Present: Mayor Harold Weinbrecht, Council Members Gale Adcock, Don Frantz, Erv Portman and Jennifer Robinson; Mayor Pro Tem Julie Robison arrived late, and her arrival time is noted in the minutes.

Absent:  Council Member Jack Smith

Mayor Weinbrecht called the meeting to order at 5:35 p.m.

Refer to handout materials, which are attached to and incorporated herein as Exhibit A.

Town Manager Bill Coleman stated that the purpose of the work session is to focus on the general fund capital budget and approach two essential questions:  (1) the level of capital improvement project (CIP) funding for 2009, and (2) how to move forward with the CIP in future years. He reviewed the General Capital Project Revenue Appropriations (roads, parks, land, and general government facilities), which provide a history of capital revenue appropriations in the general fund over the past 10 years; half of the appropriations have been paid for with debt and about half with cash.  From 1990-1998 the Town funded most of the capital facilities with cash.  The Town began leveraging cash for debt in 1999.

Mr. Coleman provided information on the overall financial picture of the current level of spending, the impact of those expenditures over time, the level of spending in the 2009 budget, the impact on debt service fund balance, projected tax rates and debt ceiling.  He said if council approves the capital and operating budgets as currently configured the percentage will exceed the 15 percent by 2011.

Mr. Coleman said in order to set the 15 percent ceiling, the debt expenditures used for capital spending would be limited to the margin created through growth and not taken up with operating expenses and the principle that is paid off of debt over time.

Mayor Pro Tem Robison arrived at this point in the meeting at 5:41 p.m.

Mr. Coleman said there are a series of projected tax increases from 2011 through 2020, which are based on our level of capital spending in 2009 and projects funded forward. He stated assumptions are made based on operating expenses and revenue with the debt picture, and if these assumptions change, then numbers may change. (Exhibit A provides additional information.)  

Mr. Coleman said if council adopts the 2009 capital budget as currently configured, in 2011 we will exceed the 15 percent debt ceiling, and based on those numbers going forward we are projecting potential incremental small tax increases, which over time amounts to a little over 10 cents.  He stated to get down to 15 percent debt ceiling or below in the 2009 budget we can delay or eliminate the Highway 54 widening and fund Cary Elementary School with cash currently appropriated for aquatics instead of debt.  He stated another option is to eliminate some of the other budgeted capital projects. 

Budget Director Scott Fogleman explained the framework used to guide policy decisions and reviewed general capital funding policy decisions factors.  The first option is to hold with no additional debt until FY2011, in addition to debt funding, there is between $8-$10 million in general capital cash generated through other revenue sources.  The second option is to move forward with the majority of the FY09 capital improvements budgets as has been laid out, know that we would go above 15 percent in a couple of years.  One example of a way to reallocate cash would be to use the aquatic enter cash for Cary Elementary. He said that depending on which policy is executed long term it would warrant an evaluation of all existing appropriations to determine the flexibility to take some of the unspent money and move forward with other projects. 

Mr. Fogleman outlined Page 3 of Exhibit A for options that council may consider, with one option allowing projects to determine funding and another option allowing funding to determine the projects. He said if council decides not to hold at the 15 percent debt ceiling, then council would need to decide the funding drivers and decide on the debt service percentage and the implications it would have to bond ratings. He stated another option is to look at the tax rate and decide the amount of taxes to dedicate as a funding source for capital. 

Mr. Portman prefers that funding determine the projects and then prioritize. He stated the other option seems to assume an unlimited supply of money and does not seem to be fiscally responsible.  

Mrs. Adcock asked why the council doesn’t consider lowering the tax rate 8 cents instead of 9 cents (currently proposed to go from 42 cents to 33 cents). She stated this would provide more cash to avoid more debt. She is in favor of setting the tax rate higher than 33 cents. She thinks it will be harder on the citizens in the future to absorb incremental tax increases.

Mrs. Robison agrees with the 15 percent debt ceiling. She would like to go through the transportation and park capital projects, understand which projects were included in the 2003 bond referendum to make sure the council is moving forward with the bond issues that have been approved by the citizens.

By consensus the council agreed with the 15 percent debt ceiling limit.

Mr. Coleman stated the 2003 bond referendum was worded to be a commitment of debt to do parks and recreation and road projects. He stated examples were given but not priorities were specified. He stated it did not commit the council to specific projects.  

Mr. Frantz is interested in looking into future budget years at how projects will impact the tax rate and setting a rate somewhere in the middle. Mayor Weinbrecht asked what it would take to level where we’d stay at the same tax rate through 2020. Mr. Fogleman stated debt service is not the issue; instead, the real issue is maintaining the four months reserve of fund balance. He clarified that 33 cents would work for FY 2009, but it has significant impacts to new projects in 2010 and 2011 with a debt ceiling of 15 percent. He stated tax increases would be a function of the debt service growth and the annual growth of the operating budget. He stated if council implements a tax increase now, then it delays a subsequent tax increase. He stated, for example, that if the council sets the tax rate at 35 cents in FY 2009, then they would potentially need to look at another tax increase in 2011.

Mr. Fogelman said other large bonds are not in the mix for the next couple of years if we stay within the 15 percent ceiling. 

Mrs. Robinson wants to understand how the cultural arts facility ($60 million project) plays into this.

Mr. Coleman urged council to take care in setting a tax rate now based on assumptions too far into the future because a lot of things can change. When considering leveling, he thinks the council should only consider three to four years into the future.  

The council discussed the transportation budget (see Page 37 of Exhibit A filed with the May 13, 2008 work session minutes).

Mr. Portman asked about the Jenks Carpenter realignment. Engineering Director Tim Bailey stated the primary issue is the high school peak times. He stated if the project stops, then the Town will lose the money spent on design. He stated the shelf life on design plans is two to three years.

Mayor Weinbrecht asked if there would be any negative consequences if the South Harrison Avenue extension is delayed.  Mr. Bailey said he does not think so, and no money has been spent on that project to-date. 

The council discussed Walker Street and the improvements it may necessitate to a portion of Chapel Hill Road. Mr. Bailey stated it would not be too difficult to add a right turn lane at Chapel Hill and Harrison and extend it back towards the Walker Street area. He stated the right-of-way impacts would be the major issue. The council concurred that the Maynard Loop is an alternative for drivers whose destination is not downtown Cary.

Mr. Portman said Cary should not do Highway 54 improvements until Morrisville agrees to improve their portion of Highway 54. 

ACTION:  Mrs. Robison made a motion that the Chapel Hill widening from Northeast Maynard to Northwest Maynard be delayed indefinitely. Mr. Portman provided the second. 

Mr. Frantz is concerned with pedestrian traffic on that road because a good portion of the road has no sidewalks.  He said he would prefer that the burden of widening Chapel Hill Road be placed on developers as the area redevelops.  However, if goals are to make downtown a walkable, pedestrian-friendly community, then it doesn’t make sense to leave some of the major roads in the downtown without sidewalks.  He doesn’t mind postponing the road widening. 

Mayor Pro Tem Robison suggested amending her motion to delay the project and revisit it in one year.  Mr. Portman said it is better to postpone it indefinitely and council can bring it back at a later date.  Mrs. Robinson said that once the Maynard improvements are complete and we have the Walker Street extension, then everyone will better understand the traffic picture.

Mayor Weinbrecht asked about amending the motion to allow money to fund the improvements between Harrison and Walker. Mr. Bailey said staff will look at expanding the scope of Walker Street to include a right turn lane.  He stated staff will study this and bring information back to council at a later date. 

ACTION:  Mayor Weinbrecht called for a vote on the motion, and council granted unanimous approval.

ACTION:  Mr. Portman made a motion to indefinitely postpone the realignment of Jenks Carpenter and High House. Mrs. Robison provided the second.

Mrs. Robinson said council voted a long time ago on this alignment, there is a school in the vicinity, there has been ongoing work on the permits, and she would prefer not to delay the project. She is concerned that if the project is pushed back, then the Town will need to seek permitting again, which can possibly delay the project another five years. 

Mrs. Adcock asked about the spending on the project.  Mr. Bailey said the Town has about $550,000 invested and has been working on it for about five years. Mrs. Adcock asked if this project is worth another $8 million. 

Mrs. Robinson expressed safety concerns at that intersection. 

Mrs. Robison asked Mr. Bailey’s opinion on the investment to date, the needs in the area, and whether there is any compelling reason to stop it at this point.  Mr. Bailey said it’s a council decision on priorities.  He stated staff would like to eliminate the second traffic signal and make it a single cross intersection instead of two “T” intersections with all of the turning movements.  He stated the improvements will improve traffic capacity and flow in the area. 

Mr. Portman asked Mr. Bailey what he would take out of the budget if he had to cut $20 million. Mr. Bailey stated when staff prepares budgets they look at whether capacity is an important issue or whether to focus funds downtown.  He said they usually have some guidance from council and time to spend on reviewing the data. He is unable to answer the question right now. 

ACTION:  Mr. Portman withdrew his motion; Mayor Pro Tem Robison withdrew the second.

ACTION:  Mr. Frantz moved to postpone work on South Harrison Avenue and revisit it in two to three years.  Mr. Portman provided the second; council granted unanimous approval.

Mr. Bailey explained the Cary Parkway improvements. He stated staff is working hard to get this roadway up to a particular standard in hopes that the Department of Transportation will accept the Town-maintained portions as part of the state’s roadway network. He stated the portion of Cary Parkway that is currently Town-maintained is from Holly Springs Road to Tryon Road, Old Apex Road to High House Road, and Evans Road to Harrison Avenue.

Mrs. Adcock said the citizen survey is another compelling reason for the Cary Parkway work. 

Mayor Weinbrecht asked if the funds included in the budget will be used only for the Town-maintained portions of Cary Parkway. Mr. Bailey concurred.

Staff explained to council the process for determining which streets to recommend for resurfacing and the process we use to fix potholes.

Mayor Pro Tem Robison asked Chief Cain to address the recommended CIB pertaining to the fire department.  Fire Chief Allan Cain said the largest project is a request is for a fire station in the O’Kelly Chapel Road area, and they have located a site in the Stonewater planned development. He said the pumper replacements are to replace two existing pumpers that have exceeded their useful life.  He spoke about additional needs in future budgets.

Town Manager Coleman stressed the importance of the budgeted funds for ongoing parks and facilities maintenance.

Parks, Recreation and Cultural Resources Director Mary Henderson referred council to Page 10 of Exhibit A, and she outlined the information contained in Exhibit A pertaining to parks, recreation and cultural resources (PRCR). She stated the total for all of the PRCR projects is about $4 million, not including Cary Elementary.

Mayor Pro Tem Robison asked about the $285,000 for WakeMed Soccer Park.  Mrs. Henderson stated funds will be used to begin renovating concessions and looking at design.  It doesn’t include any new office space or seating for the other field.

Mr. Portman asked what projects could be dropped from the PRCR budget.  Mrs. Henderson replied that they have made tremendous headway with the greenways, but they are the most used and sought after facilities requested by citizens.  She said staff can take a look at this and determine where some gaps could possibly be filled in at a later date. Mrs. Robison urged council to keep in mind that this was a very high quality of life issue at the council/staff retreat. Mrs. Henderson stated the Phase 1 greenway project for renovation is going to be very expensive project in future years. 

Mrs. Henderson said parts of the Hemlocks Bluff project are tied to the road widening, and there are also some drainage issues that could possibly be delayed.  She stated facility court lighting in the North Cary Park could potentially be delayed.  Mrs. Robinson said she is not in favor of delaying this project. 

Mr. Portman said if council takes the previously appropriated cash for aquatics as a way to fund Cary Elementary, then the CIP would not include aquatics. Mr. Portman said there is a responsibility to finish the old projects before moving onto new projects.  He said that the current plan has the money for aquatics in cash and has $15 million for Cary Elementary.  If council uses the staff recommendation to pay for Cary Elementary with cash, then debt would be used for aquatics.  Mr. Fogleman said they would change the funding source, and both projects would remain.  He stated staff would take the Cary aquatic cash, move to the Cary Elementary project and replace it with 2003 park bond referendum authority. 

Mayor Weinbrecht stated council had discussed spending the cash on Cary Elementary and using debt for aquatics.  Mr. Fogleman said it was determined to make that decision at the time of bid award, depending on the action most pertinent at that point and time.  He said it is clear with the reaffirmation of holding the line at a 15 percent debt ceiling, and staff would like to incorporate that into the fiscal planning so that we know that particular piece is solid and staff can move forward with the decision criteria. 

Mr. Portman asked how it affects the plan if both aquatics and Cary Elementary are in the CIB.  Mr. Fogleman said it depends on how long the aquatics project is into the future.  Mr. Coleman added it also depends on the cost. Mr. Coleman said the question is whether council is going to spend $15 million on aquatics given the options.  He said if council funds them both at that level, then it has no impact. 

Mayor Weinbrecht stated he thought the council had already agreed to swap funding sources for aquatics and Old Cary Elementary. Mr. Coleman stated it is funded in a previous budget. Mr. Portman stated swapping the funding source in effect un-funds the aquatics center, which means it should be on the capital plan. Mr. Coleman stated the council has not un-funded it; rather, they have indicated it will be funded with debt instead of cash. He stated this puts the council over the 15 percent debt ceiling; however, the debt has not been issued, so literally the council will not be over the ceiling. He stated council would make that decision when the project is ready to move forward. Mr. Portman stated this is really a fine-tuning issue. Mr. Coleman stated it is not really a decision at this point, because there is no aquatics project yet. He stated what we know now is we have an aquatics project that needs to be funded at some amount, and he stated it may actually be cash.

Mayor Weinbrecht summarized the outcome of this work session:  (1) 15 percent debt ceiling (2) reviewed capital projects (3) expressed an interest in a tax rate that will be steady for at least 3 years (4) based on what’s done tonight staff will provide council with a spreadsheet showing capital projects and projected tax rate(s). 

The council wants to know what the tax rate needs to be to keep the Town under 15 percent debt ceiling and to fund the capital budget as discussed tonight, and taking into account the funding needed in the next 3 years. Mr. Fogleman stated it is clear that the 36-38 cent range would give flexibility, depending on the growth of the revenue sources. He would like to take some time to review this and have it ready for the next work session.

The work session ended at 7:29 p.m.