Finance Committee

1. Finance Committee Lancaster City Council November 5, 2010

2. Agenda • Council President Culver opening remarks • Finance Chairman Stoughton presentation • C.A.C. Chairman Scamehorn remarks • President Culver discussion regarding burden-sharing and next steps • Adjourn – Hard Stop at 8:30AM

3. Why Now? • To have a document to create dialog about the upcoming budget and the near-term prognosis. • To provide budget guidance to the Administration • At the current funding levels, the GF cannot sustain itself as-is, changes must be made. • Events beyond our control will require an outlay of capital, i.e., (Rule 25) and other unplanned. • Employee benefit review. Too rich to support. • Identification of revenue needs and concerns. • Fiscal discipline to not use capital monies for short-term fixes that will only prolong the need for the discussion regarding fiscal discipline.

4. Wages and Salaries The impact of our current wage structure is heavy: • The 4-year, 4-step process from entry level pay to high-end pay covers a spectrum of a nearly 35% increase in pay over 4 years. • New pay scales should be implemented effective 1/1/2011 for Management/Non-union positions then negotiated with the collective bargaining units.

5. Wages and Salaries (continued) • Longevity Pay (retired 1/1/2006) – City employees hired prior to 1/1/2006 are paid $3.25 per year of service/per pay just for maintaining their employment. GF impact is $400,000/yr. • Professional Pay - City employees are provided “Pro-Pay” at the rate of: • $15 per pay for an Associates degree ($390/yr), • $30 per pay for a Bachelors degree ($780/yr), and • $45 per pay for a Masters degree ($1170/yr). • 1/1/2011 is the time to “retire” Pro-Pay starting with the Management/Non-union then negotiated away with the collective bargaining units.

6. Health Insurance • City has been with same administrator for a very long period of time. • City uses the third party administrator to do its bidding. Not a good practice. • Employee portion of premiums, while rising, not in-line with private sector • Services covered do not seem to change, yet service prices rise.

7. Health Insurance (continued) • Basic plan has not changed, yet the Administration is aware of sectors of insured consuming the most services. • Investigation of other types of insurance such as managed care, HMOs, HRAs, etc., should be considered, immediately. • City should use external consultants not associated with current third party to investigate and to make a recommendation quickly.

8. Retirement Benefits • City “picks up” additional retirement contributions from 3% to 6% across the workforce. Cost to the City is about $1,000,000 per year. • Currently, a retiring city employee can “cash-in” 960 hours of unused sick-time plus 25% of each additional hour in excess of 960. Impact to the GF can be a heavy burden. • 1/1/2011 is the time to cease retirement pick-up using a decreasing scale over 10 years for current employees, no benefit for new employees, starting with Management/Non-union followed by bargaining units. • 1/1/2011 is the time to modify/eliminate Sick-time Buy-out using a decreasing scale over 5 years with new cap or 10 years for total elimination. Management/Non-union followed by bargaining units.

9. Revenue • Latest update from City Auditor estimates our 2011 GF revenue at about $200,000 less than 2010. • Years 2009, 2010, and 2011 are effectively the same with no significant increases in sight. • Revenue concerns: • Low interest rates affecting cash investment returns. • Local government funds provided by the state, change of control in Governor’s office and General Assembly. • Concerns about our current mean household income as provided by the C.A.C. along with the number of households living at or below the poverty level. • No funding sources for Rule 25 Narrow-banding requirement. • Other capital infrastructure being ignored because of lack of funding.

10. Revenue (continued) Revenue drivers: • Consideration of an income tax increase for General Fund operations and capital expenditures. Each tenth of 1% would generate about $800,000/Year. • Electorate will be unlikely to support tax increases if the Administration and Council do not act now to get our fiscal houses in-order. • Now is the time to align our salaries/benefits/insurance to a more appropriate level with our Management teams, Union, and Non-union personnel based on public/private comparables. The current state of the economy and the City’s current revenue levels and projected expense structure requires the Administration and Council to act now.

11. Improvement Accounts Fire Impact District 1 – Impact Fees Collects about $40K to 50K per year – intended use when introduced; new fire station property purchases and construction costs. Fund currently has about $390K and should be used for Impact expenses only. 352 Medic Monies – Prior Year Over-collections 3rd Medic income tax over-collections should be preserved and used for true 3rd medic expenses. In 2010, the City has under-collected to fund 352 activities by about $30K which will be made up by the over-collection account. The account will be consumed over time because of year over year rising employee expenses.

12. Improvement Accounts – (cont.) Pre-Pay Gas Funds When approved by Council, main thrust was to invest into roadway improvement projects because of lack of revenue sources to support such activities within the General and LDOT funds. We should stay the course with Pre-Pay. All of these funds (Impact/352/Pre-Pay) should be considered off-limits for anything but their intended uses.

13. 2011 Budget Guidance • Carryover to be $1.5M as in 2009 and 2010 • 2% Capital improvement collections will restart with the collections committed in 2011, 2012, and 2013 for the expenses associated with the Rule 25 project. • Proceeds ($185K) from sale of old LDOT facility should be moved to an improvement account and be used to repair the LPD roof or for other capital infrastructure improvements as they arise or to pay off obligation associated with Mithoff purchase. • Consideration of committing EMS collections from $1,000,001 to $1,150,000 (each year) to be set aside for fire apparatus purchase/replacement.