MINUTES OF THE METRO COUNCIL BUDGET COMMITTEE MEETING

Wednesday, March 18, 1998

Metro Council Annex

Chair McCaig called the meeting to order at 3:32 PM.

1.  CONSIDERATION OF MINUTES OF MARCH 11, 1998

The minutes of the March 11, 1998 Budget Committee were not available in time to be voted on.

2.  ORDINANCE NO. 98-724, FOR THE PURPOSE OF ADOPTING THE ANNUAL BUDGET FOR FISCAL YEAR 1998-99, MAKING APPROPRIATIONS, CREATING FUNDS, LEVYING AD VALOREM TAXES, AUTHORIZING INTERFUND LOANS, AND DECLARING AN EMERGENCY

Transportation Planning Department Budget

Chair McCaig asked Andy Cotugno, Transportation Director, to briefly describe changes in the proposed budget from last year to this year, and to highlight key items. Mr. Cotugno appeared before the committee to continue his review of the Transportation Department budget. He referred to the revised Transportation Planning Department budget overview, a copy of which was distributed to councilors, and which is included as part of the meeting record.

Chair McCaig asked Mr. Cotugno for a description of the schools program. Mr. Cotugno said the purpose of the pilot schools program is to develop a curriculum for transportation-related matters. He said the schools proposal and the commercial transportation study are two new initiatives that are included in this year’s budget, which originated from a citizen’s budget advisory committee. Mr. Cotugno said he included these two programs in his budget request to Mike Burton, Executive Officer, and Mr. Burton included them as part of his proposed budget.

Chair McCaig suggested that in future, any evolving program that is put forward by an advisory committee should be brought to the substantive committee for review. Mr. Cotugno said he believed all proposed projects would come to committee as part of the current budget process. Chair McCaig said she would like to see these new projects before they show up at the Budget Committee as part of the executive’s proposed budget. Councilor McLain agreed these ideas should be reviewed by the substantive committee prior to being included in the proposed budget. She said it does not matter if this occurs before or after staff shares the proposals with the executive, however, councilors should be kept abreast of new projects that are working through the system. Chair McCaig said a formal process is not required.

Chair McCaig said she does not believe the department’s performance measures are adequate or meaningful. She said “publishing a Draft Environmental Impact Statement” does not fit her definition of a performance measure. Rather, “reducing vehicle miles traveled (VMTs)” is an example of an accurate performance measurement. Mr. Cotugno said he considers the performance measures referred to by Chair McCaig as performance measures of the Regional Transportation Plan; and he considers budget performance measures to reflect progress made toward achieving Transportation Department work program goals. He asked whether he should provide work program performance measures or system performance measures. Chair McCaig recommended a mixture of both, with primary emphasis on system measures.

Councilor Morissette said the Urban Growth Boundary will need to be expanded in order to reduce VMTs. Chair McCaig said her purpose was not to discuss VMTs at today’s meeting. Rather, she used VMTs as an example only. Councilor Morissette said he wished to have his comments on VMTs included as part of the record. He said problems arise because people are commuting from all over the state into the region due to the tight UGB, and the expansion that is slated to occur is happening at Damascus and Boring where there are no jobs.

Councilor McFarland asked how much of the Transportation Planning budget is funded from outside sources. Mr. Cotugno said about 85% of the budget comes from outside grants.

Metro Washington Park Zoo Budget

Kathy Kiaunis, Assistant Zoo Director, presented the Metro Washington Park Zoo proposed budget. Copies of the Metro Washington Park Zoo Department Overview were distributed to councilors, and a copy is included as part of the meeting record.

Ms. Kiaunis gave an update on the Oregon Project. She said the project is accounted for in the Capital Fund. She distributed a table entitled, “Oregon Project Progress Report as of December 18, 1997” to councilors; a copy is included as part of the meeting record. The Oregon Project is broken into four phases. Phase I is completed, Phase II will be completed in September 1998, Phase III will be completed in Spring or Summer of 2000, and Phase IV will be completed by Spring 2001. Ms. Kiaunis said voters approved a bond measure in September 1996 for $28.8 million. With anticipated interest earnings, the initial budget was set at $30.5 million. She said currently, the project is estimated to cost $34.6 million. This is the result of project estimates becoming more detailed as the project moved from initial design to construction documents, and the selection of Hoffman Construction as the construction manager/general contractor (CMGC), who presented highly detailed budget documents. The increase also reflects the tight building market in Portland.

Ms. Kiaunis compared certain elements of the ballot title and ballot question with the current proposal. The ballot language listed several animals that were to be brought in as part of the project. The current project includes the black bear, cougar, beavers, sea otters, bald eagle, and trout. The lions will be incorporated into the Africa Exhibit, and will be returning to the zoo at a later date. Wolverines are now planned as an off-exhibit breeding project in the Center for Species Survival. The current project includes salmon, Great Blue Heron, and sea lions. Bobcats and seals will be deleted.

Chair McCaig led the committee in a discussion of the Zoo’s Operating Fund. She asked Meg Bushman, Council Analyst, to review her questions pertaining the Zoo Operating Fund. Ms. Bushman said Chair McCaig had previously asked whether there is a systemic management plan for the Zoo’s budget for outlying years, given Measure 50. Ms. Bushman said in out years, projected operating revenues and expenditures become closer. She said Measure 50 will not have as much of an impact as originally anticipated, because of an anticipated increase in attendance. She recommended reviewing the methods for projecting attendance, and reviewing the value of seasonal employees. Ms. Bushman said in future, the Zoo should strive to operate on its revenues, rather than using the Fund Balance.

Councilor McFarland said that unless there is a strong entertainment component, it is hard to reach educational and species survival goals. She said the Zoo has done a good job of maintaining a balance. She asked what percentage of the total zoo budget is funded from other than its own enterprises and bond measure funds. Ms. Kiaunis said about 42% of operating revenues come from the property tax base. The rest are earned through enterprise activities, interest earnings, and fund raising. Councilor McFarland asked if Metro funds the Zoo in any way at this time. Ms. Kiaunis said Metro does not subsidize the Zoo in the proposed budget. She said in the current FY 97-98 budget, there is $219,000 excise tax money transferred to the Zoo. This has not happened in past budgets, and staff does not anticipate requesting excise tax moneys again. Ms. Bushman said in 2002-3, the fund balance will be down to $3 million, and at some point, the Zoo will have to approach Metro for money, or raise admission fees.

Chair McCaig said the excise tax funds became available when projections of solid waste revenues were revised upwards. A portion of the excess excise tax was transferred to the Zoo budget to counteract the effects of Measure 47 and 50. Ms. Kiaunis assured Councilor McFarland that the Zoo is not requesting funding from Metro this year. She said the impact of Measure 50 was $500,000 less than anticipated. Chair McCaig asked Ms. Sims to provide an updated version of a line graph from last year that shows the impact of Measures 47 and 50.

Councilor Kvistad said councilors are still not dealing with the core, long-term problems this year. He does not know how to proceed, but he is concerned that fundamental problems are not being dealt with. Ms. Kiaunis reiterated that Measure 50 did not affect the Zoo as badly as anticipated. She said the Zoo is on the cusp of opening the new entry facilities with new retail, restaurant, and catering facilities. If attendance projections hold out as the Waters Exhibit and Forest Exhibit come on line, there will be a whole new set of data to look at. Ms. Kiaunis said with the exception of the FY 97-98 budget, which was impacted by Measure 47, for the last several years, the Zoo has been adding to the Fund Balance. Councilor Kvistad said the item should be flagged for future discussion.

Councilor Naito said when the committee has more information about the impact of light rail and the new exhibits, the attendance projections may be found to be low. The budget should be reviewed in November, prior to into the budget process next year. Councilor Kvistad said this would meet his concerns. Mr. Burton said a lot of time was spent on projections. Because staff does not know how the public will respond to paid parking at the Zoo, attendance projections have been kept conservative. Staff anticipates light rail may actually bring more people, but they want to wait and see. Mr. Burton said given the new charge for parking, it was deemed to be unwise to raise admission fees at the same time. He said it would be appropriate to review the projections in the Fall.

Chair McCaig said the discussion should come before the Regional Facilities Committee with a report to Council in November. Councilor Washington asked what will happen in November if it is found that projections are off base. He said he did not want the word coming out of today’s meeting to be that huge cuts will be forthcoming this fall. Chair McCaig said the November discussions will permit the committee to deal with any problems in advance of the budget process, so drastic measures will not need to be taken.

Chair McCaig led the committee in a discussion of the Zoo’s Capital Fund, and began with a brief overview. She said over the last year and a half there have been substantial changes to the Oregon Project. The changes, which reflect a lack of available resources, have been made with the best of intentions. The project is costing more than Metro understood it would cost. In order to keep the exhibit intact, the executive and zoo staff have made very thoughtful decisions to ensure progress continues to be made, while recognizing that there is not enough money to complete the project as originally planned.

Chair McCaig said there are elements of the project people believe they bought because these items were listed on the ballot, that have subsequently been dropped from the project. She said she was not necessarily questioning decisions that were made, but rather pointing to the need for a public process. The decisions will affect people’s perception of the project. For example, the lions are not in the project, and this is a pretty substantial fact, because they have some public following. Also, bobcats and wolverines have been dropped from the project. Councilor Naito said even though councilors would likely have reached the same decision as staff and the executive, it should have been brought forward for public testimony.

Chair McCaig urged staff to give regular updates on the Oregon Project at the Regional Facilities Committee, at least quarterly, at the discretion of the chair. She said the update will permit councilors to give input into financial decisions, and will provide a public forum for problems to be aired. She said it is important that the elected officials who brought the measure to the ballot, and who are responsible to the public, provide adequate opportunity for public input.

Councilor McLain agreed that quarterly briefings at the Regional Facilities Committee would be helpful, and would permit the public to be tied-in on a regular basis, not just during the budget process. However, she said the changes to the Oregon Project had been discussed at a meeting and that the committee had been given the chance to review some of the changes. She said a very thorough briefing on the need to down-size the project had been given that included staging, phasing, and when the lions would come back. She said she wanted it known that whether the conversations were formal or informal, staff and the executive did come back to consult with the Council.

Chair McCaig said for the record, that she would not have brought the issue to the table unless she was certain of her facts. She said the briefings about “phasing in” Councilor McLain referred to took place before the ballot measure was adopted. She said there is no record of any briefing on any of these decisions in any public forum, including the Regional Facilities Committee, the Finance Committee, or the Council. Councilor McLain said she believed she had received a briefing at Council and at the Budget Committee. Chair McCaig said she did not believe a record of these discussions taking place in a public meeting existed.

Mr. Burton said he would be happy to report back to Council at any time with progress reports. He said he believes there have been times when information he intended to relay to the committee was not actually communicated.

Chair McCaig said the second portion of the discussion involves the proposed transfer of $2 million from the Zoo’s Fund Balance into its Capital Fund. Even with the decision to scale back the program, there is a $4 million shortfall. The proposed $4 million reduction corresponds with the cost of Phase IV, however, the reductions have been made throughout all of the phases. She said the $4 million shortfall that remains is proposed to be offset by $2 million from the Fund Balance, and another $2 million from Friends of the Zoo fund raising.

Councilor Morissette said he wanted the line chart Chair McCaig requested earlier to show the effect of the $2 million expenditure and the $1.8 million expenditure in 2001. Ms. Kiaunis pointed out the $1.8 million is for Renewal and Replacement projects from the Operating Fund into the Capital Fund, and is not related to the Oregon Project.

Councilor Morissette said in his business, when he is over budget, he looks to see how he can become more competitive. He said he will not recommend spending the $2 million until the committee has gone through a process to attempt to find the savings. He would ask the Friends of the Zoo if they can come up with the full $4 million, and if they cannot, the committee should look to find $2 million in reductions.

Councilor Kvistad asked if the transfer had to take place in FY 98-99. Ms Sims and Ms. Kiaunis said it did not have to occur in this budget process, although that would be their preference. Councilor Kvistad said we will need to raise zoo admissions at some point. About two years ago, he proposed an admission increase that would be coupled with a decrease in children’s admissions. He said the Oregon Project cannot be reduced further, without damage to the project.

Councilor Morissette said it would not matter to him whether the $2 million was taken in this year’s budget or next year’s budget. Metro should not spend as if the $4 million is available, when that decision has not yet been made. He also said an increase in admissions will not guarantee increased revenues, and since we will be charging for parking, we should not raise admission fees.

Mr. Burton described the bid process for the project, and said there have been opportunities at each phase where decisions and cutbacks have been made in order to stretch dollars later on. He said staff has obtained a commitment from the Friends of the Zoo to raise $2 million. This is larger than any effort they have made to-date. He said Metro is increasing and enhancing the Board of Trustees, and dollars will come in as soon as a permanent director is on board, sometime this month. Historically, surges of enterprise revenue occur when there is the excitement of a new exhibit. So, the Oregon Project can be viewed as an investment for new dollars; over a period of time, it will bring money back. Mr. Burton said staff is striving to increase the on-site revenues from enterprise activities. Metro is restricted in its restaurant operations because it is a publicly-subsidized restaurant, and it is not possible to aggressively market the facility without upsetting the private sector. Councilor Morissette recommended leasing the restaurant facilities to a private restaurateur to offset that problem.

Mr. Burton said the decision on the $2 million transfer from Fund Balance this year needs to be made now so staff can proceed in an informed manner. He said there are cash flow problems with Friends of the Zoo money caused by tight time lines. Councilor McFarland said if Council does not include the $2 million in the FY 98-99 budget, but promises to consider doing so next year, staff would immediately have to change its Scope of Work in order to meet the new demands of not having the $2 million. She said this is because it is not responsible to spend money now on the basis of money you may receive in the future.

Jim Maxwell, Zoo Construction Project Manager, appeared before the committee to describe the status of the project. He said Phase I is completed, and Phase II is underway. He said Metro is committed contractually for close to $17 million of the projected $34 million total. He said any changes to the project made at this point would be very costly to undertake. Phases III and IV will be ready to go to bid in mid-FY 98-99. Metro is currently committing design dollars toward a scope that is reflected by the numbers presented in the proposed budget. Mr. Maxwell said if changes are going to occur, they need to occur immediately, before contractual commitments for construction are funded. The money does not need to be physically moved in FY 98-99, however, the commitment needs to be there. He said asking the Friends of the Zoo to go for $4 million with the $2 million level as back-up if necessary, is fine. However, the decision on the commitment of the funds that will be available is needed now, one way or the other.

Councilor McLain said Council has committed to a minimum project. She said Councilor Morissette’s point that things are more expensive this year, so cuts will need to be made is not appropriate. Investment in the minimum project is needed to make the business thrive. Councilor Morissette said Metro should become more entrepreneurial. Ms. Kiaunis said the Friends of the Zoo will try to raise $10 million over the next ten years, so they have lofty goals. She said they have other fund raising projects at the Zoo that they are undertaking at the same time.

Councilor McFarland said she believed projected attendance will be exceeded next year, once the new exhibits are on line and once the light rail is operating. She said she is not in favor of starving the Oregon Project when the money is there and it can be used now if positioned correctly.

Chair McCaig said the current project has been scaled back from about $38 million to $34.6 million. She said last year, councilors resisted using the Fund Balance to offset cuts at the zoo because it was an inappropriate use of the Fund Balance. It was inappropriate because it did not solve the ongoing problem that existed, and hard decisions were not made. She said this year, she is concerned that there are no guarantees the Friends of the Zoo will be able to raise the $2 million. If this happens, Council may need to go back to the Fund Balance for the balance of the $4 million shortfall.

Chair McCaig said she believes there is support for the $34.6 million project. The additional $4 million can come from fund raising, the Fund Balance, or a combination of the two. She said if you commit to the $34 million, you need to commit to the $4 million. Councilor Morissette said councilors should not overlook the potential for additional cost overruns. Chair McCaig said this is a legitimate concern.

The motion failed for lack of a second.

Councilor Washington asked when staff realized they were over projections. Mr. Burton said they became aware of this situation as soon as the general contractor was brought on board, about one year ago. Ms. Kiaunis said the project has been proceeding in phases, and the whole project has never reached the point where 100% of costs are known. In November, the guaranteed maximum price was obtained for Phase II, which is the biggest single piece of the project. This gave a good indication that costs were increasing. However, the Zoo is still waiting for bids to come in, and with Hoffman taking a conservative course, staff knows costs will come in under that figure. The problem has been that the building climate in Portland is very tight, and bids have not been obtained on even 50% of Phase II. So, staff has not been able to obtain a good indication of how far under the guaranteed maximum the Zoo is.

Chair McCaig said part of the confusion today is that this project costs more than either $30 million or $34 million. But because Council was not in the loop when the cuts were made to reduce it from a $38 million project, councilors have experienced the process of making the cuts that have been necessary to put this project together. Councilors are seeing what appears to be a project that has grown from $30 million to $34 million, when in reality the original project has come from $38 to $34 million.

Mr. Maxwell said it staff’s goal to keep the project within the budget. They have worked with Hoffman and the designers to do a tremendous amount of value engineering, and they made a number of decisions to bring the project to the point where staff felt last Fall that they would hit the target. However, when the last round of bid results came in, and were found to be really weak, staff began to realize the project is not going to balance, and they brought it to Council.

Chair McCaig asked Mr. Maxwell if Councilor Morissette’s concern that another wave of cost over runs will occur is well-founded. Mr. Maxwell said Hoffman is responsible to deliver on its guaranteed maximum price (GMP). He said even with the difficulties in the bidding market, he believes Hoffman will be successful in staying under that GMP for the phases that are out right now. However, staff is going out to bid with another package in six months, and market forces could force Hoffman to come back with an increased GMP. Councilor Morissette said there are all kinds of clauses that result in GMPs being negotiable. Mr. Maxwell pointed out that the GMP for Phase III and IV has not yet been established. Chair McCaig said Council will know about potential problems as they arise, because the Regional Facilities Committee will be briefed in future. Councilors will be able to make informed decisions about any problems as they arise.

Councilor McFarland asked if the committee can commit a future Council to additional expenditure. Chair McCaig said this is much like any other element of the budget in that the committee can committing to the overall cost of the project, and future Councils can choose to revisit this decision.

Councilor Naito said Council should commit to the scope of the project, but the committee needs to know the ultimate outcome of Phase III and IV, as well as the outcome of fundraising. Mr. Burton said if fund raisers are told that anything they do not raise the government will cover, they may be less motivated to raise the full amount.

Councilor Kvistad said the committee does not have a no-build option, however, it should ask the Friends of the Zoo to raise the additional $2 million.

Councilor Naito asked whether a resolution would be required to approve moving ahead at the $34.6 million level. Chair McCaig said the $34.6 million level will be approved by approving the Zoo’s budget.

Councilor McLain said she cannot support the motion because either the Council commits to the project or it does not. If Council approves the project, but does not move the money, it gives mixed signals. She said staff has already made expert and well-thought-out cuts to the project, and have determined they need $4 million to keep the project intact.

Ms. Kiaunis said the fact that the Zoo has an $11 million Fund Balance is because their hard work has led to dramatic increases in the Fund Balance over the past couple of years. She said the request to put $2 million toward a capital project is an excellent contribution toward the future of the Zoo. She said the Zoo has lofty goals for the new Oregon Zoo Foundation with regard to fund raising over the next several years. However, Phase III is scheduled to go on line in Spring 2000, and Phase IV by Spring 2001, and that is a very tight time frame in which to raise the needed money. The Zoo and foundation have been without a director for six months, several board members are new, and the ranks within the foundation have yet to be built up to its maximum fund raising potential. She said we should be more conservative in our demands of the foundation.

Mr. Burton said it is appropriate to move money out of Fund Balance for capital needs. It is not appropriate to take it out for operating needs unless you solve the operating problem. He said there is no middle ground if you want to keep the project. The Friends of the Zoo $2 million fund raising effort is doable, but a stretch for them.

Chair McCaig said she believes it is very likely Mr. Burton will be back for more money because the project will cost more, and the Friends of the Zoo will not be able to come through in a timely enough manner to deliver the $2 million. She said the next Council will be faced with the same request to dip into the Fund Balance. She said if this was a one-time-only problem, the entire $4 million should come from the Fund Balance, however, since it is an ongoing problem, it is wrong to use Fund Balance to solve it.

Councilor McLain said taking money out of contingency is not going to put Metro in a financial bind. She said the purpose of contingency funds is to cover those times when projects go over budget.

Zoo Parking Lot Briefing

The zoo parking lot briefing was postponed until Wednesday, April 15, 1998.

Office of the Executive Officer Budget

Consideration of the Office of the Executive Officer budget was set over until Wednesday, March 25, 1998.

Chair McCaig said the Wednesday, April 15 meeting will be held at 2:30 PM in order to ensure the business of the committee is completed on time. Councilor Naito announced she will be absent at next week’s committee meeting, but would like to participate via telephone conference call.

There being no further business before the committee, Chair McCaig recessed the meeting at 5:10 PM until Wednesday, March 25, 1998 at 3:30 PM.

Prepared by,

Lindsey Ray

Senior Council Assistant

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