MINUTES OF THE METRO COUNCIL BUDGET & FINANCE COMMITTEE

Wednesday, July 12, 2000

Council Chamber

Members Present:  Susan McLain (Chair), David Bragdon, Rod Monroe, Rod Park, Ed Washington

Members Absent:  Bill Atherton (Vice Chair), Jon Kvistad

Chair McLain called the meeting to order at 1:42 P.M.

1.  Consideration of the Minutes of May 24 and June 28, 2000 Committee Meetings.

Chair McLain asked Councilor Monroe for a parliamentary ruling on procedure for voting on the minutes of a meeting that a Councilor had not attended. Councilor Monroe responded that

2.  Committee Review of Key Assumptions for Development of FY 2002-06 Capital Improvement Plan.

Chair McLain asked Tony Mounts, Administrative Services Department (ASD) Financial Planning Manager, to come forward. . Mr. Mounts reviewed his memo on the Capital Improvement Plan (CIP), CIP Assumptions and Issues. A copy is included in the public record. He said it would go out this week to all departments along with a manual of instructions for developing this year’s CIP. CIPs were due in October with final Council action due in December. This timeline allowed the first year projects to be included in the 2001-02 Budget.

Chair McLain asked for a review the definition of a Capital Project. Mr. Mounts said it was any project greater than $50k and a usable life of more than 5-years. The one exception was computer projects and software systems, while usually larger than $50 their useful life was 2-3 years. Because of their significance from a planning standpoint they were included in the CIP. He responded to earlier discussions of the nature of what was called a project. It was not just the creation or expansion of an existing asset, but included major maintenance associated with maintaining the useful life of that asset, e.g. a new roof or Zoo fencing. If it was greater than $50k and would extend the life of the asset it would be included as a CIP.

Chair McLain said she liked his verbal definition, “that “it enhanced the asset” better than the written version. Mr. Mounts clarified that the intent was to enhance, e.g. expansion at Oregon Convention Center (OCC). Chair McLain asked about the carpet at OCC. Mr. Mounts responded that would probably be a replacement project if greater than $50k. It was not an asset of and by itself. Councilor Washington asked about exceptions on computer equipment or projects. Mr. Mounts said a larger project might include both software and computer equipment (hardware) like the InfoLink project. Another was the Transportation Modeling System. Councilor Washington asked if the new Stellar Cove exhibit at the Zoo required a new water pump that cost $50k – would that be a CIP. Mr. Mounts said if a water filtration system for Stellar Cove was needed it could be programmed into the 5-year plan as a CIP. Chair McLain asked Peggy Coats, Council Analyst, to discuss a point she had brought up in staff yesterday.

Ms Coats suggested that perhaps those renewable expenses (like computer systems) that were foreseeable could be built into the system so that ongoing budgeting and reserves would be easier to plan. Council Park asked if Metro was different than the private sector in the way that the IRS (Internal Revenue Service) reviewed these costs. Mr. Mounts said it was different, the system that Metro was transitioning to over the next 2-3 years required Metro to depreciate assets and identify maintenance requirements on those assets. Typically as a non-profit Metro did not depreciate its assets as an expense against a tax obligation or reduced earned income as was done in the private sector. He noted that while he had not done a thorough study of the private sector’s building maintenance practices, he had benchmarked Metro’s program against other public sector entities. Professional organizations such as the Building Owners and Managers Association (BOMA) had established standards for building ownership and management. He said industry standards were used to establish budgetary guidelines on maintenance.

Councilor Park asked if the IRS set out guidelines for Capital Project or operating expense that Council and the general public could easily understand. Mr. Mounts said it was the Council’s choice as to what was reviewed as part of the CIP; it was a policy question. If IRS guidelines were used and only cases where a new asset was created were included it would cut down the number of projects reviewed by about one third. Chair McLain noted Mr. Mounts earlier suggestion at staff that a complete inventory of Metro facilities for future upgrades and replacement or the BOMA standard of 2-4%/year. She asked that he explain the reason why Metro used the BOMA figures. Mr. Mounts said best practice would be to use a facilities condition assessment to drive R&R budgeting, however the cost had been the barrier to implementation. Most organizations make an assessment every 2-5 years depending on what they can afford. Regional Environmental Management (REM) was required to do so on its solid waste facilities as part of the bond covenants for the Transfer Stations. Parks, Zoo and Metropolitan Exposition-Recreation Commission (MERC) facilities have never had a facilities condition assessment to his knowledge.

Chair McLain asked if the figure he gave in the document of $150-250k expenditure was for all facilities or only the ones he had named. Mr. Mounts said it was for the three departments he had named and used some broad assumptions to reach that figure. REM was updating their assessment this year at a cost of $40k. He said another issue was that it would be more reasonable to use a condition assessment than the 2-4% figure when projecting the operating impact of expanded facilities (OCC or other). Chair McLain appreciated the handout. She asked if the definitions were included in the manual of instructions. Mr. Mounts said that it did.

3.  Review Committee Schedule

Chair McLain asked the Committee to review Mr. Mounts schedule of Budget Meeting topics. She said that Presiding Officer Bragdon had requested a spreadsheet with all budget note requests along with their review dates be included with this memo. Mr. Mounts said that there were a variety of timelines; his intent was to clarify expectations as to deliverables and when they could reasonably be expected. Some were clearly due in October, however MERC and RACC (Regional Arts and Culture Council) figures would be available sometime later, but before the next budget process commenced. Chair McLain noted it was a status report to allow Council to see where Finance was in the process of providing the responses requested.

Councilor Bragdon asked Chair McLain responded. Mr. Mounts said it was to clarify when they should be expected. Db wanted to know where it would be expected. Chair McLain product or status report. Asked that Charlie Ceiko and staff be available for the meeting July 28 and August 9. Mr. Mounts said it was not his intent to bring. Chair McLain had some question on mid-year budget questions and had asked . Kathy Rutkowsky, ASD Financial Planning Analyst, gave some history. Chair McLain felt it was important that the Council had notice. Councilor Monroe said his concern was at what point the information came forward when a department was overextended. He felt it would be nice to know as soon as it became evident. Chair McLain noted Mr. Mounts said in conjunciton with the Budget notes review of REM they could use that as a checkpoint. Chair McLain asked said she.

Chair McLain thanked the Councilors for their attendance and urged them to come to the next Budget meeting on Parks July 26.

4.  Councilor Communications

Chair McLain adjourned the meeting at 2:15 PM.

Respectfully submitted,

Pat Weathers

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE MEETING OF JULY 12, 2000

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

i:\minutes\2000\budget&finance/07120bdm.doc