MINUTES OF THE METRO COUNCIL BUDGET & FINANCE COMMITTEE

Wednesday, September 13, 2000

Council Chamber

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

Members Absent:  Jon Kvistad, Rod Monroe, Ed Washington

Also Present:    Councilor-elects Rex Burkholder, Carl Hosticka

Chair McLain called the meeting to order at 1:36 P.M.

1.  Consideration of the Minutes of August 16, 2000 Committee Meetings.

2.  FY 99-00 Year End Preliminary Report (Complete at 9/26 Informal if Needed)

Chair McLain called Tony Mounts, Administrative Services Department (ASD) Manager and Jennifer Sims, ASD Director/Chief Financial Officer to the testimony table. Mr. Mounts reviewed Preliminary Fiscal Year 1999-2000 Fund Balance Report (a copy is included in the public record of this meeting). The audit should be completed by the end of October. Chair McLain clarified the fund balance projections and that the variance in the month-to-month figures was not as wide as it appeared. There was a definite process in place to keep track of anticipated revenue and expenditures. Councilor Atherton asked if the variance was within the normal range of projection variation. Mr. Mounts responded yes, it was only a variance of 1-2%.

Councilor Bragdon said it seemed like a big swing between $300k and the ending balance. He asked if assumptions or conditions had changed. Mr. Mounts said the difference came as a result of departments’ targeted savings per the request of the Executive office. Primarily these savings were accomplished by not filling vacant positions. The September projection reflected where Metro would be without action while the November projection reflected the actions taken. The difference between February and April were carry-overs in grants and projects that were dedicated revenues. The bottom line was roughly $.5 million undesignated fund balance in the General Fund. He continued with the Metropolitan Exposition-Recreation Commission (MERC) Operating Fund.

Chair McLain asked if MERC’s fund balances took into account the $10 million provided by Council. Mr. Mounts said no, he would address that in the section on Solid Waste. Councilor Park noted it provided the $10 million drop in the fund balance that was transferred to Portland Metropolitan Exposition Center (Expo). Mr. Mounts agreed that it was designated for the building of Hall E. It included the amount loaned from Solid Waste, but the full $10 million had not been drawn.

Rex Burkholder Councilor-elect, asked what the actual fund balance was. Chair McLain asked Mr. Mounts to check on it and get back to Mr. Burkholder later. Councilor Atherton asked the reason for the decline from the unaudited 1999-00 balance to the estimated 2000-01 balance. Mr. Mounts said the Operating Fund drew funds into their reserves to support the Oregon Convention Center (OCC) expansion. The budget included $1 million out of the Operating Fund as well as $4 million from the MERC capital fund. Councilor Bragdon asked if portions of the reserve fund went back to the City of Portland when Metro gave up management of Civic Stadium, and if it was reflected in these figures. Mr. Mounts responded that $400k was returned July 1, 2000 and would appear in the FY 2000-01 ending fund balance.

Mr. Mounts reviewed the Solid Waste Fund. Councilor Bragdon asked if the prepayment to STS was reflected. Ms Sims responded that it was. Mr. Mounts went on to discuss the Zoo. Chair McLain noted this year’s attendance in July/August were the highest ever. Councilor Atherton asked about the issue of maintenance reserves - a much smaller pending fund balance would be shown if bookkeeping was done in that way. Chair McLain added that the Committee had requested the Zoo develop a cleaner definition between what was capital and what was operational in their budget. It was not completely resolved to this point. She suggested that both operating and capital ending balance should be reviewed together in the Zoo budget. Ms. Sims said it had been an issue in the past and promised to get clarification for the Council. Mr. Mounts continued with the three central service funds, Support Services, Risk Management and Building.

Chair McLain asked what areas the savings to the funds came from. Ms. Sims responded a good deal came from leaving job vacancies unfilled. Materials and services that were delayed included training and conference attendance, as well as PeopleSoft upgrades. Chair McLain requested a breakdown of the Risk Management Fund. Mr. Mounts noted that building maintenance had been deferred along with debt service reserves. Chair McLain clarified the Planning Fund included both transportation and land use planning.

Councilor Park asked if the Parks reserve was still being drawn down. Mr. Mounts said the projection was to continue drawing the fund balance down; the Parks operation was not self-supporting at this time. Councilor Park was concerned about considering reserves as current revenue. He wanted to see how reserves was being drawn down when income was insufficient to fund a department’s budget. Mr. Mounts suggested this issue should be carried forward to the next meeting, September 27, where fund balances would be isolated and projected forward five years, based on assumptions that the current pattern of growth would continue. The focus of the discussion was to determine Metro policy on these issues.

Mr. Mounts reviewed the General Fund next. Chair McLain asked if he knew of anything in the General Fund that was impacted by other programs such as legal services. Mr. Mounts said there were a number of things on the horizon, including the potential impact of the Charter reform. Costs that impacted the General Fund included the open spaces bond. Transfers out were tied to the land banking program; now that this program was spending down he was not sure of the capacity of the General Fund or the Parks Fund to address these issues. Chair McLain suggested that thought be given to illustrating when major programs came on-line in specific years as part of the graph. The challenge was on how to maintain programs.

Mr. Mounts noted that information had been developed for Councilor Park on the mix of new programs as well as things transferred out of other funds into the General Fund that might be of interest to the other Councilors. Chair McLain agreed that both the information reviewed earlier in conjunction with the solid waste issue and Councilor Park’s proposal should be kept in mind.

Mr. Mounts reviewed what would be covered in the next Budget/Finance Committee meeting. It would include a review of updated forecasts and assumptions and forecast assumptions and the framework for development of the FY 2001-02 budget. Chair McLain said the recommendation from staff was to leave any unanticipated increases in the reserve account. She noted that this year’s budget notes included Council’s expressed desire to establish a balanced budget in the General Fund for FY 2001 and designate a portion of unanticipated increases in the fund be used to fill fund balance reserve needs. Also under the reserve cumulative effect, unanticipated revenues would go into General Fund revenue.

Ms. Sims provided a memo, Interest earnings on Open Spaces Bond Proceeds, in response to a question at an earlier meeting (a copy is included in the public record of this meeting). Councilor Bragdon asked about federal arbitrage regulations and limitations. Ms. Sims said that no more interest could be earned than the total sum the bonds sold for. Metro has a consultant to help manage this complex calculation. Metro invested in instruments that exactly matched so that there was little or no overpayment. Councilor Bragdon asked who managed this portfolio. Ms. Sims said Brian Williams was the new Metro investment analyst who had replaced the recently retired Howard Hansen. He worked in conjunction with the Investment Advisory Board.

Chair McLain asked if staff had encountered anything unusual in this last budget process. Ms. Sims responded she was pleased with how close the match was on General Fund forecasts, while she felt the OCC loan might have been calculated closer to the actual costs. Overall she was pleased with the results; there were no major shortfalls. Chair McLain asked which time frame was the most important for dealing with potential problem areas. Ms. Sims felt the earlier staff could identify potential shortfalls the better.

Councilor Park said he looked forward to greater delineation of programs beginning and ending, especially in Greenspaces. He asked how the General Fund had done first quarter. Mr. Mounts said the difference between budgeted and actual COLA was unanticipated, but believed the additional costs could be managed. Ms. Sims noted that Council had changed the spending level and Metro was managing to this flatter appropriation level.

Mr. Mounts said the Five-Year Plan would be projected at the macro level at the next meeting, September 27. Councilors could request more information about specific programs at that time for review at a future meeting. Chair McLain said Councilor Park’s point regarding a review of the detail and cost of property management for the properties acquired under the bond issue was an essential element the Council wished to review. The review should include detailing properties Metro had turned over, or hoped to turn over, to local jurisdictions for management, how much land was landbanked, how much was open to public use and the affiliated costs for each type of management. This would continue the discussion already begun on seeking revenue sources and the full cost to support the greenspaces program and the department. After preliminary review at Budget, the Operations Committee would look into program specifics.

Councilor Atherton suggested that a brief review might be in order for the Councilor-elects; e.g. handling maintenance reserves and replacements, greenspaces maintenance and possible new sources of funding for planning. Chair McLain felt Councilor Atherton had enumerated the major issues and noted that the Councilor-elects would be meeting with Council and Financial Planning staff for a thorough review of the past budget year and issues facing the Council for the next budget cycle. She thanked them for attending the committee meeting.

3.  Councilor Communications

None

Chair McLain adjourned the meeting at 2:36 PM.

Respectfully submitted,

Pat Weathers

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE MEETING OF SEPTEMBER 13, 2000

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

i:\minutes\2000\budget&finance/09130bdm.doc