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Home My WebLink About1988-09-14 88-383 ORDERMroducad For passage ❑ First Reading El Referral page_ of— 88-383- �- Date _9-l§ Item No. Item/subject: Providing for Public Vote on Proposed Charter Amendment. - 38 Limitation on Gross Annual Expenditures Budget (Excluding Responsible Department Enterprise Funds) Legal Commentary: This item should not be adopted until after the Council has conducted a public hearing on the proposed amendment. Ceyan er Head Managers Comms^ents:-��t ff,�, was. cm," 4.aa.s..7 uD .YuJtd1 . µ�t� C1(Y MevLd Associated Information:C Budget Approval: ae Finan e Dire Legal Approval: A �p �UISM� <irY so/i.imr Mroducad For passage ❑ First Reading El Referral page_ of— 88-383 Aedpmd to Cmmdm Tilley, September 14� 1988 r CITY OF BANGOR (TITLE.) VffTDCtp .._. __ PrwrdlBg Lpr.RYblip vote oa-Proposed Charter, Amendment_.. -- 38 Limitation on Gross Annual Expenditures Budget (Excluding Enterprise By Us City CemwJ of she City of Beeper.- OEE/EEEDe TBAT accordance With 30 y Clerk 55 1911 et set. baa as amended, the City Secular Oftr lrnereby orders the City Clerk to place on a ballot at the next question: Municipal Election ro be Held m November 14, 1988 the following gnP5t161: 'Shall the municipality approve ins charter amendment printed below?' That the following harmer City Charter Article VI Section 5 be amended by adding a new paragraph (a) as follows: -Notwithstanding any other provision in Section 4 or 5 to this Article VI to the contrary, the gross annual expenditures budget (excluding Enterprise Funds) adopted beginning with the next municipal fiscal year following the effective date of this amendment shall not exceed by more than three percent (38) the gross annual expenditure budget (excluding Enterprise Fulls) for the next previous municipal fiscal year. In the event there is a deficit in any Interprise fond at the end of my municipal fiscal year, the City Council shell provide funds in the budget for the next municipal fiscal year sufficient ro cure amid deficit. Any expenditure of funds to cure Enterprise Fad deficits shall he included in the computation of the three percent (38) expenditure limit provided herein.- and be it further, OROER80, THAT the City Clark take all necessary action at least 2 weeks prior to said Regular Election to provide information for Baogor voters on said proposed amendment as required under 30 M.R.S.A, 5 1915(3). and be it further, oRDEREH, THAT if said amendment is adopted by Ne voters at said Regular Election it shall take affect on Explanation: the purpose of the proposed amendment is to limit the gross anoual expenditures budget (excluding Enterprise Fuels) for each future nunicipal fiscal year to no more than three (38) percent of the gross annual expenditures budget (excluding Enterprise Funds) for the next previous municipal fiscal year. yY 88-383 ORDER In City Council September 14,1988 -. consider next meeting Title, .... YXnSJWig tar. YnbJ Yarm an, Proposed Charter Amendment - 3% Limitation CitClerk k U' ............................ Y G Annual Ex ditures odget (Excluding Enterprise Funds) on�W Assigned to IN QTY 03uteCCM SIIal£b®ER 26,1988.01 ..... u!Vi.!A--Y........ i..... PMF%m® AIS PASSED Arzen1 byn tint n4 n U Counc"loran 14 aadf]in9 8 and in Y' Ya sY-�v�esdd Soue w,e 30,1989 City Clerk W1ER-0FFICE � City Manager's Office W1E: September 28, 1988 1U: Honorable Chairman and Members of the City Council PIiM: Edward A. Barrett, City Manager SHflIIXT: Pry^ 3% Expenditure Limitation As I'm sure you are all by mwa, the City Council has acted to place a proposed Charter Amendment On the November 8th ballot which, if adopted, would result in a 3% expenditure growth limitation onOur aual General Fund budget. I also know that a lot of you have gnestionsregarding what the impact of such a proposal would be on the City's Operations. In Order to provide you with at least some background information, enclosed you will find a copy of a memorandum which I prepared for City Council discussion of the proposal. After you have reviewed this information, please feel free to give me a call if you have any questions and/or need any additional information. I also plan to discuss the proposal somewhat at our next agenda meeting on October 4th at 10:00 a.m. Over the next few months, I as sure we will all be asked many times to convent On this proposal and/or to express our Opinion. If you a approached and questioned by the media or by other groups, I would suggest that you try, as far as possible, to limit your comments to the provision of factual information. I would also offer each of you the Option of referring such questions to my office should you feel uncomfortable in handling than directly. I am also somewhat concerned that we as an organization not permit this proposed charter change to interfere with our basic day to day Operations. I know that this i m asnof great ern to Our employees, but I think we need to stress toallof them that we to continue to do Our work and that the most positive thing that we can do is to emphasize public service and public responsiveness throughout this period. Over the next several weeks, I will try to schedule sone time to meet with various employee groups if they am an interested in order to answer any questions which they may have and to address concerns as to how wewill continue to Operate should this proposal be Adopted. If you feel that there is such an interest among your employees, please feel free to let me know so that a meeting time can be arranged. My goal, again, is to get through the next several months with as little disruption to Our organization and our Operations as possible. I would very much appreciate your help and assistance in maintaining a feeling of normality onggl Our ! /]MA a fl' O>2lria Edward A. Barrett faC/idr Enclosure Ct.`V CG_ t City Manager's Office HTE: September 1, 1988 M: Honorable Chairman and Members of the City Cornell FIC11: Edward A. Barrett, City Manager - SU6lkZf: Proposed Charter Amendment — Expenditure Limitations As we are all aware,effort i underway to gather sufficient signatures to place a charter ame skment proposing certain expenditure limitations before the voters. Since there has been a certain amount of publicity regarding this proposal in the media, I thought it might be useful for me to prepare sate information outlining what the impact of this proposal would have been on this year's budget as well as some general concerns which I have regarding the potential affect of this proposal on the future operation and functioning of the City. The table below presents the appropriate figures for the current budget year: Actual Actual Amount FYN Budget Add 38 FY89 Budget Over Cap School $16,351,89 $16,842,412 $18,592,283 $1,749,871 City 16,638,530 17,137,685 18,421,013 1,283,328 Total $32,990,387 $33,980,097 $37,013,296 $3,033,199 As you can see, the overall budget would have been reduced alightly more than $3 million fran the figure adopted. Of this, approximately $1.3 million would have been cut from the City aide of the budget assuming that the City and School side both would have been allowed the flat 38 increase. City Budget Considerations In order to evaluate the affect of such a reduction, it i necessary to briefly review the major factors influencing the increase intheCity's budget. Among these were: 1. Funded AWve Current Requests $300,000 This included four additional Police officer positions, an additional groundsperson for the Forestry crew in Public works, the employee classification study, Eclice Station maintenance, two replacement vehicles in excess of the Reserve FLM and a number of minor equipment purchases. -2- 2. Credit Reserve Fund Appropriation $100,000 This was a first step towaN replenishing the Credit Reserve or emergency fool. 3. Taxes Paid to County $1450050 This amount is not under our control. 4. City Nursing Facility Contribution $ 96,864 This is the increase in City subsidy required to support the Nursing Facility. 5. Maine State Retirement System $328,911 7W City's contribution tawaN the employee retirement system. 6. Blue Cross and Blue Shield $ 64,509 The City experienced a 338 increase ro be generally split on a 50/50 basis with our employees. 9. Cost -of -Living $350,000 The Council again generally approved a 49 costrof-living increase for emphoryWs. 8. Transfer of street and sidewalk expense frau $325,000 bonded debt to operating budget. Certainly a number of these expenditures could have been avoided and the overall increase in the budget reduced. This would include: Above Current Requests $ 300,000 Credit Reserve 100,000 Streets and Sidewalks 325,000 Cost -of -Living 350,000 $1,0)5,000 The remaining increase could not have been so easily handled, at least on one-year basis. Please also note that these reductions would have bad some onsequencas. For example, not funding the street and sidewalk pr,gram would have returned these costs to banded debt (at an increase in our bond payments) and would have contributed to higher long-term costs due to interest charges. Providing our employees with no cwt -of -living would have Won perceived as unfair, world contribute to additional problems of attracting and retaining quality employees during a period of full - employment in the area, and may have lead to greater efforts of unionizing our enployees. Even with these reductions, approximately $200,000 in additional reductions would be required to stay within the limit. These reductions can basically cone either fron the City's maintenance fads, an area where we are challenged to keep up, from personnel reductiox, or from accounting or budgetary procedure changes designed to reduce the City's gross general fund budget. there is no doubt that the City side cf the budget could have been brought n at or below the 38 increase limit. However, after several years of such limits, it will be inevitable that such an expenditure limitation will result in service reductions. -3 - Concerns Fegarding Expenditure Limitations T"nere am a number of general concerns which I have regarding expenditure limitations, particularly at a 3% level. These include: 1. Fate of Inflation. Historically, the annual rate of inflation exceeds 3% in most years. within the last ten years, inflation rates of wet 108 have been experienced. A flat 3% limit allows no flexibility to respond to such pressures. 2. Growth Rates. We are currently enjoying relatively strong economic and construction growth and can assume that our population is also graving. Tnis growth results in an increase in both the number of people requesting services and the size of the City's infra- structure. Wren growth and inflation rates are coupled, they currently far exceed the 3% limit. Lack of available recould conceivably require the City to adopt policies to severely restrict all or certain types of development. 3. Uncontrollable Comm. Certain items in the City's budget are net controllable. Several single examples include the County Tax and Welfare expenditures. As these and other similar items rise, they will consume a portion of the allowable increase. This year, County Taxes increased $145,050. Assuning the City side of the budget was allowed its 3% increase of approximately $500,000, this increase alone would represent war 25% of the City's total allowable budget Just as times of economic growth may impact the City's budget, times of high unemployment may impact our welfare costs. 4. Fuployee Costs. Ac a general principle, I do net believe we can consistently held our costa for wages and benefits substantially below the rate of inflation. This will result in drastically creased turn -war rates and poor employee morale. The net effect will be lwered productivity and higher costs due to workers' eampeiration, accidents, and recruiting expenses. Over time, the City will truly benne an employer of last resort unless a substantial general downturn occurs in the local economy. In addition, the eventual need to reduce services and employment levels will largely eliminate job stability within the City reducing its appeal to quality employees and managers. 5. Incentive to "Creative Amounting.' The inflexibility of a 3% limit will invariably lead to what I'll call -creative accounting" for lack of a better term. Since the General Fundis limited, ways will he found to mown certainout of the General Fund or to drop them all tagether. This could include, for example, Sanitation services. The City could move garbage collection and disposal out of the General Fwd into a separate enterprise fund and bill for such services. This would allow for a greater increase in the General Find budget. Other areae where swell funds could be established could include Iransit, Central Garage, and even, at least potentially, such dropas Code Enforcement. Alternatively, certain services could be ped. Again, Sanitation cones to mina. citizens could be required to contract for disposal services much as private firma now, do. while zone such changes may to valid, they should he made on the basis of reason and financial policy, not because of the need for spending -4- 6. Capital Expenditures Requiring Bonded Debt. Cur ability to issue new lads for General Punct purposes would be limited to an amunt wnicn could only replace the debt service on bonds to be Said off. Should a need arise for a major capital improvasent, such ingzovement could conceivably require the elimination of program or personnel from the General flits. 7. Enterprise Auris. while we always strive to insure that our enterprise funds support themselves, we do recognize that this may not always he the was. Something as unpredictable as the weather can conceivably force such enterprise funds as Bass park and the Colt Course into a deficit position. Should this have to be covered from General Fund sour, it falls within the 3% limit. In addition, we can predict that we may nave to borrow money for repairs and upgrading to the Auditorium and Civic Center. Depending on the size of the need, a portion of these were may have to be assumed by the General Fund for a period of time Cur choice again may be to continue to defer maintenance at a long-term greater cost in damage W the facility or the reduction of General fund programs and services. Further, the Council's flexibility in how enterprise funds re handled may he restricted. We are now considering whether to continue to operate the track and fair. With a 38 limit on expenditures, we could rot afford to risk the possibility that these operations would loose money in one year due to had weather. To avoid this possibility, I believe we would prudently conclude these and perhaps other operations should to contracted regardless of what might re our preference based on other policy considerations. 8. potential for Refusing Grants. At the present time, the State is offering the City $5,000 toward an GUI enforcement program. The City's share will he in-kind through the use of already budgeted officer time. Conceivably, the City might be forced to refuse such a grant either because it's already at its 3% level or because the acceptance of such a grant would require reductions in other areas of the budget. 9. Additional Mandates. If the City was required to perform additional services under State or Federal mandates, such services would have to be funded from within the existing budget even if the State provided substantial or total funding for such programs. 10. Bcommic Develoanent. Tire 38 expenditure limit could have a negative effect on the City's ability to compete for future development. While eventually we may be able co offer a lower tax rate, we would be hard Created to offer other incentives orssities. This would include, de for example, need intra-structureimprovementsto support new development. It is also unlikely that we would he able to maintain a substantial Credit Reserve Fuad which would be available for mi packaging industrial or cwereial developnents V It would ne difficult for us to even participate in the cost of roads as we currently do. In terms of residential developrent, we might choose to implement capital development fees, choose not to accept any new streets, or even place a moratorium on new development. New development normally requires City .services and adds to the City's revenue base. Under the 3% limit, the City would receive or only minor benefit from new development in terns of revenuewhile incurring expanded service responsibilities. Overall Impact Overall, adopting a 38 expenditure limit would eventually have a major impact on how the City operates and on the City's ability to provide basic services. over the short -run, i.e., the first me to three years, the City could probably adapt to this limitatim through a combination of responses such as greater efficiency, the "creative accounting" techniques discussed above, and selected service and personnel reductions which would have a limited affect an a large number of our citizens. Depending on such factors as population growth, employment rates, and inflation rates, this adjustment will be easier or border. In the long-term, however, this form of limitation will require substantial reduction invirtually every service area. To illustrate this, the City's General Fund budget in 1980 was approximately $20,900,000. The City's budget ten years later is $37,013,296. Assuming a 3% expenditure cap from 1980 on, the City's allowable budget this year would be $27,250,000. This represents a nearly $10,000,000 reduction inerent expenditure levels. Not only would this clearly require a reduction services and sa levels, it would leave the City in a position where it would be unable to effectively compete for economic development and where the community's overall quality of life would be reduced. Property -Taxes It seems apparent that this proposal has been advanced due to conoern over increasing property values and property taxes. Tbese a reasonable concerns and concerns which should and must be addressed. However,anoverall percentage expenditure limitation goes far beyond addressing the issue of property tax controls or limits. As an example, again using the current year, the $3 million which would he eliminated from the budget would have produced a property tax levy of approximately $17 million dollars as coopred to the prior year's $18 million. Vale represents a 5.68 property tax reduction before consideration of property value added due to new construction. since new construction added about 4 t0 58 to our total value, the average property tax reduction would have been 108 to all property taxpayers be they rich or pour, corporation, business, or single family Mme owner. the reason for this reduction is that other revenues have been increasing at a faster rate than property taxes. Option A number of options exist which may he pursued and which could result in control over property toes. These include: 1. Increased state Fundioa of the circuit Breaker Program for Elderly and Irw-Income Haneowrers. These programs target those groups for which concerns should be the greatest and, if adequately funded, could result in eliminating the fear of being taxed off ones land, at least in most instances. 2. Pursuit of Mditional Revenue Sources. A ane -cent local sales taX mould result in 5.3 million in new revenue for the City and a more than 258 reduction in property taxes. While the most dramatic of such optional revenue eau ces, nrreroue possibilities exist. In the cass of the sales tax, a substantial percentage of these funds would cone from visitors frau other states and Canada, thus recognizing the service impact which these visitors place on the City. 3. Greater Efficiency and Effectiveness. Stags can be taken, both short and long tens, to enhance the efficiency and effectiveness of City services. This could include aof current services to determine if they should be continued wor should be funded by program beneficiaries. It could also include appropriate investments in equipment and technology to produce lag term savings. In some instances, however, it is necessary to "spend money to save money." One current example is the estimated 18 month payback on the City's street light change -out program. $30,000 most he invested this year to save $20,000 next year and every year thereafter. Under a restrictive expenditure limitation, such investments may not be mak. 4. Frocerty Tax Limitations. Reasonably established property tax lMiretions aa a more directed option which can afford sate measure of protection and predictability to the taxpayer. There are numerous variations on this tierce. As one example, a 38 limit on property tax increases would have resulted in a $1.35 million reduction in expenditures for this year as compared to the $3 million under the Market 38 limit. Given the growth in value, this limit world, m average, again have produced a property tax reduction for the average taxpayer. It would also result in an incentive to local government to maximize revenues from non -property tax souThere are numerous approaches which can be taken in this area. If structured so s to preserve some flexibility to meet the requirements of growth, inflation, a potentially unforeseen emergency, and other factors, such limitations can he workable and effective. Tbis list has not attempted to be exhaustive. Father, it attempts to point out that mseeeous property tax relief alternatives exist which can accomplish the dual goals of maintaining necessary local services and addressing the concerns of both the general property taxpayer aM the taxpayer on low and fixed incomes. It is clear that property taxation has been and will remain an issue in both the City of Bangor and the State of Maine. I would urge you all to review the various options and approacMs and to engage in a meaningful discussion of the amort and long term iWlications of these options. I am concerned that a rigid 38 increase limit on the growth of General Fund expenditures will have a substantial long teem negative impact upon the City organization and the community. At the same time, I believe the objective of property tax Control and relief for those in the greatest need of such help can be accmplished while avoiding the negative impacts discussed above. I am, as always, prepared to provide any additional information which you may desire or to clarify any information presented above. If I can be of any assistance, please contact M. Edward A. Barrett, City Manager fAs/j Date: September 26, 1988 To: Members of the Bangor City Council City Manager From: Mary Sullivan, City Councilor 7k U<w Re: Proposed Charter Amendment - 3% Limitation on Gross Expenditures The proposed charter amendment which would impose a 3s 11m V0atlon on gross annual expenditures lexcludlng Enterprise Funds), In essence can be viewed from different aspects: the motivation that impels it; the examination that dissects it; the direction that derives from it. First, looking at the motivation behind it, we all recognize the stranglehold which property taxes have on all citizens of Bangor - on those who own real estate and personal property and on those who are tenants whose landlords pass on tax increases to them. Those who are living on fixed incomes, or subsisting on low Incomes cannot face annual increases without losing ground In tneir struggles to have addend and affordable housing. Recall that all of their expenses have been inoreasing not just taxes - food and clothing costs have been steadily rising - medical, dental, and eyeeare expenses are zooming out of sight. With those on a fixed or lbw income level, the bites get larger while the substance from which they draw remains relatively stable or Increasing at a slower - rate than costs. . 'its petitioners for the 3% limitation on gross annual expenditures feel that they have reached the limit of their endurance - they cannot control food, clothing and healthcare expenses - but feel that they have some control over their municipal expenses. Thus, the motivation that. impels the proposal to amend the charter is a well-intentioned one, deriving from the citizens' frustrations and anger over seemingly hopeless upward spirals.. I recognise their anger and frustrations. I applaud their efforts - I prefer to see people trying to do something instead of just complaining, so their efforts do send a message. Secondly, let's examine the proposal itself - try to analyse it. I believe that a Charter Review Commission should have been established over a year ago. Many times a review allows us to look hard and long at what we are doing and the manner in which we are doing it. I believe that at least we should have a Council Committee to review the Charter ',t and to recommend whether changes in some areas are warranted, instead of handling items one at a time by amendments. However, the proposed amendment, if approved, will have atwo-fold impact on Bangor. There will be short- term and long term effects. In the short run, in order to stay within the parameters, some efficiencies must be Invoked. Such an effect might be good- the release of nonproductive employees, the curtailment of non- essential services, the reduction of the City's participation in develop- ment - all Could be methods to follow In the next few fiscal years. nut the nonproductive worker may not be the one whose job is deleted, the non-essential services may be the ones deemed most necessary by a large segment of our population, and developers who can afford to come in without the t;ity participation will have the upper hand in the direction Of our growth. In the Long run, an absolute reduction must be plannedin the Slone of services offered by the City, In the number of employees to be retained and In the positive attitude being promoted. nein reduction will riot always be hne result of reaction to thewill of the people but to the exigencies of the budget. Specifically, Just as citizens on low incomes must be selective in spending, soon a limit on the Gity will cause it to be selective, requiring expenditures perhaps on less dependable equipment, but it's "all we can afford," instead of on better' investments. Being forced to be selective in sPending is a commendable goal - but at what price? The reduction in services will affect low income citizens perhaps more negatively tnan positively - sidewalks, streets, affordable nousing, public safety - these are all issues to be raised when growth demands increased expenditures. If the answer is that when a necessary expense, in excess of the 3'n cap, must be brought to the people for approval then the city government will not operate effectively, nor efficiently. Of course, there's room for improvement in efficiencies - tnere always is. But what is the essentlal objective of the proposed amendment?? Is it primarily for tax relief? 'That is essential! is it a form of subtle control of economic development? Growth management Is a worthwhile goal! Is it a measure to produce efficiency and effectiveness in City government and operations? We all need to pursue this aim in our lives! Finally, the direction derived from the proposal is that of a message - an agonizing by citizens for tax relief. Their message must be directed With our own to the Legislature in Augusta. Our legislators must recognize that property tax relief IS essential for the survival of our citizens and our municipalities. My thougnts are as follows: 1. The legislature must grant the cities and towns local tax options, such as the ones]cent local sales tax, with the burden failing on visitors equally as on our residents; 2. Tax revenue sharing with neighboring communities must be earnestly pursued- after- all we are all in this together! 3. Pernaps a measure for freezing property taxes when a combination' of age/incomes is prohibitive to a decent subsistence, should be examined (gees beyond the circuit breaker program) 4. Maybe a limitation on property taxes themselves, limiting the annual increase, rather than limiting the gross annual expenditures would be a better avenue to pursue. 5. Tax exempt property (about 50% of property in Bangor is in this category) should be assessed a fee in lieu of taxes. This would be imposed only on tax exempt, income producing property. 6. Our assessment procedure should be carefully reviewed. Our tax rate decreased but our assessments continued to spiral, resulting in a net increase in most property taxes. y. Refusing to participate in subdivisions/developments costs could help to control growth, keep down the demand for increased services, additional infrastructure, more school rooms, and more public safety, or public works personnel and equipment. -3 - These are a few of my thoughts concerning the proposed charter change. I commend the citizens who have worked so hard on the petitions. I oelleve strongly that the citizens have a right to demand accountability. I want the constituents to be active - and I want the people to be made aware of what approval of this particular proposed amendment can do -- all. the positives as well as the negatives. If the plusses truly outweigh the negatives then go for itll