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HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 2/17/2004 * PLEASE NOTE: Since the Glendale City Council does not take formal action at the Workshops; Workshop minutes are not approved by the City Council. MINUTES CITY OF GLENDALE CITY COUNCIL WORKSHOP February 17, 2004 1:30 p.m. PRESENT: Mayor Elaine M. Scruggs, Vice Mayor Thomas R. Eggleston, and Councilmembers Joyce V. Clark, Steven E. Frate, David M. Goulet, H. Phillip Lieberman, and Manuel D. Martinez ALSO PRESENT: Ed Beasley, City Manager; Pam Kavanaugh, Assistant City Manager; Jon Paladini, Interim City Attorney; and Pamela Hanna, City Clerk 1. 2ND QUARTER REPORT ON THE GENERAL FUND & FY04-05 REVENUE PROJECTION FOR THE GENERAL FUND CITY STAFF PRESENTING THIS ITEM: Ms. Shirley Schurhammer, Budget Director. This is a request for the City Council to review the Fiscal Year (FY) 2003-04 second quarter report on General Fund expenditures and revenues. Also to be reviewed is the FY2004-05 General Fund revenue projection. The FY03-04 second quarter report on the General Fund is consistent with the Council's goal of ensuring the city's financial stability through timely reviews of actual expenditures and revenues. Council's review of the FY04-05 revenue projection for the General Fund also is consistent with the Council's goal of ensuring the city's financial stability. In response to requests from Council, staff committed to providing quarterly reports on the General Fund. City Council was informed at the July 15, 2003 workshop that the FY03-04 second quarter report would be brought forward in mid-February 2004. The third quarter report is scheduled for mid-May 2004. As part of this report, the FY04-05 General Fund revenue projections will be presented in preparation for the Council budget hearings on the General Fund operating budget scheduled to begin on March 16, 2004. 1 The FY03-04 second quarter budget and actuals for the General Fund operating and pay-as-you-go (PAYGO) capital expenditures are as follows (in 000s): 2nd Qtr Budget 2nd Qtr Actuals GF Operating Expenses $58,059 $55,270 PAYGO Capital Expenses $ 1,299 $ 1,137 TOTAL $59,358 $56,407 As the preceding list shows, FY03-04 second quarter General Fund expenditures were $2.9 million ($2,951,000) less than budgeted. The General Fund's second quarter revenue budget and actuals are as follows (in 000s): 2nd Qtr Budget 2nd Otr Actuals City Sales Tax $22,082 $26,135 State-Shared Revenues $22,543 $22,905 HURF $ 7,577 $ 7,029 Primary Property Tax $ 1,745 $ 1,869 Court $ 1,500 $ 1,260 All Other $11,532 $11,462 TOTAL $66,979 $70,660 As the preceding list shows, FY03-04 second quarter General Fund revenues were 5.5%, or $3.7 million ($3,681,000), more than expected according to the revenue budget. Of particular note are the following facts: City sales tax actuals are 18%, or $4 million ($4,053,000), higher than expected at the halfway mark in FY03-04; and City sales tax actuals this FY, $26,135,000, are 23.5%, or almost $5 million ($4,978,000), higher than the same period last fiscal year, when city sales tax actuals totaled $21,157,000 This growth in city sales tax revenues is surprising, especially when compared to the expectations that were prevalent at this time last fiscal year. A year ago, in February and March 2003, the City's economic outlook for FY03-04 was pessimistic. However, the turnaround in city sales tax revenues that was experienced during the 4th quarter of FY02-03 has continued through the first 6 months of FY03-04. Approximately $1.5 million of the second quarter revenue budget is considered one- time revenue, specifically from the sale of parcels at the Northern Crossing development. Second quarter revenue actuals included $1.6 million ($1,565,000) in one-time revenue, specifically from the sale of parcels at the Northern Crossing development At the end of the 2nd quarter, the budget basis General Fund fund balance is $39,089. 2 General Fund revenue projections are based on a variety of factors such as a multi- year history of actuals (to detect trends), Arizona per capita disposable income, growth in Arizona per capita disposable income, inflation, and projected population growth for Glendale. The resulting calculations are then compared to projections produced by other entities such as Marshall Vest's Economic and Business Research Center at the University of Arizona, Bank One, Arizona State University, and the State of Arizona, and adjusted as needed. The Arizona League of Towns and Cities does not produce a projection for state-shared revenues until mid-March or later. The State of Arizona does not produce a state- shared revenue projection for each municipality until June. The FY04-05 General Fund revenue projections, and a comparison with the current fiscal year's revenue budget, are as follows: 03-04 Budget 04-05 Projection City Sales Tax $ 44,163 $ 48,216 State-Shared Revenues $ 45,086 $ 46,950 HURF $ 15,155 $ 15,382 Primary Property Tax $ 3,491 $ 3,596 All Other $ 26,065 $ 23,805 TOTAL $133,960 $137,949 Overall, the FY04-05 revenue projection represents a 3%, or $4 million ($3,989,000) increase over the FY03-04 revenue budget for the General Fund. The FY04-05 city sales tax projection is 9%, or $4 million ($4,053,000) more than the FY03-04 revenue budget for this source. This projected growth is based on the additional $4 million ($4,053,000) that the city collected during the first two quarters of this FY. The city had expected to collect $22,082,000 based on the revenue budget; the city actually collected $26,135,000, or approximately $4 million ($4,053,000) more than expected. Mr. Vest, at the University of Arizona, forecasts retail sales growth as 6.5% - 7.1% for the Phoenix metropolitan area for 2005. The FY04-05 state-shared revenue projection is 4%, or $1.9 million ($1,864,000) more than the FY03-04 revenue budget for state-shared revenues. This projection is based on: • expected growth in statewide sales tax revenue, per the state's projection and the University of Arizona's projection for retail sales statewide, and • growth in motor vehicle in-lieu revenues, per the city's 2nd quarter actuals in the current fiscal year and the state's projection for statewide vehicle license tax revenue. 3 State-shared income tax revenue is not expected to increase in FY04-05 primarily because the FY04-05 state-shared income tax revenue will be based on the 2002 economy. In 2002, Arizona experienced 0% growth in employment, and per capita disposable income in the Phoenix metro area grew at only 1110th of 1% in 2002. The FY04-05 HURF projection reflects expected growth of 1.5%, or $227,000, over the current year's HURF revenue budget. The state is projecting 4% growth in this revenue source. The city's 1.5% growth projection is lower because of the erratic growth in this revenue source that the city has experienced since FY99-00. The FY04-05 primary property tax projection reflects a 3%, or $105,000 increase over the current year's primary property tax revenue budget. This projected growth reflects the 3% growth assumption used for the secondary property tax, which is used to fund the capital improvement program (CIP). The FY04-05 "all other" revenue category reflects a decline of 9%, or $2.3 million ($2,260,000) from the current year's revenue budget for this category. The primary reason for the decline is related to the one-time revenue included in the FY03-04 revenue budget. Specifically, $3 million in one-time revenue, from the sale of parcels at the Northern Crossing development, is included in the FY03-04 revenue budget. This revenue is not expected in FY04-05. The loss of $3 million in one-time revenue is offset by projected growth expected in other areas like development permits and fees, interest income, and gas/electric franchise fees. The FY03-04 1St quarter report was presented to City Council on November 18, 2003. The community benefits from periodic reports to the City Council on the General Fund's revenues and expenditures because it is a means to evaluate the city's financial stability. This is a status report on the General Fund through the first two quarters of FY03-04, and no Council action is required on this part of the report. Staff is seeking Council direction on the FY04-05 General Fund revenue projection. Mayor Scruggs asked what role does the Planning and Zoning Commission have in the draft CIP. Mr. Ernster explained the Planning Commission's review of the CIP is limited to determining if it is consistent with the General Plan. He said the Commission will not make any recommendations with regard to specific projects. Mayor Scruggs asked if Council would see department presentations. Ms. Schurhammer responded that the operating budgets and the CIP budget, CIP O&M supplemental requests, and pay-as- you-go capital requests will be presented during the budget hearings scheduled for March and early April. Mayor Scruggs pointed out there is a lot of competition for available funding, stating the various department budgets, the benefits package and the CIP do not appear to come to Council at the same time. Ms. Schurhammer clarified Council will see the CIP O&M supplementals as part of the operating budget packages. Mr. Ernster confirmed for Councilmember Lieberman that the Planning and Zoning Commission is required by state statute to review the draft CIP. 4 Mayor Scruggs pointed out the Parks and Recreation Commission also reviews the CIP. Mr. Smith explained the Parks and Recreation Commission has already reviewed the CIP and its review is not mandated by legislation. Councilmember Clark asked if Council would receive a list of all funding requests for the department supplmentals, the CIP, and the benefits package by the time it reviews the operating budget in March. Mr. Schurhammer stated the information would be given to Council in the beginning of March, noting CIP operating O&M requests were already provided as part of the CIP report. The CIP operating O&M requests also will be included in the budget workbook, along with the supplemental requests, that Council will receive in early March. In response to Councilmember Martinez's question, Ms. Schurhammer explained they would present the results for the first six-month's of the fiscal year and revenue projections for the General Fund for next year as part of the 2nd quarter report. She said Budget will return to Council in mid-May to present the third quarter results, however, by that time; the budget balancing process will be completed. Mayor Scruggs said, in the past, they could not use revenue estimates that were greater than the previous year's actuals and any money in excess of what was budgeted was considered one-time money. Ms. Schurhammer said she would address this issue when she discussed the GF revenue projection for FY04-05. Ms. Schurhammer compared 2nd quarter budget versus 2nd quarter actuals, noting city sales tax revenues are running 18%, or $4 million, higher than anticipated. State income tax revenue came in close to what was expected. She stated the City did not expect to match last year's very strong motor vehicle in lieu collections, but this revenue source is on target this fiscal year to once again attain last year's level of $8.6 million. She said December receipts for in-lieu revenues were high. Ms. Schurhammer stated that HURF collections are currently running below budget due to a glitch in the state's collection of revenue in December. She stated the state notified cities that collections came in as expected in December, but they came in late, thus impacting the December distribution to cities. The state notified cities that the distribution problem should be fixed in January or February, so the City expects HURF revenues to be on pace for the third quarter. Ms. Schurhammer explained that property tax revenue is not collected evenly throughout the year; the largest share of property tax revenue arrives in the second and fourth quarters. She said, at six months, the City appears to be running 7%, or $124,000, above budget; however it is not known at this time if this is the result of the timing of collections or if more revenue will, in fact, be collected for the year. She reported court fees are $240,000 or 16% under budget, assuming even collection over the 12 month period. She said, however, 44% of court revenues for the past three years came in during the first six months, therefore, court revenue is running 95.5% of normal, or about $60,000 under, when compared to the 3-year collections average. 5 • Councilmembers asked several questions about court revenues, but a Court representative was not available to address the questions. Ms. Schurhammer said she would ask the Court staff to address the questions through an e-mail response. Ms. Schurhammer stated actuals for the All Other category are under budget by 1 of 1%, or about $70,000. Overall, GF revenue actuals are running $3.7 million, or 5.5%, ahead of budget. Councilmember Clark expressed concern about the decrease in court fee collections and asked if staff expects collections to improve over the second half of the year. Ms. Schurhammer said they expect collections to rise to the projected level by the end of the year. Councilmember Clark asked if the increase in sales tax revenue is covering the decrease in other sources of revenue. Ms. Schurhammer responded yes, but noted that HURF revenue, which is running about $500,000 less than expected at the end of the 2nd quarter, is expected to come in as budgeted by the 3rd quarter. The problem with HURF revenue was related to late collections by the state. Councilmember Goulet asked if the 18% increase in sales tax revenue has been broken down by geographic location. Ms. Schurhammer said she will ask the Finance Department to provide that level of detail to the Council. In response to Vice Mayor Eggelston's question, Ms. Schurhammer explained, historically, 44% of court fee collections occur during the first six months of the year, with 56% of the revenue arriving during the second six months. Vice Mayor Eggleston asked about the glitch that resulted in lower than anticipated HURF revenue. Ms. Schurhammer said there was a problem with collections during the month of December; therefore the state's distribution for December was less than anticipated. With regard to the "All Other" category, Ms. Schurhammer reported revenue from the sale of Northern Crossings parcel is collected as the sales are completed and more has been collected to date than originally expected. She said Development Permits and Fees continue to outpace expectations by 3.5%, or $90,000. While recreation revenue is lower than anticipated, collections do not occur evenly throughout the year and the largest share of revenue comes in during the fourth quarter. She reported library fines and fees revenue is better than expected and enterprise fund chargeback collections are meeting expectations. She explained chargebacks represent revenue from the enterprise funds for services provided by General Fund operations. Typically, these are services that the enterprise funds would have to pay an outside provider if General Fund operations did not provide the services. Ms. Schurhammer compared year-to-year city sales tax revenue collections, stating revenue for the first six months of the current fiscal year is 23.5% ahead of the same time period last fiscal year. She stated sales tax revenues from new retail development is 44%, or $583,000, higher than expected, even though the Northern Crossings development, which was included in the budget, has not yet opened. Councilmember Clark asked if the numbers reflect the development at 95th Avenue and 6 Camelback (Agua Fria Towne Center). Ms. Schurhammer responded yes. Councilmember Martinez asked if the revenue budget takes into account the loss of auto dealership sales tax revenue. Ms. Schurhammer responded yes. Ms. Schurhammer stated telecom revenue actuals of $1.6 million is 17.5%, or $239,000, higher than expected after six months. She explained the $1.6 million is attributable to the rate adjustment. The old telecom rate generated $601,000. When the new rate revenue and the old rate revenue is added together, this source generated just over $2.2 million. Ms. Schurhammer reported that the elimination of the rental housing tax exemption added $124,000 in revenue to the General Fund. This amount is only about $10,000 less than expected. While state-shared revenue actuals are meeting budget this year, state shared revenues are less this fiscal year, after the 2nd quarter, when compared to last year. She explained the decline from last fiscal year is the result of lower income tax receipts. She said, however, the city knew there would be a decline and planned accordingly. Councilmember Clark asked if the City anticipates state shared revenues to drop further in the next fiscal budget. Ms. Schurhammer said the economy bottomed out in 2002, therefore state shared income tax revenue for the next fiscal year is projected to have zero percent growth. Councilmember Martinez asked if the city tracks the number of rental housing units in the city, explaining the lower than anticipated income suggests that some property owners are not reporting their rental units. Mr. Lynch explained the rental tax is running slightly behind because implementation of the tax ran behind schedule. He said the Finance Department is getting more compliance every month and it expects revenue to be closer to the projected amount by the end of the year. Councilmember Martinez asked if property owners who file late are still held responsible for the entire amount. Mr. Lynch responded yes. Ms. Schurhammer stated three main expenditure savings were achieved in the current fiscal year: $6.3 million in base reductions, $1.1 million in salary savings, and $3.2 million in replacement fund deferrals. She said the City achieved the annual goal of $1.1 million in salary savings after the first quarter and added almost another $500,000 since the end of the first quarter. Overall, the City has underspent its budget by $2.9 million at the end of the 2nd quarter, with the largest savings coming from salaries and benefits spending. In response to Vice Mayor Eggleston's question, Ms. Schurhammer explained the city has underspent by $162,000 for pay-as-you go capital projects. She stated, however, spending does not occur evenly throughout the year, therefore, additional spending could occur at the end of the year. Ms. Schurhammer reviewed the second quarter General Fund fund balance, stating the 7 fund had a beginning balance of $31.6 million. She said during the first six months of the fiscal year the City added $70.6 million in revenue, which was offset by $4.5 million in transfers, $56.4 million in expenses and $2.2 million in designated funds. She said the ending fund balance totals almost $39.1 million. In response to Councilmember Lieberman's question, Ms. Schurhammer explained the transfer number reflects the scheduled transfers pursuant to the budget adopted by the Council in June of last fiscal year. She noted the transfer number was lower than anticipated as the result of a smaller transfer to the Airport CIP. Councilmember Frate asked for an explanation of the almost $2.6 million discrepancy in the amount transferred to the Airport CIP. Ms. Schurhammer stated information they received from the Airport indicates revenue from several grants arrived, decreasing the GF transfer amount by almost $2.6 million. She said the City does not expect to need the city to transfer more money later. Councilmember Clark suggested the $3 million transfer was an appropriations placeholder. Mr. Ernster explained the city was approved for grant money for the east taxiway project, which is currently under design. He said he does not believe they ever intended to use General Fund money for the project. Mayor Scruggs asked staff to further research the issue, and Ms. Schurhammer said she would follow up with an e-mail explanation to Council. Ms. Schurhammer stated the General Fund revenue projection for FY 04/05 is based on a variety of factors, including a multi-year history of actuals to detect trends, Arizona per capita disposable income, growth in the Arizona per capita disposable income, inflation, and projected population growth for Glendale. She stated the resulting calculations in the model were then compared to projections produced by other entities, such as Marshall Vest's Economic and Business Research Center at the University of Arizona, ASU and BankOne. She noted the Arizona League of Towns and Cities and the State of Arizona do not produce its projections until mid-March and June, respectively. Ms. Schurhammer said the projection for next fiscal year shows a 3% increase over the current year's revenue budget. She said city sales tax projections reflect an increase of $4,053,000 because actual receipts for the first six months of this fiscal year are $4,053,000 ahead of budget. She reviewed a slide depicting the city's sales tax revenue projections for FY 2004/05 as compared to the projections of other entities. She said, in the current fiscal year, the city is seeing a growth rate of 23.5% (over last year's collections for the same time period), a rate that far exceeds the 2004 forecasts of 5.1% - 6% shown. She said that Marshall Vest's forecasting group at the University of Arizona is forecasting 2005 retail sales growth for the Valley to be 6.5% to 7.1%. The city is projecting growth of 9% based on the amount that actuals collected through the 2nd quarter exceed budget. Councilmember Clark noted that the city's projections vary widely from those of the University of Arizona, ASU and BankOne. Councilmember Clark urged staff to be extremely conservative in its projection of retail growth. Ms. Schurhammer explained the 9% increase actually represents the $4 million increase in collections over the 8 current year budget through the 2nd quarter. Councilmember Clark commented on the volatility of sales tax revenue, stating she is concerned about projecting such a high percentage of growth. Ms. Schurhammer pointed out, after six months, the city is already $4 million ahead of budget. Councilmember Clark asked staff to remind them that the General Fund projection already incorporates a 9% increase in sales tax revenue. Councilmember Lieberman asked if the figures take into account sales tax revenue anticipated to come with the opening of the Northern Crossings' Wal-Mart or the possibility of an automobile dealer opening within the last six months of the year. Ms. Schurhammer responded no, stating the figures reflect the amount collected to date. Ms. Schurhammer explained the city sales tax stabilization policy. She said it states that the actual amount of sales tax revenue collected in the current fiscal year should be the base estimate for developing the next year's revenue projection. She noted that it is impossible to use the current fiscal year's revenue actuals to establish next fiscal year's revenue projection given that the current fiscal year's revenue actuals for 12 months are not available until August or September of next fiscal year. Ms. Schurhammer then reviewed the projected (revenue budget) and actual revenue collections for the past several years, noting there was only one year in which revenue actuals did not meet projections. Ms. Schurhammer summarized that the city has not followed its financial policy to use the previous year's actuals when developing the next year's budget because the actuals are not known until after adoption of the budget. Councilmember Lieberman expressed his opinion that, given the city's sales tax stabilization policy, the 2005 sales tax revenue projection is low. Councilmember Clark asked if the money would be built into the operating budget. Ms. Schurhammer explained city sales tax revenue is considered a primary source of revenue for the General Fund; therefore it is one of the foundation stones for developing the General Fund operating budget. She said the other foundation stone for the General Fund is state-shared revenues. Combined, city sales tax revenue and state-shared revenues comprise over 66% of the City's GF revenue base. Ms. Schurhammer explained that the base operating budget for next year is based on the base budget for the current fiscal year. Any additional expenses will be brought forward to Council for consideration as supplemental requests. Information concerning ongoing and one-time revenue, the ongoing base expenditures, and ongoing and one- time supplemental requests will be provided to the Council during the first week of March. Councilmember Clark said the Council is asked every year to add a certain percentage to the base budget for things like retirement cost increases. She asked if the Council would again be asked to do so. Ms. Schurhammer stated all GF operating budget increases will come forward as supplemental requests. Vice Mayor Eggleston expressed concern that building the projected 9% city sales tax revenue increase into the permanent budget will cause problems in the future if growth 9 slows. Councilmember Martinez said he could accept staff's city sales tax revenue projection because it is conservative and does not include new businesses that are expected to open soon. Ms. Schurhammer reviewed the state shared revenue projections, explaining it includes revenue from income tax, state retail sales tax and the motor vehicle licensing tax (also known as the in-lieu revenue). She stated the state-shared income tax revenue to be received in 2004 is based on the 2002 economy and, as such, no growth is projected. No growth is projected in state-shared income tax revenue because Arizona experienced 0% employment growth in 2002, and the Phoenix metro area experienced only 1/10th of 1% growth in per capita disposable income in 2002. Ms. Schurhammer noted that state-shared income tax revenue is expected to increase in 2005/06 when the improving economies of 2003 and 2004 will be reflected. She said the City anticipates adequate growth in this revenue source to cover any loss expected as a result of the mid-decade census. Mayor Scruggs asked if the mid-decade census would affect all forms of state shared revenue. She noted the Speaker of the House has asked cities to retain their 2/10th of 1% percent cut (from 15% to 14.8%) in stateshared income tax revenue. She stated she could not accept an increase in any component of the state shared revenue projections when Glendale anticipates losing $3.6 million as a result of the mid-decade census. She acknowledged that the impact of the census will not be felt until 2005/06 or later. However, she is concerned that the projected increase in state-shared revenues will be built into the base budget. Councilmember Lieberman pointed out that the University of Arizona and the State are projecting growth in state retail sales tax revenue, which is shared with the cities. Mayor Scruggs stated she does not dispute that state retail sales revenue will increase. However, given the loss the city anticipates as a result of the mid-decade census, she is not comfortable building a projected increase for state-shared revenues into the base budget. She suggested they continue to project zero growth and use any additional money that comes in for one-time expenses. Councilmembers Clark and Frate agreed. Councilmember Martinez asked if projecting zero growth will impact anticipated capital improvement projects that have ongoing expenses. Mayor Scruggs explained her concern is with the increase in state-shared revenues pointing out that the city still has a 9% projected increase in city sales tax revenue built into the budget for next fiscal year. Councilmember Martinez agreed the state shared revenue growth projection should be zero. Mayor Scruggs asked about the city's contingency. Ms. Schurhammer stated this year's contingency appropriation is lower than they would normally budget. She explained the city's policy states the contingency appropriation should equate to 10% of 10 the City's total General Fund revenue budget, including HURF. The current fiscal year's GF contingency appropriation is $8 million for a $133.7 million GF revenue budget, which equates to 6% of the GF revenue budget. The city's policy calls for a GF contingency appropriation of 10% of the GF revenue budget. Ms. Schurhammer said, based on Council's direction to project zero percent growth in state-shared revenues, the total GF revenue projection of $137.9 million will be reduced by about $1.9 million to about $136 million. The Mayor and Council agreed that this is its direction regarding the GF revenue projection for FY04-05. Ms. Schurhammer stated that any positive difference between the revenue budget and actual revenue collected will go to the GF fund balance. Councilmember Martinez asked if state statutes require cities to maintain 10% of its General Fund revenue budget as a contingency appropriation. Mr. Lynch explained governmental accounting standards recommend a 10% contingency, however, it is not set forth in state statute. Councilmember Clark asked what is the city's current contingency. Ms. Schurhammer stated the contingency currently totals $8 million, representing 6% of the General Fund budget for the current fiscal year. Councilmember Lieberman pointed out that the city achieved considerable growth in city sales tax revenue despite the loss of a major car dealership. Councilmember Clark asked if the contingency fund was purposely reduced to provide additional revenue to pay ongoing costs in FY03-04. Ms. Schurhammer responded no. Ms. Schurhammer discussed the HURF projection, stating ADOT is projecting 4% growth while the city is projecting 1.5% growth. She explained the city's projection is lower than ADOT's because of the potential for HURF funds to be impacted by the state's budget situation. In addition, HURF revenue in past years has grown erratically, if at all. Ms. Schurhammer stated primary property tax revenue is projected to grow 3%, noting revenue is running 7% ahead of budget at the end of the second quarter. With regard to the All Other Revenue category, Ms. Schurhammer stated the FY03/04 budget included $3 million in one-time revenue for the sale of Northern Crossings parcels. She explained the FY04/05 revenue budget includes only $200,000 in one-time revenue from the sale of property because, while there could be additional Northern Crossings' property sales, the timing of those sales is uncertain. She stated they are projecting growth in some ongoing sources of revenue, which will offset the loss of $3 million in one-time revenue. Councilmember Clark expressed her opinion the 9% growth projection for city sales tax revenue is too optimistic and should be lowered. Vice Mayor Eggleston agreed. Councilmember Martinez disagreed with Councilmembers Clark and Eggleston, stating he believes the projection to be very conservative. Councilmember Frate agreed, 11 pointing out the projection does not take into account potential revenue from Northern Crossings. Councilmember Lieberman also agreed the projection is conservative. Mayor Scruggs said, while she agrees the projection of city sales tax revenue is too high, she will accept the projection because the stateshared revenue growth will be set to zero. She pointed out proposed legislative changes could lower the amount of state shared revenue the city receives. Ms. Schurhammer ended the presentation by verifying that Council's direction is to project zero percent growth for state-shared revenues so that the $137.9 million GF revenue projection will be reduced by about $1.9 million to about $136 million. The Mayor and Council agreed that this is its direction regarding the GF revenue projection for FY04-05. 2. RESIDENTIAL DESIGN AND DEVELOPMENT EXPECTATIONS CITY STAFF PRESENTING THIS ITEM: Mr. Tim Ernster, Deputy City Manager; Mr. Jon Froke, Planning Director and Ms. Tracy Stevens, Senior Planner. This is a request for the City Council to review and provide direction on the draft Residential Design and Development Expectations. Staff will present the draft expectation section-by-section beginning with the single-family residential component. Further workshops will be based on Council direction. The updated expectations will provide a document for the Council, the Planning Commission, homebuilders, staff, and the development community to use during the design review process. The document will guide quality development and ensure diverse neighborhoods are established throughout the city. The document is also customer friendly and clearly outlines the city's expectations for all new residential development during the rezoning, preliminary plat, final plat, and design review processes. The document updates and combines the existing 1999 Single-Family Residential Design and Development Guidelines and the 1996 Multiple-Residence Housing Design Guidelines. Modifications from the existing documents include: Definitions, Small Lot Development, Medium Lot Development, Large Lot Development, House Product Design, Architectural Design Review, and Amenities/Open Space. The document separates the Design and Development Expectations into eight parts: • Part 1: Small Lot Development Lot sizes less than 7,000 S.F. • Part 2: Medium Lot Development Lot sizes between 7,000 to 12,000 S.F. • Part 3: Large Lot Development Lot sizes over 12,000 S.F. • Part 4: Amenities • Part 5: House Product Design • Part 6: Architectural Design Review • Part 7: Multi-Family Development 12 • Part 8: Appendix The new expectations encourage a greater variety of lot sizes to include small lots, detached sidewalks, shorter block lengths, open space, varied setbacks, improved recreational amenities, and more variety in architectural style and building materials for house products. The document clarifies the minimum expectations for all new subdivisions, including standard subdivisions, Planned Residential Developments, and Planned Area Developments. Lot sizes greater than 12,000 square feet will be eligible for alternate development standards, when superior performance and quality is portrayed in such developments. The Council received a preliminary draft of the expectations in June of 2003. On May 8, June 12, July 10, August 14, September 11 and 24, 2003 staff discussed the draft expectations at Planning Commission workshops. The expectations were also presented at two formal Planning Commission meetings held August 21 and November 6, 2003. At its November 6, 2003 public hearing, the Planning Commission recommended approval of the draft document to the Council with amendments and a change in title to Residential Design and Development Expectations. The title change reflects an effort to be consistent with the approved Commercial Design Expectations. The Residential Design and Development Expectations were presented and discussed at the Council workshop on November 18, 2003. Topics of discussion included: • The name of the document; • The specific use of the document and how the document is perceived by the development community; • The flexibility of some of the expectations vs. definitive requirements; • Giving a higher value to some expectations rather than others; • Small lot development and traffic calming devices; • Detached sidewalks; • Diverse housing products; and • Effect the proposed document may have on redevelopment and infill projects. Since the City Council workshop, staff has incorporated the Commission's amendments and recommendation into a revised draft copy dated December 16, 2003. A written request has been made by the Home Builders Association of Central Arizona to reduce the number of required building elevations from four to three for subdivisions less than 30 lots. Staff believes this request is appropriate and will incorporate the request into the expectations. With the growth of the city and eventual buildout, there is a need to ensure greater 13 quality in residential development citywide, and allow for creative design and diversity in the city's housing stock. The revised expectations should provide guidance for diverse residential development. The Planning Department has been advising developers and homebuilders of the proposed change in the expectations during pre-application and post-application review meetings. The Planning Department held three meetings with the Home Builders Association of Central Arizona to discuss the updated draft and provided their representative with a copy of the draft document. A letter received from the Home Builders Association requesting a revision to the document is included with this report. The Planning Department has met with the Arizona Multi-Housing Association to discuss the minor changes made to the Multi-family section of the guidelines and the incorporation of the document into the Residential Design and Development Expectations. Other interested parties notified of the proposed draft and the changes made to the existing Single Family Residential Design Guidelines and the Multiple Residence Housing Design Guidelines include: Fulton Homes; Earl, Curley and Lagarde; Beus Gilbert PLLC, and Gilstrap and Associates. The draft document has been placed on the city's website and is available at the Development Services Center. The expectations will be used as part of the standard city review process. With the exception of reproduction of the final document, no additional resources will be required once the expectations are adopted. The recommendation was to provide staff direction on the updated Residential Design and Development Expectations for standard subdivisions, Planned Residential Developments, Planned Area Developments, and multi-family developments. Councilmember Martinez asked why the document is referred to as expectations versus standards. Mr. Froke stated the Planning Commission discussed the document's title extensively and felt using the term "expectations" would keep it consistent with the city's Commercial Design Expectations. Councilmember Martinez read the definitions for "expectation" and "standard"; expressing his opinion the document more closely meets the definition of a standard. Mr. Froke said they are willing to accept Council's input on the document's title. Councilmember Clark said she is also troubled by the document's title, expressing her opinion the word expectation gives the document less impact. Councilmember Goulet stated the document, as titled, gives developers a level of flexibility. Mr. Froke pointed out there are other opportunities for the Council and Planning Commission to ensure quality projects. In response to Councilmember Martinez's question, Mr. Froke stated some cities refer 14 to the document as a manual, while others refer to it as guidelines or expectations. Ms. Stevens explained the expectations are broken into three categories, small lot, medium lot and large lot developments. She said small lot development should be identified as five to eight dwelling units per acre, has physical barriers that preclude expansion of development and qualify as infill, and be located within a designated redevelopment area. She stated one key goal in small lot development is to encourage people to walk and not use their cars in order to create interaction with neighbors, build a stronger sense of community and become more transit oriented. She explained that narrow curvilinear streets or straight streets on short blocks, in conjunction with other traffic calming measures, are intended to lower vehicular speeds and create a more interesting safe neighborhood configuration. In response to Mayor Scruggs' question, Ms. Stevens stated the cul-de-sac limit comes from subdivision regulations; however, the 600-foot maximum for straight streets is an expectation. Mayor Scruggs expressed concern that the 600-foot maximum will result in more streets, making neighborhoods less safe for children. She asked where cars would be allowed to park in cul-de-sacs, stating the landscape islands will prevent cars from traveling through the cul-de-sacs if cars are parked along the curb. She asked if developers would be required to follow the suggestions contained in the document in all of their developments or only in situations where the suggestions work for the proposed development. She asked if, in their attempt to make the neighborhoods more attractive, would the expectations actually make the neighborhoods less functional for the residents. Mr. Froke pointed out the city's project team will review the feasibility of all of the expectations for each subdivision project. Councilmember Goulet asked how the expectations address lot coverage and the number of elevations required by an applicant. Ms. Stevens explained lot coverage requirements are addressed in the zoning ordinance. She said the Home Builders Association suggested developers offer a minimum of three elevations for subdivisions of 30 lots or less. Mr. Froke said a PRD overlay would address situations where a development requires a higher percentage of lot coverage. In response to Councilmember Martinez's request, Mr. Froke provided examples of developments wherein landscaped areas with bench seating have been provided. He pointed out the city has been requiring such pedestrian amenities for the past 14 years. Councilmember Clark asked what is the city doing to ensure as much usable open space as possible. Ms. Stevens said, while there is not typically a lot of open space on the lot itself, the document suggests up to 20 percent of a project be reserved for active and passive open space. She pointed out decorative landscaping does not count towards the open space requirement. Councilmember Martinez asked if retention areas count towards the open space requirement. Mr. Froke said the document requires future applicants to submit a calculation of required storm water retention and to identify the percentage of the open space that would be inundated with storm water. Ms. Stevens explained up to 15 percent of the open space could include retention areas if used for active or passive recreation. Councilmember Frate asked what percentage of the city do they predict in the future will be made up of small lot development. Mr. Froke offered to calculate the percentage and provide the answer to Councilmember Frate at a later date. Ms. Stevens continued her presentation, discussing perimeter improvements and wall 15 and decorative fencing requirements. She also identified landscaping expectations, explaining they are intended to effectuate an attractive street appearance, create increased buffers from intense or incompatible land uses, and compliment the exterior design of each residence. Ms. Stevens stated the second segment of the document is Medium Lot Developments, between 7,000 and 12,000 square feet. She said the lot development expectations encourage innovation of design, with a variety of lots and setbacks to avoid uniformity. She stated the street layouts are carefully integrated into the overall design concept to include lot layout, open spaces, pedestrian linkages, recreational amenities, focal points, drainage, and house products. She said the expectations for medium lot developments also call for curvilinear streetscapes. She reviewed perimeter improvements, explaining they are intended to create a unique character and sense of place. Ms. Stevens stated large lot development makes up the third single-family segment of the document. She explained this type of development encourages and preserves low density residential uses and includes custom and semi-custom homes, spacious yards with extensive landscaping, larger setbacks between homes, equestrian trails, and sidewalks. Mayor Scruggs questioned whether the document could be considered expectations when it requires compliance. Mr. Froke explained the intent of the document is for developers to meet the expectations unless specific conditions justify non-compliance. Mr. Ernster explained staff does not want to refer to the document as a standard because it is intended to be a living document that upholds key design concepts while taking into account the unique circumstances of individual subdivisions. Mayor Scruggs expressed concern the document will be viewed as the minimum standards to be applied to all applications. Councilmember Goulet pointed out the city's expectations today may not accommodate future designs and products. He asked if there is anything in the document that adds excessive time or costs. Mr. Froke responded no. Councilmember Martinez stated the Homebuilders Association reviewed the document and their only suggestion was to lower the number of elevations for small lot developments to three. Ms. Stevens reviewed the Amenities and Open Space section of the document, explaining the intent of this section is to provide a certain level of "Quality of Life" and "Sense of Place" for residents. She said the city wants to provide existing and new residents with an abundance of trees, open spaces, and uncluttered pedestrian ways in addition to other recreational opportunities. Councilmember Martinez asked if the Post Office dictates mailbox designs. Ms. Stevens said the Post Office dictates the type of boxes used; however, developers now add architectural features around the mailboxes. Councilmember Clark asked if the document requires all lighting elements to fall under the Dark Skies Ordinance. Ms. Stevens responded yes. Ms. Stevens reviewed the Housing Product section of the document, stating diversity best describes the housing product expected by the City of Glendale. She said the goal is to include a tremendous range of style and size while achieving architectural continuity for each neighborhood. She noted new developments locating in the historic 16 downtown area; designated infill areas or custom home development areas will adhere to the design theme established for that area. She stated Section Six, Architectural Design Review, allows the Planning Department an opportunity to review the proposed architectural features of the house product. Mayor Scruggs asked if developers would be encouraged to use a mixture of facades, roofing material and so forth within the same subdivision. Mr. Froke responded yes. 3. LEGISLATIVE UPDATE CITY STAFF PRESENTING THIS ITEM: Ms. Miryam Gutier, Intergovernmental Programs Director and Ms. Dana Tranberg, Intergovernmental Programs Coordinator. This standing workshop item provides an opportunity for the city's Intergovernmental Programs Director to update the City Council on legislative bills and issues that may impact the city and that may also require immediate policy direction. The first legislative report for 2004 was provided to Council during the January 20, 2004 workshop. The key principles of Glendale's legislative agenda are to preserve and enhance the city's ability to deliver quality and cost-effective services to Glendale citizens and visitors, to address quality of life issues for Glendale citizens, and to enhance the City Council's ability to serve Glendale citizens by retaining local decision making authority and maintaining fiscally balanced revenue sources. The recommendation was to review and provide staff direction on the items presented. SB1043 Ms. Gutier reported SB 1043 passed out of two committees in the Senate and appears to have a lot of support. She said two amendments would be offered, including one that sets forth February 29, 2004 as the date by which no further agreements can be entered into. She noted Senator Harper announced the bill would only apply to Maricopa County cities and towns. Mayor Scruggs commented it appears that Maricopa County is the target of all harmful legislation and all of the breaks are being given to non-Maricopa County areas. Councilmember Goulet said he does not support the bill, expressing his opinion the bill is being offered as a way to punish Maricopa County. Vice Mayor Eggleston agreed the bill is very damaging to cities in Maricopa County. Ms. Gutier stated they have explained the detrimental impacts to Senator Harper, however, he does not believe Maricopa County should give business incentives to retail businesses since they will come regardless. Councilmember Clark asked Ms. Gutier how likely is it that the bill will get to the Governor. Ms. Gutier said they did not expect the bill to make it through the two committees and they do not know what to expect if the bill makes it to the House. Mayor Scruggs noted the committees refused to take testimony, despite a number of 17 people present to speak against the bill. Councilmember Martinez agreed the bill would put the City of Glendale at a tremendous disadvantage, particularly with regard to the western part of the city. Ms. Gutier said they have brought several examples of business retention issues, however, Senator Harper argues that businesses that want to come will come and those that do not want to stay will leave. Councilmember Martinez asked if any business groups have come out in opposition to the bill. Ms. Gutier said the Chamber of Commerce has not been very vocal on the issue, but we have been asked for their assistance. Councilmember Clark said it is important that residents know State Legislators are proposing legislation that may harm the valley. Mayor Scruggs said those who support the bill hate big boxes and do not believe they should receive any kind of incentives. She said competition between Gilbert and Chandler for the automall also factors into their support of the bill. Ms. Gutier agreed, noting Senator Tiptraney voted in favor of the bill stating he would rather have seen the $60 million Gilbert offered as an incentive come back to both communities in shared revenues. Mayor Scruggs stated Senator Tiptraney has indicated he regrets the million of dollars in incentives he gave to WestCor for Chandler Regional Mall. Councilmember Frate clarified the incentives offered by the City of Glendale are performance based and businesses do not receive incentives if they do not uphold their promise to create jobs and increase sales tax revenue. It was the consensus of City Council to oppose SB1043. SB1143 Councilmember Goulet asked about the rationale behind 75 percent of the funds being applied to rural cities and towns. Ms. Gutier noted SB 1148 and 2510 are identical bills and HB 2670 is identical except that it applies a 1.5 percent surcharge instead of a 4.5 percent surcharge. She explained cable companies have wanted cities to tax the satellite industry so as to put them on a level playing field. She said bills have failed in the past, however, taking the funding that would come from the tax and applying it to a first responder bill will help gain support for the bill. She explained the 75/25 split is an attempt to obtain the votes of rural Legislators. She said the funds received will total $12 to $20 million per year, with 75 percent of the funds going to rural cities and towns for the first six years and grant opportunities opened to everyone after that. She stated cities and towns would receive the funds through a grant process through the Department of Homeland Security's Department of Emergency Management. Councilmember Clark suggested they amend the bill to require proof of level of threat to a community. Mayor Scruggs noted the issue would be discussed at the League Executive Committee meeting. She pointed out many communities in the west valley have railroads, nuclear plants, prisons and other substantial risk factors, but will be excluded from funding for six years. Councilmember Lieberman asked if there are any regulations with regard to how the funds are disbursed. Ms. Gutier responded no, stating the Homeland Technical Security Advisory Committee will have to develop a process through which communities apply for and receive funding. 18 Mayor Scruggs pointed out the funds will be generated in Maricopa County, stating it is wrong to exclude Maricopa County from receiving funding, Councilmember Clark suggested the bill be further amended to require a minimum threshold of threat assessment a community has to meet before being eligible for the funds. She also recommended, should the bill go through, that any funds the smaller communities do not spend should revert to Maricopa County. Mayor Scruggs asked if the state or cities would be responsible for adding the tax to the cable bill. Mr. Paladini stated it would be a state tax on cable and satellite subscriptions. He noted the bill says that, to the extent cable providers pay a franchise or license fee, that amount will be credited toward their five percent surcharge. He suggested the reason the funding is directed toward rural areas is that they are less likely to have franchise agreements. Mayor Scruggs suggested the bill should have been directed to rural areas that do not have franchise agreements, stating it is a rural issue. Councilmember Lieberman pointed out a new department will have to be created in the Department of Revenue to collect the funds. He asked if the state would collect the difference if a city's franchise fee were less than the proposed tax. Mr. Paladini stated there is no such provision in the bill at this time. Mayor Scruggs asked if the state could preempt city franchise fees to allow their tax to be assessed. Mr. Paladini stated doing so would significantly impact the city's ability to provide cable since the franchise fee pays for rights-of-way, street cuts and other basic service elements. Mayor Scruggs expressed her opinion that they should not actively lobby for the tax, but, rather, they should put their IGR capital into ensuring preemption never occurs. Councilmember Clark and Eggleston agreed. Mayor Scruggs asked what does the city receive from its franchise fee annually. Mr. Lynch responded $1.3 million. Mr. Paladini clarified the bill would prohibit cities and towns from entering into new license agreements with cable providers. It was the consensus of the City Council to oppose SB1143. SB1356 Ms. Gutier explained some of the provisions of this bill would preempt municipalities from establishing their own sales tax rates and abolish the model city tax code. She said cities would lose the ability to independently pursue the collection of amounts owed and audits of taxpayers. She stated the bill would prohibit a city from obtaining a separate license to do business within the city and provides for a credit against a municipal use tax for taxes levied in another state to the extent that the aggregate taxes exceed the state tax rate. Mayor Scruggs said the city would lose control over sales tax. She explained a streamlined tax has garnered a lot of interest because it would allow Internet sales to be taxed. She said, however, the city stands to lose much more. She voiced Council's consensus to oppose the bill. Judicial Enhancement Bill Ms. Gutier said Judge Finn recommends the city oppose the bill as introduced. Council agreed to direct the intergovernmental team to work on opposing the bill. 19 HB2264/SB1355 Ms. Gutier explained HB2264 would reduce the corporate property tax from 25 percent to 20 percent, impacting future city bond programs while increasing homeowners' tax rates. She noted SB 1355 allows the Joint Legislative Budget Committee to determine the greatest of 20 percent of full cash value for Class I properties. Councilmember Clark questioned how the bills could pass given the limited number of commercial property owners. Mayor Scruggs noted, however, there is a lot of momentum behind the bill, including the business community and the Governor's task force. It was the consensus of the City Council to oppose HB2264 and SB1355. SB2270/HB1143/1341 Ms. Gutier said SB2270 has passed out of the House Ways and Means Committee and Rules Committee. She explained the bill takes the sales factor from 50 percent to 70 percent of the tax bill and will result in a significant loss of state shared revenues. It was the consensus of the City Council to oppose SB2270 and HB1143/1341. SCR1047 Ms. Gutier explained the bill amends the state constitution to require 2/3 vote of the House and Senate to authorize a city, town, county or special taxing district to impose a new tax. She noted the vote would go to the public in the November general ballot. It was the consensus of City Council to oppose SCR1047. Vested Property Rights Ms. Gutier explained the bill says vested property rights are established when a property owner submits a site plan to the city or when a municipal body approves a zoning application. Mr. Froke said one of the biggest problems with the bills is that it is retroactive. He explained, for instance, all of the properties that had residential zoning prior to the Air Base Protection Matrix would now be vested. It was the consensus of City Council to oppose vested property rights bill. WHAT IS THE NUMBER OF THE BILL? HB2678 Ms. Tranberg stated the bill contains many provisions of last year's eminent domain bill, including one that states the city cannot transfer, sell or lease any property for 10 years and another that increases the threshold for eliminating a slum or blight designation from 50 percent to 85 percent. She said it further states eminent domain must be determined essential versus critical. She recommended the Council oppose the bill. It was the consensus of the City Council to oppose HB2678. HB2140 20 Ms. Gutier explained HB2140 would change the definition of a military airport. She said the City of Phoenix has expressed concern over the bill, fearing it will apply the high noise potential zone area to Sky Harbor Airport. She stated another bill, HB2662, states military training routes, as a flight, may fly as low as 100 feet, but has to exceed 250 knots. Mayor Scruggs asked if speed is an issue given the low altitude. Councilmember Lieberman noted the planes are equipped with ground scanning equipment, allowing them to navigate through foothills. Mayor Scruggs stated clear direction from Luke Air Force Base would be required before the Council can decide whether or not it can support the bills. HB2141 Ms. Gutier reported HB 2141 is another strike everything amendment to address Auxiliary Field One. She said she would review the bill and bring it back to Council at its next workshop. HB2605 Ms. Gutier said the only provision of the bill she has determined to be of negative consequence to the City of Glendale is that the reporting requirements are repealed out of the statute. She said, currently, a city has to file an annual report at the Attorney General's Office to determine compliance with the statutes. She said the bill would move the responsibility to the Department of Commerce to determine a general plan's compliance with state statutes. She stated the bill asks for one FTE at the Department of Commerce and one FTE at the Attorney General's Office. She questioned the need for another full time employee if the language concerning the Attorney's General's Office is repealed. She said some also argue that the Department of Commerce should not be involved in local land planning issues. She recommended support of the bill, except in terms of the FTE for the Attorney General's Office. She said, however, she believes there should be more discussion regarding the Department of Commerce. Mayor Scruggs asked Mr. Paladini his opinion of the repeal of reporting requirements. Mr. Paladini said it appears the bill would give the Commerce Department super-zoning authority. Mayor Scruggs pointed out, in the past, the reporting requirements have held cities accountable for their actions. Mayor Scruggs asked if the Department of Commerce has the authority to render an opinion with regard to the zoning process. Mr. Paladini said the state grants zoning authority to cities and, therefore, has the authority to take it away. He said, while the bill goes against what cities and towns want, it is intended to protect Luke Air Force Base. Ms. Gutier expressed her opinion there is room for amendment in the bill, stating she will bring the Council's concerns to Representative Hansen and the stakeholder group. HB 2134 Ms. Gutier reported HB 2134 would be heard in committee tomorrow morning. She stated the bill was not well received by House leadership and, consequently, was assigned to three committees. She said she has received resolutions from every west valley city in support of the bill, noting El Paso Gas has offered to withdraw the project if the bill goes away. She reported SRP and Southwest Gas have remained neutral on the bill. She explained a proposed amendment would prohibit any natural gas storage 21 or pipeline from being located within a nine-mile buffer around Luke Air Force Base that encompasses the Goodyear and Glendale Airports. Mayor Scruggs asked where the Salt Caverns are located in relation to the City of Glendale. Mr. Reedy said he believes the nine-mile buffer will take the Caverns out of the viable range. Councilmember Frate asked who performed the research on the proposed amendment. Ms. Gutier said SRP, the sponsor of the bill, and an attorney hired by the West Valley Coalition of Landowners looked at the maps to determine where the boundaries should be drawn. She offered to have Mr. Doug Kukino, Environmental Resources Director, look at the amendment to ensure it covers all necessary areas. In response to Councilmember Goulet's question, Ms. Tranberg reported the Senate left turn bill has passed out of Committee and is heading for the Senate floor. She stated the House version has not been scheduled for a committee hearing. Councilmember Frate asked about the status of SB1084. Ms. Tranberg explained three solid waste bills are included in the omnibus bill. She said a working group, including Mr. Norm Gumenik, Solid Waste Superintendent, from the City of Glendale, has been working on amendments for the bill. She stated, however, without specific direction from the city, Mr. Gumenik, participation has been limited. She said, therefore, they are asking for specific Council direction to oppose the original bills and allow them to work on amendments. It was the consensus of City Council to oppose the original bill and direct staff to work on amendments. Mayor Scruggs asked for an update on SCR1014. Ms. Gutier explained SCR1014 could have an annual impact of $1.2 million on the City of Glendale. She said the legislation would divert monies that come from the state lottery to K-12 education and road construction and renovation. Ms. Tranberg said it appears the road construction and renovation projects would be determined by the legislature. Ms. Gutier reported the bill has received significant feedback from cities and the sponsor is considering pulling the issue off the table. Ms. Gutier explained staff would update the Council on these and other bills of interest at its next workshop. Ms. Tranberg said, pursuant to Councilmember Clark's request, weekly updates will be emailed to the Council. ADJOURNMENT The meeting was adjourned at 6:30 p.m. 22