Finance Committee, November 2018

November 30th, 2018  |  Published in Observer Reports

Finance Committee
No. 19, 2018

Members Present: Council members Sean Malone (chair), Nancy Moore, Earl Williams; citizen members: Martin Kolb, Linda Lalley
Others present: Mayor David Weiss, Chief Administrative Officer Jeri Chaikin, Police Chief Jeffrey DeMuth, Principal Planner Ann Klavora, Director of Recreation Alexandria Nichols, Director of Finance Robert Baker, Assistant Finance Director Cheryl Arslanian.

The meeting was called to order by Mr. Malone at 7:31 a.m.

Agenda—Committee actions:

The minutes of the Oct. 15, 2018, meeting were approved.

Chief DeMuth presented a recommendation to enter into a service agreement with the Cuyahoga County OVI (Operating a Vehicle when Impaired) Task Force to accept and appropriate grant funding for Federal Fiscal Year 2019, which began Oct. 1, 2018, for use toward additional traffic enforcement Grant funding in the amount of $9,500 is being offered by the County OVI Task Force, administered by University Hospital’s Rainbow Babies and Children’s Hospital Rainbow Injury Prevention Center. Nancy Moore asked if this operation would focus on weekends and holidays. Mr. DeMuth said yes, it would prioritize Thursday, Friday, and Saturday evenings and holidays.

Earl Williams wondered if the use of Uber and Lyft mobile applications had reduced OVI offenses. Mr. DeMuth had no data on this impact. Tom Cicarella remarked that government grants were not free, so what was the city’s cost for the grant. Mr. DeMuth replied the only requirement was to reduce OVI offenses and file a yearly report of the result. A motion to approve was passed unanimously.

Principal Planner Ann Klavora presented a request for the Finance Committee to recommend Council authorization of a $50,000 grant application to, and acceptance of a grant from, the Cuyahoga County Department of Development 2019 Supplemental Grant Program for Van Aken District Busway Improvements. The existing station area facilities are inadequate. Sidewalk connections are incomplete and parking lot access is confusing. Conditions are very harsh and unwelcoming to transit riders due to the large amount of concrete without landscape relief, lack of shade from summer sun, and lack of protection from wind, rain and snow. The dedicated busway offers only three shelters for bus passengers, and shelter space is frequently inadequate for passenger loads. There are no other weather-protected or shaded waiting areas for passengers. The Shaker Heights Development Corporation applied for and received $50,000 to make streetscape improvements at the Lee/Hampstead Intersection last year.

Earl Williams understood that the RTA had no money to do this anywhere in their system. Ms. Kalavora confirmed RTA did not have the funds to make improvements. Linda Lalley wanted to know who owned what property at the Van Aken Station. Ms. Klavora explained RTA owned only the track right-of-way, the city owned the busway and the single-row parking lot level with the busway, and RMS owned the double-row elevated parking lot adjacent to the stores. Ms. Lalley asked if future RTA plans might impact this project. Ms. Klavora said that RTA had long-range goals for the Blue Line Terminus and had applied for federal grants. Tom Cicarella wondered aloud if winning this grant would disqualify thecity for other grants. Ms. Klavora said in her experience, there is no disqualification. Jeri Chaikin injected that grants have different sources and different criteria, even from the same source, so there was not a risk. She continued that the source of this fund is casino revenue. Sean Malone added that Shaker had been very successful winning grants. He next asked if the busway improvements would include a restroom. Ms. Klavora stated that was part of an ongoing discussion. Marty Kolb inquired if the tracks would be extended to Eaton’s headquarters in Chagrin Highlands. Mr. Malone said this was not feasible due to cost. A motion to approve was passed unanimously.

Ms. Nichols presented a proposal to approve a contract with Senior Transportation Connections (STC) for the provision of senior transportation services for calendar year 2019 with a cost to not exceed $100,000, with the provision that the city can terminate the agreement during the year if the city opts into the Community Partnership on Aging Model, and if the city researches Medicaid reimbursements for transportation services. Between 150 and 250 people register for this service annually and most use it for medical appointments, shopping, volunteering, banking and other transportation needs. Although not all registered people use the service, STC transports senior residents on over 4,000 one-way trips per year. This is the same amount that was approved for 2018.

Earl Williams inquired if the number or type of rides would be cut if the cost exceeded $100,000. Mr. Nichols replied that the number of rides would not be cut; there are incentives to supply group rides, and individual rides cost more while group rides cost less. Mr. Williams wondered if the city might have to increase the budget if the cost exceeded $100,000. Ms. Nichols added that ridership was slowly decreasing each year, so she felt comfortable with the budget, but that, yes, if necessary, she might return to Council to increase the budget. Nancy Moore remarked she did not remember a negotiation on prices having been done before, asking what caused this and how hard was the negotiation. Ms. Nichols answered that after receiving an increase in the quote, they had negotiated a reduced cost for medical rides. Ms. Moore continued, wanting to know if the city limited the cost to seniors. Ms. Nichols confirmed the full cost was not passed to seniors and that medical trip cost-sharing could increase. Ms. Moore asked if discretionary shopping/personal trip cost sharing could be increased instead in order to dissuade them. Ms. Nichols replied that most shopping trips were group trips, by resident preference. Marty Kolb noted that resident cost sharing was by donation, not mandatory. Ms. Nichols confirmed that cost sharing was not mandatory. Linda Lalley wanted to know what limitations were set for qualification and why “community building” trips (Library and STJ building) were falling so much. Ms. Nichols replied the only qualifications were Shaker residency and age over 65, and there were limits on routes, distance and purpose. She continued that most riders were much older and without automobiles, but did not know the reason for the fall in community building ridership. Jeri Chaikin added that STC had recently completed a plan to coordinate the costs for all the cities they served. Mr. Kolb asked if the $100,000 was already in the operating budget and Ms. Nichols replied that it was. A motion to approve was passed unanimously.

Director Baker then introduced two discussion items for consideration by the committee: a) the 2018/2019 Revenue Projection and b) the General Fund Reserve Policy.

Mr. Baker reminded committee members that at the Nov. 12 City Council work session, he had remarked about the significant reduction in income tax receipts since summer, and November receipts received last week were down another $800,000 from his estimate at last week’s Council work session. Some other cities he contacted had noticed the problem and others had not, but when the others checked they found the same had happened for them. Tax-withholding payments had held steady, but individual quarterly estimates were down significantly. This situation corresponds with individuals who are self-employed and/or small business owners, of which there are many in Shaker. In some cases, estimated payments had not been made in June or September. Tom Cicarella suspected that people who estimate, such as he, had been advised by accountants to use the “Safe Harbor Rule” of the federal tax code to reduce the impact of the new tax law placed into effect this year, which reduces their 2018 taxes due next April. He would expect the same for December receipts.

Mr. Baker asked the committee members what they thought would be reasonable to expect going forward this year and budgeting next year. Nancy Moore stated she was glad we have a substantial General Fund reserve. Earl Williams wondered if the reserve was enough. Mr. Baker replied it was sufficient, that the low point of the 2008-2009 “Great Recession” was the only time it sank below 20 percent, but the city needs to now expect and budget for this new lower income-tax environment. Linda Lalley asked if the budget could be revised during the year and after first quarter. Mr. Baker replied that it could, but that tax receipts varied widely month to month and project commitments must be made prior to taxes being received; he does not want to wait and have to recover after June. Ms. Lalley agreed we do not have enough information to be reactive. Mr. Williams did not discount that we could be pleasantly surprised. Sean Malone commented it felt best to plan for the worst and hope for the best. Mr. Cicarella counseled the group to understand the reasons for the shortfall and plan for that rather than plan for the worst outcome. Ms. Moore reminded everyone that changes in the budget affected employees and services, so be careful. Marty Kolb asked if Council could wait until December tax receipts arrived. Mr. Baker reminded the committee members that the next Council work session was Dec. 3, before the next tax receipts, and any budget changes (recognizing Ms. Moore’s comment) had to be discussed with all departments to determine personal and services ramifications before a revised budget could be determined. The final Council meeting for budget approval is Dec. 17, and Mr. Baker re-emphasized that this must be done now. Ms. Lalley noted that the budget contained $10 million of General Fund transfers to other operating and capital funds—could the city take on projects with transfers back to the General Fund? Mr. Williams reminded the members that transfers are not reversible. Mr. Kolb remarked that transfers could be reduced and then added back later, but not taken back. Mr. Baker answered that capital transfers can happen at year-end only, but contracts would still be delayed. Mr. Malone asked what sort of things would be impacted if transfers were reduced. Ms. Chaikin replied that staffing delays would occur. Mr. Williams cautioned that sewer maintenance cannot be reduced. Ms. Moore warned that Shaker would certainly not want a flood just after reducing sewer maintenance. Mr. Malone suggested reducing the transfer now, but not the entire $800,000. Mr. Baker emphasized that departments needed a target to start updating their 2018 and 2019 budgets now, and said there are many pieces of this puzzle to fit together. Nancy Moore thanked Mr. Baker for his skill, his attention to details and urgency. Mr. Malone echoed his thanks to Mr. Baker.

Sean Malone suggested the Finance Committee discuss the General Fund Reserve Policy after the Dec. 3 City Council/Finance Committee work session. Robert Baker suggested waiting until January as the budget takes priority until year-end. He is also reluctant to set hard and fast rules for reserve levels, preferring to set a target value that is advisory rather than a set minimum or maximum level that demands definitive action by Council to reduce or increase tax revenue. He reminded the committee that the reserve balance only dipped below 20 percent during the 2008-2009 Great Recession. Linda Lalley commented that there is a small group of people who remember and understand the issues. She noted the response of other cities who had not yet noticed this problem, and recommended adding some guidance in other areas regarding recommended options for surprises. Marty Kolb added the new federal tax laws are very upsetting to local governments.

Sean Malone adjourned the meeting at 8:42 a.m.
Frank Goforth, observer

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