THE CITY OF KENT, OHIO FINANCE COMMITTEE WED., NOV. 5, 2014

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1 THE CITY OF KENT, OHIO FINANCE COMMITTEE WED., NOV. 5, 2014 This meeting of the Finance Committee of Kent City Council was called to order on Wed., Nov. 5, 2014, by Wayne Wilson, Chair, at 8:38 p.m. PRESENT: ALSO PRESENT: ABSENT: MR. AMRHEIN, MR. DeLEONE, MR. FERRARA, MS. LONG, MS. SHAFFER, MS. WALLACH, AND MR. WILSON D. RULLER, CITY MANAGER; J. SILVER, LAW DIRECTOR; L. JORDAN, CLERK OF COUNCIL; D. COFFEE, DIR. OF BUDGET & FINANCE; AND G. ROBERTS, SERVICE DIRECTOR MR. KUHAR AND MR SIDOTI, COUNCIL & MAYOR JERRY FIALA Chair Wilson said the first item for discussion would be the Police Facility Bond issue. DAVE RULLER, CITY MANAGER, explained that DAVE COFFEE, DIRECTOR OF BUDGET & FINANCE, has been working with GENE ROBERTS, SERVICE DIRECTOR, and the architectural firm. He said they need to get the bonds issued, allowing them to proceed with the construction of the project. He said they are requesting $4.9 million. He said their debt team reviewed strategies as to the best way to do it. Mr. Ruller said he would not pretend to know all of the details. He said they have a conference call with Moody s the following day, adding they were hoping to make a strong case for great rates on the bonds. Mr. Coffee requested the Committee s authorization for the issuance of $4.9 million bonded debt, and the related ordinance as outlined in his Oct. 28, 2014 memo to the City Manager. Mr. Coffee said it would be a twenty-five-year bond. He said they are at or near historic lows in the municipal bond market, adding that this is a favorable time. Mr. Coffee said he is pleased this project came along at this time, adding that their borrowing costs are so low. He said they used a 5% debt rate on the pro forma, but at this point, they are looking at 3.6% or 3.7%. He commented that it was a darn good rate. Ms. Wallach asked if they were going to parcel it out two or three at a time, and Mr. Coffee said that is the intent. He said they are reserving decisions on bonding the remainder to see what the market is at that time. Mr. Coffee said at this point, the consensus was that this was a good time to lock in with a bond, rather than a note that is subject to interest changes. Ms. Wallach asked if it was not the full amount, and Mr. Coffee said that was correct. He said that amount meets cash flow projections in the near term to get the project farther down the road. He said it is also the small issuer cap of $5 million, which will reduce the burden of the reporting requirements. Mr. Coffee said, theoretically, if they did another $4.9 next year and the following year, that would probably complete the project s debt requirements and keep them under the cap. Ms. Wallach asked how much they will receive from the income tax levy, and Mr. Coffee said he thought it would be around $1.4 million annually at this time. He noted that is the projection. Ms. Wallach asked if the police facility cost is $12 million, and Mr. Coffee said the total project is on budget at $17.1 million. He said he has reason to believe that it may be less than that, but the costs are not finalized at this time. Ms. Long said it was an excellent idea. There were no further questions or audience comments at this time. MOTION TO AUTHORIZE THE POLICE FACILITY BOND ISSUE. 1

2 Motion made by Mr. Ferrara, seconded by Mr. Amrhein, and carried by a voice vote of 6-0-1, with Mr. Chair Wilson said the next issue dealt with the staffing at Central Maintenance. Mr. Ruller said that Mr. Roberts has been working on this, to come up with a strategy to catch up with the growth they experienced with service responsibilities at a time when they are not adding positions. He said they have a window of opportunity, adding Mr. Roberts would outline a plan to transition some existing positions when vacated giving a little more flexibility and increasing the staffing level. He said it may actually save money. Mr. Ruller said it has gone through AFSCME, adding that the Union supports this as they recognize the need. Mr. Roberts said the primary premise of this change would be to take service worker employees and replace them with laborers. He said about 50% of their work done is laborer work. He said as they look at the history of the Central Maintenance, in 1979 they had Street Department, Sewer Department, and Water Department with thirty-six employees. He said through attrition and efficiencies, they have reduced down to twenty-six positions, including managers and vehicle maintenance. Mr. Roberts said they would like to transfer the more labor-oriented work, such as plow trucks and tree chipping into a laborer s classification, saving 40% per job. He said for every 40% they save, they will increase the pot of money to hire another laborer. He said that a decrease of five service workers will equal seven laborers. Mr. Roberts said the clerk in Central Maintenance has retired. He said since they are implementing a computerized time tracking system, instead of the clock, they are reducing a good portion of the Clerk s time that was spent inputting time into the computer. Mr. Roberts said the rest of her time was spent on back flow issues. He said they have taken a service worker, and asked them to do the form letters and track the letters. Mr. Roberts said in the long term, through attrition, they will increase one staff member in the next two to three months, taking them to twenty-seven positions. He said as attrition occurs, they will increase their staff by 8%, decreasing operating costs by 1%. Mr. Roberts pointed out that does not include medical costs. He said most laborer positions do not increase their health care as they are younger people. He said one side benefit is they will see them, in a lower paying position, and see their work ethic. Mr. Roberts said as the jobs open up, they can be service workers or repair operators. He said they are seeing an opportunity because of retirements. Mr. Roberts said they do not need this as an ordinance, adding it will come back in the position allocation ordinance typically passed in December. There were no questions or audience comments at this time. MOTION TO AUTHORIZE AN AMENDMENT TO THE POSITION ALLOCATION ORDINANCE FOR 2015 TO INCORPORATE THE STAFFING CHANGES PROPOSED FOR CENTRAL MAINTENANCE. Motion made by Mr. Ferrara, seconded by Mr. DeLeone Ms. Wallach commended Mr. Roberts on a good idea and nice job. She supported the fact they were creating more opportunity for job placement for young people. The motion carried by a voice vote of 6-0-1, with Mr. Chair Wilson said the final topic was the 2015 Operating Budget. He said they would be reviewing it the same as the previous year. Mr. Ruller said he felt compelled to do introductory remarks, despite the lateness of the hour. He said they tell the specifics in the budget. Mr. Ruller said a lot of work goes into this budget, adding each budget tells a story. Mr. Ruller said someone has to tell the story. He said he is always proud of their budgets, adding that it is sometimes easier to be more proud of some. Mr. Ruller said this budget shows some promise. 2

3 Mr. Ruller said Mr. Coffee is really conservative with his assessments. He said they feel that the strategies of taking the capital monies and investing them to create a return will allow them to return to their services. He said former City Manager Lew Steinbrecher s messages to Council ten years ago were that things were not strong and they needed to make cuts. He said they have seen a constant mode of reductions, adding they have done good business practices, like the one presented by Mr. Roberts. Mr. Ruller said he prefers the environment where they save it and apply it to another emerging initiative. He said Mr. Roberts pointed out that he needs money in other areas, adding that was not possible in the last ten years. He said they were making cuts to stay afloat. Mr. Ruller said this budget and the work authorized with the union contracts begin to restore their investments in their most important capital, which is human capital. He said that reinvesting in the employees is a top priority, adding that is a good sign. He said he hoped it would continue. Mr. Ruller said Mr. Coffee takes a conservative view in all of his assumptions. He said he expects they will outperform his assumptions. He said he feels good about where they have been and where they were a few years earlier. Mr. Ruller said he felt this was anticlimactic, as they do not get the benefit of the time spent. He said a lot of time is spent by him and the staff as they grind through the budget. He said despite all of that work, the budget looks similar to previous years. He said the operating budget is not geared to a lot of variability. He said that everything they do orbits their strategic priorities, which do not change a lot. Mr. Ruller said they pride themselves on being uniquely Kent, but other cities have the same priorities. Mr. Ruller said they provide all traditional services expected of a city, and their operating budget is built around them. He said the capital budget does some investments. He said the operating budget represents their core investments that do not change year to year. He said he regrets that it is anticlimatic, adding they worked hard to not deal with drama. Mr. Ruller said it has hurt to reduce and cut, adding they managed their way through it with little impact on the community. He said any extra money would be targeted to areas where the communities have the most need, which is their hope. He said they always have grants and requests in the pipeline. Mr. Ruller said Mr. Coffee is conservative, adding he will not include any of those grants until they are on paper. Mr. Ruller said they should not see any surprises. He said he is not personally convinced that the new normal of cuts and reductions will last forever. He said he remains optimistic that there will be a day when they have a healthy dialogue about extra revenues. He said most of what the operating budget deals with is about the people. He said unless they can double the staff or cut it in half, there is not a lot of drama. Mr. Ruller said people who provide the services make Kent what it is. Mr. Ruller said there are cuts in the budget, more denials of requests, and deferral of some items. He said everything is not perfect, adding that for the first time in years, some of the savings are reinvested into their employees. Mr. Ruller said that is an important change, adding it is just a seed that they hope will grow. He said he looks forward to when they can look back when this started, adding he hoped it would be a memorable moment. Mr. Ruller said Mr. Coffee will review the budget by section. He said they are $81,000 under the current Operating and Maintenance budget. Mr. Ruller said personnel costs are up, averaging a little over 2%, reflecting the commitment to their employees. He said the employees went through the hard times with them, and they are now sharing their gains with them. Mr. Ruller said the revenue side is looking better in the last three years, adding they are looking for another year when they are on track. He said it is not the tremendous windfall they would like, but what is left is a stabilized revenue growth rate of 2% to 4%, depending on the months. 3

4 Mr. Ruller said they still have a long way to go before they declare a financial victory. He said he likes how they are trending with their plans and strategies. He said he likes the progress they have made, and the prospects on their horizon. Mr. Coffee said he is pleased to present the budget for their consideration. He said it is a very solid budget, with all conservative budget practices. He gave kudos and credit to the department heads who amaze him with their cooperation and contributions. Mr. Coffee said it truly is a collaborative process. He said there is a lot more that goes on behind the curtain to make this happen. Mr. Coffee said he is appreciative of his colleagues input. Mr. Wilson said they would go through the budget section by section, adding he would look for a motion to approve each section. He said if there are any problems, he would appreciate a motion to hold the item for further discussion. Ms. Wallach said she had some questions on the overview. She said she saw the actual for 2012 and She said Page 1-1 shows the 2013 revenue as $ million. She said on Page 1-5, it shows the actual monies spent were $ million, adding they were over budget and spent more than they brought in. Ms. Wallach said the revenue on Page 1-1 shows $ million versus $ million, which was the original from the previous year. Mr. Coffee said the primary revenue source is income tax, with $12.4 million budgeted. Mr. Coffee said they are on track, and probably will achieve $ million to end He said they are looking at ending $500,000 over 2013, which would be a 3.9% increase. Mr. Coffee submitted that is a healthy rate of increase. Ms. Wallach said the revenue would be about $40 million. Mr. Coffee said the normalized income tax collected is 2%, not the amount for the police facility, adding that would be $ million. He said they are looking at $ million in total because of the additional 1/4 percent. Ms. Wallach said they do not count that, and Mr. Coffee said he does count that money. Mr. Coffee told Ms. Wallach she asked, relative to the bond, how much they would collect for the additional tax in 2014, adding that it is expected to be $1.6 million. Ms. Wallach asked if their revenue would go up to $36 million, and Mr. Coffee said that was correct. Ms. Wallach asked if Mr. Coffee knew the revenue projections from the previous year, noting they had the actual amounts. Mr. Coffee said he was confident they exceed the original project, but did not recall the numbers. There were no questions, and Mr. Coffee moved to the General Government tab. He said the summary page reflects the change in Civil Service. He said there was a personnel change to reduce the position from full time to part time. Mr. Coffee said on Pages 2-26A and 2-26B, for Service Administration, they used to show costs under Solid Waste and Storm Water funds for activities. He said the personnel payroll was within the Service Administration budget. Mr. Coffee said the O&M used to be in the Utility Service group. He said that has been consolidated, adding they eliminated those budget pages. Ms. Wallach asked Mr. Coffee to not use letter abbreviations. Mr. Coffee said some expenses in Community Support were moved to Service Administration for downtown trash hauling and the litter program. Ms. Long asked the page number, and Mr. Coffee said it was page 2-6. He said they previously had expenses for the two programs, and have consolidated it with the Service Administration expenses. He said the increased bed tax share by $28,000 is good news. He said they are receiving 75% of every dollar through the Kent State University Hotel/Conference Center. Ms. Shaffer asked if they have to share the bed tax, and Mr. Coffee said of the 6% collected, they remit 1.5% to the Visitor s Bureau. Ms. Shaffer said they get the lion s share, and Mr. Coffee said a check came in earlier in the day for about $45,000. He said they may need to amend the appropriations if that continues. 4

5 Ms. Wallach asked if they get monies from the student complexes, and Mr. Coffee said it is the KSU Hotel and the University Inn. He said historically, the amounts were not worth mentioning, but they have seen a significant change and improvement. Mr. Wilson said when they added the bed tax, both hotels closed down. Mr. Coffee said they received between $1,000 to $2,000 annually previously. Ms. Long asked how that works with the hotels in Brimfield and the JEDD, and Mr. Coffee said they share the revenue stream with Brimfield. Mr. Wilson said that is a share of the income tax dollars, adding they do not get any bed tax from those hotels. Ms. Long asked if this is the appropriate time for a line item to be increased, and Mr. Wilson said that was correct. Ms. Long said on page 2-2, Line 7210, she would like to see an increase for Council in the Travel/Transportation line. She said if they want to go to a workshop or attend a seminar that has a cost involved, she would like to see monies available. Ms. Long said she would like to see $500 per person, or an increase to $4500. She said currently there is $1,000 between nine people or $60 apiece. MOTION TO INCREASE COUNCIL S LINE 7210 TO $4500. Motion made by Ms. Long, seconded by Ms. Wallach. Ms. Long said with only $1,000 between nine people, they cannot even go to Cleveland. Ms. Wallach said Council should be educated. She said there are really good events that people may want to attend, and should be able to. Mr. Amrhein said he was unsure how much he would use, but agreed with the motion. Ms. Long said it carries over, adding she could bring back information. Mr. DeLeone said they had that previously, and he was unsure of the amount. He said he used it once. Mr. DeLeone agreed with the motion at this time. Ms. Shaffer said she may be a little off topic, and suggested they may need to add another line items. She said there are some things that they can attend as ambassadors to the community, and she would like to see monies for those items. She said one example is the Tree City awards. Mr. Coffee said Line 7210 covers registration fees, etc., adding it pays for professional expenditures. Ms. Shaffer suggested they can broaden the category, and Mr. Wilson said it can be used for that purpose. Ms. Shaffer said it has been a problem for her, adding it could be a problem for other Council members. Mr. Coffee tried to explain something and Mr. Ferrara called a point of order, as there was a motion on the floor. Mr. Ferrara said there has not been a huge demand for money. He said those expenditures are part of the reason they get a salary. He said he would hate to see a fund built up that had not been used, adding he is opposed to the motion. Mr. DeLeone said he is opposed to using it for things like the Tree City Awards where they serve cocktails. He said Ms. Long is speaking of professional development. Mr. DeLeone said he did not agree with dinner invitations. Mr. Amrhein said he is fortunate that he does not have to take the money. He said goodwill works, as does networking. Mr. Amrhein said if he does not go, he is confronted by people. He said it is a good idea to get money if they cannot afford it. Ms. Wallach said when City employees go, they have cash bars and costs for dinner. She said if it is not abused, she does not see any reason why they cannot do that. Ms. Wallach said she was unsure if it was the same category, and suggested they could make a motion to do something different. 5

6 Mr. Wilson said they are getting into a committee meeting at this point. He suggested they hold that section until a later date. Ms. Long asked Mr. Coffee if they can do that, and Mr. Wilson said that he was the Chair. Ms. Long said she asked Mr. Coffee when it was a good time to bring it up, and Mr. Coffee said this was the time to do it. Mr. Wilson said he had said earlier they could make a motion to hold a piece for further discussion. Ms. Wallach suggested they vote on the increase at this time, adding they can discuss later how to spend it. The Clerk restated the motion at this time. She also reminded Council that she has to deliver ordinances throughout the year to the County, and that amount was included in Line Mr. Wilson said he would not be using his portion, so she could use it. Mr. Wilson agreed with Mr. Ferrara. He said they asked the staff to cut back on seminars, etc., over the last few years, but now are discussing increasing their own budget. Mr. Wilson said he did not agree with the motion. The motion carried by a voice vote of 5-1-1, with Mr. Ferrara dissenting and Mr. Ms. Shaffer reminded everyone they gave the Mayor a little slush fund so he could attend events. Mr. Wilson asked her to repeat what she said, as he did not hear her, and she said they gave the Mayor a little extra money so he could attend events. Ms. Shaffer asked when this would be discussed, and Ms. Wallach said they would have to schedule it. Mr. Coffee said in the very front of the book, behind the assumptions page, is a definition of expenditures. He said Line #7210 is defined, and includes registration fees, meetings, and conferences. He also told them the Finance Director has the authority to allocate within the Operations & Maintenance if one line is short, adding they do this normally to cover minor shortages or variances as needed. MOTION TO APPROVE GENERAL GOVERNMENT AS AMENDED. Motion made by Mr. Amrhein, seconded by Mr. Ferrara, and carried by a voice vote of 6-0-1, with Mr. Mr. Coffee said the next section was Public Safety. He said they funded three police retirements for 2015 and added one compliance officer full time. He said they are hoping to have that salary offset through collection of the parking meters and fine revenues. Mr. Coffee said they also added the position of the dedicated school resource officer. He said they have an MOU with the school to reimburse them 100% for that position. Ms. Wallach asked if that is an up-front reimbursement, and Mr. Coffee said they pay and invoice after the fact. He said they have been invoicing on a quarterly basis. MOTION TO APPROVE THE PUBLIC SAFETY BUDGET. Motion made by Mr. Amrhein, seconded by Mr. Ferrara, and carried by a voice vote of 6-0-1, with Mr. Mr. Coffee said the next section was Transportation. He said they are maintaining the status quo, adding the large capital project is the Summit Street Improvement Project in the capital plan. Ms. Wallach asked if that is the total cost or what they are paying. Mr. Coffee said they budget the full amount, and will actually pay 20%. Mr. Roberts noted they are paying 10% as is the University. MOTION TO APPROVE THE TRANSPORTATION BUDGET. 6

7 Motion made by Mr. Ferrara, seconded by Mr. DeLeone, and carried by a voice vote of 6-0-1, with Mr. Mr. Coffee said in the next section, Basic Utilities, for 2015 they are not funding solid waste or storm water out of this section, and moved it to the Service Administration section. MOTION TO APPROVE THE BASIC UTILITIES BUDGET. Motion made by Mr. Ferrara, seconded by Mr. Amrhein, and carried by a voice vote of 6-0-1, with Mr. Mr. Coffee said the next section was the Health Services budget. He said they requested a full time position that was negotiated to a part time position. He said it would be added to the authorized positions, but he was not yet funding it. Mr. Coffee said he wanted Council to authorize the position. He said that once it is done, they will return in early 2015 with the funding request as an amendment. Mr. Coffee said his understanding is that the Health Board endorsed this change. Ms. Wallach asked if the title page lists all of those items that are inspected, and Mr. Coffee said that was correct. MOTION TO APPROVE THE HEALTH SERVICES BUDGET. Motion made by Mr. Amrhein, seconded by Mr. DeLeone, and carried by a voice vote of 6-0-1, with Mr. Mr. Coffee said the next section was Leisure Time. He said they did some payroll reallocation between different cost center components, resulting in no net change in that regard. He said the Operation and Maintenance budget was largely unchanged. He said the fitness center is now showing, and there were some limited increases in the K-6 child care program. Mr. DeLeone asked if the fitness center was new, and Mr. Coffee said it would be in full swing for 2015, but was included in Mr. Wilson reminded them they could cut down the budget to zero, but would not be able to touch the money. MOTION TO APPROVE THE LEISURE TIME BUDGET. Motion made by Mr. DeLeone, seconded by Mr. Amrhein, and carried by a voice vote of 6-0-1, with Mr. Mr. Coffee said their budget did exceed their estimated resources. He said his budget will reflect less. Mr. Coffee said once they file their year end figures, they can do an amendment later after they get a new certificate of estimated resources. Mr. Coffee said the next issue was the Community & Environment budget. Ms. Wallach asked if this was the last year they fund Main Street at $75,000. Ms. Susel said it is the last year of the contract. Mr. Coffee said it will be Council s decision. He said the budget had a few minor changes in nomenclature. Mr. DeLeone asked him to define urban renewal, and Mr. Coffee said historically it is used for demolition of vacant buildings etc. He said as they can see from the actual monies, they have not been fully expending the fund typically. MOTION TO APPROVE THE COMMUNITY & ENVIRONMENT BUDGET. Motion made by Mr. Ferrara, seconded by Mr. DeLeone, and carried by a voice vote of 6-0-1, with Mr. Ms. Wallach asked where Celebrate Kent was, and Mr. Coffee said it is in the Community Support line. He said they funded $15,000 like the previous year. 7

8 Mr. Coffee said the next section dealt with Debt Service. Mr. Coffee said it is the layout of their annual debt service for authorized debt. He said the bonding they discussed earlier would not be reflected. Ms. Shaffer asked if the number will change because of the bonding, and Mr. Coffee said that was correct. He said they must first issue the bonds, and the debt service would follow. He said that debt will be paid out of the Police Facility Fund, adding it has its own dedicated revenue source. MOTION TO APPROVE THE DEBT SERVICE BUDGET. Motion made by Mr. Ferrara, seconded by Mr. DeLeone, and carried by a voice vote of 6-0-1, with Mr. MOTION TO AUTHORIZE THE 2015 OPERATING BUDGET. Motion made by Mr. Ferrara, seconded by Mr. Amrhein, and carried by a voice vote of 6-0-1, with Mr. MOTION TO RECESS INTO EXECUTIVE SESSION FOR 2 ISSUES OF PENDING LITIGATION AND TWO LABOR NEGOTIATIONS. Motion made by Mr. Amrhein, seconded by Mr. Ferrara. Roll call was taken on the motion. Voting aye: Mr. Amrhein, Mr. DeLeone, Mr. Ferrara, Ms. Long, Ms. Shaffer, Ms. Wallach, and Mr. Wilson. The motion carried by a roll call vote of 7-0. Chair Wilson recessed this meeting at 9:40 p.m. for Executive Session. Chair Wilson reconvened this meeting at 10:23 p.m. MOTION TO AUTHORIZE THE SETTLEMENT AGREEMENT WITH TRAX CONSTRUCTION ONCE STAFF REACHES ACCEPTABLE TERMS WITH TRAX. Motion made by Mr. Ferrara, seconded by Mr. DeLeone, and carried by a voice vote of 7-0. MOTION TO AUTHORIZE THE SETTLEMENT AGREEMENT WITH COLLEGE TOWN KENT LLC AND PREMIER DEVELOPMENT PARTNERS FOR SIDEWALK REPAIR. Motion made by Mr. Ferrara, seconded by Ms. Shaffer, and carried by a voice vote of 7-0. MOTION TO AUTHORIZE THE THREE-YEAR LABOR CONTRACT WITH THE F.O.P. Motion made by Mr. Ferrara, seconded by Ms. Shaffer, and carried by a voice vote of 7-0. MOTION TO AUTHORIZE THE THREE YEAR LABOR CONTRACT WITH A.F.S.C.M.E. Motion made by Mr. Ferrara, seconded by Ms. Shaffer, and carried by a voice vote of 6-0-1, with Mr. Hearing no further business before this Committee, Chair Wilson adjourned this meeting at 10:26 p.m. Linda M. Jordan, Clerk of Council ACTION RECOMMENDED: 1) TO AUTHORIZE THE POLICE FACILITY BOND ISSUE. 2) TO AUTHORIZE THE RECOMMENDED STAFFING CHANGES AT CENTRAL MAINTENANCE 3) TO AUTHORIZE THE 2015 OPERATING BUDGET, WITH THE AMENDMENT TO INCREASE COUNCIL S LINE #7210 TO $4500, TO ALLOW $500 APIECE FOR EACH COUNCIL. 4) TO APPROVE THE SETTLEMENT AGREEMENT WITH TRAX CONSTRUCTION ONCE STAFF REACHES ACCEPTABLE TERMS WITH TRAX. 8

9 5) TO AUTHORIZE THE SETTLEMENT AGREEMENT WITH COLLEGE TOWN KENT LLC AND PREMIER DEVELOPMENT PARTNERS FOR SIDEWALK REPAIR. 6) TO AUTHORIZE THE THREE-YEAR LABOR CONTRACT WITH THE F.O.P. 7) TO AUTHORIZE THE THREE YEAR LABOR CONTRACT WITH A.F.S.C.M.E 9