Mayor Henderson led the Pledge of Allegiance to the Flag of the United States of America.

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1 The City Council of the City of Fort Myers, Florida, met in workshop session at Oscar M. Corbin, Jr. City Hall, 2200 Second Street, its regular meeting place in the City of Fort Myers, Florida, on Monday,, at 9:07 o clock a.m. Present were Mayor Randall P. Henderson, Jr., presiding, Council Members Teresa Watkins Brown, Johnny W. Streets, Jr., Michael Flanders, Forrest Banks, and Gaile H. Anthony. Also present were Saeed Kazemi, P.E., City Manager, Marie Adams, MMC, City Clerk, and Grant W. Alley, City Attorney. Absent: Terolyn P. Watson, Council Member. Mayor Henderson led the Pledge of Allegiance to the Flag of the United States of America. NO. 1 REVIEW CITY MANAGER S RECOMMENDED FISCAL YEAR BUDGET Saeed Kazemi, P.E., City Manager, stated that the development of Fiscal Year budget was a fluid process striving to strike the right balance between revenue and expenditures. Mr. Kazemi stated that the economy and growth in the City were encouraging. Mr. Kazemi stated that the taxable value in the City increased by percent. Mr. Kazemi stated that the General Fund revenue was short in funding expenditures. Mr. Kazemi stated that measures to alleviate the shortage were being examined. Mr. Kazemi stated that all City operating budgets were balanced and based on rates and fees set on status quo. Mr. Kazemi stated that added burden to the General Fund and deferment of capital projects would result without increased revenue. Mayor Henderson stated that Moody s Investors Service affirmed the Aa3 rating on the Improvement Revenue Refunding Bonds, Series 2006A and 2007 which demonstrated a strong ability of the City to repay short-term debt. Mayor Henderson stated that Moody s Investors Service had assigned an A1 rating to the City Capital Improvement and Refunding Revenue Bonds, Series 2016 demonstrating a low credit risk. Mayor Henderson stated that the credit challenges identified by Moody s Investors Service included significant pension liabilities, ongoing structural imbalance, and narrowing financial flexibility. Mayor Henderson stated that the City was experiencing growth in ad valorem and the Enterprise Funds which provided discretionary cash flow. Mayor Henderson stated that the Fiscal Year budget focused on increasing reserve levels. Andrew Burnham, Senior Vice President, Burton & Associates, Inc., City consultant, stated that Burton & Associates assisted the City annually on a revenue sufficiency analysis for water and sewer utilities. Mr. Burnham stated that the management plan for water and sewer was updated and evaluated for the adequacy of rates. Mr. Burnham stated that improved plans for increases were recommended to meet cost requirements given updated assumptions relative to growth rates, current cost information, and subsequent revenue projections. Mr. Burnham stated that a solid waste revenue sufficiency analysis was completed in the early 2000s and the last rate increase was in Fiscal Year Mr. Burnham stated that Burton & Associates, Inc. 1

2 assisted with the implementation of the City stormwater system during Fiscal Year and no adjustments were made to stormwater fees since implementation. Mr. Burnham stated that the objectives for the analysis completed for Fiscal Year were as follows: 1. Update utilities multi-year financial management plan Based upon current customer, demand, operating & capital data Ensure compliance with the terms of existing and any new debt Cost comparison for typical resident user for water & sewer 2. Develop multi-year financial management plans for solid waste and stormwater Satisfy annual operating and capital requirements Cost comparison for typical residence for solid waste & stormwater Mr. Burnham stated that key financial planning parameters for water and sewer utility were as follows: Maintaining sufficient operating reserves o Target: 6 months of operating & maintenance expenses ($9,400, in Fiscal Year ) o Indicative of a financially healthy system per rating agency criteria Maintaining sufficient debt service coverage o Target: Net revenues at least 1.5 times greater than annual debt service o Indicative of a financially healthy system per rating agency criteria Utilities will strive to maintain a manageable level of debt o City debt level was a stated concern of all the major rating agencies o Standard & Poors debt to capital ratios: <35% Low; 35 to 65% Moderate; >65% High Fiscal Year debt to capital ratio: Debt of $248,000,000.00/ Capital assets of $270,000, = 92% o Fitch debt/customer ratios: <$1, Strong; $1, Midrange; >$2, Weak Fiscal Year debt/customer ratios: Debt of $248,000,000.00/ 46,563 water and sewer customers = $5, o Long-Term goal: Fund about 50 percent of annual capital improvement projects with debt to achieve balance. 2

3 Mr. Burnham stated that State Revolving Fund debt required net revenues at least 1.15 times greater than annual debt service. Mr. Burnham stated that increasing net revenues to 1.5 times greater than annual debt service would improve City credit ratings. Mr. Burnham stated that aging underground infrastructure required a significant amount of funding commitment from pay-as-you-go and utilization of debt financing. Mr. Burnham stated that the City had a history of high-level of infrastructure reinvestment as evidenced in the community and resulted in the issuance of debt for the utility and high levels of debt with credit rating agencies. Mr. Burnham stated that the long-term goal was to establish a multi-year financial plan with a balanced composition of future capital funding that was 50 percent pay-as-you-go and 50 percent debt funding. Mr. Burnham stated that water and sewer utilities had slightly lower operating costs and higher fund revenues from growth that downsized the immediate borrowing for capital funding. Mr. Burnham stated that a similar level of annual revenue and cash versus debt funding distribution of capital with a lower rate plan than in Fiscal Year Mr. Burnham stated that the forecast was for rates to be increased by 3 percent in Fiscal Year followed by a 4 percent increase in Fiscal Year , and 5 percent in Fiscal Year and beyond. Mr. Burnham stated that the same metrics from the Fiscal Year study by Burton & Associates, Inc. could be achieved without a rate increase in Fiscal Year Mr. Burnham stated that the rates in Fiscal Year should increase by 4 percent and the rates in Fiscal Year should increase by 5 percent. Mr. Burnham stated that the debt service coverage ratio of 2.87 was better than the required ratio of 1.5. Mr. Burnham stated that the Fiscal Year debt service coverage ratio was better than Fiscal Year because of high customer growth and increased revenue generated from reduced operating expenses. Mr. Burnham stated that deferrals from Fiscal Year capital improvement project spending to Fiscal Year provided a benefit in near term borrowing requirements. Mr. Burnham stated that the Fiscal Year financial analysis and management system summary 5 year forecast provided 58.3 percent of expenditures would be funded by debt and the 10 year forecast provided 49.2 percent of expenditures would be funded by debt. Mr. Burnham stated that a similar result in a sustainable plan for the system kept the same rate plan as in Fiscal Year Mr. Burnham stated that similar financial performance in terms of debt coverage ratios in 2025 would be at 2.91 as opposed to 2.89 of the prior study if there was not a water and sewer utility rate increase in Fiscal Year and the rates were increased starting in Fiscal Year and beyond. Mr. Burnham stated that the ten-year borrowing percentage would be at 53 percent which was comparable to the 51 percent borrowing in the Fiscal Year financial analysis and management system summary. Mr. Burnham stated that there were options with the water and sewer fund relative to the timing and level of rate adjustments. Mr. Burnham stated that there was the option of no water and sewer rate increase or continuing with the 3

4 approved 3 percent increase. Mr. Burnham stated that the Consumer Price Index tracked water and sewerage maintenance expenses each year and assumed the same level of residential usage and the national average change in cost of water and sewer service rates was 5.7 percent. Mr. Burnham stated that the historical increased City water and sewer rates were consistent with national trends. Mr. Burnham stated that the City struggled with affordability of water and sewer rates compared to other communities. Mr. Burnham stated that the Fiscal Year and Fiscal Year community water and sewer rate bill comparison at 3,300 gallons was as follows: Community Fiscal Year Fiscal Year FGUA Golden Gate $ $ Marco Island $92.95 $97.75 FGUA Lehigh Acres $85.29 $86.72 North Fort Myers, Inc. $83.81 $85.25 Venice $83.81 $84.81 Charlotte County $80.31 $83.13 Fort Myers $82.60 $82.60 Sanibel $80.39 $82.09 Cape Coral $81.09 $81.09 LaBelle $78.63 $78.63 North Port $76.63 $78.36 Collier County $70.92 $74.47 Sarasota $67.63 $72.99 Fort Myers Beach $71.48 $71.48 Bonita Springs Utilities, Inc. $64.94 $64.94 Sarasota County $63.89 $63.89 Lee County $63.14 $63.14 Punta Gorda $55.16 $56.11 Naples $44.90 $44.90 Mr. Burnham stated that the affordability of the water and sewer rates would be enhanced if there was no rate increase in Fiscal Year Mr. Burnham stated that the overall financial sustainability of the City should be considered in City Council policy directions. Mr. Burnham stated that the intent of the adjustments to irrigation and reclaimed water rates improved equity in pricing of irrigation/reclaimed water and enhance reclaimed cost recovery. Mr. Burnham stated that the American Water Works Association promoted a one water concept that recognized that water use was water use and identified a holistic approach to water supply and water pricing. Mr. Burnham stated that the adjustment in irrigation and reclaimed water rates was consistent with the American Water Works Association one water concept. Mr. Burnham stated that adjustments to the irrigation and reclaimed water rates should be as follows: 4

5 Reduce the 1 st tier irrigation rate from $6.98 to $5.65 per 1,000 gallons (estimated $69, revenue loss) Increase the bulk reclaimed water rate by 10 percent from $0.73 to $0.80 per 1,000 gallons (estimated $49, revenue gain) o Current cost of service per reclaimed water rate study = $4.47 o Consider additional future increase of 10 percent per year Mr. Burnham stated that the rates for reclaimed water were set by ordinance. Mr. Kazemi stated that Lee County and golf course communities were the largest reclaimed water users. Mr. Burnham stated that the reclaimed water rates for Lee County were determined by a cost sharing agreement with the City. Mr. Kazemi stated that the McGregor Boulevard irrigation line could be converted to reclaimed water system when available. Mr. Burnham stated that the community monthly retail irrigation water cost comparison at 10,000 gallons per month was as follows: Community Rate Type Monthly Rate Golden Gate Potable Water No $90.24 irrigation rate class Fort Myers Irrigation Rates $90.03 Venice Irrigation Rates $89.38 Charlotte County Irrigation Rates $87.25 Fort Myers (Proposed) Irrigation Rates $83.38 LaBelle Potable Water No $80.58 irrigation rate class Sarasota County Irrigation Rates $78.83 Marco Island Irrigation Rates $77.39 Lehigh Acres Irrigation Rates $72.25 North Port Irrigation Rates $71.74 Fort Myers Beach Potable Water No $68.35 irrigation rate class Punta Gorda Potable Water No $58.35 irrigation rate class Bonita Springs Utilities, Inc. Irrigation Rates $47.83 Sarasota Irrigation Rates $47.60 Lee County Irrigation Rates $44.18 Naples Irrigation Rates $31.91 Sanibel Reclaimed Rates $26.10 North Fort Myers, Inc. Reclaimed Rates $20.11 Collier County Reclaimed Rates $11.85 Cape Coral Reclaimed Rates $9.50 5

6 Mr. Burnham stated that many communities had bulk reuse agreements with rate structures that reflected an old view of reclaimed water in which golf courses and other bulk users were needed to take the water as effluent disposal. Mr. Burnham stated that the commodity received by bulk reuse rate users was not fully recognized. Mr. Kazemi stated that there were 3 golf courses using reclaimed water in the City. Councilman Banks stated that the City of Cape Coral wanted access to reclaimed water from the City. Councilman Banks stated that the golf courses provided a way to use reclaimed water. Mr. Kazemi stated that the reduction in irrigation rates was approximately $1.00. Mr. Kazemi stated that the increase in the reclaimed water rate achieved cost recovery stability. Mr. Kazemi stated that there was a cost to provide reclaimed water to residents. Mr. Burnham stated that one benefit of adjusting the reclaimed water rates was to fund additional transmission mains in new developments that installed dry lines. Councilman Flanders stated that the City irrigation and reclaimed water rates were the highest in Lee County. Councilman Flanders stated that complaints were received about the cost of water and it affected decisions of those considering moving to the City. Mr. Kazemi stated that the cost of replacing the aged utilities was reason for the water and sewer rates. Councilman Flanders stated that the expense of replacing utilities was deferred to utility customers whose water lines were not updated. Grant W. Alley, City Attorney, stated that the City of Cape Coral challenged the permit obtained by the City and the case was dismissed due to poor legal work by Cape Coral. Attorney Alley stated that the City of Cape Coral would have difficulty refiling the case due to the nature of the dismissal. Mayor Henderson stated that the City Manager was working with Cape Coral to accommodate a 2018 plan to install a reuse pipe under the Caloosahatchee River. Mayor Henderson stated that the City of Cape Coral would spend hundreds of millions of dollars to complete the project. Mr. Kazemi stated that some residents in the City paid $5.00 for irrigation. Mr. Kazemi stated that rushing into an agreement with City of Cape Coral was not in the best interest of the City. Mr. Kazemi stated that the City of Cape Coral challenged the City permit because of alleged discharge into the Caloosahatchee River. Mr. Kazemi stated that it was expensive to provide reclaimed water to the residents but there were ways to make it possible. Mr. Kazemi stated that the cost and cost recovery of providing reclaimed water to residents was being evaluated by Burton & Associates, Inc. Councilman Banks stated that the water and sewer rate, fire assessment fee, stormwater fees, and the millage affected the operation of the City. Councilman Banks stated that the cumulative impact needed to be evaluated. Mr. Kazemi stated that the City Code provided a 3 percent increase in the water and sewer rates. Mr. Kazemi stated that the 3 percent increase in Fiscal Year would provide a better debt ratio. Mr. Kazemi stated that the millage rate was high and a reduction should be considered. Mr. Burnham stated that increasing the water and sewer rate by 3 percent or from $82.61 to $85.10, a difference of $2.50. Mr. Burnham stated that the water and sewer rate increase of 2 percent would provide approximately $1,000, in 6

7 revenue. Mr. Burnham stated that there were notable changes in the Solid Waste fund that provided a good outlook for the solid waste rates. Mr. Burnham stated that increases to the solid waste fund were not predicted in the near or long term. Mayor Henderson stepped down from the chair at 9:52 o clock a.m. Mayor Pro tem Brown assumed the chair at 9:52 o clock a.m. Grant W. Alley, City Attorney, left the meeting at 9:52 o clock a.m. Mr. Burnham stated that a reserve of 3 months operating and maintenance expenses was achieved without an increase in Fiscal Year Mr. Burnham stated that the General Fund transfer to the Solid Waste fund was reduced in Fiscal Year and funded the capital improvement and equipment needs and an increase in rates was not needed. Mr. Burnham stated that the Solid Waste Fund should be reviewed every couple of years to evaluate the financial performance to address any unanticipated changes to avoid potential adjustments and eliminate rate spikes. Mayor Pro tem Brown stepped down from the chair at 9:53 o clock a.m. Mayor Henderson assumed the chair at 9:53 o clock a.m. Grant W. Alley, City Attorney, returned to the meeting at 9:53 o clock a.m. Mr. Burnham stated that the revenue stream from the Solid Waste fund was adequate to meet operating and capital costs given the reduction in the General Fund transfer in the Fiscal Year budget. Mr. Burnham stated that there was flexibility above the 3 month target to address unplanned capital needs or cost increases. Mr. Burnham stated that the Consumer Price Index, specific to garbage and trash collection, increased approximately 3 percent annually. Mr. Burnham stated that the solid waste rates had been steady since 2009 and should continue without an increase for the near term. Mr. Burnham stated that the Fiscal Year Residential Monthly Sanitation Fee Survey was as follows: 7

8 Fiscal Year Residential Monthly Sanitation Fee Survey North Port $24.00 Sanibel $23.07 Sarasota $21.66 Punta Gorda $19.95 Fort Myers $19.08 Venice $16.84 Lee County $16.51 Marco Island $15.69 Collier County $15.69 Fort Myers Beach $15.62 Sarasota County $13.29 Cape Coral $12.48 Labelle $9.21 Charlotte County $8.00 Mr. Kazemi stated that the City sanitation trucks were upgraded to natural gas, a more efficient and modern system. Mr. Burnham stated that there was not a recommended rate adjustment in Fiscal Year for solid waste. Mr. Burnham stated that capital funding should be supplied on a cash-funded basis. Mr. Burnham stated that financial performance reviews should be completed to remain consistent with the proactive practices of the City. Mr. Burnham stated that the Stormwater Fund was established in Fiscal Year and the rate had not been adjusted since that time. Mr. Burnham stated that the Stormwater Fund was designed to fund approximately $1,000, of capital improvements per year. Mr. Burnham stated that the cost of operations and maintenance increased since the fee was established and revenues, in the amount of $2,800,000.00, funded annual operating expenses and minimal capital improvements. Mr. Burnham stated that a ten year capital improvement project list, totaling $34,000,000.00, was identified by staff. Mr. Burnham stated that the average spending to meet the ten year capital improvement project goal was $3,400, per year compared to the revenue of $2,800, annually and there was a substantial deficit relative to capital funding needs for the Stormwater fund. Mr. Burnham stated that Burnham & Associates evaluated different scenarios to determine the future of the Stormwater fund as follows: Scenario 1: Full 10 year capital improvement project and no rate increases Scenario 2: Maximum level of capital improvement project that could be funded by current rates Scenario 3: Double the fee in Fiscal Year to fund approximately $31,000, of capital improvement projects Scenario 4: Fiscal Year rate increase to support full 10 year capital improvement projects 8

9 Mr. Burnham stated that Scenario 3 provided a comparable Stormwater rate compared to other utilities. Mr. Burnham stated that Scenario 3 and Scenario 4 provided a smoothing of the capital improvement program to eliminate spikes and sustain level of annual capital investment. Mr. Burnham stated that the Fiscal Year Residential Monthly Stormwater Bill Comparison was as follows: Fiscal Year Residential Monthly Stormwater Bill Comparison Fort Myers Beach $19.98 Clearwater $14.33 Palmetto $14.12 Naples $12.39 Charlotte County $10.71 Cape Coral $8.75 Sarasota County $7.55 St. Petersburg $6.84 North Port $6.29 Fort Myers $4.80 Venice $4.77 Bradenton $4.50 Mr. Burnham stated that the City stormwater fees, in the amount of $57.60 per year, were billed as an annual assessment but were considered as monthly fees for comparison purposes. Mr. Kazemi stated that the increased costs relating to stormwater were for infrastructure needs. Mr. Kazemi stated that there were no funds available other than the General Fund to complete the capital improvement projects. Mr. Kazemi stated that the proposed changes to the Stormwater fund provided funding for capital improvement projects. Mr. Kazemi stated that there were drainage problems in each ward of the City. Mr. Kazemi stated that the funding was the deterrent to fixing the drainage problems. Mr. Kazemi stated that drainage and water quality were the two issues that had to be addressed according to the City permits. Mr. Kazemi stated that the City was committed to improving the water quality in the Caloosahatchee River. Councilman Flanders stated that a chart showing the amount of stormwater revenues and expenditures each year since 2009 was needed. Mr. Kazemi stated that the revenues, in the amount of $2,800,000.00, did not provide sufficient funding to complete stormwater capital improvements. Mr. Kazemi stated that improving the system would reduce the amount of maintenance. Mr. Burnham stated that current funding for stormwater capital improvements was approximately $150, to $200, annually. Mr. Kazemi stated that the water and sewer improvements helped the drainage issues but there were drainage issues in some neighborhoods that needed to be fixed. Mr. Kazemi stated that the base operation costs in 2009 were approximately $2,000, and 9

10 there was not much revenue for capital improvement projects from the beginning of the stormwater program. Grant W. Alley, City Attorney, left the meeting at 10:07 o clock a.m. Mr. Burnham stated that Scenario 1 provided for the full funding of 10 year capital improvement projects, in the approximate amount of $3,400, per year, and provided no increased stormwater fees. Mr. Burnham stated that Scenario 1 provided for large spikes of capital improvement project spending in Fiscal Year and Fiscal Year Mr. Burnham stated that the accumulative operating fund deficit for Scenario 1 was approximately $34,000, Mr. Burnham stated that the system could not support the level of capital program improvement investment with the current stormwater fee of $57.60 per year. Mr. Burnham stated that the Scenario 2 provided for the maximum level of capital improvement projects that could be funded by current rate of $57.60 per household per year. Mr. Burnham stated that the system could support approximately $1,500, of capital improvement project spending for the next 10 years for an average yearly capital improvement project expenditure of $150, Mr. Burnham stated that Scenario 3 provided for the stormwater fee to double from $57.60 per year to $ in Fiscal Year to fund approximately $31,000, of capital improvement projects, $3,100, average capital improvement spending each year, and maintain operating reserves at the 6 month target. Mr. Burnham stated that Capital Improvement Project funding, in the amount of $34,000,000.00, as provided in the 10 year Stormwater Capital Improvement Plan required a fee increase more than double the current rate of $57.60 annually, to $ each year. Mr. Burnham stated that the Fiscal Year Residential Monthly Stormwater Bill Comparison including comparisons for Scenarios 3 and 4 were as follows: 10

11 Fiscal Year Residential Monthly Stormwater Bill Comparison including fees for scenarios 3 and 4 Fort Myers Beach $19.98 Clearwater $14.33 Palmetto $14.12 Naples $12.39 Charlotte County $10.71 Fort Myers Scenario 4 $10.20 Fort Myers Scenario 3 $9.60 Cape Coral $8.75 Sarasota County $7.55 St. Petersburg $6.84 North Port $6.29 Fort Myers Existing $4.80 Venice $4.77 Bradenton $4.50 Mr. Burnham stated that the current rates would not support future capital spending. Mr. Burnham stated that there was a minimal reserve balance in the Stormwater Fund that was reserved for the Fiscal Year planned capital improvement projects to the stormwater system, which once completed, would leave a reserve balance of approximately $200, Mr. Burnham stated that the fee was $0.96 per 500 square feet of impervious area. Mr. Burnham stated that residential fees would increase approximately $5.00 per month. Councilman Flanders stated that the residential rate did not seem that large when doubled, but when looking at car dealerships or Edison Mall, 4125 South Cleveland Avenue, the fees started out big. Mr. Burnham stated that there was a limit of square feet of impervious area that would be charged to commercial customers that would be provided to City Council. Councilman Flanders left the meeting at 10:14 o clock a.m. Councilman Banks stated that fees needed to be evaluated and increased annually. Councilman Streets stated that people did not mind paying bills if they were receiving the service. Councilman Streets stated that the drainage issues in Ward 2 was an engineering issue. Councilman Streets stated that the water was supposed to flow north and it was hard for water to flow uphill because of the road elevations. Councilman Flanders returned to the meeting at 10:16 o clock a.m. Councilman Streets stated that the Rockfill Road area of Ward 2 needed to be addressed. Councilman Streets stated that residents did not understand why they were paying the stormwater fees when they had a yard filled with water. Mr. Kazemi stated that the stormwater fee would 11

12 fund capital improvement projects to fix the drainage issues. Mayor Henderson stated that new infrastructure was installed in Ward 6 when the developments were completed and there were no drainage issues and the residents should not pay increased stormwater rates. Mr. Kazemi stated that Ward 6 residents had stormwater credits based on the system and some residents paid only administrative fees. Councilman Flanders stated that the stormwater assessment was established because of compliance with state and federal regulations regarding stormwater. Mr. Kazemi stated that the City was in good standing with the state and federal agencies. Mr. Kazemi stated that grants provided funding to construct the Billy Bowlegs Filter Marsh, 4320 Woodside Avenue, and Ford Street Filter Marsh, located south and east of the Central Advanced Wastewater Treatment Facility, 1501 Raleigh Street, and north of the Fort Myers Cemetery, 3200 Michigan Avenue. Mr. Kazemi stated that the City had no contingencies from federal or state agencies. Mr. Kazemi stated that the maintenance of the two filter marshes required increased funding. Mr. Kazemi stated that dredging Billy Creek was included in the Stormwater Plan. Mr. Kazemi stated that grants were being sought to provide $1,600, to complete the project. Mr. Kazemi the City was struggling to fund capital improvement projects. Mr. Burnham stated that there had to be policy level discussion that balanced the capital funding needs of the system and the actual funding implications to the constituents. Mr. Burnham stated that the stormwater fee increase may involve a phase-in plan but the City would have significant near term capital limitations until the higher level stormwater fees were reached. Mr. Burnham stated that City Council should exercise its policies and identify the capital funding needs for the system and where those needs would be met to drive the stormwater rates. Mr. Kazemi stated that the stormwater fee was established in 2009 and the rates had not been raised since that time. Councilman Flanders stated that the collection of stormwater fees in other cities should be evaluated. Mr. Kazemi stated that the City charged the flat rate like other cities in the area. Mr. Burnham stated that the rates were based on the impervious area and water quality was not part of the user fee structures with any significance. Mr. Kazemi stated that violators of the City stormwater policy were fined above and beyond the stormwater fee. The meeting was recessed at 10:27 o clock a.m. The meeting reconvened at 10:41 o clock a.m. Mr. Kazemi stated that the highest commercial stormwater fees in the City were as follows: 12

13 Annual Fee Site Address Owner Name $38, Cleveland Avenue Edison Mall, LLC $24, Red Cedar Drive Gulfstream Isles Apartments $20, Renaissance Preserve Way Housing Authority of the City of Fort Myers $18, South Cleveland Elizabeth A. Bickimer Avenue Trust $15, Winkler Avenue Leesar, Inc. $15, Edison Avenue Housing Authority of the City of Fort Myers $15, Metro Parkway Lee County $15, /2744 Edison Avenue State of Florida Department of Agriculture $14, Colonial Boulevard An Fort Myers Imports, LLC $11, Colonial Boulevard ALS Commercial II, LLC $11, Cleveland Avenue Seritage SRC Finance, LLC $11, Cleveland Avenue Burdines Real Estate, Inc. $11, Ortiz Avenue City of Fort Myers $11, Boy Scout Drive Sam Galloway Ford, Inc. $10, Jeffcott Street Tricircle Holdings, Inc. $10, Dr. Martin Luther City of Fort Myers King, Jr. Boulevard $10, Cleveland Avenue Alta Center, LLC $10, Colonial Boulevard Carmax Auto Superstores, Inc. $10, Palm Beach Boulevard $10, South Cleveland Avenue Sams East, Inc. $10, Metro Parkway SPT WAH Westchase, LLC B & B Cash Grocery Stores, Inc. Mr. Kazemi stated that credits were received by most of the people paying high stormwater fees. Mr. Kazemi stated that the people without stormwater improvements or system did not receive credits. Mr. Kazemi stated that less maintenance and improvements were needed when less water entered the stormwater system. Mr. Kazemi stated that everybody that contained stormwater and made quality improvements was eligible for stormwater credits. Mr. Kazemi stated that the purpose of the stormwater fee was to provide water quality as soon as possible. Mr. Kazemi stated that the state and federal governments were satisfied with the efforts of the City. Mr. Kazemi stated that ditches and swales were 13

14 used instead of pipes to receive stormwater credits. Mr. Kazemi stated that commercial businesses were encouraged to spend money on water quality improvements rather than paying stormwater fees. Christine Tenney, Budget Manager, Financial Services Department, stated that the Fiscal Year General Fund summary was as follows: $ Change % Change Taxes, Licenses & $64,239,800 $69,148,600 $4,908, % Permits Intergovernment/ $10,152,000 $16,932,600 $6,780, % Charges for Service General Admin $4,688,300 $4,969,400 $281, % Charge Miscellaneous $1,383,700 $1,438,200 $54, % Transfers from $12,817,700 $3,397,900 ($9,419,800) (73.5%) Other Funds General Fund $757,450 $3,787,047 $3,029, % Reserves Total Revenues $94,038,950 $99,673,747 $5,634, % Personal Services $61,039,823 $65,562,500 $4,522, % Operating $19,360,127 $20,032,447 $672, % Debt Transfers $8,259,600 $8,224,000 ($35,600) (0.4%) TIF Transfers $2,409,700 $2,732,600 $322, % Venue Subsidies / $2,812,700 $2,965,200 $152, % Other Transfers Capital Transfers $157,000 $157,000 $0.00 N/A Total $94,038,950 $99,673,747 $5,634, % Expenditures Shortfall $0.00 $0.00 $0.00 Ms. Tenney stated that the property appraiser certified values were included in the Fiscal Year General Fund Summary. Ms. Tenney stated that the revenue components for the General Fund were as follows: 14

15 General Fund Revenue Percentage of Revenue Component Property Taxes 46% Intergovernmental 16% Other Taxes 13% Licenses and Permits 8% Other Income 6% Reserves 4% Transfers In 3% Fire Assessment Fee 2% Fines and Forfeitures 1% Charges for Services 1% Ms. Tenney stated that a payment in lieu of taxes calculation was used and reclassified the Transfers In from the Fund, Stormwater Fund, and Solid Waste Fund to an Intergovernmental revenue component. Ms. Tenney stated that the ad valorem revenue for Fiscal Year budget was as follows: 2015 tax base $4,976,882,235 Increase to tax base, (5.86%) $291,738,645 New construction, (4.30%) $213,890, tax base $5,482,511,408 Overall increase in tax base 10.16% Millage rate FY2017 Property tax revenue budget* $45,708,800 FY2016 Property tax revenue budget* $41,584,300 Increase in property tax revenue $4,124,500 Ms. Tenney stated that the City tax base increased percent to $45,708, and was $4,124, more than budgeted in Fiscal Year Ms. Tenney stated that the change in ad valorem taxes as presented in the City Council workshop held on April 26, 2016, as follows: 15

16 Ad valorem revenue budget: April 26, 2016, workshop $44,605, June 30, 2016, and, workshop $45,708, Increase in Ad valorem revenue $1,103, How increase in revenue was accounted for: Increase in transfer to TIFs $142, Additional Police Officer positions $700, General Fund subsidy for golf course funds $261, Rounding ($400.00) Increase in expenditures budget $1,103, Ms. Tenney stated that the ad valorem revenue was assumed at 7.5 percent when presented to City Council on April 26, Ms. Tenney stated that the ad valorem revenue was percent and provided additional revenue, in the amount of $1,103, Ms. Tenney stated that the General Fund subsidy for golf course funds was for Fort Myers Country Club, 3591 McGregor Boulevard, and Eastwood Golf Course, 4600 Bruce Herd Lane. Ms. Tenney stated that the taxable value in 2016 was $5,500,000, in comparison to the highest valuation in calendar year 2007 when the taxable valuation was $7,000,000, Councilman Flanders stated that the population of the City increased by at least 15,000 people from 2007 to Ms. Tenney stated that Fiscal Year property tax revenue was $45,709, compared to the highest revenue of $46,722, in Ms. Tenney stated that the lowest millage rate, in the amount of mills, was in Fiscal Year Ms. Tenney stated that the millage rate in 2009 was mills and the Fiscal Year millage rate was mills. Ms. Tenney stated that the 2016 residential analysis by ward was as follows: 16

17 Ward 1 Ward 2 Ward 3 Ward 4 Ward 5 Ward 6 Total Taxable Value - Homestead Taxable Value Non-Homestead $8,679 $39,847 $19,230 $161,367 $220,049 $795,603 $1,244,775 $72,299 $299,776 $169,975 $273,195 $248,139 $1,252,895 $2,316,279 Total Taxable Value $80,978 $339,623 $189,205 $434,562 $468,188 $2,048,498 $3,561,054 % of Taxable Value - Homestead # of Parcels Homestead # of Parcels Non- Homestead 10.7% 11.7% 10.2% 37.1% 47.0% 38.8% 35.0% 1,179 1, ,785 1,475 4,889 10,944 2,087 2,688 2,855 2,021 1,692 8,902 20,245 Total Parcels 3,266 3,845 3,314 3,806 3,167 13,791 31,189 % of Parcels - Homestead 36.1% 30.1% 13.9% 46.9% 46.6% 35.5% 35.1% Ms. Tenney stated that thirty-five percent of City homes were homesteaded property. Ms. Tenney stated that the trends in commercial values/taxes were as follows: 17

18 Taxable Value (in thousands) $1,196,804 $1,085,350 $1,087,028 $1,064,028 $1,068,582 $1,093,468 $1,151,367 # of Parcels 2,016 2,054 2,068 2,069 2,078 2,261 2,263 Average Taxable Value $593,653 $528,408 $525,642 $514,272 $514,236 $483,621 $508,779 Millage Rate Ad Valorem Taxes $4,987 $4,439 $4,613 $4,513 $4,513 $4,244 $4,465 % increase (decrease) in Taxes (11.0%) 3.9% (2.2%) 0.0% (6.0%) 5.2% 18

19 Ms. Tenney stated that the Fiscal Year budget generated revenues, in the amount of $2,100,000.00, from the fire assessment fee. Ms. Tenney stated that the fire assessment fee was a non-ad valorem assessment included on the annual tax bills mailed in November each year. Ms. Tenney stated that the fire assessment fee recovered approximately 15.1 percent of the costs of fire suppression and rescue services. Ms. Tenney stated that the fire assessment fee rates were as follows: Fire Rescue Assessment Rates Property Use Category Assessment Unit Assessment per Unit Residential Dwelling Unit $45.83 Commercial Square Foot $0.030 Industrial/Warehouse Square Foot $0.008 Government/Institutional Square Foot $0.070 Ms. Tenney stated that a separate fund would be created for the Fire Department budget to report the fire assessment fee and all related revenues and expenditures for the Fire Department. Ms. Tenney stated that the General Fund budget would not include Fire Department expenditures and a transfer out would be for the different revenue and expenses to the special revenue fund for the Fire Department. Ms. Tenney stated that the separate revenue fund for the Fire Department budget would be completed by September Mr. Kazemi stated that the revenue from the fire assessment fee would be placed into the separate fund and used exclusively for expenditures for firefighters, salaries, and Fire Department expenditures. Ms. Tenney stated that the Fiscal Year budget expenditure components were as follows: Expenditure Amount Percentage Public Safety $62,000, % General/Government $12,500, % Governmental Debt $8,200, % Parks & Recreation $6,800, % Other Uses $4,500, % Subsidies $3,000, % Payout to TIF Districts $2,700, % Ms. Tenney stated that the Fiscal Year General Fund expenditure highlights were as follows: 19

20 Expenditure Highlight 16 Police Officer positions - (9) from COPS grant requiring City match Amount $1,323,000 Employee wage increases (includes FICA and pension) $2,230,300 Health insurance increase $401,400 Pension increase (excludes wage increase impact) $1,584,900 South Trail Fire District increase $354,700 Transfers to TIFs increase $322,900 Removal of one-time equipment/vehicle purchases in FY2016 budget ($621,000) Miscellaneous other changes, net $38,597 Total increase over FY2016 Budget $5,634,797 Ms. Tenney stated that the addition of 7 police officer positions and a City match for the COPS grant increased Fiscal Year expenditures by $1,323, Ms. Tenney stated that wage increases for union employees that were members of the International Association of Firefighters & Paramedics, Local 1826, Florida Police Benevolent Association, Inc. Gulf Coast Chapter, and Fort Myers City Employees Union and non-union employees increased Fiscal Year expenditures by $2,230, Ms. Tenney stated that the health insurance increase of 6 percent, in the amount of $401,400.00, was offset by a rebate received in Fiscal Year Ms. Tenney stated that City Council would not receive a wage increase in Fiscal Year Ms. Tenney stated that pension costs for the Fire Department and Police Department increased Fiscal Year budget expenditures by $1,584, Ms. Tenney stated that the payment, in the amount of $354,700.00, to South Trail Fire District increased due to the property values of the area where the district provided service. Ms. Tenney stated that the Tax Increment Financing District valuations were higher than assumed and an additional $322, was included in the Fiscal Year budget expenditures. Ms. Tenney stated that Fiscal Year budget included one-time equipment purchases that were not included in the Fiscal Year budget and provided a credit of $621, to budgeted expenditures. Attorney Alley stated that City Council was not under contract and wage increases required a separate approval process than the one used for City employees and could be done concurrently with the budget. Councilman Flanders stated that something needed to be done to increase pay for the Council Members. Councilman Flanders stated that Ward 4 Council Member gets paid 20

21 $15.69 per hour for a 40 hour week totaling $32, per year to be available and work for constituents. Councilman Flanders stated that someone could not serve on City Council and support a family on $32, per year. Councilman Flanders stated that the salary for City Council should be increased to provide opportunity for young people to make service to the public a career. Councilman Flanders stated that past Council Members, including Warren Wright, served one term and had to leave to work and earn more money. Councilman Flanders stated that the salary for the Mayor was $42, Councilman Flanders stated that an increase to $17.00 per hour for Council Members should be considered as part of the Fiscal Year budget. Councilman Flanders stated that the young generation could not participate on City Council due to financial constraints of the position. Attorney Alley stated that there was nothing in the Charter that specified Council Members served full-time or part-time. Attorney Alley stated that Council Members had a choice to participate. Attorney Alley stated that a Council Member that attended all scheduled meetings and was responsive to constituents worked more than part-time. Attorney Alley stated that the Charter did not require attendance at all meetings. Attorney Alley stated that the choice was of the Council Member and how they decided to represent their constituents. Councilman Streets stated that Council Members worked full time whether they were in their offices or not. Councilman Flanders stated that Council Members should receive pay increases equal to those received by City employees of 3 percent. Councilman Banks stated that requiring Council Members to serve full time would include providing time reports. Councilman Banks stated that the Council Members were well qualified in their respective fields and were worth a lot of money per hour. Councilman Banks stated that highly qualified Council Members would not be enticed by the salary. Councilman Banks stated that the City would have to rely on volunteers willing to serve on City Council. Councilman Banks stated that he enjoyed the flexibility of creating his own schedule to complete City Council duties. Councilman Banks stated that increasing Council Member pay along with City employee pay increases was fair. Councilman Flanders stated that Council Members were not in it for the money but the financial reality of the job kept young people from pursuing it. Mayor Henderson stated that discussing the pay of the Council Members was unsavory and each Council Member worked harder than they were paid. Mayor Henderson stated that the pay of City Council was a challenging debate. Mayor Henderson stated that City Council took pay cuts during the Great Recession. Ms. Tenney stated that the increased Personal Fund costs included $700, for 7 police officer positions, wage increases, in the amount of $2,200,000.00, health insurance and pension increases that totaled $4,522, in Fiscal Year Ms. Tenney stated that the projected General Fund reserves were as follows: 21

22 Balance 2016 Forecast $14,137,921 Use of reserves in 2017 Budget ($3,787,047) Ending estimated unassigned reserves $10,350, General Fund Budget $99,673,747 Unassigned reserves as a % of total 2017 Budget 10.4% Ms. Tenney stated that the comparison of General Fund reserves with other cities was as follows: City Fiscal Year 2015 General Fund Budget Fiscal Year 2015 Unassigned Reserves Reserve % Naples $32,899,438 $14,030, % Sarasota $56,873,937 $16,530, % Cape Coral $170,906,563 $46,494, % Fort Myers $88,509,900 $11,064, % Lakeland $107,015,688 $9,483, % Ms. Tenney stated that the Government Finance Officers Association recommended at least 2 months of reserves in the General Fund. Mr. Kazemi stated that the population of the City was 72,000 to 73,000 people in the morning but increased to 120,000 to 130,000 people 6 days a week as the workforce entered the City. Mr. Kazemi stated that the City employed people from unincorporated areas of Lee County, Cape Coral, Punta Gorda, and Naples. Mayor Henderson stated that there was concern about statistics that cast the City in a negative way when the commuter population was not calculated into the formula. Attorney Alley stated that the City was the central location for the five county seat for the criminal and civil judicial system and the federal court was located in the City. Attorney Alley stated that the Census was not impacted by the number of resources used for the state and federal jail. Mayor Henderson stated that the City was the epicenter of the southwest quadrant of Florida. Mr. Kazemi stated that there was not another fully urban city in the region. Ms. Tenney stated that the Fiscal Year budget was balanced 22

23 but it was not ideal. Ms. Tenney stated that Burton & Associates, Inc. provided long term models that would impact the budget in the future. Erick van Malssen, Consulting Manager, Burton & Associates, Inc., stated that the model provided a 10 year General Fund cash flow projection similar to the utility models presented to City Council. Mr. van Malssen stated that more cash in than cash out created a budget surplus and added to General Reserves at the end of the year. Mr. van Malssen stated that more cash taken out of the fund than going in the fund created a deficit and used reserves because there was no other funding source. Mr. van Malssen stated that data sources and assumptions that were used for the model included the following: Beginning fund balances based on the Fiscal Year Comprehensive Annual Financial Report Fiscal Year cash flows based on staff estimates in line item detail Fiscal Year cash flows based on the preliminary budget in line item detail Fiscal Year through Fiscal Year projected based on: o Line item escalation factors for revenues and expenses o Debt service amortization schedules Minimum reserve target: 10 percent of expenses Mr. van Malssen stated that other variable assumptions and features for consideration included the following: Millage and property tax impacts Property value adjustments Funding of additional capital projects Funding of additional hiring of full-time employees What-If revenues and expenses in any combination Mr. van Malssen stated that assumptions did not include any capital investment from the General Fund and no hiring of additional full time employees beyond Fiscal Year Mr. van Malssen stated that there were significant changes to the Fiscal Year budget model over the Fiscal Year budget model as follows: Approximately $1,000, additional capital funding debt service in Fiscal Year o Funded approximately $20,000, of capital projects 25 new law enforcement full-time employees o 9 full time employees from the 2016 COPS grant o 9 full time employees from the 2017 COPS grant 23

24 o 7 full time employees from the Fiscal Year budget o Last model assumed no additional hiring Approximately $2,000, reduction in Sanitation transfer to General Fund Expenses increased at a greater pace than projected Increased property value projections Fiscal Year estimated 9.92 percent increase Mr. van Malssen stated that there was a cash flow deficit built in to the Fiscal Year budget that impacted the overall cash flow funding scenario. Mr. van Malssen stated that the diagnostic projection assumed no change in the millage rate. Mr. van Malssen stated that the property values were adjusted to reflect increased growth of 5 percent growth year over year. Mr. van Malssen stated that the Fiscal Year budget provided a spike in cash flow from the General Fund. Mr. van Malssen stated that Fiscal Year budget deficit, in the amount of $3,325,000.00, must be funded from the General Fund reserves. Mr. van Malssen stated that continued growth indicated by the annual escalators and stabilized costs would eventually result in a cash flow surplus. Mr. van Malssen stated that the increased costs in the General Fund contributed to the Fiscal Year cash flow deficit. Mr. van Malssen stated that the City would be at the 10 percent General Fund reserve target by the end of Fiscal Year Mr. van Malssen stated that if no corrective action was taken the General Fund reserves would be below 10 percent by the end of Fiscal Year and was projected to be 7.7 percent. Mr. van Malssen stated that there would be continued depletion of General Fund reserves if corrective action was not taken. Mike Burton, Project Director, Burton & Associates, Inc., stated that there were two solutions to relieve the pressure of the General Fund reserves including generating more revenue or incurring less expenses. Mayor Henderson stated that increasing the number of building permits issued by the City was the only meaningful way to impact revenues. Mr. Burton stated that the fire assessment or the millage rate could be increased to generate revenue. Councilman Banks stated that the stormwater fee could be increased. Mr. Burton stated that the stormwater fee was a separate Enterprise Fund and would not affect the General Fund. Mr. van Malssen stated that the largest controllable revenues were the millage rate, fire assessments and the costs that could be reduced by City Council. Mr. Burton stated that the fire assessment fees subsidized the Fire Department operations. Mr. Burton stated that putting the fire assessment revenue into its own fund would provide a clear accounting of the revenue received. Mr. Burton stated that the more revenue received in fire assessment revenue the less net expenses would be incurred by the General Fund. Mr. Burton stated that the fire assessment fee, in the amount of $45.83, was relatively low when compared to single family residential fire assessment fees from other cities as follows: 24