvatore said the funding for the FCDA was not a typical return on investment equation. It
would bring jobs, but those workers might not live or shop in the City. It could cost the City
money. King said the City had paid salary grants that the County and other cities in the County
did not do, but benefitted from. The Board of Commissioners should be educated on what the
FCDA could do for them.
Ernst said he was completely embarrassed by how the Board of Commissioners had thrown the
FCDA to the curb. One member refused to discuss the FCDA. If the County did not support
what the FCDA did, the people who worked there would still find a way to do what they were
doing. There had to be a way to bring everyone together. King noted that one year ago, the
FCDA had gotten the old Photocircuits building redone and gotten an employer in the building.
The County had no clue what was going on.
Fleisch said she had not made up her mind. The City was the FCDA's number one area, and the
majority of businesses in the County were located in Peachtree City. She was disappointed the
County had continued their bad feelings about the FCDA. She would not commit to the
recommended level of funding for three years, but she would commit to one year with the hope
the Commissioners would change their minds. King added that, as late as the week prior to the
meeting, he had specifically asked the Commissioners a question, and he had only heard from
the County Administrator.
Prebor said he would consider supporting it for a year, then looking at to see what had been
gained and what had changed with the Board of Commissioners. Council consensus was to
take this approach.
Rorie discussed street resurfacing, saying that the FY 2017 budget draft had included the same
funding as the FY 2016 budget ($1.8 million). The funding provided approximately 3.9 miles of
road maintenance at $462,000 per mile. Rorie said additional millage, Cash Reserves, or a
SPLOST could fund more maintenance/repaving of the roads. Additional millage would provide
the following:
• 0.25 mills $482,000 1 additional mile
• 0.5 mills $965,000 2.1 additional miles
• 0.75 mills $1.45 million 3.1 additional miles
• 1.0 mills $1.9million 4.2 additional miles
Rorie recommended holding the line at $1.8 million, as budgeted. The projects would be bid in
December 2016/January 2017, and by then, FY 2016 would be finished, so staff would know by
then how much money could be used from Cash Reserves. A decision could be made based
on information, not assumptions. Council consensus was to follow the City Manager's
recommendation.
City Council Workshop Minutes
June 27,2016
Page 8
Rorie looked at the 2017 PIP, reiterating that the mobile restrooms would come off the list and be
put in the TDP. Salvatore said the PIP (Capital Improvement Plan) included equipment-lease
financing for five to seven years. Citywide bridge maintenance was also a cash item and
should cost approximately $200,000. Cash payments were also used for equipment
replacements. There was nothing really new on the list.
Salvatore reviewed the five-year model, noting that FY 2017 showed an increase in the Cash
Reserves. The maintenance and operation (M&O) millage rate was 6.756 mills, and the bond
millage rate was 0.306 mills, for a total millage rate of 7.062 mills. Salvatore noted that the bond
debt would be paid off in 2019 and in 2020, and the General Obligation millage rate would be
zero.
Salvatore said the projection was that $1.1 million in Cash Reserves would be used for FY 2016,
but there would still be a 34% fund balance. They expected it to remain at 34% in FY 2017. He
noted that each year, the budget projections increased, and although the Cash Reserves
should have more funds, the percentage would get smaller. The projections were 33% in FY 2018
and 2019 and 32%in FY 2020 and FY 2021.
Learnard said everything that had been done for the last several years had come to pass. This
was the best budget she had ever seen, and she asked if they could look at the debt list the
next time they met. Rorie said there would be a reduction in expenses of more than $400,000 in
the near future as the bond debts were retired. Salvatore said several bonds would be paid off
in the next few years. As the General Obligation bonds were paid off in the next few years, the
millage rate associated with them would be gone as well.
Learnard noted the tax digest had gone up, asking if that was considered a tax increase. Rorie
said it was, and three public hearings on the millage rate would be scheduled.
Rorie looked at the remaining scheduled workshops on the budget, recommending cancelling
the June 28 (if needed) meeting. The July 12 workshop would not be needed. Rorie said a
workshop would be scheduled on July 19 to discuss the employee pension plan and possibly
impact fees. The public hearing on the budget would be July 21.
Salvatore added that one public hearing on the budget was required, and it was scheduled on
July 21. Three hearings were required for the millage rate, which was a separate process. The
budget and the millage rate could be adopted at the same meeting and were usually
scheduled in August. He would have to wait for the final Tax Digest.
Rorie continued that the departmental operating budgets were up 0.5%. Staff had done an
exceptional job of keeping the budget flat. Salvatore said the model assumed a 2% increase
each year. He had never seen such an austere and responsible budget come in during his 16
years with the City. Rorie gave kudos to staff and Salvatore.
There being no further business to discuss, the meeting adjourned at 8:00 p.m.
yr
Pamela Dufresne, De y City Clerk anessa Fleisch, Mayor