DRAFT (contact Town Clerk for official minutes; 919-469-4011; sue.rowland@townofcary.org)

Work Session Minutes of the Town of Cary, NC
April 25, 2006
4:30 p.m.
Subject: FY 2007 Proposed Budget
Conference Room 11130
316 N. Academy St., Cary

Present: Mayor Ernie McAlister, Mayor Pro Tem Jack Smith, Council Members Marla Dorrel, Mike Joyce and Nels Roseland; Council Members Jennifer Robinson and Julie Robison arrived late, and their arrival times are noted in the minutes

Mayor McAlister started the meeting at 4:41 p.m.

The proposed budget is attached to and incorporated in these minutes as Exhibit A.

Town Manager Coleman gave an overview of the budget and stated there’s no proposed tax increase, there’s no solid waste fee increase, and there’s a 6.3% recommended increase for utility rates (generated from the utility system requirements and calculated by the rate model).

Mrs. Robison arrived at 4:47 p.m.

Mayor Pro Tem Smith asked for an update on complaints he’s heard about C-Tran not meeting its pick-up time goals. Mr. Boylston of planning responded that recent system changes, new technology, and a cap on the number of trips has dramatically reduced the number of complaints

Mrs. Robinson arrived at 4:55 p.m.

Mrs. Robison asked about some of the requested positions that weren’t recommended. She asked if the Technology Services database programmer objective can be achieved through an outsourced service. Budget Director Scott Fogleman stated staff plans to migrate another position in this department towards this internal support function. Staff will provide an evaluation next year to see if we’re gaining efficiencies across the board. Technology Services Director Bill Stice stated he plans to free up about ½ of a position from existing staff to put towards this effort.

Mrs. Robison asked about the police crime analyst position and the proposed transfer of a records tech position to support the crime analyst function. Police Chief Scott Cunningham stated they’ve already dedicated a position part-time to the crime analyst function. Additional software is coming on line to relieve some existing workload in the records area. They intend to convert the records person to the crime analyst task.

Mrs. Robison asked about median maintenance and questioned how we meet service levels without this position. She also questioned the transfer of staff from the public works solid waste division (reduction in force staff). She stated our medians set us apart. Public Works Director Mike Bajorek stated the requested position was to upgrade the Harrison Avenue median to make it more like Cary Parkway. He stated the Town is not changing the level of service without the position, but we won’t upgrade it to the Cary Parkway level. He stated when the new trucks come in next fiscal year the staff will do an analysis regarding possible position transfers and will make a recommendation to council.

Ms. Dorrel questioned staffing needs to handle the anticipated acquisition of open space in the coming year. Mr. Coleman stated staff recommends an additional parks planner and much time of this person’s time will be allocated to this effort.

Mr. Roseland question whether real estate staff can handle the additional open space acquisition efforts. He’s concerned about their priorities and workload. Mr. Coleman thinks the current staffing can handle the land acquisition. Staff intends to work through the process to identify open space priority parcels and move forward to acquire the land if council approves the $10 million. He stated the Town will contract to get it done if it can’t be done with existing staff.

Mr. Joyce commended Inspections and Permits Director Bob Strowbridge for his approach to use inspection positions instead of the normal single trade inspector position approach.

Ms. Dorrel asked about the rollover of affordable housing funds. Mr. Fogleman stated if the targeted affordable housing money is not spent at the end of the year, then it’s rolled over to the next year. Ms. Dorrel asked why it won’t be used in this current fiscal year. Mr. Fogleman stated this is the Town’s portion of the funding that is currently in progress but not yet used. Mr. Philip Smith of the planning department stated a good portion of the funding was set aside to subsidize the parking garage project at the Harrison and Chatham intersection. He stated there is CDBG funding for this project as well. He stated the active program for affordable housing is the housing rehab program, which is funded at about $100,000. He stated work is being done to expend these funds, but to-date they’ve not been expended. He stated that $130,000 of the $1 million is for Habitat to acquire a triplex on Waldo Street.

Ms. Dorrel doesn’t understand how a parking deck relates to affordable housing. Mr. Fogleman stated it was unspent funding targeted and set aside until logistics could be worked out with the potential downtown project. He stated there’s no direct tie to this funding supporting affordable housing.

Mr. Roseland stated it may be helpful to sort out supply and demand of the affordable housing funds. He suggested a status report that shows the funding flow. Mrs. Robison concurred. She doesn’t recall a discussion about the parking deck being funded with affordable housing money. Mr. Coleman stated when staff reviewed potential funding sources for the parking deck project staff provided council with a document that outlined the funding sources. He stated staff will resurrect that document and provide it to council.

Mayor Pro Tem Smith stated there’s confusion about the affordable housing strategy. He’s making a presentation next week to the Triangle leadership group about affordable housing, and he could use an executive summary. He stated this might help the council as well. The council concurred.

Mr. Joyce stated he seems to recall that the parking deck will enable higher density.

Ms. Dorrel wants to know our commitment to affordable housing in the coming year and how we’re meeting the funding needs. She stated there are threats on CDBG funding at the federal level, and she questioned if the Town needs to step up. Mayor Pro Tem Smith stated this should include refurbishing existing stock in addition to new stock in order to maintain the Town.

Mr. Roseland sees blight reduction as separate from new affordable housing. He agreed with a status report.

Mr. Coleman stated staff will provide an affordable housing status report as part of a future budget work session.

Ms. Dorrel asked about the amphitheatre numbers; she stated it appears that the expenses are being added back. She stated it seems that we’re understating these numbers. Mr. Fogleman stated the timing of the SMG season is difficult for Cary’s budget projections. He stated the budget doesn’t including funding for October 1 forward for amphitheatre operations. Ms. Dorrel stated this could be $½ million. Mr. Fogleman concurred and stated staff did this to make it a cleaner process, recognizing the need for a mid-year appropriation to match the SMG fiscal year.

Mr. Coleman stated the pay for performance plan is funded about 4.5%, which is about $2.5 million. There are no health or dental increases. Mr. Fogleman stated staff estimates early during the budget building process about health and dental increases and then monitors it during the budget process.

Ms. Dorrel stated last year the council put pressure on employee raises. She asked how the FY 2007 budget amount compares to FY 2006. She doesn’t think the council intended it to be a continuous situation every year. Mr. Coleman stated last year’s original budget was 4.8% and it was reduced to 4.0%. He stated FY 2007 is 4.5%. He stated the Town doesn’t have cost of living raises, but the Town does adjust the pay plan, but this does not mean the Town gives automatic pay raises. He stated as a result of the reduction last year the staff went through an extensive pay for performance training to tighten up the process.

Mr. Joyce stated he understands that raises for some staff were offset by health insurance increases last year. Mr. Dale Johnson of the human resources staff stated employees had a choice of three levels of health insurance, so this would depend based on which level they chose.

Mrs. Robison wants follow up information on the FY 2007 pay for performance figure that is planned. She wants to know the same amount for FY 2006. Mr. Fogleman stated $2,071,564 is the salary increase in the general fund related to the pay plan.  

Mr. Roseland stated the Triangle market surveys don’t show a material difference in the Town’s wages vs. market averages.

Mrs. Robison still wants to compare the FY 2007 proposal to the FY 2006 number. She doesn’t want the Town to be average; instead she wants the Town to be competitive.

Ms. Dorrel stated she doesn’t like Page 13 described as fund balance “breakdown”. She would rather it be described as “analysis”.

Mr. Coleman stated the utility fund operating budget is estimated to increase by about 12.9% with a 6.3% increase in utility rates for an average 7,000 gallon residential customer. He stated the major cost increases are debt service, general fund reimbursement, a full year of operating cost for the biosolids dryer and increased cost for the water treatment plan primarily due to the volumes produced. He stated no additional personnel is proposed in this area.

Mr. Joyce asked how to keep this more flat. Mr. Coleman stated the majority of the rate increase is produced by the acquisition of debt to expand/construct utility infrastructure. Mr. Joyce is not comfortable with assuming that there will be a cost increase each year. Finance Director Karen Mills stated rates are based on a budget to include operating increases and debt service based on the capital plan. Mr. Coleman stated with the model staff can look at what it takes to reduce expenses to get to a zero rate increase, and then look at capital and operating cost to see if the budget can be reduced to match that number.

Mr. Joyce would like options and more details about utility rates.

Mayor Pro Tem Smith stated the only utility fee increase seems to be to the base fee. Mrs. Mills stated there’s no increase in water rates for Cary customers this year. She stated the base charges have gone up based on customer service improvements in utility billing, and this resulted in a base increase. She stated staff moved the credit card bank charges to the utility fund since it’s a cost of doing business, which is about $200,000 or 2-3% on transactions.

Mrs. Robison asked about customer consumption. Mrs. Mils stated the FY 2006 consumption is up from FY 2005. She stated irrigation sales have significantly exceeded recent history. She thinks this is directly related to weather and it’s not prudent to count on maintaining this per capita consumption. Mrs. Robison wants more information on the numbers that Mrs. Mills is using.

Mayor McAlister stated the capital budget deserves its own work session. He suggested to take a broad view of the budget today with another work session dedicated to capital issues. Mr. Coleman stated major decisions this year and future years are related to priorities in the capital budget for roads and parks. He stated staff needs a little more time to project scenarios as discussed at retreat.

Mr. Joyce pointed out that all the parks projects in the budget document (Exhibit A) are ranked as a high priority. He asked who determines this. Parks, Recreation and Cultural Resources Director Mary Henderson noted that the prioritization method was discussed at the council/staff retreat in detail.

Mayor Pro Tem Smith had a question about the Lochmere greenway. Mrs. Henderson will provide more information at the next budget work session.

Mr. Coleman stated staff recommends $10 million for open space because land is rapidly being developed and the cost of land is increasing. The Town will receive approximately $17 million from the State (Highway 55 loan repayment), which is the major funding in the transportation budget this year.

Mr. Coleman noted that the capital budget work session will give a more aggressive scenario with estimates of impacts at certain levels, and funding and priorities will be considered. He stated the council may want to discuss Cary Elementary, the aquatics center and the performing arts center.

Mrs. Robison asked when the council last took a close look at the 10-year capital improvement plan. She’d like a bigger picture review. Mr. Coleman stated staff and council can address this in a capital work session by looking at the out years at all requirements and determine the need for reprioritization.

Mr. Coleman stated one issue is at what rate the Town should develop the long term parks, recreation and cultural resources master plan. If we implement the plan over the recommended time period we’d spend close to $20 million per year without any special projects. Council may discuss this in a future capital work session.

Mayor Pro Tem Smith stated the council must agree on projects and he gave the aquatics center as an example in that some seem to be interested in a $20 million venue while others aren’t. He stated there also seems to be a difference of opinion with regard to the performing arts center.  

Mrs. Robinson left the meeting at 6:09 p.m.

Mayor McAlister asked if the more aggressive projections that staff plans to bring to council in a future work session will lay out the expenditures. If the council made a decision to undertake one of the major projects, then the numbers provided by staff would show the impacts on tax rate and future budget years. Mr. Coleman stated staff can do this as long as there’s a number identified for the cost.

Mrs. Robison stated staff seeks direction on whether council wants this exercise. Mayor McAlister suggested to understand the money that’s available to spend and future impacts and then decide what the money goes to instead of saying what we’re going to build and then later worry about the impacts. He wants to look at projections first and understand impacts.

Mr. Roseland wants to look at options and a phasing plan.

Ms. Dorrel stated aquatics and cultural arts are discussed as being outside the parks, recreation and cultural resources master plan, but she doesn’t think they are outside the plan, although funding is not identified in the plan. She wants to look at all pieces as a total program.

Mr. Joyce asked about the U.S. 1 pedestrian bridge overrun. Mrs. Henderson stated the overrun is based on costs going up on the final design and extra plantings for neighbors and the general construction of the trail. Mr. Joyce stated when council made the public art decision there was a remaining amount to cover it. He stated those numbers did not materialize, so and council should reduce that decision by $30,000. (pg. 65 of Exhibit A).

With regard to open space acquisition, Mr. Joyce doesn’t disagree with buying parkland. He stated if the council plans to use the $10 million for open space acquisition, then he believes the $1 million should be left in the utility fund. Ms. Dorrel stated the $1 million covers debt service. Mrs. Robison questioned whether council actually made this decision. She recalls that council decided last year to leave the revenue stream intact. Mr. Coleman stated this issue was discussed last year, and the budget this year is based on us selling the debt and funding the debt with the $1 million from the utility fund. He stated council may not agree with this proposal. Mr. Fogleman stated this approach was first referenced with the bond referendum literature that indicated the debt service on the $10 million would either be paid from the existing $1 million appropriation already in the utility rates at the time or by a one cent tax increase out of the general fund. Mrs. Robison wants to know if council ever directed staff to do this. Mr. Coleman stated it was discussed, but since the debt wasn’t sold he doesn’t recall this decision being made last year. He stated staff will go back and check the minutes. Mayor McAlister asked where the information for the original public information campaign came from. He remembers a clear feeling that the council wouldn’t continue to have the $1 million feeding into open space and borrow another $10 million. He recalls that the council would do one or the other. He stated it goes back to the initial discussions about the bond referendum. Mrs. Robison again questioned a council decision on this issue.

Mr. Fogleman referenced Page 44 of Exhibit A. He stated technically the $1 million in cash is being generated the year before due to bond covenants, and this is the last available money that can be used because we’re using pay as you go funding. He expects the $1 million for FY 2007 to be generated in FY 2006. He stated if council decides not to do the debt at all, then there would still be $1 million for pay as you go funding. He stated this scenario (Page 44) puts the extra $10 million in debt authority into FY 2007. As shown, there would also be $1 million generated from rates in FY 2007 to help fund $750,000 in FY 2008. He stated it’s reduced by $250,000 because based on the timing of the debt sell, the Town will incur $250,000 in debt service. He stated in FY 2009, the debt service is $1 million, which is roughly 10%, and as we pay down the principle, the pay as you go funding begins to reappear in the out years. He stated this is the proposal, and the $1 million would be dedicated for debt service once the debt service comes on line. Mr. Roseland stated this scenario assumes the Town buys $10 million in property. He stated a counter proposal is that if we only fund $3 million and spent it over two or three years, then the following year the debt service should be shaved. He doesn’t want the open space to get lost in the other road acquisition and real estate transactions, and he again questioned the real estate staff being in charge of open space acquisition. He stated if we acquire the land, then he thinks it’s reasonable to shave the out year utility amounts, but he doesn’t want to do budget accounting to make people feel good but not actually get the land. Mr. Coleman stated we’ll get the land, and Mrs. Henderson has already identified about $25 million worth of property, and it’s just a matter of council setting the priorities.

All agreed to discuss this in more detail at a future budget meeting.

Ms. Dorrel stated the council needs to discuss the ultimate use of the open space land that we acquire, because it’s shown as open space/parkland acquisition. Mr. Coleman stated council prioritization discussion will occur before acquiring the land.

Mayor Pro Tem Smith left the meeting at 6:30 p.m.

Ms. Dorrel referenced Page 18 of the budget message. She wants a summary of what reductions from last year are continuing in this budget and what’s been restored. She stated the council hoped some of these areas would be single year issues.

Mr. Coleman will get information to council on the operating budget and council can discuss this in the next work session or can have a separate wrap up session to respond to these. All concurred with a separate wrap up session, because they want to segregate the capital and operating discussions.

The capital improvement budget work session will be on May 9.

Mr. Coleman stated if council has additional capital questions for the May 9 meeting, then they should submit these questions to him by Tuesday, May 2 if possible.

Mayor McAlister adjourned the meeting at 6:35 p.m.