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Minutes of Grand Forks City Council/Committee of the Whole
Presentation of Mayor's Preliminary Budget
Wednesday, August 19, 2009 - 5:30 p.m._________________ __

The City Council met as the Committee of the Whole on Wednesday, August 19, 2009 at 5:30 p.m. in the Council Chambers in City Hall with Mayor Brown presiding. Present at roll call were Council Members Bjerke, McNamara, Glassheim, Gershman, Bakken, Kreun - 6; absent: none.

Mayor Brown presented the Mayor's Proposed Budget for Fiscal Year 2010 for council's consideration. This proposed budget is the result of a thorough and consistent budget process that has been used for many years; this is the third year they have been employing the 6th Year Budget Financial Planning Model. The budget process is spearheaded by the Finance Department under the direction of city administrator Rick Duquette, finance director Saroj Jerath, budget officer Maureen Storstad. This process takes months of cost revenue analysis, meeting with department heads to discuss the details of department needs and goals in regards to the city's overall aim. This budget is prepared with 3 underlying directives, no increase in mills, a joint undertaking by the mayor and city council, hold the line on expenditures at the 2009 level, and maintain the quality and level of current overall services the Grand Forks citizens are accustomed to. As the nation is going through a rescessionary period, traditional revenue sources are dwindling, economic sensitive revenues such as sales tax have softened and interest income on investments is projected to decrease. In a context of revenue uncertainty the City's financial outlook is further challenged by the limited ability to contain costs, increases in health insurance and pension contributions. It was a challenge to prepare this budget, these fiscal constraints require diligence on the part of administration to insure that resources are allocated responsibly, wisely and most effectively.
The following information will provide an outline of the fiscal year 2010 budget, including significant inclusions and exclusions and synopsis of individual funds that comprise the budget. What is included in this budget, the City's proposed budget for all funds is $128,463,536 compared to $135,721,000 for 2009 and that is a decrease of 5.35%. Total operating budget is $101,317,625 compared to $121,653,407 for the 2009 year, a decrease of .33%; and the operating budget excludes capital projects and debt service funds budgets, this budget includes a freeze on the current on the current mill rate of 107.92.
This year's budget achieves the underpinnings of a functioning 6-year plan that will anticipate future needs and costs and prepare the appropriate resources. Some of the critical assumptions that interconnect this preliminary budget and the 6-year plan are: population growth at 1.6%; increased physical assets, including streets and infrastructure to be serviced, anticipated capital costs as outlined in the City's 6-year capital improvement program. Some of the key components of the 6-year plan include anticipating and repairing for future costs, this is demonstrated by the following examples: preparing funding and functioning mechanisms for bridge repair and rehab, the Washington Street underpass, the Sorlie and Kennedy Bridge replacement, subject to priorities of the ND Department of Transportation. Funding mechanisms for major water treatment plant project alternatives and pilot testing and water supply planning in the Capital Improvements is aligned in the 6-year budget with the CIP will also be discussed in the future. There will be a CIP work session this next Wednesday, August 26, and would request that you hold your questions to the end as many questions are answered in the presentation.

Saroj Jerath, city auditor, presented the Mayor's 2010 Proposed Budget, handouts had been distributed to council members. She reviewed the guiding principles and standards they follow; and reviewed the individual fund budgets with highlights and major changes, special revenue fund, enterprise funds, capital project funds, special requests, and general fund, which is the main operating budget of the city.
Council Member Christensen reported present.

Mrs. Jerath stated that on September 8, 2009 preliminary approval of the budget and preliminary rate ordinance, and work sessions as Mayor Brown has announced - August 26, 2009 at 5:30 p.m. Final budget will be adopted on September 21, 2009, and second reading of rates, and October 10, 2009 the budget to be certified by county auditor. She thanked the departments that worked to hold line on expenditures; personnel in her department, the finance department, who worked tirelessly to have this presentation this evening; mayor and council who realized that resources need to be provided in order to provide services; and citizens for input throughout the year.

Council Member Christensen stated that before they get to the questions there are things that should be talked about, whether tonight, as CIP has been waiting for three weeks and have not had other discussions, that there may or may not be reasons for a rate increase in utilities; there seems to be some continued erosion of our 2163, economic development, and CVB and the Library. The $40,000 for the Library is for their consultant and should be a lay-up. He stated they are going to begin the conversations about building water treatment plant, big ticket item, and we have to start talking about setting in place a policy as to what going to do with rates, how fund that when we take it to market in 2017, and important that the council get on that and understand where we are going with this - will sell bond for the landfill, and thinks council should have that information before making decision on this budget.

Council Member Kreun stated that perhaps at this meeting have the conversation to see if it is appropriate to stay with our budget promise and have conversations starting for 2011 and 2012, etc. the conversation should be addressed and should be on agenda, esp. for rates to see how incorporate the water treatment plant somewhere between 2015 and 2020, long range plan, but at least have discussion and whether we want to adjust this budget or just look for 2011, 2012, etc. and make that policy decision - it was on the Service/Safety agenda last night and will be getting that information on committee of the whole next Monday night.

Council Member Gershman stated that if there is a possibility to sell the bonds earlier to get the lower rates, don't know if we can do that because of arbitrage, but Mr. Bakken made the point in the meeting that as years go on will be hit with inflation, cost higher and the sooner we look at this and in agreement that we have to move early on this. He stated they should have some of that information from our bond counsel to see what we can do early. Ms. Jerath stated that bond counsel would be here on August 24 re. other bond issues on Sanitation, Sewer and Refinancing of old bonds.

Council Member Bakken stated that if going to talk about policy, would like to see us have a discussion about special assessments and how we do it, if can find a revenue stream and build a fund so eventually won't have to special assessment streets, and would like to see that as part of their discussion for policy - won't happen overnight but if don't start, won't ever go anywhere. Mr. Gershman stated it would be good to know from Mr. Grasser approx. how much money you would need in a year, what is really needed for streets and infrastructure and that would allow us to begin to think about various methods to fund that.

Council Member Bjerke stated he would like to see them get rid of all special assessments and maybe could find some areas in the country that don't special assess. He raised questions about excess sales tax being set aside for emergency expenditures and contingencies and thought that was what a reserve was for, and would be duplication. Mrs. Jerath stated that in the 2009 budget they had budgeted some funds for municipal parking and also in 2008 $150,000. Bjerke stated he thought it was time to end municipal parking subsidy and needs to be done in 2010. He stated information re. large special events, etc. and that if have a budget for Special Events, etc. time to stay within the budget. He asked for clarification on flood protection project to pay off temporary dike bonds, if that is the third special assessment - Jerath stated is the third special assessments and that they have temporary bonds issued for approx. $1 million and they will be maturing in 2010. He stated they are setting some money aside for JDA, need discussion of how much balance is acceptable in that account, and if continue to put money in. He brought up officers for the Airport, and that the Airport Authority was to pay that, and asked for status - Jerath stated that the grant money will be short and need to cover that. Mr. Duquette stated they have had a grant reduction and don't have the funds to do it, so we are budgeting for it. Christensen stated that is a separate tax paying/collecting entity but would vote against that - if going to provide police officers for other entities that collect and pay tax money, they should be able to include in their budget $13,000 to $15,000 over a grant; what happens when the grant goes away. Bjerke also stated that he thought the Airport should pay for that.

Council Member Glassheim asked what unassigned cash in Enterprise Funds, if that could be added to the reserve. Jerath stated that is in the reserve but in the construction account, and have listed those projects in the water fund, and in sanitation fund have restricted cash for that serve and landfill closure, etc. and is about $1.5 million for next 40 years for care costs for old landfill, and about $1.2 million is rest of the closure costs, and have given the State the financial assurance that we have the money to do the closure and forced closure care costs., and restricted ones not available for spending. Christensen stated in looking at Enterprise Funds when they call it construction cash, unless have specific activity or specific project, and that the unallocated and unspent and if not spent goes into excess cash.

Council Member Kreun questioned $54,000 special assessment on tax sale property, what is resource for that money or special fund. Jerath stated it is special assessment on city-owned property.

Council Member Glassheim stated he was concerned about all the Enterprise Funds not meeting the percentage targets that were set for them and being off by 3, 4 or 5%, and unless see that as a problem and the rates go up sooner than want them to; is against raising rates but have to budget responsibly, looks like some of the funds are significantly below what had hoped for. Jerath stated that the Wastewater Fund needs rate increase. Gershman stated it would be nice to see the percentage that we have in reserve in each one, rather than cash. Jerath stated they would do that.

Council Member Bakken stated he thinks mayor and staff did excellent job of trying to do what council wanted, but thinks backing ourselves into a corner if not being careful - hopefully the economy will turn around quick enough so it won't matter - if we get our reserves too low becomes harder on the taxpayer than if plan ahead and do it little by little - need to start doing some of these things.

Council Member Gershman started that in March were going to have a recap, found $1.4 million shortfall and the council requested of mayor and staff to find that amount in savings or reserves to hold the mill levy even and did not want to put additional stress on our citizens, that was done and thanks for that - was difficult and have seen where those savings are, that we can't do this next year, maybe some places where can find some things but fact is we stretched the band pretty far - and that is one time event.

Council Member McNamara questioned relative to the pension, slide is economic constrains and that a significant increase is in costs we do not control, part of what has happened in the past 12 months is that market has gone sour, and know that our custodian and have confidence in them, what are requirements for the contribution - do we have discretion in terms of what we contribute. Jerath stated that the total of $2.4 million but General Fund was short and they covered the shortfall from the Loan Stabilization Fund, and are building Loan and Stabilization Fund so that we can cover for 5 or 6 years from that Fund, but beyond that thinks by then our investment income will have positive results because we are investing with ND State Bank and good economic conditions and good investment results after 5 or 6 years contribution coming down. McNamara stated that the marginal increase in our contribution because of market conditions and if we have any discretion in that or if that is a mandatory amount that we have to contribute. Jerath stated that it is a required contribution but that is what happens if you don't make the required contribution your unfounded liability increases. McNamara stated we do have some discretion relative to our pension contribution. Maureen Storstad stated they would discuss this at Pension meeting next week but total recommended was about $3 million and about 65% of that is General Fund related, but believes it is a recommendation, but not required to put that amount in each year, our current plan is that we have 26 years left to fund that and that is how they are figuring the recommendation for the contributions. It was also noted that it depends on he market conditions and unfounded liability.

Mr. Gershman stated that this was Mrs. Jerath's and new team's first presentation to council, and did a wonderful job, and know that you've worked very hard - thank you.

Mayor Brown thanked Mrs. Jerath and finance department, Mr. Duquette, department heads and council for their input on this budget.

ADJOURN

It was moved by Council Member Gershman and seconded by Council Member Glassheim to adjourn. Carried 7 votes affirmative.

Respectfully submitted.


Saroj Jerath
City Auditor