MINUTES OF THE METRO COUNCIL

BUDGET AND FINANCE COMMITTEE REGULAR MEETING

Wednesday, May 22, 2002

Metro Council Chamber

Members Present:  Rex Burkholder (Chair), David Bragdon (Vice Chair), Bill Atherton, Susan McLain (arrived at 2:00 p.m.), Rod Monroe

Chair Burkholder called the meeting to order at 1:34 p.m.

1.  Consideration of the Minutes

2.  ORDINANCE NO. 02-940, For the Purpose of Adopting the Annual Budget for Fiscal Year  2002-03, Making Appropriations, and Levying Ad Valorem Taxes, and Declaring an  Emergency

Chair Burkholder opened a public hearing on Ordinance No. 02-940. No one appeared to speak. Chair Burkholder closed the public hearing.

Chair Burkholder opened the discussion on Ordinance 02-940A (a copy of which is attached to this meeting record), which amended sections 1, 5 and 6 of Ordinance 02-940. He explained that the first change was to section 1, which amended the total amount of the FY 2002-03 budget from $327,342,400 to $359,665,861. He then introduced Bryant Enge, Director of Administration for MERC, to explain the changes to sections 5 and 6.

Mr. Enge said that Metro had authorized a Local Improvement District (LID) obligation to construct a pedestrian walkway over the Steel Bridge and had now been assessed $204,545.45 for the improvements. In addition, he said that MERC was obligated to pay $109,119 for its share of a Local Improvement District to finance the Portland Streetcar Phase 1 Project.

The City of Portland offered the option of paying in one lump sum, making installment payments over a period of 20 years, or using a combination of the two. Mr. Enge asked the Council for the authority to use the installment contract option, which would provide MERC with the flexibility to choose the way it paid its obligation. He said the matter would be presented to the MERC Commission in June.

Casey Short, Financial Planning Manager, said that if the Council approved paying on installment rather than in one lump sum, there would be a technical amendment to the 2002-03 budget designating an amount to go into debt service to pay next year’s portion of the assessment.

John Houser, Council Analyst, reminded the committee that the Council had already passed a resolution that sent the approved 2002-03 budget to the TSCC. He said that the committee was now passing out of committee the annual budget ordinance that the Council was required to adopt each year so that this document would be available for Council action following the TSCC budget hearing on June 6. Passage of this ordinance would allow it to be placed on a Council agenda after June 6 for final action to adopt the budget for 2002-03.

3.  Resolution No. 02-3169, For the Purpose of Amending Council Policy Regarding the Management of the Regional Parks Fund

Pete Sandrock, Metro Chief Operating Officer, said that in 1994 the Council adopted by resolution a policy that dedicated excise tax from parks facilities back to the Parks Department. He explained that the purpose of Resolution 02-3169 was to rescind that policy so that the excise tax generated on parks facilities would remain in the general fund to be allocated for general program use throughout the agency. This action would also create consistency in the way Metro handled excise tax in all departments. Because of the $1/ton provision in the 2002-03 budget, there would still be a net increase in resources to the Parks Department of approximately $1 million.

4.  Third Quarter Financial Report

Casey Short reviewed the four sections of the Third Quarter Report (a copy of which is attached to this meeting record): operating funds, capital funds, excise tax, and spending vs. appropriations.

Chair Burkholder asked why Metro’s operating fund revenues are only at approximately 65% of the amount budgeted, since the fiscal year is three quarters complete. Mr. Short answered that there are a number of reasons revenues are less than 75% at this point: hotel/motel receipts have not yet shown up for the third quarter; there is a reduction in real revenue at the Oregon Convention Center; and the third quarter is generally a low revenue period for weather-dependent operations such as the Parks Department and the Zoo. Mr. Short added that although he doesn’t expect to get all of the revenue budgeted for the fiscal year, the shortfall should be taken care of with fund balances and underspending.

5.  Committee Work Plan Review

Chair Burkholder outlined the three components of the committee’s work plan review: 1) review the FY 2003-04 budget process; 2) develop financial policies; and 3) look at long-term funding issues.

Budget Process

Casey Short reviewed his May 8, 2002 memo to the committee (a copy of which is attached to this meeting record) and said that the purpose of the discussion was to have the committee begin to develop a plan for the FY 2003-04 budget process and determine what decisions will need to be made and when. He said that, assuming a similar schedule to FY 2002-03, the budget manual would be issued in early October and departments would submit their budgets to Financial Planning in November. Final budget decisions would be made by the budget officer in late January or early February, and the proposed budget would be submitted to the Council in March. He said that the committee needed to determine no later than September when it wanted to see the proposed 2003-04 budget, because that decision would affect many other phases of the budget process. He added that the Council would need to determine whether the Chief Operating Officer or the Council President would propose the 2003-04 budget. Councilor Bragdon said that the Governmental Affairs Committee had been discussing the issue of who the budget officer would be.

Chair Burkholder asked for ideas on how the committee should poll the Council in terms of what programs and projects should be added, maintained, reduced or eliminated. The committee would need input prior to September, which would be the end point of that portion of the process. Mr. Short added that the committee would have to consider future initiatives, ballot measures, funding measures, or program enhancements as part of that discussion.

Councilor Atherton suggested that the committee identify these issues as soon as possible, produce a list, and ask staff to create an issues and options paper on each issue to present to the committee prior to the retreat. John Houser, Council Analyst, added that it would be helpful for Council and Financial Planning staff to work together to produce a list and then get feedback from the committee on what should be added to or deleted from the list.

Financial Policies

Mr. Short said that he was ready to begin developing a set of comprehensive financial policies for Metro, which would be added to the Capital Asset Management Policies already adopted by Council. He talked about the importance of having codified policies in areas such as debt policy, creation and/or elimination of funds, appropriate fund balances, etc. The first step in developing these policies would be to survey existing policies, compare them with best practices, and determine where the gaps are. The policies would be brought to the Council for discussion and hearings and targeted for adoption in September.

Chair Burkholder said that he wanted to be sure that there was a complete list of policies before the actual writing was begun. Councilor McLain pointed out the importance of assuring that these policies are consistent with Council actions in other vision documents.

Long-Term Funding

Chair Burkholder reviewed a list of long-term funding areas enumerated in a memo from Presiding Officer Hosticka dated May 8 (a copy of which is attached to this meeting record). The committee added the following items to the list:

•  Expo Halls A, B and C

•  Global approach to excise tax issues within agency

•  PERS and pension funding

•  Metro health care policies

•  Performing Arts Center funding stabilization

Chair Burkholder said he was bringing these issues forward because the committee needed to look at them in context with each other prior to deciding which ones to pursue. He said the issues would be discussed further at the next Council Informal meeting.

6.  Ordinance No. 02-943, For the Purpose of Amending the FY 2001-02 Budget and Appropriations Schedule Transferring $200,000 from Capital Outlay to Operating Expenses and $554,077 from Contingency to Operating Expenses in the Zoo Operating Fund, and Adding 1.0 FTE for a Budget and Finance Position; and Declaring an Emergency

Chair Burkholder opened a public hearing on Ordinance No. 02-943. No one appeared to speak. Chair Burkholder closed the public hearing.

Kathy Kiaunis, Zoo Deputy Director, explained that because the Zoo is dependent on attendance for revenue, which in turn is dependent on weather, it is necessary to adjust the budget at the end of the fiscal year. She said the Zoo anticipates that next year’s beginning fund balance will be approximately $50,000 to $100,000 in excess of predictions, even after transferring $554,077 from Contingency to Operating Expenses.

She explained the factors which made the adjustment necessary, among them higher-than-anticipated utility bills; an increased demand for education programs; the creation of the butterfly exhibit which will not generate revenue until FY 2002-03; and roof repair and replacement costs.

Last, she said the Zoo was requesting 1.0 FTE for a budget and finance position to take the lead in developing the budget, working on the zoo business plan, and managing the CIP.

7.  Councilor Communications

There were no Councilor communications.

There being no further business before the committee, Chair Burkholder adjourned the meeting at 2:45 p.m.

Prepared by,

Claudia Wilton

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE MEETING OF MAY 22, 2002