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FEDRAC MINS 10-26-2008 ~ Federal Way City Council Finance/Economic Development/Regional Affairs Committee Tuesday, October 28, 2008 City Hall 5:30 p.m. Hylebos Conference Room MEETING SUMMARY Committee Members in Attendance: Committee Chair Park, Committee Member Faison and Committee Member Duclos Councilmembers in Attendance: Councilmember Burbidge and Council member Kochmar. Staff Members in Attendance: City Manager Neal Beets, Assistant City Manager Bryant Enge, Police Chief Brian Wilson, Deputy City Attorney Aaron Walls, Finance Director Tho Kraus, and Deputy City Clerk Krystal Roe. 1. CALL TO ORDER: 5:32 P.M. 2. PUBLIC COMMENT: None. 3. COMMITTEE BUSINESS Topic Title/Description A. Approval of Minutes: September 23, 2008 Meeting Motion second and carried to approve the minutes as presented (carried 3-0). B. Monthly Financial Report Ms. Kraus presented her staff report. The committee discussed Streamlined Sales Tax (SST) data reporting and whether or not the City will prove to receive benefit or injury based on the new sales tax allocation structure. Once more information is received from the state, we'll be in a better position to understand the benefits or disadvantages of SST. Chair Park remarked he's spoken with leaders in Auburn and Kent; they are not seeing a benefit from SST. He further noted if the City is shown to have benefited from the SST changes, the sales tax revenues will actually be even lower than currently reported with SST funds bringing the figures higher than they otherwise would have been. Councilmember Kochmar remarked on potential automobile dealership closings/restructurings and the impact those changes will have on the City's finances. Chief Wilson clarified that if Pacific Coast Ford loses its new vehicle dealership and moves to used-car only inventory, the City would continue to use them for the contracted vehicle maintenance but would need to have Forward to Council N/A 11 A.2008 Consent FEDRAC Meeting Summary October 28, 2008 - Page 2 of 5 warranty service conducted by a dealership. Mr. Beets remarked that our Police vehicle fleet is made up of both Ford and Dodge vehicles. Ms. Kraus distributed a new Proposition 1 report with all Proposition 1 revenues, expenditures and earmarked fund balances in one table. The report showed all Proposition 1 funds had been removed from the General Fund and Designated Fund Summaries. Ms. Kraus stated with Committee approval, they would begin reporting this way for future reports. The Committee concurred they were in support of the new format. Committee Member Faison inquired about the accuracy of the totals in the middle table on page 10; they appear to be incorrect. After reviewing the numbers Ms. Kraus agreed they appear to not have been totaled correctly and she will be sure the report is amended when it's submitted to the full Council on November 4. Committee Member Duclos inquired if Chief Wilson has budgeted enough overtime for the 2009/2010 budget based on potential rising crime rates as a result of the economic difficulties. Chief Wilson replied he has increased his department's overtime budget to nearly $800,000 for the two-year cycle. His department continues to work very hard to get full staffing levels in place and to restructure some shift assignments, schedules and work assignments so they are as efficient as possible. He noted the difficulty comes when major crimes occur in the city outside of somewhat predictable standard crime rates. However, he stressed it is his intent is to stay within the budget for overtime. He also remarked that although overtime rates may have been over budget previously, those expenditures were offset by salary cost savings from reduced staffing levels. Ms. Kraus remarked she will follow-up at the next FEDRAC meeting with more information on how past overtime expenses were budgeted. Committee Member Faison inquired if the City could budget overtime using Proposition 1 funds as the expense falls under increased public safety instead of hiring additional officers which the City may later be unable to retain when budgets are short. Chief Wilson replied it is possible although he would prefer staying within the overtime budget while increasing staffing levels to their budgeted rates. Mr. Beets replied that the budget meeting on Thursday, October 30 will be discussed in greater depth. Committee Member Faison stated he would prefer overtime funding come out of Proposition 1 funds rather than the General Fund. Chair Park asked Chief Wilson to consider using Police Reserve Officers and to research the pros and cons of such and report back at the next FEDRAC meeting. Committee Member Duclos inquired if a cap has been set on the amount the City will continue to subsidize for the Federal Way Community Center (FWCC). Chair Park suggested the possibility of discussing the topic during the Council Retreat in January. FEDRAC Meeting Summary October 28, 2008 - Page 3 of 5 Committee Member Faison asked that the phrase "subsidy" be changed to more accurately describe the role and purpose of the Community Center funding. Ms. Kraus will make the change in future Monthly Rnancial Reports. Ms. Kraus distributed three pages with altered reporting formats for the Committee's consideration. She highlighted the benefits of the changes and asked the Committee's opinion on using the format in Monthly Rnancial Reports in the future. The Committee concurred that the changes are beneficial and should be incorporated. Mr. Beets stated $1 .2 million in Proposition 1 revenue has not been allocated in the 2009/2010 budget at this time; it is set aside completely in the next cycle. Further discussion regarding these funds will take place in the budget hearings in October and November. Motion second and carried to approve the Monthly Financial Report as amended/corrected (carried 3 - 0). C. Vouchers Ms. Kraus highlighted the report has been revised to provide greater detail in an easier-to-read format which now gives information on credit card usage. She also remarked the format has reduced the number of pages previously generated when reporting vouchers. Motion second and carried to approve the vouchers as presented (carried 3- 0). D. Draft SCORE Interlocal Agreement Discussion Mr. Enge distributed a summary outlining his staff report. He noted he has spoken with other SCORE committee members to get an understanding of the costs associated with this proposed agreement. He has successfully negotiated one vote per City rather than the previous proposal to provide cities with voting status based on capital investment, usage, etc. He also clarified the future draft agreement will contain language preventing the smaller cities from having a greater influence over the other two large cities. Although the language has not yet been finalized, the idea would be to prohibit the minor cities from taking action unless one of the major cities (Auburn or Renton) agreed with the action. Committee Member Faison inquired how the City would terminate its partnership with the facility. Mr. Enge reported the City would be responsible for fulfilling its financial obligation to the facility and would leave its assets behind with the facility. Chair Park remarked it seems to be very similar to the Valley Com agreement structure. The Committee concurred they were in favor of this agreement structure. Mr. Enge further reported the higher initial capital investment by Federal Way will result in higher on-going costs; they are proportionate to each other. He further clarified the total annual cost is unknown at this time which is why his report provides three scenarios for planning: Best Case, Most Likely and Worst Case. He noted the 8-year increase of jail costs under the SCORE facility would likely be nearly 12% while staying with King County would mean in increase of more than 30%. Using these figures, Mr. Enge estimated the City would break even in 2017. 11 A .2008 Consent 11 A.2008 Consent FEDRAC Meeting Summary October 28, 2008 - Page 4 of 5 Mr. Enge also reported the reason his report shows much higher costs in 2011 and 2012 is because the City will have double expenses during this time frame. Specifically, the City will be preparing to transition its inmate population (including hiring new staff) while at the same time paying for its current jail contract. Some overlap will exist during these two years. The Committee and Council may consider using Proposition 1 funds to support these costs as they too fall under improved public safety. On page 65, the figure of $970.296 in 2012 would come from capital funds; not general. It was discussed that a potential funding source would be from Real Estate Excise Taxes (REET). Mr. Enge reiterated the numbers are preliminary and are likely to change. For now, it is estimated construction costs will be $80 million (in 2010 numbers) for the facility only. A figure of upwards of $5 million could be expected for start- up costs. Of that $5 million, approximately $800,000 could come from the abandoned east-side jail project. Financing for start-up costs have not yet been determined - the SCORE committee members are still discussing options. It was further stressed that a s sense of urgency exists for two reasons. The first is because inflation will drive up the total expense of the project to greater than $80 million. The second is King County's ability to penalize the City for not meeting the termination date of the contract which ends in 2013. The County can back-charge the City 400% of its contract rate to 2010 if the inmate population remains in their facilities. Mr. Beets remarked that he and Chief Wilson have had very good discussions with the City of Kent for a possible contingency plan should the SCORE facility not go forward or if it is not completed in time to avoid penalties from King County. If the Committee wants to continue considering the SCORE facility, the City must contribute 18% of the $100,000+ feasibility research fees for the project (approximately $18,000). Chair Park asked if proper notice had been given that action would be required for this issue. Ms. Roe replied adequate notice had been given yesterday morning by changing the City's Weekly Meeting calendar, re- posting a revised agenda, and sending both notices through the City's e- subscribe system. The Committee next discussed funding options for the project. Mr. Enge answered the current plan calls for one of the other City's to be the lead funding agency. The other cities would be obligated to reimburse the funding City for their portions of the facility. Committee Member Faison inquired if it would be possible for each City to fund the project separately to take advantage of funding mechanism most advantageous to them. Doing so would also make it easier for a City to terminate it's partnership at a later date if so desired. Mr. Enge replied he will bring the idea back to the SCORE committee and noted the option certainly has merits. He will report back at the next FEDRAC meeting after speaking with the other agencies at their November meeting. Committee Member Faison also remarked that by individual up-front funding, the partnership would not be left with an outstanding debt should a city be unable to continue paying its obligation (such as a bankruptcy). FEDRAC Meeting Summary October 28, 2008 - Page 5 of 5 Mr. Enge summarized his understanding of the Committee's questions and committed to following up at the November FEDRAC meeting with the following: 1. The option for cities to individually fund their obligation to the partnership. 2. The repercussions of a partner city that is unable to fulfill its debt to the partnership, such as in a bankruptcy scenario. 3. Whether the banks are likely to use the credit rating of the one, lower- ranked agency or if the bank would use the collective higher credit ranking of the other project partners to determine loans. Motion second and carried to forward approval of funding the feasibility activities at 18% for the proposed SCORE Interlocal agreement (carried 3 - 0). 4. OTHER A. Committee Member Duclos noted she had heard at a recent South Sound Chambers meeting King County may be asking the legislature to allow them to charge a city-wide utility tax (to include a tax on city residents). The Committee discussed that the Association of Washington Cities and the Suburban Cities Association have both come out strongly opposing this proposal. However, the Association of Washington Cities has expressed interest in exploring negotiations with the County to receive a benefit in exchange for supporting the County's request. B. Mr. Beets noted the December FEDRAC meeting is currently scheduled for the 23rd; he inquired about the Committee's interest in rescheduling or cancelling the meeting due to the close proximity of the holiday. The Committee asked Ms. Roe to place the item on the November agenda for possible action to cancel/reschedule. 5. FUTURE AGENDA ITEMS: A. Ms. Kraus will provide information on police overtime expenditures. B. Chief Wilson will report back to the Committee regarding the pros and cons of utilizing police reserve officers. C. Mr. Enge will report back to the Committee regarding his discussions with the SCORE facility committee members. D. Canceling/rescheduling the December 23,2008 FEDRAC meeting. 6. NEXT MEETING: Tuesday, November 25, 2008 @ 5:30 p.m. Meeting was adjourned at 6:50 p.m. Committee Member J-kCJJAut Eric Faison Committee Member