2016 Budget Questions Page 1 of 20 City Council Budget 2016 Questions & Staff Responses November 6, 2015 How many times in the last 10 years have we not taken the 1% property tax that benefits the general fund? The 1% property tax increase has been levied each year for the last 10 years. The increase (approximately $38,000 for 2016) benefits the general fund, fire/ems, debt service fund, affordable housing, community services and the firemen s pension fund. The actual increase to the general fund is only about $7,000. If it s not too difficult, can we estimate the amount of money that these increases have benefitted the general fund? That will take some time so I will probably need to look at this in the near future but a high level quick and dirty estimate would be approximately $70,000 over the 10 year period, if the General Fund received $600k to $700k per year (1% increase of $6,000 to $7,000 per year). The impact of the two levy lid lifts skew this analysis somewhat as they both occurred during the ten year period mentioned. Please explain the $100,000 difference in the expenses over revenue in the GO Debt Service Fund. I believe that in 2015, it was the opposite. Typically, the debt service revenue would meet our annual debt service expenses. However, since we are on a cash basis, we have 2015 interest expense for MV voted debt that will be paid in 2016 (approximately $60,000). We will be transferring GF dollars to the debt service fund in 2015 to fund some of the 2016 shortfall. The Projected Ending Balance in the Transmission Line Replacement Fund (TLRP) does that take into consideration the $500k loan? Yes, it does. Does the proposed loan from the TLRP count against our debt limit? Also, please give us a current balance on the line of credit and the current status of the expense guarantee for bldg. 202. I believe both of these also count against our debt ceiling. Interfund loans do not count against our debt limit. Any outstanding amounts for the line of credit would count against the debt limit but there is currently $0 outstanding as of today and we do not have anticipated draws built into the 2016 budget. The building 202 commitment will be paid in 2015 and it is being funded largely by REET dollars with a small component coming from 2010 bond funds.
2016 Budget Questions Page 2 of 20 The Council Policy targets please show ranges if there are set ranges. This would better explain the NO in the Stormwater Fund. How far off are we in this fund and why? I will add the target ranges in the next run. We did include the ranges last year and will include as part of the budget book in the financial policies section. The target for the Stormwater fund is that revenues should cover expenditures and long term needs. The expenses in excess of revenues triggered the NO response. However, we have a proposed solution that includes increased stormwater revenue (to existing rates established by code) and an interfund loan from the water system. We also reduced the 2016 requested expenditures. Longer term strategies for funding stormwater fund may include a stormwater surcharge. This potential surcharge was one of the items that was discussed at the June budget retreat. The grand totals show a negative $2m in revenue compared to expenses. We talked about a $242k gap. Isn t the $2m a gap? The $242,000 gap that was referred to was for the general fund only. In the version of the budget that will be presented this week, this gap will be bridged by some of the items that David mentioned at the meeting on Monday. We will provide more details on these changes in your packet. The grand totals include all of the capital and debt funds. The gap in these areas is related to timing of revenues versus expenditures. For example, all of the bond revenue of $3.3 million was recognized in 2015 but $1.2 million of the expense will not be recognized until 2016. This creates a reduction of fund balance that creates a gap related to payment of expenditures in a different year than the receipt of revenues. The same situation occurs in our construction funds and SDC funds. I would not consider this an unfavorable financial concern just a result of our cash accounting system. Please explain the reasons for the proposed TLRP loan. I thought that I heard needing Howard Street match; cost overruns on Landes and Sheridan streets; and money owed Honeywell for work at the library. Are those correct? If so, please give the amounts. The three components are: the Landes/Sheridan sidewalk supplemental costs (approved by council in June 2015) for $205,000; Honeywell energy costs for non MV buildings (library, Cotton, Pope, City Hall) for $180,000 and the match for Howard Street grants for $115,000. We will be presenting this information at council on Monday. The interfund loan is built into the budget and we are suggesting repayment from future advance refunding/refinancing of 2008 bonds and/or REET revenues in excess of what is budgeted for 2016 (should that occur). How are we going to repay the TLRF loan? I understand that we are estimating increased REET funds and may use the refi of the 2008 bond? Is that possible with the 3-year loan limit? Is it proper to make a loan without having a set repayment plan? Using the bond refi, would that just extend and increase the debt but at a lower interest rate?
2016 Budget Questions Page 3 of 20 The interfund loan is built into the budget and we are suggesting repayment from future advance refunding/refinancing of 2008 bonds and/or REET revenues in excess of what is budgeted for 2016 (should that occur). The loan would occur in December 2015 and we are recommending repayment no later than January 31, 2019. This creates a term of three years and one month. I suggested that term to give us the most amount of time to analyze and complete a refinancing but we can look at a payment commitment in 2018, if Council desires. The advance refunding is the payment plan; in lieu of that, we would need to identify another solution. A bond refinance will be similar to any other loan refinance; we will have to analyze the new term and any additional funds we take out versus the long term cashflow payments. David has asked our bond underwriter/advisors to provide a current analysis and to continue to monitor market opportunities for the best rate, term and costs. The seawall repairs. I assume those have already started? Why didn t that come before council? Those repairs have started. The cost of the repair is approximately $12,000 and is within David s signature authority. We moved forward with these repairs because a neighboring property is working on a portion of the seawall and doing this necessary repair now in conjunction with the other property owner will save the City money. CM message, page 2, bottom. What is meant by the sentence starting: In addition to the project cost appropriations.? That IS a convoluted sentence! I will rewrite. It is attempting to say that not only are there actual 2015 expenditures related to MV but also transfers from the bond project funds (expenditures) to the capital funds. Again, I will clarify this better in our update. CM message, pages 7 and 9. What is meant by the 2015 COUNCIL AND CITY-WIDE GOALS? Should this be 2016 goals? We seem to be combining projects that should be completed (Howard Street, Fort Worden, etc.) with projects to start (streets, ERR, etc.)? And then on page 9, we seem to be getting into this again with unmet needs? I will review the message. This was a very ROUGH draft completed without as much time as it should have been given. We will work on a more complete message that is better structured to the current budget. CM message, page 10. Unmet needs for street maintenance. We ve talked about an annual $1m need. This shows a much smaller amount. The street maintenance request for $100,000 would only provide some repairs and would not fund all of our needs for ongoing repair/maintenance and paving. Typically, the manager has requested the $100,000 and not received funding. The
2016 Budget Questions Page 4 of 20 actual need is much larger but the $100,000 would help the existing crew address some repairs. Also, I would like to see the report that David was talking about showing the money flowing out of the city because of a lack of shopping options. I believe that is what he was referring to. Separate document attached. And finally, in the police department, have we considered hiring a mental health professional instead of another police officer? The police department plans for one or more officers to receive mental health related training to help with these needs. I think I heard a proposal for a 2% utility tax for public and/or private utilities. Does that tax get passed through to citizens? The public utility tax would get added on to the City water, sewer, storm and garbage bills and would be paid by the citizens as a percent of their bill. We do not have an increase for private utility tax (electric/phone) as those increases would require a vote of the citizens. If we use the Contingency Fund for code enforcement and abatement does that negate David's idea to train a police officer to be a temporary code enforcer or would the fund pay his salary? How does that work and which proposal would happen sooner in 2016? David s suggestion to use the contingency fund related to the costs to abate certain hazards or make repairs. The fund would be repaid when the citizen made payment to the city, either directly or through settlement of a property lien. The code enforcement officer would not be funded from the contingency fund as there would not be adequate ongoing funds to pay salary and related expenditures. Would planning for seasonal paid parking need to be a new budget item? Or does that fall into Admin budget? We currently only budget for parking fines. Parking fees would fall into the same area in the general fund revenue line items. We do not have any paid parking revenue in the budget; nor do we have the equipment/start- up costs or additional staff/volunteer time to monitor built into the budget. Under facility rental revenues, I saw no revenue requested for Short Term Facility Rentals. Nothing from the Cotton Building, Chetzemoka, etc.?
2016 Budget Questions Page 5 of 20 The revenue is budgeted in Community Services Parks. The line item is 362-400-00- Facility Rentals Short Term and the budget for 2016 is $12,000. In 2015 there were estimated 6,800.00 for other miscellaneous revenues. What did that include? Miscellaneous revenue is actually quite a variety items. Generally consists of refunds and purchase card rebates that are required to be recorded as revenues and not as credits against expenses (per State Auditor s BARS manual). Additionally, small fees that have no other category will be posted here. In 2015, we had a couple of small filming fees that people pay the City. Can you explain the high revenues from PEG Access and what kind of expenses they have? Is there a salaried employee? The City charges WAVE cable for the use of the public right-of- way/cost of regulating the company. There is no limit as to what the City may do with the money collected. I believe these fees are passed on to the individual customers. WAVE also pays PEG fees for public/education/government TV. These fees must be used for capital costs and operating expenses for the PTTV studio. PEG does not have any employees. The budget includes professional fees that are used to fund some of their filming/content and some administrative type services that are provided by an independent contracter. The remainder of their expenses are technology related phone, computer, network and cable costs. 9500.00 in revenue is requested from Library Fines for 2016. Are these from late books, etc.? Library fines are charged for late DVDs ($1 per day up to $5) and replacement of lost items. The library does not collect fines for late books. How do we use the $10,000 Housing Fund? And what was included in the 6500.00 expenditures? The $10,000 is currently used to fund permit fees for programs like Habitat for Humanity. The expenditures are transfers to the Development Services Department for any permit fees for this program. In 2015, we did not have any permits issued for the program but are budgeting expenditures for 2016 to fund any activity that might occur. What is meant by Rec Prog (Pool) School Dist? Does the School System not pay for swim team use?
2016 Budget Questions Page 6 of 20 The Port Townsend Swim Team (a private non-profit organization) does pay for pool use but the revenues are budgeted in pool facility rental. I believe the account you are referencing is no longer used. The Port Townsend High School swim team does not pay for pool use as the School District owns the facility.
Retail Leakage and Surplus Analysis The Retail Leakage and Surplus Analysis examines the quantitative aspect of the community's retail opportunities. It is a guide to understanding retail opportunities but it is not an analysis that indicates unconditional opportunities. The analysis is sometimes called "a gap analysis" or "a supply and demand analysis" and can aid in the following: -Indicating how well the retail needs of local residents are being met -Uncovering unmet demand and possible opportunities -Understanding the strengths and weaknesses of the local retail sector -Measuring the difference between estimated and potential retail sales Understanding Retail Leakage Retail leakage means that residents are spending more for products than local businesses capture. Retail sales leakage suggests that there is unmet demand in the trade area and that the community can support additional store space for that type of business. However, retail leakage does not necessarily translate into opportunity. For example, there could be a strong competitor in a neighboring community that dominates the market for that type of product or store. Understanding Retail Surplus A retail surplus means that the community's trade area is capturing the local market plus attracting non-local shoppers. A retail surplus does not necessarily mean that the community cannot support additional business. Many communities have developed strong clusters of stores that have broad geographic appeal. Examples of these types of retailers include: sporting goods stores, home furnishing stores, restaurants, and other specialty operations that become destination retailers and draw customers from outside the trade area. Examining the quantitative aspects (Leakage/Surplus) is only part of the evaluation of community's retail opportunities. Before any conclusions can be drawn about potential business expansion or recruitment opportunities, qualitative considerations such as trade area psychographics and buying habits must be analyzed in context of other market factors. Interpreting Leakage Index 1.0 = equilibrium, meaning that demand and sales in the area being analyzed are in balance..80 = demand exceeds sales by 20%, meaning that consumers are leaving the area being analyzed. 1.2 = sales exceed demand by 20%, meaning that consumers are coming from outside the area being analyzed.
Leakage/Surplus Index by Major Store Type The quantitative comparison of retail leakage and surplus in the twelve major store types shown in the chart and table below provides an initial measure of market opportunities. Combining this analysis with the knowledge of the local retail situation will take the process of identifying retail possibilities one step further. Figure 1 provides the leakage/surplus indices and following is the sales potential and estimated sales for major store types. Figure 1. Leakage/Surplus Index and Estimated and Potential Sales by Major Store Types Motor Vehicle Parts & Dealers 43,569,966 10,046,880 0.2 Furniture & Home Furnishing Stores 4,717,231 3,824,225 0.8 Electronics & Appliance Stores 5,483,917 1,290,827 0.2 Building Material & Garden Equipment & Supply Dealers 17,114,832 11,270,742 0.7 Food & Beverage Stores 33,278,458 56,775,942 1.7 Health & Personal Care Stores 15,090,320 6,564,622 0.4 Clothing & Clothing Accessories Stores 11,481,708 7,860,995 0.7 Sporting Goods, Hobby, Book, & Music Stores 4,462,140 10,439,841 2.3 General Merchandise Stores 42,865,609 2,693,094 0.0 Miscellaneous Store Retailers 5,867,681 18,480,735 3.1 Foodservice & Drinking Places 22,595,654 20,723,273 0.9 Total 206,527,516 149,971,176 0.7 2 of 14
Sub-Categories of Motor Vehicle Parts & Dealers Automotive Dealers 36,757,165 1,563,146 0.0 Other Motor Vehicle Dealers 2,820,295 4,322,720 1.5 Automotive Parts, Accessories, & Tire Stores 3,992,506 4,161,014 1.0 Total Motor Vehicle Parts & Dealers 43,569,966 10,046,880 0.2 3 of 14
Sub-Categories of Furniture & Home Furnishing Stores Furniture Stores 2,127,117 1,198,218 0.6 Home Furnishing Stores 2,590,114 2,626,007 1.0 Total Furniture & Home Furnishing Stores 4,717,231 3,824,225 0.8 4 of 14
Sub-Categories of Electronics & Appliance Stores Household Appliances Stores 725,830 0 0.0 Radio, Television and Other Electronics Stores 3,139,960 738,871 0.2 Computer and Software Stores 1,388,564 551,956 0.4 Camera & Photographic Equipment Stores 229,563 0 0.0 Total Electronics & Appliance Stores 5,483,917 1,290,827 0.2 5 of 14
Sub-Categories of Building Material & Garden Equipment & Supply Dealers Home Centers 6,350,176 399,848 0.0 Paint and Wallpaper Stores 654,492 714,771 1.1 Hardware Stores 1,146,254 3,569,584 3.1 Other Building Materials Dealers 6,060,464 716,746 0.1 Outdoor Power Equipment Stores 471,120 576,562 1.2 Nursery and Garden centers 2,432,326 5,293,231 2.2 Total Building Material & Garden Equipment & Supply Dealers 17,114,832 11,270,742 0.7 6 of 14
Sub-Categories of Food & Beverage Stores Supermarkets and Other Grocery (except Convenience) Stores 28,137,324 43,605,268 1.5 Convenience Stores 1,519,827 10,559,391 6.9 Specialty Food Stores 1,259,323 283,050 0.2 Beer, Wine, & Liquor Stores 2,361,984 2,328,233 1.0 Total Food & Beverage Stores 33,278,458 56,775,942 1.7 7 of 14
Sub-Categories of Health & Personal Care Stores Pharmacies and Drug Stores 12,287,365 4,808,936 0.4 Cosmetics, Beauty Supplies and Perfume Stores 791,323 451,315 0.6 Optical Goods Stores 948,612 344,672 0.4 Other Health and Personal Care Stores 1,063,020 959,699 0.9 Total Health & Personal Care Stores 15,090,320 6,564,622 0.4 8 of 14
Sub-Categories of Clothing & Clothing Accessories Stores Mens Clothing Stores 382,020 243,939 0.6 Womens Clothing Stores 1,942,603 3,670,352 1.9 Childrens and Infants Clothing Stores 484,940 392,875 0.8 Family Clothing Stores 4,588,249 137,103 0.0 Clothing Accessories Stores 355,635 666,298 1.9 Other Clothing Stores 655,164 1,716,455 2.6 Shoe Stores 987,263 0 0.0 Jewelry Stores 1,887,698 936,981 0.5 Luggage & Leather Goods Stores 198,136 96,992 0.5 Total Clothing & Clothing Accessories Stores 11,481,708 7,860,995 0.7 9 of 14
Sub-Categories of Sporting Goods, Hobby, Book, & Music Stores Sporting Goods Stores 1,762,171 4,097,346 2.3 Hobby, Toys and Games Stores 1,177,406 3,554,269 3.0 Sew/Neddlework/Piece Goods Stores 327,546 831,518 2.5 Musical Instrument and Supplies Stores 200,543 1,047,367 5.2 Book Stores 683,974 331,537 0.5 News Dealers and Newsstands 107,504 348,933 3.2 Prerecorded Tape, Compact Disc, and Record Stores 202,996 228,871 1.1 Total Sporting Goods, Hobby, Book, & Music Stores 4,462,140 10,439,841 2.3 10 of 14
Sub-Categories of General Merchandise Stores Department Stores excluding leased depts 8,196,640 925,877 0.1 Warehouse Clubs & Supercenters 32,795,465 1,674,771 0.0 All Other General Merchandise Stores 1,873,504 92,446 0.0 Total General Merchandise Stores 42,865,609 2,693,094 0.0 11 of 14
Sub-Categories of Miscellaneous Store Retailers Florists 407,079 778,725 1.9 Office Supplies and Stationery Stores 878,797 801,244 0.9 Gift, Novelty, and Souvenir Stores 1,066,178 3,325,726 3.1 Used Merchandise Stores 698,324 1,497,219 2.1 Other Miscellaneous Store Retailers 2,817,303 12,077,821 4.3 Total Miscellaneous Store Retailers 5,867,681 18,480,735 3.1 12 of 14
Sub-Categories of Foodservice & Drinking Places Full-service Restaurants 9,786,905 13,821,506 1.4 Limited-service Eating Places 9,953,474 4,046,671 0.4 Special Foodservices 1,955,041 2,363,902 1.2 Drinking Place - Alcoholic Beverages 900,234 491,194 0.5 Total Foodservice & Drinking Places 22,595,654 20,723,273 0.9 13 of 14
Sources and Methodology The primary data sources used in the construction of the database include: -- Current Year CAPE (Census Area Projections & Estimates) Consumer Expenditure Estimates -- Census of Retail Trade, Merchandise Line Sales -- Census Bureau Monthly Retail Trade The Census of Retail Trade presents a table known as the Merchandise Line summary, which relates approximately 120 merchandise lines (e.g. hardware) to each of the store types. For each merchandise line, the distribution of sales by store type can be computed, yielding a conversion table which apportions merchandise line sales by store type. The CAPE (Census Area Projections & Estimates) Consumer Expenditure database was re-computed to these merchandise lines by aggregating both whole and partial categories, yielding, at the block group level, a series of merchandise line estimates which are consistent with the CAPE Consumer Expenditure database. These two components were then combined in order to derive estimated potential by store type. The results were then compared to current retail trade statistics to ensure consistency and completeness. 14 of 14