MINUTES OF THE METRO COUNCIL BUDGET COMMITTEE MEETING

Wednesday, April 15, 1998

Metro Council Annex

Chair McCaig called the meeting to order at 2:32 PM.

1.  CONSIDERATION OF MINUTES OF APRIL 8, 1998

The committee did not consider the minutes of April 8, 1998.

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

Washington Park Parking Lot Fund

Jennifer Sims, Director of Administrative Services, presented the proposed FY 98-99 Washington Park Parking Lot Fund, and referred councilors to the overview of this budget item. A copy of the overview is included as part of the meeting record. She answered committee members’ questions concerning the overview document.

Miscellaneous Funds

Craig Prosser, Financial Planning Manager, appeared before the committee to report on the Miscellaneous Fund budget. A copy of the document entitled “Miscellaneous Funds: General Obligation Debt Service fund, General Revenue Bond Fund, FY 1998-99 Fund Overview” was distributed to councilors, and a copy is included as part of the meeting record.

MERC Budget

Mark Williams, MERC General Manager, appeared before the committee to report on the proposed FY 98-99 MERC budget. A copy of the document entitled, “Metro Exposition-Recreation Commission FY 1998-99 Department Overview” was distributed to councilors, and a copy is included as part of the meeting record. A copy of a memorandum dated April 15, 1998 from Michael Morrissey, Senior Council Analyst, to the committee entitled, “Recommendations Concerning the MERC Budget” was distributed to councilors, and a copy is included as part of the meeting record.

Mr. Morrissey reviewed his recommendations concerning the proposed MERC budget as set forth in his memorandum. Mr. Morrissey said his recommendations will not affect the current budget process, but are recommendations that can be acted upon after the budget is adopted. Chair McCaig asked that the recommendations be considered by the Regional Facilities Committee at a future date.

Regarding the discussion about the nature of the agreement or “contract” between MERC and Metro, Chair McCaig asked that the executive officer draft a recommendation clarifying the relationship. That recommendation should be brought to the Council, either through one of the committees, or directly to the full Council.

Councilor McLain recommended that the recommendation language in Mr. Morrissey’s memorandum be incorporated into the budget note. Chair McCaig agreed that the language should reflect Mr. Morrissey’s recommendation No. 1.

Mr. Morrissey’s second and third recommendation were approved by acclamation.

Councilor Kvistad said MERC has a $6.5 million contingency, which is about 25% of the current budget. He said he has seen a real disconnect between Metro’s arts funding through the General Fund and what is a MERC function of working with the arts community. He said he would like to see the committee discuss moving Metro’s arts funding into the MERC budget, and funding it at a level of about $200,000 per year. He said the first $200,000 should come out of the $6.5 million contingency.

Chair McCaig asked Mr. Williams to comment. Mr. Williams said the $6.5 million is not MERC’s Contingency. Rather, it is a combination of MERC’s Ending Fund Balance and Contingency. He expressed concern with some of MERC’s Ending Fund Balances. MERC’s money is segregated by facility, and is not completely fungible. The pooled Capital Fund is interchangeable, but it is restricted to capital. The Operating Funds are specific to facilities. Mr. Williams said he is unsure there is enough to withstand any substantial downturn in business. He said there is not $200,000 to spare in MERC’s budget, and that MERC Commissioners have expressed misgivings at the manner in which MERC Fund Balances are being run down.

Councilor McLain said the committee has often had to deal with existing capital needs issues at MERC facilities in the budget process in the past. When the long-term funding discussion took place, there was a healthy list of basic needs at MERC. Without an analysis of capital needs, Councilor McLain said she was unprepared to support Councilor Kvistad’s motion. She asked Mr. Williams for more information on ending fund balances in future, and an update on the capital needs issue.

Councilor Kvistad said his proposal was just something he had thought about as he was on his way to today’s meeting. He said he does not believe he can get to the level of arts funding he wishes to achieve without looking outside the box. In spite of MERC’s budgetary needs, it is the only place he can find the level of arts funding he thinks is appropriate. If $200,000 is too high, he said perhaps $150,000 or $100,000 would be prudent.

Chair McCaig said it would be a blow to the budget process to incorporate this expenditure at this time without a closer examination of its ramifications, and suggested Councilor Kvistad’s concept be studied in greater detail in the coming year. Councilor Naito said she is interested in exploring Councilor Kvistad’s recommendation, however, she would not be comfortable doing so in the current budget process, given the lack of public notice. Councilor Washington said his second was intended only to permit discussion, however, he would be voting against the motion at this time. He recommended forwarding the proposal to the Regional Facilities Committee for further consideration.

Councilor Kvistad asked to withdraw his motion, and asked that his proposal be forwarded to the Regional Facilities Committee for consideration. Councilor McFarland, chair of that committee, agreed to place the item on the next committee agenda. Councilor Washington withdrew his second. Chair McCaig said a report from the Regional Facilities Committee should be forwarded to Council, and a recommendation by Council should be made prior to the beginning of the next budget cycle in October, 1998.

Chair McCaig said if the votes were there, she would have moved to delete the $75,000 from unexpended Support Services. She thinks the $75,000 proposal comes close to crossing over the line to being an inappropriate deal. Chair McCaig said she believes there is Council consensus to call for a broader discussion about at what cost to the government is Metro willing to make a deal with MERC for the services Metro provides. She believed the Council would be willing to accept the $75,000 deal, but councilors’ concern surrounding this agreement highlights the need for future discussions on the matter. She said the deal would reduce MERC’s cost of doing business with Metro, and that Metro already reduces MERC’s costs in other ways as well. It is not clear the government was fairly represented in this negotiation.

Councilor McLain agreed with McCaig’s summary of the conversation, and said the following question must be answered: By agreeing to the $75,000 is Metro giving MERC their fair share, or is it more of an enticement or incentive. This needs to be answered in order for the Council to have a true understanding the exact relationship between Metro and any jurisdiction or company or piece of Metro that may be under separate management. She hoped the budget note voted on previously will lead to this discussion in a proactive, pragmatic way. The minutes should reflect that the committee is very interested in the answer to this question. She said the $75,000 underspending was represented to the committee at two meetings in a row in two very different scenarios, and that anyone reviewing the minutes of those two meetings in the future would be very confused by the conflicting presentations.

Chair McCaig said Gary Conkling, MERC Chair, has assured her that the MERC board wants to work cooperatively with Metro, and that this can be a productive process over the next year.

General Fund Special Appropriations

Chair McCaig asked, and the committee agreed, to delay approving any special appropriations until it had also heard the presentation on the Growth Management Department budget. She said this will let the committee have the full picture with regard to how much money is available and how it might be applied.

Mr. Prosser gave a presentation on the General Fund Special Appropriations. A copy of the overview for these appropriations was distributed to councilors, and a copy is included as part of the meeting record. Chair McCaig distributed a copy of a memorandum from Mr. Burton to the Budget Committee chair dated April 14, 1998, regarding options for additional discretionary funding in the FY 1998-99 budget. Included in his memorandum was a potential savings of $25,000 in the Election Expense line item if not all of the councilors in outside elections win their races. A copy of this memorandum is included as part of the meeting record.

Mr. Prosser reported that the contribution from General Fund Special Appropriation to the Regional Arts and Culture Council in FY 97-98 was $50,000. The proposed FY 98-99 budget increases this amount to $62,500.

Chair McCaig opened a public hearing.

• George Bell, MERC Commissioner, RACC Board Member, appeared before the committee to speak in support of a restoration of funding for the Regional Arts and Culture Council to previous levels. He distributed two documents pertaining to RACC funding, copies of which have been included as part of the meeting record.
• Bill Bulick, RACC, spoke about the model for raising money for arts organizations that is outside of the government. He reminded the committee that Metro has signed an IGA with RACC to provide support for culture in the region.

Chair McCaig closed the public hearing.

Councilor McFarland proposed to fund this increase with the Council Office “scrounge” money of about $19,000, with the remainder to come from General Fund Contingency. She said she is impressed with the region’s arts organizations. She said they have reached out geographically to the whole Metro area, and have acted as a regional force. They have also made a great effort to include all segments of the population, thereby contributing to the livability and sustainability of the region.

Councilor Kvistad asked to delay action on his motion until all other proposed expenditure actions had been discussed.

Chair McCaig distributed a worksheet that set forth the identified shortfalls, needs, and potential uses for the available dollars identified in the proposed budget. A copy of this worksheet is included as part of the meeting record. She said some councilors expressed hope that there would be an excess of excise tax collected, however the worksheet points to an excise tax collection shortfall in the amount of $130,000. This will lead to the Beginning Fund Balance being $130,000 less than presented in the proposed FY 98-99 budget. She said it is important to be aware of this unanticipated shortfall before moving to appropriate money to arts and/or growth management.

Ms. Sims said two excise tax revenue pieces have been projected: the new excise tax revenue, and the Fund Balance carryover amount. She the $130,000 shortage, means that the $200,000 Unappropriated Balance will be funded at $70,000. She said the hedge against excise tax fluctuations, which comes from the Unappropriated Balance and Contingency has not increased, although excise taxes have increased. This means the hedge is now proportionately smaller than in previous years. Chair McCaig said this is partly because staff has become better at making accurate predictions. Ms. Sims said where the shortfall will really be felt is in the FY 99-00 budget, where the $600,000 gap becomes a $730,000 gap. The problem becomes worse the next time the budget is reviewed.

Councilor Naito asked about the merger between Waste Management and BFI, and the possible effect on Metro’s solid waste contract and revenue stream. She asked whether the merger will affect the size of Metro’s “cushion.” Ms. Sims said the merger will only affect the spending, not revenues.

Councilor McLain said in the last five years Metro has had more excise tax revenue than projected. The formula for projecting tonnage has become more accurate, however, historically the winter months are Metro’s weakest time of the year in terms of excise tax revenues. Councilor McLain said when considering the $130,000 figure, it needs to be recognized that staff has just changed the forecasting formula, and that those figures are for the winter quarter. She said although Ms. Sims may have already adjusted for the yearly fluctuations, because the projection method was changed in October, it is hard at this point to say we know what the $130,000 means. Councilor McLain pointed out that Metro has not used more than $25,000 from the Contingency Fund for any unanticipated budget amendment in the last five years, and she said there will still be a $70,000 level in that fund for a cushion. She said the committee is looking at short term fixes this year for needs identified by Metro, local partners, and art partners.

Councilor McLain then reviewed her memorandum dated April 13, 1998 to the Finance Committee regarding her proposed amendment to increase Metro funding of planning technical assistance grants to local government by $100,000, and to clarify through a budget note that Metro will utilize the public outreach program in the Growth Management Department budget to partner with local governments to maximize notification and public participation in the local planning processes related to 2040 implementation and urban reserve planning. A copy of this memorandum is included as part of the meeting record.

She said we know it will be hard to find money, and priorities for where the money will be spent will need to be changed and a decision will need to be made about whether to fund the expenditure from Contingency or Unappropriated Balance. She said the Contingency Fund needs to be analyzed to determine whether it is adequate to take care of a current year need. However, the committee should not assume that the Contingency Fund will be used for this purpose in the future. Discussion will still need to take place about future regional funding for infrastructure for the growth plan. Councilor McLain said we can take $100,000 from General Fund Contingency and still have an adequate fund there even with Ms. Sims new information. She said the committee needs to decide whether to take $75,000, or $100,000 from Contingency.

Councilor Washington asked Ms. Sims if staff was aware of the $130,000 shortfall prior today. Ms. Sims said they became aware of this shortfall as a result of a study of third quarter information that was completed yesterday. Chair McCaig said this is not an actual shortfall that needs to be back-filled, rather, it is the amount that is different than the committee’s expectations. Councilor Naito suggested using the term “revised forecast” instead, and Ms. Sims agreed this would be a good description.

Ms. Sims said the revised forecast means that the Beginning Fund Balance for next year will be less than budgeted. This is the result of an interest by the Council in having a more accurate forecast. Historically, staff has taken a very conservative tack with the tonnage. Historically, when we are at the point we are now at in the budget, an update has shown that there were more revenues than projected. By starting the process with a more accurate number we were able to estimate that we would have an 8.3% increase in excise tax for next year even though we are substantially lowering the tip fee. Now, the latest news is that we have been more aggressive, and the results are tighter this time.

Chair McCaig said General Fund Contingency is $100,000. She believed there is unanimous agreement to use the unused General Fund Contingency of $50,000 for arts or 2040 planning. There is currently $80,000 in the Growth Management Contingency. The proposal to take $50,000 from the fund would only leave $30,000, and does not have universal support. Staff is very nervous about this. Chair McCaig recommended striking this proposal from the list, and Councilor Naito agreed. Regarding the Growth Management transfer-- there is $194,000 for outreach, of which $25,000 is already allocated for local government. Councilor McLain said the transfer would more accurately reflect what staff anticipated would be an outreach effort to assist local jurisdictions with notification and outreach. She said the $25,000 is a kind of truth-in-advertising shift. Chair McCaig asked whether the action would work in Metro’s favor. Councilor McLain said it would be beneficial to Metro.

Chair McCaig said a $25,000 Lake Oswego Trolley allocation was put in the budget by Executive Officer Burton, however, it will not be taking place. Chair McCaig said the $25,000 trolley allocation, the $25,000 reduction in Election Expense, the unused Contingency Fund amount of $50,000, and the Council and Executive Office budget cuts of about $19,000 brings the total of available General Fund money that can be allocated to roughly $120,000. She said Councilor McLain is suggesting $25,000 from General Fund Contingency for $100,000, as well as a $25,000 transfer within the Growth Management budget. Chair McCaig said the committee needs to determine whether it is interested in backfilling any part of the $130,000 or leaving it alone. There is enough money available without using the General Fund Contingency of $100,000, if the money is split to fund the arts at $81,000, Growth Management at $75,000, and put $30,000 back into excise tax shortfall. This way everyone gets 2/3 of what it wants. Another option is to fund Growth Management at $100,000 and the arts at $100,000, by taking the resources that would have gone back to paying back the shortfall and applying it to those two places.

Councilor Washington asked if $100,000 is taken from General Fund Contingency, what amount will be left. Mr. Houser responded the amount remaining would be $269,284. Ms. Sims said that is also part of the cushion which, in combination with the Unappropriated Balance and Contingency for the General Fund, comprise the flexibility for absorbing any deviations in the excise tax revenues. She stated strongly that it would not be prudent to take money out of any contingency for this. Chair McCaig then distributed a chart entitled, “Contingency & Unappropriated Fund Balance as a % of Total Budget” a copy of which is included in the meeting record. Chair McCaig asked Ms. Sims to describe the chart. Ms. Sims said the chart goes back over several prior budget years and shows what the total budgeted amount was for excise tax, for Contingency, and for Unappropriated Balance. She said the total dollar value of the fund has increased, while the amount that is being set aside for the cushion is decreasing. Staff has felt comfortable with the cushion because they have refined their projection techniques, and because historically Metro has had excess revenues at the end of each year to carry forward. However, Metro is now right at the edge where the agency should not go any lower.

The committee continued to discuss the revised excise tax revenue projections. Ms. Sims said their projections are not straight-line projections, they have taken into account the Koalas, the seasonal variation, and other factors. She said she believed this is one of those times when councilors do not want to hear what she is saying. She said the projections are not the best news, and admitted there is a credibility problem because in the past she has always been able to come to say there is more money. However, in this case she said it does not look there will be more money. Perhaps by the end of the year, the weather will be great, there will be fantastic attendance at the zoo, and the $130,000 will be made up, however, at the current time, using tonnage projections, the $130,000 looks to be accurate.

Chair McCaig said from Ms. Sims perspective, the worst case scenario would be to fund programs by not backfilling the $130,000 and cutting the $100,000 out of Contingency. In scale, the least risky would to be not to repay the $130,000 without taking the $100,000 out of Contingency General Fund. She said you can get to the additional $37,500 for arts and the $100,000 for Growth Management. You would use the Unused General Fund Contingency for $50,000, the Growth Management transfer for $25,000, and the reduced projection of Election Costs which will reach $100,000 for Growth, the $25,000 Trolley reduction, and the $19,000 savings from Council, which gives $44,000 for arts, leaving an excess of $6,000.

With the approval of his seconder, Councilor Kvistad amended his motion as follows:

For the record, Councilor Naito expressed appreciation of RACC, and said she wished they could have funded the council to its full requested amount.

Chair McCaig noted there was $6,617 left in the General Fund that had not been appropriated.

Growth Management Department Budget

Technical Amendments

Mr. Prosser described the technical amendments to the proposed FY 98-99 Budget. He distributed a memorandum dated April 8, 1998 from Executive Officer Burton to Chair McCaig regarding an additional Regional Parks Department grant for FY 1998-99 that was not included in the proposed budget. He also distributed a memorandum and packet of technical adjustments to the FY 98-99 Proposed Budget dated April 8, 1998. Copies of these documents are included as part of the meeting record.

Mr. Prosser said the Parks budget needs to be amended to place the amount of $245,300 for a new grant to Oxbow Park into the Parks CIP.

Mr. Prosser then reported on the technical amendments to the proposed FY 98-99 budget. He said technical adjustments are noted, as well as carry over projects. He said the total amount of the amendments is about $19.7 million, which is unusually high. He reviewed these amendments as they appear in the memorandum.

Martin Luther King Jr., Statue

Councilor Washington proposed that the remaining money arising from cuts in the General Fund budget be donated to the construction of a Martin Luther King, Jr. statue in front of the Oregon Convention Center. The project has been in the works for almost two years. He recommended that $5,000 of the remaining $6,600 be contributed to the statue project.

Councilor Kvistad questioned the appropriateness of putting money toward a private venture. He did, however, agree it is appropriate to permit the statue to be placed at the convention center. Councilor McLain said she considered this to be another contribution to arts in the community, and an appropriate public/private venture for Metro to invest in. Chair McCaig said it would be highly inappropriate to take this action at this time because there has been no discussion about it, and there are many other interests already vying for this money. She said it is a worthy cause, however, she would not support the motion.

Chair McCaig said she was sorry to see the budget end on this note, and predicted the Council would be haunted by this decision. She reminded committee members of the upcoming TSCC meeting on Thursday, June 11, 1998, at 12:30 PM. She said a quorum of the membership would be required for this meeting. She asked councilors to confirm their attendance with Ms. Ray.

Chair McCaig thanked the committee for its hard work. Councilor Naito said she thinks the resulting budget is a tight one. Councilor McLain thanked Chair McCaig for her work as Budget Chair, and said this budget process was one of the smoothest in recent memory.

3.  RESOLUTION NO. 98-2599, FOR THE PURPOSE OF APPROVING THE FY 1998-99 BUDGET AND TRANSMITTING THE APPROVED BUDGET TO THE TAX SUPERVISING AND CONSERVATION COMMISSION

There being no further business before the committee, Chair McCaig adjourned the meeting at 4:30 PM.

Respectfully submitted,

Lindsey Ray

Senior Council Assistant

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