HomeMy WebLinkAbout26 - November 30, 2011 COW - Special Meeting
SPECIAL COMMITTEE OF THE WHOLE MEETING
November 30, 2011
The special Committee of the Whole meeting was called to order by Mayor Kaptain at 6:05 p.m.
in the Council Chambers. Present: Councilmembers Dunne, Gilliam, Moeller, Powell, Prigge,
Steffen, and Mayor Kaptain.
Budgetary Discussion
City Manager Sean Stegall gave a brief overview of the meeting’s agenda and reviewed the
remaining budget schedule. The objectives for this meeting were a review of the water, sewer
and recreation funds, initial consideration of supporting ordinances to the 2012 budget, and the
review of any questions from the Council. The presentation is on file in City Clerk’s office.
Water Fund
Colleen Lavery, Chief Financial Officer, provided information regarding the Water Fund. For
2011, total estimated revenues are on target with budget and estimated expenses in the categories
of earnings and benefits, commodities and supplies and contractual services are slightly under
budget. Expenses related to debt service are estimated to be $86,500 or 1.3% below budget. This
the result of the favorable interest rate (3.55%) that the city received on the $8.7 million of bonds
issued earlier this year.
Estimated capital expenditures are substantially less than budgeted for two reasons. First, the city
wide meter replacement program is utilizing staff to perform the replacements resulting in
savings. Second, the expenses associated with water main oversizing reimbursements were paid
using water development funds rather than water operating funds. In total, expenses are
estimated to be approximately $875,000 under budget.
For the year 2012, revenues in the water fund are budgeted at $21,476,860 with 99 percent of the
Water fund’s revenue from water billings. Total expenses budgeted in 2012 equal $22,561,580.
Debt service is the principal water fund expense at 29.85% of total costs. For budgeting
purposes, debt service reflects both the principal and the interest on outstanding bond issues and
includes an estimate for the proposed issuance of approximately $4.7 million of debt in 2012.
Earnings and benefits is the second largest operating expense in the fund with a 2.0% increase
over the 2011 estimate as a result of annual wage and benefit increases.
The budget for commodities and supplies expense is being kept the same as the previous year
based on the assumption that water quality will remain consistent and the cost of chemicals will
remain constant. Additional contractual expenses are being budgeted for 2012 as a result of
anticipated increases in electricity charges. The city entered into a contract with Direct Energy
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November 30, 2011
Page 2
Services, expiring in April 2012, which enabled the water department to purchase electricity at
favorable rates. The expiring contract leaves the cost of electricity uncertain for 2012 and an
increase in this expense was budgeted.
Financing transfers represents charge backs from the general fund for administrative services
such as water billing and collection, finance activities, payroll and insurance processing, and
legal counsel. These costs have been left constant in the absence of cost of living (COLA)
increases. The remaining 2.6% of budgeted expenses relate to capital purchases financed
through operations. The meter replacement program is being shown separately to highlight that
meter replacements are being exchanged at an expedited pace and there will be a need to
purchase and implement a meter read collection system. The decision to replace all telephone
read meters with Wi-Fi enabled modules will allow for automatic water reads which can be
utilized if the city chooses to deploy a citywide Wi-Fi network.
The water funds solid cash reserve position allows for a 1% reduction in water rates during the
2012 budget year. The reduction in the water rate is the result of two factors. First, the 2011 -
2015 adopted financial plan budgeted approximately $16,000,000 for the Airlite Water
Treatment Plant improvements. These improvements were to be financed with debt. As a result
of the favorable bid environment, the renovations to Airlite will cost $5,000,000 less or
$11,060,000. Second, the 2011 – 2015 plan anticipated that the city-wide meter replacement
would require outside contractors to be hired to install the meters, however city employees are
replacing the meters reducing the expense to the cost of the meter only. The costs savings being
realized on these two items increased the funds cash reserves, in all the years of the plan, and
allowed for the reduction in 2012 rates.
The five year financial plan anticipates that expenditures will be greater than revenues in each of
the plan years and will require the fund to use its cash reserves to supplement revenues during the
plan years. Given that the 2011 beginning cash reserves are estimated to be well above the 25%
minimum level the fund can afford to reduce its reserves during these years thereby lowering
water rate increases.
For the remaining years of the plan, the earnings and benefits, commodities and supplies and
contractual service expense categories have been increased 5 percent, 4 percent and 4 percent
respectively. These assumptions mirror those made in the general fund.
The funds financial goal is to maintain a prudent operating cash reserve of at least 25% of
expenditures and no greater than 35% of expenditures. Unlike the general fund, the water fund
has only one source of revenue and is vulnerable to factors which effect consumption such as
conservation efforts on behalf of residents, greater precipitation during summer months and
housing foreclosures.
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November 30, 2011
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The City finances the water funds strategic initiatives primarily through issuing debt and also,
previously collected impact fees and project savings. Fees collected from the users of the water
system fund the principal and interest payments. In 2012, $750,000 of cash reserves are being
used to fund strategic initiatives thus reducing the amount of debt that needs to be issued. These
funds are available because of the savings with respect to the city-wide meter replacement
program and the water main oversizing reimbursements.
Sewer Fund
Colleen Lavery, Chief Financial Officer, provided information regarding the Sewer Fund. The
sewer fund is a self supporting enterprise fund established to provide residents and businesses
with wastewater collection. The City is currently responsible for the maintenance of
approximately 550 miles of sewer lines. For 2011, estimated revenues are on target but the
estimated expenses are expected to be $8,320 greater than the budgeted amount with expenses
related to Capital improvements projected to be $52,000. However, reductions in commodities
and supplies and contractual service costs were made by management in order to accommodate
these additional capital expenses.
For 2012, revenues in the sewer fund are budgeted at $4,915,390 with 98% of the Sewer fund’s
revenue being derived from billings. Given that sewer fees are based on usage, this makes the
fund susceptible to consumption declines. In 2011, sewer recapture fees were added to the
budget and approximately $82,000 is collected annually from this fee. This charge is intended to
recover the city’s cost of constructing sanitary sewer interceptor trunk 30 which provides sewer
service to the western area of Elgin.
Bond and interest payments make up 55% of total expenses in the Sewer Fund. The budgeted
payment of $2,829,000 includes the refunding of the appreciation bonds completed in 2010.
Earnings and benefits make up 22.9% of total expenditures. This expense is expected to decline
slightly in 2012 due to reductions in management salary allocations which are then offset by
wage and benefit increases. As with the water fund, the sewer fund reimburses the general fund
for administrative services and this amount is being held constant in 2012. Capital expenditures
financed through operations include annual sewer repairs and cleaning, the lateral assistance
program and the overhead sewer replacement program. The operating reserve category
represents the newly initiated overhead sewer installation program which provides a match to
residents who install overhead sewer systems to alleviate basement flooding.
The sewer funds strong cash reserve position allows the sewer rate to be kept stable during the
2012 budget year. A portion of the delayed increase is being pushed out to future years. The
delay of the increase is the result of reducing the funds contribution to the combined sewer
separation project. The 2011 - 2015 adopted financial plan budgeted $1,500,000 in combined
sewer separation for each year. These improvements were to be financed with debt. A dedicated
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November 30, 2011
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source of funding for combined sewer separation and streets is being established using sales tax.
The principal and interest savings allows for the reduction in the planned 2012 rate increase.
In plan years 2013-2016 earnings and benefits are being increased 5% with all other categories of
expenditures being increased 4 percent. Using these assumptions, the 2012 budget and 2013 plan
year projects that expenditures will out pace revenues by $211,160 and $633,390, respectively
requiring the use of existing cash reserves to supplement revenue. The 2011 cash reserve is
estimated to be 32.8% of expenses therefore the use of reserves in 2012 will maintain the
financial goal of 25%. The rates as adopted in 2012 and 2013 will require that cash reserves dip
under the 25% goal.
Debt service represents actual principal and interest payments and an estimate for debt being
issued in the out years of the plan. In 2010, the fund refinanced $1,840,000 of capital
appreciation bonds, converting it to traditional general obligation debt. The sewer fund has an
adequate revenue stream from the collection of sewer interceptor fees to pay these newly issued
bonds during this five year plan. Beginning in 2013, the debt service expense includes originally
issued sewer interceptor principal and interest payments. The current level of interceptor fee
collections does not accommodate this payment and alternative payment options will be pursued
including refinancing these bonds to delay payment. The annual combined sewer overflows
program will continue to be funded at a level of $155,000 through the remainder of the plan.
The proposed 2012 sewer strategic initiatives will be funded using impact fees, operating
revenue and project savings. Project savings represent roll over of existing funding related to
completed projects. These planned projects relate to infrastructure in existing areas of the City.
The City Council discussed the impact of the slow down in development in the Western area of
the City and the status of the sewer separation project.
Recreation Fund
The Recreation Fund provides for all leisure-type activities with the exception of golf operations,
which are accounted for in a separate fund. For 2011, fund expenditures are estimated to be
$9,613,740. There are three major components of Recreation Fund Revenue; charges for
services, financing transfers and working cash carryover. In total, 2012 revenues have been
budgeted at $9,619,050 and the working cash carryover accounts for 20.5 percent of the
established revenue. In the five year plan the cash carry over will be used as a funding source to
reduce the increased need for the subsidy from the General Fund. In 2012, the Fund is budgeted
for a 14 percent decrease in expenditures as compared to the 2011 budget ($8,910,210). This
decrease is the result of changes being made to various Parks and recreation fund operations.
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November 30, 2011
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The revenues for the fund are broken down into five categories: Charges for Services, Sale of
Commodities, Miscellaneous Revenue, Financing Transfers and Working Cash Carryover. At 43
percent of total revenue, charges for services represent proceeds from program registration,
Centre of Elgin membership, daily pass fees for the outdoor aquatic centers and Hemmens
Cultural Center facility rentals. Charges for services have been budgeted at $4,117,350, which
represents a 6.2 percent increase from the 2011 budget of $3,875,370. This increase is attributed
to improvements in program revenue streams.
Financing transfers consist of monetary support given to the Fund by the general and IMRF
funds. The 2012 Budget for this revenue is $3,315,870 as compared to a 2011 budget of
$3,975,470. This equates to a 16.6% decrease in total financing transfers. The general fund
transfer will be reduced in response to operational changes being implemented in 2012.
However, an inflationary growth rate of 4.0 percent is assumed throughout the Plan. As of
December 31, 2011, the Fund will have accumulated an estimated working cash reserve of
$1,973,030, and will be used as a revenue source in 2012. In the five year plan the cash carry
over will be used as a funding source to reduce the increased need for the subsidy from the
General Fund. In addition, the working cash reserve will be available to fund unexpected
building repairs at the city’s parks facilities should the need arise. Ms. Lavery noted that other
than this reserve, there are no funds set aside specifically for this purpose. As indicated in the
plan, the working cash carryover will be reduced to $1,289,410 in 2016 and the general fund
portion of the financing transfer will be reduced by 19% in 2012.
The Council briefly discussed the need to have a fee study and if there was a breakdown of
resident vs. non-residents that use the different services. Colleen Lavery, Chief Financial
Officer, noted that there is a draft of a fee study that would be forward to the Council once it was
completed.
Budget Summary and Other Topics
City Manager Sean Stegall reviewed the following topics: E-911, Alarm monitoring, Streets,
Leaf Collection, and Not for Profit funding.
E-911
E-911 revenue is derived from a charge of $0.65 per telephone line per month and a wireless
surcharge. Expenditures of the E-911 fund include a portion of the overall communications
operations. It is anticipated that a new public safety radio system will be purchased or leased in
2012. Therefore, an annual transfer of $1,200,000 from the general fund will be made to finance
the cost of the purchase or lease.
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November 30, 2011
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Alarm Monitoring
City Manager Stegall address recent questions regarding the City instituting a mandatory alarm
monitoring system. He stated that they would continue to review this topic and felt it would not
necessarily be a mandatory system but no decisions have been made at this time.
Streets
City Manager Stegall presented the big picture for the financing of street resurfacing and
rehabbing. He presented a chart that outlined the other sources of funding such as: Central
Business District (CBD) Streetscape, LAPP and STP grant program, Motor Fuel Tax (MFT), and
Riverboat funds.
There was a discussion regarding the LAPP funding and how the process works and if the City
had received any funds in the last five years.
Leaf Collection
The rake out service would continue and those in the affect area would be charged $2 per month
to cover the costs. It was felt that this would help with the equity issues of the program.
Not-For-Profit Funding
The funding for the not for profit agencies would be at the same level as last year. Rather than
being a line item in the budget, the funds would be dispersed through a grant program.
There was a break from 7:30 p.m.-7:55 p.m.
Collective Bargaining, Pensions and Personnel Costs
Corporation Counsel Cogley presented a review of the City’s make-up of collective bargaining
units and pension obligations. He noted that there were three different pensions, Police, Fire and
IMRF that were governed by state statute.
Mr. Cogley stated that there are four full-time bargaining units: Police, Fire, Public Works
(SEIU) and Clerical/Technical (SEIU), and that all will be undergoing negotiations this year. By
state statute Police and Fire cannot go on strike and the other two SEIU units have a stipulation
in their contracts that they cannot strike.
Councilmember Dunne asked if the City was currently meeting all of its pension obligations and
it was verified that the City was meeting that obligation.
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November 30, 2011
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Summary and Questions
There was further discussion regarding the funding of the not for profit organizations and the
proposed grant program.
Councilmember Prigge made a motion to accept the proposed dollar amounts of Not-For-Profit
Funding: $230,000 for Human Services and $50,000 for Arts. The motion died for a lack of a
second.
Councilmember Powell asked about the leaf collection program. She verified that only those in
the rake out area would pay an additional fee. City Manage Stegall noted that there should not be
the expectation that the bagged areas would eventually become rake out areas.
Councilmember Gilliam made a motion, seconded by Councilmember Moeller, to authorize staff
to move forward with the proposed ordinances regarding the 2012 budget. Upon a roll call vote:
Yeas: Councilmembers Dunne, Gilliam, Moeller, Powell, Steffen, and Mayor Kaptain. Nays:
Councilmember Prigge
Adjournment
Councilmember Gilliam made a motion, seconded by Councilmember Steffen, to adjourn the
meeting and go into Executive Session. Upon a roll call vote: Yeas: Councilmembers Dunne,
Gilliam, Moeller, Powell, Prigge, Steffen, and Mayor Kaptain. Nays: None.
Collective Bargaining Issues or Deliberations Concerning Salary Schedules for
One or More Classes of Employees - Exempt Under Section 120/2(c)(2) of the
Open Meetings Act
The meeting adjourned at 8:59 p.m.
s/ Kimberly Dewis December 21, 2011
Kimberly Dewis, City Clerk Date Approved