MINUTES OF THE METRO COUNCIL BUDGET & FINANCE COMMITTEE

Wednesday, May 10, 2000

Council Chamber

Members Present:  Susan McLain (Chair), Bill Atherton (Vice Chair), David Bragdon, Rod Park, Ed Washington

Members Absent:  Rod Monroe, Jon Kvistad

Also Present:    

Chair McLain called the meeting to order at 1:43 P.M. She said Councilors Park and Washington would be in shortly; since a quorum was not present at this time, (the Committee had become a committee of the whole), she asked that Administrative Services Department (ASD) staff come forward to discuss item 3 on the agenda. At the conclusion of discussion of items 3 and 2, and with a quorum present, the Committee considered the minutes.

1.  Consideration of the Minutes of April 12, 17, 20 and 26, 2000 Committee Meeting.

2.  Committee Discussion of Capital Needs Assessment and Preparation for Retreat

Chair McLain said she had asked staff to put together a notebook for background for the conversations the Committee would have today and May 24 in preparation for the Council Retreat May 30. Today ASD would present key budget assumptions and policy issues, Long-Range Financial Planning FY 2001-2006. A Copy of the notebook is included in the public record. Tony Mounts, ASD Financial Planning Manager, said this material was just a starting point for discussion today. He asked for advice relative to the adequacy of current assumptions from the Committee’s perspective, as well as input in terms of key framing assumptions that would help support future decisions in this area.

Chair McLain asked where the $1.1 million came from in the General Fund. Mr. Mounts said that a $1 million fund balance had been discussed as a target, or roughly 10% of the General Fund. Given that the revenue stream for the fund was effected by the economy, it could fluctuate. Sound financial policy suggested it would be wise to have a conservative fund balance in order to cushion operations against a downturn. The Council had never adopted an official policy regarding fund balance. Past staff recommendations were to shoot for a $1 million balance. This scenario would not achieve that balance in 5-years; if Metro ramped up $100k/year that target would be reached in 2007.

Councilor Park asked if it made a difference whether or not the reserve amount was in a semi-restricted account. Mr. Mounts responded that it did not really matter how reserves were structured, it would act as a cushion in case of a downturn in the economy. In the General Fund the $300k contingency was available for Council action within the year. There were other reserves that could potentially be set up that could be available via Council ordinance during that year. Councilor Atherton asked the reason for the reduction in the estimated end of fund balance between 2001 and 2002-03. Mr. Mounts said he would have to review. He encouraged questions because it gave him the opportunity to bring back additional information.

Council Atherton asked if a resolution was the instrument required for the Council to set $1 million as the ending fund balance. Mr. Mounts agreed. He said it should be kept in mind regarding the excise tax that the Oregon Convention Center (OCC) project timelines and whether the project achieved OCC’s objectives would impact this forecast. Chair McLain noted that one of the assumptions was a 4% transfer out although the agency was currently at 5% actuals. This scenario assumed there would be continuing cuts. Mr. Mounts said 4% was a holdover assumption from this year’s budget process. Given the interrelationship between General, Planning and Parks funds the assumptions around the transfers defined the problems in one fund or another. Reducing the transfer out to 4% would make the General fund healthier, but tended to cause the Planning and Parks funds more financial problems. Growth Management, particularly, got a substantial portion of its revenue from the Excise tax - 4% was just a starting place. On the personnel side historically it had been 5%.

John Houser, Council Analyst, asked what the specific assumptions were from the OCC expansion on Excise tax revenues. Mr. Mounts said it roughly doubled the amount of Excise tax projected to be received from OCC during that 5-year period. Transfers out reflected the decreasing transfers to Metropolitan Exposition-Recreation Commission (MERC) for support services. Overall, given these assumptions which would change if the fund balance target was increased, the agency was in the black during the 5-year period, given revenues and expenditures remained as projected. He noted that this was the first iteration. Chair McLain asked if he had treated each of the other funds in the same way. Mr. Mounts responded there was no capital in the General Fund; but other funds included information gathered from the Capital Improvement Projects (CIP) document relative to the adopted CIP. Both revenue and expenditures, then unfunded projects, if noted, were included as well.

Mr. Mounts went on to the Planning fund. Chair McLain asked what the criterion was to determine if computer needs were department CIP or part of the cost allocation plan. Mr. Mounts responded that in the Transportation department the computer system was a tool for work to be done. In that instance it was most appropriate to purchase as part of department operations. As it exceeded the $50k capital threshold it was put in the CIP. Systems in the indirect cost plan were those that served the entire organization via the network of which all or part of the organization partook. Chair McLain asked for some sort of screen to determine priorities for future Information Technologies (IT) needs. Mr. Mounts said he might ask if there was competition for resources – were there two discrete choices or was there an overlap in terms of funding or staff required for implementation. In the case of Transportation he believed that the funding source was separate and the staffing required was by and large supported by its staff. The issue around prioritization became the competition for resources.

Councilor Atherton asked about the footnote concerning Regional Solid Waste fund paying for support of the Data Resource Center (DRC). Mr. Mounts and Ms. Rutkowski said Regional Environmental Management (REM) purchased some mapping and data services from the DRC. Chair McLain noted one use of the DRC was for tonnage forecasting.

Mr. Mounts reviewed the Regional Parks fund. He highlighted the fact that there was an on-going gap between funding and operations cost. The result was that the fund balance was being eaten into. This was the only fund forecasting an increase in staff load. Current reserves would be exhausted by 2003-04. Chair McLain asked the cause. Mr. Mounts responded it was the higher cost of managing acquired lands. ASD would provide more detail May 24. Cherie Yasami, Financial Planning Analyst, pointed out CIPs in the Regional Parks fund were normally supported by local share money, grants or donations.

Councilor Atherton asked what the target figure would be for a supplemental funding source. Mr. Mounts said $1 million/year would be a base, but would not include the wish list that the Committee had requested, including CIPs. Councilor Atherton said that while the concept of a legacy fund had been discussed previously, this material indicated it would require $20 million to fund it. A regional systems development charge (SDC) required that figure plus the costs for a master plan. Mr. Mounts clarified that what was needed was a current list of unfunded projects, the master plan for developing the acquired properties, and Councilor Atherton’s legacy fund that must produce revenue of $1 million/year.

Mr. Mounts moved on to the MERC Operating fund. Chair McLain noted the reduced subsidy that would leave MERC paying their full share of support services after July 2003 and MERC timing issues related to the OCC expansion and Portland Metropolitan Exposition Center (Expo) Hall D. A review of this construction would come before the Council at the Informal meeting Tuesday, May 23. She felt there were possibilities for additional excise tax and more income for these facilities.

Ms. Yasami noted that REM was analyzing the figures for the Regional Solid Waste fund. ASD had based these figures on the proposed changes in waste reduction, etc. REM would project these changes out into the future. She expected a better forecast to be available by the next meeting. She noted that expenditures in the fund were tonnage driven. If tonnage went up the expenditures went up, and the reverse. Mr. Mounts added that it was a conscious decision to draw down the reserves of the fund and not a matter for concern. Chair McLain mentioned the earlier Department of Environmental Quality (DEQ) request to pick up some liability for an orphan site in Portland. She felt that and other possible orphan sites should be noted in the analysis. A second issue was a lawsuit. Because these were both big-ticket items she felt the policy on buying down or using solid waste money should be discussed further. Mr. Mounts said one of his key assumptions was that the solid waste industry continued as it was currently structured. Any change would impact this fund.

Councilor Park asked what rates the solid waste fund forecast was based on. Ms. Yasami said it was based on the current tonnage forecast, recycling rate, etc. that was in place at the time the proposed budget was presented to the Council. It had not been altered by any changes that the ordinance under current discussion might cause. Chair McLain said a second forecast that reflected this ordinance should be prepared.

Mr. Mounts moved on to the Zoo Operating fund. The current budget did not allow the Zoo to invest in the development side in terms of redeveloping or creating new exhibits while maintaining the assets already in place. Chair McLain suggested that if the Zoo contemplated any large new exhibits in the future the Master Plan would need to be revisited. Under Assumptions she felt it should be noted that they were made based on the approved Master Plan from 1994-95. Mr. Mounts said he thought the Zoo was working on small project changes while finishing the current projects.

Mr. Mounts said that at the next meeting ASD would cover MERC and Support Services and its issues, as well as additional items brought up today. Councilor Bragdon suggested requests from outside the agency, DEQ and RACC (Regional Arts and Culture Council), might be included on the Add sheet. A copy is included in the public record. Chair McLain asked the analysts to let the clerk know if there were any other requests for adds that they knew of that should be included. She asked that a copy be given to all councilors.

3.  Ordinance No. 00-859, an Ordinance Amending the FY 1999-00 Budget and Appropriations Schedule for the Purpose of Adopting a Supplemental Budget for the Fiscal Year Beginning July 1, 1999 and Ending June 30, 2000; and Declaring an Emergency.

Kathy Rutkowski, ASD Financial Planning Analyst, said that this supplemental budget required TSCC (Tax Supervising and Conservation Commission) action; following Committee action it would be forwarded on to them. The TSCC Hearing would be held June 8 at 1:00 PM prior to hearing the Metro budget. This supplemental budget had two purposes; both of which effected MERC. She said when ASD prepared the FY 99-00 budget, the Expo project was put in the MERC operating fund on the assumption that it would be MERC revenue bonds that were issued. Since that time the project had been funded by a loan from the Oregon Economic and Community Development Department (OECD). MERC revenues would be the primary funding source, with the secondary pledge of General fund revenues. In order to track the expenditures the project would be moved from the Operating fund into the General Revenue Bond fund.

David Biedermann, MERC Director of Administration, said the Aramark piece of this ordinance was part of a request for bids done 1-year ago to provide concessionaire and catering services to the facility. As part of that bid MERC required the successful bidder contribute a $1 million investment in the facilities. This was not operating costs, it was a capital contribution and recognition of the $1 million. Chair McLain read from Wording for Susan McLain for the May 10 council Budget & Finance Committee for Ordinance 00-859. It is included in the public record. She said that it was a supplementary budget, it required the same review as the regular budget, and must be done by June 30. The full budget would be passed on June 15. Councilor Bragdon asked if the interest cost had been reduced from what was thought to be the original cost. Mr. Biedermann responded yes, the interest rate was less that what might have been expected if Metro had gone out for a bond measure. Chair McLain thanked Mr. Biedermann for his attendance and set the Ordinance aside until a quorum was present. She turned to discussion of item #2.

4.  Councilor Communications

Chair McLain said some of the add projects and where the Council’s interest was would be discussed at the next meeting. The Growth, Transportation and Parks committees had presented some project needs. Councilors would also have an opportunity to request any special materials they would like to see at the May 30 Retreat. Councilor Atherton said he would like a systems development chart developed for Parks and Planning departments. He said he was investigating the concept of a planning utility fee of $20-25/acre per year inside the urban growth boundary (UGB). In more developed areas, i.e. 4-5 houses per acre, it would cost $4-5/year per household. The fee would only be levied on developed land. He hoped to have this ready for discussion at the Retreat. His thinking was that current owners were the beneficiaries of regional planning. He saw regional planning as to prevent bad things from happening while local planning was to make good things happen. This regional utility fee would support the planning function at Metro.

Chair McLain thanked the ASD staff for gathering all the information together for the meeting. Mr. Mounts asked for clarification on the adds list. It was done within the context of what cuts departments would like to see restored. This might not reflect all of the issues relevant to the programs within the context of the 5-year forecast. They were more near-term. He asked if the Committee were also interested in further unnoted issues. Chair McLain said that this was a first year list, not for the longer term (2-5 years). The last time that long-term planning was done was when Councilor McCaig was on the Council. The number of wants was so big it made it difficult to find a starting place. Mr. Mounts clarified that he would prepare an alternative scenario for the General fund that would both achieve a $1 million reserve within 5-years, and bump the excise tax transfer to 5% in Parks and Planning. He would also update Parks and Planning for that additional revenue from the General fund. He would also bring further information from MERC and Support Services, follow-up questions on the Zoo and orphan sites. Peggy Coats, Council Analyst, suggested it might be useful to add a page to discuss key trends along with key assumptions, e.g. when each fund could run out (an assessment of financial condition).

Councilor Atherton noted that he wanted to discuss the unfunded mandate proposal he hoped to present. Chair McLain asked staff to get a legal opinion from General Counsel to give Councilor Atherton and the Council some guidance as to what was doable.

Chair McLain adjourned the meeting at 2:56 PM.

Respectfully submitted,

Pat Weathers

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE MEETING OF May 10, 2000

The following have been included as part of the official public record:

i:\minutes\2000\budget&finance/05100bdm.doc