DATE: 20 June 2007

TO: THE HONORABLE MAYOR & CITY COUNCIL

FROM: RANDALL M. EALY, CITY MANAGER

BUDGET OFFICER

SUBJECT: FY 2007-08 BUDGET MESSAGE

“I don’t know the key to success, but the key to failure is trying to please everybody”

-Bill Cosby

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. Notices and publications are filed according to law and the budget is then forwarded to the Council for formal adoption prior to June 30.

FY 2007-08 BUDGET MESSAGE

I am pleased to present you with the FY 2007-08 recommended budget for the City of Estacada. This year’s recommended budget is $6,182,535 and reflects a 9% increase from last fiscal year.

Within Estacada’s tax code (108-002) the total assessed property valuation is projected to increase 12% in FY 07-08. Therefore, the resulting property tax receipts, assuming a 5% un-collectable and a permanent rate of $2.6749/1,000 AV, will be $405,350.

INTRODUCTION

Fiscal year 2006-07 was an exciting year for the community, and an active one for the City Council. Citizens were brimming with pride when Oregonian columnist Andy Parker referred to Estacada as having the “best public library in Clackamas County” after Estacada opened the doors to its new 12,000 square foot public library. The $3.5 million effort was funded first through local donations, then through a voter approved $1.9 million construction bond, and lastly through foundation grants.

The City Council was active in the study and funding of several major projects during this fiscal year. The 4^th Street Realignment project ($210,000 is budgeted for FY 2007-08) was approved and has ended up representing a funding partnership of no less than six different federal, state and local jurisdictions totaling over $500,000. Phase 1 of the Wade Creek Park project ($566,200 is budgeted for FY 2007-08) was largely grant funded this year and approved for construction during the Summer of 2007.

Throughout the year, the Citizens of Estacada narrowly approved the adoption of a new City Charter, one based largely on a model provided through the League of Oregon Cities, but also retaining the existing voter-approved annexation language. After years of study, the City Council approved an Urban Renewal Plan that funds an estimated $6.6 million in improvements to the downtown commercial core through tax increment financing. Closely related to the adoption of the plan was an intergovernmental agreement between the City and the Estacada Fire District that requires the City to acquire property at fair market value for the public purpose of a new Fire Station.

The City Council also set aside land for the Estacada Veteran’s Memorial project; purchased parks and open space land between the Foothills and Bunyard developments; adjusted its’ construction noise ordinance; transferred tourism duties to the Estacada Chamber of Commerce; approved the 265 unit Campanella Estates planned unit development; commissioned a structural, mechanical and alternative use study of City Hall; adopted a building permit fee to help cover general fund planning costs; specified its’ percent for art ordinance; concluded the bulk of their transportation master plan update; and approved a contractual arrangement for code enforcement services during FY 2007-08.

“There are risks and costs to a program of action, but they are far less than the long range risks of comfortable inaction.”

-JFK

GENERAL FUND

Estacada’s official population, as estimated by Portland State University, grew by 4% this year from 2,480 to 2,580 however, since the 2000 US census count the City has grown just over an average of 1% per year (9% total.) The Building Department issued 30 new home construction permits -to date- during FY 2006-07, and citizens approved six annexation requests, bringing the total voter approved annexations to 350 acres during the past seven years. The Estacada Industrial Park now boasts seven different companies and well over 100 family wage jobs that include health insurance.

As a result, our total estimated assessed valuation inside the City limits has grown 8% higher than the previous year (from 4% to 12%).

Our FY 07-08 recommended General Fund Budget is $1,529,550. The following bullets highlight General Fund activities:

Contingency: In this proposed budget the GF begins with $155,000 cash on hand and ends with $156,205 in contingency. The Council approved several General Fund requests from community programs including Estacada’s Public Library ($6,000); Sandy Transit ($5,000); and Estacada Community Center Meals on Wheels ($10,000).

Property Taxes: In 1997 the total tax rate for Estacada residents was $19.66 per $1,000. In 2007, ten years later, the total rate is $16.16 per $1,000 (and is down 48 cents from 2006).

Franchise Fees: The City receives franchise fees in exchange for the right to utilize the public rights of ways to conduct business. We anticipate receiving $134,000 during FY 2007-08.

Public Safety: We are again budgeting for a 5% increase to the contract rate (from $394,146 to $414,260), which would maintain our current level of service of 104 hours per week. Monday and Sunday have 12 hour coverage, and Tuesday through Saturday have 16 hour per day coverage. Four different deputies cover the Estacada contract. The 2006 Annual Report reveals a 45% reduction in reported felonies and a 41% reduction in reported misdemeanors from 2005. Overall, the 1,889 calls in 2006 reflected an 11% decrease from the prior three year average, and the 594 reports taken reflected a 33% decrease from the prior three year average. The annual report charts a 10 minute response time from call input to deputy arrival.

Parks: Phase 1 of Wade Creek Park will be completed in FY 2007-08. This includes all infrastructure, parking, lighting, landscaping, irrigation, basic amenities, playground equipment and restrooms. This is a $566,200 endeavor. We propose to fund the skatepark in Phase 2 next summer.

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. This year, staff is listing two requests (Meals on Wheels and Estacada Food Bank) as consideration for GF assistance.

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 brought revenues up from around $4,000 in 2005 to over $75,000 in FY 2006-07. At the same time, we have reallocated GF staff planning time, so expenses now more closely mirror our revenues.

BUILDING FUND

Based upon forecasted building permit activity (38 SFDU’s; up from 30 in FY 2006-07) we project to receive $114,000 in this Fund, which equates to paying out $81,900 to The Building Department. The Fund continues to break even with no contingency. The only year the Fund “made money” was during the school district bond project. The 30 new home construction value during FY 2006-07 totals roughly $7,000,000.

CITY LIBRARY FUND

It appears that the County Commissioners will place a county-wide levy on the ballot in November of 2008. Our proposed budget keeps the library open six days a week, but spends $100,000 of contingency funds and leaves only $50,000 on June 30, 2008. Prior to 2004, and in the old library space, Estacada was open seven days per week (65 hours). We are now open 50 hours and receive roughly $100,000 less annually from the Commissioners to operate.

The Estacada Library Fund pays the City roughly $30,000 for administrative services. Each city in Clackamas County (except Molalla and Estacada) gives its’ respective library no less than $100,000 in GF transfers to operate, and in the case of Lake Oswego, the transfer is close to $2 million.

**The Estacada Budget Committee voted to transfer $6,000 to the Library Fund again this Fiscal Year but wanted the Budget Message to reflect their expressed support for the library as well as their concern for a long term and sustainable funding source.

STREET FUND

Highway Tax: State highway tax revenue ($118,400) is based on our population (2,580). This Fund balances without a GF transfer, and without additional project work. Several street improvement options endorsed by the Infrastructure Committee, could be funded through a GF transfer, similar to FY 2006-07. The legislature is currently considering legislation that would raise the statewide gas tax from 24 cents per gallon.

Street System Improvement Fund: Staff estimates nearly $337,750 will be available in street SDC’s (this factors an additional $60,750 in earned SDC’s throughout the FY.) A transfer of $115,000 to the Street Fund is budgeted to assisting in funding the 4^th Street Realignment project.

Park Improvement Reserve: Staff recommends transferring $101,200 to the GF to assist in the $566,200 Phase 1 Wade Creek Park project, most of which will be funded through grants and donations.

WATER FUND

Staff estimates customer revenues of $446,000 this fiscal year, however expenses to operate the utility are $345,940 (treatment) and $214,885 (distribution.) This leaves $1,775 in contingency, which is dramatically down from $85,500 in 2006.

Water System Improvement Fund: Staff requests a $60,000 transfer to the water fund for mechanical plate settler connection project.

STORM SEWER FUND

Staff proposes a $35,000 transfer from the reserve fund to cover a Master Plan and SDC update; and build the Wade Creek pond outfall. Utility customer revenue ($133,000)is outpaced by operating expenses ($200,965) and therefore reduces contingency from $130,500 to $83,435.

SEWER FUND

Staff estimates customer revenues of $460,000 this fiscal year, however expenses to operate the utility are $296,490 (treatment) and $169,800 (collection.) This leaves $76,610 in contingency, which is dramatically down from $222,294 in 2006. This proposal dedicates another $100,000 to slip line the NW corner of the City (I&I) but may have to be reduced due to budget constraints. Staff is proposing to transfer in $170,000 from the reserve fund for the mechanical headworks project to screen out organic material, and $17,500 to replace the 1970 blower (aeration.)

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

The overall calculation of FTE’s is 25.7, up from 23.4 FTE in 2006-07.

All employees pay 10% of their insurance premiums.

Without an additional new hire, this proposal increases total personal services from $1,090,575 to $1,185,347 in FY 07-08. Increases are due specifically to a 15% hike in CCIS insurance rates (some employees began family coverage) and a 4.84% hike in the employer PERS contribution rate.