Town Council Minutes April 28, 2009 at 8:15 a.m. Morehead City, North Carolina Special Meeting/Work Session
The Honorable Council of the Town of Morehead City met at a Special Meeting/Work Session on Tuesday, April 28, 2009, at 8:15 a.m., in the Municipal Building Auditorium at 202 South 8th Street, Morehead City, North Carolina. Those in attendance were:
MAYOR: Gerald A. Jones, Jr. COUNCILMEN: George W. Ballou Paul W. Cordova David Horton John F. Nelson Demus L. Thompson CITY MANAGER: R. Randy Martin CITY CLERK: Jeanne M. Giblin OTHERS: Mike Shutak, Reporter, THE CARTERET NEWS TIMES; Jennifer Stallings, Reporter, THE GAM; Ellen Sewell, Finance Director; Steve Hamilton, Public Utilities Director; Wes Lail, Morehead City Fire/EMS Chief; Jamie Fulk, Morehead City Fire/EMS Deputy Chief
I. Call to Order:
Mayor Jones called the meeting to order at 8:15 a.m., for the purposes of the work session reference material review.
II. Financial Projections: City Manager, R. Randy Martin, Finance Director, Ellen Sewell
Manager Martin stated that the financial projections are intended to estimate the City outcome of the City budget as of June 30, 2009. This year the City staff anticipated early in the fiscal year significant shortfalls in some of the revenue sources due to the slumping economy. All Department Heads were directed to identify ways to reduce costs and spending has been reduced. Management froze vacant positions, some new positions, salary and merit increases and capital spending.
Finance Director Sewell updated the revenue sources through March 24, 2009. She commented that the City budgeted very conservatively for property taxes. As a result, the City has collected $42,000 more than what was budgeted. At the present time 99 percent of the total tax levy has been collected. This money will somewhat offset the expected lower Unrestricted Intergovernmental Revenues which is primarily a result of reduced sales tax distributions.
The City has collected 56.6 percent of the budgeted sales tax amount projected for the first seven [7] months of FY2008/2009. The sales tax revenues as a percentage of budget are erratically received throughout the year based upon monthly sales and collections. The City has received collections through January 2009, and these collections include some of the traditionally lowest collection months of the year in terms of sales revenues. Projecting through the end of the fiscal year at June 30, 2009, the City is expected to be short of budget as much as $100,000 to $110,000 in state sales tax revenue. It is simply a projection based upon past percentages of collection because sales tax collections for the remainder of the year are unknown at the present time.
Manager Martin gave a brief history of property tax revenues through the last few years starting with the revaluation year. He stated that the revaluation greatly expanded the tax levy base and the City then lowered the tax rate to $0.22 per $100 assessed valuation. He commented that there is growth projected in the City tax base for the year. However, the impact on the budget is minimal in terms of revenue growth because of the expanded tax base levy and the lower tax rate. He was of the opinion that the City will “hold its own” next year in terms of growth.
Manager Martin continued that the franchise tax, the cable/telecommunications sales tax and the natural gas tax will offset some of the projected loss from the sales tax in the Unrestricted Revenue total category. The Restricted Intergovernmental Revenues are $290,000 less than what was projected. Much of this relates to the Little Nine Road grant of $250,000 which was frozen by the state thus delaying the project. The revenue from fees and permits usually increases during this time of year. We anticipate more revenues in this category, however, at the present time this figure is down significantly.
Revenues from sales and services are on target; while investment earnings are under budget due to lower interest rates on investments. Miscellaneous revenues are up mainly due to collections on foreclosures on properties which have been on the books for years. The projected appropriated amount of the Fund Balance is $912,370. The full amount is projected to be used to be conservative, but it is unlikely all of this amount will be expended by June 30, 2009. The Fund Balance is not used for operating expenses, only for capital projects.
Councilman Nelson commented that the Fund Balance has been reduced during years in which the City has undertaken major capital projects.
Manager Martin reported that the Council appropriated money out of the Fund Balance this year to pay for remaining planned obligations for several capital projects including the baseball park. This has been a trend that the Council over the past decade instituted to use some of the Fund Balance for capital projects on a pay-as-you-go basis instead of relying entirely upon borrowed funds to do major projects. This has saved the city substantial dollars by avoiding interest costs. The Manager also noted that the Council had set a minimum Fund Balance goal/policy to ensure that the amount of available Fund Balance remained significant to meet the City’s needs.
Manager Martin continued that all departments had reduced spending and all departments will come in under budget. The City had to freeze salaries, vacant positions and a significant number of capital projects. Currently there are eight [8] full and part-time positions which are still frozen. The City budget projections are significantly under budget on the expenditure side and anticipated to be double the amount of revenue loss.
Finance Director Sewell summarized the projections on the Fund Balance. The projected revenues for the year less expenditures are $417,000. The City will, therefore, have a net increase in the amount of Fund Balance available at year end than what was projected when the budget for this year was adopted. Projected to June 30, 2009, the Unrestricted and Undesignated Fund Balance is $2.8 million or 30.30 percent of expenditures. Funding the acquisition of the waterfront property would have an impact on the Fund Balance, however, this figure is unknown at this point until grant resources are finalized in June, 2009.
Manager Martin explained that we anticipated and projected approximately $912,000 of the Fund Balance to be appropriated. The City’s reduced spending has somewhat offset this as we will now only deduct approximately $500,000 from the Fund Balance for a net gain on the year after deducting planned spending on capital items.
Manager Martin reviewed all the reserve funds that the Council has at its discretion to use. The money in the Capital Reserve Water/Sewer Fund is mostly impact fees. Trends were analyzed for these reserve funds noting the impact of increases and decreases on development in the City.
With regard to impact fees, Finance Director Sewell reported that the City collected approximately $3 million since the inception and has earned $400,000 in interest. The City has not yet spent $156,000 budgeted for this year; the cash balance was $472,529 on March 30, 2009.
Manager Martin compared the building “boom” years to the current year and noted that the current year compares favorably to the years prior to the years of substantially increased development this decade.
The Council took a ten [10] minute break.
Manager Martin reviewed the Rebatable Water/Sewer Capital Reserve Fund which is comprised of fees that are paid to the City for water/sewer lines initially constructed by the City. The City is reimbursed when the property owners hook up onto the water/sewer system on these extended lines. With regard to Sidewalk Fee Reserve funds, the City has expended a significant amount of these funds throughout recent years and this fund will be rebuilt as new development occurs.
Councilman Cordova commented that with regard to capital sewer projects that a few years back the City was cited by the state because of sewer flows exceeding permitted limits due to infiltration and inflow of extraneous water seeping into sewer lines. By developing a maintenance program including sliplining sewer lines, the City has drastically reduced the amount of surface and groundwater seeping into the sewer lines.
Manager Martin reported that the new Wastewater Treatment Plant [WWTP] is on line and with the efforts the City has made in developing a maintenance program including sliplining, our monthly average of wastewater has been dramatically reduced. This could be attributed to in some part to conservation efforts on the part of our customers, but the sliplining project has been most successful. He congratulated the Council for having the foresight to approve funding for this over the last decade plus.
Finance Director Sewell reviewed projections on other City operating funds. Regarding the Fire/EMS Fund, she reported that Restricted Intergovernmental Funds are in a positive trend and that the ambulance fees were on target as projected. We have not as yet acquired property for the relocation of Fire/EMS Station No. #2 as was projected.
Councilman Nelson questioned where the Powell Bill funds were spent.
Manager Martin replied that the Powell Bill funds in recent years have been used to pay down the debt on borrowings for street projects and $120,000 was spent for ongoing costs associated with maintaining the streets. It was noted that one of these borrowings will be paid off in August, 2009.
The Sanitation Fund is projected to break even this year. The Solid Waste Authority is anticipating a rate increase this year related to reduced quantities of refuse, therefore, reducing their revenues. This is believed to be related in large part to the reduced amount of construction activities in the area thus reduced amounts of construction related materials sent to the landfill.
The Water/Sewer Operating Fund revenues are expected to be right on target with the budget. The investment earnings for this fund will be on target as well as contributed capital. This fund as well as all the other funds will have a positive variance for the year if projections prove accurate. The City will not have to use the contingency and will contribute to the Fund Balance and retained earnings. Debt service will have a positive variance. It was noted that debt service related to capital spending as expected will significantly increase in the Utility Fund in the new upcoming budget year.
III. Public Utilities Status: Public Utilities Director Steve Hamilton
Public Utilities Director Steve Hamilton reported on the City’s efforts to secure the use of federal stimulus funding for a lift station project approved for the budget. The federal funds are a combination of a loan forgiveness which is in essence the same as a grant, a 0 percent interest loan and a state low interest loan. The previously approved North Carolina Rural Center grant has been qualified for stimulus funding. The balance of the funding will be loan forgiveness and the other half will be 0 percent interest. He continued that the basic foundation of Lift Station #9 located at the end of 25th Street is in poor condition. It is necessary to replace the entire lift station which has increased the project cost estimate significantly. Fortunately, the federal stimulus funding will provide the additional funds. Lift Station #11 will be refurbished as was planned originally. The total project is now estimated at $2.1 million.
Councilman Nelson inquired if it was necessary to increase water fees for this project more than was originally projected when the WWTP project was planned and approved.
Public Utilities Director Hamilton replied that the City share of this project will come from the Capital Reserve Fund and by receiving the grants and 0 percent interest loan portion, it lowers our capital debt. The engineering and permitting has already been done. City Engineer Tyndall Lewis got this project designed and the permitting applications to the state. He is to be commended for having the foresight of having these project “shovel ready” for the stimulus funding. No additional impact on rates beyond the budgeted amount is anticipated for this project.
The proposed water treatment project for meeting the new demand for water treatment regulations and softening is very favorable to also receive federal and state stimulus funding. It is hoped that a loan forgiveness/grant in the amount of $1.3 million and a $1.3 million interest free loan would become available.
Manager Martin reported that as the engineering has already been done for the water re-use project it is also a candidate for stimulus funding, but no word on its status for this round has been received. State Clean Water Trust Fund dollars for such projects have been deferred to next year due to the state budget crunch. The City has applied for this source, but it is unlikely a funding decision will be made until next year.
Public Utilities Director Hamilton then proceeded to update the Council on existing projects. The new Wastewater Treatment Plant [WWTP] is completed; $240,000 has not as yet been billed. The sludge dryer has had significant problems and was never started. This separate operation of the WWTP will not be completed until July. The City has expressed to the supplier of the sludge dryer equipment that the City will expect a much extended warranty for the delay. In the meantime, the City is using an alternative method and is incurring additional expenses. The supplier will also be requested to repay some of the additional expenses associated with the delay.
Public Utilities Director Hamilton continued that the Automatic Meter Reading [AMR] project is ongoing and that the City has remitted half of the money with 1,376 meters out of the anticipated 5,774 being installed and the remainder being received and in storage. The City has 7,500 slots for meters, however, some are inactive. He estimated that completion would be in 2 ½ months. This project will produce efficiencies in operations and improve customer service capabilities and allows monthly billing to occur once again.
The Council took a ten [10] minute break.
Public Utilities Director Hamilton continued that the City applied for funding from the North Carolina Rural Center in their second funding cycle for another well to be located on the State Ports Authority property off Business Drive. The Port is willing to sell a portion of land which would be close enough to our new proposed water treatment plant and yet not adversely impact the nearby existing well on Arthur Farm Road. The City has two [2] other existing wells; one [1] at 14th Street and another at 5th Street. The plans are to take these out of service when the water treatment project is complete.
Public Utilities Director Hamilton reported that an additional person included in the budget to meet demands at the new WWTP was hired, David Brigman, who is a certified operator with quite a few years experience. With the replacement of David Griffin by Daniel Williams, who is also well qualified, the Water/Sewer Department is fully staffed at present.
He continued that the Public Utilities Department Capital Project expenses are within what was expected. There are funds which will be left from the WWTP project and it is requested that this money be used to fund a building for office space and laboratory at the WWTP site. The current building is inadequate with the chemist continuing to do both drinking water and wastewater testing in the same lab space. When the project was planned it was hoped that the contingency funds in the WWTP budget would not need to be expended entirely and, therefore, allow consideration for meeting this needed improvement.
Public Utilities Director Hamilton stated that Morehead City still needs to develop a plan to lower the nutrients going into Calico Creek. The parameters or standards required of the City were changed by the state during the construction of the WWTP project.
IV. Sales Tax Update
Finance Director Sewell reported that changes occurred in the state sales tax distribution for the 12/31/2008 quarter. In the prior session of the General Assembly, the state and county traded out ½ cent of the sales tax for the state to take over Medicaid. This impacts municipalities’ share. However, municipalities are being “held harmless” from getting lower revenues. The Morehead City rate for its share of Carteret County sales tax distribution is now increased from 6.9 percent to in excess of 7 percent of all sales tax revenues. This will increase the City’s share in the next budget year.
Manager Martin reported that the Senate last Wednesday evening released the 21st Century Tax Rate Reduction and Modernization Plan. The net result would mean more money for local governments and the state if projections are accurate. Some tax rates would go down while some additional services would be taxed. Certain taxes would no longer be levied and collected or shared with cities.
V. Fire/EMS Services: Fire/EMS Chief Wes Lail
Fire/EMS Chief Lail reported that the department has implemented all of the operations and equipment upgrades that the Council approved over the past few years. The new Station #3 located adjacent to the Wildwood Fire Station is manned with a three [3] person crew with this station sharing EMS responses which were previously handled exclusively by Fire Station #1. There have been no major issues with the renovation of the building and operationally they are taking care of business. The Morehead City crew has a good relationship with the Wildwood crew. Terrance “Pops” McMahon is the new Chief of the Wildwood Fire Department and is very cooperative with Morehead City.
Fire/EMS Chief Lail continued that the third or fourth EMS call at the same time taxes the response system and that the QRV unit now located at Station #2 has been a great asset. Equipment-wise the biggest upcoming need is to replace one [1] ambulance. The Department is trying to be as cost effective as possible. The goal of the Fire/EMS Department is to lower the fire insurance rate and thereby lower fire and insurance premiums for property in the City’s jurisdiction. The previous concern of a retrogressive fire insurance rating has been eliminated with Station #3 opening. He continued that the rating standard for fire insurance depends upon: 1] Communication/Dispatch; 2] Water Supply; and 3] Fire Department Capabilities. In 2005, Morehead City received a ratings report from the state which the Department has been trying to improve with the previously approved changes and additional administrative efforts to enhance training. The centralized Emergency 911 system should improve communications particularly with Emergency Medical Dispatch.
Discussion centered on firefighting efforts in the extraterritorial jurisdiction [ETJ] area and the ways to influence the fire insurance ratings in this area as well as the City in an effort to improve the current 5-9s ratings for the City to a 4 in-City and an improved number in the rural areas of the district which are currently 9s rated. The City wants to time its re-rating request when it is highly likely the rating will be lowered based upon these improvements.
Councilman Ballou MOVED, seconded by Councilman Thompson, and carried unanimously, to enter into CLOSED SESSION as per G.S. 143.318.11[a][5] to discuss potential property acquisition.
Councilman Cordova MOVED, seconded by Councilman Nelson, and carried unanimously, to return to OPEN SESSION.
There being no further business, the meeting was recessed at 12:15 p.m., to be reconvened on Wednesday, April 29, 2009, at 8:15 a.m.
__________________________________ Gerald A. Jones, Jr., Mayor
Attest:
_____________________________ Jeanne M. Giblin, City Clerk |