TOWN OF OCEAN VIEW

Long Range Financial Planning Committee

Minutes of Initial Meeting on the FY09 Budget

November 13, 2007

1.      Pursuant to notice duly given, a meeting of the Long Range Financial Planning Committee of the Town of Ocean View (the “Committee”) was held at the Ocean View Town Hall on Tuesday, November 13, 2007 beginning at 5:30 PM.

2.      CHAIRMAN:  Town Manager, Conway Gregory, presided and Lee Brubaker acted as secretary of the meeting.

3.      MEMBERS PRESENT:  The following Committee members, representing a quorum, were present:  Mayor Meredith; Councilmen Thomas and Wichmann; Cliff Mitchell; Maureen Nicholson; and Bill Schury.  Member Marc Grimes was unable to attend.  Also in attendance were Town staff members Lee Brubaker, Ken McLaughlin, and Charles McMullen. 

4.      CALL THE MEETING TO ORDER AND AGENDA APPROVAL:  Mr. Gregory called the meeting to order and the Pledge of Allegiance was recited.  There were no changes to the Agenda and upon motion made, duly seconded, and unanimously carried, the Agenda was approved.

5.      INTRODUCTIONS:  This was the first meeting of the Committee that was appointed by Town Council to review the FY09 Budget.  The members introduced themselves and the Chairman thanked the members for their participation in this important committee.

6.      MEETING SCHEDULE AND GOALS AND OBJECTIVES FOR THE COMMITTEE:  Mr. Gregory suggested that the Committee plan to meet on the 2^nd Tuesday of each month from 5:30 to 7:00 PM until such time as the Committee is prepared to recommend approval of the FY09 Budget to Town Council.  He informed the Committee members that the annual budget needed to be adopted by Town Council as an ordinance prior to the end of the current fiscal year – April 30, 2008.  The Committee agreed to follow this meeting schedule.

The Chairman next suggested the following goals and objectives for the Committee:

·         The Committee’s primary focus should be on the long term (out years) financial issues facing the Town and infrastructure and local economic issues – the macro level.

·         The Town Manager and his staff will focus on the micro level, especially as to the operating budgets and individual line items for FY09, the next fiscal year that runs from May 1, 2008 through April 30, 2009.

·         The Committee was first established in 2001 and there is no set number of members for the Committee.  Mr. Gregory informed the members that Town Council had selected the members for the current year and that the Committee composition would, based on Council’s agreement, change for the next fiscal year.  Town Council’s Resolutions regarding the Committee and its composition will be distributed at the December meeting.

7.      REVIEW AND DISCUSSION OF THE INITIAL DRAFT OF THE FY09 BUDGET:  Mr. Gregory referred the Committee members to the draft budget for FY09 through FY13 (Revision C dated November 8, 2007) that had been distributed for members’ review prior to the meeting.  He noted that the Town’s staff had, through a series of meetings, settled on the operating and capital budget for the next fiscal year (FY09) and did not anticipate making any significant revisions, unless the Committee members noted a major omission.  Using overhead slides, Mr. Gregory led a discussion through the budget document.  He specifically covered the following key points:

·         When developing this budget, several goals and objectives were established:

                                                   i.      Balance the budget

                                                 ii.      Reduce dependency on Transfer Taxes

                                                iii.      Make Town government more efficient and use available resources better

                                               iv.      Deliver more amenities to the Town’s citizens

·         This budget meets two key objectives:

                                                   i.      Balance the budget within the next five years

                                                 ii.      Maintain operating capital at approximately $800,000 (enough to cover four months of cash flow)

·         The budget encompasses all known major revenue sources including major grants and a recently annexed development (Canal Way Landing)

·         The Grimes/Magill Budget Rule has been followed – every budget expense increase must have a corresponding budget decrease

·         The downside risk is greater than the upside potential – many of the key assumptions rely on (a) the real estate market turning around and (b) Transfer Taxes returning to the levels seen in FY04 through FY06, during the build out of Bear Trap and several other large developments

Revenues – Mr. Gregory reviewed a series of charts which showed, among other things:

·         The level that disbursements exceeded revenues would decline each year until FY09 when revenues would exceed expenditures by approximately $60,000. 

·         The significant, positive impact that Transfer Tax collections had made on the Town’s revenues in prior years and how the continuing collection of these taxes were a critical component of this current budget.  He also pointed out that through FY13, this budget includes approximately $1,000,000 in Transfer Tax collections from Canal Landing.  This is a high risk assumption.

·         Other key revenue assumptions were reviewed and the impact of these assumptions on the total revenue projections was discussed.

Operating expenses – Key assumptions regarding operating expenses including salary and personnel related expenditures were discussed.  These assumptions were incorporated in a detailed operating budget for each of the Town’s three departments – Police, Public Works, and General/Administrative.  Mr. Gregory reviewed a chart that depicted the growth of government from FY00 through FY13.  He pointed out that salaries and benefits were projected to represent approximately 2/3 of the Town’s annual budget during the FY09 through FY13 periods.

Mr. Gregory pointed out that for the period FY00 through FY13, the growth of Town operating expenditures (non-capital), even without the addition of any more employees, was growing at the rate of 8 to 10% per year, or about four times the projected rate of inflation.  He noted, however, that this same trend has been experienced by government at all levels and that the requirements and expectations on government have been increasing over the years.

Capital expenditures – Mr. Gregory next reviewed highlights in this budget relating to capital and infrastructure needs including drainage, street repairs and improvements, new DPW building, administrative space needs, new police vehicles, and an unallocated amount intended to cover unanticipated needs.

Final comments – Gregory concluded the presentation by reviewing the potential effect of certain upside and downside possibilities and the impact of the depressed real estate market on (a) Transfer Tax revenues (including Canal Landing) and (b) building permit fees.  The results of a study that will be performed by the Town’s engineer to determine the reasonableness of the Town’s recently established Capital Reserve Trust Fund also could have a significant upside or downside impact of the long term budget.  He also described certain “options” that may need to be taken (but probably not until FY11) if the approximately $1,000,000 in revenues from the Canal Landing project are not realized.

Gregory ended with a review of how this FY09 budget had been able to “swing” the projected fund balance at the end of FY13 by approximately $2,300,000 – that is, from a deficit fund balance of $1,375,000 in the FY08 budget to a positive fund balance of $922,000 in this current draft of the FY09 budget.  He thanked the department heads for their support in putting together this budget and stated that the Town’s staff had been challenged to find ways to be more effective in the delivery of services to the citizens and better define those services and was committed to “making it work”.

8.      COMMITTEE INPUT AND COMMENTS – Gregory next opened the meeting for comments and questions on the FY09 budget.  He suggested the Committee focus on major matters and if there were lesser comments or suggestions, they be provided off line.

·         Mr. Thomas commended the Town Manager for a thorough and clear presentation, but noted that he had a major problem with the assumptions made relating to Canal Landing.  Based on the current depressed real estate situation in this area, he believes it is highly unlikely that the Town will see the level of revenue from this project that has been included in this FY09 budget.  He is aware that the purchase of the land has not yet occurred which could indicate the project is in some jeopardy.  He also recognized that this budget had “pushed out” Canal Landing by one year compared to the FY08 budget and that those projections had “shaved”, by 50%, the build out projections made by the developer of this project.  He concluded with the comment that this exposure had been recognized during the preparation of the FY08 budget but the Committee didn’t do anything about the problem at that time and, as a result, the problem has been deferred to the current year.  Thomas believes that the Canal Landing project needs to be closely followed but pointed out that there is no real impact on the annual budgets until the end of FY10.

·         Several Committee members suggested that the Council may need to consider raising taxes above the 3% increases provided in each of the years FY10 through FY13.  The Mayor suggested that we should consider a 5% increase instead of the current increase provided for in this plan.  Mr. Wichmann pointed out that the impact of these increases on the average tax bill on a house in Ocean View was likely to be less than the taxpayer’s monthly cable TV bill.

·         Mr. Mitchell asked that Town staff review and report back to the Committee the impact on future year costs and to the Town if the drainage and street repair/maintenance projects recommended by the Town’s engineer are deferred for too many years because of a lack of current revenue for capital projects.  He noted that all of the Town’s capital assets should be reviewed to evaluate major, on-going maintenance and repair costs.  He also suggested the Town look at whether any cost savings could be generated by outsourcing.  Mitchell said there were several calculations that he doesn’t quite understand but he will provide details off line to the Finance Director.

·         Ms. Nicholson said that although she saw evidence of trying to hold expense increases, she didn’t see any real cuts being made in this budget – sometimes it is necessary to cut expenses, services, etc. if the revenues to support the business are not available.  Mr. Thomas agreed that he didn’t see anything being cut in this budget.

There were no further comments or questions and Mr. Gregory thanked Committee members for their participation in this important project and for their input.  He reported that he will continue to work with Town staff to refine this budget and respond to the questions noted above and any additional comments provided subsequent to the meeting.

9.      NEXT MEETING:  The next meeting of the Committee will be held at Town Hall on Tuesday, December 11, 2007 beginning at 5:30 PM.

10.  ADJOURNMENT:  There being no further business to come before the Committee, upon motion made, duly seconded, and unanimously carried, the meeting was adjourned at 6:45 PM.

                                                                                                _______________________

Lee Brubaker

Secretary