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HomeMy WebLinkAboutMinutes 1986J Minutes Budget Policy Committee Meeting of January 16, 1986 Members Present: Aldermen Nelson, Korshak, Collens Members Absent: None Staff Present: Robert Shonk. Bruce Zimmerman Others Present: Robert Heytow. President, Evanston Police Pension Board; Timothy Schoolmaster, Secretary, Evanston Police Pension Board Presiding Official: Alderman Nelson Summary of Action: The minutes of the December 17, 1985 meeting were approved as submitted. Police Pension F'undinE The Committee requested that Mr. Shonk review the pension materials forwarded in the January 16, 1986 meeting packet. The materials included a comparison of net assets available versus projected benefits on the state actuary basis, a comparison of the same information on the A.S. Hansen actuary basis, and a historical summary of expenditure and revenue by type. Mr. Shonk reviewed the information in the materials and indicated that the percent funded had increased every year since the new funding law went into effect in 1980. Mr. Heytow stated that he was concerned over the use of the percent funded growth as a guideline instead of the growth or decrease in the amount of unfunded liability. The Committee then suggested that Mr. Schoolmaster review the material prepared by the Police Pension Board for the Committee. The materials Included a history of pension payrolls and a historical summary of the amount of unfunded liability. The Committee and representatives of the Pension Board then discussed the use of percent funded versus the increase or decrease in the amount of unfunded liability as a funding guideline. Both representatives of the Pension Board expressed concern that the materials reviewed by Mr. Shank indicated that the percent funded increased while the amount of unfunded liability also increased. They suggested that this indicated the increase in the portent funding of the Police Pension was not sufficient to meet the State's guidelines. Mr. Shonk noted that though the amount unfunded increased the amount of assets grew at an even faster pace. Eventually, at this pace, the amount not funded should decrease. Minutes of the Budget Policy Committee Meeting January 16, 1986....... Page Two Mr. Heytow expressed concern over differences in the actuarial report] and the materials forwarded in the Committee's packet. He also suggested that the Pension. Board needs to know that the City Council has recognized the pension funding problem and has developed an appropriate funding policy. Alderman Nelson stated that he believed the Committee could set answers to the Pension Board's concerns from A.S. Hansen. The Committee and the Pension Board representatives then developed the following lint of questions for the consideration of A.S. Hansen. 1. On page 2 of the 2/28/85 A.S. Hanson actuarial report. data on active participants show none beyond the assumed retirement age. The Police m obers of the Pension Board say that twelve members are over retirement age and question why the report has not indicated that twelve members are beyond retirement age. 2. Why is the State's actuarial present value of $29,937,250 as of 2/28/85 so much higher than the Hansen amount of $25,495,782? 3. If the City continues its present -ate of funding and the percent funded continues to increase, will the amount of unfunded liability eventually decrease from year to year? ,. Referring to the tables prepared by City staff for the Committee's January 16. 1986 meeting, do the final columns which summarize annual Increases in the percent funded and the related footnote have validity? Mr. Nelson stated to the Pension Board representatives that the City has two goals: (1) to comply with State law; and (2) to follow a rational funding policy. The Committee told the representatives of the Pension Board that they would request answers from A.S. Hansen and contact the representatives about a future meeting. Food and Beverage Tax The Committee decided there were no additional issues to discuss related to this matter, and agreed to present their recommendation on the revenue during a Council budget worksession. Other Business Alderman Korshak stated that he would encourage the City Council to consider fair share payments from Northwestern University prior to consideration of revenue additions or program reductions. Kr. Korshak asked the Committee how he should bring this matter to the Council's attention. Alderman Nelson suggested that the Committee take a vote on the use of fair share payments and that Kr. Korshak make his proposal during the January 18, 1986 budget worksession. Alderman Korshak said he would accept this approach. Minutes of the Budget Policy Committee Meeting January 16, 1986....... Page Three The Committee then discussed the merits of fair share payments, with Alderman Collens and Kelson expressing opposition to the concept. The Committee voted 2-1 not to recommend this revenue to the City Council. There being no further business, the Committee adjourned the meeting at 9:00 P.M. • $tacit � . minutes Budget Policy Committee meeting of February 6, 1986 Members Present: Aldermen Nelson, Collens Members Absent: Korshak Staff Present: Robert Shonk, Bruce Zimmerman Others Present: Timothy Schoolmaster, Secretary, Evanston Police Pension Board; Larry Dowling, Consultant Actuary, A.S. Hansen, Inc.; Ira Golan, Executive Vice President Evanston Chamber of Commerce Presiding Official: Summary of Action: Alderman Nelson The minutes of the January 16, 1986 meeting were approved as submitted. Pension Funding Alderman Nelson began the discussion by summarising the Budget Policy Committee's recommended goal for f+jnding the Police Pension Fund. Mr. Nelson stated that it is the Committee's recommendation that the City's goal be as follows: (1) To fund the Police Pension Fund at an annual cumulative increase of not less than 1.91% from the starting point of February 28, 1981; (2) To continue following the City's current pension funding policy as stated in the FY1986-87 City Council Budget Policy; and (3) To fund a consultant to provide a plan for the use of dedicated investments by the Police Pension Fund. Mr. Larry Dowling, an actuary from A.S. Hansen, Inc. and Mr. Timothy Schoolmaster, Secretary of the Police Pension Board, then discussed a number of questions, with Mr. Dowling providing the following answers. 1. On page 2 of the 2/28/85 A.S. Hansen actuarial report, data on active participants show none beyond the assumed retirement age. The Police members of the Pension Board say that twelve members are over retirement age and question why the report has not Indicated that twelve members are beyond retirement age. Response: Both the Hansen and the State's actuarial study use age 65 as the assumed retirement age. Since there are no participants in the fund who are 65 or over, the Hansen actuarial report shows all participants as being before the assumed retirement age. The twelve participants mentioned by the members of the Board who are eligible for retirement, but who have not reached age 65, would therefore be Included in the group of participants who are before the assumed retirement age. 2. why is the State's actuarial present value of $29,937,280 as of 2/28/85 so much higher than the Hansen amount of $25,495,782i Minutes of the Budget Policy Committee Meeting February 6, 1986........ Page Two Response: The only differences between the State's actuarial report and Hansen's are the assumptions on interest earnings and wages. The State assumes interest earnings of 6.5% and a wage progression of 5k. Hansen assumes Interest earnings of 7.5% and a wage progression of 5.5%. The higher Interest earning assumption used by Hansen is the reason for the higher actuarial present values on the Hansen report. 3. If the City continues its present rate of funding and the percent funded continues to increase, will the amount of unfunded liability eventually decrease from year to year! Response: Yes, the amount of unfunded liability will eventually decrease as long as the Interest earnings in the Police Pension continually exceed the interest assumptions of the actuaries. Alderman Nelson emphasized to the representative of the Pension Board that the City's past track record In funding the Police Pension Indicates the City's commitment to comply with State law and increase the amount of funded liability. Mr. Schoolmaster stated that he would discuss the Information provided by Mr. Dowling and the Budget Policy Committee's recommended funding goals with the Pension Board. Mr. Nelson encouraged the Pension Board to contact the City's Finance Director should they become concerned over the funding trend in the Police Pension during the course of FY1986-87. Real Estate Transfer Tax Alderman Nelson asked for public comment on the real estate transfer tax. Mr. Gerald Gordon expressed his concern over the impact of the Council's Budget Policy on the growth in City expenditures. hr. Gordon also stated he was concerned over the site of the fund balance in the General Fund and the related lack of borrowing by the City. Ira Golan, Executive Vice President of the Evanston Chamber of Commerce voiced concern over the use of selective taxes by the City, and said he would encourage the City to develop a policy on limiting expenditure growth. Alderman Collens then discussed the use of broad based taxes versus selective taxes with Mr. Golan and expressed interest in receiving any Information on the use of user fees from the Chamber. Alderman Collens asked staff when the Real Estate Transfer Tax would be implemented if it were adopted in the 1986-87 City Budget. Staff stated that the tax would require a May 1, 1986 implementation date. The Committee stated that the Real Estate Transfer Tax would receive further consideration from the City Council during its budget deliberations. Minutes of the Budget Policy Committee Meeting February 6. 1986........ Page Three Other Business Mr. Golan discussed the Chamber of Commerce projections for FY1986-87 sales tax and income tax revenues. Mr. Golan reviewed the Chamber's assumptions In projecting these revenues. The Committee discussed the Chamber"s projections and stated that they would review the City Manager's analysis of these revenue projections before deciding on whether any changes in FY1986-87 revenue projections are necessary. The Committee set a tentative date of March 5, 1986 for Its next meeting. There being no further business. the westing was adjourned at 9:15 P.M. Staff: minutes Budget Policy Committee meeting of April 24, 1986 Members Present: Aldermen Nelson, Rorshak. Collens Members Absent: Alderman Davis Staff Present: Asprooth, Shonk and Zimmerman Others Present: Ira Golan, Executive Vice President, Evanston Chamber of Commerce Presiding Official: Alderman Nelson Summary of Action: The minutes of the February 6, 1986 meeting were approved as submitted. Communications: The Committee discussed the March 10, 1986 Chicago Sun Time article on the munici- pal budget for Sunnyvale. California. In response to questions from the Committee, the City Manager pointed out that Evanston currently has a process for staff devel- opment of production improvements and economies of scale, but does not provide fi- nancial incentives in return for staff suggestions. The Committee requested that staff gather further Information on Sunnyvale's "pay for performance" system and conduct a survey of other communities' use of incentive programs. Development of a long-term strateAy to address the financial needs of the Ci y and establishment of service or program _riorities The Committee then entered into a discussion with the City Manager on the City's budget preparation process and the establishment of budget reduction options. Among the issues discussed by the Committee and the City manager were: [1) The discussion of budget reduction options by the Council early in the budget prepera- tion process; (2) The feasibility of identifying program goals and priorities; (3) The definition of a private sector versus government function; (4) The influence of advocacy groups on the City Council's budget process; (S) The impact of the current budget policy property tam limitation on expenditures; (6) The differences between core City programs and services versus those which may be considered non -core pro- grams; and (7) The difficulty in comparing the level of Evanston's service delivery to the service levels of other communities. Alderman Collens stated that the Committee on Committees is currently reviewing some National League of Cities (NLC) literature which may help the Committee eval- uate a Council budget process. The Committee agreed to keep this item on its agen- da and asked Alderman Collens to forward the NLC literature to Committee members. The City Manager also stated that he would forward literature to the Committee which could provide some ideas on the budget process. Revenue Survey The Committee briefly reviewed the Illinois municipal Revenue Survey prepared by Northern Illinois University. Alderman Nelson suggested that the Committee study Minutes of the Budget Policy Committee April 24, 1986..............Page Two this survey and attempt to determine how Evanston's. use of revenues compares to other communities. The Committee and staff then discussed some of the difficulties in comparing communities' financial data without extensive information on the com- munity's socio-economic characteristics and the level of service delivery. Alderson Korshak suggested that it sight be useful to compare Evanston's financial data with Ithaca, New York because Ithaca has some characteristics similar to Even- ston and is the home of a private university. The Committee also suggested that the Cambridge. Massachusetts city budget and other financial date be compared to Evanston's. The Committee agreed to study the Illinois Municipal Revenue Survey and requested that financial data from Ithaca and Cambridge be studied In relation- ship to Evanston. Pension Funding: Policy The Committee considered a policy for funding the Fire Pension Fund. It was sug- gested that the Committee adopt the sane funding policy for the Fire Pension Fund as previously adopted for the Police Pension Fund. The City Manager suggested that the policy be stated so that the property tax levy for either pension fund should never exceed the actuary's recomstended levy. The City Manager also stated that once the actuary's recommendation is attained for one pension fund, the funding should not be lowered In the subsequent year In order to increase the levy for the other pension fund. The Committee agreed that the policy for funding the Fire Pension Fund should be the same as that previously adopted for the Po -ice Pension Fund and asked staff to add language concerning compliance with the Hansen actuary funding recommendation. The Committee also asked that the Police and Fire Pension Funds be treated separ- ately from the General Fund and Debt Service Fund under the City's Budget Policy. The Committee voted 3-0 to recommend this funding policy to the City Council. Review of the 1986 Unaudited Financial Statements Staff emphasized to the Committee that the March 27, 1986 Unaudited Financial Statements did not include the final Bills List and payroll expenditures for FY1985-86, and were therefore not complete. The Committee reviewed each of the unaudited fund summaries and discussed the fol- lowing Items with staff: (1) Revenue from Parking Fines; (2) Mass Transit Fund RTA Handicapped Grant revenues; (3) A number of unexpended appropriations in the FY1985-86 Revenue Sharing Program; (4) Other operating expenses in the Sewer Fund; and (5) Sale of Surplus Property revenue in the Fleet Services Fund. In response to a question from the Committee, staff stated that the FY1985-86 financial audit was to be available by August 31, 1986. The Committee scheduled its next meeting for May 15, 1986 at 7:30 P.M. There being no further business, the meeting was adjourned at 9:45 P.H. Staff: Bruce Zimersan Minutes Budget Policy Committee Meeting of May 19, 1986 Members Present: Aldermen Nelson, Collens, Korshak Members Absent: Alderman Davis Staff Present: Robert Shank Others Present: Alderman Radon Presiding Official: Alderman Nelson Summary of Action: The minutes of the April 24, 1986 meeting were approved as submitted. Meeting Schedule It was noted that the next meeting of the Committee was scheduled for June Sth. After discussion, the members rescheduled the next meeting for Tuesday evening, June 3 at 7:45 P.M. The Committee set the agenda for the June 3 meeting. The Committee is to discuss the April 25. 1986 memo by Alderman Nelson titled, "How to Evaluate Programs and Establish Priorities" and the impact of the current budget policy property tax limitation on expenditures. Alderman Collens referred to publications titled, Resource Directory of Council Innovations: 64 Reasons Not to Reinvent the Wheel and Tools_ for Leadership: A Handbook for Elected Officials, and asked that staff distribute designated excerpts to the Committee. Reference by Alderman Roden Concerning Real Estate Transfer Tax_ Exemotione Alderman Raden joined the Committee for this discussion. The Real Estate Transfer Tax, as adopted by the City Council on Match 24, 1986, exempts real estate transactions of governmental bodies and real estate transactions when one charitable organization conveys property to another charitable organization. The Committee members discussed this reference. Alderman Korshak moved to amend the existing Ordinance 50-0-86 by striking out all the language after the first clause in Article A "Transactions involving property acquired by or from any governmental body,...". This would eliminate the exemption previously granted to real estate transactions between non -governmental charitable organizations. Alderman Radon stated that she believes the exemption is appropriate for governmental bodies but not for other charitable organizations. She stated that the real estate transfer tax is similar to the utility tax and other consumer taxes and no exemptions are granted to charitable institutions in Minutes of the Budget Policy Committee Ray 19, 1986..............Page Two the administration of these taxes. After further discussion, the Committee members present voted 3 to 0 to recommend adoption of this amendment by the City Council. Revenue Manual Alderman Nelson mentioned the New York City Tax Guide that he had received from Aldermman Warshaw. In reference to this, Alderman Nelson requested staff update the City of Evanston Revenue Manual and have it ready for City Council use at budget review time. Material covering alternative taxes, previously considered but not now utilized, is to be included in the manual. The meeting was adjourned at 7:25 P.M. Respectfully submitted, Robert A. Shonk Finance Director Members Present: Members Absent: Staff Present: Presiding Official: Summary of Action: Minutes Budget Policy Committee Meeting of June 3, 1986 Aldermen Nelson, Collens, Davis Korshak Joel Asprooth, Bruce Zimmerman Alderman Nelson The meeting was called to order at 7:55 P.M. The minutes of the Mar 19, 1986 sleeting were approved as submitted. Pension Funding: The Committee reviewed and approved the statement summarizing the polity for funding police and fire pensions. The Committee requested that staff incor- porate this policy into the City Council's Budget Policy. Coemittee Priorities The Committee reviewed and approved the Chairman's suggested Committee pri- orities. and requested that the priorities be forwarded to the City Council. Budget Process The Committee continued its discussion concerning the evaluation of City pro- grams and the establishment of program priorities. Among the items discussed by the Committee were: (1) City Council goal set- ting; (2) Budget decision -making in a political process; (3) Program informa- tion included in the City Budget; (4) The use of a consultant; (5) The iden- tification of core versus non -core City programs; (6) City Council Committee reviews of City Department programs and budgets, (7) The establishment of City Council priorities to guide staff in the preparation of the budget; and (8) The different budget and program priorities among Council members. The Committee expressed interest in identifying core versus non -core programs and in developing City Council priorities to guide staff early in the budget process. The Committee requested that staff consider the feasibility of in- corporating these items into the budget process and provide their recommenda- tions to the Committee at its next meeting. The Committee agreed that it Would further discuss the Council's budget process at its July meeting. There being no further business, the meeting was adjourned at 9:00 P.M. The next meeting of the Budget Policy Committee was scheduled for 7:45 A.M. on Tuesday. July 8. Staff: ilembers Present: Members Absent: Staff Present: Presiding Official: Others Present: Presiding Official: Summary of Action: Minutes Budget Policy Committee Meeting of July 8, 1986 Alderman Nelson, Collens, Davis Alderman forshak Joel Asprooth, Hobert Shonk, Bruce Zimmerman Alderman Nelson Ira Golan, Rxecutive Vice President, Evanston Chamber of Commerce Alderman Nelson The meeting was called to order at 7:50 A.K. The minutes of the June 3, 1986 meeting were approved as submitted. SujAet Projections Staff provided the Committee with an overview of the budget projections for FY1987-98 and future years. Among the points highlighted by staff were the projected decrease in the debt service levy, the lack of growth in non -property tax revenues, the termination of General Revenue Sharing on September 30, 1986, the small CPI property tax guideline projected for 1907-88, and the lack of sufficient growth in projected revenues to support the projected continuation level of expenditures, In response to a question from Alderman Davis, Mr. Shonk explained that the City had experienced decreases in telephone and natural gas utility tax revenues in recent years. He explained that the decrease in telephone revenue was due to the divestiture of A T 6 T and the resulting loss of the tax on leased equipment. Mr. Shonk also stated that natural gas revenues were down due to the decreased cost of the alternative fuels used in the production of natural gas. It was also noted that Northern Illinois Gas had not imposed a rate increase in many years. Based on this experience, the staff explained that utility tax revenues were projected to decrease in the coming year. The Committee also discussed the projected revenue from sales tax. Staff explained that the sales tax revenue in the first two months of this year was below the budgeted level. Based on this experience and available information on retail activity, staff stated that the 1987-88 sales tax revenue was projected at a level below the current year's budget. The City Manager stated that as additional information becomes available on current year revenue and expenditure performance, staff will update these projections. Changes in business activity and vendor cost estimates and the additional availability of other information could also lead to revised projections. The Manager emphasized that, based on current information, Minutes of the Budget Policy Committee July 8, 1986..............Page Two these projections are realistic estimates of revenue and expenditure activity for FY1987-88. HudAet Policy The Committee then reviewed the proposed budget policy for the coming year. The proposed policy included a recommendation from staff that the property tax guideline be amended to offset the loss of General Revenue Sharing funds. Staff explained that in prior years a portion of these funds had been transferred to the General Fund revenues, and used to purchase community social services and fund eligible expenditures. The average amount of this transfer over the past four years was SSO0,000. The proposed policy recommended that in order to offset the lose of Revenue Sharing, $S00,000 be added to the property tax base figure used in calculating the coming year's levy. Staff explained that this would be a one-time addition to the base levy. Alderman Nelson stated that as an alternative to this approach, the City should take advantage of the growth in the property tax base. He referred to Statement IS of the Budget Policy, which stated that the net increase in the tax base resulting from economic development projects should not be subject to the property tax limitation. Alderman Nelson stated that the city had never taken advantage of this provision. Alderman Nelson proposed that the City calculate the net growth in the property tax base resulting from economic development by subtracting the CPI inflated equalized assessed value (EAV) from the actual LAY. He suggested that a portion of this growth in the base should then be used in calculating an amount to be added to the property tax. Aldermen Collens and Davis both expressed reservations about Alderman Nelson's proposal. Among their concerns were the complexity of the formula and policy that would be required to implement the proposal, the volatility and unpredictability of the equalized assessed value of property, the treatment of the Tax Increment Financing District, and the treatment of economic development under the proposal. Following considerable discussion, Alderman Nelson said that he would withdraw his proposal and would propose that Statement I5 be eliminated from the Budget Policy. The Committee then unanimously approved the proposed Budget Policy with an amendment to eliminate Statement 05. Bud et Process The City Manager informed the Committee that staff would again be submitting budget options to the City Council. He explained that these options would reflect staff's views of what are essential and non -essential City programs. There being no further business, the meeting was adjourned at 9:20 A.M. Staff: