1. Call to Order. The budget workshop session of the Council of the City of Rogers was called to order by Mayor Grimm on Tuesday, August 25, 2009 at 5:35 p.m. at the Rogers Community Room, 21201 Memorial Drive, Rogers, MN, 55374.
Council present: Jason Grimm, Jay Bunting, Rob Bell, and Steve Rauenhorst.
Council excused: Jamie Davis.
Staff present: Gary Buysse, Liquor Manager; Jeff Carson, City Attorney; Stacy Doboszenski, Assistant City Administrator/Clerk; Brad Feist, Fire Chief; Jeff Luther, Police Chief; John Seifert, Public Works Supt.; Steve Stahmer, City Administrator; and Lisa Wieland, Finance Director.
2. Presentation of budget reduction options
Administrator Stahmer stated staff has continued to analyze budget cuts and modifications. Stahmer stated the first draft of the line item budget is completed and has been reviewed by the Finance Director and himself and some modifications were made before submitting to Council.
At this time staff discussed the summary worksheet with Council titled City of Rogers – Summary. Stahmer highlighted the following:
• Departmental budgets came in somewhat below the baseline budget
• A use of $30,000 of fund balance – a significant reduction
• A $35,000 carryover for paved streets – looking to spend next year on a seal coating
• A reduction of 90k in use of fund balance
• Summary budget shows the general fund operating levy would be below 2009, due to cuts
and frugal budgeting by department heads
• The draft levy shows the City 10% below the overall general fund levy limit
• An increase of 10% on special levy and debt service levy (incorporating unallotments)
Stahmer stated staff prepared some options based on the budgets submitted and updated them based on the options Council discussed in the past; options 1, 3, and 4. Stahmer stated all options still rely on large non-staff modifications as previously implemented. Options continue to include staffing reductions and continue to deliver services but being fiscally responsible in the budget. Staffing reductions are 1.5 FTE; Engineering Tech and ½ of the AP/Payroll position. Adding the Code Enforcement piece is difficult when trying to maintain the same level of service. These reductions result in additional savings of $84,000 to the general fund levy; net any short-term unemployment costs estimated as high as $32,000 and any severance costs. Actual costs cannot be determined because of union contracts so staff estimated on the high side.
Stahmer stated one last point made in terms of staffing, not ignoring the Council’s discussion in regard to the planning position, but in reviewing this budget and where we are at in terms of levy limits and the levy, and the amount of work in the planning area, we were recommending, if Council were open to a 1% increase in the levy under option 6, recommending that the position of planner be filled. Another option would be to use budget reserves greater than $30,000. Stahmer read Option 6 elimination of Engineering Tech IV position, reduction of AP/Payroll to ½ time and the filling of planner position, and the public works reorganization, which has a positive impact to the general fund as 40% of a salary would come from the storm water utility.
Stahmer stated staff is asking Council to provide direction on what to include in the numbers to get to the September 15 preliminary proposed levy. At this point we are getting down to the wire.
We would recommend that whatever levy the Council is shooting for, as the Mayor mentioned previously, to have Council consider an additional $100,000 to give flexibility between now and setting the final levy. The $100,000 wouldn’t be used unless absolutely necessary.
Bell has a question related to what was just discussed and asked Wieland if she has the spreadsheet available for option 6, what it looks like 3 years down the road.
Wieland provided the spreadsheet. Stating the fund balance would be left in the high 50% for this year and next year. Wieland stated over 50% is on the high side of the fund balance policy, but we can justify that we have a plan for a one year drop and how to bring it back up, commenting on whether or not the City will receive any fund balance from Hassan Township.
Stahmer informed the Council that Interim Administrator Willis stated the current draft of the Hassan budget does not show any use of reserve funds for 2010.
Wieland explained how the tax rate relates to taxable market value stating the City is not increasing what we are billing to our taxpayers from 2009 to 2010.
Bunting stated he spoke with Stahmer regarding the refilling of the planner position, stating it would be tough for him to justify at this point, particularly when looking at removing a position due to lack of building within the City. He stated he understands issues with impending merger, but can’t see filling for at least 12 months if not more than that.
Bell agrees with not filling the position at the present time. If the economy picks up and spring looks busier, get someone in and get them up to speed.
Rauenhorst agrees with Bell, for now bring in a consultant.
Bunting agrees with the need for the contract planner.
Grimm asked if the planner was included in the budget.
Staff explained it is not included in line item budget as a full-time position, but is added back into option 6.
Stahmer stated option 8 would be almost a 1% reduction in the levy and keeps the City 10 to 11 percent below the levy limit.
Stahmer then discussed furloughs; one week would be roughly $21,000. Stahmer then explained how PERA is an option for employees on furlough. Stahmer then noted the 33 days of furlough employees took voluntarily resulting in approximately $5400 in general fund savings and thanked those employees.
Stahmer stated he anticipates more voluntary furlough use as we get closer to holidays and could conceivably get toward the $10,000 that was estimated. Stahmer recommended continuing voluntary furloughs through 2010.
Stahmer reminded Council of any mandatory furlough longer than one week would have unemployment impacts and it is difficult to estimate what they would be. Staff’s recommendation at this time, based on the fact that $20,000 is a fairly small number compared to the negative impacts that could come as a result, staff is recommending against the mandatory furlough.
Bunting asked if furloughs are voluntary, do we still run into unemployment issues. Staff stated no.
Stahmer stated Mayor Grimm’s proposed idea for severance was for 3 weeks salary per year of service (rounded to next higher year), 60 days notice, and a $3000 reimbursement.
Stahmer stated staff ran this by the labor attorney and the City has the authority to give severance up to the statutory maximum of 6 months, typically with a separation agreement. Anything beyond that amounts to a gift to the employee. Stahmer stated the labor attorney mentioned any severance to a union employee would need to be negotiated. Stahmer stated it would probably result in that level of benefit to be included in the contract if that benefit were offered. In return, would the City be looking for a waiver and a signed release of all claims?
She was recommending not offering a severance, but if we did she would recommend a waiver.
Council discussed potential long term consequences with a severance package.
Stahmer recommended when dealing with union contracts and bumping, any action to eliminate be given a 60 or 30 day notice approved by Council.
Grimm asked what was in the contract for severance. Staff stated payout of vacation, comp, and sick time if applicable.
Stahmer stated it is difficult to estimate what a severance cost would be without necessarily knowing what employee would be laid off. Impacts would be different given the pay to the employee. Based on one employee, the package could be $20,000 or more.
Wieland stated unemployment does not begin until severance is paid.
Stahmer stated Doboszenski did include some information on HSA and if there are any questions, she can explain the worksheet.
Grimm asked if there are types of supplemental unemployment benefits with unemployment. Staff was not aware of any.
Grimm stated he is torn on this issue because this is the first time Council is in this position of laying people off. Times are tight and Council has to make big decisions. He stated he is torn by the fact that we want to make sure we are fair, doesn’t want to hinder future union negotiations.
Council questioned if previous severances are public record.
Doboszenski stated they were separation agreements and yes, separation agreements are public record.
Bunting stated he would like to see something for severance. In his opinion, do the right thing.
Bell thinks that we have to be fair to the employees affected, if affected. The 60 day notice is a good thing to do to aid the transition. Bell then commented on looking at corporate standard for severance stating one or one and a half weeks per year of service.
Rauenhorst stated the difference in corporate world is they can raise costs to cover their expenses. We are trying to cut costs and save money. Rauenhorst agrees with 30 days, but is concerned about setting precedence. Rauenhorst proposed a 30 day notice.
Bunting asked at what point do we have to decide on a severance agreement.
Stahmer stated it would have to be negotiated, if Council comes up with a package to bring forward, we would have that amount of time to negotiate.
Bunting then asked what options the employees have to opt out of the health insurance plan. Stahmer stated the City has not done that in the past. Bunting commented on the cost of health insurance. Doboszenski provided explanation on the employer’s cost and the employee’s cost.
There was continued discussion regarding paying employees to opt out of the City’s insurance.
Doboszenski commented on the City’s contract with LOGIS and the restrictions within the contract.
Wieland reminded Council it would need to be negotiated with union contract because of the benefit.
Stahmer likes the benefit from the standpoint that it can be a benefit to the City but also to the employee with the option or flexibility.
Council asked staff to look into the possibility of paying employees to opt out of the health insurance plan with spousal coverage.
This led to discussion regarding the cost of the health insurance and being a member of LOGIS.
Bunting commented on the annual cost to the City of health insurance being over $200,000 stating it is 2 to 4 FTE’s and wants to cut expenses in non-personnel areas.
Bunting then commented on wanting to be involved in initial budget discussions.
There was discussion between Bunting and Wieland regarding Council involvement in budget discussions with Bunting stating he wanted the process started earlier.
Stahmer then stated that staff will be sitting down with LOGIS to look into the HSA options for 2010.
Council then discussed payroll processing. Stahmer stated staff looked into the costs associated with processing. Currently, approximately $18,000 is being paid out of the general fund to have ADP process payroll. Stahmer commented on the complexity with payroll on employees who are also firefighters. Stahmer commented on the benefit of ADP processing tax payments, garnishments, and having the 3rd party being responsible that the information reported is correct. Wieland provided an example of an IRS issue currently being handled by ADP.
Stahmer stated the payroll module for our current accounting software is $22,000 for upfront start-up costs, and anywhere from $5,000 to $8,000 per year for maintenance and licensing.
From a staff standpoint, it seems the arrangement we have now is close to being the most effective and most efficient. Staff stated if payroll were brought in-house, there would be a need for additional hours above a half time position along with training. Stahmer stated he does have the proposal from Springbrook.
Wieland stated her concerns are that Springbrook may not be the top-of the line accounting software. At some point in the future will navigate away from Springbrook to a more user-friendly package of software and advised Council not to invest in the software.
Wieland stated in two to three years she would like to do an RFP for conversion.
Stahmer reiterated Option 8 would be staff’s recommendation if Council is not refilling the planner position. Any actions by Council will have to come at the regular meeting. Stahmer asked for any direction on these options or a combination thereof.
Grimm stated he likes where Option 8 is going. He then stated to give 60 day notice, and one week per year of service on severance and implement mandatory furloughs in 2010 which will pay for the severance.
Stahmer asked for clarification on the furlough.
Grimm stated one week at end of this calendar year and one week at end of 2010 to separate 12 months.
Stahmer questioned any reduction in cost of living. Grimm stated we would go into negotiations on reductions in cola.
Stahmer asked if the staff that has already done voluntary furlough could be given credit for those days used toward their mandatory furlough if implemented.
Grimm doesn’t have an issue with that.
Bunting stated that’s fine unless they want to do the week.
Bell stated if anyone has already taken the time; it would be taken away from the mandatory part. Bell stated he is not sure there is enough benefit with mandatory furlough given the consequences.
Bunting commented on those employees with less disposable income and agreed with Bell on this stating it’s tough for someone making $35,000 to $40,000 to lose one week of pay.
Stahmer stated he understands Grimm’s thoughts in helping to offset severance.
Stahmer stated he is looking for Council consensus on Option 8 which has a .85 reduction in levy and if Council put that at zero instead of a .85 reduction, that could equal approximately $30,000 that could be where any severance would come from, or use of reserves.
Bell agrees with Option 8. He stated the furlough bothers him stating there are negatives to it that the City can’t get back for $20,000. Let the voluntary play out and see where that goes and maybe address it again in six to eight months. He stated it is coming time to make a decision.
Bunting agrees it is time for a decision.
Rauenhorst stated he doesn’t like the idea of severance. He stated he likes Option 8 stating it fulfills the City’s needs.
There was discussion between Rauenhorst and Bell regarding severance.
Grimm stated Option 8 appears to be the direction and would like to see the severance he requested.
Bunting asked staff to give options on severance and how it affects the bottom line.
Stahmer stated staff can give the worse case scenario based on bumping.
Stahmer asked for direction on the education piece.
Bunting stated he is not worried about the education piece.
Consensus is 60 days and one week, in terms of incorporating it into the summary budget.
Bell asked what the motion will be in the main meeting.
Stahmer stated, if council were inclined to move forward, they would motion to eliminate one FTE, reduce a second FTE to half time, with 60 days notice and direct staff to negotiate and work through layoff procedures in the union contract. It is possible the council may want to enter into a closed meeting to discuss negotiations. If we are just talking about the 60 days and one week option, then no need, but if the Council wishes to give staff direction on negotiations for union purposes, then staff proposes a closed meeting.
Bell commented on the payroll piece saying we are in a reasonably strong position and to change it would incur a lot of disruption - this is one we should leave for now. Rauenhorst agreed with payroll keep where it is at for now.
Bunting asked if the half-time positions responsibilities could be given to other existing positions.
Wieland expressed her concerns with internal controls and having a separation between HR and finance in payroll being one of the strongest reasons.
Stahmer stated AP is the tougher one to parcel out; payroll is possible.
Grimm asked if another finance person could handle AP.
Wieland explained the payment processing and again expressed internal controls and the risk of being written up for weak internal controls and separation of duties.
Bunting asked if it could be done in a non-finance area.
This led to discussion regarding using existing personnel to get the work accomplished.
Wieland stated when she was hired four years ago, AP was done by the existing accountant, and saw the internal controls as a weakness, and reevaluated the process. If we were to change that we would be back peddling.
Bunting stated we always aim for best practices, but sometimes can only afford good practices.
Stahmer asked for consensus of Council on health insurance and HSA. Council asked staff to look into options for employees to opt out.
Motion by Bell, seconded by Bunting to adjourn at 6:45 p.m. Motion carried 4-0.
Assistant City Administrator/Clerk