HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 3/22/2011 *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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GL E
MINUTES OF THE
GLENDALE CITY COUNCIL BUDGET WORKSHOP SESSION
Council Chambers—Workshop Room
5850 West Glendale Avenue
March 22, 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,
ALSO PRESENT: Ed Beasley, City Manager; Horatio Skeete, Assistant City Manager; Craig
Tindall, City Attorney; and Pamela Hanna, City Clerk
1. RECOMMENDED FY 2012 BUDGET— 1ST WORKSHOP
CITY STAFF PRESENTING THIS ITEM: Sherry Schurhammer, Management and Budget
Director and Don Bolton, Assistant Budget Director
This is a request for City Council to review the recommended FY 2012 operating budget
included in the budget workbook that is publicly posted with this agenda. The FY 2012
operating budget is balanced between estimated revenues and expenditures.
Council's 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.
The recommended FY 2012 overall budget continues to focus on Council's strategic goals. We
continue to drive the city's successes in areas of key importance to the Mayor and Council
despite the economic downturn.
The recommended FY 2012 budget reflects the continuing challenge of today's economy and the
expected gradual economic recovery. Accordingly, the FY 2012 General Fund (GF) operating
budget includes a mix of ongoing and one-time budget measures, debt refunding and the
leveraging of the GF fund balance as was done for the FY 2009, FY 2010 and FY 2011 operating
budgets.
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Use of the GF fund balance during challenging economic cycles is a legitimate and widely-used
course of action for many state and local governments here in Arizona and across the United
States. These balancing measures are discussed in detail in the City Manager's Budget Memo in
the budget workbook publicly posted with this meeting agenda.
Three key highlights of the overall recommended budget are summarized below and will be
addressed during the Council Budget Workshops on March 22 and 29, 2011.
o Furloughs and Pay-Related Reductions: Over these past two years, staff has kept the
organization running at optimal levels while enduring a 5% pay reduction and increased
demands on time. In an effort to provide some relief to these dedicated and valued
employees, the FY 2012 recommended operating budget reflects the scaling back of the
furloughs. For FY 2012, furloughs would be 2.5% (52 hours) instead of the current 5%;
and the pay-related reductions for the Public Safety labor groups would be similarly
adjusted. For more information about these items see the City Manager's Budget Memo
in the budget workbook, specifically Table 6 and the bullet points that precede it.
o Pavement Management: The Capital Improvement Plan (CIP) includes $2M per fiscal
year for FY 2012 through FY 2016, and $10M for the last five years, for continuation of
the pavement management program. This project is included in the transportation sales
tax component of the CIP. The CIP will be discussed at the March 29 budget workshop.
o 10% Contingency: The city's financial policies, as published in the annual budget book,
state that "10% of the total General Fund revenue budget for the upcoming fiscal year
should be set aside as a contingency appropriation." The recommended FY 2012 GF
operating budget includes a full 10% contingency. This is a notable accomplishment
given the duration of the recession that has hit Arizona particularly hard.
The recommended FY 2012-2021 CIP is included in the budget workbook publicly posted with
this meeting agenda. It also is discussed in the City Manager's Budget Memo that is included in
the budget workbook. The first five years of the General Obligation (G.O.) component of the
CIP was restructured to push back into the last five years of the plan all but two projects (plus
any carryover from projects underway in the current FY). The two projects retained in the first
five years of the G.O. component of the CIP are listed below.
o One project is in the Public Safety category and is related to ongoing improvements to the
public safety digital communication system.
o The second project is in the Flood Control category and addresses the cost of a regulatory
permit the city is required to maintain.
The CIP will be addressed at the March 29, 2011 budget workshop.
Council was provided the FY 2011 budget workbook during the week of March 14, 2011.
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On March 1, 2011, Council reviewed an update on the FY 2011 GF operating budget through the
first seven months.
On January 18, 2011, Council reviewed an update about the economy and the FY 2011 GF
operating budget through the first five months. This update also confirmed the strategy for
balancing the GF operating budget for FY 2012 and beyond, given that economic recovery is
expected to occur gradually over time.
On November 16, 2010, the first quarter report on the FY 2011 GF operating budget was
presented to Council.
The city'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.
All budget workshops are open to the public and are posted publicly per state requirements.
Council budget workbook materials are posted publicly along with the meeting agenda.
Today's workshop is for information only. Decisions on the FY 2011-12 recommended budget
will not be requested until the last budget workshop, which is scheduled to occur on March 29,
2011.
Today is the first of two scheduled budget workshops on the recommended operating and capital
budgets for FY 2012.
Ed Beasley, City Manager,provided a brief summary on this item. He stated staff was
presenting a balanced budget for FY 2012, as required by state law and the continuation of core
services to the community as identified through the Council's goal setting process. He
highlighted the three particular areas staff was recommending in the operating and capital
budgets. They include: Furloughs and PS MOU deferrals scaled back for FY 2012, no increases
for employee and employer health, vision, dental and life insurance, no rate increases for water,
sewer, and sanitation and landfill services. These highlights will be addressed over the course of
the two scheduled budget workshops. These workshops are Council's opportunity to ask
questions about the recommended operating and capital budgets as shown in their council budget
workbooks. For the public, the budget workbook materials are posted online with today's
meeting agenda packet.
Sherry Schurhammer, Management and Budget Director, stated today's workshop will address
the operating budget for the General Fund, which supports most of the city's operations. They
will review two of the three highlights Mr. Beasley mentioned, as well as the measures used to
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develop a balanced operating budget for FY 12. She indicated they will close today's workshop
with a review of the topics to be addressed at the March 29 workshop.
Ms. Schurhammer presented a slide presentation showing ongoing revenue grew significantly for
several years which was the result of Council's strategic investments in the community and the pursuit
of high quality economic development. She indicated that GF ongoing revenue peaked in FY 2008 at
$184 million. That was a phenomenal $67 million more than the amount collected only 6 years earlier
in FY 2002. GF ongoing revenue then declined over three years because of the nationwide deep
recession that hit Arizona and other fast-growing states very hard. However, the good news is they
believe they have witnessed the worst of this economic cycle and will not see any further erosion of the
ongoing GF revenue sources. The $144 million figure projected for FY 2012 is consistent with the
message they provided at the January 18th budget workshop update when they noted the worst of the
recession was behind them. While there are encouraging signs of progress that reflect an improving AZ
economy, it is not known how long it will take to ensure stable, steady growth across the board so
sustainable levels of revenue sources are regained. Therefore, the FY 2012 revenue projections are
about even with the level expected in the current FY.
Councilmember Clark asked if FY 2012 revenue sources most closely match FY 2005. Ms.
Schurhammer replied yes.
Ms. Schurhammer stated that included in the GF ongoing revenue projections for FY 2012 was
the primary property tax revenue. She explained there were two parts to the primary tax,primary
and secondary. The primary can be used for any general purpose, while the secondary can only
be used for the capital improvement plan. She noted that for the primary property tax rate, they
are assuming the continuation of the existing primary rate of about 22.5 cents that is expected to
yield about $2.9 million. This amount is approximately $780,000 less than the amount they
expect in the current FY. Since FY 2010, this revenue source will have eroded by $1.2 million
as a result of the property valuation declines that have occurred over the past few years. She
noted more information about this topic was in the city manager's budget memo included in the
council budget workbooks.
She indicated that because the economic recovery is expected to occur gradually over time, the
budget strategy used to develop the FY 2011 budget remains in place, as they discussed at the
January 18 budget update workshop. This strategy also was affirmed by the public last spring
(spring 2010). Staff expects this strategy to take them through the next few fiscal years until
they see sustained growth in retail sales, income taxes and other critical revenue sources. She
stated the budget strategy was built around a strategic, business-based and phased approach, in
addition to sustaining core city services that serve the community, as defined by Council.
One element of this budget strategy is the city's Innovate Initiative that was presented to City
Council at its December retreat. This initiative is directly tied to the budget process and the
city's strategic business model. Additionally, employees have been, and continue to be, actively
engaged in making business-based recommendations for adjustments that help them prepare a
balanced budget. 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.
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Don Bolton, Assistant Budget Director, stated that key elements of the operating and capital
budgets discussed today or next week are shown on the slides presented. The first three bullets
will be discussed today. They are: furloughs scaled back from 13 days to 6.5 days, public safety
MOU deferrals scaled back and 10% GF contingency maintained. He explained that the last two
bullets about additional funding for the pavement management program and no rate increases for
the enterprise funds will be discussed next week.
Mr. Bolton stated that since FY 2009, employees have kept this organization running at optimal
levels, providing exceptional services to residents and the business community. This was done
while employees also voluntarily committed to furloughs and MOU deferrals. In fact, Glendale
was the first city to do this on a voluntary basis and other organizations have continued to follow
suit. A positive outcome of the furloughs and MOU deferrals is that they helped the city balance
the budget so layoffs could be kept to an absolute minimum. Additionally, given the employees'
willingness to step forward and work proactively with management, we are happy to announce
that the FY 2012 operating budget reflects a scaling back of the furloughs from 104 hours or 13
days to 52 hours or 6 1/2 days. In addition, MOU deferrals will be scaled back accordingly.
In January 2012, management will re-evaluate the remaining furlough and MOU issues in
conjunction with what they hope will be continued economic recovery. This re-evaluation is
necessary to ensure a quality workforce that is competitive in the marketplace is retained. He
noted the recommended balanced budget also reflects the fact that there will be no increases to
employer or employee for health, dental, life and vision benefits. Lastly, the 10% GF
contingency is maintained with this balanced budget and will be discussed in more detail on
another slide before the conclusion of their presentation.
Mr. Bolton said the GF operating budget reflects balancing measures that are a mix of one-time
and ongoing measures, consistent with the approach used for the FY 2009, 2010 and 2011
budgets. These measures include the use of one-time revenue, the continuation of expenditure
management measures already in place, and the use of GF fund balance. He indicated these
balancing measures also include the savings to the GF operating budget that are expected from
future restructuring of some lease and municipal property corporation debt service. The use of
GF fund balance during challenging economic cycles is a customary, generally accepted and
widely-used course of action for local and state governments across the U.S. As a result of
Council's prudent direction, the city was in a very good position to use its healthy fund balance
to help weather the long recession and minimize service impacts for the community.
Nevertheless, we know City Council must take deliberate steps toward a gradual rebuilding of
the fund balance as the economy recovers, customary and consistent with past business and
budgeting practices.
Ms. Schurhammer stated the recommended GF contingency appropriation for FY 2012 is $14.4
million. This amount is consistent with the city's financial policies published every year in the
annual budget book which state 10% of the total GF revenue budget for the upcoming FY should
be set aside as a contingency appropriation. She presented a slide showing a ten year history of
the GF contingency appropriation that was part of the adopted budget for each FY. As shown,
the $14.4 million recommended for FY 2012 is consistent with the levels established in prior
FYs for the GF.
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Ms. Schurhammer presented a slide showing the topics to be discussed at the March 29 budget
workshop. She explained that staff will address the enterprise funds and why they are able to
recommend no rate increases for water, sewer, sanitation and landfill funds. In addition, staff
will also address the capital improvement plan, including additional funding for pavement
management. She said she will be happy to answer any questions at this time.
Councilmember Martinez asked a question regarding lease restructuring and interest rates. Ms.
Schurhammer explained that the restructuring had not occurred yet and at the moment, staff was
only meeting with banks for possible restructures. Once they have the final details, they will
come back to Council for review.
Councilmember Clark asked what the annual payments were, coming out of the GF in order to
satisfy debt that is carried by the GF. Ms. Schurhammer stated there were two parts; one was
related to the GF leases that is about $4.2 million for the current FY. She noted most were
related to land purchases made several years ago. The other part is related to the municipal
property corporation debt service. She added most of that debt service was addressed through
revenue generated at specific developments. Councilmember Clark asked if the specific
developments were the Westgate area and the debt on the arena. She asked if they were part of
the equation. Ms. Schurhammer replied yes. Councilmember Clark asked if the Media Center
was another. Ms. Schurhammer replied yes and noted that the city also issued MPC bonds to
pay for a portion of the Zanjero development and the Regional Public Safety Training Facility.
Councilmember Clark commented that they can assume part of the debt is paid for through sales
tax generated around those areas. She asked since all debt was not covered through sales taxes,
how much was coming from GF transfers to cover the remaining debt. Ms. Schurhammer
explained that for FY 2012, there is a transfer for MPC related debt service of approximately
$12.2 million. Councilmember Clark inquired as to the proposed restructuring of the MPC debt
and if it was known what was eligible at this time.
Horatio Skeete, Assistant City Manager, explained the city may have approximately $50 million
of taxable debt service that can be restructured. Councilmember Clark commented that between
the leases of$4.2 million and the MPC debt in FY 2012 covered through a transfer from the GF
($12.2 million), the GF supports approximately $16.4 million in debt payments. Ms
Schurhammer explained that through restructuring of this debt the city expects to have savings to
the GF of $8.6 million. Councilmember Clark indicated this appears to reduce the debt by at
least half, which means the loan will be for a longer period of time. Ms. Schurhammer noted
staff will look to restructure the payments, however, whether that means spreading it out over a
longer period of time really depends on the terms of the deal. Councilmember Clark asked at
what point this would be brought back to Council. Ms. Schurhammer indicated staff will bring
this item to Council before it was completed; however, it was unknown whether that will be
completed in this FY or next. Councilmember Clark remarked that if this restructuring does not
materialize, these numbers could change. Ms. Schurhammer explained that a budget was a plan
of action and if Council provides direction to proceed, staff will do everything they can to follow
the plan of action. She added this budget was planned under the best information available
today.
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Councilmember Clark asked if they had a contingency plan if this were to fall through and cause
the budget to be out of balance. Ms. Schurhammer stated they will try everything possible to not
have to go to a contingency plan and would look first to making reductions elsewhere in the
budget. Councilmember Clark commented that during last year's budget cycle, she had made
many comments referencing FY 2005 because revenues were so closely aligned with the
revenues the city had for that year. And, although she had not completed her review, just by
looking at the departments' operating budgets, she would like to congratulate staff on the
numbers. She explained that when comparing FY 2005 with proposed FY 2012 numbers, the
numbers were very similar in terms of departmental budgets and the number of FTEs. Ms.
Schurhammer noted staff had completed three straight consecutive FYs of budget reductions.
Mayor Scruggs commented that they were not setting the budget today, but staff was simply
providing recommendations. She referenced the Coyote deal and how it might affect the budget
once it's completed. However, that would have to wait until the issue was resolved. Therefore,
she would like to know if Council were to agree with these recommendations, does this mean
staff will move forward with the debt restructuring part or will they delay it until they adopt the
budget. Mr. Skeete explained that once City Council provides general guidance then we will
intensify discussions with the financial institutions. Their goal is to chip off as many pieces of
the budget and make them as firm as possible, as early as possible. He remarked by doing that,
staff knows exactly what the rest of the year is going to look like. Mayor Scruggs remarked that
once Council adopts the budget, they might see the same numbers or a different number
depending on what they were actually able to do with the restructuring. Mr. Skeete agreed.
Councilmember Lieberman asked if staff had a figure for the average GF contingency
appropriation for the last five or eight years. Ms. Schurhammer referred to the slide and stated
that the high was 18.6 million when the GF revenue budget was estimated at approximately $186
million. Councilmember Lieberman thanked staff for the great work done on the charts and the
slides. He stated they were excellent and easy to follow.
Councilmember Martinez asked if the 10% contingency was by rule of law or just something that
cities have adopted. Ms. Schurhammer stated Glendale adopted this as a financial policy
decades ago and was a customary practice among many public agencies and governments.
Councilmember Martinez remarked that as Mr. Beasley explained, even in hard times, they still
need to build up the contingency. He complemented Mr. Beasley and staff because it seems they
have gotten the city off to a good financial start. He likes how the information is being presented
and how easy it was to follow. He inquired if staff will have community meetings this year on
the budget as was done last year. Mr. Beasley explained last year's practice was unique to the
city, but also very beneficial. He noted they had received three years of information of what the
public's priorities were and what they would like to see go first if cuts needed to be made.
Councilmember Martinez stated he was also glad to see the reduction of furlough time. He
noted it was always important to consider staff's morale and make them aware that the city was
doing the best they can under some very difficult circumstances.
Councilmember Clark asked for clarification regarding an item stating the city will continue
making strategic investments in business delivery systems that will enable them to be responsive
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when the economy fully recovers. She questioned the replacement of the sales tax and license
data system and whether it was a critical expenditure. Ms. Schurhammer stated this project was
considered critical. The old system the city had in place prior to this system was very
problematic as it was characterized by a lot of time-consuming manual processes involved. For
example, all sales tax returns had to be manually data entered. Additionally, the legacy system
did not provide the detailed information needed to do analysis. She indicated the implementation
of this system allowed them to automate a lot of processes that enabled the department to cut 10
FTEs as well as implement savings in other departments. She noted no one lost their job as a
result of this automation process, but instead were redirected to more value-driven tasks.
Councilmember Clark read passages from page 4 and asked for clarification regarding the
realignment processes. Ms. Schurhammer explained this was a continuation of the business
based strategic approach undertaken last year to evaluate programs to determine whether there
were other providers in the community that provide the same service and whether the city needed
to continue providing services in those areas. In short, this is a continuation of the ongoing
evaluation of programs and services. Councilmember Clark commented on how pleased she was
with the development and accomplishments of the Innovate Initiative. She complemented
everyone who came up with this wonderful idea. She stated staff was doing a very good job.
Mayor Scruggs commented on her recent meeting of the Arizona League of Cities and Towns
and noted this was the hot topic at the meeting. They discussed the better use of resources and
ways to develop innovative ideas as well as not providing programs that were already out there.
She believes this will continue to be the hot topic since every city and town was looking for more
economical ways of doing things and how to best use their limited resources.
Mayor Scruggs stated there was a piece of legislation introduced this year called SB 1220. This
bill, if passed, would have eliminated the model city tax code, which was the ability for cities to
assign sales tax in ways that best serve their community. The state has its own taxing
mechanism; therefore, removing the city's model tax code meant that if the state did not tax it,
then cities could not. However, every city is different and has to assign sales taxes in ways that
actually produce revenue in their community. As a result, she met with the executive director of
the Arizona Tax Research Association along with other mayors. She explained this bill was
being initiated because businesses were frustrated with the complexity and difficulty they
experienced in dealing with the different tax and licensing procedures that cities had in place.
Businesses stated they would rather have the state be the revenue collector. However, since their
meeting, they have formed a small working group with the League and ATRA and the bill has
been withdrawn. She explained doing things like this, which make collecting taxes easier for the
businesses to understand, were accomplishments that have a much wider and broader positive
impact on cities than anyone ever realizes. Mayor Scruggs asked if tax and license reported to
the finance staff. Ms. Schurhammer replied yes.
Councilmember Martinez noted it was mentioned that this system will be able to help in
identifying businesses that were not licensed. However, he believed those businesses had
already been identified with the amnesty program totaling 800 businesses reporting. Ms.
Schurhammer stated he was correct; however, that was only voluntary. This next effort will be
for those that did not come forth.
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Councilmember Knaack remarked there was a lot of lost revenue with businesses that were not
licensed or reporting. She hopes this system will give them the man hours to be able to do the
canvassing.
Councilmember Alvarez asked if there was a figure for police and fire public safety labor
furlough reductions. Mr. Beasley explained they were still working to allow them to have the
flexibility to decide for their individual areas. He noted there might be adjustments in other
areas because they want to be proactive. However, as far as an exact amount, there was none
until they identify it from their prospective.
Councilmember Alvarez remarked that in regards to attorney fees and city law suits, she believes
the $500,000 budgeted for FY 2012 will not be enough. Therefore, she would like to know
where they expect to find other funds to fight these law suits. Ms. Schurhammer explained that
in FY 2011 the budget to address these expenses were divided between one budget for outside
consultants and another budget for outside legal counsel. She stated the city's attorney's budget
for outside legal fees is $500,000 for FY 2011. Additionally, the Economic Development
Department has a budget of $500,000 in division called Business Development to address
outside consultant expenses related to business development opportunities. s. The final funding
amount will be addressed in the FY 2011 clean-up ordinance that will be brought forward next
FY, after FY 2011 closes.
Councilmember Alvarez remarked that these expenses all happen after the fact and she believes
the tax payers should be aware and have some say in where their money goes. She asked if there
was any way to project where they will get the money from before it was done. She noted that
the city had already spent $1.3 million on the casino issue. She explained these were surprises
the community was not too fond of and coming to Council after the fact was where the public
had much discontent. She questioned why staff makes decisions on spending appropriation
authority and provides Council with that information after the fact. Ms. Schurhammer explained
that if additional funding were needed for legal fees, savings elsewhere within the GF is found
and that appropriation authority is transferred. She noted that last year, the total appropriation
authority that could have been spent in the GF was about $190 million and the city spent less
than that. She indicated that according to the city's financial policies published in the annual
budget book, there is the authority out of the city manager's office to authorize the transfer of
appropriation authority. She added if they did not have that authority, staff would have to come
forward to Council for every single transfer, which was not practical. Councilmember Alvarez
remarked that she was not questioning the legal authority, but was concerned that the community
does not understand and wants to know why programs are reduced and alleyways not cleared if
there was additional money for lawyer fees. She noted that as far as the legal authority, she
knows it exists and trusts Mr. Beasley completely; however, there should be a way of not getting
a surprise at the end. Mr. Beasley stated that they make every effort to predict what the city's
expenses might be and do not want to provide an element of surprise. However, there were
certain aspects in operations that they do not have any control over and do not know when they
will occur. Additionally, things such as street and alleyways were more predictable; however,
litigation was a very fluid process and not easy to predict the level of those costs. He added
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when fees are paid, they try and bring this information to Council directly and there has never
been a plan to delay or not provide the information once they are aware of it.
Councilmember Alvarez commented that she has heard a lot of congratulating regarding the
innovation program and the great ideas staff has come up with recently. She explained that as an
ex-employee of the city, she has seen great savings to Glendale by great ideas, as long as she can
remember and employee innovation was not news to her. She noted that the congratulations
should go back 30 years. Mayor Scruggs agreed and added there used to be a program that
rewarded employees with a portion of the money saved by their idea.
Councilmember Lieberman asked a question regarding Community Development
Administration, which shows a salary of $200,000 a year for one person. Ms. Schurhammer
remarked he was correct. She added it also included social security, Medicare, retirement and
medical. Councilmember Lieberman noted he still finds it hard to believe that one person in the
department makes that salary.
Councilmember Lieberman asked for a list of the city's legal consultants. Councilmember also
Lieberman asked if there was on staff a full time person developing grants. Ms. Schurhammer
stated that position still existed and is currently filled. Councilmember Lieberman asked if the
budget for homeland security had been absorbed by the police department and Mr. Bolton stated
the entire budget for the homeland security operation was transferred to the police department.
Councilmember Lieberman asked for clarification on merchant fees referenced in the financial
restructuring. Ms. Schurhammer stated merchant fees were fees the city pays to the credit card
company for accepting credit card payments. She added the city had recently negotiated a lower
rate because of the number of transactions the city has. Councilmember Lieberman inquired as
to a decrease in Marketing Communication of 11%. Mr. Bolton explained the drop was the
result of a reduction of one FTE.
Councilmember Clark read a paragraph in the operating budget strategy that really bothered her,
which read ongoing revenues have not recovered sufficiently to fully support the city's GF
ongoing operating expenses. She stated what they were essentially saying was that the city was
not collecting enough money to pay their bills. Mr. Skeete explained that because of the
economy, the city started a process of reducing expenses systematically to match the expense
using the fund balance set aside for that purpose. They are continuing this practice in order to
rely less and less on the fund balance, recognizing they cannot deplete it all. He indicated this
strategy will continue until the economy recovers and the city undertakes rebuilding the GF fund
balance. Other ongoing strategies are in areas like refinancing outstanding debt service. The
city's strategy is to work its way through these times by making some adjustments to expenditure
habits, pursuing revenue opportunities, and using the GF fund balance to minimize draconian
cuts to city services. He noted they were using the fund balance to carry them through the
recession with the understanding that they will build themselves out with systematic reductions
in expenses. He stated that a similar approach was used to weather the recession after the
terrorist attacks in 2001. Councilmember Clark remarked that she understood and appreciated
their purpose; however, at some point; the luxury of having the fund balance will run out. She
stated her concern was that the city might be expecting a faster bounce back whereas she
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believes recovery from this recession will be very small and will occur over a long period of
time. She asked staff if there will ever come a time when they will finally make the decision to
align their expenses with their revenues. Mr. Skeete responded yes and added that process was
part of this ongoing process. Staff will continue to make adjustments through the course of this
year and next. He stated part of the expenses they are covering today were expenses they
systematically have to adjust. He explained they were working through a systematic reduction in
ongoing expenses by spreading them out and changing the quality of the service and improving
the technology to reduce expenses.
Councilmember Lieberman commented that last year, the city had finished the year with a loss of
90 positions due to attrition. He inquired as to the number this year. Ms. Schurhammer stated
that next FY there will be a continuation of the 22 phased positions in police and fire as part of
this year's balancing. They will also continue the same plan next year. They will continue to
leave 30 vacancies already in the GF and are planning an additional 34 next year.
Councilmember Lieberman remarked on how he had taken some heat at the last meeting because
of his comments on the property tax revenue valuation. He noted that now it seems his estimate
of a decline of 40%was very accurate and even below the city's estimated 46%.
Vice Mayor Frate commented on city services and how some people would like to reduce
services by doing away with loose trash pick-up. He stated that for every one person who asked
for that, there were thousands who did not like the idea because of the mature yards and older
homes. He noted it speaks volumes of how the city cares what the community feels and
believes.
Councilmember Knaack commented that the budget recommendations were reasonable and
agrees with their systematic approach to making reductions. She thanked Mr. Skeete and staff
for all their hard work on this issue. She noted she has received far more compliments than
complaints concerning the city's reduction in some services. She stated she does hear from
unhappy residents, but by far, the majorities were very happy to live in Glendale and love the
city. She believes the city of Glendale does a bang-up job and she truly appreciates staff's
excellent work.
Mayor Scruggs asked to discuss the property tax. She explained that over the years, this was a
subject she has always been very unhappy about, especially since Glendale's property tax was so
much higher than other cities in the region. She noted the city has never had the commercial
base other cities have and property taxes have always been on the backs of the citizens.
However, the city has slowly built its business development over the years. This has allowed
them to provide a level of service and create extraordinarily important public assets such as new
parks and recreation facilities, better flood control measures, and new police and fire facilities
that are supported by the city's secondary property tax.
Mayor Scruggs discussed an item on page 19 on table 11. She stated table 11 showed Glendale's
secondary assessment valuation was down almost 50% from a high of$2.2 billion in FY 2009, to
an estimated low of$1.1 billion in FY 2013. She noted this will be a very important discussion
for the next budget meeting. She remarked that she wants to make clear and hopes the marketing
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team can position this situation with the media appropriately. She stated this had nothing to do
with arenas, sports teams, Westgate or anything that has happened in the western area in terms of
ways to raise revenues. This has to do with what has happened in the real estate market and the
valuations that have been set by the Maricopa County Assessor. She stated the city's total
assessed valuation has dropped 50% over a four year period. She indicated that because of this,
the city had put its capital improvement programs on hold except for those projects related to
health and safety. She noted that although it pains her to say it, based on the 50% drop and the
new tax valuation reports that this may continue to drop, she believes they are not done with the
property tax rate discussion and will have to continue to address it. Ms. Schurhammer agreed
with Mayor Scruggs' comments and added this was the result of the real-estate market across the
state. She explained if they were to compare nationally what has happened in Phoenix to other
areas, Phoenix and Las Vegas were at the top for the biggest declines. She noted the magnitude
of the valuation declines has been unprecedented.
Mayor Scruggs discussed the high assessed valuations of a few years ago and how everyone
knew they were only aberrations. She noted that staff, back then, had assured Council the city
was not overspending or building a capital improvement plan, based on those ridiculously high
numbers. As a result, people saw their tax bills go up just because of these inflated assessed
valuations that did not approach reality and now people are witnessing their assessed valuation as
low as they have ever been. She reiterated they seriously needed to examine property tax
supported debt service and the property tax rate.
Councilmember Clark referred to the chart on the secondary assessed valuation and noted that in
2009 the city's total assessed value was $2.2 billion and the estimate for 2013 is $1.1 billion, a
50% decline. She also noted the gap between secondary property tax revenue and the related
debt service and how that gap widens in the future. She discussed possibly looking at projects in
the CIP that directly benefit the citizens such as the West Branch library and examine if there
was any way to build in some capacity to a least start those projects incrementally.
Councilmember Martinez commented on how the city's property tax rate and assessed valuations
have declined over the years. He read from the city manager's budget memo and noted that the
sentence that really concerned him was that if the decline in assessed valuation continues beyond
next year, the city will have to consider a change to the way it sets the secondary property tax in
order to maintain a fiscally sound plan to protect the city's bond rating for the future. He
reiterated that the Council does have a lot of things to talk about at the next budget meeting.
Mayor Scruggs commented that the legislature was currently hearing SB 1525, which will
decimate any idea of cities to build any services anywhere. SB 1525 takes away the ability for
cities and towns to levy development impact fees. She noted development impact fees are levied
now on both residential and commercial property. She believes, as do many others, that
developments should pay for themselves. She explained that last year the Central Arizona
Homebuilders, after six years of negotiations, agreed to a two year moratorium on any new
legislation having to do with developments impact fees. However, this year, the Central Arizona
Homebuilders believe it can pass this bill because it has the right people in the legislature. She
noted this not only destroys the city's ability to use development impact fees the way they are
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supposed to, but also takes away the six years of compromises that had been worked out. She
explained the implications to Glendale if this passes.
Councilmember Lieberman asked for clarification on the public safety digital communications
system. He inquired if they were voting on it today. Chief Conrad stated the item today was an
upgrade of the radio system that will allow the department to communicate with public safety
agencies throughout the valley via wireless connection.
Mayor Scruggs commented that she had breakfast this morning with General Harris, Commander
of Luke Air Force Base. She stated that he and staff members could not stop talking about the
Glendale's police department's absolutely outstanding service during Luke Days. Chief Conrad
thanked Mayor Scruggs for her comments and recognized Lieutenant Brian France who was
responsible for planning many of their major events and had done a phenomenal job this year
with Luke Days.
Mayor Scruggs remarked that everyone appears to have accepted staff's recommended budget
and the recommendations look very good. She noted staff should proceed with working on the
debt restructuring. She noted they are still waiting on the Coyotes matter and how it will impact
the city.
As no further business was discussed, Mayor Scruggs adjourned the meeting.
ADJOURNMENT
The meeting was adjourned at 3:40 p.m.
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