HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 1/18/2011 *PLEASE NOTE: Since the Glendale City Council does not take formal action at the
Workshops,Workshop minutes are not approved by the City Council.
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MINUTES OF THE
GLENDALE CITY COUNCIL WORKSHOP SESSION
Council Chambers—Workshop Room
5850 West Glendale Avenue
January 18, 2011
1:30 p.m.
PRESENT: Mayor Elaine M. Scruggs, Vice Mayor Steven E. Frate and
Councilmembers Norma S. Alvarez, Joyce V. Clark, Yvonne J. Knaack,
H. Phillip Lieberman, and Manuel D. Martinez,
ABSENT: None
ALSO PRESENT: Ed Beasley, City Manager; Horatio Skeete, Assistant City Manager; Craig
Tindall, City Attorney; and Pamela Hanna, City Clerk
WORKSHOP SESSION
1. FY 2011 GENERAL FUND OPERATING BUDGET UPDATE AND FY 2012
GENERAL FUND OPERATING BUDGET STRATEGY— 30 MINUTES
CITY STAFF PRESENTING THIS ITEM: Sherry M. Schurhammer, Management and Budget
Director; Diane Goke, Finance Director; and Don Bolton, Assistant Budget Director
This is an update for City Council about the economy and the FY 2011 General Fund (GF)
operating budget through the first five months. This is also a confirmation of the strategy for
balancing the GF operating budget for FY 2012 and beyond as the economy gradually recovers
and returns to robust health.
Council's strategic goals continue to serve as the foundation for the development of the city's
annual budget regardless of whether the economy is growing or contracting. Vision, innovation,
partnerships, and dedicated employees continue to play a central role in making the city's efforts
successful in areas of key importance to the Mayor and Council.
Economic Update
According to a September 2010 announcement from the National Bureau of Economic Research
(NBER), the recession officially ended in June 2009, 18 months after it began in December
2007.
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The NBER defines a recession as "a significant decline in economic activity spread across the
economy, lasting more than a few months, normally visible in real gross domestic product, real
income, employment, industrial production, and wholesale-retail sales." According to the
NBER, the end of the recession is defined as "the end of the declining phase and the start of the
rising phase of the economic cycle."
NBER is the nation's leading private, nonprofit, nonpartisan research organization dedicated to
economic research and has been operating since 1920. It has been under contract with the U. S.
Department of Commerce for many decades and is well-known for providing start and end dates
for recessions in the United States.
The consensus among experts on the Arizona economy such as Elliott Pollack, Marshall Vest
(University of Arizona), and Lee McPheters (Arizona State University) is that the worst of the
recession's impact is past us although the return to normal and healthy economic growth will
take time.
Recovery is expected to be gradual and occur over an extended period of time. It is important to
recognize that economic recoveries frequently are marked by occasional unevenness, with
stretches of growth sporadically interrupted by elements of decline, although the long-term trend
is toward growth and a return to normal economic capacity. Further, significant improvement in
the unemployment rate is a lagging indicator so economic experts expect that measure to decline
slowly over a longer period of time.
According to the Arizona experts on the economy, recovery across the state relies on business
growth, business investment and population growth, the traditional drivers of economic growth
in Arizona, as well as a clearing of the excess inventory of vacant homes.
Budget Strategy
Given that economic recovery is expected to occur gradually over time, the budget strategy that
was presented to Council as part of the FY 2011 GF operating budget remains in place. This
strategy will take us through the next few fiscal years as the economy strengthens until we see
sustained growth in retail sales, income taxes and other critical revenue sources. Further, this
strategy was affirmed by the public through a series of extensive public meetings that occurred
last spring.
The budget strategy is built around a strategic, business-based and phased approach. This
strategy sustains core city services that serve the community, as defined by Council, ensures the
smooth operation of the overall organization and minimizes, to the extent possible, impacting
other services provided to the community.
One element of this budget strategy is the city's Innovate Initiative. This initiative is directly
tied to the budget process and the city's strategic business model. Employees have been, and
continue to be, actively engaged in making business-based recommendations for adjustments that
help us prepare a balanced budget. Some adjustments will result in expenditure savings while
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others, through changes in process or structure, result in efficiencies not currently captured. Yet
other adjustments will result in new or improved revenue streams for the GF.
While this budget strategy is designed to adapt operations to constrained resources, it also
positions the city to be ready for the time when the economy is fully recovered.
Other steps have positioned Glendale to be more successful than other cities. These measures
include the cooperative efforts we have witnessed across the Glendale organization such as
voluntary employee efforts and other innovative expenditure management measures. Glendale
was the only valley city to adopt this approach in FY 2010, including adjustments to represented
labor agreements. Additional expenditure management measures include the following:
o Programs that were not paying for themselves or achieving targeted contribution rates
were eliminated or reduced;
o Services for which demand had diminished, or future demand was not anticipated, were
eliminated;
o Hours of operations for some facilities were adjusted to better match demand for service;
o Activities offered by other organizations in the community were eliminated; and
o Vacancies have been and continue to be carefully evaluated to determine if they must be
filled.
Revenue enhancements also have been pursued such as new agreements for electronic marquees
and revised agreements for the placement of cell phone towers on city property. Additional
examples of revenue enhancements include the following:
o Implementation of Fire Department inspection fees, premium parking fees for downtown
special events and transaction fees for pawn shops and second-hand stores; and
o Implementation of a tax amnesty program that resulted in an additional $1.3 million in
revenue with 618 taxpayers participating.
In addition, Glendale has remained at the forefront in bringing high quality economic
development to the city. In FY 2010, the City's efforts resulted in 1,776 jobs (includes both new
jobs and the expansion/retention of jobs). Through the first half of FY 2011 the City's efforts
resulted in an additional 710 jobs (includes both new jobs and the expansion/retention of jobs).
It is important to recognize that a municipality is a service organization. Therefore, continuation
of the phased budget strategy is appropriate as it takes us through a series of steps that are
designed to attain a fiscally responsible budget while not severely diminishing the valuable
services we provide to the community.
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The outlook for FY 2012 requires continuation of the realignment of resources based on the
business needs of the community and the level of resources we can afford. This means we must
continue to adjust our delivery system to match the peak demand times for services. We are also
continuing the review of the useful life of all equipment and capital assets by extending their
service life as long as efficiency of service delivery would not be affected. The intent of these
steps is to sustain the city's core services that serve the community and ensure smooth operation
of the overall organization while we continue to strategically manage our way through this
current economic downturn.
The long-term outlook requires continuation of strategic investments in business delivery
systems and realignment of functions that enable us to be responsive when the economy fully
recovers. Some strategic investments that have started and will continue include the following:
o Upgrade of the city's tax and license technology system that will reduce manual
processing of tax and license filings, simplify and shorten transaction times for customers,
improve the turnaround time for management reporting and improve revenue recovery efforts.
The new system is expected to be in operation during the spring of 2011.
o Realignment of functions within the city to reposition programs based on the needs of the
community and based on the recognition that some programs will continue to be provided by
non-profits and/or the private sector.
The first quarter report on the FY 2011 GF operating budget was presented to Council at the
November 16, 2010 workshop.
Glendale's budget is an important financial, planning and public communication tool. It gives
residents and businesses a clear and concrete view of the city's direction for public services,
operations and capital facilities and equipment. It also provides the community with a better
understanding of the city's ongoing needs for stable revenue sources to fund public services,
ongoing operations and capital facilities and equipment.
The budget provides Council, residents and businesses with a means to evaluate the city's
financial stability.
The budget strategy was presented to the public through community-wide public meetings on the
proposed program and service adjustments for FY 2011. These meetings occurred on March 3,
4, and 8, 2010. A document summarizing the proposed program and service adjustments was
posted publicly in advance of the meetings.
The public also was given the opportunity to provide feedback on the proposed program and
service adjustments through the city's website and a telephone hotline, both of which were
available through the close of business on March 11, 2010. A total of 200 responses were
received plus 52 citizens spoke at the public meetings. Overall, the public affirmed the budget
strategy.
All budget workshops are open to the public and are posted publicly according to state statutes.
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Today's workshop is for information only. Decisions on the FY 2012 budget will not be
requested until the budget workshops are held in March and April 2011.
Horatio Skeete, Assistant City Manager, provided a brief summary He explained that staff will
proceed with development of the FY 2012 budget using the same strategy used for the
development of the FY 2011 budget. He noted that the public and Council validated this strategy
through the community meetings on the proposed service adjustments and the council budget
workshops, both of which occurred in February and March 2010. Additionally, Council's goals
and objectives from their retreat in December 2010 will be used. He stated this presentation will
include a brief summary of the current fiscal year expenditures and revenues. He said it was
important to note that today's presentation is for the first five months of the year and therefore
will not reflect any holiday sales activity. He said those retail sales figures will be included in a
later status report.
Sherry M. Schurhammer, Management and Budget Director, explained that executive
management began implementing corrective actions when revenues began shrinking and resulted
in three consecutive years of operating budget reductions. Through this tough economy, the
city has consistently adopted a balanced budget as required by state law. She explained that as
budget reductions have been implemented, the departments have tried to minimize impacting
major services and programs to the community. Staff also has continued to evaluate program
and service performance and to identify adjustments through strategic, business-based decisions.
In addition, executive management has worked successfully with employees and their
representative labor groups to ensure they are proactively and positively involved in the budget
process.
Ms. Schurhammer explained that the National Bureau of Economic Research declared in
December 2010 that the national recession ended in June of 2009. The National Bureau of
Economic Research is a private, non-partisan, non-profit research organization dedicated to
economic research since 1920. It is the organization tasked with dating economic cycles for the
federal government and has been doing so for decades. She noted that the end of the national
recession is arrived at when there is data showing 'the end of the declining phase' for a range of
economic measures such as real income, gross domestic product and retail sales at the wholesale
level. This declaration means the worst of the recession is behind us and economic recovery is
underway. She further clarified that Arizona has been particularly hard-hit during this recession,
so recovery is expected to occur over a longer period of time. She also noted that signs of
recovery have occurred already and represent encouraging signs of progress. For example, both
state and city sales taxes have halted their slide downward and have begun to grow slightly.
Also, corporate income tax receipts at the state level are showing strong improvements and the
tourism industry has reported gains over the prior calendar year. She also stated that job growth
in Arizona is beginning to take hold as unemployment claims are declining.
Diane Goke, Finance Director, said Glendale has had many successful accomplishments related
to positioning the city for future economic growth. These accomplishments include steps to
build confidence in the community and encourage businesses to invest and relocate to Glendale.
She explained that despite the deep recession of the past few years, Glendale remains at the
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forefront in attracting high quality economic development. Another accomplishment for the city
has been the retention of the city's strong bond rating during this challenging economy. This
bond rating is based on the city's recognition of the changed economy and the city's disciplined
financial management including three consecutive years of budget reductions to address
diminished revenues.
Don Bolton, Assistant Budget Director, presented a slide summarizing of General Fund revenues
and expenditures through the first five months of the fiscal year. He said the expenditure side
saw a favorable change from the first quarter with spending at $1.3 million less than budget.
This is a savings of 2.1% through five months. On the revenue side, the nationally reported
strong retail sales activity over the holidays is not reflected in the revenue figures so it is not
surprising to see collections below budget. Additionally, most of the revenue enhancements
included in the FY 2011 adopted budget are expected to be collected in the last half of the fiscal
year.
Mr. Bolton provided a slide showing the calendar for developing the FY 2012 balanced budget
and the Council budget workshops. He remarked that this summary included some very good
news for Glendale residents: no increases to water, sewer, and sanitation rates for FY 2012. .
Councilmember Lieberman welcomed Councilmember Alvarez as the newest member of the
Council to her first meeting.
Councilmember Lieberman questioned the statement about the end of the recession by pointing
out that housing sales in the Phoenix metropolitan area have dropped for the fourth month in a
row. He also expressed his concerns about the many personal and business bankruptcies
occurring. He noted that many shopping centers remain empty and the unemployment rate still
remains at 9.8%. He explained that because of these facts and other indicators, he is somewhat
confused by the notion that the recession is over. However, he was glad Glendale was able to
fair well through it all.
Councilmember Clark asked about the projection for FY 2012 property valuations since
secondary property tax revenues fund a large portion of the city's capital improvement plan. Ms.
Schurhammer said the Maricopa County Assessor's Office will issue those figures in mid-
February. Councilmember Clark asked if the secondary assessed valuation for Glendale has
been trailing downward and Ms. Schurhammer replied yes.
Councilmember Clark asked for the city's total GF operating budget figure for FY 2011. Ms.
Schurhammer replied the figure was $147.3 million. Councilmember Clark inquired if that
meant the expenditures were $1.3 million less than $147.3 million. Ms. Schurhammer replied
no. She added the slide presented only reflected where they were at the end of five months.
Councilmember Clark said it was difficult to form a conclusion based on the small amount of
information received in their packet. She asked if they are to assume that revenue trends will be
substantially under budget. Ms. Schurhammer replied no. She added they have not yet recorded
the nationally reported strong retail sales from the holiday season. Additionally, for five of the
last six years, both city and state sales tax have done better in the last part of the fiscal year.
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Councilmember Alvarez inquired about employee furloughs. Ms. Schurhammer explained
furloughs will be addressed when the City Manager's recommended FY 2012 budget is
presented in March. She said staff was still putting together the proposed budget for next fiscal
year as additional data needed to complete next fiscal year's budget has not been available yet.
Councilmember Alvarez asked if Council's input and discussions were also done in mid-March.
Mayor Scruggs asked Mr. Ed Beasley, City Manager to explain the city's budget process. Mr.
Beasley explained the process.
Councilmember Martinez remarked this was the first time staff has provided only five months
worth of data; therefore, this presentation was new for everyone. Additionally, he believes that
although good news has been reported, he still has reservations about the recession being over.
He added that he believes they will have a tough year with the budget. However, they will have
a much better picture when Council receives the six month update and hopes they will not have
to make additional difficult cuts in the budget.
Councilmember Lieberman inquired if staff had comparison totals for the city's secondary
assessed valuation over several years. Ms. Schurhammer stated she did not have that
information with her; however, she can provide it after the meeting. Councilmember Lieberman
asked for comparison information for FY 2006 through FY 2011.
Councilmember Knaack remarked she was glad to see no proposed water and sewer rate
increases. However, she would like information on the effect this will have on the enterprise
funds.
Mayor Scruggs inquired if the enterprise funds will also be covered in the March budget
workshops and Ms. Schurhammer replied yes and said those issues were normally covered at
that time.
Vice Mayor Frate thanked staff for providing the most updated information available. He noted
he appreciates staff not offering speculation as fact and waiting until they have all the
information before presenting.
As there were no further comments, Mayor Scruggs adjourned the meeting.
ADJOURNMENT
The meeting was adjourned at 2:00 p.m.
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