A special meeting of the City Council was held in the City Council Chamber, 900 East Strawbridge Avenue, and was called to order at 6:30 p.m. by Mayor Kathy Meehan. 1. Pledge of Allegiance. 2. Roll Call. Present: Kathy Meehan Mayor Tim Thomas Council Member, District 1 Betty Moore Council Member, District 2 Yvonne Minus Council Member, District 3 Debbie Thomas Vice Mayor, District 4 Paul Alfrey Council Member, District 5 Teresa Lopez Council Member, District 6 Michael A. McNees City Manager Shannon Lewis Deputy City Manager Alison Dawley City Attorney Cathleen A. Wysor City Clerk Jeff Towne Director of Finance Marla Keehn Management and Budget Officer 3. COUNCIL ACTION RE: Review of the FY 2017-18 proposed budget City Manager Mike McNees stated that Council is gathered to review the fiscal year 2017-2018 proposed budget in accordance with state law. Council will need to adopt a proposed millage rate, which will be advertised for the budget public hearings scheduled for September where a final budget will be adopted. Mr. McNees said that this is a status quo budget; the city will be providing the same level of service in the next fiscal year that it is providing in the current fiscal year. Director of Finance Jeff Towne thanked the City Manager and city staff for their hard work preparing the proposed budget. Mr. Towne stated that one of Council s goals at this meeting is to adopt a tentative millage rate. Once adopted, Council can only decrease the rate at the September budget public hearings; the rate cannot be increased. Mr. Towne summarized the city s major funds and their proposed budgets: General Fund $79,826,158 Special Revenue Funds $3,487,681 Enterprise Funds $62,224,540 Internal Service Funds $5,285,182 Capital Improvements $10,128,000 FY2018 Proposed Budget $160,951,561 Page 1 of 9
General Fund CITY OF MELBOURNE, FLORIDA The General Fund contains all departmental operations and is the city s main fund. As stated in the City s Manager s budget letter to the City Council, the proposed budget has been balanced using the revenue generated by the rolled-back millage rate of 7.1878 mills, which is 6.51% below the current millage rate of 7.6886 mills. This is considered by state law to be neither a tax increase nor tax decrease. Mr. Towne stated that the General Fund budget was balanced without using prior year unassigned fund balances for operations. In addition, it includes continuing dedicated millage programs for road resurfacing ($1.2 million) and public safety machinery and equipment ($1.2 million). It includes a 2.5% wage increase for settled union contracts and non-union employees, as well as an amount reserved for upcoming PBA negotiations. Additional money has been set aside for: the initial implementation of the compensation maintenance plan ($300,000); grants-in-aid funding ($60,000); and one Steady Town homeless outreach case worker ($50,000). The budget does not include adequate funding for essential capital improvement projects. Mr. Towne discussed the General Fund s source of funds, the largest of which is property taxes. This revenue accounts for 38.7% of the General Fund budget (approximately $31 million). This is the revenue source over which the city has the most control by its ability to levy taxes. Most revenue sources are showing moderate declines with the exception of intergovernmental revenues, such as the local option gas tax, sales tax, and ½ cent sales tax. The City of Melbourne s property values equate to approximately $4.5 billion. The rolledback millage rate means no new taxes from that base property value. Only things like new construction, alterations and annexations provide for new dollars, which equates to approximately $723,000 in fiscal year 2018. New growth only accounts for less than one percent of the total General Fund revenue budget. Continuing, Mr. Towne stated that over the last ten years, state shared revenues have been flat, except for the steady decline in the amount of money received from the communications services tax. In the General Fund, personal services such as wages and benefits account for almost 70% of expenditures. Personal services have increased due to health insurance premiums and retirement contributions for regular and police personnel. In addition, an estimation for PBA collective bargaining negotiations has been programmed into the budget. Further, public safety costs represent 55% of the General Fund expenditures. Special Revenue Funds Mr. Towne said that this category includes the three Community Redevelopment Agencies (CRAs), as well as Community Development Block Grant (CDBG) funds, HOME Investment Partnership funds, and State Housing Initiative Partnership (SHIP) funds. Mr. Towne stated that he will be highlighting the CRA funds since they are the largest special revenue funds. Page 2 of 9
The Melbourne Downtown CRA will see a nominal increase in tax revenue of approximately $70,000, and its budget continues to include funding for facade programs and the exterior light grant program. The Babcock Street CRA will see an estimated tax revenue increase of approximately $35,000 and includes funding for the Babcock Street medians project. The Olde Eau Gallie Riverfront CRA will see an estimated increase of $60,000 in tax revenue and includes funding for the construction of the phase one lighting project. Overall, all three of the funds will most likely see a decrease in tax revenue based on the county s proposed millage rate. Enterprise Funds The proposed Water and Sewer Fund budget is $57,069,240, an increase of 1.87% over the current year adopted budget. Staff is recommending continued deferment of the previously approved 5% utility rate increase based on the fund s sound financial position. Major capital projects in this fund include the Grant Street water reclamation facility upgrade, St. Johns Heritage Parkway utilities, and the water main water crossing to beachside project. The proposed Stormwater Utility Fund is approximately $2.9 million. It continues to fund water quality projects to meet federal and state mandates. The rate per equivalent residential unit (ERU) remains at $44 per year with no proposed increase. However, a utility rate study is being planned for fiscal year 2018 since the last study was performed in 1999. $1.4 million in capital improvement projects have been programmed into the budget, including Sherwood Park water quality, Cliff Creek retrofit, and Thrush Drive baffle box projects. The proposed Golf Courses Fund is approximately $2.2 million. The proposed budget does not include any subsidy from the General Fund. The budget as presented was balanced by outsourcing golf maintenance functions, resulting in the reduction of the workforce by nine employees in fiscal year 2018. The budget does not include any new machinery equipment or capital improvement projects. Mr. Towne displayed three fund balancing options relating to the golf courses: Option 1 Option 2 Option 3 Outsource maintenance functions Continue providing subsidy from the General Fund Make golf courses a division of the General Fund Mr. McNees commented that operation of the golf courses has consistently required $200,000-$300,000 per year in subsidies from the General Fund. Council has sent a clear message over time that this subsidy should not be a regular source of funding. He noted that for every citizen that participates in an activity at the Melbourne Auditorium, Council pays a subsidy of about $2. In a similar way, Council pays a subsidy to the golf courses for every round of golf. Regarding option 3, Council can treat golf like other recreational programs by taking the position that the General Fund support of golf is acceptable because Council supports golf as a recreational program. Mr. McNees stated firmly that he cannot recommend adding such an expenditure to the General Fund. Such a decision Page 3 of 9
would be going in the opposite direction of attempting to mitigate the new homestead exemption mandate that is on the horizon. Staff does not support option 3. Regarding option 1, Mr. McNees said that Kevin Briski, Parks and Recreation Director, can replace nine city employee positions with outsourced positions to eliminate the $200,000 General Fund subsidy. However, even during the recession of the mid-2000 s, the City of Melbourne has maintained a philosophy of never trying to balance a budget by laying off city employees. From a financial standpoint, Council needs to ask itself how much it is willing to spend to stay in the golf business. If Council chooses to continue subsidizing golf operations from the General Fund (option 2), how to do that becomes the next question. Council could cut other items from the budget, but this subsidy is Council s lowest priority expenditure in the entire budget. Another option Council has is to increase the millage rate just enough to raise the necessary $200,000 to continue the subsidy. If Council chooses to stay the course and take on this subsidy for another year, Mr. McNees said that he would support that. However, to balance the budget, one of the options presented has to be selected. Mr. Towne clarified for Mayor Meehan that since 2009, approximately $1.2 million has been subsidized to the golf courses. Mayor Meehan asked if revenue from the sale of the Marina Towers property could make up the difference. Mr. McNees said that he would advise Council not to do that for two reasons. First, the city doesn t have that money in its bank account. The contract hasn t been signed and the transaction has not closed. Second, that money is one-time revenue or balance sheet money. Council could balance its budget in one year with that money, but next year that money won t be available. Council Member Betty Moore stated that all the reports she has received from the Parks and Recreation Department and the Golf Courses Advisory Board have been positive. She expressed her desire to continue providing the subsidy for at least another year. Regarding the nine positions that would be lost, Council Member Paul Alfrey proposed placing those employees in other positions throughout the city. Council Member Teresa Lopez asked why staff is not considering raising the price of playing golf. Mr. McNees discussed elasticity how much the price of golf is raised versus how many rounds of golf the city would lose based on that price increase. Parks and Recreation staff has examined competitors prices and is confident that the golf courses are in the right price point. If the price goes too high, golfers will go elsewhere. Prices are evaluated constantly to stay competitive. Council Member Tim Thomas agreed with Mr. Alfrey s idea. In these tough economic times, any millage increase would be a game changer for residents who are living paycheck to paycheck. Regarding the subsidy to the golf course, Mr. Thomas said he would not support a raise in the millage rate to recoup the subsidy. If positions have to be eliminated, that s tragic. If that happens, the city should put those employees first in line for other positions. Page 4 of 9
Mayor Meehan recommended that the city wait another year and conduct a workshop on the future of the golf courses. Mr. McNees clarified that the proposed budget is balanced with the elimination of nine fulltime city employees. Ms. Moore said she is not looking for layoffs the city should maintain both golf courses with a subsidy for one more year. Council briefly discussed subsidizing the golf courses one more year using unassigned fund balances. However, the City Manager cautioned against using savings account money to pay ongoing expenses. Vice Mayor Debbie Thomas said taking from the unassigned fund balance may have unintended consequences on other issues throughout the city. Ms. Lopez referenced the $700,000 economic development incentives paid to Embraer and Northrop Grumman. Mr. McNees confirmed that these payments will end next year. Council unanimously expressed support for continuing to subsidize the Golf Course Fund for fiscal year 2018, saving the nine full-time city positions, and keeping the status quo for one more year. Mr. McNees said that if Council holds to the rolled-back millage rate, staff has its direction. If a discussion is opened regarding the millage rate, Mr. McNees stated that he would make another pitch to find the additional $200,000 in the millage rate rather than taking that money from reserves. Mr. Towne continued his review of the budget. Internal Service Funds The Internal Service Funds are made up of two main categories Risk Management and Workers Compensation. Risk Management s proposed budget is $2.4 million and provides for general liability and property damage insurance coverage. Premiums and administrative costs are allocated to departments. The Workers Compensation proposed budget is $2.8 million. Staff is working towards building reserves in workers compensation through the assessment of a 5% increase to departments. Additionally, staff is actively managing the caseload and focusing on preventive training. Capital Improvements $10.1 million has been included in the proposed budget for items such as transportation, general projects, special revenue, stormwater quality, and bikeways and pedways. Regarding the millage, Mr. Towne displayed a chart comparing the proposed millage rate to other cities in Brevard County. The City of Melbourne is the only community that has proposed using the rolled-back rate. Mr. Towne then displayed a chart that shows additional General Fund dollars that could be generated with incremental increases to the Page 5 of 9
millage rate, along with the impact on a median taxable value homestead property at $40,000. For example, a millage rate of 7.4113 would generate an additional $961,000. That rate is 3.61% lower than the current millage rate but 3.11% higher than the rolledback rate. It would add an additional $8.94 to a tax bill for a property valued at $40,000. Mr. McNees stated that to fund the $200,000 subsidy to the Golf Course Fund, an increase of 0.65% above the rolled back rate would be needed. Mr. Towne closed by stating that the proposed millage rate will be transmitted to the Property Appraiser for inclusion in the Truth in Millage (TRIM) statements that will be mailed to property owners in August. Council may not increase the millage rate at the budget public hearings, but Council may decrease it. The first budget public hearing is scheduled for Thursday, September 14, at 6:30 p.m. and the second budget public hearing is scheduled for Thursday, September 28, at 6:30 p.m. (Note: the regular City Council meetings in September will be held immediately following the conclusion of the budget public hearings on September 14 and 28.) Mr. Alfrey asked what the city could do to lower its workers compensation costs. Mr. Towne replied that through training and proper handling of claims, staff plans to minimize risk and actively manage cases. Mr. McNees commented that Mr. Towne and Director of Human Resources Dr. Kimberly Foxworth both have financial experience and expertise with workers compensation issues. Mayor Meehan commented on the grants-in-aid budget of $60,000 and stated that the discussion on grants-in-aid would take place in the future. Mr. Towne clarified that the grants-in-aid process will be handled separate from the budget per City Council policy. Mr. McNees commented that $60,000 has been budgeted as a placeholder for grants-in-aid, as well as $50,000 for a Steady Town case worker. Council will not decide at this meeting to whom that grants-in-aid money will be given to. Ms. Lopez expressed her support for the rolled-back millage rate. She requested amending (Council Policy #10 Funding for Non-Profits/Grants-in-aid Funding). That policy states: the following four parades will be automatically programmed into the annual budget: Memorial Day Parade $2,000 Fourth of July Parade $2,500 Veterans Day Parade $2,000 Melbourne Light Parade $7,000 The designated funding will be available to the organizations that apply for the special activity permit for these parades on October 1 of each year, contingent upon approval of the budget in September by City Council. Ms. Lopez further cited Council policy saying grants-in-aid funds must be spent to benefit the residents of Melbourne. She stated that she cannot understand how funding the three Page 6 of 9
patriotic parades (Memorial Day, Fourth of July, and Veterans Day) benefits all of the residents of the city when some who attend these parades feel belittled, insulted and upset by the display of such a hateful symbol as the confederate flag. Ms. Lopez said she has received numerous e-mails from residents and has read countless public opinion articles in the Florida Today regarding people s disgust of the display of the confederate flag in these parades. Continuing, Ms. Lopez quoted an e-mail she received from a practicing Florida attorney wherein he states that when First Amendment speech rights are discriminatory, hateful, and racist or run contrary to the position of the state, they should never be permitted at any government sanctioned or sponsored event. Doing so sends a message that the governmental agency is in support of the images and statements that are being portrayed. Ms. Lopez concluded by saying that the confederate battle flag should not be displayed at city events and that everyone should unite under the American and Florida flags. The motion by Council Member Lopez to (stop supporting the Memorial Day, Fourth of July, and Veterans Day parades with City of Melbourne tax dollars) did not receive a second. The Mayor opened the floor for public comments. Samuel C. Lopez, 2129 Royal Poinciana Boulevard, stated that he cannot believe that a symbol of hate like the confederate flag is displayed in a parade that is funded by the city. He read a quote from the creator of the confederate flag and said that it is incredible that the city is supporting hatred with its tax dollars. He thanked Ms. Lopez for her courage to stand up and face the issue. Mr. Alfrey said that for some people who grew up in Melbourne, the flag is a symbol of where they are from. There are opinions on both sides of this issue. Council Member Yvonne Minus said that she understands the confederate flag and everyone knows what it means it doesn t stand for anything good. Mr. Thomas stated that if the flag bothers someone, they can turn their back in protest. The First Amendment gives people the right to carry and display the flag. Ms. Lopez stated she agrees with the First Amendment; however, she stated that the city should not fund parades that include this hateful symbol. Larry Maxwell, Indialantic, stated that he was personally hurt to see the flag in the parades and that it is not appropriate to think he should just turn his back and let the flag go by. The confederate flag was created by a white supremacist and is a bad part of our nation s history. He concluded by saying this is not a First Amendment free speech issue; this is a hate discussion. Phil Moore, 3589 Egret Drive, said free speech is great, but endorsement of the confederate flag during a parade is not the same thing. Page 7 of 9
Eileen Petrovic, 3745 Town Square Boulevard, said that the government cannot stop individuals from liking the confederate flag, but the government does not also have to sanction the confederate flag. Katherine Banko, 2803 Bayeux Avenue, stated that she was appalled to hear about the participation of the confederate flag in the parade. She asked that tax dollars not be used to allow symbols of hatred to be paraded throughout the community. Mr. McNees clarified that the funding of the parades (for a total of $13,500) is not a part of the $60,000 grants-in-aid budget; rather, it is hardwired into the budget based on City Council policy. The grants-in-aid process that will occur in the future will not include a conversation about the parades. Nelly Cardinale, Cape Canaveral, said that the flag is a symbol of white supremacy and she is personally offended by it. The city is promoting hate in the community. Terry Muller, Palm Bay, said that he agrees with previous speakers and that as a combat veteran, he knows what it means to sacrifice. As a Hispanic, the confederate flag is very offensive. The flag has always been directly related to hate. Tess Martin, 2578 Floridiane Drive, said that this is not a First Amendment issue. This is an issue about the city funding a parade which sanctions the use of the confederate flag. She stated she was sickened to see the flag in the parade. The confederate flag is anti- American and if someone wants to fly it in their yard or wear it on their shirt, that s their First Amendment right. This is a funding issue, and the city should not pay for the confederate to be on display. 4. COUNCIL ACTION RE: Adoption of a proposed millage rate Mr. McNees stated that the proposed budget before Council has been balanced using the rolled-back millage rate of 7.1878. Staff is requesting Council s adoption of a proposed millage rate. Moved by Lopez/Meehan to (adopt a proposed rolled-back millage rate of 7.1878 mills). Ms. Moore stated the city cannot function with that rate. The city s roads need work and vehicles need to be replaced. The water and sewer increase will be deferred and rates from Waste Management were decreased. She cautioned against proceeding with the rolled-back rate and stated that the city must move forward. Mayor Meehan said this budget includes $1.2 million for road resurfacing and another $1.2 million for police and fire vehicles. This budget is sufficient with the rolled-back rate. She asked Ms. Moore what millage rate would be sufficient. Ms. Moore recommended a millage rate of 7.4113 which would generate just under $1 million. That rate would raise taxes by only $9/year. Ms. Moore stated she understands the Page 8 of 9
financial impact of a small tax increase, but she also understands what it takes to remain a viable city. Ms. Lopez said that if Council adopted Ms. Moore s recommended rate, it would mean three straight years of tax increases. Residents are living on a strict income and cannot afford to pay additional money on taxes. There isn t a need to increase taxes again. Mr. Thomas said that he can support the motion knowing that the economic development incentives to Embraer and Northrop Grumman will expire next year. Mr. McNees said that additional funds would be used to address capital needs outside of the police and fire departments. There are a number of large ticket items (such as stormwater maintenance projects) that were left on the table since there wasn t funding available. There are some enormous capital needs that are not being addressed. Without addressing those needs, the city will continue to fall behind on projects that will eventually cost more down the road. Ms. Moore repeated her recommendation and said that the rate could always be reduced during the September budget public hearings. Mayor Meehan said that she cannot support a tax increase. Vice Mayor Thomas said this is a well balanced budget. The city has had two years of tax increases and it needs to be fiscally responsible. The question was called. The roll call vote was: Aye: Alfrey, Lopez, T. Thomas, Minus, D. Thomas and Meehan Nay: Moore Motion carried. 5. ADJOURNMENT The Mayor adjourned the meeting at 8:19 p.m. Assistant City Clerk 8/8/2017 Approved by Council: August 22, 2017 Page 9 of 9