Budget Review Commission - February 28, 2025

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we are um going to call the meeting to
order
now this is the February 28th meeting of
the budget review commission and I'll
ask for a roll call of
attendees can you hear
me and you want to know if I'm here I
said we're going to call the meeting of
February 28th budget review commission
to order now and I then requested a roll
call um chair David Smith pres Vice
chair Daniel schwier present
commissioner Carla here commissioner
Brad Newman here commissioner Jim ransco
here commissioner Sharon sites here and
commissioner Mark Stevens
here the uh first comment I'll make is
that we welcome public comment and
usually I read boiler plates I can have
three minutes
and please be gracious and whatever but
you all know the rules so if you want to
make comments the cards are over there
and that's all we have to say on that I
think um the second thing I'd like to
mention uh just as a clarification
uh before we get into the regular
agendized items is the members up here
have from time to time made requests for
information and the answer is if it's
not immediately available we'll get back
to you I would like for the first agenda
item of each meeting to be automatically
agendized to cover whatever open items
there were from a prior meeting and and
maybe it's two or three meetings hence
that we get the answers to some of the
questions but
if there's some that require
presentation um let's reserve a time for
doing that if we
can and I don't think I have to vote on
that I can just decree that right with
all the power vested in
me
um so then on to the agenda the new
business uh discussion of business
policies and Sonia Andrews the city
treasurer Chief Financial Officer
will present the city's budget related
Financial policies
for our
discussion um I think in that regard I I
want to understand um Sonia you also
gave us uh the the financial policies of
the city in their
entirety will we be going into that some
as well okay very good carried on good
thank you chairman I'll wait for the
presentation to come
up you should have in your packet the
set of uh the entire uh comprehensive
Financial policies for the city it's 27
pages
long and as we go through each of these
slides I'm going to highlight some of
these policies I'm not going to read all
27 Pages or every you know uh policy but
please uh let me know if there's any
specific policy you'd like to discuss
further otherwise I'm just going going
to highlight for you some of the more um
uh policies that remain to our uh budget
so next
slide so the first set of policy policy
number one relates to fiscal planning
and budgeting it pretty much um talks
about all these items that I've listed
on the slide in terms of setting what
our budget period is our budget adoption
a budget basis and so on so forth the
ones that I would like to highlight for
you are is policy
1.05 where in our policy we do promote
long-term strategic thinking and
long-term Financial forecasting as part
of our budget process The Five-Year
forecast identifies revenues and
expenditures that are anticipated to
ensure Financial sustainability over the
5-year uh planning period I also want to
point out policy 1.07 related to a
balanced budget the balanced budget
policy relates to um making sure that we
have a balanced budget in that we do not
use one-time non-recurring sources to
fund continuing recurring uses or use
external borrowing for operational
requirements so the budget will
incorporate the best available estimates
of revenues and expenditures to
accomplish
that I also want to point out um policy
1. 9 with respect to contingencies a
policy does provide for uh contingencies
to address unanticipated increases in
Service delivery costs and unexpected
needs that may arise throughout the
fiscal year and the contingency amounts
can only be used uh and expended upon a
separate Council approval so Council
approval is required if we are to uh if
the department wants to use contingency
funds we will have more discussion of
contingencies in our uh next future
items on this agenda so I will um move
on from there the other um budget
related policy I wanted to point out is
1.10 of budgetary controls in our policy
we do control our operating budget um
via Department fund and general account
classification and the general account
classification is primarily Personnel
versus non-personnel category
and for the capital budget our budgetary
control is exercised at the project
level so if a department wants to move
budget Authority from one project to
another project that requires city
council approval if we want to move
funding from one Department to another
department that requires city council
approval and likewise if we want to move
budget from a non-personnel category up
to a Personnel or vice versa that that
requires city council approval so that's
what we mean by budgetary level
control um the next uh policy 1.11
relates to budget adjustments amendments
to our budget so requests for amendments
within the same Department within the
same fund and within the same uh general
account classification requires the um
Department director and City budget
director approval so those do not
require Council approval if it's within
the same Department within the same um
classification and within the same fund
so for example the water fund if they
want to move um some items from supplies
up to Contract Services it's within the
same Department within the same fund
within the same classification they just
need the director approval and the
budget director approval they don't need
uh city council approval what require
fire city council approval is any
transfers of budget appropriation
between funds between departments
between general account classifications
between capital projects and then also
use of contingencies and
reserves then the uh staying on the
policy number one for fiscal planning
and budgeting we also have a policy
related to budget deficits uh policy
1.12 a deficit is if if we project a
deficit during the fiscal year we will
take the necessary steps to reduce the
expenditures and or increase revenues
before considering using fund balance or
reserves to to um um address that that
deficit um and then uh policy
1.13 relates to unspent Appropriations
so at the end of the year if there's
unspent budget dollars and unspent
budget appropriation
those go into the fund balance of the
fund and it can be carried over to be
appropriated in the next year through
the budget process and to be authorized
by Council as well so what we're saying
here is that our policy does not
automatically allow departments to carry
forward their unspent uh unused budget
Authority they have to request the use
of those unspent dollars again in the
next budget cycle commissioner Carla has
a question yes going back to the
previous one
1.12 um if it there's cost overruns if
it's going to cost more what is the
existing process within the department I
mean does it as um commissioner Steven
said yesterday does it have to reach a
certain level that it's going to be over
and then it goes up to a higher you know
supervisor or I mean how does the
current process of controls on that
actually work okay um if it's within the
general
classification within the department
within the fund the Departments do have
the discretion to go over budget if they
are under budget in another line item so
they offset if their budget is is going
to exceed
the general
classification fund Department then they
have to get Council approval if they're
looking to obtain budget Authority from
another fund or a non a different
classification so we do monitor the
budget on a monthly basis we look at
their budget and actual we do the budget
department works with the Departments
you know in the operating departments to
project and identify if there's going to
be any budget overages and if those
budget overages can be absorbed within
their own department or if it requires
Council approval or use of contingency
or moving of some other budget dollars
to
address city manager I think wants to
chime in here thank you Mr chairman um I
just wanted to point out as I understood
that question is compared to to the
discussion yesterday I want to point out
the difference between the capital and
the operating and so as I heard
yesterday some of the discussion was
primarily as the agenda item was more
Capital related this operating related
uh and then also maybe at some point um
the treasure can discuss how we they
take savings um on an ongoing basis when
there's unspent dollars within uh the
operating piece so a different different
kind of triggers and different measures
on the capital side so just wanted to
point out those two differen thank you I
just wanted to understand both of them
to see what controls are in place
currently thank
you and before we go on commissioner
Stevens has a
question uh thank you just drilling down
a little bit on that I'm a department
director and I've got some unfilled FTE
positions are going to cause me to go
under budget I also have additional
needs of supplies in my area or small uh
Capital expense Capital items to
purchase if I understand your um 111
right I
can't without uh okay if I do if I
decide I'm GNA fill a different FTE I'm
not I'm going to go under with one FTE
but I'm going to hire a new person all I
need is budget director's approval for
that but if I want to say hey I'm going
to come under an FTE I want to move some
of my people budget over to supplies
that would require Council approval is
that
right that is correct any movement of
budget dollars between the major
classifications of expenditures requires
Council approval okay and do you have
some kind of dominous threshold or
something on that I didn't see that and
they're like because you're not gonna be
going to council for $500 or are you is
it that strict that is correct and
usually for $500 they should be able to
find savings to absorb that so we would
not we would ask them to do that we
would ask the Departments to do
that I realize you're uh probably going
to March us through the financial
policies and more or less this topical
order um and should we chime in with
specific questions from the financial
policies themselves or wait for this
overview to be finished or what is your
pleasure
I I think it would help if I go through
the policy in its entirety for like
policy one I just completed that and
then you can ask questions related to
policy one and then I can move on to
policy two that might be
helpful all right so finish policy
one so if there's no further questions
on policy one we can move on to the next
slide well no I I
thought I I meant you should finish your
review of policy one and you've done
that so now we have some questions um in
the financial policy number
1.04 you talk about the uh requirement
for performance
measures and are these performance
measures part of the report to council
at the end of the year and do they
measure things like efficiencies within
the department and ways we found to to
do three jobs with the with two people
or what's meant by this or is that just
a gratuitous statement that we have
performance
measures um the city does Track
Performance measures uh we do also ask
each department to develop performance
measures in terms of their uh targets
and the goals for our budget and I think
the city manager's office also has a
Personnel that does look at performance
measures and provides some reporting to
the
community yeah Mr chair I would just add
as as the Sonia said there we uh track
this and uh have a reporting mechanism I
think it's still evolving and so we're
looking as it relates to particularly
financial pieces to add certain elements
I also would point out through the gfoa
they trigger uh have some requirements
for the award uh or the recognition
there and so it really flows through
General plan uh strategic plan a
budgeting policy and then gfoa uh and
all of those working together generate
the
QPR my reason for asking is that I know
that as we uh make whatever
recommendations we might make to council
we'll probably have um a suggest that
they have a more robust U reporting
mechanism to
evaluate in instituted deficiencies in
the organization um so we can see is it
is it always just hiring more people or
do we actually figure out a way to get
along with fewer people in some
places um while I have the microphone
here and realizing now that we're going
to go through these Financial
policies topically on the screen but in
detail with what we have as our
handout uh I would like to refer back to
uh your opening comments
um uh when you first of all you made the
comment about we're striving for
sustainability and I know that is a hot
button with many people up here on the
on the Das and it is and we're getting
spun up for that by our respective app
pointers who are interested in
sustainability
but in the introduction to the financial
policies the detailed document in P
paragraph and it says we're going to try
to take care of uh better service and
worldclass community and all that sort
of thing including provision and
maintenance of public
facilities
and I will be curious as to how we
actually provide for the
maintenance uh of public facilities
um because that's again I think
something that many of us feel we have
not as a city addressed adequately in
the past
so keep that in mind as we March through
this
policy I'll let you get back
to policy number
two okay moving on to policy two our
policy two is uh pretty much most
dedicated to uh reserves and fund
balances we do have a presentation on
reserves and fund balances in uh later
on in the item so I won't spend a whole
lot of time on this policy other than
just to let uh the audience and let the
Commissioners know that we do have an
operating Reserve policy for the general
fund of 20% of operating uses excluding
transfers out and um Debt Service we
also have an emergency reserve of 5% in
the transportation fund we have an
operating reserve requirement of 10% and
then the new park and preserve tax funds
we are requiring a 20% Revenue
stabilization
reserve and our policy also calls for uh
reserves in our Enterprise funds for
water and water Wastewater funds of 25%
Aviation fund of 25% in solid waste fund
of 15% we also have Debt Service
reserves of 10% for The geod Debt
Service that is a uh State uh limitation
that we can only carry 10% of reserves
for the Geo bonds and then for the non-
Geo bonds the excise tax bonds we carry
a minimum of 25% of Nick's Year's Debt
Service as a Debt Service Reserve in our
risk Insurance Fund for risk management
of liabilities and workers comp we use
an Actuarial firm to calculate the level
of reserves and the loss trust fund
board has adopted a 80% confidence level
in terms of the Actuarial um projection
of um uh Reserve
requirement and
um I think that's all I wanted to say
about the reserve policies if there's
any questions on
that uh I have a question and Others May
as well but if I look in this category
the specific policy number
2.06 which is the asset replacement
reserve the policy says an asset
replacement Reserve may be considered if
needed do we have this again goes back
to my maintenance
question I don't see a reserve anywhere
for maintenance and repair of assets and
perhaps it would be here but this is
only it may be considered if needed as
opposed to a finite
policy
um chair Smith and Commissioners some of
the funds do carry an asset replacement
Reserve so for as example for our Fleet
fund we do have uh future Capital
replacement reserves I think our uh
water and wastewater fund also has some
future maintenance uh future Capital
Reserves
um the uh Stadium fund has some future
Capital replacement
reserves um solid Solid Waste fund also
has some future Capital replacement and
maintenance reserves so it's specific to
the different funds our Aviation fund
also has if I can interrupt you I'm I'm
aware that the you know we provide for
replacing the cars and so on and so
forth uh I'm really talking
about the things that we've been talking
about The Replacements and res uh
repairs that need to be done on roads
and
buildings
um the major assets I'll call it um in
the general
fund my point is this if we don't set
aside money for doing maintenance and
repair and have some Reserve to draw on
to do those then they never get done and
that may be what we've encountered for
the past few years city manager has
comments thank you Mr chairman um what I
might also submit here I concur with
your thoughts and I introduced uh a term
yesterday or a process or method that I
previously used that we may want to
consider I called it operating Capital
um and I I may use a small example of
let's just say a playground and maybe a
a a small playground element that
wouldn't be more of a significant
Capital project rise to that level and
what I have seen before is you put those
smaller elements on a life cycle within
uh it's not exactly operating it's kind
of a little bit in between the capital
and a little bit between the operating
piece but it has a life cycle let's just
say hypothetically some small play
element has a 20 years you put that and
you develop a plan and then you can
either towards the tail end of that life
cycle start to fund it or do it
incrementally depending upon the length
of of that life uh or the cost of that
and so we have been starting that
discussion internally as we're building
the 25 26 don't know that we would be
able to implement that for next year but
I think that type of process could
address uh your point my second uh point
that I may add uh to address this topic
but then also goes back to the previous
discussion about staff I from my
observation there has been so much
downward pressure or cognizant of not
adding new staff there is a direct
connection between what I would refer to
as minor maintenance uh and if you don't
handle that minor maintenance with staff
and when you get spre spread too thin
then that ends up being a larger Capital
uh deficit that you have to deal with
the second item that I I'm May introduce
related to policies which the agenda
topic here again there's so much
downward pressure on staff uh numbers
but there's still a lot of work that has
to be done so the alternative path has
been
contract and if you remember back to the
initial slide uh that Sonia introduced
on the labor piece uh from a new lens A
New Perspective that I bring here the
Labor uh portion of the pie was smaller
than I'm used to so then how is this
work being done it's being done through
contract labor and that's somewhat of a
philosophical uh discussion or debate
but what I might also submit as a policy
there could be a trigger where we do
some type of analysis so hypothetically
some dollar threshold if we're
Outsourcing to a certain dollar amount
that analysis is performed to see if
that could or should be handled
internally versus Outsourcing and I will
tell you uh that in a good number of
instances and particularly recently we
have seen re large cost increases on
those outside contracts and the inside
performance is not moving at that level
so something to be mindful of uh as we
evaluate uh those two and all that
interplay thank you Mr chairman
well it it
highlights what I will continue to
highlight through these discussions in
the coming weeks and that is that we
have to have an affirmative program for
maintenance of assets and you mentioned
the the pavement conditions yesterday in
our meeting the PCI indicator and how it
is
deteriorated um commissioner Carla could
certainly talk about the deterioration
that occurred in the Parks leading to
the voter initiative to
create a separate dedicated fund to take
that pro project over um so it is a
matter of concern to all of us up here
um and in fact commissioner Carla has
requested to speak thank you um city
manager Kon I like what you were saying
about and and looking at that and I
actually hope that that may turn into a
recommendation or a work for recomend
Commendation for next cycle because it's
not just the streets it's not just the
parks in the protect and preserve task
force we had Arts come to us and say we
have all this wonderful art we don't
have a fund to maintain it so we have
these beautiful pieces that are falling
apart and my question follow-up question
is who makes the decision about whether
or not a department has a fund for this
minor maintenance if you're calling it
that and how I mean could we pursue that
the city has an actual policy where
everybody who has something that's a
city asset you have to have a fund to
maintain
it uh Mr chairman and uh commissioner I
think that could be an area where a
policy recommendation is made uh because
as I spoke about yesterday uh
maintenance is takes a lot of discipline
and the way to enforce that discipline
is through a policy I think you're
looking at a few staff members that have
that discipline but I think uh for the
sustainability to use that word and the
longevity that's where you tie it in
with your policy I think the balance
would be to not have I I think a maybe
I'll use my interpretation of one of the
Commissioners words yesterday kind of a
profit Center and so we have to be
mindful of not having all these I'll use
the bad word in finance it's called SL
funds or something we don't want those
but we still need to have money set
aside for ongoing maintenance and
reoccurring maintenance uh and
particularly if you don't do that on a
regular basis that large number that is
eventually coming so I think as staff we
could put together a couple thoughts on
maybe the mechanism that might drive
that which would be a balance between
allocating some funds but not some
dollars not to use the other funds uh in
budgeting but dollar amounts but not
have 20 different ones if you will so
some opportunity some recognition of
this and come back with some
recommendations and maybe you just set
up a new Department of Maintenance
without any FTE of course but
uh commissioner
sites thank you um it's I'm on a
different topic could you go into well
let me say it this way as I read this
reserves could be tapped first and then
contingency or could you explain the
difference between reserves and
contingencies how they can be used
differently or
similarly yes thank you I can really
quickly do a high level because we do
have a full presentation on reserves and
contingencies which I will go into a lot
more detail but in general the
difference between reserves and
contingencies is that reserves are for
extraordinary AR events that are not
part of your normal operations so for
example a significant catastrophic event
that occurs or a major recession where
revenues fall off and we need to dip
into those reserves to cont continue and
maintain our core services to the public
whereas contingencies are for
unanticipated um unexpected expenses
that come up in the normal course of
operations so for example we had a
larger than normal storm damage we
didn't budget for and so or maybe
there's a purchase that we didn't
anticipate that we need or some
expenditure like excess overtime that we
didn't anticipate but they're not
extraordinary events and they're not out
of the ordinary so we would use uh
contingencies for those thank
you and commissioner schwier on some
point maybe not this one but uh no just
going back back uh chairman to your
comments about the uh the Deferred
maintenance on things and I just want to
be supportive of the direction the city
manager taking uh during our preserve
and protect task force as Carla
remembers I was pushing hard to get a
little bit of money to protect the
public art that is in the public right
of way as part of that uh we could never
come to agreement on how to do that but
I am strongly supportive of the
direction you're taking
that's all the request to speak so back
to
you let's move on to the next
slide so our next uh policy number three
relates to expenditure management a lot
of these policies are uh repeats kind of
the earlier policies in terms of our
budget level control and in terms of the
council required approval process for
moving uh budget Appropriations one of
the ones I'd like to highlight is 3 01 C
where if there is a midyear um budget
adjustment for any um new ongoing
programs that is initiated outside of
the annual budget process that that
requires the city manager approval as
well as Council approval meaning the
Departments cannot just start a brand
new program in the middle of the year
that is not has not been uh budgeted for
without proper approval
um we also have in uh 3.01 D what we
call position control meaning that
through our budget process if we uh
approved 2700 full-time equivalents then
that is the total number of full-time
equivalents that we are authorized to
have so if there was a need for
additional um new positions it either
has to go through the new budget process
or we have to give up uh a position in
order to um uh pay for a new position
within the year so we cannot exceed that
total number of FTE that's approved
through the budget process so that's
currently our our
policy
um the other policy is 3.01 under health
benefits our policy is that we would um
administer our health benefit plan based
on in order to contain costs B based on
a cost sharing between the uh employees
and the city and currently our um health
and uh benefit plans are about a 75 25%
split 75% the city and 25% employees
more or less I think it's different for
uh the dental
plan um and then uh wanted to point out
3.02
see with respect to uh funding capital
projects our policy is to in order for
us to put a capital project into our
budget we will ensure that we have
funding for the entire project not just
the first year of the project so we will
make sure that we set aside funds to
cover the entire project if it was a
multi-year
project um and also one of our polic
still under the and this and this one
you just referred to
um also insists that we will have future
operating and maintenance costs
associated with the capital will be
approved by the council so there is some
intent at the very outset to provide for
maintenance and
again somewhere along the line on many
of the assets it seems to Fall by the
wayside but
um absolutely so so uh yes I was going
to mention that so that policy also uh
requires us to ensure that future
operating and maintenance costs
associated with the new capital um uh
project is uh forecasted and included in
our operating budget and our five-year
financial plan as well um also any
unspent funds for inactive projects or
completed projects will revert back to
the fund for which the original funding
Source came from so we do not um hold uh
unspent or unused Capital dollars in our
uh capital
budget or un unneeded
dollars um in policy 3.02 e the pay as
you go our policy currently requires
that we um pay a minimum of 25% of our
Capital Improvement plan through pay as
you go basically cash funding that is to
minimize our debt and make sure we don't
just issue debt for uh the entire
Capital Improvement uh
program um also we have a policy in
terms of cost increases for capital
projects where if cost to a capital
project increases by the greater of 10%
and $1 million that that increase um in
terms of whether it's an increase in
scope or other cost increases will need
to be presented to council and receive
Council
approval I have a request to speak from
commissioner Carla uh yes going back to
what you just read about the fact that
in the policy we already have something
in the policy that says you have to when
it comes to Capital you have to account
for future
maintenance so this may be a dumb
question but looking at what we just had
to do for parks and looking at what art
says and our roads where's the money
going I mean if it's already budgeted in
there and it's a requirement that it
must be budgeted in there how do we end
up with having to make up for 30 years
of parks maintenance so I think that to
answer that question how we do that
right now is so let's take a let's take
a fire station for example so when we
have a fire station in our Capital
Improvement plan we make sure that the O
the operating impact in terms of the
Staffing required to uh staff the fire
station the custodial cost the
electricity cost and all those costs are
what we consider the operating impacts
that we make sure that our operating
budget can fund we're not going to build
a fire station and leave it empty
because we didn't consider the fact that
we have to pay for the staffing and the
electricity and all the cost but what I
think uh we were referring to earlier on
in terms of Are We funding the um future
maintenances as this fire station gets
old are we properly accounting for the
replacement and the repair and
the depreciation of the asset correct
the depreciation of this asset and so
this policy doesn't address that this
policy addresses the operating impact
like we're not going to have an empty
fire station we're going to make sure
the operating of this fire station is
properly forecasted and budgeted for
every Capital project but what I think
chair Smith is making a point of is what
about the future deterioration of this
facility are we properly uh budgeting
and accounting and setting aside funds
for that okay thank
you um I'll pick up on what she was
talking about
here because in fact the financial
policy does say future operating and
maintenance costs um and I don't think
any of us are quarreling with the fact
that you have a budget put together that
provides that we're going to have the
proper Personnel to the man the station
and you know heat light and water and
all that sort of thing but it's the
inclusion of the phrase here maintenance
costs and I think commissioner Carla is
asking if we actually have built parks
in the
city and provided for the maintenance of
those
parks that why did the protect and
preserve task force find them in such
shape as they did in their studies
requiring um remedial
taxation I might introduce a ter and I
obviously newer to the community so
wasn't a part of that lengthy discussion
but I might introduce use the term here
replacement so let's just use the park
when we one could interpret the
maintenance that we would mow the grass
and pick up trash you know that that and
so therefore one could argue that that's
meeting the the obligation where it
needs to go above and beyond is really
the replacement and just use if you have
a play area and then let's just say the
play area has a 20-year life cycle one
of the challenges and let's just say
it's going to
be hypothetically $20 million so do you
start to put uh together a million
dollars for for 20 years and I will tell
you why we don't do that is for f for
the first 15 years you've got 15 million
sitting here and then you have all these
other needs so you it become and I've
seen something comparable to that what
happens is that's your go-to then and
you never end up with the funding
because you don't have the luxury of
just putting extra money in all these
different accounts
just accumulating for the life cycle so
that that's the trickiness is is is
planning for it putting it aside and
also it's probably more challenging when
it has a longer life cycle so let's just
say you you acquire something a car is
is much easier you know it's going to be
five or six years just using that as an
example so you start from day one with
that replacement when you have something
20 30 years that becomes a little more
challenging on setting this side dollars
from day one so I think one could argue
in some areas and and and again not to
confuse with the the specific
discussions that were had at a community
level but generally speaking I I think
uh when I think of the maintenance it
could have been met and a fairly minimal
it's that replacement of those more
significant infrastructure
elements I have several other speakers
that want to chime in but if I can I'm
going to take commissioner Carla out of
order because this may be still on the
same topic right I I I just would like
to say I don't want to make it sound
like I'm downt talking the parks
department because we have a wonderful
parks department and a wonderful Park
system but somehow in the process what
you just talked about I mean and who
knows over the years maybe every time
Parks came forward with their budget
they did try and set aside that but
because there are so many things
competing for money in the general fund
you know they were told no you can't
have this you can't have this so by
virtue of attrition it all just went
into another project so I just would
like to reiterate that I hope as one of
our recommendations coming from this
group with your help will be a recommen
policy recommendation to address this
issue so thank
you commissioner
Stevens uh yes I'd like to uh refer to
uh 302f which actually touches on the
future agenda item we have on looking at
increases of 10% and $1 million I think
it's important that we understand
exactly how that process works and when
the identification takes place so for
example if there's a contract that
starts at $10
million and all of a sudden it comes to
the project manager's attention that
let's say it's a scope increase that
it's a scope increase increase of
800,000 at that point do they do
anything or does the project manager get
to approve it and then if a subsequent
one for 400,000 happens is that what
triggers the uh 1 million threshold or
10% so it's h when do you report as
things are identified and who who spots
it who reports
it so whenever a project goes over
requiring additional budget dollars it
has to come to the budget Department in
order for us to approve additional
dollars and at that time we will remind
the department of this policy and we
will then prepare a um report or
presentation to council so what will
happen is if I'm the project if I'm the
department or project if I'm the project
manager I guess the minute I see the
contractor says hey Mark we need another
$500,000 for whatever reason could be
inflation could be something the
contract permits could be an overrun
could be uh acts of God that are
permitted in the Contra whatever it is
uh before I can go ahead and have that
authorized I then have to come to the
budget director and have the budget
director decide who has the purview to
authorize that work to be done like how
does that work mechanically yeah so it's
not as cut and dry as that because some
of these projects have a lot of buckets
of dollars that can be used so if uh the
if the project is in progress ress that
overage could be could they could take
that overage from a different bucket
let's say design and Engineering or
contingency or um construction there's
different buckets that they may be able
to use but overall if the project is
going to be over by 10% or 1 million
they will have to um either through a
mid-year budget adjustment or a yearend
budget adjustment requests additional
dollars and it's at that time that we
say okay you need to explain all this to
council and have Council approve that
however within the bud uh Capital
project if there's available dollars to
absorb that one increase then they they
go ahead and proceed okay I'm almost
done and I looked at all these policies
and this is my only other question so uh
if I were to uh like you're putting
together something for us on the other
agenda item if I had a project at the
start of this fiscal year that was $10
million and as of now it's at $13
million
will there
be approvals that were put before
Council on those that's total project I
understand you're thinking about within
pieces of a contract uh would there be
approvals of council covering that $3
million and what I'm after is I want to
make sure there aren't little things
that somehow get approved that in total
could get over the threshold and get
around this
policy I think what I'm going to have to
do is once we pull the actual projects
uh to share with the Commissioners we
can walk through some of
these
okay if I may Mr chair just add to the
discussion and I um I mentioned this
earlier I and tangentially related to
the question I think what we've also
seen a lot of and I think quite frankly
seen more of which has caught some
exposure in the community is when we've
put in an estimate into the budget and
then we go out and get bids and then the
the bids are over the estimate so just a
little introduction of one of the
interesting things we do here and there
are lots of positives to adopting a
fiveyear because you can spread it out
one of the challenges is is you're more
held to that number an alternative the
number for the capital on alternative is
to just budget for the next year and
then the the rest uh is fluid let's say
so you're adopting one-year Capital you
have a 10-year look I'm used to a
10-year look but you're really adopting
one at a time that's why it also looks
like our number is so large because it's
uh all of the five years cumulative but
I my main point in bringing this up is
that in many instances using the 10
million what has been identified was
three years ago we put in the budget
just a hypothetical $10 million and now
the $10 million is not realistic at all
it's a budget it's an Engineers estimate
I'll use that or a project person's
estimate then we go out to bid at
Contract time and it comes back in at 15
then we stand here and say it's 15 it's
not 10 and we only have 10 million so
then people say that's an overrun and it
was just a miss not just but it's a Miss
on the estimate in the budget then what
you're specifically speaking to is when
we have a contract and then there's the
escalation through the contract amount
what I have seen here is most of the
times the contingency will pick that up
and you really shouldn't have too much
scope creep at that point because you're
really changing the project and then
that gets us into a procurement
situation if we change it uh more than
let's just say 20% uh then we should
have bid the project uh differently and
so uh taking to look at those increas in
costs I would call it in uh two
independent uh challenges for
us okay so then on what that what this
telling me when we see our list of
projects you're going to present that
are going to come to the billion or so
or whatever they're going to come to
it's going to be a mix of things that
are project estimates because you
haven't fully contracted it yet or it'll
be things that are a part contracted
part estimates and then I guess the only
thing that concerns me a little bit so
if there was a t a a a $21 million
contract that was going to be 7 million
a year for three years we could actually
be going over and the person can be
spending the money having you send work
orders out and everything and then it's
two years later and we don't have a
sense that we've been running over or
are you doing updated estimates to
complete so that you're identifying when
it looks like you're running over to
bring approval to council so that's
probably the biggest question are there
realistic good estimates to complete on
Long projects so you can flag when
you're running into
trouble I would say absolutely that we
have the Milestones that are completed
and and let's just I just use rough
percentage it uh project manager is
watching that and you're not going to be
I'll exaggerate the prove the point
you're not going to have 75% spent and
25% completion uh we track that really
closely so that we don't get into the
situation and just use the seven time
three as a great example we'll come in
and we will have had that bid and it
will be the 20 you know it' be $21
million with contingency within that 21
and then also what you end up having is
your when you start off a project your
uh contingency percentage is larger and
then as you get through your uh risk
period or through the potential
uncertainties then that contingency uh
is going to get much smaller you could
release that not hold that back as as
many people know that work with capital
projects
yeah just going back to what Carly was
talking about earlier on uh 3.02 C you
know in a previous life I spent six
years on the mag Transportation policy
committee anybody who drives around
Phoenix notices that the new freeways
look much nicer than the original i7 and
I10 and that was because when they did
i7 and i1 to begin with they made the
Assumption and we all know what
assumptions do but they made the
assumption that the City of Phoenix
would budget for cleanup and maintenance
of that road which then became a general
budget item that always got Whitted down
every year the reason the newer freeways
look great is when they funded those
through pop prop 400 and I may be wrong
in the exact details but as I recall
then we put one quarter of 1% aside
for cleanup and maintenance of the
freeways so you know how you structure
these from the very beginning can have a
big difference because they they assumed
that people would look at the regular
maintenance and that the council would
do the right thing and do that every
year but then you get into that
competing budget request from everybody
so I think we're better to make sure
that when we do these projects that we
have that repair and maintenance built
into it
commissioner
sites that leads me exactly to what I
wanted to ask I hear a distinction and
in my experience I've been in budgeting
with this distinction between
maintenance and repair and replacement
we're tossing the words maintenance out
for kind of like anything is there in
the capital program a call out of what's
future repair and
replacement separate from the
maintenance that you
described so that that we can see that
that's accounted for or is it just in
the projects as uh part of the future
projects so um commissioner sites um
there for some of the areas there are
future callouts for replacement but in
not in all
areas uh I would ask
it might not might not be easy if we
could try to use the terminology of
Maintenance as you described it I think
versus the repair and replacement kind
of capital cost it we're getting tangled
up in it and we want to understand I
think the repair and replacement is
being
handled absolutely so uh going back to
making it clear I think the policy 3.02
C addresses maintenance costs and not
replacement costs so whenever we uh
identify a capital project we do make
sure that the operating and maintenance
costs are projected and included and it
if this commission wants to um recommend
us including in a policy that we also
factor in replacement cost as well that
would be back to Under The Reserve
policy where it was policy 2.06 where we
do say an asset replacement Reserve uh
should be considered and that is where
there is currently no specific
requirement to do so other than just
leaving it up to the Departments and or
if there's something that comes up that
we see that we need to do so so maybe we
need to tighten up that policy and uh
require specific uh replacement reserves
and that's very clear thank you
what's not clear is maintenance versus
repair I think what the commissioner is
saying we have three terms that we're
using almost interchangeably here
maintenance which in a park might mean
you're cleaning the bathrooms every
night or
something repair which means you have an
allocated fund to actually fix the
things that break and um and wear
out replacement is not necessarily
something that you would have a a
reserve for that's in a sense a new park
and replacement of the park alog
together um I think what we are all
expressing and concern about is that
middle terminology
repair and if that's encompassing enough
to mean what we're all saying here
commissioner Newman get us out of this
okay thank you for your explanations and
I think there is this missing category
in here and I view it as capital
depletion is is it's repair there's
normal annual repair and clean up and
the roads and things like that there's
the big investment that goes in there
but it's the replacement of the capital
because you wear it out a little bit at
a time I'm thinking in terms of we take
our aggregate assets of the city you
know every year we add a little bit more
of new hard assets water projects things
like that but there's a certain
percentage of that that is going to wear
out on average every year if we went
through and applied depreciation
schedules to each of those major assets
and then say okay in aggregate what
percent of our billion doll budget
should be dedicated to just ongoing
replacement and this you know this these
these three years the water plant needs
to be replaced and then we need a major
highway replaced and those things I mean
it's a big it's a big
Capital analysis but it seems like
that's Missing Link for me and that was
and there are three categories there but
it's it's this Capital replacement piece
and there's just an ongoing set of
projects you have to think about them
differently there's new things that
Carla may want or whatever but there's
but then there's things that we just
have to fix because a few years ago Brad
wanted that and now we have to replace
it you know so um I think we have to we
have to think about it that way and that
seems like the missing link in our
policy for me does that make
sense
City yeah I it does and I think that it
might be um in terms of the funds that
have dedicated funding like our
Enterprise fund they do develop their
infrastructure Improvement plans and
master plans that probably address these
repairs replacement and then part of the
fee and rate studies that are done for
specifically Water and Sewer factor in
the depletion depreciation of assets so
in terms of our water fund I think these
questions about repair replacement are
addressed through their Master planning
efforts their infrastructure planning
efforts and also their rate and uh fees
efforts it's probably the non uh the the
areas where we have non-dedicated
funding where it's relying on the
general fund and our voter approved
bonds that we have a a bigger challenge
with identifying those as uh um uh our
city manager Greg mentioned earlier you
know when you have a 20year asset and
then we starts putting aside two to
three million a year all of a sudden it
looks like we have this big pot of money
that could uh from an opportunity cost
standpoint could be applied to other
core needs and all that so there's
always a challenge of doing that doing
that in terms of but through that
process you you you're living beyond
your means long term because then
eventually you're you're still building
things but then you have this big Bill
to replace things it seems to me like
yes you have an asset is $3 million you
got to pay it off a little save up for
it a little bit at a time but you're not
a to use all that money at the same time
there's got to be some aggregate number
across all of our asset base that we get
to and say 20% of our budget every year
ought to be dedicated on prioritized
projects that are old and need to be
replaced and and that's going through an
analysis of the age of our assets and
and and Roads infrastructure things like
that it it it it seems like that's the
missing piece I understand if you did
that siloed by project by project by
project you could use your whole budget
for for that for for just ongoing
replacement it doesn't work that it
won't work but a certain portion of it
dedicated to that and then a prioritized
separate discussion of here's the
projects we can add to the capital base
this year and or the next three years
but then here's what we got to do in
that in that unit of time each year to
replace what we built 15 years
ago yeah I would just add to that I I
totally agree with the concept and where
you're headed I would just also
introduce one thing to keep it mind
sometimes we think of the current
capital plan as nice to haves uh or once
and uh luxury and a lot of times their
needs their need to haves and so that is
the challenge when you have two
competing priorities of a need to have
and a need to have um so that's really
what we run into that makes makes it
extremely challenging and particularly
you you touched on something a few
minutes ago with the public safety the
public safety
uh in which takes up a a significant
portion of operating General plus uh
even the capital and at the price of a
truck for example of a fire truck is
would have a significant draw a new
truck an additional not a replacement
one that's what happens you add the fire
station add the truck add the staff and
how all of that works
together yeah it's it's not it's not an
easy problem to work through because it
takes time of of being disciplined like
that over a period of time time to then
work your way out of an old asset base
and renewal of that and so it's not
going to it's not going to happen
overnight but uh if if we're continually
in a situation where we feel like we're
always into the need to does as opposed
to the the Improvement things to the
community then we Pro we probably don't
have enough allocated to it and May and
and that gets into how much are you
bringing in but how much how much are
you devoting to that and we're just
building too much new and not renewing
it you know enough if we if we're
continually running into that so there's
a separate of the annual just clean up
things and paint things and the things
that wear out over in a oneyear time
frame but that longer term peace that's
that's not an easy one and and you
really got to be disciplined over a long
period of time and public organizations
don't do a good job of that in aggregate
as a community because everybody wants
what they want and they don't think long
term I think um I'll interject here
we've had a long discussion on this and
the reason for that is that
I think the seven of us and the seven
people who appointed us all have a
concern that the the assets of the city
whether it's streets or Parks or public
art or
whatever is the maintenance of that is
being quote unquote kicked down the road
or has been and it's an
important quality of life factor for the
citizens and equally it's an important
feature of how we try to attract
tourists to our Premier City so it's uh
you'll hear more about it and I
apologize for the extended discussion
but uh that's that's why you're hearing
so much about it and then commissioner
Carla has another comment I'll just wind
it up and because I agree with
everything commissioner Newman said and
let's just make a simple sentence let's
take care of what we have that's
it back to you
thank you for that great discussion um
next slide so moving on to policy four
that's our uh policies on Revenue
management just want to highlight some
of these uh
4.03 one of our policies that we will
strive to maintain a diversified and
stable general fund Revenue base to
Shelter From Any um you know to try to
minimize the volatility in our general
fund
um 4.05 on user fees and charges we do
um have a policy in terms of recovering
full or partial cost of service delivery
through our user fees and charges and uh
for some of the user fees and charges we
do have a policy where we we we're not
recovering 100% of the cost because in
order toover 100% of the cost we would
end up charging way too much so for
example some of our Parks wreck or
Library fees they're not exactly full
cost recovery but those are by Design
they're not full cost recovery so they
are definitely supported by General
taxes but in terms of some uh areas
where we have full cost recovery are
like our planning and building permit
fees those are full cost recovery and
clearly our Enterprise operations like
solid was airport Water waste water
those are full cost recovery
um 4.06 talks about and our Fleet and it
replacement rates we do through our
budget process utilize a fleet and uh PC
replacement um uh sort of a a rate
structure that contemplates those assets
as rental to the Departments and we do
develop those rates on an uh annual
basis to ensure that we are recovering
the cost of the fleet and um PC uh
management of of those
assets um 4.08 I wanted to bring this up
as in unanticipated one-time
nonoperating revenues sometimes the city
uh uh receives some unexpected not
grants but for example let's say we sold
a piece of land and there was
significant unexpected one-time uh
revenues and that requires Council
approval in in order for us to spend it
so we can't just um decide to spend it
however we want
to um next
slide before you leave the um Revenue
management do you have any Financial
policies
on um
taxes in terms of uh what were you
thinking of in terms of taxes well uh
sales tax um
any recommendations that sales tax
should
be controlled to be Equitable or let me
give you an example um is there a
financial policy or should there be a
financial
policy that says that we would not issue
or we would not impose temporary taxes
to deal with a permanent
problem um and I mean we've already done
this the voters have approved it and
that's history so I'm not going back to
challenge what the voters approved but I
think the structure of the tax that was
approved in prop
490 we imposed a temporary
tax to solve a permanent problem the
permanent problem is continual
maintenance and repair of the city's
assets and it will go beyond 30 years so
we may be back in 30 years asking for a
renewal of that but should we have a
financial policy that addresses the uh
that kind of question of recommendation
to
council very simply you don't impose
temporary taxes to solve permanent
problems if the commission wants to
recommend that uh policy we can
certainly add that in and and we may we
may recommend it but I'm my point is we
don't have anything that talks
about the imposition imposition of taxes
and the appropriateness of the tax
structure or the equity of tax structure
these don't get into that okay
commissioner
schwier yeah and I think one of the
challenges on that uh is when the
political reality comes if Carla
remembers I was an advocate that the uh
490 should go on forever so that my
theory was limiting it to 30 years we
were just kicking the can down the road
to a council
30 years down the road that would have
to tackle it I wanted to solve that have
to worry about that well that's true
after 10 years I might not have to worry
about that but um yeah I was an advocate
for for project or protecting future
councils from having to make those tough
decisions uh what I kept hearing was
that it was just that much harder to get
a voter approved if it didn't Sunset but
in an ideal world it would
Sunset and then you mentioned something
a little while ago Sonia about maybe
some of these policies would need to be
adjusted just for our education like how
were these Financial policies
established and how and how often are
they
revised we review these policies every
year and we take them to council every
year so these policies will be uh
reviewed and approved by Council on
their May 4th meeting they they the
council looks at these policies every
year oh okay and from my Council
experience I know that a a current
Council canot bind a future Council but
it seems to me that I would kind of like
to see some kind of a policy that says
we don't kick the can down the road on
some of these big
problems just to make you know like
we're talking about the parks and
everything that there should be some
kind of a policy that
says what you're what you were talking
about I think that's the caption don't
kick the can down the road yeah that's
it that's the
caption commissioner
ransco so you said uh May fourth is
council's going to approve the
edits or the adjustments yes are those
edits and adjustments already crafted
can we see
those they're already already in this uh
version that you have got it is there a
way we can get this version um
highlighted so we can see what is
changing from from last year to this
year absolutely we will send that out to
the commission with the track
changes sha back to
you okay moving on to policy number five
that's our policy on Grant Management
and the only one I want to highlight is
our policy uh makes sure that any match
requirement or any additional funding
requirement necessary uh for us to
receive the grant is uh identified and
uh communicated with
Council um and also policy 5.03 that we
would avoid using and relying on grant
funding to support ongoing
operations and that is um sort of a
policy for grants that are onetime
grants and not um necessarily the
formula grants that we receive on an
ongoing
basis
okay next
slide um we do have a policy on Capital
asset maintenance and replacement and
6.02 talks about establishing ongoing
source of funds to provide for and avoid
deferral of critical Capital asset
maintenance repair renewal and
replacement needs so is that the policy
that the commission um basically talked
about not kicking the can down the road
so that is the policy on that and uh
6.03 where um uh Fleet and Equipment
reserves are determined as part of our
annual budget process as
well I I think you're right 6.02 indeed
addresses the question that we spent so
much time talking
about uh I I read that and I felt like
it was an aspirational statement as
opposed to um
as opposed to something with meat on the
bones um I think all of us are looking
for something that has a more meat on
the bones this this struck me as we will
play nice with others or something but
uh I don't know how you implement this
other than just saying we'll we'll try
to do that and so you're right this is
the section we'd like to see beefed up
with um actionable items
okay next
slide so the other policy I wanted to
point out was is policy eight on debt
management um specifically that 8.02 a
that debt financing is not used to fund
operations um 8.02 e that we when we
issue debt that the average with
weighted average maturity of our debt
doesn't exceed the expected life of the
asset so we're not going to issue 20year
debt to fund asset that has a 15-year
life um
8.04 C that our policy limits our uh
combined property tax rate to
1.5 secondary property tax rates are
assessed for payment of General
obligation bonds and so our policy
basically restricts us to no more than
um a combined property tax rate of 1.5
our current property tax rate is uh less
than a dollar it's
93 uh one6 cents or something like that
um and then also 8.04 C that our general
fund uh excise tax debt service should
not exceed 10% of the general fund
current or future annual operating
revenues in order to um minimize that
fixed cost on our general
fund okay see next
slide so moving on to our policy on
Enterprise funds we do have several
policies related to how we budget for
and account for our Enterprise spends um
9.02 regarding rates and fees as we
spoke earlier it's at a level that
recovers total direct and indirect cost
for both operating Capital requirements
a policy is that our Enterprise funds do
not rely on the general fund or general
taxes that they're 100% uh fee supported
the uh Enterprise funds also um in terms
of ensuring the rate stability that we
are not um uh implementing rates that
fluctuate significantly for our rate
payers we make sure we include future
Capital needs in our rates as well as
current operating and current capital
needs so we can smooth out those rates
for our rate payers um
9.05 in terms of debt financing again
it's uh similar to the policy earlier in
Deb um that we will have a minimum of
25% of our Capital Improvement plan paid
on a paysu go basis as opposed to debt
financed and in terms of debt coverage
ratio uh policy
9.06 we will maintain a at least two
times debt coverage ratio for Water
waste water and 1.5 times for Aviation
and solid
waste next
slide uh we do have a policy 10 on how
we allocate our tourism Development Fund
dollars and that is primarily our 5% bet
tax tax I do think there is some uh
princess lease revenues in that fund as
well but primarily it's our 5% beted tax
it is allocated in accordance with
Council adopted ordinance
4534 um the policy for uh allocating is
50% goes for Destination marketing and
the other 50% is allocated as you see in
10.02 12% to the general fund 9% for
tourism related events and event
development 4% for tourism related
Administration and research 25% plus the
lease payment on princess lease or any
balance of the remaining fund for
tourism related operating expenses
capital projects or any other um uh
expenses associated with tourism or
tourism related expense not to exceed
600,000 per commitment unless approved
by
Council okay
next slide so this is uh the next slide
is on the new park and preserve tax the
0.15 from prop 490 this whole section is
new policy 11 and that is also a policy
that shows the allocation of that that
Revenue stream in accordance with the
ordinance that Council adopted the uh
policy basically states that all the
taxes collected from the park and
preserve tax will go first into a
preserved tax allocation fund and then
from that preserved tax allocation fund
it will be allocated accordingly in uh
11.02 51% to park and park improvements
18% to preserve maintenance 14% to park
maintenance 10% to the fire fund for um
Park and preserve related expenditures
technical rescue uh fire fuel mitigation
and 7% to park and preserve uh Park
Rangers for the park ranger program and
uh there will be distribution for Debt
Service for some uh specifically
identified Capital Improvements for
Westworld and so the policy mirrors the
ordinance where the revenues will first
be allocated to satisfy the debt service
for Westworld and before being allocated
according to those percentages that I
just read any questions on this
nope okay just a couple more uh policy
12 next
slide um on economic development we do
have a policy where any Economic
Development agreements and contracts
that the city enters into we will
carefully identify and impacts and make
sure those are forecasted and included
in our operating budget and our fiveyear
plans to make sure that we account for
all of those and we do restrict the use
of public funds for economic
development um next slide and then we
have a policy on risk management and
policy 13.04 is where we have our uh
self-insurance reserves where on an
annual basis we do an Actuarial study to
identify the probable losses and uh
basically identify the self- Insurance
Fund balance based on our historical
loss data and then also so in um policy
13.7 I wanted to point this out where we
do have um uh involuntary Tor judgments
where we follow the state of Arizona's
um admin Administrative Code which
allows us to include any um Tor
settlement judge judgments in our
primary property tax levy so our policy
is that we do that and uh reimburse the
risk management fund for any involuntary
Tor judgments that's paid out of that
fund okay and then I think just a couple
more uh we do have a policy on funding
and I think that you know if you've
heard of any state that has uh problems
with their pensions where they don't uh
fully fund the annual required
contribution and basically fall way
behind um the city does not do that we
do have a policy
15.01 that we shall fund uh fully the
annual required contribution that's
calculated by the actuaries and in
1503 we do maintain and Sonia if I may
we have done so in the past is that
correct yes absolutely yes we have not
um we have not paid less than the annual
required
contribution um also we have a policy
that ures that we maintain an acceptable
level of funded status and if it falls
to an an acceptable level that we make
additional contributions above the
annual required contributions to bring
the uh restore the uh pension plan to an
acceptable level of funding of fun being
funded and also um our policy
15.04 that the city shall not rely on
any pension obligation bonds to reduce
um un funded pension
liabilities and um next excuse me why do
we have that
policy 1504 that says we won't use debt
to um discharge a pension
obligation what's the rationale there
some cities do not have that restriction
so you might explain why we have it yes
so pension obligation bonds add a level
of risk that is basically
speculative and there have has been a uh
recent um
gfoa um advisory advising against using
pension obligation bonds to satisfy
unfunded liability pension obligations
bonds are sometimes used by cities that
have very significant pension
liabilities and cash flow problems with
respect to like for example I think City
at 10p they have a very large uh had a
very large unended liability where their
uh pension cost was like 70 something
per of payroll well that is very very
difficult to address without pension
obligation bonds for a city that is um
as financially sound and strong as the
city of Scottdale uh pension bonds would
add a level of risk and speculation for
our taxpayers that we uh have a policy
against doing
so next slide so the final slide is we
do have an appendix called our budget
governing guidance they're not part of
our policies but it's certainly how we
put our budget together and we
contemplate these uh five items the
first item being how we fund the general
fund the um capital projects that do not
have dedicated funding we look at
anywhere from 25 to 50% of the
unrestricted portion of our construction
sales tax we use that for funding of
capital projects that do not have their
own dedicated funding we take 100% of
the general fund interest earnings and
any additional funding as we recommend
through the budget process and number
two we also look at operating surpluses
at the end of the year that we do not
need for any other uh reason we also
consider those as one time that can be
used for the um any general fund funded
Capital which we can also um put into
our budget process to fund Capital uh we
do uh the general fund does make a
transfer to the benefit healthc care
self Insurance Fund to provide health
care benefits for sworn Public Safety
accidental disability
retirees we also um fund our
transportation Capital Improvement
projects with our um any surpluses in
our
transportation operating fund and also
we have a uh budget guidance where the.
2% Transportation sales tax we uh fund
at least 50% of that sales tax is
transferred to our transportation
capital for transportation capital
projects any questions on
that I have none showing
if anybody wants to make summary
comments or summary questions why now is
the time to do it on these Financial
policies commissioner
Stevens yeah I just want to make some
comments and ask my uh colleagues here
uh some thoughts we've just gone through
an hour and a half and we've hardly
covered anything on the agenda as far as
what we need to get through I'm
wondering if we need to reconsider
exactly how we're going to be doing
things couple of thoughts one is uh we
talked about things that could be
recommendations and everyone has some
great observations I am personally
keeping my old list of things that I
think could be recommendations one view
is why don't we all keep our list and
then in a month or so at some point
let's have a meeting where we talk about
all our recommendations and that might
become a report to Council on the
results of the committee so just think
about that as a possible I am keeping my
own list of
recommendations uh another thought is uh
because the way the meetings are going
what if we all it's going to take more
work what if we all read all the
material beforehand and instead of
asking Sonia to walk through it slide by
slide we possibly provided her either
questions on things we had or slides
that we thought we would have a would
want to talk about and then instead of
going through all the slides the meeting
for each section might be more of a hey
let me ask a couple of questions on what
I've got I did my homework I read your
slides I here's the two things I don't
understand and here's two things I'd
like you to dig into to a little bit
more That Could set a frame for what
we're going to be look at and then a
final thing is uh the risk of upsetting
everyone uh maybe we need to rethink
exactly what we're going to focus on I
got two or three things I would one will
be if we get to the proposed new agenda
items I'm going to propose one for a
reaction One thought would be do we need
to kind of hone in on what are the few
things we really want to nail and then
do we need to go do this some of this
homework individually and report back or
what so I'm really struggling a little
bit with process I'm hoping that my
suggestion might spur some discussion as
to a way we can be more effective
because right now I feel like I'm not
meeting the objective of my councilman
who appointed
me nope and if you want to just ignore
it and go on you can do that
too the silence is deafening
uh I think the uh it it is a good
suggestion for us to keep our own list
of
uh things that we might like to explore
further or whatever
um we can't share those amongst
ourselves um outside the meeting without
violating the open meeting law um we can
certainly send them to Sonia and she can
at some point accumulate those and we'll
have a discussion of those items um you
I suppose you could copy me on it but uh
you can't copy the whole group
commissioner
Carla um I think we all have our lists
um but and I agree somehow we have to
get through this in a more expedient
manner because we're not even going to
get to pensions today and that's
something some of us really want to
discuss my only concern about what you
said and there's agreed got to be a
better way to balance it is a lot of
what Sonia is going through
is helping the public that's not you
know not here that's home understand
what we're doing what we're going
through and why and you know maybe we
need to look at
suggestions you know to meet somewhere
in the middle because yeah we're not
going to get through anything if we keep
doing it like this
agreed I do think um
the City attorney wants to weigh on on
something we we have to listen to
him thank you chair and members of the
commission um certainly member
individual members of the commission
could communicate directly with um Sonia
the city treasurer regarding um items um
and and ask questions you just need to
make sure that you don't discuss outside
the meeting um in a manner that would
constitute a quorum of the of the public
body remember Quorum is for
so just keep that in mind when when
you're doing your work and your
research um and in what may be a final
comment I do apologize for the length of
time we spent on this but I think it's a
an important area these Financial
controls
are the restrictions the guard rails we
have in place already in the city for
making sure that we're uh spending
taxpayer money in a ious and Equitable
manner I made one of the opening
comments in our first meeting that I H
the collection of our meetings would in
some small way reins The public's
confidence that uh in city government
and the uh spending of their money um
and that they're it's being done in a
responsible way we may find other
suggestions and other recommendations
but um it is important I think to give
the public some background and
understanding of uh the guard rails that
are already
there with that let's move quickly to
item number
two which is the discussion of reserves
and contingencies and um Sonia is going
to present the city's reserves and
contingencies including but not limited
to reserve and contingency policies and
the use of reserves and contingencies
for the budget review commission
commissioner nean would like to make a
comment before we do that just a point
of process here if we are limited on
time which is more important pensions or
contingencies and I don't know if we can
flip those in the agenda
but can prioritize I think we can
reasonably predict we're not going to
get pensions today but that doesn't mean
we'll never visit it I would recommend
that we put that as the first agenda
item on our next meeting um my question
is could we talk about that today and
then put contingencies on the next
meeting we can probably do that uh the
question is whether we uh can skip item
number two and go directly to item
number three and that's probably at the
discretion of the commission
here
um do you collectively have a thought on
that I'm not asking for a vote but I I
move that we uh move the agenda item so
we cover pensions
now second
second okay we actually have a motion in
a second uh so let's go ahead and vote
on
that okay thank you so oh
sorry looks like everyone wants to talk
about
pensions proceed to item
three which is discussion of pension
costs Sonia okay pensions it is so this
uh next slide so this presentation B
basically gives you an overview of the
city's pension cost and discuss
primarily the public safety pension
retirement system because where that's
where the most of the unfunded liability
is so next slide so the city's nonpublic
safety personnel participate in the
Arizona State Retirement System or asrs
as we call it it's for all full-time
city employees except police fire and
mayor and counsel it's a cost sharing
multiple employer Pension Plan it's
administered by the state and it's a
pulled valuation means there is not a
separate valuation done for the city of
Scottsdale so we just fall under a
pulled valuation for all the state
employees and all the city employees and
other uh districts or M jurisdictions
that participate in this asrs next slide
so this uh came from the asrs um most
recent Actuarial valuation as you can
see currently we are paying about um 11
about 12 % of our payroll for asrs and
the projection is that the uh plan will
continue requiring a contribution of
about 11 point something per. that's
really all I have to say about asrs
unless there's any questions
specifically about asrs I'll move on to
uh
psprs I think uh just order magnitude
how
many how many participants do we have in
the city in the ASR RS
program and I think I'm asking active
FTE and retireds and you know some
number of people who have left
employment but still have vested
interest in this do you happen to know
that number yeah I don't have that on
the top of my head but we will get that
for you commissioner Carla has a
question as well yes I have a question
how safe our state pension plans from
monkeying from the state legislature
um I I don't have an answer for that we
can but can they I mean can the
legislature run a bill and screw with it
no Scott can answer like our City
attorney the City attorney may be the
best one to answer that and he's
currently missing an action why don't we
hold that question till he gets back
commissioner
Stevens yeah but my understanding is
this a find been of bench plan there's
all kinds of Arisa and other issues
there that you can't mess with that
without taking away benefits from people
but that'll tie into my question you're
going to love this one um do we have to
have all of our employees involved in
this or can I with a view towards a
recommendation to councel consider
having new employees be part of a
defined contribution plan as opposed to
a defined benefit plan if that was in
the best interest of the
city Mr chairman Mr Stevens uh my
understanding is that all employees must
participate in the asrs system as
currently constituted and there are no
other options for DC type
plan additionally to the question Mr
chairman um that was posed by
commissioner Carla my understanding is
also that uh the state the the asrs
trust fund is a trust fund and cannot be
swept by the state um this was examined
many times during the Great Recession
and it it just can't be done
go
ahead next slide so um for the public
safety personnel we have the
psprs and it's an agent multiple
employer plan it is administered by the
state psprs system it does have separate
valuations for each employer so the city
of Scottdale has its own um Actuarial
valuation for the police and fire psprs
plan
so next
slide so this is some history about
psprs and explanation of the problems
that psprs faced psprs used to have what
we call a permanent benefit increase
instead of a cost of living adjustment
that started back in
1986 and the permanent benefit increase
was pretty much allowing the benefits to
increase in a fixed amount every year
and so in
um 2001 and 2002 there was the
investment losses and then also in 2008
2009 there was the Great Recession
investment losses so those two Global
losses um significantly impacted the
psprs plans and their Investments also
it was discovered that there was a lot
of inaccurate Actuarial assumptions like
for example the Actuarial assumptions
did not contemplate the permanent
benefit increase it would it used
outdated life expectancy tables and it
had very unrealistic assumptions of
investment returns and payroll growth So
based on those Actuarial assumptions
things had to change next slide so in
2011 psprs tried to reform uh the system
and the plans and it failed D due to
some lawsuits in
2016 the was a more successful reform
effort it changed the plan design and
introduced what we call a tier three
employee so all the employees police and
firefighters hired after July 1 of 2017
and now under a new tier three plan um
it also replaced the permanent benefit
increase with cost of living adjustments
and they changed the actuary and also um
phased in some of these uh Actuarial
assumption Corrections like for example
updating the life expectancy tables
reducing the investment return
assumptions they lowered it from 9% to
it is currently at
7.2% um they also reduced the payroll
growth assumption the original payroll
growth assumption was
5.5% and now it's been reduced to 2% and
they've also replaced their board and
administrator and investment manager so
all of this reform happened in 2 around
201617 next slide so as a result of the
before you leave that one you said that
the payroll growth assumption has now
been reduced to
2% is that in any way
realistic
um and I think what might be informative
perhaps for the Commissioners is to is
to understand what the payroll growth
has been for our membership
um I'm confident it's
bit greater than 2% a year is that per
person 2% assumed growth in in earnings
or or so so the payroll growth
assumption is not salary growth is your
total compensation growth and the
compensation growth is
um there variables is not just the
market and Merit adjustment and new
hires but also attrition and vacancies
so when you look at it in totality the
payroll growth is growing at a lower
rate than what the um Merit adjustment
is and new hires are we can go back and
look at our uh payroll growth our total
payroll growth has probably been at
about 2% is but we can certainly look at
that and get you the exact numbers I'd
like to see some kind of chart of what
it's been for the past 10 years or
whatever but 5.5 % was definitely on the
high end and not realistic so as the
actuaries are projecting that our payo
is growing at 5.5% and if it's only
growing at 2% we're not meeting we're
underfunding the
plan commissioner
schwier and how often does the pspr
board actually look at their investment
return
assumptions um is that 7.2 are they
meeting that number for an Investments
or is this something that's going to
come back and bite cities down the road
if this is not a accurate
assumption um I am not sure how often
they look at it but they do report their
annual investment returns um as part of
their annual reporting and I do believe
the board receives you know detailed
investment reports to uh align to see if
they align with their 7.2% and they do
make decisions as a board as a PSP's
board a and you as being the Chief
Financial Officer of
Scottdale do you have input on that when
they have discussions about
that
um they're they're not local they're not
local to Scottdale so no no no I know
they're they're for the state but still
if they're saying that you know it's
7.2% that the fund's growing at and the
fund's only growing at
4% then there's a difference in there
that's going to affect Scottdale
somewhere down the road and I just
wonder if if local if local officials
have uh if they aine on those as they
look at those reports or do they just do
it in the vacuum we do not they do have
their own board and investment advisory
commission um they do I think the last
time I looked at it they do have a study
of their long-term investment returns
and they do believe the 7% is still
their long-term investment performance I
don't know if that's changed most
recently or not but I believe that
that's the reason they left it at
7.2% I think nationally at 7.2 it's
probably around there for most State um
pension plans maybe some of them are
slightly lower at 6 point something perc
but it's not significantly higher than
most state pension plans
plans commissioner
Stevens uh yeah just a couple of
questions in here my for my days uh
whenever my clients had pensions they
had to submit their payroll records with
the individual people from which the
actuaries will then do their own
projections factor in estimated uh uh
people leaving how many are going to
invest and that's how they come up with
the stream of payments they believe is
going to happen from which they provide
a discount rate are the allocated of the
unfunded liability to us is that based
on city employee specific portion of
that larger fund so it really does
impact us what our behaviors are it is
based on our um actual okay then one of
the one of the things that I'm
interested about uh one of the things
that happens out in the world is
something referred to as pension spiking
and I think I meant you you're I think
you're aware of that the concern that I
have is do we do we need to what degree
do we need look into that because
what'll happen is uh some cities are
more egregious than others uh I sense
you're probably not but what some will
do is if a benefit plan says I'll pay
you half of what your last highest three
years are what they'll do is they'll
take a $50,000 employee and give them a
$100,000 job for the last three years so
they end up getting their full pay at
the end but when they submit the
information to the actuaries they tell
the actuaries a person's making 50,000 a
year they add their two 2% a year and
they end up being grossly underfunded
funded and you don't see that for a
while because you're not going to see
that until the actual experiences the
money coming out of the fund end up uh
starting to exhaust it at a faster rate
so we're not going to cover this cover
this today but I need to think about
with what we're going to look at is that
something we need to look in that any
trends of what people's compensation
have been before the last three years
they work or the highest three years and
then what kind of things happen there
because some people might save a
vacation to get paid out they might have
a nice boss that let have a whole bunch
more overtime and so is that an area
well I guess is that an area you look at
to see that you're going to have good
solid inputs or is that an exposure we
need to look at next
year um we can certainly look at that if
you
want okay let's what's the discount rate
also on on the obligation do you Happ to
know what the discount rate is on the uh
obligation the 7.2% I I I'm not that
close to the stuff anymore that doesn't
necessarily scare me and there's
measures out there about what public
entities do so you can probably
Benchmark yourself against the others
that doesn't feel horrible to me payroll
increase feels low but maybe your
attrition takes care of it do you know
what the discount rate those is on the
benefit
obligation I believe it's 7.2% 72 and uh
that's kind of high to me that sounds
high in an investment world where
interest rates are like 4% too high of a
discount rate makes your obligation
understated so I guess I would encourage
you uh when you look at this piece of it
to consider whether or not the discount
rate how that compares to other entities
and I could be wrong on this one it's
actually Scott just looked it up at 7.0
as the discount 7.0 is considered a good
discount
rate oh that's what yours
is uh Mr chairman Mr Stevens that's what
Google is telling me the discount rate
is for psprs I don't know how that falls
into the other pension plans around the
the nation okay that might be something
look might want to look at thank
you I think before we leave this slide
um for the commissioner's benefit but
also maybe the public we have three
tiers of employees in public safety and
you've alluded to the tier three where
the people who were hired after 2017
which is now eight years ago I think it
would be and and by the way some of the
changes that took place for those
employees unlike the earlier plan that
uh the tier one employees where their
pension is a function of the best 36
months or three years of
earnings the tier three employees and I
think even tier two it's a five-year
measure of earnings five consecutive
years the five consecutive highest years
for their earnings and that's the base
on which their pension is calculated and
based on service and so
on and also I think many of the uh
pension spiking things that may have
been true in the
past uh a crude vacation and so on have
been eliminated from the calculation if
I'm not mistaken so it still has
overtime as was mentioned by uh chairman
St or commissioner Stevens um but
perhaps if you're not prepared to answer
this off the top of your head we maybe
need some some kind of a schedule that
talks about how many people do we have
in tier one tier two and tier three um
and I would assume obviously that tier
three is the smallest number but
um so we need to understand what the uh
what the spread is obviously the changes
that were made in
2017 with the tier 3 employees were
intended to mitigate some of the growth
in uh in the pension benefits in this
public
sector yes um so we do have that data so
for example for the uh Scottdale police
we have um
198 active and
433 inactive tier one tier 2 members and
we have 122 active and 25 inactive tier
3 members
and rather than all of us trying to
memorize those numbers on the Fly let's
just say that next time let's let's have
um a little schedule that talks about
the distribution of employees in these
categories yes
um commissioner
schwier sorry is inactive the retired
people what's it okay could be yes yeah
because I know that Paradise Valley has
more retired policemen than they have
current
policemen okay next slide so as a result
of the reform basically correcting the
Actuarial assumptions and lowering the
um payroll growth rates and investment
return rates it resulted in basically um
an identification about unfunded
liability so basically what the Act was
saying is because of the um inaccuracies
in the past these plans have been
significantly un underfunded so as a
result of that as you can see in
2017 our unfunded liability for police
this chart shows you the police p uh
psprs the unfunded liability Grew From
um less than you know 100 million in
2013 to 161 million in 2017 to
17.8 million in
2021 and the city started paying down
the unfunded
liability um basically in addition to
our annual required contribution we were
making additional payments on top of
that so for uh 2021 through 2024 we made
59.5 million of additional payments
above the annual required contributions
for police and so together with the
investment earnings in 2324 we were able
to bring the unfunded liability down to
143.5 on the most recent
valuation and let me ask you to
um explain to
us what the reason might have been to
make the extraordinary payments in other
words we were meeting the financial
obligation of amortising the liability
according to the Actuarial
determination paying both normal cost
and amortization of the
liability uh but we elected to uh make
additional payments and I we won't talk
about it today but obviously we have on
the reserve schedule uh an indication
that we have $114 million or some such
thing on uh earmarked for additional
future payments for these liabilities
and I think in my mind I'm wondering if
we came up with that pile of money
historically and
presently what did we not do otherwise
in the city to accumulate that
money maybe I'm asking is that where my
maintenance and repair money went into
that fund
um city manager may want to respond I
was just going to say potentially
replacement but um but it's a fair
question and I think it goes back to the
trade offs and I think as we look at
this uh all the cities uh across state
have uh varying levels uh particularly
on the psprs and that's why and I know
this board already gets this but they're
so different on the asrs versus the
psprs and the challenge is uh even on
the psprs is you have I'll call it the
higher level board which sets the 7.2
not us uh versus the they've lowered it
um and then so much of it is derived
from an authority other than us however
uh we do have our own board some of
which uh I will tell you that they're
deciding on long-term disability and
things of that nature that can have a
significant impact on the viability of
the localized pension
fund commissioner
Newman just a clarification um
I I see the numbers and I you're paying
down and what's an appropriate level of
unfunded liability in a couple of slides
you're going to show that Scottdale is
way higher than the than other
communities around and I don't know if
that's good or bad or if that was on a
per capita per tax more of a per capita
if that chart was more on a per capita
basis then maybe I could compare it but
I just know that Scottdale is the
biggest one of all of them and I don't
know if bringing that to 143 or 53 or
zero is better and the same thing for
fire what's what's what's kind of the
rule of thumb there um so I believe to
answer that question that's a matter of
opinion some people might say zero would
be the appropriate number that we should
have zero unfunded
liability however I think I tend to want
to look at the plan and unfunded
liability based on how sustainable it is
in terms of the contribution rate that
we're required to pay and also the
funded status so if because it it is a
moving number it's not a fixed number so
if we didn't make any additional uh
contribution and we had very significant
investment returns positive returns this
unfunded liability will also start to go
down like if we make um an additional 60
million of additional contributions but
we had another Great Recession year the
unfunded liability will go back up again
it is affected by investment
uh returns and losses just as much as
it's affected by contributions so given
that I feel that um to be financially
stable like if you look back at the asrs
we are paying 11% into the asrs fund
whereas for psprs you'll see in a later
slide we're paying 50 something percent
uh as a percent of payroll for police
that to me is not affordable and
sustainable for the city to pay over 50%
or something so high so maybe to answer
your question is we probably should in
my opinion uh to pay that unfunded
liability down so that that percent of
payroll is reasonable and affordable for
our residents that makes sense and it it
removes the vulnerability to whatever
happens with the economy or whatever but
I mean these are promises that been made
so they have to be kept right yeah thank
you
we will uh let me interject here we'll
later get to this percent of payroll I'm
not sure
that's I'm yet to be convinced that's a
proper measure I mean uh what it is as a
percent of payroll is a lot less
convincing to me than what it is is just
an aggregate dollar amount um this is a
liability is just the same as go bonds
and everything else we owe the money um
and to accelerate these payments so that
the percent of
payroll is a lesser number I'm not sure
I see the logic of that I'm not sure I
see the logic of paying down at all but
I'm being open-minded to be convinced
but it's uh my concern is what are we
trading off what are the citizens losing
it's a fixed pile of money and we are
diverting a great deal of it
historically in two years and
prospectively again this year
to paying down a liability rather
than fixing the streets um and I need
better understand those priorities but
in the meanwhile I'll let commissioner
Stevens speak well I'd just like to WAN
on this because just uh I'm not an
expert in this area the thing that I've
always looked at is what is the percent
funding that the assets are with respect
to the benefit obligation I look at that
number I look at it over a 10e period or
15E period And if I in general it's not
getting worse and it's at the 70 80%
level I feel comfortable I forget what
yours is at I don't remember it being a
problem here if it's at the 30 50% level
I get nervous but the reason you need to
look at over a 10 or 15 year period
because Market crashes are going to
hammer it and it looks bad great markets
make it look a lot better so you really
kind of look at the trends over 10 or 15
years you kind of see how it's moving
and then you factor in what happened in
market conditions
uh in order to see where it's at and so
I think a good exercise might be to look
at all that and then you might all be in
a better position to say it's a good or
bad idea to fund more of the benefit
obligation with the extra reserves we
have so that's just my uh
observation commissioner
Carla um I just wanted to verify with
Sonia we have more options this upcoming
fiscal year than we did last since we
passed and increased the base
expenditure limit right yes okay thank
you so yeah all the comments are
relevant we certainly have set aside of
a pot of money to pay down this unfunded
liability but we certainly will explore
opportunity cost maybe it's better to
use the funding for capital projects
instead of paying down the psprs
liability and those are all certain
conversations that we can certainly have
as you know um uh the design of this
commission commissioner
Newman well well I pulled off let me let
the city manager talk first th thank you
I was just going to say briefly was
going to go back to commissioner
Newman's question about the percentage
and I do concur that there's a lot of
debate in the industry but really to
kind of confirm uh commissioner
Stevens's thoughts on the percentage
that you referenced I was a Arizona
League of cities and towns when psprs
was going through these challenges uh in
1415 or so I was appointed to a
committee that made looked into this uh
extensively on behalf of uh communities
across the State of Arizona and made
recommendations that ultimately became
legislation and that 80% some would say
you should have it 100% funded but 80%
is a pretty common theme out there
number out there and I totally concur
when you're say Le south of 60 for sake
of discussion then you start to get in a
little bit different areas so I really
do concur with your assessment of that
commissioner
Stevens and now commissioner Newman I
have no further comment on it so I I was
just I was going to concur with with
commissioner Stevens um you know we have
promises that we've made and we have to
keep those but we can't unfund
everything else in the city just to try
and do that to with absolute certainty
so there some risk is
reasonable Gord
ahead um next slide so this just shows
you our uh fire psprs the unended
liability has also been going up but
since our fire department is relatively
uh new the uh plan is actually at 80 80
something perc funded so we've only made
5.3 million of additional payments to
try to keep the um unfunded liability
from growing too much but otherwise um
the fire plan is a much healthier plan
than the police plan next slide and as
you can see as a comparison I share this
with you because all these all the other
cities every City's um pretty much had
to deal with the same psprs problems as
we had to it's part of uh the whole
psprs system the problems that we uh
mentioned earlier um all these cities
have already paid down their psprs
liability over the last few years
um and we you know uh commissioner kala
did mention we were not able to uh pay
it down as quickly because we had the
expenditure limitation so we were not
able to put more than what we put to pay
down the pension
liability um some of these I think a
couple of these cities paid down their
pension liability by issuing pension
bonds which we already spoke about that
we would not be doing
here um next commissioner Newman has a
question just clarify on this slide um
is 179 million is that comparable to
those others or is it truly higher than
the others and we should be down around
100
million I just I'm trying to get a feel
for what's the right level here again I
think I I like the way commissioner
Stevens and our city manager Greg spoke
about it I think if we maintain uh
something over 80% funded status that
would be an appropriate level and then
we will see where our liability is once
we get to to that 80s something per
funded where our contribution rates are
and where our unfunded liability is and
I think that that might be where we
consider appropriate okay and what is
our current funding level our current
funding level for police with the
payments we finally went over 70%
because it was under 70% and now I think
we're slightly over 70% for police and
we're 80 um I think 84% for fire okay
thank
you and and just as an editorial comment
I'm I'm usually not persuaded by knowing
what other cities in the valley are
doing um I really like to March through
our own drum beat and have a ration now
I don't even know how many employees
they have covered in each City and
obviously some of the newer cities are
going to have fewer tier one tier two
employees
so uh again I think what all of us are
looking for is some
uh rational
reason of what we should be paying down
and the most rational reason is perhaps
to bring the funding level as
commissioner Stevens said up to a
precise number but it's not looking at
other communities in my opinion it's not
looking at what the impact is compared
to base salaries in police and fire so
see if we can come up with some other
metrics next slide oh commissioner
Newman has sorry just one other question
on the last slide um how much does
movement and I I remember I seem to
vaguely remember a conversation I had on
movement between communities how much
does that affect these numbers because
as people change jobs and and and go
from one police force to another and one
one uh fire force to another so my
understanding is if there is lateral
movement that the um the the city that
the firefighter police officer moves to
we do not take on the unfunded liability
of from their
previous employer right we'll confirm
that but that's my understanding is we
we don't take on that uh separate uh
additional unfunded liability so it
feels like a net zero when it when
there's a movement I believe that but
let me let me confirm that and get back
to you on that great thank you okay next
slide so so um as you might imagine with
the increase in unfunded liability the
contribution rates have also
significantly increased as you can see
on this chart in 2015 our contribution
rate as a percent of payroll for police
psprs was less than 30% and it went up
to as much as
63% and now with the uh additional
contributions and pay down we've made
we've dropped it down to
52.5% with fire it started in 201 15 at
12% and we're now close to 30% and we're
going to try to keep that below 30%
we're also trying to pay down additional
unfunded liability to bring that 52.5
five% down to something more like
30% um and again as you uh recast some
of these numbers for us in the future
speaking for myself I'm not persuaded by
a statistic of what it is as a percent
of payroll I'm the my take away from the
whole slide was at the top when it says
28 to $31 million that to me puts an
order of magnitude on the number that
that's um I'd like to see what we've
actually spent dollar amount more than
percent of payroll
but next
slide so the employ I just wanted to
share this with you is where the
employer contribution rates as
calculated by our actuaries as you can
see the employee contributes
7.65% and the employer rate is made up
of the employer normal cost and also the
unfunded liability portion which is uh
basically charged to us at that
7.2% rate so it is a very costly and
expensive liability for the city that
factors into our uh contribution
rates next slide and again when you
prepare an update of this topic uh
include the dollar amount as opposed to
the percent of payroll which doesn't
give an order of magnitude yeah so if
you go back to the previous slide so the
28 to 31 million is the annual pension
expense that we pay to psprs for police
and fire that is not including the
additional contribution that is just
based on the um annual required
contribution okay next slide
next slide so I know you mentioned you
you don't really care what the other uh
cities are paying in terms of
contribution rat but I do want to share
that with you because often times we
compare the cost of our police Personnel
to the cost of you know uh police
Personnel and other communities and one
of the reasons ours might be higher is
because our pension contributions are
higher so our Personnel cost is higher
because of that until we pay it down and
we may not pay it down to 30% or 20% but
uh it is a factor in in terms of the
cost of our um uh public safety
personnel that's the last slide I have
and can answer any questions if you
have have a request from commissioner
schrier to yeah just real quick and this
goes back a long time but um I know in
PV there was a difference where you
hired people to come to work for the
Police Department um they would like to
hire local people that kind of
understood the valley and understood
Paradise Valley and everything but as I
recall um for pension purposes it was
much better for them to hire a younger
officer from out of state and bring them
in than it was to hire somebody uh with
more experience who was
local uh I can certainly add to that and
I'll look to a chief chief uh as we now
refer to him uh who's moved Walther
moved into a different position so as I
understand first of all you have
recruitment which is an issue and then
you have a pinion issue so laterals uh
from a city manager perspective bring a
a lot of experience and uh is really
important uh mix to the police force
police or fire I would say uh that it's
more common it feels as though to really
start them uh from uh the academy and
move them on up that way but uh
it's really fortunate to have a lateral
situation from an operation standpoint
uh from a pension standpoint I
understand uh if they come from another
agency you inherit uh that as an
individual and so using it a
hypothetical if someone puts uh 15 years
in on the force in another agency and
then they do a lateral then when they
retire out that becomes a part of your
psprs a number as a as an individual I'm
getting a thumbs up from the chief of
Chief and so I I think I'm good in that
regard thank you Mr chair commissioner
Stevens yeah I think we like out of time
now because I I had a okay then I I'm
gonna if I can I'd like to make a
statement on something that I was
thinking of as a future agenda item for
now I'll mention it as a suggestion to
staff as they're doing the budget for
you to consider and we can see if this
goes anywhere uh there's a lot of uh
unfilled FTE type positions go into a
budget you budget for all the unfilled
positions so what I'm about to say is
not going to be popular uh it uh when I
was working there were a lot of times I
had to reassess restructure eliminate
positions and things like that my
suggestion to you is to look at all the
here's what I was going to say look at
all the unfilled positions at
22825 whatever's open right now look at
any of those that have been unfilled for
all eight months look at any of those
that have been unfilled for the eight
months and then do an internal
assessment about whether or not there's
a way to eliminate one of those posi any
of those positions by merging any key
function in there with another function
basically do a restructuring so the
trigger would be what have I gotten by
okay all year because the city hasn't
fallen apart so somehow you're getting
by without these people so how do I look
at that and and I uh and I um and I
don't know so it's an unpopular comment
uh I don't want to be the person to say
you should be cutting police and fire
Public Safety people that'll be an
absolute hot button I'm sure but uh we
might have an obligation to look at
other departments to say where can some
unfilled jobs have responsibilities that
someone else is already doing merged in
as a way to cut some headcount costs and
help the budget so I won't go anywhere
further with that other than I'll see if
staff goes anywhere with that
recommendation thanks well let's do keep
that on the agenda for when we talk
about FTE in a general sense uh I would
clarify probably the interest would be
not just unfilled positions but
particularly if they're unfilled and not
even being recruited for um meaning
they're just there as a place saer
that's perhaps the easiest low hanging
fruit commissioner Newman I was just
going to voice support in terms of if an
FTE has not been filled the work is
getting done somehow we've went through
I've gone through this dozens of times
and people figure out how to get the
work done the important work and
sometimes work goes away that's not
needed to be done and that's a that's a
rational way to go about it and and look
at start there looking at that so I just
want to voice support for
that we're out of time anybody want to
make a motion to
uh use the rest of Friday constructively
commissioner Carla I just have a
question question um we don't meet again
till for 19 days and the question is
considering we didn't get through the
whole agenda are we going to be looking
at trying to fit a meeting another
meeting somewhere in those 19 days or as
commissioner Steven said
restructuring what how we're looking at
things uh we were not planning
additional meetings our meeting in March
we are planning for uh presenting the
proposed um Capital Improvement plan to
the commission a lot of these additional
requests we can send to the commission
um you know via Communications with the
commission maybe I should ask the
Commissioners
uh to weigh in on whether you think we
need or would benefit from or should
have another meeting before 19 days are
up there was a oh sorry I'll get to you
commissioner
Stevens okay um I i' propose that other
agenda item if that's going to be ready
at the next meeting at least I know
we've got that so we're moving forward
on something so I is that going to be
part of that meeting or is the meeting
only to present your CIP
is that the um what information are you
referring to I'm referring to the agenda
item we approved uh where you were going
to present the uh contracts that were
changed by a million dollars and 10 we
will bring that to you in March that'll
be in our March meeting thank
you so if there's something else that
you want now is the time to get it on
the
agenda
um where does that leave is
I I
um I guess the well we did Skip past the
item of of future
agenda uh item number five or four on
the agenda which was identification and
approval of possible future agenda
items do you have something to propose
there or has is that what you've already
suggested commissioner Stevens I'm I'm
going to I'm going to try to uh no let's
just go with the comment I made we'll
see where they go with that on looking
at the FTE and doing an assessment there
and then what they're going to report
and then separately I may ask in a week
or so after Sonia gets done with her
closing if there's something else I can
learn a little bit more about uh with
respect to some of the Contracting area
like I would like to understand a little
bit more about how Contracting works is
it firm fixed price is a cost price do
you do bidding do you do bid scoring do
you ever do a soulle source how do you
decide when it's so source so a lot of
those things I have in my head I don't
necessarily want to propose that as
agenda item but if I'm able to meet
maybe with one of your people separately
as a commission member to learn a little
bit more about that maybe that can save
a lot of time by only getting it down to
the couple of things that might matter
that I want to present and ask for an
agenda item
for commissioner Carla uh to go along
with that I just guess I would ask staff
you know to communicate with us and
let's just do a realistic assessment of
how much time we have left before the
budget has to go to council and with a
hopefully a work study session with them
prior to that and there's only so many
days we had this whole list of
departments we wanted to go through
which I think is Pie in the Sky now um
so just give us a realistic assessment
of what you think we can look at and
what it's your intention to to bring to
us and then we can all react and say
well I think you're missing this I don't
really think this is necessary and maybe
we can just start winnowing down to have
very productive meetings between now and
not so far off when the budget has to go
to
council just an
idea we we can certainly work towards
that we definitely have to present the
budget to the council on May 6 because
we do have a lot of uh posting
publication public hearing requirements
in order to meet the uh budget timeline
that we are uh required to do per our
city Charter so May 6 is the drop debt
date the the date for when we present
the budget to council I think right now
our city clerk is looking at April 22nd
as the joint work study between the
budget review commission and Council and
so working back with we will release our
proposed budget on April 3rd we're
putting final touches into it we're
still balancing it we're still massaging
uh final numbers so it's not quite ready
yet and it will be ready on April 3rd
and then we do have those three meetings
with the budget review commission April
7th 10th and 11th if we do need to
insert a couple more meetings for the
commission we can certainly do that and
so we will just um go from there
we'll leave it up to you to let us know
and also let us know if if as and when
April 22 is a um a definite date for
meeting with the
council with that I'll entertain a
motion to adour I I'm sorry S I had a
note that you change that to May 6th
it's back to April 22nd um May 6 is the
presentation to council April 22nd will
be the joint work study okay thanks
yes May 6 is the date that the council
will actually agree to the propos well
or make modifications to the proposed
budget but our joint meeting would be
ahead of
that make a motion I move we adjourn
second all in favor of adjourning
finally we're out of here thank you
all
e for