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HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 12/21/2004 *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 December 21, 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; Craig Tindall, Acting City Attorney; and Pamela Hanna, City Clerk Vice Mayor Eggleston, seconded by Councilmember Martinez moved to got into Executive Session on recruitment for the City Attorney position. The motion carried unanimously. The City Council went into executive session and returned at 2:30 p.m. The Special City Council Meeting was convened at 2:30 p.m. and adjourned at 3:10. The City Council returned to Executive Session and opened the Workshop at 4:00 p.m. 1. FY 2004-05 — 1ST QUARTER REPORT ON THE GENERAL FUND CITY STAFF PRESENTING THIS ITEM: Ms. Sherry Schurhammer, Budget Director This is a request for the City Council to review the Fiscal Year (FY) 2004-05 first quarter report on the General Fund (GF) expenditures and revenues. The FY04-05 first 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. In response to requests from the Council, staff committed to providing quarterly reports on the General Fund beginning with FY03-04. 1 The GF's first quarter revenue budget and actuals are as follows (in 000s): FY05 Budget FY05 Actuals City Sales Tax $12,054 $12,510 State Income Tax $ 4,937 $ 5,031 State Sales Tax $ 4,328 $ 4,496 State In-Lieu $ 2,007 $ 2,354 HURF $ 3,845 $ 3,711 Primary Property Tax $ 899 $ 178 All Other $ 6,575 $ 6.327 TOTAL $34,645 $34,607 As the preceding list shows, FY04-05 first quarter GF revenue receipts are only $38,000 less than expected, or within 1% of the first quarter budget for GF revenues. City sales tax receipts, which account for almost 35% of the city's total GF revenue budget, exceeded expectations by $456,000 or about 3.7%. State-shared revenues are performing very well, with receipts exceeding budget by $609,000 or about 5.4%. Highway User Revenue Funds, or HURF, are revenues commonly known as the gas tax although there are several additional transportation-related fees that comprise this revenue source. This revenue source is running about $134,000 or 3.5% below budget. It is too early to tell whether the first quarter results are of a long-term nature or merely a seasonal anomaly. News reports have suggested that higher gasoline prices for cars and more competitive airfare prices led to an increase in airline travel over the summer vacation months. Whether this short-term trend continues is unknown at this point. There are no significant one-time sources of revenue reflected in the first quarter revenue actuals, unlike FY03-04 when the sale of parcels at the Northern Crossing development generated $7.3M ($7,270,000) in GF revenue. The FY04-05 first quarter budget and actuals for the GF operating and pay-as-you-go (PAYGO) capital expenditures are as follows (in 000s): FY05 Budget FY05 Actuals GF Salaries/Benefits $20,809 $18,828 GF Non-Personnel $10,652 $ 8,088 GF Debt Service $ 1,081 $ 2,178 PAYGO $ 909 $ 909 TOTAL $33,451 $30,003 Salary savings for the first quarter of FY04-05 totaled almost $2M ($1,981,000). Non-salary savings for the first quarter of FY04-05 totaled over$2.5M ($2,564,000). 2 Lease debt service payments are seasonal, with most occurring twice per year, once in the fall and once in the spring, thus accounting for actuals that exceed budget after the 1St quarter. In addition, the amount of each payment can differ based on payment terms and payment structures. Overall, the FY04-05 first quarter GF expenditures were over $3.4M ($3,448,000) less than budget. At the end of the first quarter of FY04-05, the budget-basis GF fund balance was $54.8M ($54,808,000), which is $2.8M ($2,812,000) more than the budget-basis GF fund balance at the start of FY04-05. This is the first quarterly report on the GF expenditures and revenues for FY04-05. The community benefits from periodic reports to the City Council on the General Fund's revenues and expenditures because they are a means to evaluate the city's financial stability. This is a status report on the General Fund for the first 3 months of FY04-05. No Council action is required on this report. Mr. Beasley reported first quarter sales tax and state shared revenues performed well, expenditures have been conservative and, overall, the General Fund fund balance is growing. Ms. Schurhammer reported that city sales tax receipts account for almost 35% of the city's general fund revenue budget for FY04-05. Actuals for the 1St quarter of FY04-05, or July 2004 through September 2004, came in about 4% (3.7%) or $456,000 above expectations for city sales tax receipts. Ms. Schurhammer noted that holiday retail sales tax receipts would be reflected in the 2nd quarter report, which will cover July 2004 through December 2004. Ms. Schurhammer reported that state-shared revenues were performing very well compared to budget for the 1st quarter of FY04-05. Specifically, receipts for state- shared income tax, state-shared sales tax, and motor vehicle in-lieu taxes were approximately 5% (5.4%) or $609,000 more than expected for the 1St quarter of FY04- 05. HURF revenue, according to Ms. Schurhammer, was running about 3.5% or $134,000 less than expected for the 1st quarter. Ms. Schurhammer stated that it is too early to tell whether the first quarter results are of a long-term nature or merely a seasonal anomaly. News reports have suggested that higher gasoline prices for cars and more competitive airfare prices led to an increase in airline travel over the summer vacation months. Whether this short-term trend continues is unknown at this point. 3 Mayor Scruggs commented that many cities, including Glendale, are making substantive strides forward in public transportation. She said the city's population is growing, but it seems that in the not too distant future the tremendous number of miles of bus service should be factored into the city's HURF revenue expectations. She asked when light rail is expected to be online. Mr. Tindall stated light rail will come online in 2008. Ms. Schurhammer reported that the "all other revenue" category is running about 4% (3.8%) or $248,000 below expectation. She explained the "all other revenue" category encompasses several seasonal revenue sources including recreation-related revenue and various types of license renewals. Overall, Ms. Schurhammer stated that general fund revenue for the first quarter of FY04-05 is performing as expected, coming in only $38,000 or less than 1% under budget. Ms. Schurhammer moved to the next slide, which presented information about the Northern Crossing development. Mr. Lynch discussed this slide by stating that the Northern Crossing development once was a non-performing property with undesirable uses. He said the land is now an asset to the city, providing city sales taxes, improved property tax revenue, and jobs. Mr. Lynch went on to explain that the city's land acquisition cost was $11 million. Completed parcel sales have exceeded that amount by $500,000, coming in at $11.5 million for FY03-04 and FY04-05. Since the opening of stores at the development, he said city sales tax revenue generation is expected to be in excess of $1 million by the end of FY04-05. He noted current sales activity per square foot exceeds regional averages by 80% and national averages by 116%. Councilmember Lieberman said, while the land acquisition cost $11 million, the city gave Wal-Mart a rebate bringing the city's total investment closer to $14 or $15 million. Mr. Lynch agreed, explaining demolition costs of $2.2 million and relocation costs and legal fees of$1.3 million brought the total loan amount to $14.5 million. He said the city is now in the second year of the five-year redevelopment project and revenue generation has already exceeded the cost of acquiring the land by $500,000. Mayor Scruggs suggested future presentations set forth all of the costs and identify how much the city is receiving in sales tax revenue from each of the establishments. She stated it would not be long before the city's sales tax receipts far exceed the total cost of the overall project. Councilmember Lieberman agreed all of the costs and revenue should be presented to represent a complete picture of the overall transactions. Mayor Scruggs said the City Council felt redevelopment of that part of the city was so critical that the project would be worth doing even if the full cost were never recovered. 4 Ms. Schurhammer discussed details of the all other revenue category, stating that revenue from development permits and fees came in 2% (1.8%) or $24,000 less than budgeted. She stated that revenue from franchise fees was better than expected, coming in 12% (12.2%) or $107,000 better than expected. She stated that the license fees category represents seasonal revenue sources, reflecting revenue from renewals of business/professional licenses, liquor licenses, and sales tax licenses, as well as revenue from new licenses. She stated most revenue from license renewals come in during the third quarter of the fiscal year. She said recreation-related fees are also a seasonal revenue source, with most of the revenue coming in during the third and fourth quarters. She explained that chargebacks represent revenue from the enterprise funds to the general fund for services provided by the general fund. Specifically, general fund operations within the city, such as budget, finance, human resources, and the city attorney's office, provide services to the enterprise funds. The enterprise fund operations would have to pay outside contractors to provide these services if the general fund operations did not provide the services. Ms. Schurhammer reviewed a year-to-year comparison of city sales tax receipts, stating FY04-05 actuals totaled $12.5 million, which is 4% or $456,000 more than expected for the 1St quarter of FY04-05. When compared to the city sales tax receipts received in the 1st quarter of FY03-04, FY04-05 receipts are about $468,000 or almost 4% (3.8%) ahead. Ms. Schurhammer said a year-to-year comparison of state shared revenue shows current fiscal year receipts for the 1St quarter have increased $426,000 or almost 4% over last fiscal year's 1st quarter receipts. She pointed out that state income tax collections are beginning to see improvements at the state level. Specifically, state income tax net collections from individuals are up 13% for the 1st quarter of FY04-05 when compared to FY03-04. On the corporate income tax side, net collections are up 47% for the 1St quarter of FY04-05 when compared to FY03-04. This dramatic improvement in income tax receipts at the state level should be seen at the local level in FY06-07 given the 2-year lag in state-shared income tax receipts. Ms. Schurhammer stated it is possible these improvements in net income tax collections could mitigate the impact of the mid-decade census on the distribution of state-shared revenues. Ms. Schurhammer reviewed the city's first quarter expenditures, noting the city achieved $3.4 million in expenditure savings. Mayor Scruggs asked if new FTE's added to the budget are put into the budget for a full year of salary. Ms. Schurhammer responded yes. She further explained that partial- year credits are built into the operating budgets for the estimated lag that occurs in getting new police and fire recruits into the Phoenix academy. Ms. Schurhammer stated that $1.2 million of the almost $2 million in salary savings is due to vacancies in the Police and Fire Departments. Mayor Scruggs expressed concern that the General Fund will not have enough money to do the kind of staffing needed in the Police Department, when, in reality, they could take the one time savings, roll it over for a year and build up to the amount needed. Ms. Schurhammer explained funds budgeted at 5 the beginning of the year for salaries are based on ongoing revenue whereas salary savings represent one-time savings of ongoing revenue. Mayor Scruggs said she would like to see the budgets more realistically reflect when the officers will be hired. Councilmember Clark agreed, stating there has to be a built in periodic adjustment to reflect what really occurs. Councilmember Martinez also agreed they need to look at the Public Safety budget. Mayor Scruggs clarified she does not want to use the $12 million in public safety salary savings for other purposes when there is not enough general fund ongoing money to add the officers the department needs. Mr. Beasley said he spoke with the Chief and they will look at certain aspects of the public safety budget differently. He said they will also look at doing things differently in terms of recruiting and retaining officers and expediting the process. Councilmember Clark stated Glendale has lost its competitiveness with other valley Police Departments. She said as long as other valley cities pay more for the same positions, Glendale will continue to lose officers. She suggested staff review the city's competitiveness with other cities on a more frequent basis. Ms. Carmichael stated Glendale recently conducted a classification study on police officers, which found Glendale to be second in the valley for new officers. In response to Mayor Scruggs' question, Mr. Schurhammer explained non-personnel savings represent that portion of the operating budget dedicated for non-salary and non-benefit related budget items, including professional contractual services. Mayor Scruggs asked if the savings are due to expenditures being seasonal. Ms. Schurhammer responded yes, stating non-personnel expenditures typically occur in the third and fourth quarters. Councilmember Martinez asked about the debt service line on the slide. Ms. Schurhammer explained that the debt service line represents lease payments in the operating budget. She explained payments generally occur two times per year, but one lease has only one payment per year occurring in September, thus causing the debt service line to be overspent for the 1st quarter. Ms. Schurhammer stated that she expects this spending to even out over the course of the fiscal year so that the total operating budget for debt service is not exceeded by the end of FY04-05. Ms. Schurhammer reviewed the first quarter general fund balance, stating the city began the year with a beginning balance of almost $52 million ($51,996,000). She said revenue during the first quarter totaled $34.6 million ($34,607,000), transfers to other funds totaled almost $1.8 million ($1,792,000) and expenses totaled $30 million ($30,003,000), resulting in an ending fund balance, on a budget basis, of $54.8 million ($54,808,000). 6 Ms. Schurhammer discussed the budget calendar for the next few months, stating staff will talk to Council about the compensation study in January. The 2nd quarter general fund status report will be presented to Council in February. She said the operating and capital budgets, related supplemental requests, and the final balancing budget workshops will occur in March and April. She stated the 3`d quarter general fund report would be brought to Council in June. Finally, the preliminary and final budget adoption for FY05-06 will occur in June. In response to Councilmember Martinez's question, Ms. Schurhammer explained the $16.5 million ($16,485,000) FY04-05 GF contingency appropriation is part of the $54.8 million GF fund balance. She noted the contingency represents 13% of the city's revenue budget, exceeding the 10% minimum spelled out in the city's financial policies. Councilmember Lieberman asked Ms. Schurhammer what she predicts the city's sales tax receipts will be for the second quarter. Ms. Schurhammer said we would not know the 2"d quarter results for city sales tax receipts until the first or second week of February. She noted Westcor is reporting a 20 percent increase in their sales of gift cards, explaining the city does not collect sales tax on the sale of gift cards until the cards are redeemed. 2. MUNICIPAL MARKETING REVENUE OPPORTUNITY CITY STAFF PRESENTING THIS ITEM: Ms. Gloria Santiago, Deputy City Manager; Julie Frisoni, Communication Director, and Stacy Pearson, Assistant Communication Director. This is a request for the City Council to review and provide direction on a policy regarding municipal marketing as an opportunity to generate non-traditional revenue. Municipal Marketing meets a number of City Council Strategic Priorities. Primarily, it has the potential to provide additional financial stability. It may also promote economic development, project a positive image of Glendale, strengthen community relationships, and create new partnerships. In the spring of 2003, the Marketing/Communications Department began researching programs that use marketing, sponsorship, and asset management, as alternative ways to raise revenue. Corporations are increasingly receptive to such programs. In fact, the International Event Group's Sponsorship Report states that U.S. companies spend more than $400 million annually on municipal marketing partnerships. Since 1997, more than 50 municipalities have developed long-term marketing agreements, selling both sponsorship of programs and projects, as well as and exclusivity of services to companies, including beverages and cell phone providers. Cities with successful programs include: Clearwater, FL; Garden Grove, CA; Huntington Beach, CA; King County, WA; Lancaster County, PA; Long Beach, CA; Los Angeles, 7 CA; Marino Valley, CA; New York City Hospital Network, NY; Newport Beach, CA; Ocean City, MD; Sacramento, CA; San Diego, CA; and Vancouver, BC, as well as others. All of these cities contract with a municipal marketing firm to serve as the agent of the city. Public Enterprise Group (PEG), the firm selected via the city's recent RFP process represents Huntington Beach, Long Beach, New York Health & Hospital Network, King County, and California State Parks. In Arizona, the cities of Chandler, Flagstaff, Mesa, Peoria, Phoenix, Surprise, Tempe, and Tucson are developing or conducting municipal marketing programs of varying size and scope. Public Enterprise Group does not currently represent any Arizona cities. Cities negotiate agreements that either generate cash or relieve budgeted obligations. Traditional city assets include event sponsorship opportunities, exclusive vending/pouring rights, affinity banking agreements, and naming rights. Examples of products that could be received by the city include automobiles, recreation equipment, and cell phones. Staff issued a Request for Proposals in June of 2004 to determine if municipal marketing opportunities existed for the city of Glendale and four proposals were received. A proposal evaluation team included the Deputy City Attorney, the City Auditor, the Deputy Director of Parks and Recreation, the Assistant Director of Marketing/Communications, and the Special Events Coordinator responsible for sponsorships. Public Enterprise Group was selected based on expertise, experience, and cost, and, with council approval, will help develop the city's municipal marketing program. Staff drafted a municipal marketing policy for review by the City Council prior to entering into an agreement with Public Enterprise Group. This item has the potential to benefit the community by increasing revenue and funding available for city programs without additional burden to city taxpayers. If the Council adopts a policy, Public Enterprise Group is paid a combination of commission, retainer, and reimbursable expenses. For the first six months of the contract, the company receives a monthly retainer of $6,500 per month for analyzing, soliciting, and promoting negotiations. This $39,000 total retainer will be reimbursed to the city upon closure of the first agreement. 8 PEG receives 15 percent commission on all revenues it raises for the city. Each proposed revenue partnership valued above $50,000 would be brought to council for approval. Grants Capital Expense One-Time Cost Budgeted Unbudgeted Total *$39,000 $39,000 Account Name, Fund, Account and Line Item Number 73-4249-7330 — Special Events Sponsorship Revenue * Would be reimbursed to the city when revenue is received from the first partnership agreement Staff was directed by city management to research non-traditional revenue and considered two options — negotiating agreements in-house and contracting with an agent as proposed in this communication. A number of problems exist with in-house solicitation and include perceived conflict of interest and lack of expertise in sponsorship value and negotiation. Each of the cities referenced above uses an independent agent to negotiate sponsorships. A request for proposals was issued to explore services available in the private sector and confirm that Glendale has opportunities to generate revenue in municipal marketing. Public Enterprise Group has a track record of success in other municipalities. The recommendation was to provide staff direction on a policy regarding Municipal Marketing. Ms. Pearson said staff has identified two primary areas of opportunity, exclusivity and sponsorship. She explained corporations are willing to pay for the exclusive right to do business in and with the city. She said the city already utilizes sponsorships with APS as the presenting sponsor of Glendale Glitters and Kalil for beverages. She stated they hope to broaden the program to gain additional sponsors and revenue for the city. She stated the proposed policy positions the city to select sponsors selectively and cautiously. She presented a list of qualifications, stating corporations must be compatible with the city's image and goals, their visibility must not be objectionable, and they must be consistent with the scale of their contribution. She stated companies involved in a lawsuit with the city, involved in negotiating an unrelated city contract, or whose products or services are not deemed in the best interest of the city would not be eligible to enter agreements with the city. 9 Mayor Scruggs suggested they clarify the language concerning companies already involved in negotiating an unrelated city contract. She expressed concern that the public's perception will be that the city is giving preferential treatment to a company with which it has a partnership if that company is ultimately awarded an unrelated contract. In response to Vice Mayor Eggleston's question, Ms. Frisoni stated the city would have the right to pull out of the agreement with notice if it decides it is no longer in the best interest of the city to be associated with a particular corporation. Mayor Scruggs asked if everyone in the city would be required to use the service or products provided by a sponsor, even if the service or product does not meet their individual needs. Councilmember Clark expressed her opinion the city's unilateral ability to cancel a contract presents legal issues. She said cities are required to do everything above board and in an unbiased manner, stating the proposed policy flies in the face of that mandate. She asked who determines what is in the best interest of the city. Ms. Pearson said staff has looked very closely at the issue and believes the policy calls for what is standard and reasonable. She agreed the determination of whether or not a particular company's service or product is appropriate is subjective, stating it will depend on the type of event being sponsored. She pointed out all of the contracts will be done by RFP, which is an open and competitive process. Mr. Tindall explained the city will issue an RFP asking for an exclusive agreement at a certain level of usage, meaning other people with other usage needs will not be included in the agreement. He said the bid process can be structured to ensure the city can successfully defend any protests. He agreed the city has to be careful when making its judgments as to with whom it will do business, but as long as it uses a rational basis for its decision, the city can legally defend its decision not to do business with a certain type of business. Mayor Scruggs asked how the city would react if the vendor of a product or service deemed inappropriate by the city wants to partner with the city. Mr. Tindall said the city would be able to defend its position as long as it can articulate it's reasoning as to why a partnership with a particular type of business is not in the best interest of the city. Councilmember Goulet asked how the city will safeguard against a company that seeks and can afford to gain market control. Ms. Frisoni explained the agreements require more than cash contributions, with in-kind contributions being equally important. Councilmember Goulet expressed concern that large companies will be able to make in kind contributions that exceed those possible by smaller local companies. Ms. Pearson pointed out no city that has implemented a municipal marketing program has discontinued the program; stating most are looking to enhance or grow their programs. She stated the city already uses the services or products and the municipal marketing program will allow it to achieve a better value for its money. 10 Councilmember Martinez asked if all city facilities will be required to offer the product or service selected through the RFP process. Ms. Frisoni responded yes. Councilmember Martinez said he does not like that the partnerships will limit the public's choice. Ms. Frisoni explained it would be similar to a restaurant that offers only one beverage vendor's products. Mayor Scruggs expressed her opinion the city already does a good job of obtaining appropriate partnerships and sponsorships. She said she has serious issues with the proposed municipal marketing program. She stated she would never support putting a person or company's name on a city facility, pointing out the city has chosen not to name its parks after people for fear of offending someone. Councilmember Clark agreed the city does a good job of soliciting marketing opportunities. She said, under the proposed program, the Marketing Department would make decisions as to what best fits all departments' needs, suggesting the departments would rather be able to spend the funds as they see fit. She said she is also concerned that Marketing takes a share of any revenue brought into the city through the program, stating she believes the revenue should remain with the department being affected. Ms. Frisoni explained representatives from each city department would bring forward items they want to pursue. She said, while the contract will be managed by the Marketing Department, the process would include representatives from each city department. Councilmember Clark asked if the department would have any say if a vendor wanted to substitute an in kind donation for an expected cash payment. Ms. Pearson responded yes, stating the departments will have a say in what they need, with whom they would like to partner, and what is received by the department in return for participation in the program. Ms. Frisoni stated departments will have to see a benefit to the program for it to work, therefore, the departments who participate will have a say in the process and a cut of the benefit. She emphasized no contracts will be signed without Council approval. Mayor Scruggs pointed out the Marketing Department approves all contracts under $50,000. With regard to cell phones, she agreed the city could save a lot of money if everyone wanted and needed the same kind of phone; stating, however, that is not necessarily the case. Ms. Santiago said the Marketing Department and department representatives will drive the process and will likely start with a small, specific request for proposal. Ms. Frisoni explained the city is looking at ways to conserve money and work contracts. She said if the city is comfortable with certain categories as they are, it can choose not to pursue contracts for those categories. Councilmember Martinez asked if staff has looked at a particular product. Ms. Pearson reported sponsorships for Glendale Glitters have grown considerably over the past few years and will likely soon be over $50,000 and with national corporations. She stated the policy will set the framework to allow the sponsorship program to grow and, if successful, apply it to other areas of the city. 11 Ms. Pearson reviewed the approval process, stating contracts over $50,000 will require Council approval, pointing out none of the city's current contracts for sponsorship of special events are over that amount. She stated contracts under $50,000 will revert to standard signature authority for expenditures so as not to affect small sponsorships that departments may already have in place. Councilmember Clark asked if departments will be free to negotiate their own sponsorships if they are less than $50,000. Ms. Pearson responded yes; stating, however, they may work with the departments to combine some of the larger agreements. She assured Councilmember Clark all of their decisions will be based on what best meets the needs of the departments. Councilmember Goulet asked if there is any data that shows that once one particular vendor or service provider is selected, certain other vendors and providers follow. He pointed out that limiting the public's choices with regard to the products available at city facilities may discourage them from returning. Ms. Frisoni said they have not seen a blanketing effect over the past 18 months, pointing out neighboring cities often choose competing vendors and providers. Ms. Frisoni explained staff is suggesting that revenue be used to offset costs associated with the contract; noting, however, the costs associated with the contract will typically be written into the contract itself. She said the funds will not be dedicated to ongoing expenses since it is one-time revenue. She stated the funds should be considered only as a means of enhancing something already being done or alleviating certain budget allocations. She said, given the success they have seen and the number of requests the city is already getting from corporations, staff felt it was in the city's best interest to bring forth the proposed policy. She emphasized the city will be in control at all times in terms of what it asks for and receives. She stated work can begin immediately upon Council approval to identify potential opportunities. Councilmember Clark said she initially thought she would oppose the proposed policy, but now believes it should be given a chance since Council will have final approval authority over the contracts. She stated doing so will allow the Council to judge the program on its merits. Mayor Scruggs asked why they did not choose to proceed with the sponsorship component of the policy and wait to see if it is successful before proceeding with the exclusivity component. Ms. Pearson said the two components are closely related, explaining most vendors already provide products and act as sponsors of special events. She stated corporations are looking for ways to further reach the residents and help the city meet its needs. Councilmember Lieberman said he would like to see the program proceed on a trial basis. 12 Mayor Scruggs expressed concern that naming rights are mentioned as being part of the program. Ms. Frisoni said as they pursue sponsorship opportunities, companies will inquire about other ways of reaching residents. Councilmember Martinez asked how the policy became an issue. Ms. Santiago said they have researched the issue over the past 18 months as a creative approach to slow economic times. Councilmember Martinez expressed his opinion staff should have brought the idea to Council before spending 18 months doing research. Councilmember Goulet said, while he can see the value of buying in bulk, he does not necessarily want the proposed policy to apply to everything the city purchases. He suggested they try it on a limited basis, such as with regard to special events or the special event season. He asked to see examples of how the program has been successful in other cities. Councilmember Frate said municipal marketing is a trend the city will likely embrace at some point, but he does not feel confident he can make an educated decision at this time. He asked to see the program's track record in other cities, suggesting they have people from the other cities come and talk about their experience with the program. He commended staff for following Council's direction 18 months ago to "think outside the box" to generate revenues. Councilmember Clark agreed with Councilmember Goulet, stating she would be willing to try a pilot project since the Council will have the right of refusal. Vice Mayor Eggleston said he likes the city's current strategy for obtaining sponsors and he is not comfortable proceeding with the municipal marketing policy at this time. Councilmember Lieberman stated he likes the concept and believes they should proceed on a limited basis. He said the policy will encourage competitive pricing and better service among the vendors. Councilmember Martinez noted he told staff after his meeting with them that he was not comfortable with the policy. Mayor Scruggs said she is very uncomfortable with the proposed policy because the citizens, not the city, own the city facilities. She stated, however, they are comfortable with sponsorships. She said she also cannot support a pilot project given the lack of details as to how the pilot would work. She agreed the city should be given fair value for the benefits it provides by having products displayed at city events. She questioned why the Council should direct staff to put further time into the issue when the majority is not comfortable with the policy. She asked if there is any way to separate the exclusivity component. She expressed her opinion the policy, as written, is open ended. 13 Councilmember Lieberman asked how the proposed policy differs from what the city is already doing in terms of Glitter and Glow. Mayor Scruggs reiterated the Council is comfortable with sponsorships for special events. She asked if there is a way to contract with the company to enhance the sponsorship component without delving into exclusivity. Councilmember Lieberman suggested they proceed with a pilot project. Mayor Scruggs objected, stating there have been no clearly defined parameters for a pilot project. Councilmember Clark said the level of specificity that some members of the Council are requesting cannot be delivered at this point because no one can say at this time what opportunities are possible. She suggested they gain comfort by identifying areas the Council is not comfortable pursuing as a pilot project. Mayor Scruggs suggested staff come back with examples from other cities. She said, unless there is a certain level of specificity, she cannot support proceeding at all. Ms. Santiago offered to go back and evaluate Council's comments and obtain more information. Councilmember Lieberman pointed out the Ellman Companies, a private corporation, is trying to sell the naming rights to the arena. He asked why that private corporation should have the right to benefit financial from naming an arena that the citizens own outright. Mayor Scruggs pointed out the Council voted on it in 2001. Ms. Santiago stated they will focus on sponsorships for special events since that seems to be the component for which there is strongest Council support. The meeting recessed for a short break. 3. PHASE II ANNEXATION ANALYSIS: LITCHFILED ROAD TO PERRYVILLE ROAD CITY STAFF PRESENTING THIS ITEM: Mr. Ken Reedy, Deputy City Manager and Ms. Kate Langford, Senior Planner. This is a request for the City Council to review the Phase II Annexation Analysis for the area located between Litchfield Road to Perryville Road. This is the second of a series of workshops discussing the entire strip annexation area, 115th Avenue to Perryville Road Additional workshops are anticipated to allow for in-depth discussions of such issues as water resources and services; emergency services, and other topics requested by the Council. Glendale 2025, the city's General Plan, includes specific goals addressing the need for growth management. Annexation is a tool that can be used by the city to direct and manage growth. 14 The Annexation Policy, adopted in December of 2003, indicates specific priorities for annexation activities east of 115th Avenue. The area west of 115th Avenue was left for additional discussion at some future date. These workshops are intended to address the area west of 115h Avenue. In 1977 and 1978, the city created boundaries outlining an area referred to as the strip annexation area. The entire strip annexation area is approximately 38 square miles in size and is generally bounded by Peoria and Northern Avenues on the north, 115th Avenue on the east, Bethany Home and Camelback Roads on the south, and Perryville Road on the west. The Council adopted Glendale's first annexation policy on December 16, 2003. Discussion of the policy began in July of 2002 and development of the policy was completed over the course of five Council workshops. Annexation analysis is required by the annexation policy. An annexation analysis is used to determine potential fiscal impacts and impacts to the levels of service provided to the city. Both immediate and long-term impacts are identified by this analysis. Phase II Annexation Area boundaries are Peoria Avenue on the north, Litchfield Road on the east, Camelback Road on the south, and Perryville Road on the west. The Phase II area is approximately 26 square miles in size and is currently developing in accordance with Maricopa County zoning designations and development standards. The area is bisected by the 65-Idn noise contour line of Luke AFB. This has a significant impact on potential development within this analysis area. State legislation has been passed over the last few years addressing acceptable uses within the noise contours of this and other military installations within the state. A table and map of uses within the noise contours is included in the council communication. Glendale's General Plan identifies the western half of the Phase II area for predominately low-density residential development. The lands within the noise contours are identified as a Luke Compatible Land Use (LCLA) area. Uses within the LCLA are evaluated using the legislative requirements that have been established. The entire Phase II area is undeveloped and has a significant potential for development of employment type uses appropriate within the LCLA area. This area could yield as much as 20.8 million square feet of employment uses over the very long term. Limited potential for retail and employment uses exist west of the noise contour boundaries. Approximately 200 acres of retail and 360 acres of employment uses are shown on the existing General Plan for this area. 15 Loop 303 travels north and south between Cotton Lane and Citrus Road and provides an opportunity for a five-mile long "window" of freeway through this area. One of the greatest challenges in the area is the subsidence, sinking of the ground due to the excessive pumping of ground water. The third most active area of subsidence in the country is contained within the Phase II boundaries. Phase I Annexation Analysis was presented to the Council at the December 7, 2004 workshop. The Phase I area is located on the east side of Litchfield Road and extends to 115th Avenue. The potential annexation of all or a part of the 16,640 acres would provide the following benefits to the community: • Allow Glendale's land use designations and development standards to apply to this area. • Loop 303 provides a five-mile long "window" for future retail and employment development. • Strengthen Glendale's ability to protect Luke AFB from encroachment. This presentation was provided as the second of a two-part annexation analysis encompassing the entire strip annexation area. The analysis was completed to provide a foundation of information from which the Council can choose issues for in-depth discussion at subsequent workshops. Ms. Langford said the plat records for the area show about 14 individual plats, which equates to approximately five different subdivisions. She said, based on the Glendale General Plan which shows very low density residential for half of the area, there is a potential for around 25,000 people in the area and as many as 8,300 lots. She stated roughly 85 percent of the Phase II area is undeveloped, with roughly 13 square miles located outside the 65 ldn boundary. Ms. Langford identified challenges associated with the Phase II area, stating they are similar to those in Phase I and include providing Police, Fire and Sanitation services immediately upon annexation, subsidence, flood and drainage issues, and redistricting. Mr. Reedy pointed out the subsidence area is sinking at a much slower rate than in previous decades. Councilmember Frate asked if a subdivision could be built in the subsidence area. Mr. Reedy said a lot of the subsidence area is located in the noise contour area, protecting it from intensive development. He expressed his opinion the area will stabilize over the next twenty years to a point where development may be possible. Ms. Langford agreed the development potential for the area will increase as the ground stabilizes over the next 35 to 40 years. 16 Ms. Langford said phasing opportunities exist for capital improvements and special funding could be available for capital improvements necessary to address immediate needs. She stated there is the potential for$95 million in residential and non-residential development impact fees, which could contribute towards the provision of future improvements. She said program fees and different rate structures for city services could also be reviewed and adjusted accordingly. She said there are four private water utility companies in the Phase II area. Mr. Reedy noted the city recently entered into an agreement with Surprise to serve Sections 27 and 34 as part of an intergovernmental agreement, wherein Surprise temporarily provides service to the area until Glendale decides whether or not it wants to serve the area. He said Section 15 was included in a similar agreement with Russell Ranch, allowing them to build a small package plant, which would eventually be decommissioned and become a pump station that would pump to a regional sewer system. He said LPSCO is studying and planning to build a sewer system down Camelback Road that would allow the rest of Section 18 that was originally supposed to be served by the small package plant to be served. He stated the small package plant is not capable of serving the area at this point and the county will not allow the plant to be expanded. Mr. Reedy confirmed for Councilmember Martinez that 80 acres on Litchfield Road, north of Camelback, were de-annexed to Litchfield Park about five years ago. He noted another 160 acres were de-annexed to Litchfield Park 10 or 12 years ago. Ms. Langford reported the Arizona American Water Company serves the most developable area. Mr. Reedy explained Glendale has developed over the past 80 to 100 years, with varying standards. He said they are not recommending that everything has to be done, but wanted to give a comparison of how the area differs from today's standards. He acknowledged some improvements may need to be made because deficiencies impact the city's ability to provide services at the level they are provided to everyone else in the community. He stated, however, other improvements may never be necessary. He pointed out there are no immediate service needs when undeveloped areas are annexed and, once development occurs, the development impact fees will help offset the cost of providing services. He suggested, therefore, Council focus primarily on undeveloped areas in terms of prioritization. Mayor Scruggs asked how many property owners are located in each section. Ms. Langford said it would be difficult to determine an exact number, but offered to provide a close estimate. Councilmember Lieberman asked about development fees on existing homes. Mr. Reedy stated the City Council adopted a policy last year that states existing homes will be charged an amount equal to the previous year's property tax. Ms. Langford explained the exaction of development impact fees is directly tied to the issuance of a building permit. Vice Mayor Eggleston referenced a list of major property owners west of 115th Avenue previously provided to the Council. Mr. Reedy said an analysis was conducted when the city annexed Luke Air Force Base in 1995, but property ownership in the area has most likely changed substantially since that time. 17 Councilmember Martinez said according to staffs analysis of estimated costs and revenue, it appears the city stands to profit $55 million if annexation occurs. Mr. Reedy explained the one time costs relate to the infrastructure necessary to provide required services, but do not address the ongoing operating costs associated with providing the services. Ms. Langford clarified the tables included in the executive summaries were prepared as illustrations of the potential and include only information that was readily available. Mr. Reedy said, while he would not recommend against annexing some of the other areas, focusing on the undeveloped areas first will allow them to help pay for some of the infrastructure needed to annex the developed areas. He pointed out any area considered for annexation has to be tied to the strip annexation boundary or to one of the county roads that can be tied to the strip annexation boundary. He explained the city can annex county roads without any signatures simply by gaining the County's approval. He said, as long as the size of the county island is reduced, the annexation will be valid in terms of the state law. Ms. Langford confirmed for Mayor Scruggs that at the next workshop session staff will present a list of topics from which the Council can choose to move towards a decision of whether or not to annex. ADJOURNMENT The Council members wished everyone a happy and safe holiday season. The meeting was adjourned at 7:10 p.m. 18