DATE:         12 JUNE 2006

TO:           THE HONORABLE MAYOR & CITY COUNCIL

FROM:         RANDALL M. EALY, CITY MANAGER

              BUDGET OFFICER

BUDGET COMMITTEE

The Budget Committee is the fiscal planning board of the City.  It consists of the governing body (the City Council) and an equal number of legal voters (citizen members) appointed by the Council.  Estacada has 14 Budget Committee members, and the votes of all the members are equal.  State law (ORS 294.336) mandates a budget committee for all Oregon local governments.

The Budget Committee reviews the proposed budget rendered by the City Budget Officer  (In Estacada, this is the City Manager.)  The committee approved the proposed budget with amendments.  Notices and publications have been filed according to law and the budget is now forwarded to the Council for formal adoption prior to June 30.

BUDGET MESSAGE

“Spectacular achievements are always preceded by unspectacular preparation.”

I am pleased to present you with the FY 2006-07 approved budget for the City of Estacada .  This year’s approved budget is $5,136,205 and reflects a 37% decrease from last fiscal year. Note:  The completion of the Estacada Public Library project($3,214,210)comes off the budget this year.

INTRODUCTION

While our official population climbed by 20 (2,460 to 2,480) the increase was balanced by far less housing starts than predicted.  The forecast of an additional 40 new housing starts fell short by 24.  Based on conversations with several possible builders and developers, staff is cutting last year’s projection in half, and now estimates 20 new housing starts for FY 2006-07.  While it is true that the city has given land use approvals for 500 SFDU lots (remember to factor 2-3 infill builds per year as well), a combination of heavy rains this past winter and an active homebuilders interest in purchasing developed lots has stalled actual construction.

Estacada’s “slow” start comes at a time when the Metro region is preparing for considerable growth- another one million plus people by the year 2020.  In a recent poll conducted by Davis , Hibbits & Midghall, 87% of those surveyed said that population growth cannot be stopped, with 68% of Clackamas County respondents feeling it cannot even be slowed.  In planning to deal with population growth, Clackamas County respondents value protecting area rivers and streams, preserving farm and forestland, protecting air quality and protecting existing neighborhoods (these top priorities were the same for Clark and Washington counties as well.)  Building roads and highways is in a second tier of priorities.  Over 75% agreed, or strongly agreed, that land use planning helps protect the value of their homes and is an essential tool in protecting our area’s quality of life.

With that said, our budget focus continues to be on the aggressive pursuit of capacity increases to the City’s infrastructure. A recent survey of 30 Oregon municipalities revealed Estacada’s total SDC rate ($11,500) is $3,000 higher than the mean. Even with annual inflation adjustments, our Master Plans are each over six years old (except the Parks) and consequently the CIP’s are missing projects critical to staying ahead of forecasted population growth.  Staff therefore has proposed an investment with this year’s budget of $70,000 in five areas of our infrastructure to update Master Plans and their respective CIP lists.

Below is a quick view of accomplishments for FY 05-06 (11 months) and a chart displaying the updates to the City Council Goals as projects were moved up from long term to short term during the February 2006 workshop.  Perhaps the most exciting figure to report is the $711,331 secured this past fiscal year in grants.  This eclipses last year’s amount by more than double.  Grants are a critical component to our ability to finance major project work.

FY 05-06 Highlights

§         Significant restructure to planning rates

§         Valberg building demolition ($2,000)

§         Constructed sodium hypo-chlorite building ($35,000)

§         Issued 16 SFDU building permits (July-April)

§         Lake Shore lift station pump ($13,000)

§         4^th Street property demolition ($15,000)

§         Began updating the TSP($80,000)

§         Wastewater treatment plant lagoon rehab

§         Inflationary adjustment to all SDC’s

§         Managed new Public Library construction ($3.46 million)

§         Purchased Case 580M backhoe

§         Assisted Seubert Machining expansion

§         Assisted Metallion Industries relocation

§         Hosted Earth Day event at 3 sites (80+ volunteers)

§         Adjusted water rates to cover operation costs

§         Utility “Add-on” program for ECF ($2,000 in donations)

§         Collected 96 tons of recyclables ($2,300)

§         200 Acre Annexation

§         Secured $2,225,000 in Grants

               FY 2006-07 Proposed Budget

Within Estacada’s tax code (108-002) the total assessed property valuation is projected to increase 4% in FY 06-07. Therefore, the resulting property tax receipts, assuming an 5% un-collectable and a permanent rate of $2.6749/1,000 AV, will be $350,500. Fifteen percent of tax lots inside the City Limits is tax-exempt.

GENERAL FUND

Our FY 06-07 approved General Fund Budget is $840,025. The FY 05-06 General Fund budget was $727,538.  This reflects a 15% increase from last year.  The following bullets highlight General Fund trends and activities:

   Contingency:  The GF begins with $140,000 cash on hand and ends with $83,759 in contingency.

   Taxes:  In 1997 the total tax rate for Estacada residents was $19.66 per $1,000 of valuation.  In 2005, nine years later, the total rate was $16.64 per $1,000.  Estacada voters saw the addition of the library construction bond (14 cents per thousand); and a five-year local option of (five cents per thousand) for maintenance.  Only .21 cents of every Estacada tax dollar goes to the city and .45 cents goes toward education. 

   Franchise Fees:  The City receives franchise fees in exchange for the right to utilize the public rights of ways to conduct business.  Uncharacteristic of any other local government, the City currently tries to send those receipts to assist in balancing the Street Fund.  This year, the Budget Committee approved a transfer to streets for street projects for 65,000.

   Demographics:  Populations within city limits are always an important indicator to track. Local governments receive shared revenues from the State based on a population multiplier.  The table below highlights growth rates for the State, Clackamas County and various cities within Clackamas County from July 1, 2004 to the latest certified population estimates of July 1, 2005 .  Annexation activity also affects population growth as over two-third of Oregonians reside inside city limit boundaries.  Estacada is submitting a revised estimate to PSU based upon our November annexations of nearly 200 acres.

   Public Safety:  We are completing our first FY under the new contract rate and schedule.  We are budgeting for a 5% increase to the contract rate, which would maintain our current level of service at $358,798.  The new “staggered” hours has worked out well during the past several months.  Staff is suggesting a minor purchase ($5,000) for the speed radar unit in this budget. The 2005 Annual Report reveals an 18% increase over the 3 year average for calls (6 per day) with a total response time average of 15 minutes.

   Parks:  With only 20 new homes estimated (18 of which are eligible for park SDCs) funding the $500,000+ Wade Creek Park project will come only through major grant assistance.  The State Park and Recreation grant, our top priority, is due by mid-June.  This budget does not buy more time from project manager Phil Lingelbach.  Staff will ask the Council to make that decision early in the fiscal year based upon the success of the grant application.

   Community Center:  The City pays for the Center’s building insurance; weekly staff visits for routine maintenance; and water and sewer utilities.  The Center also enjoys free garbage service as part of a franchise agreement between the City and Walker ’s Disposal. 

   Planning:  Perhaps our greatest improvement area of the budget.  Council adopted a 1% design review fee for new construction (similar to other municipalities Community Development Fee).  This should bring revenues up from around $4,000 to roughly $35,000.  At the same time, we have reallocated staff planning time, so expenses now more closely mirror our revenues. 

BUILDING FUND

    Last year, the City negotiated a revised rate share with our building inspectors.  The City will now receive thirty-percent (vs. 25%) of every building permit after the first $30,000 in activity.  With the new split in place, and based upon forecasted building permit activity (20 SFDU’s and 2 commercial permits) we project to receive $75,000 in this Fund.  The danger area to this fund is a low projected contingency ($8,550 is down from $17,140 last year.)  With relatively little activity, the Fund isn’t paying for itself in terms of recovering city staff time.  The newly annexed north territory is not scheduled to begin requesting building permits until 2009. A preliminary estimate is for 500 homes. Further capacity improvements to the plants are necessary to accommodate these permits, as previously approved sites may be hooked to the system by that time.  Further, the 70 acre tract (previously known as Campanella) is scheduled to come in for land use approval by June and July of this year for an estimated 260 homes.

PLANT CAPACITY & GROWTH

A February 2006 memo from our engineers estimates capacity for an additional 791 homes (wastewater) and 731 homes(water supply) to the system at this time.  The FY 06-07 budget proposes $70,000 in Master Plan updates, and roughly $345,000 in specific capacity improvements. Currently, the city is completing $200,000 in capacity projects separate from those performed by developers as conditions of their approval.

We currently average 600,000 gallons per day, with a peak (summer) demand of 1 MGD.  Our capacity sits at 1.5 MGD today and will be at 2 MGD by July 2006.  According to the engineer’s memo, the city’s 4 CFS (or 2.58 MGD) water right is sufficient to serve an additional 6,000 people.  At our current annual growth rate of 1.2% this would take a little more than 100 years.  At a 3% annual growth rate, this would take 42 years, and at a 5% annual growth rate the timeline reduces to 25 years.  An average of 3.5 occupants per home calculates 6,000 new residents occupying an additional 1,700 homes.

We must continue to make capacity improvements along the way.  When capacity is at a maximum, other water sources (such as wells) must be obtained. 

STREET FUND

    Highway Tax:  State highway tax revenue ($120,000) is based on our population (2,480).  This Fund balances without a GF transfer, and no major project work.  Several street improvement options endorsed by the Infrastructure Committee, with costs, are listed on the project spreadsheet for the Budget Committee’s review.     

    Street System Improvement Fund:  Staff estimates nearly $225,000 will be available in street SDC’s (this factors an additional $45,300 in earned SDC’s throughout the FY.)  As of July 1, the Fund is projected to have $178,000 which is more than the $120,000 we need for our share of the $425,000 4^th Street Realignment project- which is already underway.    

CITY LIBRARY FUND

    A new Clackamas County Library Study has been made public and in its draft form, among other short-term recommendations, calls for gradual ramp-up of contributions from municipalities to a rate of 20% of county support.  In our case, this would be $60,000.  Of our 17,000 service population, roughly 10% reside within the city limits.  Staff recommends that any GF contribution be dedicated to Collection Development.  We remain one of the only libraries that has yet to contribute financially to its library operation.  The Library Fund spends $30,000 on its cost share of city services.

    Library Project Fund:  The overall budget of $3,459,172 as estimated roughly two years ago appears to be spot on.  The committed revenues for the project rest at $3,404,000 but interest earnings and donations are such that the gap is anticipated to be virtually closed within the next 30 days.  This would leave any remaining contingencies for further considerations at the end of the project.  The grand opening is scheduled for August 4, 2006 .

WATER FUND

   Last year’s rate increase (from $23.80 per month to $27.00 per month for an average household) was critical to helping keep pace with operation and maintenance costs.  However, we are a relatively small utility and when one of our largest metered clients patched a leak, their bill decreased by roughly $8,000 per month. This factor alone has brought O&M expenses back to equal with our collection for services. Not included in this budget proposal is a staff request for an additional operator FTE.

   Treatment: The purchase and installation of our final river pump (FY 05-06) will bring our reliable capacity to 2 MGD.  $20,000 is earmarked for Master Planning, and $10,000 for facility upgrades regarding security.  Staff proposes to otherwise save during the upcoming FY for capacity improvements in FY 07-08.

   Distribution & Storage:  $20,000 earmarked for Master Planning. 

   Water System Improvement Reserve: Staff projects receiving 18 SDC eligible residential and 2 commercial permits for a total value of  $54,240. 

SEWER FUND

A similar O&M trend is developing in this fund as compared to the Water Fund.  The last sewer rate increase was in 2003 and our operational expenses have now surpassed revenues. Not included in this budget proposal is a staff request for an additional operator FTE.

   Treatment:  $6,250 is proposed for Master Planning. $115,000 is proposed for new head-works and mechanical bar screen at the plant to reduce suspended solids and BOD.  Also, $78,500 is proposed for work at the Lake Shore pump station.

   Collection: $6,250 is proposed for Master Planning.  Staff proposes to increase our annual Inflow and Infiltration budget to $150,000 for continued work on separating storm water from our sewer collection system, as mandated by DEQ.  Our average daily flow through the wastewater plant is 540,000 GPD, and when we get an inch and a half of rain that jumps to 1 MGD. 

   Sewer System Improvement Reserve: Staff projects receiving 20 SDC eligible residential and 2 commercial permits for a total value of $62,160.

STORM SEWER FUND

   With the upcoming developments, staff projects development driven storm projects throughout town.  Cemetery Road area should see the most activity.  $15,000 is set aside for Master Planning.

   Storm Sewer Improvement Reserve:  Staff projects receiving 20 SDC eligible residential and 2 commercial permits for a total value of $24,000.

DEBT SERVICE FUNDS

    The Debt Service Funds include the two G.O. Water Bonds (Fund 80) that the city is currently paying with revenues collected by property taxes and the two LID's (Funds 85 & 86) that are being paid by the benefited property owners.  There is also a fund (82) that holds a required reserve for the 1973 water revenue bond.

PERSONNEL & BENEFITS

 This year, for the first time in recent memory, CCIS did not raise our insurance rates.  Here’s to good health and less claims.

 The overall calculation of FTE’s is 23.41, ten of which are staffing the library.  Another 11 FTE’s staff our street and utility funds.  The remaining 2 FTE staff the GF.  A FTE position is proposed as a general administrative to staff City Hall. This person would move from part-time to full-time and be responsible for (among other duties as assigned) staff to the City Recorders and City Manager; serve as court clerk; customer service and telephone duties; type correspondence; filing and record keeping; staff citizen committees as necessary.

   All employees pay 10% of their insurance premiums.  This reduces the cost to the City by nearly $16,000.

   The City is at a very interesting time in its’ 100 year history.  As a new library facility is completed and the pressures of growth mount, the relatively small staff is faced with its’ most challenging work yet.  In that vein, I’d like to offer our Department Heads a bit more latitude in the way they reward their employees throughout the year.  This proposed budget is based upon a 5% possible raise for each department.  The Department Head, under this proposal, will have the flexibility to reward superior efforts based upon merit.  In other words, their department will have a set amount of personnel budgeted

   This proposal increases total personal services increases from $1,002,642 last year to $1,090,195 in FY 06-07.