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HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 3/29/2011 *PLEASE NOTE: Since the Glendale City Council does not take formal action at the Workshops,Workshop minutes are not approved by the City Council. r I GLENTIE MINUTES OF THE GLENDALE CITY COUNCIL BUDGET WORKSHOP SESSION Council Chambers—Workshop Room 5850 West Glendale Avenue March 29, 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—2ND WORKSHOP CITY STAFF PRESENTING THIS ITEM: Sherry M. Schurhammer, Executive Director, Management, Budget and Finance Departments; Don Bolton, Assistant Budget Director; Stuart Kent, Executive Director, Public Works; and, Jamsheed Mehta, Executive Director, Transportation Services Additional presenters included Mark Burdick, Fire Chief, Fire Services; and Steven Conrad, Police Chief, Police Services. This is a request for City Council to review the recommended FY 2012-2021 Capital Improvement Plan (CIP) that is included in the budget workbook. The budget workbook is publicly posted with the meeting agenda on the city's website. The specific topics to be addressed at this public workshop are the following: o Enterprise funds and the FY 2012 recommendation for no rate increases o Additional funding for the pavement management program and the plan for using those funds o Transportation sales tax capital program o General obligation portion of the CIP, including the impact of the multi-year property valuation decline on the city's secondary property tax revenue and the recommended plan of action This also is a request for City Council to provide direction regarding the overall FY 2012 recommended budget as explained in the City Manager's Budget Memo that is included in the budget workbook. 1 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 2012-2021 CIP continues to focus on Council's strategic goals within the constraints of the various funding sources for different components of the CIP. We continue to drive the city's successes in areas of key importance to the Mayor and Council despite the economic downturn. One of the key highlights of the recommended CIP concerns the pavement management program. Specifically, the recommended CIP includes new funding of $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 recommended FY 2012-2021 CIP is a 10-year plan supported by several different funding sources. Those funding sources are: o General Obligation (GO)bonds, which are backed by secondary property tax revenue o Enterprise funds, which are supported by user fees o Designated transportation sales tax fund, which is supported by the city's designated transportation sales tax (1/2 of one cent) o Development impact fees Enterprise Funds The FY 2012 rate recommendation for the water, sewer, sanitation and landfill enterprise funds is for no change to the rates currently in effect. This recommendation is based on the annual update of the individual rate models for each of the enterprise funds that are used to develop a balanced capital plan for each operation. This rate recommendation is the result of: o The deferral of non-essential growth-related capital projects o Ongoing improvements in operational efficiencies to minimize cost increases related to fuel, equipment and electricity o Continuation of critical repair, maintenance and replacement of existing capital assets such as underground pipes o Continuation of capital projects that ensure compliance with applicable federal, state and county regulations Transportation Sales Tax Fund The transportation sales tax capital plan is a balanced, long-term roadmap for improvements and additions to the city's public transit, roadway, bicycle, pedestrian and aviation capital assets. As noted previously in this report, the transportation sales tax capital plan includes new funding of $2M per fiscal year for FY 2012 through FY 2016, and $10M for the last five years, for continuation of the pavement management program. 2 Since the economic downturn, the transportation sales tax funds are primarily used to match federal and regional funds. In FY 2010 and 2011, the GO Transportation program was augmented by approximately $18M in one-time discretionary federal funds. General Obligation Component of CIP For the GO component, assumptions were made about future secondary assessed valuation (AV) performance and the city's secondary property tax rate, the two factors that determine the level of revenue generated to pay GO bond debt service. On the valuation side, it is important to remember that property tax revenues are similar to state income tax revenues — there is a multi-year lag between the calendar year when valuations are completed and the fiscal year when the city receives the revenue. For example: o Secondary property tax revenue the city will receive in FY 2012 reflects the 2009 real estate market o Revenue the city will receive in FY 2013 will reflect the 2010 real estate market. In February 2011, the county provided cities and property owners with preliminary valuation estimates for FY 2013 On the rate side, the future secondary property tax rate is assumed to remain unchanged at $1.3699, the rate in effect in FY 2011. Table 1 shows that Glendale's secondary assessed valuation has plummeted almost 50% from a high of $2.2B in FY 2009 to an estimated low of $1.1B in FY 2013. The unprecedented valuation decline has resulted in a corresponding dive in secondary property tax revenue, from just over $29M in FY 2010 to an estimated $15.5M in FY 2013 (based on the preliminary valuation notices sent to property owners in February 2011). Table 1 Glendale's Secondary Assessed Valuation (AV) & Glendale's Property Tax Rate Secondary AV& Calendar Fiscal Year Year (CY) % Change Secondary Total Prop Tax Real Estate Market in AV Prop Tax Rate Rate the AV Reflects 2007 $1.4B /CY 2004 8% $1.4275 $1.7200 2008 $1.8B /CY 2005 33% $1.3519 $1.6200 2009 $2.2B /CY 2006 20% $1.3519 $1.5951 2010 $2.1B / CY2007 (3%) $1.3699 $1.5951 2011 $1.8B / CY 2008 (18%) $1.3699 $1.5951 3 2012 $1.3B / CY 2009 (25%) $1.3699 $1.5951 2013 Est. $1.1B / CY 2010 (14%) $1.3699 $1.5951 The impact of the steep valuation decline on the city's secondary property tax revenue stream directly affects the city's capacity to support debt service on existing GO bonds, as well as the city's ability to support additional debt service for new capital projects. Existing GO debt service addresses bonds issued over the last several years to pay for numerous capital projects such as the Emergency Operations Center, Public Safety Training Facility, the downtown parking garage, fire stations 159 and 151, the Glendale Adult Center, the Foothills Recreation and Aquatic Center, the Rose Lane Pool Aquatic Center, various flood control projects such as the Bethany Home Outfall Channel, and the downtown plaza and civic center annex. Significantly less revenue is and will continue to come in to pay debt service on existing GO bonds and to fund plan projects as a result of: o Unprecedented decline in assessed valuation across the real estate market o Reduction in the assessment ratio for commercial properties per state statutes o Reduction of the city's secondary property tax rate in FY 2008 and FY 2009 Table 2 shows the significant gap between secondary property tax revenue and GO debt service on existing bonds. Similar information based on data available a year ago was shown in the FY 2011 budget book and now has been updated to reflect recent figures from the county assessor's office for FY 2012 and FY 2013. Table 2 Glendale's Secondary Assessed Valuation (AV), Property Tax Revenue & General Obligation Debt Service Secondary Plus Debt Service Remaining Gap Fiscal Year Secondary Prop Tax Contributions On Existing Between Revenue A.V. Revenue from Other G.O./HURF and Debt Service Funds Bonds* (B+C)-D 2007 $1.4B $19.5M $1.8M $17.4M $3.9M 2008 $1.8B $24.7M $1.8M $22.3M $5.9M 2009 $2.2B $29.1M $1.8M $20.6M $10.3M 2010 $2.1B $29.3M $1.9M $25.6M $5.6M 2011 $1.8B $24.2M $507K $27.8M ($3.1M) 2012 $1.3B $18.1M $209K $24.7M ($6.4M) 4 2013 Est. $1.1B $15.6M $209K $23.3M ($7.5M) (estimate) (estimate) *Includes Build America Bonds subsidy in FY's 2010, 2011, 2012 and 2013 Given Council's prior direction to keep the secondary property tax rate unchanged, the first five years of the GO component of the CIP had to be 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 GO component of the CIP are listed below. o One 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 Notable GO projects on hold are the completion of the new Municipal Court and the West Area Library. Both of these projects were in FY 2015 in the adopted FY 2011 — 2020 CIP (FY 2011 budget book); they are in the last five years of the recommended plan included in this workbook. It should be noted that the significantly changed landscape will necessitate an evaluation of the city's secondary property tax rate over the next year. This is especially true if the city is not able to restructure existing GO bond debt service along more favorable terms so annual debt service payments can more closely match the diminished revenue stream. If this declining trend in property values continues beyond next year, the city will have to consider a change to the way it assesses secondary property tax to maintain a fiscally sound plan to protect our bond rating for the future. One concept staff will begin to evaluate is the one used by many valley communities today. That approach is based on establishing a rate based on the funds needed to service outstanding debt issuances, the capital needs of the city and the minimum fund balance needed to maintain a fiscally sound plan. The plan of action is to evaluate debt restructuring options through this upcoming fall and return to Council with a revised debt management plan and recommended options for Council's annual retreat. This timeframe allows us to evaluate fully the range of options as well as assess the 2011 real estate market, which will affect the secondary property tax revenue to be received in FY 2014. On March 22, 2011, the first budget workshop on the recommended FY 2012 operating budget occurred. Council was provided the FY 2011 budget workbook during the week of March 14, 2011. On March 1, 2011, Council reviewed an update on the FY 2011 General Fund (GF) operating budget through the first seven months. 5 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. Staff requests guidance on the FY 2011-12 recommended budget as presented to City Council in the budget workbook and the March 22 and 29 budget workshops. Ed Beasley, City Manager, stated this will be the second meeting and the continuation of the budget workshops. Today, they will be discussing the enterprise funds for 2012 and the recommendation for no rate increases. They will also discuss additional funding for the pavement management program, transportation sales tax capital improvement program and the general obligation portion of the CIP, including the impact of the multiyear property valuation decline on the city's secondary property tax for the recommended action for the fall. Sherry M. Schurhammer, Executive Director, Management, stated today's workshop will address the main elements of the recommended capital budget as shown on the slide presentation. Mr. Stuart Kent, Executive Director, Public Works, will first address the enterprise funds, the FY 2012 recommendation for no rate increases, and the main elements of the enterprise funds' respective capital plans. Mr. Kent will also address the new funding for the pavement management program as well as that program's plan for FY 2012. Mr. Jamsheed Mehta, Executive Director, Transportation Services, will discuss the FY 2011 accomplishments of the transportation sales tax capital program and the capital plan for FY 2012. The last part of today's capital presentation will be about the general obligation portion of the recommended capital plan and the recommend next steps to complete over the next 9 to10 months. Mr. Stuart Kent, Executive Director, Public Works, restated there will be no water, sewer, sanitation or landfill fee increases for FY 2012. He explained there were three primary components responsible for the recommendation in the utility rate recommendation of no water and sewer rate increases or landfill fees for the 2012 fiscal year. The three issues center on innovation, investment and revenue generation, and reduced growth. This recommendation comes as the culmination of work completed by budget, utilities, and solid waste staff and will 6 allow the city to continue to meet its financial obligations while maintaining high quality services to its customers and protecting public health and environment. On the innovation side, the water production optimization program has an estimated annual cost savings of up to $1.2 million. A new energy efficient ultraviolet light disinfection system at one of its water reclamation facilities will reduce operating costs by approximately $200,000 per year. In addition, on the investment and revenue generation side,the amendment of the SROG effluent agreement with the Palo Verde Nuclear Generating Station will result in Glendale receiving an additional $0.5M in revenue in 2012. Mr. Kent stated the reduced growth in the recommended O&M budget for FY 2012 as $42.9 million, which was 3% less than the FY 11 budget of $44.2 million. The department has reviewed and reprioritized the CIP to reduce costs. The recommended CIP budget for FY 2012 is $16.3 million, which is 23% less than the previously planned CIP budget of $21.2 million. The recommended budget in the utilities operating and CIP budgets allows for the anticipated revenues to meet anticipated costs. In the solid waste collection and disposal operations, staff was also pleased to announce no rate increase in FY12. As with utilities, a commitment to innovation, prudent capital investment, and reduced growth is allowing sanitation and landfill operations to continue to meet our service demands without having to raise any cost. An example is the new Zonar GIS program that Council was introduced to in December at the Innovate workshop meeting. He noted their capital plan recognizes the reduced level of growth in the community and was set appropriately. Councilmember Martinez commented that this was very good news not only to Council, but to the citizens as well. He remarked he had been concerned when he first heard about the recommendation since they have always been told about the high cost associated with regulations and equipment. He thanked staff for explaining the reasons behind why the city was able to recommend no increases. Councilmember Knaack agreed with Councilmember Martinez's comments. She had also wondered how the city was able to do this and how it would affect the enterprise fund. She noted it appeared staff had come up with very good reasons why they were able to recommend no increases. She wondered if these would be one time cost savings or ongoing. Mr. Kent explained some would be ongoing savings such as the energy efficiency improvements, and the atomization program. The atomization program was an evaluation that staff conducts to assess how each of the plants operate and make determinations of which plants operate more efficiently. This provides the opportunity to redirect resources and not just distribute them equally. He provided an example of an atomization process conducted every year at the Cholla Water Treatment Plant. This progress enables staff to find opportunities to reduce operating costs. He noted rates for FY 13 will depend on the economy and on any changes in the EPA and when the state makes their determination on water quality standards. Vice Mayor Frate asked what new innovations they perceive helping the city become more efficient, as far as what was in the open market, any new technology or what other cities were doing. Mr. Kent stated there was an ongoing effort to look for opportunities to reduce cost such as what they were doing now with energy efficiency programs. Vice Mayor Frate commented on the reduced growth aspect as one of the items that enabled them to keep rates the same. He added it was a double edge sword since most cities welcomed growth; however, because of the 7 economy; they have been able to take a breather and analyze what they do have and use it more efficiently. Councilmember Clark asked for a reserve figure for each of the enterprise funds. Mr. Kent stated that on the utilities side, the reserves were approximately $14.3 million, which follows a standard use with both the American Water Works Association as well as the Water Environment Federation. This allows for enough operating revenue to cover a 90 day period for unseen situations. Councilmember Clark asked if the figure was a percentage. Mr. Kent responded yes and it was 10%. He noted he would have to get back to her on the numbers for landfill and sanitation operations. Councilmember Clark asked if the city invested the reserve funds. Mr. Kent replied yes. He added the money was used to pay debt utility service in approximately $25 million for next FY. He indicated the debt service for sanitation was different since they were not paid on any plants; however, they still have to make debt payments. Councilmember Clark commented on the city not issuing any increases in rates and the reasons behind that decision. She indicated that although cost for O&M and rate regulations have continued to increase, staff has been able to halt increases because of the 3% decrease in growth and because of innovation steps used to cover the cost of any new cost increases. Mr. Kent replied she was correct. He explained some of the cost savings made in sanitation and landfill services because of the decrease in growth. Councilmember Clark asked if they anticipate rate increases when normal growth resumes. She wondered if they were looking at greater than 12% increases in the future because of this decision of no increase for this year. Mr. Kent stated he was not prepared to answer that at this time. However, the reality was that a year from now, the future was unknown and they might be able to find new innovations and new revenue opportunities as they had done this year with APS. Councilmember Clark commented that most Councilmembers had not supported rate increases and cost savings were apparently found for this budget cycle. However, how would this been handled if there had been growth but the economy was still stagnant. Mr. Beasley noted that most of these saving as Mr. Kent had reported were ongoing opportunities. He added growth was a component of this, but there were also other factors for this decision that created the opportunities for this budget. Councilmember Clark agreed with Mr. Beasley's comments; however, stated her concerns that eliminating an increase this year simply defers the problem of rate increases for future years. Mayor Scruggs remarked this was a very difficult issue concerning budget strategies when the economy was still so unclear. She wanted to take a moment to thank staff since there have been many changes in the organization; however, they had still been able to continue excellent progress for this budget cycle. Nevertheless, she also had some of the same concerns as Councilmembers Martinez and Clark with the recommendation of no rate increases, when every year since she can remember, they have always been told increases were needed because of regulations and infrastructure, thus creating an element of surprise by this proposal. However, her observation has been that since the economy has taken this drastic turn, the organization has really devoted itself to studying processes and how things were done and why. She remarked she had bragged all over the valley about the city's innovation program and what she believes was a totally different attitude in the organization, which comes from need and also because of time the departments now have because of low growth. She believes this was a very good thing and would like to congratulate the organization for providing them with a new sense of assurances and sustainability. She indicated she felt better about the organization now than she has felt in many years. 8 Mayor Scruggs noted that although she felt better about the organization, she still had some concerns she wanted to address. She had a question on page 110 related to government facilities construction fuel sites equipment upgrade. She stated it was her understanding by reading the narrative, that this equipment had reached its maximum useful life, however, will not be replaced until 2017. Mr. Kent stated the equipment will meet its useful life in 2017 and that was when staff will deal with those improvements. Mayor Scruggs suggested staff be clear in their write- ups as to when items reach their maximum useful life to avoid confusion. Councilmember Martinez asked if there had been any thoughts from staff to recommend a modest increase so if one was needed in the future, it would not be such a big shock. Mr. Kent replied no. He explained they did not want to pass increases along when they weren't needed just to prepay for increases that might occur in the future. Mr. Kent presented a slide presentation on Pavement Management. He explained the re- establishment of the pavement management program for next FY and its basis in two strategic actions that the city has taken. In March 2008, the city entered into a contract to have a comprehensive assessment completed of all 710 miles of city streets. This assessment not only evaluated the condition of each street at the surface, but also below the surface and evaluated the sub-grade of the street to make sure it was structurally sound. This involved the regionally cooperative efforts between Glendale, MAG and ADOT to shift the cost of the interchange connecting Loop 303 to the Northern Parkway from Glendale to ADOT, thereby relieving Glendale of the cost of that interchange. As a result, the CIP includes $2 million per FY for FY2012 through FY2016, and $10 million for the last five years, for continuation of the pavement management program, funded through the GO Transportation sales tax component of the CIP. Staff is recommending the current $2 million pavement management funding to focus on the neighborhood streets. The $2 million in funding next year would allow for approximately 21 miles of surface treatment by conducting slurry seal operations. Comparatively, they could accomplish just under 6 miles of an asphalt overlay with the same $2 million. The surface treatment option will allow the city to improve more streets and keep a larger portion of their residential neighborhoods in good condition. Staff will continually evaluate the condition of the street network in making decisions in subsequent years as to the use of the pavement management funds. Councilmember Alvarez asked if staff had done a study on the worst streets in the area including residential. Mr. Kent replied they had completed some of those initial studies; however, worst does not necessarily mean first since a greater benefit might be to improve a larger section than a small area. Councilmember Clark noted staff's philosophy was to maintain streets that were in relatively good condition while not working on really bad streets since they were too expensive and as a result, they continue to deteriorate. She added that at some point, they had to address the problem and do the work. Mr. Kent explained that on those streets, they will continue to do the patchwork and repairs. However, as far as reconstruction, they will continue to focus their efforts where they can. He added that as the economy turns around, there will be other opportunities that will increase the level of funding so they can get to other streets. He explained the city had focused in the past on arterial streets and residential and they were in good shape. Councilmember Clark disagreed and added that some residential streets were truly awful. 9 Councilmember Martinez asked for information on the new technology and how it was used to evaluate streets in Glendale and prioritize them. Mr. Kent stated that report will be brought to Council after they get through the budget meetings to discuss the 21 miles and how the $2 million will be used. Councilmember Martinez remarked that this information should be provided to the public. He explained the many calls he receives on this issue, as do other Councilmembers. Mayor Scruggs commented that the science of deciding what kinds of repairs to make to each street was something that was totally unknown to the general public and most did not understand it. She explained there was a methodology to this system and it was not about who you liked best or who bugged you the most. This was a method that manages all the streets in the city to the best possible way, given the resources available. She agreed with Councilmember Martinez's suggestion to keep the public informed on how things were decided and how the methodology was used. This will help the public understand why some streets are not getting done and why others are. Councilmember Knaack asked if this included any of the long standing requests and approvals for speed cushions. Mr. Kent replied no, and added that those were funded separately. Councilmember Lieberman asked for clarification on what streets would be covered. Mr. Kent stated this would include all residential, except arterial streets. Councilmember Clark asked what the policy was on streets that need reconstruction. Mr. Kent explained those would have to be evaluated accordingly and the city would have to make a capital investment that would go beyond the $2 million. Councilmember Clark noted that by his answer, she assumes there was no funding for street restoration. Mr. Kent replied there was no money set aside at this time for reconstruction of streets; however, that may change in the future if additional monies become available and the economy improves. Councilmember Clark asked how much street restoration had currently been done. Mr. Kent stated that over the past five FYs, they have competed overlays for 30 miles in arterial roads and 21.5 miles in residential streets. Councilmember Lieberman inquired about a deal with the Citizens Transportation Oversight Committee (CTOC)where they provided $8 million a year, a total of$40 million over a five year period, for streets. Mr. Kent explained because of the economy, that program only lasted two years. He added in FY12, they will receive $2 million from the GO transportation for several years, as a part of an agreement the city was able to reach. Councilmember Alvarez remarked that leaving the worst streets for last will be very costly in the future. She explained these streets have been in that condition for a long time and it does not make sense to continue to neglect the worst and fix others that only need maintenance. She noted the tax payers did not understand why they were paying their taxes and the city does nothing to fix the worst streets. She added there were many streets in the Ocotillo District that were in very bad shape. Mr. Beasley explained that"old" and "deteriorated" were two different terms. He stated no one was going to let an old and deteriorated street continue. The city had programs that addressed those issues. However, reconstruction was starting completely from scratch and they first need to identify those areas. He explained that once identified and funds become available, those streets will receive attention and will eventually get done. He indicated 10 Glendale streets were constantly being evaluated on an ongoing basis and if streets continue to deteriorate, they do receive attention and were not neglected. He added Council had identified and had concerns with residential streets; therefore, the emphasis was on that objective. Councilmember Knaack asked what would be the cost of an actual reconstruction project. Mr. Kent explained a slurry seal may be $100,000 and an overlay may be approximately $1M. Councilmember Knaack noted that $2 million was very little when it came to pavement management. Councilmember Clark reiterated her comments that those streets in bad condition will continue to deteriorate and will need major work. She understands that funding was limited and the city was thankful for the $2 million to be able to do this work. However, her concern was philosophical in that those that have continue to get and those that have nothing continue to get nothing. She indicated that at some point, they needed to break that philosophy and focus on the areas that have been neglected due to lack of funding. She noted she was not accusing anyone of having an agenda; however, staff needs to focus on older neighborhoods that have not received a great deal of loving care from the city. Councilmember Martinez stated he agreed and understood the comments made by Councilmembers Alvarez and Mr. Beasley. He also understands that at the moment, there was no additional funding available. Further, as Mr. Beasley explained, the city will not let a street get to a point where it will put the public at risk and the city will take care of it somehow. Mr. Kent agreed. Vice Mayor Frate commented on the scientific way the city will be selecting the streets that will receive the slurry seal. He added not all the sealing will be in one district. He explained the city was doing 21 miles, which was seven times more that has been done in the past. He stated the x- ray technology will help determine the condition of the streets since appearances could be deceiving. He noted the technology cannot deny the truth. He reported they will be starting the pavement project on Bell Road to 71th Avenue with federal stimulus money. Mayor Scruggs explained that federal stimulus money has a restriction and can only be used for arterial roads. She stated that was a very important point the public needed to know. She mentioned all the streets in Glendale that have already been worked on and completed. Councilmember Lieberman asked for clarification on the program for overlay for the next few years. Mr. Kent explained the $2 million was for pavement management and the treatment will depend on the streets and the capacity. Subsequent years may include an arterial overlay. Councilmember Lieberman asked for the cost of a one mile overlay. Mr. Kent explained that on an arterial road it was in the range of $700,000 to 900,000 a mile and for residential, possibly half that figure since it was smaller. Jamsheed Mehta, Executive Director, Transportation Services, stated Glendale residents throughout the city have seen significant improvements in the transportation system. He stated the city has completed many projects and on most of those projects, they used funds generated with the GO 1/2 cent transportation dedicated sales tax fund, with some federal and other regional type sources. He noted a shift in the fund source making these projects funded completely or mostly by federal or regional funds. Some of the projects completed are: Northern Parkway — 11 federal approval, phase-1 design and right-of-way, 11 Federal stimulus projects underway, Loop 101/63rd Avenue bike and pedestrian bridge and the Loop 101/ Union Hills/ 75th/ Beardsley Connector project. Mr. Metha stated Glendale, in FY 2012, will see tremendous improvements. He discussed some of the goals for FY 2012/2016. These include: Grand Avenue improvements, Northern Parkway construction, Loop 303 construction, Loop 101 HOV construction underway, 51st and Camelback intersection improvements and airport runway improvements. He indicated that the completion of these highway projects will not only enhance Glendale's transportation system, but also positions them for growth and development as the economy gets better. Councilmember Clark discussed a new pedestrian light crossing project that has been done at two intersections, one as a pilot project. She noted this project was very beneficial to the citizens in a very tangible way. She asked if there were any plans to continue this program at other intersections. Mr. Mehta explained every new signal comes with that as standard. However, the city has 192 signals throughout the city. He noted that by the end of this year, through various different one time funding sources, half of those signals will be converted to the countdown pedestrian signals. He stated those funding sources were part stimulus money and a grant from the Highway Safety Improvement program. Councilmember Clark commented on the sinkhole at the intersection of 67th Avenue and Camelback. She asked if he knew the status of that repair and also a project that will be started at 59th and Camelback. Mr. Metha stated the sinkhole work should be completed by this Friday. This would not complete the project, but only fixes the problem that happened in the construction area. He noted he did not have information on the project starting at 59th and Camelback, however, will get to Council by the end of the day. Councilmember Knaack stated that Glendale Today, with Councilmember Martinez, was providing much of the same information on transportation issues. Ms. Schurhammer presented information about the general obligation portion of the recommended capital plan that addresses the capital needs of all other city operations. She explained that as staff showed Council a year ago, the capital plan was essentially stationary. This means that the portion of the capital plan supported by the secondary property tax shows no projects advancing because of the current constraints on secondary property tax revenue as a result of the current economy. There are three reasons why the secondary property tax revenue has been disproportionately impacted by the recession of the last few years. The first reason was because secondary assessed valuation, the value of a piece of property, has declined almost 50%from the real estate market peak in 2006. This was true for residential and commercial property as a whole within the city limits of Glendale and across the metropolitan area. She noted property tax revenue was like state income tax revenue because there was a multi-year lag between the calendar year when valuations are completed by the county assessor's office and the FY when the city receives the revenue. This means the decline in property values that began in calendar year 2007 was not reflected in secondary property tax revenue until FY 2010. This also means the valuation declines that continued through calendar year 2010 will impact the city's secondary property tax revenue through FY 2013. The big unknown now was whether calendar year 2011 will bring further valuation reductions or price stabilization. She said overall prices have continued to decline in January and February 2011. However, this two 12 month trend could change. Staff will know more only after they get through at least eight to nine months of the current year. Ms. Schurhammer noted that a second factor affecting secondary property tax revenue was that at the same time property values declined, the state legislature chose to reduce the assessment ratio for commercial properties. The assessment ratio for commercial properties was reduced a full 20%beginning in 2006. Finally, the third reason is the fact that the city's secondary property tax rate was reduced a total of 5.76 cents at the same time the decline in property values began and this concurrent decline is impacting the city's secondary property tax revenue. She stated the proposed capital financial plan was to evaluate debt restructuring options through this upcoming fall. The plan is to return to Council with a revised debt management plan and recommend options in time for Council's annual retreat at the end of calendar year 2011. This timeframe allows staff to evaluate fully the range of restructuring options and assess the 2011 real estate market. This timing also permits an assessment of the calendar year 2011 real estate market, which is important because it will impact secondary property tax revenue to be received in FY 2014. This timeframe also allows staff to evaluate the way the city assesses secondary property tax to maintain a fiscally sound plan to protect their bond rating for the future. One reason this schedule is recommended is the fact that the city currently is meeting the debt service coverage requirements for existing general obligation bonds that are outstanding. The city will remain in a good financial position for FY 2011 and FY 2012 in terms of existing general obligation bonds because they have a balance in the secondary property tax revenue fund to cushion this revenue shortfall. The use of fund balance, in this case the balance for the secondary property tax revenue source, during challenging economic cycles is a customary, generally accepted and widely used course of action. As a result of Council's prudent direction, the city was in a very good position to use its healthy fund balance for secondary property tax revenue to help weather the significant impact of this recession on property values. Nevertheless, staff knows deliberate steps must be taken to resolve the imbalance between debt service and revenue to support that debt service for the long term. Ms. Schurhammer noted another reason staff was recommending the schedule shown earlier for a capital financial plan was that it was not known how the real estate market will perform in calendar year 2011. The performance of the calendar year 2011 real estate market is important because it will affect the secondary property tax revenue to be received in FY 2014. Based on real estate transactions in January and February 2011, the capital plan assumes a further decline in secondary property tax revenue for FY 2014. However, this assumption could change over the course of the year. The next scheduled steps for this budget cycle are as follows: May 24, preliminary budget adoption; June 14, final budget adoption and public hearing, as well as the property tax levy public hearing; and June 28, property tax levy adoption. She stated this schedule was based on state statute. Mayor Scruggs asked for clarification on table 12, page 19. She explained that last week she thought the gap between secondary property tax supported debt service and secondary property tax revenue would be addressed by the GF. However, today she learned that the cushion the city was using to make-up the shortage was secondary property tax fund balance that reflects city collections when assessed values were extremely high. Ms. Schurhammer stated she was 13 correct. Councilmember Martinez stated he had been thinking the same thing and had also misunderstood. Mr. Horatio Skeete, Assistant City Manager, explained there were 19 or 20 different funds that staff operates in the city. He stated they maintain the same principals throughout all of the funds where they keep a fund balance to cover these situations. The important thing regarding the cushion was they were able to cover shortages for FY 2011 and FY 2012. He reiterated that deliberate steps to resolving this imbalance for the long term must be undertaken. Councilmember Clark inquired about the balance for the secondary property tax fund. Ms. Schurhammer said FY 2011 was expected to end with $26.6M in that fund and $20.2M at the end of FY 2012. Councilmember Clark asked what categories compete for general obligation funds. Ms. Schurhammer stated this type of bond covers the vast majority of city operations including public safety, parks recreation and open space, flood control and many others. She noted this covered everything except the enterprise funds and dedicated sales tax for transportation. Councilmember Clark commented that the city was at a standstill and it was something they really needed to examine at their next retreat. Councilmember Clark added that the city needs to figure out a way to get back on track with its general obligation bond supported capital plan. Ms. Schurhammer explained that capital improvements are paid for over time with the issuance of bonds. This means the existing debt service for outstanding general obligation bond issuances is related to capital projects completed over the last few years. She listed the many community projects the city has been able to complete for the citizens of Glendale and added the city did undertake significant capital projects in the last few years. Mayor Scruggs stated that council will be looking at the O&M expenses for planned future capital projects that have been delayed. She said council recognizes the fact that raising people's taxes was only half of the problem. The other half of the problem was how to pay for ongoing services when employees were still taking furloughs. Mr. Beasley stated it was important to note that it was Council's policy not to build anything if they could not operate it and believes this policy has served the city well. Councilmember Lieberman discussed the chart on page 15 regarding the GF balance and the $9.6 million shortfall and what the city was doing to balance the shortage. He restated how he really liked how the charts flow nicely from one to another. Mayor Scruggs asked a question about the information on page 96 regarding the 800MHz radio system and meeting FCC federal requirements. Chief Burdick explained these funds had been merged with the police public safety digital communication system. He stated their radio purchases will be implemented in the same fashion and added the process had already begun. Mayor Scruggs asked if they will be in compliance with the FCC. Chief Burdick responded yes. Mayor Scruggs asked for clarification on a replacement of a new vehicle in the CIP. Chief Burdick stated they had just received a new truck and they have adjusted the CIP to reflect it. Mayor Scruggs remarked on the 30 heart monitors purchased and their life span as explained in the write-up, which was unclear. She added the write-up makes it sound as though they were using equipment passed its life span. She asked Chief Burdick to clarify. Chief Burdick explained the new technology and how they are now able to upgrade this equipment such as you 14 would a cell phone. He noted this was placed in the CIP to make them aware of the purchases. He added they had recently replaced most of the monitors with maintenance agreements. Mayor Scruggs suggested that next year, for public safety and health, staff provide a clear description of the status and what is needed. She indicated that if there were any new obligation bond money available, she would first cover these types of items that directly affect people's lives. Mayor Scruggs commented on the issue of air packs and having the same concerns with the write-up. Chief Burdick clarified they had recently upgraded the air packs with the most recent technology. Mayor Scruggs commented on Bill 1525 and its looming impact on Glendale. She indicated the Home Builders Association was not interested in discussions and the outcome of this bill looked bleak. Councilmember Martinez asked if this entire workbook was on the internet and on the city's website. Ms. Schurhammer responded yes. Mayor Scruggs commented on another public safety project on page 97 regarding the crime scene evidence digital system utilized for documentation. The write-up was also unclear and made it sound as if the system was now obsolete. Chief Conrad noted the wording for this project was also unfortunate; however, this equipment has also been upgraded, as well as a new video equipment project in patrol vehicles. He assured them the equipment itself was not obsolete. Mayor Scruggs asked if the $309K was for the maintenance agreement with the vendor that will maintain the equipment. Chief Conrad replied yes. He added it was for a five year period. Mayor Scruggs asked for additional information on the EOC system and its replacement cost in the future. She asked if the intent was to start working towards keeping the system at its highest level. Chief Conrad stated she was correct. He explained when the equipment was first purchased, the initial outlay was so great they did not have the opportunity at the time to budget for all of the equipment and have it added to the technical replacement funding. He noted the city was very dependent on this equipment and it was very important to keep it in well working order. Mayor Scruggs asked if full funding of equipment replacement funds will be built into the operating budget as the revenue situation improves, Ms. Schurhammer replied yes. She stated the enterprise funds was still contributing at 100%, however, the GF has been contributing at 50%. She discussed the many issues and costs regarding upgrading equipment. Mayor Scruggs thanked staff for the information and clarification on these items. Councilmember Clark remarked that although her questioning had been skeptical and not always in agreement, she wanted to extend her thanks, especially to Ms. Schurhammer and staff. She noted that each year, the department was under the gun to put together a budget. She indicated it was a very difficult annual task and recognizes and appreciates the department's continued cuts and sacrifices they have to make during this difficult economic time. She believes staff was doing a wonderful job and it was truly appreciated. 15 Councilmember Knaack remarked she was glad to see $300K in the budget going to the restoration of the Civic Center. She noted it was one of the few revenue generating facilities in the city. Mayor Scruggs summarized the Council's agreements to staff's presentation. She stated it seemed the CIP was fine with everyone and they will be back in the new fiscal year for a full discussion on property taxes. She indicated that in terms of the general fund operating budget, it was agreed that as long as things don't change, everyone was comfortable with staff's recommendations. However, if a major issue occurs such as the Coyotes leaving; they will come back and review the budget for adjustments. Mr. Beasley agreed. As no further business was discussed, Mayor Scruggs adjourned the meeting. ADJOURNMENT The meeting was adjourned at 3:50 p.m. 16