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HomeMy WebLinkAboutMinutes 12/08/1993 2636 CITY COUNCIL SPECIAL MEETING Port Angeles, Washington December 8, 1993 CALL TO ORDER - Deputy Mayor Sargent called the special meeting of the Port Angeles City Council SPECIAL MEETING: to order at 5:05 p.m. ROLL CALL: Members Present: Deputy Mayor Sargent, Councilmen Braun, Hulett, and Wight. Members Absent: Mayor Hallett, Councilmen Ostrowski and Schueler. Staff Present: Manager Pomeranz, K. Godbey, J. Pittis, B. Titus, and Y. Ziomkowski Public Present: C. McKeown and L. Doyle. Work Session - 1994 Gamblimt Tax: Various business and tavern owners were present to discuss with the Proposed Budget COuncil their opposition to the level of gambling taxes imposed by the city. Present were: Reg Midgley, Reggie's Sports Tavern, 1328 E. First Street; Stan Blonde, Gateway Tavern, 120 N. Lincoln Street; Don Iredale, Iredale's, Front & Lincoln; Vern Elkhart, Laurel Lanes, 8th and Laurel; and Dave Solway, Port Angeles Lanes, 1714 E. First Street. Distributed to the Council was a copy of written comments submitted by the business owners regarding the gambling taxes. Reg Midgley, acting as spokesman for the group, explained to the Council that the City is taxing the gross sales of pulltabs/punchboards, which is taking 50 % of the profit out of the owners' pockets. There is no way to recover it, as the State strictly controls gambling in all ways. Gambling is an important part of the business, as it gives the people something to do - it's their entertainment. Small businesses cannot afford to take a large percentage of their profits and give them to the City when the City is not involved in any way. These businesses pay property taxes and business taxes, but the gambling tax is unjust and unfair. Mr. Midgley continued by stating that this group of businessmen would like to play a larger part in community affairs by raising money for community uses. Deputy Mayor Sargent assured the businessmen that the Council would consider their proposal and try to t-md a solution. Councilman Wight asked for clarification as to how the taxes were computed. The Federal and State taxes are calculated on net income, City taxes are calculated on gross income. Mr. Midgley reviewed the taxes he has paid for gambling and noted that the price of the games has also increased, yet the amount the business owner is allowed to charge for the game pieces remains the same. Mr. Midgley informed the Council that on $3,700, he paid $2,614.19 in combined taxes. Deputy Mayor Sargent thanked the businessmen for discussing this matter with the Council, and the business owners expressed their appreciation to the Council for listening to them. Eric Machin, Administrator of the Moose Lodge, also addressed the Council on the gambling tax issue. He informed the Council that charitable, non-profit organizations, i.e. Moose Lodge, Elks and Eagles Clubs, are taxed heavier than the bar owners. If gambling taxes are increased further, the non-profit organizations will be forced to cease gambling operations, as it will cost them too much money. The tax increase last year resulted in a decrease of charitable contributions around the City. Before the increase, these organizations raised about $180,000 in charitable funds; this year it dropped significantly. Mr. Machin indicated that even though gambling activities are not their only source of revenue, it is a main source. Non- profit organizations are limited by their own laws as to how much they can make on social activities, which he then explained. Manager Pomeranz inquired if gambling taxes were reduced for next year, would there be additional charitable contributions to the community forthcoming? The response was yes. More specifically, Mr. Machin indicated that by the end of the year, the Moose Lodge will have paid almost $30,000 in gambling tax between punch boards, pulltabs and bingo, versus prior taxation to the level of $13,000. Manager Pomeranz indicated that in 1992, the total amount of revenue from gambling taxes, including bingo, was $103,000; in 1993 is was $136,000. The increase in tax was about $33,000 total, community-wide. A brief discussion then followed on taxing bingo. The Council thanked Mr. Machin for his comments. -1- 2637 CITY COUNCIL MEETING December 8, 1993 Work Session - 1994 The Council held a brief discussion on gambling taxes and asked Councilwoman-elect Proposed Budget (Cont'd) McKeown for her opinion of taxing the gross income for pulltabs. She responded that it was unfair - no one pays tax on the gross. She has watched their net profits decline considerably due to these taxes. Councilman Wight recommended that the tax be rolled back to 3 %. Councilman Hulett suggested rolling back 1/2% this year and 1/2% next year. Manager Pomeranz asked that the Council not commit beyond this year. Councilman Wight informed the Council that he was told handling pulltabs and punchboards is labor intensive due to the paperwork involved, etc. The County does not charge any gambling tax at all, so the City businessmen feel frustrated. They need the gambling as a drawing card, but they feel like it is getting too expensive to bother with. Councilman Hulett then suggested dropping the tax by 1%, but to stipulate an effective date no sooner than June. This would give the City six months to attempt to find a way to mitigate the impact of the $26,000 revenue loss. Councilman-elect Doyle agreed that if the tax is going to be reduced, it should only be by 1/2%. Manager Pomeranz informed the Council that the average gambling tax in the State is 4%; the City is right on the average. Discussion followed, with Councilman Hulett suggesting the tax be calculated on the net instead of the gross income. No final decision was made; however, it was the general consensus of the Council that the tax should be reduced to 3% or 3.5%. Break The Council recessed for a break at 5:50 p.m. and reconvened at 6:00 p.m. Convention Center Fund: The Council continued with a discussion pertinent to the division of the hotel/motel tax funds and the various agency requests. Deputy Mayor Sargent suggested some changes which included: VCB and Chamber - the same as 1993; Derby Days - $5,000; Symphony - $2,000; Loges - 0; Marine Lab - the same as 1993; Fine Arts Center - $1,500; Museum - $12,500; OPTA - $1,000; Juan de Fuca Festival of the Arts - $5,000. Manager Pomeranz felt that being the OPTA didn't make a presentation to the Council, and it is only a brochure, the Chamber of Commerce should handle this. Councilman Wight addressed the issue of the Symphony. While he enjoys the Symphony and finds it to be a community asset, he doesn't believe that it has any impact on the amount of hotel/motel tax collected. The Symphony is 100% subscribed to by membership of local citizens. Since there are no tourists attending the Symphony, Councilman Wight could not justify the Symphony as an expense under the law. Councilman Hulett pointed out that there were guest performers who used the hotels/motels in the area. Deputy Mayor Sargent reminded the Council that the Symphony also puts on the Nutcracker, which draws people from out of town. Councilman Hulett agreed that the Symphony does performances that draw tourist trade; however, he noted that it is only once or twice a year. Councilman Wight advised the Council that once the Museum moves to its new home, it may not attract much tourist trade anymore, as it will be so far from the downtown area. Deputy Mayor suggested the Museum allocation be reduced to ~.. J//,~, ,.~:)~, Deputy Mayor Sargent reported that she had inquired of Parks and Recreation Director Brodhun as to what the VBMCC needed to help make it a better conference and convention center. She received a list of needed items and associated costs, which she read to Council. She felt Council should consider whether this might be a better way to spend the money. Manager Pomeranz indicated that new ways to operate the General Fund are always being sought. A lot of time, effort and energy is spent operating the convention center facilities. It would be possible to transfer $20,000 - $30,000 from the Convention Center Fund to the General Fund for the convention center, which would be justified. He stressed that he is not making this as a recommendation for the upcoming budget, but it is an option for the future. Deputy Mayor Sargent stated the VCB has expressed concern because the VBMCC is not available enough for outside functions. Manager Pomeranz suggested that local events not be scheduled more than six months in advance. This would allow conferences scheduled in advance to have first choice for the space. A brief discussion followed on this subject. Manager Pomeranz suggested that, in the future, a small committee of individuals be appointed to receive the applications for hotel/motel funds. The committee can review the applications, set performance standards and then make recommendations to the City Council. Discussion followed on the Festival of the Arts. It was the general consensus of the Council that $5,000 was an adequate contribution. The Council reviewed the agency -2- 2638 CITY COUNCIL MEETING December 8, 1993 Work Session- 1994 requests again and decided on the following funding for 1994: Chamber. of Proposed Budget (Cont'd) Commerce and VCB will stay the same as 1993's allocation; Derby Days - $5,000; Symphony Or~h~?,$1,500; Loges - 0; Marine Lab - same as 1993; Fine Arts Center - 0, as the City is already paying for reroofmg of the Fine Arts Center; Museum - $12,500; OPTA - 0; Juan de Fuca Festival - $5,000; World Affairs Council - $500. This will leave a balance of approximately $3,400.00. Councilman Hulett informed the Council that he had been approached regarding the deficit of chairs in the VBMCC. Manager Pomeranz replied that more chairs had been ordered, and Deputy Mayor Sargent commented that chairs were on the list of needed items given to her by Director Brodhun. It was suggested that the $3,400 be used to help obtain the items needed for the VBMCC. Street Fund: Manager Pomeranz reviewed the Summary of Revenues and .. Expenditures for the Street Fund. Of note was the reduction of personnel by one part-time employee, and under Capital Outlay, the purchase of a $15,000 button applicatOr, which will save time and money. Buttons are much more effective and have a longer life than line-painting. Comtnunitv Develol~tnent Fund: Manager Pomeranz explained that this fund is used for accounting for smaller grants. Currently, the fund has a reserve balance of about $200,000, which is money that came from the Landing Mall settlement. The City is working with the Downtown Association, and a revolving loan program has been established by working with the local banks. The City will commit $100,000 to this program. A portion of the remaining $100,000 is committed to the Housing Rehabilitation Program and approximately $70,000 is in reserves. If the Council wishes, some of the Campbell Avenue contributions can come from these reserves. Manager Pomeranz explained the downtown revitalization program and how local banks have committed to offering loans to downtown businesses for facade improvements at favorable interest rates. A brief reviewed followed on the Housing Rehabilitation Program and its goals. Real Estate Excise Tax Fund; This fund has taken care of a number of significant projects and is committed for the future. Manager Pomeranz reviewed the projects and associated expenses for 1993 and 1994. The State no longer provides grants for these types of projects; however, they offer low interest loans to cities which qualify. The Marine Drive Project was accomplished thanks to a 3 % loan from the State. Recently, Director Pittis and Manager Pomeranz went to the Board of Realtors to review how this money is being used. There were no criticisms from this Board as to how the City was utilizing these funds. Manager Pomeranz also informed the Council that the amount shown for the 2nd Street Bridge Replacement will be reduced, because the City received a $32,000 grant for this project. However, part of this will go to the Marine Drive project, as the cost was slightly higher than originally estimated. Manager Pomeranz informed the Council that $100,000 has been placed in the Sidewalk Improvement Fund. This is an attempt to improve the sidewalks to such an extent that, hopefully, the number of accidents that occur due to poor sidewalk conditions will decrease, and the amount of money spent on settlements due to these accidents will also decrease. Not long ago, the City had a claim for almost $50,000 because a woman hurt her knee. Discussion ensued regarding the sidewalks. Manager Pomeranz informed the Council that it appears the Waterfront Trail lighting and the Pedestrian Downtown lighting are going to get underway in 1994. The City is working closely with the Downtown Association and the Soroptimist Clubs in the hopes of accomplishing these projects. Growth Management Funds: Manager Pomeranz reminded the Council that in 1995 there will be no State dollars to fund the Senior Planner. There may be some Growth Management responsibilities remaining, and the Council will need to make a decision at that time as to how to proceext. Pencotn: Manager Pomeranz explained that this is just a continuation of the existing system; there are no major enhancements. Deputy Mayor Sargent asked if the Enhanced 9-1-1 will affect the program. Manager Pomeranz responded that this would add to the work load, but it will result in better service to the public. Debt Service Funds and Cat~ital Itnt~rovernent: Manager Pomeranz reviewed the general information on the Debt Service Funds and the Capital Improvement Projects. Councilman Braun commented on the Pier Float RePlacement and expressed the hope that once this is put into place, the City will give strong consideration to lighting and water. He felt these enhancements are necessary to have a first class float facility. People with large boats who spend tourist dollars have commented they would like to come to Port Angeles; however, the City does 2639 CITY couNCIL MEETING December 8, 1993 Work Session - 1994 not have the proper facility as this time. A brief discussion followed on the pier. Proposed Budget (Cont'd) Public Works Director Pittis advised the Council that the Waterfront Trail will extend to Harborview Park by this time next year. Tliere is also funding for the placement of reinforcement under that park. This will include sewer service for the City's facilities, as well as the Coast Guard's, subject to future agreements. Ente~rise Funds: Manager Pomeranz stated that the Utility Advisory Committee deals with many of these issues specifically, then forwards recommendations to the Council. There are a lot of capital outlay projects in this budget which impact rates. It would be desirable to have more citizen input into these projects, and therefore, Manager Pomeranz proposed that after the new year, the Council look at the UAC and attempt to fmd a way to get more citizen input. Manager Pomeranz suggested a subcommittee of the UAC where experts in the various fields might be brought in to advise the UAC regarding various capital projects that are initiated. The City would identify the project or the plan, and request this subcommittee study it and make recommendations to the UAC. Director Pittis suggested that the CFP would be a better place for this subcommittee, because that is where the planning occurs. There would be a lot more flexibility as well. Manager Pomeranz noted that as rates continue to increase, capital outlay and bond indebtedness are having an impact; more input is needed in the process. At Deputy Mayor Sargent's request, Director Godbey explained why the cash balance fluctuates so much from year to year in the Enterprise Funds. Director Godbey advised the Council that it is difficult to combine construction or long-term capital planning in the operating budget because it really skews the bottom line. Many cities separate their capital and operating budgets. The .budget is on a yearly basis and the capital budget is on a project basis. An example is the wastewater treatment plant, a seven year project, which will be closed out at the end of the project, not the end of the fiscal year. It is difficult to analyze utility funds when capital projects are folded in with operations, as there are peaks and valleys in the bottom line. Light Det~artment: Director Godbey informed the Council that she changed the way the Enterprise Funds are presented so that it is easier to establish whether or not expenses are being met and to determine at a glance whether or not debt coverage ratio is being met as determined by bond ordinances. The City must be certain that what is pledged in the bond ordinance is actually occurring. Last year it was presented on a working capital basis; this year it is more of a cash flow basis. Director Godbey reviewed the Light Fund Summary of Revenues and Expenditures. Overall, revenues were increased by approximately 5 %. The City has projected about a 25% decrease in revenues from ITT, due to their temporary closure. Additionally, the weather has an affect on Light Revenue, and early 1993 had some very bad weather, which lead to higher electric revenues. Normal weather conditions are projected for 1994. A discussion followed on the impact of ITY's shutdown on the City, as well as the BPA. Director Godbey then continued to review the Light Fund's revenues and expenditures. A temporary electrical engineer will be hired to assist Director Titus. Discussion followed concerning "Other Professional Services" and "Miscellaneous Services", both. of which were explained by Director Titus. A list of all these items will be prepared and distributed to the Council members at the next Council meeting. Manager Pomeranz generated discussion as to whether the Council would like to proceed and approve the budget, but wait on some of the capital projects until the Council makes a determination on forming the subcommittee. Director Titus explained the capital projects expenditures by function, what they entailed, why they were needed, and the total cost. Deputy Mayor Sargent inquired again of Manager Pomeranz as to whether this budget would be submitted to a subcommittee for review. Manager Pomeranz explained that the City has some large capital projects planned in a variety of the funds, which will impact the rates over the next several years. Each item does not necessarily need review; however, large items such as substations may benefit by review. Councilman Braun agreed that a subcommittee might save time for the UAC and asked Directors Pittis and Titus their opinions on this matter, both of whom agreed it might save time and money in the future. A discussion ensued on how helpful this subcommittee might be. Director Godbey pointed out that the financial focus has been on the General Fund, and the City really needs to start focusing on utilities and the impact on rates. Director Titus further reviewed his budget. Water/Wastewater Fund: Manager Pomeranz reviewed the Water/Wastewater -4- 2640 CITY COUNCIL MEETING December 8, 1993 Work Session - 1994 construction projects, many of which are included in the CFP. There has been Proposed Budget (Cont'd) $10,000 budgeted for design of the Campbell Avenue utilities, but it will cost more than this. Wi~.the:9~.~t of.~rage tanks, etc., it may not be feasible. The City discussed a contribution of $200,000 to this project for utilities and infrastructure. A consultant was hired by the State who has developed a master plan for the site and is gathering community input. The City is not legally committed to putting anything into this project, but it was a goal of the current Council and the staff has pursued that goal. The City should make a determination in 1994 as to whether or not it wishes to participate in this project beyond the planning. Discussion followed on the Campbell Street project. Review of the Water/Wastewater construction projects was resumed. Director Godbey informed the Council that the City is barely covering costs on water. Water rates have not been increased since April of 1992. The Wastewater Division is financially strong compared to Water, as it is subsidizing the cash flow of the water utility. Director Godbey is working on a bond issue to complete the financing for the secondary treatment plant, as well as financing for some of the capital improvements listed. The City must generate enough revenue to cover its debt, plus debt coverage. The City is starting to pay back loans for secondary treatment, and bonds will be issued to cover the rest of the construction. The rates must be structured to cover operating expenses and debt. There will have to be an increase in water and wastewater rates. In order to meet the debt service and bond structure requirements, net revenues must, by bond ordinance, exceed annual debt service by 25% - 30%. Director Godbey informed the Council that there was a discussion on using reserves to help offset rate increases. City Manager Pomeranz stated that monitoring the City's coverages on bond issues has become much more difficult. At the end of the year, the City must be able to prove debt service expenditure has been properly covered. It is a technical default of the bonds if the City is not in compliance. Director Pittis concluded the discussion by informing the Council that both water and wastewater are influenced by environmental regulations. The City just received its NPDES permit for the outfall for the treatment plant. There is $200,000 worth of testing to be done over the next two years for the wastewater plant, and some of these costs were not included in this budget as the information was not yet ~/vailable. Solid Waste Fund: The Council discussed how upset the citizens are over the increase in solid waste rates. There was no other discussion, as this was recently  .~ discussed at Council meetings. ~ ~ Internal Service Funds: Director Godbey explained that Internal Service Funds are ~ ~ those funds that provide services to other funds and operate on a reimbursement basis. There is basically no profit or loss involved. She provided a more extensive ~,~211~)~ DOC)' '~~ :~D~ explanation of the funds, and noted the Equipment Services Fund does two things: ~ ~ :~ ~ maintains the City equipment and provides a financing mechanism so that there is ~~~ enough cash in the fund to replace equipment as needed. Director Pittis explained how it was decided which pieces of equipment needed replacement, and the process of obtaining approvals for replacement. ff.srx__t,,C - Information Systems Fund: Director Godbey stated that Information Systems is ~ another internal service fund under the auspices of the Finance Department. It ~ .. provides maintenance of the IBM system and the network. She reviewed the ~~~[.~ ~information pertinent to the fund and explained the realignment of staff. .)4~jjL ~b~_~ Self-lnsurance: Manager Pomeranz explained that there are no real changes in this ~ ~ ~ area, other than the City is vacating the medical self-insUrance program to join AWC. There will be one less employee in the department. Fiduciary Funds: These are basically trust funds of the City, and cover Firemen's Pension Fund, Esther Webster Trust Fund and Recreation Activity Fund. Councilman Braun addressed the Fireman's Pension Fund, as he was concerned over the ending fund balance of > $700,000, and wondered if this kind of money was necessary to be actuarially sound. Director Godbey explained that the City will be seeking another actuarial study in 1994. Councilman Braun felt $300,000 as an actuary figure should be within the ballpark, and the balance of $500,000 could go back into the General Fund. Treasurer Ziomkowski explained that in 1989,there was an actuarial study and the City was underfunded at that time, which is why $10,000 of property taxes are being contributed to this fund. Esther Webster Trust Fund: . Deputy Sargent Mayor expressed concern that a contract with the Director was approved this past evening at the Council meeting before the budget had been studied. She reminded the Council that the Board had 2641 CITY COUNCIL MEETING December 8, 1993 Work Session- 1994 approached the Council mid-year seeking to make the Director full-time. The Proposed Budget (Cont'd) Council did increase him to full-time and it was to be reviewed at the end of the year. She reviewed the information given to the Council last night regarding revenue and asked staff if they were satisfied that there are sufficient funds to keep the Director on full-time. Manager Pomeranz reminded the Council that the contract is renewable annually. Deputy Mayor Sargent pointed out that the contract had been changed to read that at the end of the year it could be renewed for two more years by action of the Trustees Board and the Parks Director. Manager Pomeranz replied that this could be changed, and that there is also a 30-cancellation clause. There was further discussion on the Fine Arts Center. It was the general consensus of the Council that the Director would be full-time in 1994, and this would be reviewed again next year. Capital Imorovement Program: Manager Pomeranz reviewed the information provided in the budget document. The CIP projects have been discussed in the individual department budgets. Director Pittis pointed out that these are multi-year projects. Apoendix: Manager Pomeranz reviewed the salary ranges and miscellaneous information with the Council. Deputy Mayor Sargent commented on the fantastic budget and how it was easily understood. She expressed thanks to staff for their efforts. Manager Pomeranz will be on KONP next week to talk about the budget; Council members are welcome to join him. ADJOURNMENT: The meeting adjoumed at 8:45 p.m. Clerk q ' -6-