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HomeMy WebLinkAbout2007/06/15-Minutes-City Council FORT WORTH CITY COUNCIL RETREAT JUNE 15 AND 16, 2007 OMNI MANDALAY HOTEL MANDALAY EAST, LOBBY LEVEL 221 EAST LAS COLINAS BOULEVARD IRVING TEXAS 75039 FRIDAY, JUNE 15, 2007 Present: Mayor Mike Moncrief Mayor Pro Tempore Kathleen Hicks Council Member Sal Espino Council Member Chuck Silcox Council Member Danny Scarth Council Member Frank Moss Council Member Jungus Jordan Council Member Carter Burdette Council Member Wendy Davis City Staff: Charles Boswell, City Manager Libby Watson, Assistant City Manager Joe Paniagua, Assistant City Manager Mark Ott, Assistant City Manager Dale Fisseler, Assistant City Manager Karen Montgomery, Assistant City Manager/Chief Financial Officer David Yett, City Attorney Marty Hendrix, City Secretary City Department Heads or their Assistant Department Head were also in attendance. There were also representatives from the police, fire and general employee associations, the news media, the Bond Consultants from First Southwest, and others. Call to Order/Welcome—Mayor Mike Moncrief The Fort Worth City Council Retreat was called to order by Mayor Moncrief at 9:00 a.m. on Friday, June 15, 2007, in the Mandalay East Ballroom, Omni Mandalay Hotel, 221 East Las Colinas Boulevard, Irving, Texas. Mayor Moncrief provided opening remarks and welcomed people to the meeting. He talked about the growth in the City. He spoke about changes in the wind for the City and the changes in staff, particularly with the City Manager leaving the City in early 2008. He talked CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 2 of 99 about the challenges for the Council to find a replacement. He emphasized the need for the Council to work together. Mayor Moncrief pointed out he wanted to build the City in a responsible way and take major steps and put in place guidelines. He talked about the issues the City is facing as to infrastructure needs; the need to press the Texas Legislature to address issues; and to do things on a regional basis particularly as it relates to mobility. Mayor Moncrief talked about the Barnett Shale and how long it will last and that it is going to be around for 40 to 50 years. He emphasized the good news that it is a revenue source for the City. He pointed out the Council's planning for a proactive piece to create an endowment for future generations when things might not be as financially positive. He spoke about the fact that the gas well drilling can also bring about problems and issues, i.e., salt water disposal wells. Mayor Moncrief added he is looking forward to the presentations and discussions to be held today. He emphasized his pleasure of working with the Council Members, who are gifted colleagues that have made their mark in the community and give daily to the City. He reviewed a few housekeeping items related to the hotel facilities. He advised of the meeting protocol and asked the City Council Members to allow the City staff to go through the presentations; the Council Members make their notes and hold their questions until the completion of the presentations and then their concerns can be addressed. He opened the floor to the Council Members for comments. Council Member Jordan stated that it would be nice to have a hotel like this in Fort Worth, Texas (which is currently under construction). Mayor Moncrief stated he was going to mention that also. He encouraged everyone to look around at the Omni product and he talked about the friendly hotel staff welcoming the guests and that the City was most appreciative of the product and hospitality. Introduction— Charles R. Boswell, City Manager City Manager Charles Boswell went over the purpose for this retreat for today and the next day. He explained how this was an opportunity to provide a common understanding for how the City's FY 07-08 budget is coming together. He stated the City was just right on two months before presentation of the budget document to the City Council. He stated there are certain elements that are coming together. Mr. Boswell emphasized that the City will receive the certified tax roll on July 25th and it will be a key piece to the budget process whether it is good or bad. He emphasized to the Council Members that he wanted to get consensus direction from the Council on budget formulation. He stated that he is not expecting to get clear consensus on every budget issue. He talked about certain scenarios that will be presented. He stated that nothing should be perceived as a budget proposal or recommendation or final budget item. City Manager Boswell emphasized this is an information sharing process. He talked about preparing CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 3 of 99 a balanced budget. He outlined that decisions must be made, considering trade offs, the consequences, challenges and problems that the City is faced with now and for the future. City Manager Boswell continued his comments. He stated that not all pieces of puzzle will fit together. He talked about the recent time taken to visit with the Council on their interests for the budget document, programs, services and enhancements, which included the compensation package, the retirement fund, the tax rate, etc. City Manager Boswell emphasized that another element the City staff is dealing with in explicit ways for the first time at a budget retreat is talking about the City's capital needs and the relationship to the operating budget and the impact on debt service. He cautioned the Council that they were going to see all of these things and they were not going to necessarily fit together like everyone would like them to do. City Manager Boswell talked about the steps for final policy direction on dealing with the retirement fund and the next meeting of the Texas Pension Review Board on June 25. He added he has not seen the agenda and he expects to be on the agenda to talk about the City's process. He talked about his other visits and the needed direction that the Council has decided to go with on the retirement challenges. City Manager Boswell talked about the critical capital needs in the City, whether a bond election should be held in November 2007 or whether to proceed with the annual Certificate of Obligation issuances that were done in 2007. He stated the City needs to get to the bottom line and it is going to be a difficult budget. He added that the City has been spoiled by the FY 06/07 budget in that the City got funding to enhance programs and services, added public safety employees, increased compensation and there was a tax rate reduction. He pointed out that he did not feel that could be done this year, particularly after the budget and capital projects discussions. He talked about the hot button issues to be considered by the Council, which were the major decisions over the coming months and how those are scheduled to be discussed, i.e., smoking ordinance, what the status is, when the Council will consider action, etc. City Manager Boswell concluded his remarks and introduced Bridgett Garrett, Director of Budget and Management Services Department for her presentation. Fiscal Year 2007— 08 Budget Process— Brid2ette Garrett, Director of Budget and Management Services Department Director Garrett reviewed the agenda topics for her presentation and the City staff members that would be making presentations for today and tomorrow. She indicated the topics were revenue and expenditure projections, the Council Members' budget priorities and the budget gap projections. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 4 of 99 Revenue and Expenditure Proiections Director Garrett began her PowerPoint Presentation. She reviewed the objectives as follows: • Discuss economic indicators • Discuss revenue and expenditure trends • Discuss Council Members budget priorities • Discuss budget gap progression • Discuss capital projects, including debt capacity She talked about the economic indicators as inflation, development and population. Director Garrett talked about inflation and presented a chart showing the Consumer Price Index—Urban for a ten year period from 1997 to 2006 and how this impacts the City. She stated that it was 2.9% for the DFW metro area, 3.2% nationally. She clarified that she has used the national average since the City is influenced by issues outside of the region. She reviewed the chart slide showing the National versus the DFW metro area inflation for the years 1997 through 2006. She talked about the upward trend. Director Garrett talked about the large amount of revenue the City receives from property taxes and that the City staff spends time studying this source. She presented the chart showing the single family residential permit valuations from 1999 to 2007. She talked about the significant growth in the City and stated that the average home value had increased from $61,415 (1999)to $108,256 (current year) over the subject years. She reviewed the commercial valuations for the years 1999 to 2006 and a chart reflecting those figures. She indicated that this was the largest source of revenue for the City. Director Garrett presented a chart of the construction permit valuations from 1999 to 2007, which showed a comparison of both commercial and single-family residential. She emphasized that the largest growth seen has been in commercial development. She then reviewed the population growth from 2003 to 2012. She indicated that the City has experienced a 6.9% from 2005 to 2006. She stated that the City staff has used 4% as the projection in the future growth, which is conservative. She indicated that the City staff was taking the conservative approach being mindful this has an impact on the revenue and impact on the City's services. She talked about added employees, facility and infrastructure needs, etc., to address the growth factor. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 5 of 99 She talked about the Fort Worth economy strengths as the population increases, the increase in gas well production, and the increase in property appraisal valuations. She then advised of the economy cautions as: • Housing market is slowing as a result of foreclosures and unsold housing stock • Revenue policy issues such as tax rate reduction and exemption increases • Energy costs which are highly volatile and difficult to project • Federal budget which results in potential loss of federal funding Director Garrett reviewed the Council Budget Retreat Revenue Distribution Chart and identified those categories that had increased. The pie chart showed the categories of property tax at 56.77%, sales tax at 18.71%, franchise fees at 1.70%, fines and forfeitures at 2.30%, licenses and permits at 10.01%, service charges at 4.78% and other revenues sources at 5.72%. She reviewed the chart on the property taxes and pointed out that it is the City's largest single source of revenue at $56.77%, which represents $291,590,333. She presented the property tax rate chart showing the years from 1995 to 2007. She emphasized that over the years of 1995 to 2002 it dropped, then remained constant and was reduced last year from $.8650/$100 to $.8600/$100 of assessed valuation. She then advised of the components of the tax rate being: Operation/Maintenance (O/M) at $.7259 (84%) and Debt Service at $.1341 (16%). Director Garrett then reviewed the chart showing the property values based on tax year and the trend up for the years 1997 through 2007. She stated that this has allowed for needed services to be added and enhanced the City's current programs. For this same period of time, she reviewed the chart showing the property tax revenues had been steady. She pointed out the growth assumptions were 2008 at 5%, 2009 at 5%, 2012 at 5%, 2011 at 4% and 2012 at 3%. Director Garrett provided a chart showing the comparison of average tax bills for the cities of Fort Worth, Arlington, Austin, Dallas, El Paso, Houston and San Antonio. She advised that while the City of Fort Worth had one of the highest tax rates in the state, the City did not have one of the highest combined tax bills. She advised that Dallas and Austin had the highest and El Paso had the lowest and the City of Fort Worth has the second lowest tax bill. She reviewed the details of the chart. She pointed out that Austin and San Antonio do not offer homestead exemptions. She advised that Austin and San Antonio own their own utilities and transfer funds from those entities into the City's General Fund Budget. Mayor Moncrief asked her to again review this information. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 6 of 99 Council Member Silcox asked about the tax rates. He pointed out the City of Dallas and stated that while Dallas has a lower tax rate than Fort Worth, he understood that they have higher fees and more fees and charges than other cities. Director Garrett indicated that she did not have that information; however, she would provide it to the Council. Council Member Jordan asked about the "Senior Tax Freeze" and whether most all of the cities in Texas have approved this freeze. Director Garrett stated that most all of the cities have approved this tax reduction; however, she would provide a list of the cities that have approved it for the Council's information. Director Garrett continued her presentation with a review of the sales tax. She advised that the sales tax is the second largest single source of revenue for the City. It represents 18.71% of the General Fund Revenue Budget. That figure is $96,093,842. She presented the chart showing the sales tax per capita. She indicated that the City staff monitors it and goes forward with the re-estimate basis. She pointed out that sales tax has been trending down in the last two months. Council Member Espino talked about while it may be trending down for now, he pointed out the new retail developments that could be occurring in the next few years in the northern sector of the City in his district, i.e., Alliance Town Center, other developments along SH 114. He asked if the City staff has considered that area and how it will impact the trend. City Manager Boswell stated that the City staff has considered it for a long term trend. He referenced a comparison of the commercial permitting which is trending higher, which in turn has driven the commercial sales tax. City Manager Boswell stated that Director Garrett is trying to say for the next budget year purposes there is not much of a tremendous increase. He emphasized that sales tax is very volatile. Director Garrett reviewed the chart on the sales tax per capita for the comparison cities of Fort Worth, Arlington, Austin, Dallas, El Paso, Houston and San Antonio, with Austin and Houston with the highest per capita sales tax. She talked about the FY 06-07 adopted budget and debt services. She explained that the tax rate for debt serve is $.1341 of $.8600 (16%). She pointed out that it is declining as a percentage of the General Fund expenditures. She stated that the FY 2006-08 at 8.79% of General Fund expenditure budget (debt service transfer divided by the total General Fund expenditure budget is $45,130,973/$513,590,486 = 8.79%). CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 7 of 99 Director Garrett then reviewed a chart showing the comparison of O/M tax levy and the debt levy for a ten year period of time from FY 97/98 to FY 06/07. She reviewed the details of this chart and pointed out the tax levy has increased and the debt levy has decreased. Director Garrett presented the debt service as a percentage of the total General fund budget chart for FY 1997 to FY 2007 and advised that it is trending down. She reference 1992/93 22% expenditure list. She advised of the previous Councils' desire to get the debt service lower in order to have more funding for the O/M in the General Fund Budget. She pointed out that this has been accomplished and now there is a need to raise it in order to provide for funding to address critical capital needs. She emphasized that this requires a careful balancing act. She provided a chart showing the budgeted expenditures growth areas for a ten year period from FY 1998 to FY 2007. The chart contained the expenditures by department, showing the Police, Fire, Parks, Library, Code Compliance and Transportation/Public Works. She pointed out that the Code Compliance Department for the years 2002 — 2007 was 74%, the Fire Department was 63.5%; the Police Department was 45.2%; Parks was increased at 42% She stated that the City was able to provide some significant programs and enhanced services. Director Garrett presented the budget forecast assumptions as follows: • Conservative projections • Maximizes flexibility and options • Ensures City of Fort Worth is not over extended if economic trends reverse course • Inflation projected at 3.2% -FY 2006 Annualized • Property Tax growth projected at 5% • Sales tax growth projected at 2% • All other revenue growth projected on average at 2% She added that the property tax, sales tax and other revenue are based on preliminary December 2006 re-estimates. Director Garrett reviewed the FY 2007/08 preliminary projection as of February 2007 for total revenue projection at $536,000,262 -- less expenditure projection at $580,277,246 then equals the surplus/(gap) of-$44,276,984, which is a gap. She referenced the fiscal outlook sheet which showed the revenues, expenditures, for February and March of 2007 and the differences. She reviewed the "place holders" for market lag from last year at 1.5%; the loss of"T" sales tax, the loss of Community Development Block Grant monies, the cost of the new Computer Aided CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 8 of 99 Dispatch System, the energy conversion (traffic signal conversion) and the FY 06-07 approved decision packages. She went back to the presentation and talked about the meetings with the Council regarding their list of budget requests as follows: Address 1.5% compensation lag from last year in market median $4,100,000 Street Maintenance $5,000,000 Increase Funding for Public Safety Departments*: Police $11,324,586 Fire $1,399,770 Increase Funding for Employee Retirement Fund— 1% $2,700,000 Continue to fund Critical Capital Needs with CO's $105,464,000 (Total program $150 million) *Amount submitted by Police/Fire Departments in Decision Packages to be considered for funding in the FY 2007/08 adopted budget. Director Garrett reviewed the additional items identified by Council Members as follows: Offset increased retirement contribution w/compensation $3 million or 1% Reduce tax rate by 1 cent $3.77 million* Increase funding for Code Compliance $950, 000** *Based on preliminary TAD Report **Amount submitted by Code Compliance Department in Decision Packages to be considered for funding in the FY 2007-08 adopted budget. Director Garrett then presented the update of budget gap projection from $44.2M to $24.5M. She reviewed the revenue projects from February 14, 2007 to March 2, 2007, the total revenue adjustments, the total revenue projection, the expenditure projection, the total prior commitments, the total other expenditure increase, less expenditure projection. The result was a gap of -$544,276,984 for the February period and -$524,547,615 for the March period. She referenced the FY2007-08 fiscal outlook sheet that had been provided to the Council. She talked about budget reduction packages which represented 4.9% of the current adopted budget. Director Garrett presented the slide on the property tax valuations. She stated the preliminary TAD Appraisal on May 15, 2007, reported a net taxable value of$37.8 billion, an increase of $5.5 billion (17%) over the July 2006 certified tax roll. TAD reported an 11% CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 9 of 99 increase on May 16, 2007, but this compared to the September 2006 tax roll values (quoted from the Fort Worth Star Telegram). She reviewed the four components that make-up the property tax valuation comparison, which included new construction, annexation of land into the City, gas wells and the category of "other". She reviewed the numbers for the preliminary tax roll in 2006, the certified roll in 2006 and the preliminary roll for 2007. The total net taxable values for those periods were $33,781,084,833, $32,253,876,189 and $37,750,321,861, respectively. There was clarification discussion on the property tax on gas wells shown on this chart. Director Garrett reviewed the chart showing the property tax valuations for new construction for the years 2003 to 2007. She presented the property tax forecast—revenue. She stated that the Preliminary TAD shows the revenue projection assumes 5% shrinkage from preliminary to certified. Also, revenue projection assumes no impact from protests. She advised that the fiscal outlook was $299,416,794, the preliminary TAD was $301,707,201 and the variance was $2,290,407. She then reviewed the budget projections from two different approaches. One approach was to look at the budget projections and the other approach was to maintain current service levels. Director Garrett talked about maintaining current service levels for FY 2007/08 and stated that the City can maintain current service levels, plus add a few extras, i.e., increase funding for the employee retirement fund (1%) that is $3 million; address the 1.5% lag from last year in market median for compensation at $4.1 million and funding for exception packages at $8.245 million. The total of the extra packages was $15.35 million. She pointed out that the senior tax freeze will not impact the budget for next year. She clarified that this does not allow for any improvement packages. She advised of need for off-setting reductions for any additional items added to the budget. Council Member Espino requested clarification on the $5,000,000 for additional funding to address the City's street maintenance. Director Garrett indicated that this was an enhancement package and it was not included in the base budget. She stated that the current funding for street maintenance is still in the budget; however, it does not address the inflation factor for construction for next year. Council Member Espino pointed out that if the Council wants to increase that amount then this will be a topic of discussion for this meeting, which Director Garrett concurred. Council Member Davis referenced the expenditure reduction made in the 10% increase payment based upon GASB 45, which was to be paid toward the retiree health care benefit. She questioned how that assumption was made and if it is was based upon the City Manager's CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 10 of 99 recommendation of how to deal with retiree health care costs or if the City staff has just decided that the City is not going to take care of that right now. City Manager Boswell interjected that the City staff would be talking about GASB 45 later in the meeting. He emphasized that City staff is getting a different look and the City staff is not making a recommendation. He added that they are making a conceptual recommendation that the City would provide for a 10% payment, whether that occurs in FY 07/08. He added that it does not have to occur then. He added that this would move the City towards addressing the GASB 45 funding and not just recognizing the liability. Council Member Jordan requested clarification about the evaluation of the gas wells and how it compared to last year's evaluation. City staff indicated that they would have to get back to him on this information. Director Garrett continued her presentation with a review of the Culture and Tourism Budget, which included the bed tax dollars. She pointed out that they are requesting a 1% increase over the current year's budget for next year. The FY06/07 adopted revenue was $9,565,456 and the proposed for FY 07/08 was $9,646,153, with the difference at $80,697. She reviewed the additional request from the Convention and Visitors Bureau (CVB) of$2 million and that there had been additional funding requested from all agencies at $364,310. She emphasized that the City cannot fund all of the requests received, thus priorities need to be determined. City Manager Boswell stated that this is a certainty that all requests cannot be funded, with the modest growth in revenues projected. He advised of the City staffs dialogue with them and the negotiations for a new contract at the current time. He stated that it should be wrapped up before a budget decision is made. He added that there is a strong feeling that since this comes from the hotel community and with more beds coming on line next year„ with more amenities, there will be more bed tax revenue received. He pointed out that their position is if there is not adequate marketing, the beds will go unfilled. City Manager Boswell stated that beyond that, they want funding to promote economic development and bring people in to the City and conventions into the Convention Center. He stated that the CVB has indicated that they need to beef up their marketing budget. He pointed out that initially they are asking for a $2 million jump for next year. City Manager Boswell advised that in the contract negotiation they are requesting to get 55% from bed tax collections to the CVB. He added that there is still another negotiation session coming up. He stated that it is currently at a fixed level and goes up 3%to 5% each year. City Manager Boswell advised of the letters requesting funding from the Art Council, Sister Cities, Science and History Museum, etc., all looking for increases. He pointed out that the City cannot fund all of the requests and some entities will just not get it. He stated that then they will look to the City's General Fund for those monies. He added he felt there are significant CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 11 of 99 policies that need to come forward to address these issues for both the bed tax revenue and the City's General Fund. Council Member Davis interjected that she understood that the DFW Airport Board had agreed to fund $5,000,000 for marketing the airport through the CVB's in Fort Worth and Dallas. Council Member Davis questioned how this impacts the Fort Worth CVB and their budget and how they are going to utilize those funds. She also questioned how they were going to utilize the $2,000,000 that they were requesting for increased budget dollars. Mayor Moncrief indicated that the FAA is very picky about the use of their funds and it has to be to promote the airport and guidelines are put in place to address those uses. He added that there was no question that it will help be an attraction to Fort Worth and to Dallas. In addition, part of the argument for moving it forward is the fact that the Super Bowl will be coming and there is a ripple effect to the City. He added that the point is well taken. City Manager Boswell looked to the City staff to get the answer about the request for the additional $2,000,000 and how it will be used. He stated that City staff is trying to get a handle on how much will benefit the City of Fort Worth as opposed to the region. He added he appreciated the way they are handling their budget proposal this year. He clarified that instead of looking at other cities' budgets and asking for monies to match what other cities are doing, they based their request on outcomes and what they can do with the funding. He indicated that for an example, if they add staff then the results will be thus and if they add advertising dollars, the results will be thus. Mayor Mike stated that the bottom line is that it is a matter of supply and demand and there are just not enough dollars to go around. At this time, Director Garrett responded to a previous question by Council Member Jordan regarding the gas well revenue comparison for this year compared to last year. Mrs. Garrett stated that it was $149,000,000 last year to $596,000,000 this year, which as a 298% increase. Mayor Pro tem Hicks requested to know about funding provided to the Sister Cities International last year, as she remembered that they got increased funding. She added that each of the groups is promoting a diverse Fort Worth; however, she is concerned with the CVB and their approach through their marketing brochure. She indicated it concerns her as there was a lack of diversity in what they are promoting in Fort Worth. She added that it makes good business sense in promoting diversity in tourism and for the City to see and enjoy diversity in the visitors and conventions that come to town. She added that everything in the brochure shows the west side of IH35W. She asked what their plans are for their additional funding request and how they are going to use those dollars. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 12 of 99 Council Member Espino indicated that he also sided with Mayor Pro tem Hicks' comments. He talked about the marketing of the Texas Motor Speedway with the City of Fort Worth and at times it is a challenge to promote a lot of Fort Worth. He pointed out that they hold two races per year that bring more visitors to the City than a Super Bowl and thus they need to do more to promote the speedway with the CVB dollars. Mayor Moncrief requested to return to Slide 8 on construction permit valuations. He talked about the growth explosion and how now there is a slow down in the housing market. He added that he did not feel this was a bad thing and hoped to see the continued growth on the commercial side. He feels that the balance was coming back. City Manager Boswell also spoke about the commercial building and permitting is coming up as the residential is coming down and this is not a bad thing. Council Member Silcox interjected that as fast as the growth has been taking place; the infrastructure is not keeping up with it. He added now it is the time to play catch up. Council Member Moss stated that putting the residential developments up will result in the demand for more commercial development also. Assistant City Manager Dale Fisseler spoke about the work of the Development Advisory Committee and the slow down in residential construction will produce the upswing in the commercial. He stated that they are being conservation about those projections. Director Garrett advised that the Sister Cities International received $25,000 in this year's budget and they are requesting $21,000 for next year. Council Member Jordan pointed out that the request for the $25,000 this year was due to the fact that the President and CEO Mae Ferguson is going to be the President of the International Organization of Sisters Cities and part of the funding was needed in support of that position. Director Garrett concluded her presentation. Total Compensation: Analysis and Findings— Jose A. Moreno, Compensation Manager, Human Resources Department Jose A. Moreno, Compensation Manager in the City's Human Resources Department, spoke before the Council on his presentation. Using a PowerPoint presentation, he advised that his presentation would contain the historical background on the study of total compensation; the background of the Total Compensation Committee, the findings of the total compensation study, the committee's endorsements, the goals/objectives of the total compensation (TC) and the Human Resources staff s observations and perspectives on total compensation. Mr. Moreno advised of the historical background on the study of total compensation. He stated that in 2004, after the Buck/Mellon Study, the Human Resources staff requested formal CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 13 of 99 direction and guidance from the City Council on total compensation. In 2006, the Council requested another Total Compensation Study with employee input. Mr. Morales stated that the City Manager commissioned the Total Compensation Committee, consisting of 13 members. This committee represents a cross section of the City's general employees and Civil Service Associations. It also includes a general employee retiree and a Civil Service retiree. Mr. Moreno advised that the committee's objectives were to: 1. Develop formal TC objectives to guide the City in total compensation and recommend them to the City Manager. 2. Develop a methodology for quadrennial review and determine where the City of Fort Worth stands among market peers. He then reviewed the focus: • Total Compensation will focus on the four components: direct pay, paid time off (PTO), retirement, medical benefits (all are part of a holistic approach) • Study will show how the City stands as an organization in comparison with other jurisdictions Council Member Davis interjected a question about the issue that employees are allowed to build up vacation time and then take it at the time of retirement or resignation, which results in higher costs for the City. She questioned if this type of accrual was part of the study. Mr. Moreno explained that it was not captured in this study. He advised of the third component that the study includes 45 different benchmark classifications used to provide a snapshot of the organization in relation to its total compensation. He stated that the total compensation data is not intended to show the market standing on individual classifications. He added that the method of analysis was to be considered as to whether it was the cost, value or both. Mr. Moreno presented the goal of the Total Compensation Study as follows: • To effectively provide an indication of how the organization stands among its peers in Total Compensation • For example: If the organization, as a whole, is behind its target in TC, this study will identify areas that need improvement or show areas where the City is very competitive. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 14 of 99 He talked about the methodology as: • Findings derived and analyzed from a "cost" only method (one-dimensional analysis) • Data obtained from 10 core cities (Arlington, Austin, Dallas, Garland, Grand Prairie, Irving, Mesquite, Richardson, Plano, San Antonio) • Data compared to market median (50% percentile), market median +3% (53rd percentile), and market median+5% (55th percentile) • Each major TC component is comprised of various sub-components which are also analyzed. He presented the issues of the study: • Data submitted in various formats by reporting agencies (e.g. supplemental pays, medical), including lack of data • Some captured cost data could benefit by having more substantial information • Some components do not lend themselves to meaningful analyses when considering only cost (e.g. medical benefits, paid time off) Mr. Moreno stated that the Council will see a report of the survey's findings for each of the four total compensation components focusing in on a holistic approach, with comparisons of each component to Market Median, 53% and 55% percentiles; issues with the findings in each component and conclusions regarding each component. He talked about the total compensation study regarding the results for the city-wide summary. He stated that holistically, total compensation results show the City to be under the median in total compensation for all City employees by -3.4%. The direct pay remains above the median by approximately 3%, the benefits are below the median by approximately -19% and the data is based on actual averages. On this slide, Mr. Moreno noted that the preliminary budget change effects on overall total compensation equals -1.27%. He presented a chart of the study for each of the employee groups, General, Fire and Police. The left side of the chart showed the direct pay, the benefits and the total compensation for each of the referenced categories. The right side showed the percentage difference from the median. The chart noted that holistically, the total compensation shows the Fire employees very near median at +0.04% but the overall findings for general and police employees are in the negative at -3.6% and at -3.5%, respectively. Benefits area is consistently low when compared to market. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 15 of 99 Mr. Moreno showed a pie-chart of the city-wide total compensation component breakdown averages for the categories of paid time off at 12%, retirement at 9%, health and welfare at 7%and direct pays at 72%. He then reviewed the Direct Pay Cost Analysis Chart for the respective employee groups. He advised that the overall direct pay component is positive for all employee groups when comparing median, 53% and 55% percentiles. He advised that direct pay equals the base pay plus supplemental pays, such as overtime. Another note stated that all other supplemental pays were eliminated by the committee ($9.0 million). Mr. Moreno presented the chart showing all the paid time off cost comparisons. The notes on the chart stated that the analyzing cost value only gives general indication of how the City compares to peers on amount of leave offered at specified tenure level and on average base salaries for each benchmark. Overall, the City averages PTO costs were found to be positive when compared to the market for each employee group. Holiday is the only sub-component in the negative for all groups. He reviewed the chart showing the Employer Pension Fund Contribution Rate Comparisons. The notes on the chart stated that the City of Fort Worth employer pension fund contribution rates were found to be significantly below market for all employee groups. The contribution rates for general employees were behind by approximately 3%; Fire by -4.5%; and the police were behind by approximately 3.7% on contribution rates. Mr. Moreno presented the chart showing the Total Dollar Retirement Comparisons. Notes on the chart stated the annual total is comprised of employer contributions to pension (TMRS or other), Social Security, Medicare, and any other pension contributions to 401k/457/other. Considering total dollars contributed toward retirement related costs for employees, the City is significantly below market. Mr. Moreno reviewed the chart showing the Health and Welfare Costs (medical/dental/long term disability/Life Accidental Death & Dismemberment). The notes on the chart stated that in regards to all medical-related costs, the City, as a whole, is below median by approximately 11%. The majority of health and welfare costs are medical benefit. Being below median on medical-related costs may not be a negative (e.g., other cities may be experiencing higher medical claims, etc., or they could have better benefits.) Mr. Moreno reviewed the summary of the findings as follows: CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 16 of 99 • Holistically, City of Fort Worth (CFW) is competitive in direct pays among all employee groups at median, 53% and 55% percentiles • CFW, as a whole, is competitive overall in paid time off component o Holiday sub-component was the only area where all employee groups were below median • CFW, as a whole, is below median in retirement costs • CFW, as a whole, is below median in most health and welfare-related benefit costs. Mr. Moreno presented the preliminary budget projections related to the Total Compensation as follows: Preliminary FY07-08 Budget (based on 3/2/07; $24 million gap)* • +7% increase in Group Health • Increasing city retirement contributions by +1% • Average salary increase of+3.2% • If the above is the only funding associated with TC, the committee endorses this preliminary budget *Under "approximately" current service levels budget, the increased cost of health insurance would not be included and the salary increase would be limited to 1.5%. Council Member Davis requested clarification on the information provided and how salary increases affect the health insurance, retirement, etc. Mr. Moreno presented the total compensation objectives as recommended by TC Committee as follows: 1. Reach market median in total compensation when economically feasible 2. Once market median is achieved, attempt to exceed the median by 3% to 5% when economically feasible 3. Provide benefits that employees value and flexibility of choice when feasible 4. Keep employees informed and involved with the structure of their total compensation 5. Provide equivalent and fair benefits to all employee groups when possible 6. Continue to monitor the total cost of all benefits and the long term liability posed to the City for these benefits. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 17 of 99 He reviewed the TC Committee recommendations as follows: • The City provide an increase in its contribution toward health insurance • The City provide an increase in its contribution to retirement. • The City provide enough of an increase in salaries to maintain its market position after 10/01/2007 • Additional remark from TC Committee is for the City to provide the entire +5% ($15 million) increase in city retirement contributions (either via multiple year phase in or all in one year). If+%5 contribution is given in one year, consensus is from committee for the City employees to forego a salary increase. At this time, Mayor Moncrief recessed the Fort Worth City Council Budget Retreat at 10:44 a.m. The retreat was called back to order by Mayor Moncrief at 11:05 a.m. Mr. Moreno provided information that had been requested previously by Council Member Davis regarding increases in the preliminary budget and how it will affect the overall compensation. He reported that it would be .08 % above median. He emphasized that as part of the budget process in all other comparison cities; they will also adjust and go above. The Council requested the list of the City employees that served on the committee. Mr. Moreno read off names of the people who were on the committee. Mr. Moreno turned the presentation over to Dick Hodapp, Assistant Director of Human Resources, who reviewed the slide showing the Human Resources and Total Compensation Committee Perspectives, Interpretation and Improvement. He advised of the debriefing of the Total Compensation Committee in order to determine what the results were from the study. He pointed out that the last three slides of the presentation represent the results, the lessons that were learned and how to interpret the results. He complimented Jose Moreno, the committee members and other City staff that worked on this process. He indicated that the committee had a great deal of discussion and debate. He reviewed the information on the slide as follows: Total Compensation has many definitions and can be measured in different ways (no single correct methodology) Current Total Compensation results of this study are one dimensional Cost data can only provide so much information • (e.g. due to lack of data from other cities, earlier removal of supplemental pays impacted the validity of the City's approach to the study) • Cost of benefits (e.g., medical-related benefit costs cannot give much insight on what specifics are being paid for) CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 18 of 99 • Using cost method and capturing overtime data— overtime can be affected by an organization's policy decision and change expended costs rapidly • Future costs of other benefits (based on current policies) Mr. Hodapp advised of looking at the straight costs of benefits was also considered. He stated that when benefits are looked at from a cost point of view, it is hard to determine what the City is getting for its money. He pointed out as an example the medical costs. He stated that those costs can be lower when taking into consideration the City's wellness program and that the program is keeping those costs down. He pointed out that the committee failed to look at deferred costs, i.e., the City's policies on vacation leave, the generous accruals and the retirement plan. He talked about the calculation of the employee's major medical leave into their retirement benefits and that this can be a major benefit for a long tenured employee. He pointed out that this was not part of the study. Mr. Hodapp continued his reviewed of the Human Resources and Total Compensation (TC) Committee perspectives, interpretation and improvement. He emphasized that one of the most important factors was the importance of value for total compensation including the value of benefits (e.g., medical benefits, retirement) and value to the employees and that this was not measured early on due to complexity and interpretation problems. The committee determined that the cost would represent value and it does; however, it does not represent the total picture. Mr. Hodapp stated that one of the major objectives of TC is to help the City attract and retain employees. He stated that the value portion of total compensation is what helps to retain the employees. He added that the compensation and cost value is what helps to attract employees. Mr. Hodapp stated that there are two types of values that the City needs to consider, i.e., value of those benefits and the employees' perception of the compensation. He stated that one example was the medical benefits and how those are structured and is the City receiving the most benefit for the cost being paid. He also talked about the retirement program and what the City is paying for and how does the employee value it. He added that Total Compensation must address value. Mr. Hodapp pointed out to the Council that what the study means for the City is that it now has the most comprehensive data that the City has ever collected before and it is very useful in many different ways. He added that the interpretations of the current TC study results were that the results should not be taken as an absolute; lets the City know where it is; and helps the City focus on areas of concern. Mr. Hodapp advised that what was learned from the study for future improvements was to do a separate analysis on each comp component. He stated that the City needs to look at the cost and the value and the benefit associated with each component and then holistically they would have to be combined. He pointed out that this was a first time experience to have the CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 19 of 99 committee and for having Human Resources do the work on the study. Mr. Hodapp stated that they can improve on the results and go forward. He reiterated that the total picture had to include cost and value and that the value can mean different things to the employees. He talked the City's policies also play a role in the process as well as quantities as it relates to holidays. He pointed out that measuring value is more difficult than measuring cost. He talked about employee demographics, both internally and externally. He advised that the comparison cities may not have a mix of employees like the City's. Mr. Hodapp pointed that that other factors are years of service, generations, and family relationships. He advised of the different values that the younger generation may have as compared to the current employee base and this has to be considered as a part of total compensation. He emphasized that they learned that the analysis needs to be customized. Mr. Hodapp stated that the recommendation coming forward from the committee was that a consultant with this particular expertise be used the next time to help pull together the cost and value to give the total picture. He stated that the study gave them a good view and lets the City know where it is right now, including the strengths and weaknesses. He stated that Human Resources will continue to do an evaluation on each of the components using the typical methods in order to stay competitive with the other cities that will also be changing and increasing their benefits. He pointed out that the City needed to be competitive and look at each major component. Mr. Hodapp concluded his presentation and asked for questions. Council Member Jordan commended the City Manager and City staff on this work and stated that he wanted everyone to understand that this was a huge benchmark for how the City treats compensation. He stated that it provides a benchmark for this Council and future Councils on how they treat compensation issues and how it affects other parts of the compensation package. He pointed out how much effort went into it. He commended the committee and staff on the number of hours it took to do this work. He added this will save the City time in the future and there needs to be continuation of the process. He emphasized that as the Council talks about value, part of it is getting the best and brightest for a competitive rate. Council Member Scarth questioned how many of the other benchmark cities have a defined benefit package rather than retirement. City staff advised that there are nine (9) different defined benefit packages. He then asked about the number of defined contributions and the City staff indicated that there were eight (8). There was discussion on what cities have used bond funds to fund benefits and the history of the City of Dallas utilizing bond funds to put in funding for their retirement system. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 20 of 99 There was further discussion and clarification of how the City compared to other benchmark cities and their defined contributions and whether the City was above or below in each of those areas. Mr. Moreno clarified that there were seven (7) defined contributions, rather than the eight (8) that he mentioned earlier. Mr. Moreno stated that the City was behind in comparison, except for the dental plan, and on an average the City was at the median. There was discussion on the number of City holidays in Fort Worth and how that compared to other cities. Mr. Moreno pointed out other cities have 10 holidays compared to the City's nine (9). (Mayor Moncrief left the meeting at 11:25 a.m. and turned the meeting over to Mayor Pro tem Hicks.) Council Member Jordan talked about the treatment of overtime in the salary calculation and the payment of accrued leave at the time of retirement. He stated it was brought to his attention that the City had done away with the policy of allowing annually the pay off for excess leave and vacation in a "sell back" program. He pointed out as a result now that all of it occurs at the highest dollar when the employee leaves the City's employment and not each year. He questioned when the program was in place if the employees took advantage of it or whether most employees did it at the end of retirement. Council Member Jordan stated his concern is that this accrual is being paid at a higher rate at the end of the career and there is a need to look at this issue. Council Member Scarth questioned if the City tracked what the accrued liability was each year, or if this is only occasionally tracked. Assistant City Manager Karen Montgomery stated that this amount has to be shown in the City's annual financial audit. She indicated that she would get that number for the Council. Council Member Davis indicated that Council Member Jordan addressed the point she wanted to make also and that is addressing the accrual leave and it is just another unfunded liability. She pointed out that with a "pay as you go system" this will save the City money rather than a "pay at the end system". She stated that it would be helpful for the Council to see on a year to year basis what percentage of employees were using the "sell back" program as compared to accruing the leave. She stated that this is necessary in order to have a compensation comparison between those two. She stated that if the City is looking at the value of the dollar paying off the time at the current dollar rather than at the higher rate at retirement makes more sense. She pointed out by delaying it; the City is creating some really high costs for the future and thus eliminating that policy was not a good idea. Council Member Davis emphasized that some employees would like to see that policy return. She emphasized that it is a value question. Council Member Davis stated that if it is true that it has to be shown in the City's financial CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 21 of 99 statement, then benchmark cities must also show it in their financial reports. She pointed out that this was one of the things that was not compared; however, the City ought to be able to capture this information from the other cities' financial statements. Assistant City Manager Montgomery stated in the 2005 CAFR the figure was $82,000,000. She also referenced the $6.6 million figure noted in the footnote to the financial. She stated that this information can be pulled from the other cities' financial audits for comparison. Council Member Scarth asked why the pay back for leave had been changed. City Manager Boswell stated it was budget balancing issue in a budget year when the City needed the $1 million to fund something else. GASB 45: Changes to Accounting for Employee Retirement Healthcare Benefits— Mark Washington, Assistant Director, Human Resources Department Mark Washington, Assistant Director, Human Resources Department, spoke before the Council regarding his presentation and the recommendations on Governmental Accounting Standard Board (GASB) Statement No. 45. He reviewed the purpose was to consider adopting the Audit and Finance Advisory Committee's recommendations on strategies for other post- employment benefits. Using a PowerPoint Presentation, he presented a chart showing the health coverage costs in comparison to other peer cities. The chart showed the average annual health benefit cost in 2006 per employee was $6,997 for the City and $9,217 for other local governments; average health care cost as % of payroll was 14.5% for the City and $20.2% for other local governments; average employee monthly contribution for individual coverage (PPO) was $58 for the City and $64 for other local governments; average employee contribution % for individual coverage (PPO) was 10% for the City and 15% for other local governments. He reviewed the next chart showing the retiree health coverage in comparison to other peer cities and the large private sector as follows: Retiree Only Health Coverage Local Large Private City of Fort Government Sector Worth Offer retiree coverage Pre Medicare Eligible 82% 25% Yes Medicare-Eligible 68% 16% Yes CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 22 of 99 Contribution requirements Pre-Medicare-Eligible Employer Pays All 22% 12% 77% Share Cost 26% 45% 23% Retiree Pays All 52% 43% 0% Medicare-Eligible Employer Pays All 26% 19% 87% Share Cost 23% 50% 13% Retiree Pays All 51% 41% 0% He then reviewed the chart showing the overview of the retiree medical benefits. He advised that approximately 2,395 retirees/survivors are receiving benefits. Over half are eligible for Medicare. A majority of City of Fort Worth retirees were hired prior to October 5, 1988 and receive a basic plan at no cost for themselves. Their dependent cost is 30%. Retirees hired on or after October 5, 1988 with 5 years of service and less than 15 years the retiree's cost is 33% and the dependent cost is 50%; 15 years but less than 25 years the retiree cost is 67%, with the dependent at 40% and retirees with 25 or more years receive 100% and their dependent receive 30%. Mr. Washington presented the chart stating GASB 45 will require the City to change from funding on a "pay as you go basis" to accrued liability. The unfunded actuarial accrued liability (UAAL) as of October 1, 2006 was $858,254,000 and the annual required contribution (ARC) as of October 1, 2006 was $89,170,000. Mr. Washington explained that the annual required contribution at $89,170,000 was 100%, less the "pay as you go cost" of $20,331,965 (23%)would result in the unfunded ARC at $68,838,035 (77%). He reviewed the chart titled GASB 45 Cost Savings Ideas for 30-year Cumulative. The options were as follows: 1. Place $5 million of reserves year 1* (assumes 6% of ARC thereafter annually, in Trust) 2. Continue to fund the expansion of Wellness Program to retirees* 3. Access Only for dependents of future employees 4. Access Only to future employees and dependents 5. Provide 25% subsidy for future employees and access only for dependents 6. Provide 50% subsidy for future employees and access only for dependents *Endorsed by the Audit and Finance Advisory Committee CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 23 of 99 Mr. Washington pointed out Options 1+2+3 had no impact on liability; 1+2+6 had slightly major impact on liability, 1+2+5 increased the impact on liability and 1+2+4 had the highest impact on liability. Mr. Washington presented the chart titled Cumulative Impact First year — Reduction in Baseline ARC of$89.17 million. The impacts were: 1. $5 million in first year, 6%thereafter 2. Expansion of wellness to retirees 3. Access Only for dependents of future employees 4. Access Only for future employees and their dependents 5. 25% subsidy for future employees and access only for dependents 6. 50%subsidy for future employees and access only for dependents He presented the following options: Action 1st Yr ARC Reduction 1st Yr ARC Value of after Reduction: Cumulative (1, 2, 3) 9% ($8 million) $81.29 million Cumulative (1, 2, 4) 9% ($8 million) $81.29 million Cumulative (1, 2, 5) 9% ($8 million) $81.29 million Cumulative (1, 2, 6) 9% ($8 million) $81.29 million Note: 1st Yr UAAL = $858 million under current plan; $772 million under cumulative options Mr. Washington then reviewed a similar chart that showed the Cumulative Thirty-Year Impact—Reduction in Baseline ARC of$420.63 million. Council Member Davis talked about the "do nothing approach" and the "pay as you go" amount that is around $170 million in 2036. She indicated that she wanted everyone to hear this that in the year 2036 and every year after that year, the health care cost to the City will be $150 million per year. She emphasized this point again. She made another point regarding the "pay as you go"that in another ten years it will be twice that amount. Council Member Moss requested further clarification about the "pay as you go" costs and cumulative amount, which Mr. Washington responded to. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 24 of 99 Mr. Washington reviewed a chart showing Option 3: Access Only for Dependents of Future Employees hired after 1/1/08 Upon Retirement. Today's Monthly Cost (with Cost to Retiree (100% Retiree 100% Retiree Subsidy; Partial Subsidy Only) Unblended Dependent Subsidy) Rates* Retiree Only $0 $0 (No Medicare) Retiree Only $0 $0 (Medicare) Retiree and Spouse $245.65 $517.13 Retiree and Spouse $233.14 $340.59 *Amounts shown are illustrative of the 2007 monthly rates. These rates will change in the future. Dependent rates shown are for spouse only. Mr. Washington presented Option 4: Access Only for Future Employees Hired After January 1, 2008 and Their Dependents upon Retirement Today's Monthly Cost (with Cost to Retiree (100% Retiree 100% Retiree Subsidy; Partial Subsidy Only) Unblended Dependent Subsidy) Rates* Retiree Only $0 $497.24 (No Medicare) Retiree Only $0 $341.20 (Medicare) Retiree and Spouse $245.65 $1,014.38 Retiree and Spouse $233.14 $670.30 *Amounts shown are illustrative of the 2007 monthly rates. These rates will change in the future. Dependent rates shown are for spouse only. He then reviewed the Option 5 chart: Access Only for Dependents of Future Employees Hired After 1/01/08 Upon Retirement. Today's Monthly Cost (with Cost to Retiree (100% Retiree 100% Retiree Subsidy; Partial Subsidy Only) Unblended Dependent Subsidy) Rates* Retiree Only $0 $372.93 CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 25 of 99 (No Medicare) Retiree Only $0 $255.90 (Medicare) Retiree and Spouse $245.65 $890.06 Retiree and Spouse $233.14 $596.49 *Amounts shown are illustrative of the 2007 monthly rates. These rates will change in the future. Dependent rates shown are for spouse only. Mr. Washington presented Option 6: Access Only for Dependents of Future Employees Hired After 1/01/08 Upon Retirement: Today's Monthly Cost (with Cost to Retiree (100% Retiree 100% Retiree Subsidy; Partial Subsidy Only) Unblended Dependent Subsidy) Rates* Retiree Only $0 $248.62 (No Medicare) Retiree Only $0 $170.60 (Medicare) Retiree and Spouse $245.65 $765.75 Retiree and Spouse $233.14 $511.19 *Amounts shown are illustrative of the 2007 monthly rates. These rates will change in the future. Dependent rates shown are for spouse only. Mr. Washington presented the chart again showing the GASB 45: Cost Savings Ideas — 30-Year Cumulative with the various options to be considered to address the liability. He also presented charts showing the dollar amounts in the millions for the unfunded actuarial accrued liability (UAAL) and the annual required contribution (ARC) for the years 2006 to 2036. Mr. Washington presented the recommendations endorsed by the Audit and Finance Advisory Committee: Cumulative (Options 1+2+4) • Place $5 million of committed reserves in year I*, which is 6% of ARC, into a trust • Continue funding the expansion of the Wellness Program to Retirees* CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 26 of 99 ■ Provide Access Only to medical benefits for employees and dependents who are hired on or after 1/02/08 upon retirement Mr. Washington presented the question: "What is the impact of the changes on recruitment retention?" and provided the following answers: • Fort Worth remains competitive with post employment benefits with the 10 Benchmark Cities: • 2 Cities (Irving and Arlington) provide no subsidy to retirees o Arlington paid 100% of retiree healthcare until 1/02/05 and made a change prospectively for future hires • 5 Cities (Dallas, Garland, Irving, Plano and Richardson) provide no subsidy to dependents of retirees • 7 Cities (Dallas, Garland, Grand Prairie, Irving, Mesquite, Plano and Richardson) have capped their contributions for retiree medical coverage at a fixed dollar amount per month • The average subsidy ranges from a minimum 25% to a maximum 61% • Fort Worth has comparable pension benefits to all 7 defined benefit plans (Austin Fire, Irving Fire, San Antonio Police and Fire, Dallas Police and Fire, Austin Police, Austin General, Dallas General). • Grandfathering current employees from changes will encourage "job locking" as part of retention strategy. Mr. Washington reviewed the implementation timeline as follows: 5/24/07 Audit and Finance Advisory Committee finalized recommendations 6/15/07 City Manager presents recommendations to Council during budget retreat 7/17/07 Council approves GASB 45 strategy 9/11/07 City Council adopts budget 10/1/07 GASB 45 Accounting Rule effective; Trust created 1/1/08 Effective date of changes to retiree medical plan for new employees hired on/after 1/1/08 He then reviewed the new House Bill 2365 (GASB 45 Alternative) as follows: • Allows governmental entities to opt out of the BASB 45 accounting requirements CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 27 of 99 • Allows entities to disclose liability to employees/retirees without guaranteeing benefits/funding • Results in financial statements not being in compliance with Generally Accepted Accounting Principles (GAAP) • According to a letter from Deloitte & Touche, the CFW "may not receive an unqualified (clean) audit opinion from its auditor" • May result in lower bond ratings, which translate to higher interest rates on capital projects • Independent Auditors (Deloitte & Touche) and Financial Advisors (First Southwest) do not recommend opting out of the BASB 45 requirements, even though state law would permit do so • City manager recommends following the advice of the City's Auditors and Financial Advisors, and complying with the reporting requirements of GASB 45 Mr. Washington concluded his presentation. Council Member Moss asked if there was another option available if the City went to Option 4. He spoke about the higher paid city employees can afford to pay for the insurance costs; however, the lower paid employees could not cover the insurance costs. He questioned as to whether there is there another option for the lower paid employees. Mr. Washington stated that the options as presented represent subsidized costs and subsidized costs would be a liability for the City. He explained that other options might include providing a defined savings account so employees could prefund their future retirement costs or put funding in a trust and not incurring the liability. He added that there are cities that are looking at this and creating a savings account for employees who retire before they become Medicare eligible at the age of 65. Assistant City Manager Montgomery added that there was federal legislation several years ago on health savings accounts that allow employees to put funds in an account on a pre-taxed basis and the employees retain the account even if they go to another place of employment. She stated that she thought there was an age requirement for when the funds can be disbursed and those funds can then be used for medical related uses, i.e., prescriptions and other health costs, and these funds are not taxable at the time they are disbursed. Assistant City Manager Montgomery stated that the City can provide funds to those accounts as well and it does not count towards a liability for the City. She stated that staff has talked about it. Council Member Moss stated this is what is he is talking about. He talked about employees that retire before age 65 and put in CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 28 of 99 time and are eligible for retirement and they will have a difficult time paying for the health costs. He pointed out he did not want to incur the liability but requested the City staff to look at what is another option the City can consider for those employees. Mayor Pro Tem Hicks stated that this would help if there was a major illness. Council Member Scarth asked about being able to participate in the health savings account even if the employees are currently covered by the City's health insurance. Assistant City Manager Montgomery stated that she felt this was correct and the City could also add money to the fund. Council Member Scarth indicated that he thought that when individuals have those types of funds, then they only carry a catastrophic health plan with high deductibles. He asked about the possibility of reducing the City's future liability with retirees only carry catastrophic health plans, if they have created this health saving fund. Assistant City Manager Montgomery reiterated that employees can use those funds to pay insurance premiums, deductibles, etc. Council Member Moss stated that his whole concern is for the current and future employees and how to take care of them and not put them under major strains for health costs until they are 65. He emphasized that it is the lower paid employees that need this benefit. He stated that the higher pay employees can cover those costs perhaps, but not the lower paid employees. Council Member Espino asked about GASB 45 and he understood that it is under fire in Texas as well as all over the country. He indicated that he supports the City Manager's recommendation and the auditors that it cannot be ignored, as it makes financial sense. He asked about it in terms of where it stands and that there is an outcry all over the country regarding it. He added he felt it might go away and so what is its status. Assistant City Manager Montgomery stated that this could be the case in that the Government Finance Officers Association was withdrawing their support of it. She explained its existence in the private sector and the reason GASB 45 had been applied to the government sector so that the financials would be similar to the private sector. She spoke about the controversy on this issue of the different mind sets when booking the liability actuarially based upon a number of assumptions that may or may not occur versus a real liability based upon a real point in time. Council Member Davis stated that she felt that GASB 45 has been a nightmare for the entities that have not been recognizing the liability. She added the good thing about GASB 45 is policy makers at all levels have for the first time been make aware that if they want to take care of the commitments to their employees and retirees and that they have a tremendous hill to climb. If they had not been forced to recognize it, then they would rock along only thinking about the current liability. She pointed out as an example the City is currently paying a $20 CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 29 of 99 million "pay as you go" towards the liability and further down the road they are going to be faced with a $130 million "pay as you go" cost. She pointed out that Council would not be able to pay those costs and there is no tax increase that can cover those costs. Council Member Davis emphasized the repercussions would be telling the current employees their compensation benefits could not be paid and to the retirees that their compensation could not be paid. She reiterated that the good news is that it has made the City realize that they must take care of their employees. She stated she liked Mr. Moss's suggestion that if the Council decides to move away from the City's current system, that the City look for ways to aid or help the new employees after January 1, 2008; however, obviously not through a system that the City can not afford, which is what the City current has in place. Council Member Burdette talked about the unfunded liabilities for health care for retirees and the unfunded liabilities for retirement for future employees that will not go away if the City sticks its head in the sand. He stated that the City must carry through and provide the benefits to the employees. He stated that one of the things on the agenda for discussion at the retreat is to talk about future capital needs. He stated that if he was a bank or a bond buyer and he was going to buy the City's bonds, he would not care that GABS 45 tells the City to keeps its books a certain way. He is going to look for and wants to know what the City's liabilities are before he buys the bonds. The financial health of the City is going to be a concern to the bond buyers. He added that if these problems are not solved, the City is not going to be able to borrow money at an acceptable rate to take care of the future needs. Council Member Burdette reiterated that the City can not stick its head in the sand regardless of what the Texas Legislature has said. He stated that the City has to understand the liabilities and to take care of them. Mayor Pro tem Hicks indicated that City Manager Boswell is looking for some direction from the Council before the break for lunch. She added that several options have been presented to the Council and he is looking for direction on those options. Council Member Scarth supported the comments made by Council Member Burdette. He felt the good news was seeing what effect that adding the 5% over a number of years can do. He pointed out that while there is a large number for the retiree health care, he felt there were other options that the City can do. He felt the cost can be maintained and lowered and not affect any of the current employees today. He added that in the context of what other cities are doing and in corporate America, with what they are doing, he felt the City could remain very competitive in terms of the hiring field for future employees and yet make significant difference in what it is going to cost the City in the future. He supported the comments by Mr. Moss regarding giving the future employees the opportunity for creation of the health care fund in order to put money aside and having it compound in 25 to 30 years to create a significant amount of money and also saving the City money. He stated that Options 1, 2, 4, 5 or 6 put the City in good shape in 40 CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 30 of 99 years. He stated that there was a need for the Council to come to consensus on whether it was Options 4, 5, or 6. Council Member Moss expressed his concerned with supporting one of the options without having a plan in place for the future employees. He added that part of that would be what the City would be required to do and put aside if the current system was kept in place. Council Member Moss stated that he wanted to know what the City could put into the fund to contribute towards building a fund that makes it lighter on the future employees. He indicated that he could not support an effort to cut them out altogether. City Manager Boswell stated that he was sorry he did not have a fully identified health care saving plan for the Council to consider. He stated that the City staff is recommending the Options 1, 2 and 4, with the stipulation that the City staff come up a health savings plan for the employees hired after January 1, 2008. He felt this would give significant direction to the City staff Council Member Moss interjected that he wanted to see a health savings plan that was joint with the City and employee contributing to the plan. He added that specifically dealing with it from the standpoint of the timeframe that they are not eligible for any other coverage that would be available to them if they were 65 and older. Assistant City Manager Montgomery stated that she wanted to clarify that she was not sure how long it will take to get the accounts established. She suggested that the effective date be kept flexible. She pointed out that this may take until February; therefore, the effective date may need to move and be effective on February 1, 2008. Mark Washington stated that the City would have to review proposals for this account. He pointed out that the City's plan with Aetna expires next year and the City staff would not want to duplicate the efforts. Council Member Burdette stated that he does not see the approval of the Audit and Finance Committee's recommendation of Options 1, 2 and 4, precluding what Council Member Moss is suggesting. He stated that he felt the City Manager was asking the Council to look at Options 1, 2 and 4 for planning and budgeting purposes. He felt the Council should go forward with that and then look at the plan when it is before the Council. Mayor Pro tem Hicks requested further clarification from Mark Washington on the Audit and Finance Committee's recommendation and she referenced the "*" that was shown by the recommendations. Mr. Washington indicated that the "*" were shown in error. He clarified that the recommendation is for Options 1, 2 and 4. . The options showing the "*" are the employee committee's recommendation and are also supported as well. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 31 of 99 Council Member Davis stated she agreed with Council Member Burdette and she felt the Audit and Finance Committee's recommendation should be what the Council moves forward with and does not preclude the Council from moving forward with Mr. Moss's recommendation. She added that she felt his recommendation was a good idea. She pointed out that the reason this is a good idea is as the City begins to chip way from the yearly required contribution, it actually frees up monies that the City can use to do the very thing that Council Member Moss is requesting. The City would operate as a typical 407k savings plan where the City would make employer contributions just as the employees would. She pointed out that it was obvious that the Council did not know what level that might be in terms of the percentage for each but she did feel it was something that the City needed to look at. Mayor Pro tem Hicks asked Assistant City Manager Montgomery about the health saving plan and the fact that it belongs to the employee and if they decide to quit and go to another company, the health savings plan goes with them. She pointed out that if the City was putting money into their fund, she felt it might be problematic. Ms. Montgomery stated that as she understands the process, the trust is in the employee's name and thus this is what makes it portable. She stated the staff really needs more time to look into the details of this process. She provided further explanation that it is similar to a defined contribution plan like ICMA. She provided an example of an employee that had an ICMA account and that this account goes with the employee so that they can keep their retirement account. Council Member Moss stated that he wanted to see that the account is the employee's no matter where the source of funding comes from. Mayor Pro tem Hicks stated that the City is in a tough predicament regarding future expenditures. She talked about Option 4 and that the numbers look very painful to her. She indicated that it would be her preference to move towards Option 5 if the health savings plan details are not worked out. Council Member Espino stated he shared concerns expressed by Council Members Hicks and Moss. He stated that Options 1 and 2 make sense. He spoke about providing access only for health insurance and indicated his support of the health savings account. He suggested by the first meeting in July the City staff provide the Council with a primer on health savings accounts and how they work. Council Member Espino indicated that he felt Council Member Moss' idea was a good one. He stated that the City needs to encourage employees to save their money into the account and that they will have this fund available if they retire before age 65. He pointed out the daunting health care costs that they may face otherwise. He emphasized this problem will not go way and the City has to start tackling the problem now. He added he is in support of CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 32 of 99 moving forward with the recommendation with the caveat that he will not endorse Option 4 without the information on the health savings fund. Mayor Pro tem Hicks stated that she concurred with that also. She pointed out that City Manager Boswell had referenced an article in the newspaper regarding the daily costs of$1,000 per day at today's costs for health care and that it will be much more in the future. She also spoke about her concern for the lower paid employees and their need for health care coverage and particularly if they had to experience a catastrophic illness. She indicated that she wanted to go forward with the recommendation but wanted to hold her options open for Option 4 until she can see the information on the health care savings fund for individual employees. Mayor Pro tem Hicks recessed the Fort Worth City Council Budget Retreat for the lunch hour at 12:25 p.m. The retreat was reconvened at 1:40 p.m. Mayor Moncrief had returned to the retreat. Council Members Espino and Davis were temporarily absent. Employee Retirement Fund—Mark Washington Mark Washington, Assistant Director of Human Resources, presented his PowerPoint Present on the retirement ordinance changes. He advised of the purpose as follows: • Review the Audit and Finance Committee's recommendations on retirement • Ordinance changes to include: • Overtime (OT) spiking controls; • Ad hoc COLA; contribution increases • Obtain Council direction in preparation for Texas pension Review Board Meeting on June 25, 2007. He reviewed the Audit/Finance Advisory Committee's recommendations as follows: • Eliminate overtime from the definition of earnings by creating overtime accounts for all contributions on overtime. The accounts are to be administered by the ERF beginning 1/1/08 using current contribution rates. • Increase contribution by 5% over 3 year 3% City 2% employees • Implement Ad Hoc COLA of 0 — 4% using recommended amortization period as "triggers"; mandatory participation for new hires and non-vested employees; optional participation for vested employees and retirees Mr. Washington presented the chart for the Criteria for Granting Ad Hoc COLA. The chart showed: CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 33 of 99 COLA Recommended Amortization Period 4% =< 18 3% 18.1 -24.0 2% 24.1 -28.0 0 .=28.1 Mr. Washington reviewed a chart showing the current benefit w/2% guaranteed COLA; 5% funding increase (assumes 8.5% annual rate of return) for the years 2007 to 2037. He then reviewed the chart showing the new Ad Hoc COLA w/5% funding increase (OT included). This information assumes 10% employee and 60% retiree participation; mandatory participation for non-vested employees; 1.4% membership growth; 8.5% annual rate of return. (Council Members Espino and Davis arrived at the retreat at 1:45 p.m.) Mr. Washington reviewed charts on the following information: No Overtime in Definition of Earnings (prospectively) 10 Year Average Period of Overtime 15% earnings cap 8% earnings cap. New Ad Hoc COLA w/5% Funding Increase Impact of Management Controls on Overtime (high 3 years) He reviewed the comparison of average overtime hours worked from FY 05-06 and FY 06-07. He talked about the overtime worked by the Fire Department and the Police Department. He stated that people in their high three years are working more overtime than people that are not in their high three years. Mr. Washington presented the impact of management controls as follows: • Average overtime cost and average hours of employees in their high three from 11/06 o 5/07 is lower when compared to 11/05 to 5/06 • Employees in their high three are working more overtime than employees not in their high three • Need more time to observe the impact of overtime controls on the operating budget and the corresponding actuarial impact on ERF before determining its effectiveness CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 34 of 99 He reviewed a chart showing the contribution increase as follows: City Employee Contributions City Contributions FW— General & Fire 8.25% 10.74% FW—Police 8.73% 11.46% Defined Benefit Plan 10.37% 18.14% Average Average All Plans 8.50% 15.92% Mr. Washington advised that the City is behind on contributions when compared to other cities in benchmark group. He added the 5% contributions will not bring fund into finite funding period without Ad Hoc COLA. Mr. Washington presented the DROP review recommendations as follows: • Retirement Board requested extending DROP from 5 years to 10 years 0 224 current DROP participants (27% general; 43% Police; 30%Fire) o No adverse actuarial impact to the fund per GRS 0 4 DROP participants will reach 5 years by 12/31/07; additional 30 participants will reach 5 years by 12/31/08 • City staff to review impact to General Fund by 9/30/07 and focus on: • Attendance/productivity • Salary savings/cost • Staffing/succession planning He reviewed the recommendations of the Audit/Finance Advisory Committee as follows: • Eliminate overtime from the definition of earnings by creating overtime accounts for all contributions on overtime. The accounts are to be administered by the ERF beginning 1/1/08 using current contribution rates • Increase contribution by 5% over 3 years—3% City 2% employees • Implement Ad Hoc COLA of 0 — 4% using recommended amortization period as "triggers"; mandatory participation for new hires and non-vested employees; optional participation for vested employees and retirees. He then reviewed the chart of what the Council should act on any of the recommendation. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 35 of 99 Change Type of Change Rules Proposed Timeline Ad Hoc COLA Benefit Reduction At least 90 days Notice to Board by before the date Resolution—July 10, Council is scheduled 2007 to vote on the Council Vote to add reduction, Council Ad Hoc COLA— must give notice to 10/09/07 the Board of Trustees Election— 10/8/07 — of the governing body 10/22/07 (employees) of its intent to 11/5 to 11/19/07 consider and vote on (retirees) the amendment. Effective 1/1/08 Employee Rate • A qualified Council votes on City Contribution actuary must increase and calls Increase perform an employee election — actuarial analysis 9/11/2007 of the fiscal Election — 10/8 — impact of the 10/23/07 proposed Deadline for vote amendment; canvass— 10/28/07 • Council (or the Effective— 1/1/08 Retirement Board) must call a special election; • The amendment must be approved by a majority of vote of the participating members eligible to vote in the election • The Retirement Board (or Council if the Board calls the election) must approve amendment by the 90th day after the CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 36 of 99 date the voters are canvassed OT Change Benefit reduction At least 90 days Notice to Board — before the date 7/10/07 Council is schedule to Council vote to add vote on the reduction, Ad Hoc COLA — Council must give 10/9/08 notice to the Board of Effective— 1/1/08 Trustees of the Governing body of its intent to consider and vote on the amendment. Mr. Washington concluded his presentation. Council Member Jordan spoke about working with the actuarial and a lot of calculations and he felt it depends on the recommendations and how they are timed. He referenced the chart that shows the implementation of the 5% over a three year period. He then referenced the previous recommendation of the Total Compensation Committee that shows the City to picking up the total 5% and the employees foregoing a pay rate. Council Member Jordan indicated that if he is reading the budget proposal correctly, it appears that if the City makes a 1% contribution that represents $2.7 million and if the employees make the contribution with a pay raise, it is $3 million, due to the way the payment is processed. He then referenced the 3.2% in additional compensation package that has been included in the budget; the City has increased its funding from 1% at $2.7 million and 1% increase by employees. He emphasized that if the City put in all 5%, it would equal $13.5 million. He suggested that if the City could forego the pay raise, they could accelerate the 5% contribution. He added that this also accelerates the City's ability to get there in 2009 in combination with the Ad Hoc COLA. Council Member Jordan stated that the Ad Hoc COLA was a "no brainer" and the City should go forward with that implementation for all future employees. He talked about doing the notice and vote for the current employees. He recommended that the City go ahead and do the 5% contribution this year and forego giving pay raises in FY 07/08. Council Member Jordan indicated that in a combination with the other total compensation, this will close the gap. He provided an explanation about one of the reasons that the City was behind in the market median for total compensation. He talked about the pay raises given last year and where that put the City and he stated that this is a continual process. He pointed out that if the City puts in the 5% contribution, this will save the City $600,000. He added that the actuarial cumulative return affect in 30 years will be $100,000,000, which could be refunded to the employees that leave the City before they are vested. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 37 of 99 Council Member Jordan reiterated that it was his recommendation that the City put in the 5% as quickly as possible and forego the pay raises and implement the Ad Hoc COLA. Council Member Jordan then talked about the overtime issue and stated that his philosophy has always been a promise made is a promise kept. He stated that he laid the difficulty with spiking of overtime at foot of the Council and at the foot of the City management. He pointed out that since 1985, overtime has been included in the retirement calculation. He stated that the City has an entire staff of employees that have been there with the promise that overtime is included in their retirement calculation. He also advised that since 1985, employees have been contributing their 8% towards any hour of overtime at the time and half rate and the City has also been contributing. He has seen numbers actuarially that suggests that the City forego $70 millions worth of benefits for the next 30 years actuarially. He emphasized that he is concerned about taking out overtime from the retirement calculation and pointed out that it should have not been included in the calculation in the first place, which this current Council did not do. Council Member Jordan stated that he is recommending to the Council the treatment of overtime on a capping basis rather than a management basis. Council Member Jordan reiterated his previously stated recommendations and that overtime be capped at whatever number and he suggested perhaps 15%. He added that the Ad Hoc COLA needs to be implemented for all new employees effective January 1, 2008. He felt that if the City looked at this actuarially, it will get the retirement fund into the funded period by 2009 to 2010. Council Member Silcox stated he understands two of the three. He asked about the overtime issue and asked Council Member Jordan to repeat his recommendation. Council Member Jordan indicated that he is recommending leaving the overtime in the retirement calculation; however, that the Council employ management criteria to eliminate spiking. Council Member Silcox repeated Council Member Jordan's recommendations and stated that he agreed with them. Council Member Davis stated that she sees the direction of the Council and it does make her feel that she is spitting in the wind. She indicated that she is still going to make her point. She stated that first of all the Council had an agreement with employees last year on the 5% and that was that the Council was going to move forward on a pay raise increase, which they did last year to the extend that they could and then with a commitment to provide for the rest in next year's budget. She pointed out that the Council has already followed through on a portion of the agreement. She stated it comes down to an issue of trust and that the issue of trust goes both ways. She stated that part of the agreement was that the City would pay 3% contribution to the retirement and the employees would pay 2% contribution. She stated that the Audit Committee CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 38 of 99 made that recommendation and she stands by that recommendation. She felt it was a fair step to take in order to accomplish the 5% over a three year period of time. Secondly, she did agreed with the Ad hoc COLA recommendation and that the City needed to do it. She added that she hopes it will have the impact that the City is looking for. She then spoke about the overtime. She referenced the presentation by Mr. Washington showing the six months of what was happening with overtime staffing and that management has tried hard to respond to that. She stated that even after that and still for the Fire and Police Departments, it appears that the overtime hours are still being stacked and predominately worked by people in their high three years. She pointed out that it has gone down some, in the Fire Department more than the Police Department. She emphasized that in looking at the comparison of the people who are not in their high three years as compared to those who are, there is still a significant weighting in the high three years for overtime. Council Member Davis stated that she believes that the management has tried to respond by telling employees they cannot stack. She stated that the City needed to look at the consequences of that and to look placing an 8% earnings cap on it and what will result. She stated that this will chop off$14.3 million from unfunded liability. She gave other examples of capping or smoothing for specific periods of time. Council Member Davis indicated that she felt City staff looked at the overtime issue, they realized from a management perspective there was no way to manage out of this problem. She stated that the Council needed to keep something in mind and that is what the City is looking at for unfunded liability at a point in time. She added that nothing has been shown that demonstrates that overtime that the impact to the City's unfunded liability will improvement overtime under the current system or even under better management controls. She explained that if the Council just looked at it today, it is $70.5 million that will increase and compound and it will be a bigger number in the future if it is not taken out of how the system is operated. She felt the only responsible thing to do for the taxpayers is to remove $70.5 million of unfunded liability, as it is only fair to the taxpayers. She stated that she felt that if the taxpayers were asked if they wanted to take care of the City employees, they would support doing so. She felt their answer would be "no" to paying for overtime being calculated as part of the employees' retirement benefits. Council Member Davis emphasized that some of the City employees will be retiring at higher salaries than they had when they were working for the City. She added that she did not feel her constituents would have this in mind when they talk about treating the City employees fairly in their retirement. She stated at the end of the day, the Council does have a budget to meet. If the Council takes the suggestions that were made today, it would be paying the entire 5% contribution, which represents $14 million. Council Member Davis pointed out that she understands that the recommendation being made for the pay raises represent $4.5 million and requested clarification from City Staff in that figure. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 39 of 99 City Manager Boswell clarified that there is no real recommendation yet. He stated the City staff is providing information that they were working with a 3.2% increase, which represents a 1.5% lag and a 1.7% across the board increase. Council Member Davis then referenced the balance number presented to the Council that anticipates maintaining current service levels, a balanced budget and anticipates what number for increased compensation. Director Garrett talked about the 1% across the board for retirement contributions equals $3 million. She added that the other reference was the 3% and 2%, which represented $15,000,000. Director Garrett talked about the budget "place holders" that had been presented. Council Member Davis indicated that if the full 5% is made to the retirement fund this year, the City has to come up with another $10.9 million and this means cutting a service some where or raising taxes, those are the two choices. She stated that at the expense of the tax paying community, the City is going to pay the entire 5% contribution into the City's retirement fund and allow an overtime contribution system to continue to occur in the pension fund. She felt the City Manager and City staff came forward with a good compromise which was that the City would continue to pay contributions on overtime at an estimated $2.5 million annually but ask that it be set aside in a separate fund and not contribute to an unfunded liability. She felt this approach was more than reasonable. She added that she felt the Council was being derelict in their duties to the taxpayers if the Council did not take this advice. She added she also felt the Council needed to take the advice on the cost sharing increases and on the Ad Hoc COLA and it appears that the only position that the Council supports is the Ad Hoc COLA. She added that she cannot go along with the Council recommendations that are being made. Council Member Scarth stated that he wanted to clarify some information. He stated that in the zero gap budget there appears $4.1 million for the market lag from last year and 1% is already figured in for increases, so that is another $3 million. He stated it is actually $7.1 million, which Director Garrett confirmed. He pointed out that it would be $15 million for the other. Council Member Scarth pointed out the situation that if the 1.5% market lag compensation was given to the employees and the City paid its 3% portion to the retirement fund and the employees paid their 2% for their portion of the contributions to the retirement fund, then the net to the employees' checks is going to be .5% less in compensation. He added that if the City foregoes that 1.5% pay raise to the employees and pays the 5% into the retirement fund, there will be benefit to the employees. He suggested paying 3% this next budget year and 2% the next budget year to realize the actuarial benefit of more dollars sooner rather than later. He stated that the City would not be taking back the 1.5% from the employees in the 3%/2% scenario. He referenced the 30-year 5% affect that Council Member Jordan had pointed out earlier that resulted in an actuarial benefit of$100,000,000 as a result of employees who leave the system CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 40 of 99 who are not vested and the City's portion stays in the fund. City Manager Boswell clarified that the $100,000,000 was a result of the 5%being put in the retirement fund in the first year. Council Member Jordan clarified the issue of paying the employees a salary increase and taking it back as compared to the City paying the 5% into the retirement fund and what the actuarial results are in the out years. He emphasized that the City gets more bang for the buck with the City providing the 5% contribution to the retirement fund. Council Member Scarth interjected that he felt it was a better deal for the City if the City puts in the 5% up front rather than the 3%, 2% into the retirement fund. He spoke about the overtime spiking issue and that it does need to be addressed and the question is how it should be addressed. Council Member Scarth then addressed the comments made about the taxpayers' perceptions. He stated that he has no disagreement that they do not expect employees to abnormally affect their retirement in only a three-year period of a 25 to 30 year career. He pointed out situations where Water Department employees and Fire Department employees are required to work overtime to address the City's needs and services or to cover staffing requirements. He questioned whether their overtime income should or should not be included in their retirement calculation. He pointed out that the staffing levels are being addressed. He added that this issue is still up for debate. He stated he has not made up his mind and is willing to debate it further. He added that he felt it was a better deal to provide for the 5% contribution to the retirement fund from the City and forego the 1.5% salary increase for employees. He pointed out that the employees are seeing a benefit in that the City is paying their 2% contribution. Council Member Burdette reviewed the recommendation made by the City Manager. He stated that it contained three elements: increased contributions, Ad Hoc COLA and the definition of earnings as it relates to the calculation of retirement amounts and whether or not overtime will be deleted from that calculation. He talked about his approval of the three items when the Council discussed them at the end of May and he stills feels that way. He stated that the Ad Hoc COLA was needed and no debate was necessary. He stated that he understands Council Member Jordan's recommendation on providing the 5% contribution to the retirement fund and the resulting savings to the City. He stated he is not clear on the 5% increase and foregoing a wage increase. He clarified with Council Member Jordan that he is recommending the City employees would forego all wage increases. He stated that he was not sure what that does with the agreement that the Council made with the employees that there would be a 1.5% lag increase in wages for this coming budget year. He stated that he understands the theory. Council Member Burdette spoke to the third element which was whether the City should include overtime in the definition of earnings. He pointed out that Council Member Jordan talked about the fact that it was included in the definition of earnings calculation a number of years ago by a prior Council and that Council Member Jordan did not feel it was the right thing to do then. Council Member CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 41 of 99 Burdette stated that he was disturbed by that if it was not the right thing to do then why is the current Council not going to take the time now to review and address it. He wanted to address it again now. He pointed out the unfunded liability in the retirement plan is a huge burden on the City and the taxpayers and it is growing everyday. He felt it was the Council's responsibility to the taxpayers and citizens that it be addressed and resolved some how. He stated that he was not in favor of doing it in a way that would take away any vested rights that the current employees have. He added that he felt that if the City had a system that was not going to work, the City needed to revise the system for the future. He indicated that is the reason that he supported the recommendation coming forward from the City Manager. He is recommending that overtime be deleted from the definition of earnings calculation for retirement. He stated that he supports that the overtime earnings will be placed in a separate retirement fund and earn dividends. Council Member Burdette stated that the benefit is not being entirely taken away. He is satisfied that this will not violate Prop 15 or any legal requirements placed upon the City. He added the City cannot continue with a system or plan for future employees who are not currently working for the City that is going to put the taxpayers in the hole in the future. He emphasized this is the Council's responsibility to address the problem. He reiterated that he does support the recommendation from the City Manager on the three elements. He also supports Council Member Jordan's recommendation to fund the City's contribution of 5% into the retirement fund and forego the wage increase. He added that if the City cannot do the 5% in one year, then it will have to be stretched out over a year or two. He added he found it interesting that in the presentation on total compensation that the City was at or above the median on direct pay; thus, he felt not providing for a wage increase for next year did not really violate the City's efforts to try to be competitive in the aspect of direct pay. City Manager Boswell stated that he wanted to get in a couple of points. He understands Council Member Jordan's recommendation for the 5% contribution to the retirement fund in the first year, with no salary increases for the employees. He stated that he wanted to make clear the City staff s proposal to maintain current service levels. He pointed out in that scenario for going forward, the numbers looked like: the 1.5 % market lag commitment; 1% increase for retirement fund ($7.1 million). He added that there were no other market increases, step increases, merit increases, etc., in that number, which Director Garrett confirmed He explained that he was not sure that the 5% contribution to the retirement fund may not match up with the compensation in that scenario. He also spoke about the contribution of the 5% versus the 3%/2% proposal. He explained that the Council cannot mandate the employees to contribute the extra 2%. He explained the voting percentage needed by the employees to approve their contribution participation. He explained that he felt the City needed to account for the full 5% since the City cannot mandate the employees put in anything. He explained that the reason the 3%/2% was proposed was that City management believed that it was fair in the sharing of the costs to make up for those contribution shortfalls. He added that just last year, members of the employees CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 42 of 99 associations were supporting that position. He explained the change in 1990 when the 5% rate reduction was made at a 3 to 2 ration and this recommendation is just restoring the City back to that time. Mayor Pro tem Hicks questioned if the City did provide the 5% contribution, then what does that mean to the City's bottom line. She questioned what does this do to the other programs and services. Director Garrett pointed out in the budget scenario to maintain current service levels the 5% contribution would be $15 million. She explained there is $4.1 million in the budget for the across the board 1.5% lag calculation, thus this results in a gap of$7.9 million. Mayor Pro tem Hicks requested clarification on providing 3% in the next year's budget and 2% in the following year. Director Garrett stated that this would result in the gap of$2.9 million for next year. Council Member Davis interjected that she would benefit greatly from seeing the information on the 5% versus the split of the 3%/2%. She added that she wished that this information was available as it was very important to the discussion and after seeing it, she may have a different option on it. She posed a question on the overtime and whether she was thinking of it in the right way. She referenced the $70.5 million savings in the unfunded liability as it stands today and if that number represented the City, from this point forward, not paying a contribution on overtime. Council Member Davis requested further clarification on if the unfunded liability still continues to grow in the future if the City continues to pay contributions on overtime and has overtime in the calculation of the retirement benefits, rather than the separate account, or does the $70.5 million comes off of the $400+ million. City Manager Boswell indicated that it would come off of the $411 million figure. She stated that this is her concern and she referenced what has occurred with overtime as seen in the unfunded liability. She pointed out that employees that are not benefiting from overtime compensation pay in retirement or being able to work overtime are supplementing the cost of this benefit in the pension fund because it continues to have a negative draw from the pension fund as a result of it occurring. She explained that if this is the snapshot of the fund today and it is not addressed and removed, this problem is going to continue to grow. She requested clarification from the City staff as to whether that was a correct assumption. Mark Washington stated that it depends on utilization and how it is managed. Council Member Davis stated that she did not feel that if it is managed that it can be truly addressed and it cannot be assured that the smoothing affect will have an impact. Her concerns were on the liability today and in the future when the overtime benefit is continuing to be paid out of the retirement fund. She questioned again what is that cost going to look like and can it be really determined. She stated that she has not heard a management way to address this and whether this can be addressed. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 43 of 99 Council Member Jordan stated that one of the issues or problems with the actuarial is that the Council has to understand what the assumptions are that are used in the actuarial. He stated that any assumption can mean hundreds of millions of dollars 30-years in. He pointed out that when information was sent to the Retirement Board, overtime had not been separated out until this year. He stated that all they are seeing are the total salaries and total contributions to the retirement fund. He stated that if overtime spiking were to continue at the current levels 30- years hence and the City stop using spiking effective January 1, 2008, in the calculation of the retirement, the contributions have already been made over the last 20 years. He added if the City did not pay any overtime for employees that retire after that time period; it means the $70 million figure in 30 years. He added that his point is that this is not just a retirement fund issue. He pointed out over the last 10 years overtime has been used as a staffing tool, which is time and half as opposed to adding staff He pointed out as an example the additional positions approved in FY 06/07 for the Police Department, which were hired and trained this year, will be fully staffed in FY 07/08, thus reducing the overtime hours needed in the department. He stated that the overtime in the budget can be reduced from $20 million to perhaps $17 million or $15 million. He stated that gradually through management activity, the City can reduce that dollar value that would have to be paid out for overtime. He pointed out the $70 million is assuming that the City is going to pay for the overtime spiking going forward. He explained that if the City eliminates the spiking the City will still have a significant decrease in the actuarial number just through management activity; it may not be $70 million. He added that depending on how much access to overtime the City creates, the City is going to reduce that number. He stated that the staffing of new people will also decrease the unfunded liability. He stated that even in 30 years there will still be unfunded liability. Council Member Davis stated that she felt the City staff has tried to capture through management activity what the City might be able to do to eliminate spiking. She stated that probably it is too soon to tell what the management controls will mean in terms of overtime spiking. She pointed out for example in the six-month window of watching the overtime usage, more people who are in the high three years are still working overtime rather than those employees were are not in their high three years in the Police and Fire Departments. She stated that what is significant about that is this is happening in a climate where the City had an out call, huge publicity and a thunder storm of what is happening to the City's overtime system. She added that she felt the Police and Fire Chiefs are working hard to respond to the concern and out cry; however, in spite of that, the City is still winding up with the same situation. She is concerned and stills questions, and only time will time, what will happen with in terms of management's ability to be able to manage the City out of the high three-year spiking. Council Member Davis indicated that the impact to the retirement fund is not just about the overtime spiking. She pointed out it can never occur consistently over time that the employees that the City is contributing to their retirement fund is going to work a level amount of overtime that is CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 44 of 99 equal to the amount of contributions that are going to be made to the life of the fund. She indicated that it cannot be done. She added that since it cannot be done, it is always going to have a negative actuarial impact to the fund. She stated that the City staff s response to that particular part of the problem has been to see if there is a better way to compute the way the fund would pay on that overtime. She added that this is separate and a part from the way the City management is managing the hours that are being paid on. She stated that if the Council looks at their creative ideas, it is to smooth it over a ten year average instead of a three year average, then put a 15% earnings cap on it or an 8% earnings cap on it. She pointed out that none of those options is getting the City close to the same difference the Council can make in ending the practice today. She stated by ending that practice today, the City will save $70.5 million on the unfunded liability. Council Member Davis stated that the City might save less than that if the problem went away tomorrow. She emphasized that she did not see it happening. She continues to be concerned about the negative impact on the fund due to the issue of overtime and that the other employees that are not working overtime are making up the difference. She stated that ultimately the impact to the fund is borne by the persons who are being paid the benefits from the fund or borne by the taxpayers who have to make up for the fact that there is a loss in the fund as a result of the overtime issue. She states she does not have comfort with the recommendations, nor has she see anything that is being done to take care of these two concerns. Council Member Davis reiterated her comments on the fact that the message to the taxpayers is the City is continuing with the same system and the City knows that the taxpayers are going to have to pay more because of it, but the City is not going to change it because it was a promise made. She emphasized that she does not feel that it was a promise made. She pointed out that it was adopted years ago by a policy and she does not know why it was adopted. She added that she did not believe that the Council that adopted knew the actuarial impact that it was going to have for the City. She stated that once the Council has been made aware of the problem, it is incumbent upon the fiduciary of the taxpayers to fix it. She reiterated her support of the recommendation that the City Manager has made to allow the practice to continue but to set it aside in a separate fund, with a $2.5 million contribution from the City, so that it does not have an negative impact on the pension fund is fair to the employee and more fair to the tax payer because the City has assured them that the City has cut off their unfunded liability by $70.5 million. Council Member Jordan stated that he would like to set down with Council Member Davis and City Manager Boswell and discuss this issue further. He pointed out that the City has totally converted to total compensation measurement as to what the cost is to the taxpayer as to what the City looks at. He pointed out the big four, salary, vacation, retirement, etc. He added in the way that the City has managed the work force in the last 20 years, the City staff showed the Council that at median, with 3.3% above the benchmark in median salary, included overtime hours. He added that what the City has done over these 20-years is rather than add staffing, the CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 45 of 99 City has used overtime. He pointed out that overtime in staffing requirements should be used as a penalty. He stated that in Fort Worth instead of it being a penalty; it is used as a supplement to the pay. Council Member Jordan added that when staffing is increased and reduce the dollars available for overtime; the City should effectively maintain the salary increases to maintain the median. He added that this is going to require a science over a five-year period of time. Council Member Jordan stated that the City is not going to get out of the situation overnight and it is not as simply as scratching through or and saying that the City made that promise of calculating the overtime into the retirement fund calculation and now the City is doing away with it. Council Member Jordan added that the City has got to address the situation over time with increased staffing, reducing the dollars that are going to overtime and still get the job done. Council Member Jordan stated that through the City's personnel management policies the City has forced the staffing into the high three years. He emphasized the City has done this and gave as an example the four-person staffing for the firefighters and he indicated that the decision was made to do it through overtime. Council Member Jordan added that statistically it appeared that this was going to add to the high three-year spiking; therefore, Chief Jackson came to the City Council and requested to add 37 more people in order to not to spend $2.5 million in overtime and saved the City $600,000 by using new recruits and by not using the tenured firefighters in overtime. He emphasized that this is what it is going to take the City over five years to accomplish. Council Member Jordan added that this is the reason he wrote the City Manager a letter telling him that the City needed to work its way out of this. He added that the City needed to put more police officers on the street, more firefighters and more general employees in order to eliminate the need for overtime as practical. He stated that overtime will never completely go way due to the fact that the City receives federal grants, etc., that are based upon the use of overtime. Council Member Burdette stated that the problem he sees through Council Member's Jordan recommendation is that the Council does not manage the City; the City Manager and his staff manages the City. He pointed out that he did not feel the Council's role is to say the manager has to do something different tomorrow, in the next five years, the next 20 years, etc. Council Member Burdette stated that the City of Fort Worth has a competent manager that is leaving the early part of next year, and the Council will have to select another competent City Manager soon. He added that he did not believe the taxpayers can expect the Council to manage how the overtime is done. He felt the Council's role was to manage the system or devise a system that will work regardless of who is in the City management. He felt this was the difficulty as he sees it as relating to that the City can manage its way out of the situation. Council Member Burdette talked about the number of employees that work overtime and in comparison the employees who do not. He reiterated that he did not believe that the City could manage its way of the problem and the City needed to have a system that works correctly and he emphasized that the one in place now has proven that it does not work correctly. Council CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 46 of 99 Member Burdette indicated that he also supports the recommendation coming from the City Manager to redefine earnings and take overtime out of the retirement calculation and place it in a separate fund to be paid out at the time of retirement. Mayor Moncrief stated he agreed with Council Member Burdette that the Council is not managers but policy makers of a City Manage/Council form of government. He added the Council set those policies and set the course for the manager and staff to steer the course of the ship. He referenced the comments made by Council Members Jordan and Davis that the City did not get in this situation overnight and the City will not be able to overnight. He added if the City tries to do it too quickly there will be unintended consequences. He stated that a lot of good points have been made and he has listened to the debate and he is trying to seek middle ground. He stated that he is trying to do what is expected of election officials and that is to act in a responsible manner to the public, to work with the staff and their recommendations and the recommendations of the City's Audit and Finance Advisory Committee. He pointed out that their recommendation was made as part of a process to come back before the City Council. He pointed out that the Council is has the ultimate decision-making on the recommendations. Mayor Moncrief pointed out that this was the intention when the committee was devised and it should work this way. Mayor Moncrief spoke about the difference of opinions that have been heard around the table. He spoke about the issue of overtime. He reiterated that he agreed with Council Member Davis and Jordan that it evolved overtime and the City has perpetuated it. He stated that he is not an expert in the budget process. He added that he understands that the City Manager, Budget Director put a lot of hours into the process. He pointed out that the City has taken the position that it is easier to cover the work with overtime rather than hiring, training and implementing new employees, along with the associated equipment, for the Police Department, Fire Department as well as the general employees. Mayor Moncrief posed the question of where should the City go with that issue? He indicated that rather than try to take all of this in one bite, it made sense to try and approach it with a cap and with expectations by management to make those corrections. He suggested an 8% cap rather than a 15% cap. He stated that instead of the $5.1 million reduction in the unfunded liability, this would result in a $14.3 million reduction. He emphasized that it was not the $70.5 million, but it was a good start. Mayor Moncrief then spoke to the issue of the increased contributions to the retirement fund. He pointed out the comments made by Council Member Davis about certain intention by the employee groups that they too felt it was appropriate to have some skin in the game. He added he has not made a final decision on this and while Council Member Jordan has pointed out the benefits to the City of paying all 5%, there was a certain commitment made and he is not convinced that it would not be a good idea for the employees to go ahead and have the vote and CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 47 of 99 see what the employees are willing to do. Mayor Moncrief stated that if the employees are not willing to do so, then that option is removed. He pointed out that the Council knows the amount it is going to take and now it is just a matter of how the City is going to get there and what the benefits are going to be. He added he is not there yet. He felt the Council needed to move forward with the Ad Hoc COLA. He stated the City is only as good as those people that the City is able to attract and work those jobs daily, whether fixing a water break in the middle of winter or summer, putting out a structure fire or locking up bad guys. He added he felt the Council has done a very good job for providing for the employees. He commended Council Member Silcox and Davis for their long tenure on the Council and that the City and Council owed them a debt of gratitude for what they have done. He pointed out that he felt the City can improve upon all of the problems that it is facing and emphasized that it is going to take an effort. He stated that if the City does the full 5% contribution to the retirement fund and if the pay raises are foregone then does this put the City deeper in a hole when trying to reach median, which is what the City set out to do when the initial commitment the Council had before this issue came to the forefront. He stated that these are questions he does not have the answers to. He pointed out that the one thing that is obvious to him is that every Council Member is focused. He advised the City Manager and City staff that he does not want the staff to think that they have not been heard. He stated hat everyone has been heard and he commended the staff on their presentations. City Manager Charles Boswell indicated that he wanted to speak to the issue of better management of overtime and if it can get the City out of the spiking issue. He stated that overtime can be managed well or poorly and it has not been managed very well in the past. He felt the City staff is doing a better job and additional full time staffing can reduce that to a point. He felt the City will always need an overtime budget to address the needs of the City and the flexibility that is necessary. He stated that adding more full time employees can not be done overnight. He gave examples of when staffing is necessary to address certain situations that arise in the City and there is not time to add additional employees. He cautioned there is a limit of what can be done on the management of overtime event for employees. He also expressed concerns for how the employees in their high three years before retirement are restricted from working overtime and his concern with age discrimination. City Manager Boswell indicated that he felt the City can do better with management of overtime; however, he added that he did not feel that the City management can guarantee that there will not be a certain amount of spiking. Council Member Espino spoke about diversity of opinion that he had heard today. He spoke about the disagreement of just certain issues. He commended the Audit and Finance Advisory Committee on their work. He felt it was tough decision on some of the issues. He was sympathetic to management of spiking and management of overtime. He still wanted to have an open mind on how the overtime issue can be addressed as it is a complex issue. He stated that he was not ready to support any of the Audit and Finance Committee's recommendation at this CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 48 of 99 point, except he supported the Item 3 for Ad Hoc COLA, but he felt more discussion was needed on the other issues. He spoke about comments made by each of the other Council Members. He added he wanted to maintain the trust of the employees. He provided comments on the overtime separate account, the City providing the full 5% contribution to the retirement fund, but with the employees foregoing their raises. He added that he felt there needed to be a balance there and shared costs. He added that more discussion of the Council needs to be held and more of a consensus reached. He stated that the Council was getting there,just not quite yet. City Manager Boswell emphasized that he needed to have something decided to share with the Texas Pension Review Board next week. He added he needs a consensus of the Council on the direction they desire to go with all of the issues. Mayor Moncrief recessed the Fort Worth City Council Budget Retreat at 3:15 p.m. Mayor Moncrief reconvened the retreat at 3:33 p.m. Water/Wastewater Two-Year Capital Improvement Program (CIP) Needs— Frank Crumb, Director, Water Department Frank Crumb, Director of the Water Department spoke before the Council on the Water/Wastewater Two-Year Capital Improvement Program and the associated needs. He referenced the handout provided to the Council and began his presented. The budget presentation included a slide that showed the water/wastewater financing. There was $200,000,000 in projects, with $100 million sold in the summer of 2006 and $100 million proposed in the spring of 2008. Mr. Crumb stated that the assumptions were that $100 million was needed for FY 2006-08 and the proposed sale of revenue bonds in July 2007 and assumes private placement through competitive bidding process. He added that the timeline is for a Mayor& Council Communication (M & C) to come to the Council to award the sale of bonds on July 17, 2007 and the closing and receipt of proceeds to be on August 21, 2007. Mr. Crumb pointed out that in addition to the capital funding through debt, the City has applications that have been submitted for the state revolving loan funds for a water treatment plant and some large wastewater collector projects. He advised that the Texas Water Development Board will be considering those applications this summer and those will be coming before the Council, if approved by the board. Mr. Crumb provided a chart of the water/wastewater two-year CIP needs and reviewed as follows: Program Needs 06-07 07-08 SRF* Water Plants Water Plants Expansion and New $6M $11M $47M CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 49 of 99 Plants Sewer Plants Sewer Plant Rehabilitation or $17M $11.5M Expansion& Riverside Closure Special Programs Other City/State Initiatives $32M $47M Major Water New major mains for increased $24M $6M Mains demand Major Sewer Rehab & replacement of old & $1.5M $3M $43M Mains undersized sewer mains Tanks & Pump New pump stations & tanks for $5M $11.5M Stations expanding service area Sewer Lift New lift stations for new service areas $1M $1.5M Stations & rehab/expansion of existing lift stations Security& Info Facility Security & IT Security $2.5M Technology Projects Development & CFA Funding and Projects for $5M $5M Annexations Annexation Other Admin Costs $6M $3.5M TOTAL $100M $100M $90M *State Revolving Fund Mr. Crumb explained that the "special programs" category is a large figure and included the infrastructure relocations for the projects of the expansion of State Highway 121 (Southwest Parkway Project) and the Trinity River Vision Project. Mr. Crumb concluded his presentation. Mayor Moncrief asked whether Mr. Crumb and his staff were continuing to minor the technological advances and research regarding the issue of the recycling of frack water. Mr. Crumb indicated that the City currently has two initiatives in that regard. He stated that they have been talking to the gas companies' representatives about a potential reuse project that will take effluent from Village Creek and pump it to both irrigation customers as well as gas well customers. He stated that normally this would be effluent that is currently being discharged into the river and they can use it for their fracking operations. He stated that the City felt that it has potential not only for the gas well fracking operations but for long term irrigation demands. He pointed out that a big part of the state's water plan for the future is through reuse. Mayor Moncrief requested a clarification as to whether it would be sold to the customers. Mr. Crumb stated that it would either be sold or given for free if a capital contribution was given to the City. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 50 of 99 Mayor Moncrief asked about the gas well representatives' attitude towards the offer. Mr. Crumb stated that they are still discussing it as there is a significant dollar amount on the project, i.e., $30 million to take it to DFW and to Gateway Park. He pointed out that there is a lot of pipe involved. He advised that the projects can be broken up into two separate contracts. He added that their discussions are continuing; however, they are not close to agreement at this time. Council Member Carter suggested that if this project is done to the two locations, then another pipe should be installed in the right-of-way to bring the salt water back to some location, since the cost of the right-of-way to do those two projects separately would be very expensive. Bryan Boerner, Director of Environmental Management, spoke about the status of the action on the salt well moratorium. He advised that there would be a Pre Council Briefing on July IOth on the salt well moratorium language and as part of that briefing the City staff would be talking about looking at piping salt water from the well site to a recycling unit. He added that outside of what Mr. Crumb just talked about City staff is looking at the recycling of the salt water on site and how it can be used in other wells or discharge it as part of the surface water supply. He stated that there are two independent actions going on, but both are related to the production of disposal of salt water from the wells. Mayor Moncrief added that another entity that would be helpful is the new education organization of the Barnett Shale, who recently hired their executive director and are putting a product together. Council Member Scarth provided compliments that he heard from other entities that work with the staff from the Water Department. Capital Needs — Sandy Oliver, Assistant Director, Budget and Management Services Department Sandy Oliver, Assistant Director of Budget and Management Services Department, spoke before the Council on the citywide capital project needs (excluding water). She advised the Council of the location of this information in their agenda packets. She advised that they were titled Transportation/Infrastructure Needs, Critical Capital Needs and a list of the capital projects as requested by the City Council. She pointed out the following: Remainder of 2006 Critical Capital Needs $105,464,000 10-Year Transportation Infrastructure Needs $2,800,000,000 CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 51 of 99 (Capital and Maintenance) Relocation of City Hall to Post Office $130,000,000 $20M in FY 2007-08 Acquisition & Design $110M in FY 2009-10 Construction Relocation of Fire & Police Training Academy $150,000,000 (Range $100 - $150M) Trinity River Vision Bridges (Range $100 to $150M) $10,200,000 Capital Projects Requested by Council members $115,754,420 Lake Worth Dredging $40,000,000 Water Reuse: Village Creek $30,000,000 Enterprise Resource Planning System (ERP) $50,000,000 Total $3,431,418,420 She also referenced the handout document showing the transportation capital needs for the next 10 years. That document showed the following information: Program Need Impact Neighborhood Street 815 lane miles of"poor" streets $400 M Reconstruction Goal is to reduce the number of"poor" lane miles by 20% in 10 years Major Arterials Existing needs $585M New growth— 10 years $1.2B Total $1.785 B Transportation Grant Match to leverage federal funds for needed $30 M Projects transportation projects (freeway bottlenecks, rail safety, intersection improvements, etc.) Traffic Calming Address need for Neighborhood Traffic Calming $10M due to more traffic in our neighborhoods (trying to avoid the increasing congestion on arterial network) New Traffic 2004 Bond Program funding will be exhausted this $40M Signals/Street Lights year CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 52 of 99 Repair Premature Repair recently failed new streets $20M Street Failures Bridge Replacements Replace failing bridges... Riverside Drive over the $30M Trinity River, E. Rosedale Street over Sycamore Creek, and W. 7th Street over the Trinity River Total 10-Year Transportation Capital Program: $2.3 billion Program Need Impact Road Maintenance Provide appropriate routine and major maintenance $300M Goal: Minimize the number of land miles deteriorating into the "poor" category Bridge Maintenance Provide appropriate routine and major maintenance $15M Goal: Minimize the number of bridges deteriorating into the "poor" category Traffic Provide appropriate routine and major maintenance $200M Signals/Streetlights Signs Traffic Neighborhood Traffic Calming due to increasing $20M Engineering/NTMP congestion on arterial network Transportation Master Thoroughfare Plan, Impact Fee CIP, $15M Planning Regional Transportation Equipment Maintain/Repair Fleet $35M Maintenance Equipment Replace aging equipment $15M Replacements Maintenance was $500 million Total Capital Needs and Maintenance: $2.8 billion CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 53 of 99 She also provided handout information on the critical capital needs for all capital improvement projects (facilities/telecommunication, transportation, traffic signal, streets, etc.) at a total cost of $150,915,000, with the chart showing the projected expenditures from 2007 to 2010, with the total amount of city funds needed, the leveraged funds, and the total cost of the projects. There were also documents showing the capital projects requested by the Council Members for the next two years. Council Member Burdette asked about the police/fire training facility and if the City staff was working with Tarrant County College (TCC) regarding a joint use facility. He pointed out that they have this type of facility at their northwest campus. Assistant City Manager Joe Paniagua stated that there are not any ongoing discussions. He added that both departments want to control their own facility. He added that the Fire Department's preference is to have one facility for the City's own use. He pointed out that TCC facility is used by other cities and there may be problems finding the time to use it by the City of Fort Worth. Council Member Silcox requested to go back to look at the streets in the "over the next 10-year program". He pointed out the neighborhood streets reconstruction program. He advised that it shows 815 miles of poor streets, with the goal to reduce by 20%; however, the impact is $400 million. He questioned where that figure came from. He indicated that he does not see it adding up. Robert Goode, Director of Transportation Public Works, advised the Council that this figure is from the different funding scenarios that was provided to the Council in the last budget cycle that is stated that if $400 millions was spent on the streets in the next 10 years it would reduce the number of poor streets by 20%. Council Member Silcox indicated his surprise that the 20%reduction at the large number of dollars being spent. Mr. Goode explained the issue of the City's street maintenance does not have enough funding to address the streets and keep them from falling into the poor category. Mr. Goode clarified that if the City had $420 million then all of the poor streets in the City could be address. Council Member Silcox pointed out the costs for construction per lane mile and stated again he could not get to the figures that staff is using. Mr. Goode talked about the number of fair streets that then fall into the poor street category each year. He questioned the number of streets that are falling from fair to poor on an annual basis. Mr. Goode indicated that this information can be provided to the Council. Assistant Director Oliver spoke before the Council on the funding for the critical capital needs through the issuance of certificates of obligation over several years. She added another option is a bond program for voter approval. She emphasized that it would be a deviation from the traditional process. She advised of the traditional process of the citizens' input with a number of meetings and the City staff providing information. She pointed out that it is a very lengthy process. She stated that the City staff does not take out a preset list of CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 54 of 99 projects. She added that often times citizens come up with projects that are not even on the list. She pointed out because of the traditional approach, that type of process may be an issue for the Council to move forward quickly with an election. She stated that there are critical capital projects that are ready to launch and need funding. She advised that City Manager Boswell is going to recommend the City proceed with the annual Certificate of Obligations sale and launch a more traditional bond program in the future. Council Member Silcox interjected that he thought the plan for the needed $151 million was to proceed with the annual Certificate of Obligation sale for $42+ million and that the $100+ million would be taken out to the citizens for a vote out. City Manager Boswell stated that this is still and an option. City Manager Boswell clarified that when the City staff talked with the Council Members in February on an individual basis, there appeared to be a difference of option. He referenced again the list of critical capital projects. He pointed out that the input was basically all of these fit into a category of what the City must do. He pointed out the programs that are part of the transportation grant program and that they are on a funding cycle. The City has to have their part of the funding in order to proceed; if not, the project cannot move forward. He stated it would be unwise not to move forward with it. He pointed out the cost overruns for the Southwest Parkway project on right-of-way acquisition. He referenced the Nashville Police Station which is programmed for $12,000,000 in 2008. He advised it was needed and that the Police Traffic Division and other operations were located there and the project need funding. City Manager Boswell indicated that the plan is to have the annual Certificate of Obligation sales from 2007 to 2010 because there is not much discretion with the projects that need to be done. He explained that the City staff talked about an election in November and it can be done. He pointed out that due to the short time line, this bond election would be a very different approach from what has been done over the last 20 years. He stated that the City staff does not out with a set program, but just with a list of suggested projects and a list of needs. He added that then with the citizens' input it gets fashioned into a bond program. He stated that if the Council agrees that the projects on the $151 million list are "have to" project then the approach to the bond election would be very different and the City staff would have to go out and say to the citizens these are urgent and this is why and this is what we can afford without a tax rate increase on the debt levy. City Manager Boswell pointed out that again this is another item that the City staff needs direction on because if the Council wants the November election the process has to quickly begin, with the communication process and citizen involvement process being very different from the traditional approach. Council Member Silcox stated that he did not know that the Council wanted to take a different approach. He stated that he can see issuing the Certificates of Obligation on projects where there has not been enough money to complete them. He added he has a problem with issuing Certificates of Obligation on projects not approved by the citizens. He emphasized that CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 55 of 99 he felt the citizens needed to be involved. He stated that he also felt Council Member Davis had talked about her concerns with a need for a public vote. He stated that he felt the Council needed to have discussion on this and made a final decision was to whether to do the Certificates of Obligation or have a public vote. He pointed out that these are major dollars and if the citizens are not involved, they may decide that there is a project they do not want on the list. He stated that he is concerned with any Council that just wants to issue CO's and they start racking up debt for the City. City Manager Boswell stated this was the reason this had been brought to the Council. Mayor Moncrief indicated that it appears this was going to be extensively debated. He pointed to the list and he added that he did not see any fluff on the list that would indicate that somebody just wanted something rather than providing something that the citizens need and want for their protection or to maintain their quality of life. He encouraged the Council to think long and hard on both sides of the issue as it is a difficult debate. He pointed out that the City is on a short fuse to instruct the City staff to move forward with a bond election in November or to doe the Certificates of Obligation. Council Member Espino explained his observations of the City's critical capital project was presented to the Council in 2005 and one year later in December the Council issued the $42 million. He pointed out that in the meantime streets continue to deteriorate. He stated that the number one issue in the City is roads and while the critical capital needs package is good, it does not address the $585 million in arterials roads. He stated that if the City does not do something about the roads, it is going to impact the economic development of the City and air quality. He pointed out the people in the northern section of the City and the southern section and in many other parts of the City have trouble getting around in the City. He pointed out that while the City is looking at a rail system, the big question is how do the citizens get around in the City. He stated in his District 2 alone, the roads are congested, i.e., IH35W is congested, Blue Mound Road is congested, North Beach is congested. He emphasized that the funding should have issued back in 2005 and now he is hearing that the City may not go out for a bond election until 2011, seven years from now. He pointed out that all of the school districts in the northern area of the City are building schools to address and yet the City has no money for roads. He pointed out the frustrations of the citizens when the Council Members have to tell them there is no money for those roads. He emphasized it is not only now to address the vehicles on the road, but if the City expects to get mass transportation, the City needs arterial streets. He wants to move forward and get the projects in the pipeline and these are emergency needs and the City's roads are in crisis. He emphasized that he wants a bond election now rather than later and he posed a question to the staff on how much more debt can be issued by the City without raising the tax rate. He wants the new debt to be issued to address the arterial street issue. Council Member Espino pointed out the outcry of the citizens in 1998 and there was a small $120 million package that year to address the CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 56 of 99 streets. He also pointed out that the $270 million bond package in 2004 was also for streets. He stated that the City was way behind in addressing the City's arterial streets needs and the problem is in city-wide. He stated that when he goes to a meeting in his district, the citizens are disappointed to hear him tell them that another bond election will not be held until 2010 and now it is 2011. He reiterated the number one problem is roads and it is going to hurt economic development if nothing is done. He indicated that he wants to issue the rest of the Certification of Obligations package. He stated that the Council has been having this discussion for two years now. He wants to move forward with the $48 million. He emphasized again a capital needs package for arterial streets. He talked about the lack of east/west mobility in the City and gave examples of roadways where the funding has been approved and it takes six years for the roads to be built, i.e., Golden Triangle Boulevard. Council Member Silcox interjected he wants the public to know what the City is doing. He just does not want to go on and issue the CO's and the public does not know what and why the Council is going with that approach. He indicated he agrees with the comments by Council Member Espino; however, he wants to be very transparent about what the City is doing. Mayor Pro Tern Hicks stated that she does not want the Council to just issue CO's when they feel like it; however, she referenced the list of projects and referenced that they have all been discussed with the public many times before and she felt it was a waste of money to do a bond election on those projects when the City needed to look at a much larger bond package and ask the citizens for their needs. She added that the Council can also tell them about the current list of critical capital needs and these are things that were previously asked for. She referenced comments made by Council Member Espino about explained to citizens that there is no funding to address certain street projects. She emphasized that what is worst is having to tell the citizens that the projects were approved as part of the bond process; however, the City does not know when they are going to be built or when projects are in process are going to be completed. She talked about road projects in her districts where the work has not completed. Mayor Pro tem Hicks stated that the City has the lowest debt service in years and the City needs to do something. She spoke about the $150 million and going forward. She pointed to the revenues of $1 billion from the Barnett Shale and how quickly the City decided how that revenue is going to be spent. She emphasized the need for the City to do the funding of$150 million sooner rather than later. Council Member Scarth questioned whether the City had the debt capacity to support this bond issue. City Manager Boswell indicated that Assistant City Manager Montgomery would cover this issue later. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 57 of 99 Council Member Jordan questioned if it was feasible to take the grant match and do it through CO's and do a bond package for the remainder. He asked if it can be split that way legally. He clarified again the grant match is the $18 million over two years , which are the arterials, and he questioned if those can be done through the use of CO's and then ahead with the bond package for the remainder. City Manager Boswell stated that the bond election can be done for any size. Council Member Jordan indicated that $150 million is on the low side when the City looks at its total requirement. Council Member Jordan referenced the $8 million in 2008 and $10 million in 2009 for arterials and or if the real numbers for the grant match is to look at the total for transportation in the amount of$11.6 million and do those through CO's. He talked about putting together an omnibus package and the difference schools district in the City that are having bond packages and building more facilities. He added that having seen the backlog he feels the City needs to have a $250 million package rather than a $150 million. He wants to know if both can be done with CO's and bonds. City Manager Boswell stated "yes"; however, it is an issue of capacity and before the Council makes a final decision, he questioned what projects the Council feels can wait for the election process. Council Member Davis stated that she shares the concerns expressed by Council Member Silcox and this is the reason that she voted against the issuance of the CO's when the Council considered them. She stated that she understands the Council Members arguments for these needs and she agrees with them. She pointed out that if the City had started in 2005 with a capital needs list, then the City could have done a bond election already. She also pointed out that when the Council had the debate on the issuance of the $42 million in CO's, that she voted against, the process could have been started at that time moving forward with a communication process and a bond vote on the remainder of it. She pointed out now the City is in critical needs time for these projects and now the City does not have time to do the communication process and the bond vote. She emphasized that when the City can leverage a grant it should be done. She talked about a hybrid approach should be used. She pointed out that she and Council Member Silcox have the same position then as they do now and that is they agree that this is something that needs to go to the voters. She added the City does have a policy on the use of Certificate of Obligations they should be used in very defined circumstances as the exception and not the rule and the Council should not be supplanting the voters voice in how their dollars should be spent. She stated that the policy probably applies to the greater part of the list of projects. She emphasized to the City Manager that it might be good for the Council to see that policy. She clarified to the City Manager that his recommendation is rather that go through a communication process and election cost and delay the process, the City would instead do a fairly thorough capital communication needs process with the citizens and explain and hear their input and then make a decision on the issuance of the Certificate of Obligations after the input. She pointed at CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 58 of 99 that at the least; the City put all of the information in front of the citizens to respond. She stated she felt it was a good opportunity to hear what the citizens want. She added that she felt her constituents would be saying that to all most all of the items on the list. She felt it would be a good middle of the ground approach. City Manager Boswell stated that he does feel that it has merit; however, he added that Council needs to keep in mind the date timeframe for the bond election process in case the Council wanted to go forward with the bond election. She pointed out that the Fort Worth Independent School District is doing a bond package in November. Funding of Alternatives for Capital Projects/Debt Capacity- Karen Montgomery, CFO/Assistant City Manager Assistant City Manager Karen Montgomery spoke before the Council on the funding of alternatives for the capital projects and regarding the City's debt capacity. Using a PowerPoint Presentation, she presented the debt modeling for debt service fund (non-enterprise funds). She stated that the assumptions were: • Use excess fund balance in debt service fund to defease $48 million in outstanding bonds for FY 2006/07 • Maintain current debt service tax rate of$.1341 for FY 2007/08 • Beginning in FY 2008-09, reduce O/M tax rate with corresponding increase in debt service tax rate, to shift $8 million annually to debt service (City Manager recommends no further reductions to O/M tax rate.) • Growth in property tax value estimated as follows: 2008 5.96% 2009 5% 2010 5% 2011 4% 2012 3% 2013 2% She then presented a chart showing the general debt modeling (non-enterprise funds) Results: with additional $8 million 1. Allows issuance of $105.5 million over 3 years, of remaining critical capital needs 2. Allows issuance of $174 million over 3 years, for remainder of 2004 bond program. 3. Allows for replenishment of $21 million in Equipment Note Authority CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 59 of 99 4a. Allows for $50 million bond issue (10 year payout to accommodate ERP System) plus $8 million (20 year payout) for additional projects through 2010 4b. Allows for $78 million (20 year payout) for additional projects through 2010 5. Allows planning for next 4 year bond program, in 2011 of $175 million (20 years) Assistant City Manager Montgomery reviewed the general debt modeling (non-enterprise funds) as follows: Results: without additional $8 million 1. Allows issuance of $105.5 million over 3 years, of remaining critical capital needs 2. Allows issuance of$174 million over 3 years, for remainder of 2004 bond program 3. Allows for replenishment of$21 million in Equipment Note Authority 4a. Allows for $50 million bond issue (10 year payout to accommodate ERP System) but requires an additional $10.6 million transfer in 2010; allows planning for next 4 year bond program, in 2011 or $94 million (20 years) OR 4b. No ERP, but additional transfer of$700,000 in 2010; allows planning for next 4 year bond program, in 2011 of$162 million (20 years) Assistant City Manager Montgomery went back to Council Member Scarth's question on whether the City had the debt service programmed in the budget and the answer is "yes" from the standpoint of using the current tax rate and what it allows the City to do. She stated that it is minimal at best. She stated that it accomplished what has already been on the drawing board to get done. She added that even with an $8 million transfer, which is the City Manager's recommendation, this is all that the City staff could recommend taking out of operations and there is not a whole lot left to work with. She also mentioned the Certificate of Obligation policy that had been referenced by Council Member Davis. She stated that the City did adopt it and it states what the City's needs are for the issuance of Certificates of Obligation and it does say that they may be issued as permitted by state law and it is the policy to utilize CO's to finance public CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 60 of 99 improvements only in special circumstances, one of which the allowed uses is cost over runs on capital projects. She went over all of the allowed uses under the policy. Assistant City Manager Montgomery concluded her presentation. Council Member Espino indicated he wanted to move forward with the issuance of the CO's for the critical capital needs list. He stated that if the Council takes this to the public, they are going to want more, not just for the streets, but for other projects. He emphasized that this was a problem city-wide, state-wide and nation-wide. He talked about in critical budget years in cities all over the country the spending on maintenance and capital needs were deferred. He emphasized that then these projects become critical and something must be done. He stated that the older streets in the neighborhoods are in need of reconstruction. He continued by pointing out the problems with new subdivisions being allowed to develop on two-lane roads, the premature street failures and the need for arterial roads to move the traffic. He talked about the City's roadway impact fee to try and address some of these issues. He emphasized the need to go forward with the issuance of the CO's now and look at an interim bond package before 2011. He recommended that the interim bond package is for streets only. Council Member Espino expressed further concerns about the streets and gave examples of contacts from citizens, school districts and business leaders to him about the various street issues that will impact the City's economic development, traveling to the schools, etc. He also requested various options be provided by the City staff on how much debt can be issued. Council Member Scarth indicated that he agrees with Council Member Espino on the need to move forward. He spoke pointed out the issue that between the construction projects for water and sewer fund, the construction from the storm water impact fees and the list of critical capital needs, how many more projects can the City staff take on . He questioned the limit for the number of projects that can be accomplished for the City and emphasized that it was not a criticism of anyone. He pointed out that it was not just the capacity of the Engineering Department and the outside consultants but also the contractors. He felt that within the next three to four years, the capacity will be maxed out to get the projects done. Council Member Burdette concurred with what Council Member Espino stated. Council Member Burdette talked about a developer in his district that wants to put in a development and it will be adjacent to a two-lane asphalt road and add a lot of capacity to that road. He pointed out that it was another issue of new development and lack of adequate road infrastructure to accommodate the development. He pointed out that the City cannot tell the developers that they can not build here any more. Council Member Burdette also indicated his support of moving forward with the issuance of the Certificates of Obligation and with an interim bond package to CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 61 of 99 address the arterial streets. He expressed concerns for the bad roadways that exist in the City, particularly in his district and his concern that a bad accident will happen. Mayor Moncrief obviously there is a concern that the public has an understanding of where the Council is going and why. He added that he did not feel that the process should be slowed down to the point of where the list of projects is changed. He added that everything on list is need for the public protection, for their safety and well-being and needed for their ability to get to and from their destinations. He emphasized that the Council has got to move forward. He stated that he understands what Council Members Davis and Silcox have suggested as public input, he felt it should be a process of why the City is moving forward rather than seeking permission to do so. He stated that Council Member Espino has made a good argument and using specific examples in both his district, Council Member Burdette in his and Mayor Pro tem Hicks in hers. He reiterated again that the City has to move forward and he senses this is the indication from the Council to the City staff to do so. He would encourage them to move forward. Council Member Davis provided comments about the issue of input from the community. She indicated that it goes back to democracy and while it is cumbersome and inconvenient, it is the best system in the world. She pointed out that the City could run the risk that voters may say that they do not want the list of projects identified by the City. She stated that this is what representative government is all about and that is hearing from the constituency. She felt there was a way to put the information in front of the public that helps them to understand why it is important that these dollars be spent in this way. She added that she felt it was very important to have this communication. She asked for clarification from Council Member Espino on which interim package that he was recommending. He emphasized that he wants to know what the size of the arterial package can be and how many streets that can be funded to stay within the debt service and without increasing the tax rate. He stated that he is asking the City staff to bring back some scenarios. He added that there may have to be difference scenarios and how those impact the General Fund. He stated that then the Council will have to decide just how much a priority it is to the Council. He stated that it is going to be a tough budget workshop. He stated that the Council is going to have to decide how more debt to the City can incur to address the roads. Council Member Davis requested to go back to the presentation and to the slide showing the 4a and 4b options. Council Member Davis continued to express her concerns regarding the comments that had been made about moving forward. She stated she wanted all voting public to have a voice in the decision as they are paying for it. She stated her concerns for the Council speaking for the citizens. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 62 of 99 Council Member Jordan stated that he felt the Council was elected to make those decisions. He stated that his constituents wants the streets in their district and they are always questioning why is all of the funding going downtown and not building streets. He indicated that he supports what is being done downtown; however, he has to try and explain the reason the streets are not being built in District 6. Mayor Moncrief stated that he is trying to get an indication from the City Council for the City staff on the critical capital needs as recommended by the City Manager. He pointed out that the majority of the Council Members have indicated that they are comfortable with moving forward with the critical capital needs package as recommended by the City Manager. Council Member Silcox requested further clarification. He pointed out the $8 million transfer from the City's General Fund, that all of the critical capital needs can be funded over the next three years without a tax rate increase. City Manager Boswell stated that "yes" that is correct; however, it would not occur next year but the year after that. Ms. Montgomery added that it would also occur in the years after that and it would allow for the entire list. She pointed out that there would be $8 million less on the O & M side but more money to address the debt service. City Manager Boswell also clarified that the assumption includes the projected tax increases as well. Council Member Silcox stated that when he first came on the Council, the City was facing a debt of $700 million in debt and the debt load was 26.6 % in 1991 and the problem is that it takes money to pay back debt. He expressed concerns for the $8 million shortage in the O & M side. He added he wants to be transparent for the public. He did point out that the projects on the list were projects that the citizens had already authorized there was just no funding to finish them. He indicated that he will support it. Mayor Moncrief talked about the debate of the Council that that is had been done with respect and appreciation for each one's opinions. Council Member Jordan stated the Council has worked diligently to get the debt service down and for that, the reaction has been that the City has gotten behind on the streets. He pointed out that the Council needs to now make priorities and take on some more debt. Council Member Silcox and Mayor Moncrief providing additional closing comments. Adiourn With no further presentations or discussions, Mayor Moncrief adjourned the Fort Worth City Council Budget Retreat at 5:03 p.m., on Friday, June 15, 2007. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 63 of 99 SATURDAY, JUNE 16, 2007 Present: Mayor Mike Moncrief Mayor Pro Tempore Kathleen Hicks (left the meeting at 11:00 a.m.) Council Member Sal Espino Council Member Chuck Silcox Council Member Danny Scarth Council Member Frank Moss Council Member Jungus Jordan Council Member Carter Burdette Council Member Wendy Davis (left meeting at 9:47 a.m.) City Staff: Charles Boswell, City Manager Libby Watson, Assistant City Manager Joe Paniagua, Assistant City Manager Mark Ott, Assistant City Manager Dale Fisseler, Assistant City Manager Karen Montgomery, Assistant City Manager/Chief Financial Officer David Yett, City Attorney Marty Hendrix, City Secretary The Department Heads or their Assistant Department Heads were also in attendance. The Budget Retreat of the Fort Worth City Council was called to order by Mayor Moncrief at 8:50 a.m. on Saturday, June 16, 2007, in the Omni Mandalay Hotel, Mandalay East Ballroom, 221 East Las Colinas Boulevard, Irving, Texas 75039 Mayor Moncrief shared an article that was given to him by Police Chief Mendoza, from the Dallas Morning News, by reporter Jacquelyn Floyd, regarding needed changes in the City of Dallas regarding security issues in an apartment complex and the incidents of theft and vagrancy. In the article, she suggests that they call the City of Fort Worth and stated that they have done great work over there. He added that he felt this said volumes about the City. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 64 of 99 Mayor Moncrief advised that the Council's meeting yesterday was productive. He pointed out that the Council got a lot of information; however, he was not sure how much was absorbed, but there was a lot that was exposed to the Council. He emphasized that the Council had a much better idea of the mountains that they face and need to be climbed and some of them have shorter time lines than others. He commended the City staff on their outstanding presentations that gave the Council a clear picture, especially with the overall compensation piece. He stated that it was well put together and it was very helpful and something that the Council needed to hear on a regular basis to keep them well informed of that process and the ripple affect that the Council may not pay attention to and should. He advised of items that needed to be deliberated and that City Manager Boswell wanted to go over some items. Recap of Items Discussed on Friday, June 15, 2007 — Charles R. Boswell, City Manager City Manager Charles Boswell indicated that the City staff did not totally get through yesterday, i.e., there was one piece of the compensation program that the Council needed to go back to and that was health insurance. He added that he wanted Karen Marshall, Director of the City's Human Resources Department, to do this presentation and where the City stands and what assumptions the City has been working with on that issue. Assistant City Manager Karen Montgomery interjected that she was doing this presentation. City Manager Boswell added he wanted to reference a page in the agenda book that references all of the new programs that were added for the Fiscal Year 06/07, which amounted to $12,000,000 in addition. He stated what was more important were the second year costs for those initiatives. He stated that this would be $3.7 million to carry over on those programs. City Manager Boswell stated that there were two points to be made; one was that this amount of funding was going to eat up revenue growth for FY 07/08. He added this was also to remind ourselves that the initiatives that have been started have not had much of a time to show any affect. City Manager Boswell stated that he then wanted to show the Council the items that would not be funded if the City went forward with the position of"status quo", just continuing with the current service levels. He stated that then this would lead into deliberation on general budget direction, capital needs, GASB 45, and post employment health insurance costs. Assistant City Manager/Chief Financial Officer Karen Montgomery spoke before the Council on the issue of the City's health insurance. She indicated that she wanted the Council to see the pros and cons of this issue. She explained that yesterday the Budget Director outlined the budget gap and there was an estimated increase in the health insurance at a 10% increase. She indicated that this was part of the $44,000,000 gap. She added that one of the ways to get the gap down to $24,000,000 was to reduce that increase to 7%. She pointed out that if the City wants to just maintain current service levels in the City, then the insurance cost will go away. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 65 of 99 She indicated that this information had been placed in the form of the following pros and cons. She reviewed those for the Council. PROS Insures adequate "pay as you go" cost is met Allows City to use $5 M of reserves for GASB 45 requirement Allows City to ask for corresponding employee cost increase Assistant City Manager Montgomery pointed out that the City has not had an increase in the cost of the health care in three years. She stated that many organizations have double digits in their costs growing over that period of time. CONS 30-40% contribution increase may be needed in FY 08-09 Precludes use of$5 million of reserves for GASB 45 requirement Difficult to ask for associated employees increase Mayor Moncrief stated as the Council is aware, it has been quite a while since the City has had an increase in the health insurance costs. He felt it was a result of some of the things that the City has done like the wellness program, and some of the things that a large number of the employees being a part of that program have done. He pointed out that one thing that the City has not accomplished is the retirees becoming a larger part of that program. He stated that he knew that efforts were underway and he did not know what incentives the City can offer, but the Council needs to look at that issue. City Manager Boswell referenced page 22 of the handout materials, slide 44, which was titled FY2006-07 Service Level Enhancements and New Programs. The slide showed the programs and services that were approved in the FY06-07 budget and their second year impact for FY 07/08. These included public safety programs, clean and attractive programs, promote orderly growth programs and improve mobility and air quality programs. City Manager Boswell spoke about 91 positions added to the Police Department and the chart reflected that those positions had $1.4 million impact in the budget for this year and to carry those positions forward for next year will be an additional $2 million. He looked at the numbers for staffing for fire stations, mowing and rental registration. He pointed out to put those into full affect would be another $400,000 on top of what is currently budgeted in current year and the City has not even gotten to that at this point. He added that the City staff has indicated that there are some that will not have an incremental impact, like the Housing Trust Fund, which will just carrying over the $2 million set aside for this program. Council Espino clarified that the CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 66 of 99 $2 million would be carried over and be in the base budget, which City Manager Boswell confirmed. City Manager Boswell stated that he just wanted the Council to know that this is another $3.7 million built into the budget to carry on current service levels approved last year. City Manager Boswell stated that if the status quo is held for budget purposes, then 1% would be added for the retirement contribution. He then referenced page 23, slide 46, titled Decision Wheel for the City Manager's Balanced Budget. The following items were included for consideration on the wheel and he reviewed the wheel with the Council: 1% Across the Board Compensation $2.7M Group Health Insurance (7%) $2.09M Tax Rate Reduction at Kent $3.7 M Police $11.32 M Street Maintenance $5.OM Compensation Additional $4.2M Fire $1.39M Replacement Vehicles $1.8M Alley Maintenance $498,000.00 Retirement—2% $6.OM Code Compliance $950,000.00 Mr. Boswell also advised of the cost of Step Increases for City employees, which are based on longevity, for general employees and police and fire which is projected at $4.2 million dollars. Mr. Boswell reiterated that just to try to keep going with what the City has now, these elements would not be funded. City Manager Boswell pointed out all of these "pieces of the puzzle" are priorities for a majority of the Council Members. He added trying to get these wedged into the budget is going to be a struggle and it is just impossible to get all of them in; therefore, he is looking for some discussion from the Council in this regard. He added that first of all he wanted to look at the basic budget issues first. Council Member Jordan stated that the Council had not seen all of the pieces of the budget. He referenced a question he asked yesterday as to whether the City staff had quantified the delta generated by the gas well revenues as it relates to ad valorem taxes. He stated that he saw the numbers for the increased values and he questioned if the City staff has equated it to a delta for what the gas well revenue is going to be. City Manager Boswell stated that while he did CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 67 of 99 not have that number, he stated the value added of the mineral interest increase in the property tax base is reflected in the overall revenues numbers for the property tax. He stated that it can be isolated out because the City did get a number from the Tarrant County Appraisal District (TAD). Budget Director Bridgette Garrett stated that she is not able to find the exact number; however, based upon the preliminary TAD numbers the overall increase from the adopted budget to the May TAD numbers is a $16 million increase in revenue. She clarified that about $5 million of that number is attributed to the gas well revenue. Council Member Jordan stated that the City is just now phasing up in the ad valorem issue to the point that the task force is looking at that issue and the City needs to project that over the future years so the City has it for longer years. He questioned the City staff on how they treated the overtime issue in the budget. He questioned whether it has been reduced and he requested to know what is the delta and dollars for overtime. Budget Director Bridgette Garrett stated that they are still working with the departments in terms of the Budget Office's preliminary analysis, so it has not been finalized. She stated that they are looking at reductions in the public safety departments based on the projected increase in staff She added that they have not settled on a final number but there will be some adjustments. Council Member Jordan questioned whether they were included in the deltas that the City Council was looking at. He added ideally, if there are savings, then that would be applied to the retirement number. Director Garrett stated that it has not been included in the numbers that the Council is looking at today. Council Member Jordan indicated that needs to be resolved. City Manager Boswell pointed out to the Council that there will be a lag effect between the reduction in overtime and in hiring and training of new employees. Council Member Jordan stated that he understands there is a training lag and so what was approved in the budget for this year will not in some cases impact the City until a year later due to that issue. Council Member Jordan clarified with the staff that 95 positions were approved and there will be 91 officers hitting the street. Council Member Davis referenced the budget package numbers that were presented yesterday. She referenced the $8.2 million for exception packages and she questioned whether any of those exception packages were placed on the decision wheel. She stated for example, the alley maintenance. City Manager Boswell stated that all of the items on the wheel are considered discretionary. She asked for the list of exception packages. She stated she is trying to get an understanding of the Council's ability to enhance service levels that the citizens want and request and yet it is so difficult to communicate why it is the case that the property values are rising, taxes they are paying are rising and there is so much growth and increase in revenue yet the City still can not do things such as maintain alleys or improve upon the City's ability to provide for adequate street maintenance. She clarified that the $5 million figure is just going to CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 68 of 99 hold the City at what the City has been able to do. She questioned how that can be communicated to the citizens. She added that the challenge for Council is to be able to communicate to the voting public that their needs are being addressed. She added her concern is for the challenges that are facing the City this year; which is that the Council is going to have to say they are sorry but they are not going to be able to do certain things. She emphasized it will be hard to communicate why when it is the case of the rising property values and higher taxes being paid. Council Member Burdette indicated that the Council came to this meeting with the understanding from the presentations given yesterday, that this was a shallow first cut at the budget and there are a lot of the budget items not before the Council today. He hoped that the City staff could get to the Council Members as quickly as possible a simple rundown of what the revenues look like, the expected expenditures as reflected in programs from this year and separately what to add to it. He referenced all of the documents that had been provided to the Council separately, the decision wheel, the exception packages, Council desires, etc., and he requested that all of those things be placed in one document presentation to put in front of him. He felt better decisions could be made working with one document. He also felt the Council could address Council Member Davis' concerns, which he shares, on how to communicate to the tax payers. He added the message would be that because the City has to address some of these unfunded liabilities issues with current dollars, in order to avoid problems in the future, as compared to the hard dollars that can be spent on alley maintenance. Council Member Burdette explained that he felt there are different characterizations for the expenditures and if he can get one document with simple explanations he felt he could get his arms around it. Council Member Espino stated he wanted to look at the exception packages and the issue of alley maintenance. He pointed out that he knew that was an issue in the older neighborhoods and he wanted to continue the discussion on that topic. He talked about the street maintenance at $5 million and he knew that was a lot of money. He stated that he knows the City has a lot of needs and this is going to be a very tough budget. He talked again about the alley maintenance and the frustrations the City has seen with trying to have the property owners maintain them. He indicated that he hoped the City could come up with funding for that project. He pointed out that yesterday he spoke as an advocate for streets and today he is an advocate for the maintenance of the alleyways. He stated that alleys are in dire need of cleanup. Mayor Pro tem Hicks stated that she agreed with Council Member Davis about the difficult budget session coming up. She stated that with all of the good news coming out of Fort Worth that the citizens hear, she felt that the Council has a responsibility to continue with promises of alley maintenance and she wanted to see how far the City has gone in this program. She added that there is a direct correlation between cleaning these alleys and dealing with or CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 69 of 99 deterring crime. She referenced various parts of the City where this has occurred and she added she wants it to continue. Mayor Pro tem Hicks stated that she realizes that the TPW Department has taken over this maintenance; however, she and Assistant City Manager Libby Watson and Director of Code Compliance Carl Smart have been in numerous meetings and the discussions have been that it is successful in keeping out the crime, so she wants it continued. Mayor Pro tem Hicks added that the Council should be able to find the funding for that program in the amount of $498,000. She stated that she also felt code compliance was a huge issue with the City. She talked about the use of code compliance in dealing with crime in her area and the officers are doing the best they can and they are way understaffed. She stated that she felt the City of Fort Worth is behind in this area when compared to other cities of Fort Worth's size. She talked about the environmental court and the need for it on these incidents. She questioned whether this aspect was going to occur this year; however, she pointed out that the citizens need a court where these incidents do not fall through the cracks. She stated looking at the decision wheel she felt those were some of the major issues and they are not in just one area of the City, they are located throughout the entire City. Council Member Scarth stated he wanted to see some tracking of some of the enhancements in programs from last year and he realizes that some of them had multiple parts. He talked about the programs/services that added positions, i.e., tree preservation ordinance, gas well inspectors, code enforcement officers, etc. He added that he realizes that some of those were "pay as you go" and should be self-supporting by next budget year. He reiterated he just wants to see a review of those things, get an historical tract and what they have done to the programs and how they will affect the budget for this next year. Council Member Davis stated she wanted to see the exception packages and one of those may include additional code officers. She talked about complaints that she receives or hears about regarding the animal control officers and their ability to be able to do their jobs and keep up with their calls for service. She stated that the same number of employees has to deal with a larger area. She talked about a situation that she recently observed where an animal control officer had to catch and contain a large possum. She spoke about the fact that the officer had already caught eight dogs and now added a possum and this was just at 12:45 p.m. Council Member Davis added she also wants a number on the cost for providing health insurance to the eight Council Aides. Mayor Moncrief stated that the decision wheel is spinning. He stated that it is obvious that it is an issue of supply and demand. He added that the City does not have as many dollars needed to meet those demands and the expectations of those the Council serves. He stated that the same time he wants to also offer his strong support for the alley maintenance program. He CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 70 of 99 asked for a clarification about the $498,000 figure and whether it is to maintain the current alleys on the list or to add to the inventory. City Manager Boswell stated that since the City staff offered the budget of"status quo", the alley maintenance program was to just maintain the current inventory. He stated the $498,000 would enable the City to take the next step and add more to the inventory. Mayor Moncrief stated that he does not feel it would be responsible to remove this money or reduce it since it has been started and as it affects the public safety, appearance, crime, etc. He talked about the Code Compliance Department and the new technology for reporting. He stated that he wanted to hear how well this is working and helping to reduce the amount of time between a call and response. He added the City put a lot of money in that program and technology and he wants to make sure it is working. Mayor Moncrief stated that the one item on the wheel that has not been discussed is the tax rate reduction. He knows there are Council Members, including him, who want to see it happen. He stated at the same time he wants to be clear in his position that if doing so at the sacrifice of some of the things that have been discussed, it may not be the right direction for this Council to pursue. The tax payers may understand that and the last thing would be to reduce services in order to provide the tax cut. He knows that there have been discussions on the use of the gas well revenues; however, he wants to have that discussion on another day. He did want to at least comment that if the Council can hold the line on the tax rate, he will be pleased and can offer the public that the Council has taken responsible action dealing with the budget, dealing with the grow and providing the level of service that the City currently provides. Council Member Jordan questioned the $11.32 million on the decision wheel for the Police Department and how many positions are in that dollar figure. Council Member Frank Moss indicated as the newest Council Member he cannot provide any comment on the budget until he has an opportunity to get with the City staff and get more detail on what they are going to do. He added that this is his frustration at this point. City Manager Boswell asked if there were any more questions or concerns on the budget issues presented and there were none. He advised of moving to the next agenda item. He advised that the next item was the critical capital needs: He explained that what he heard yesterday from the Council was to proceed with sale of the Certificates of Obligation (CO) and then he indicated that he was not sure if the Council wanted to have the CO sales the following two years or prepare for a bond election for the balance of the program and when the election should be held.. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 71 of 99 Council Member Espino indicated that he felt a consensus was reach among the Council Members to go forward with the City Manager's recommendation to go forward with the sale of the Certificates of Obligation to fund a critical capital needs package. He added that it was also his preference to go ahead with the CO issuances each year as recommended. He added that it was his recommendation to have an interim bond election. The interim bond election that he is recommending is solely for a road package for arterial streets. He added that even with the sale of the CO's, there is still a $585,000,000 arterial street need all over the City. He reviewed the list and the amounts in each district. He added his basis for the recommendation was from the presentation made by Assistant City Manager Montgomery who indicated that the City has the capability to handle $8 million more for debt service. He pointed out that he is challenging the City staff to see how much more debt service can be accommodated for an interim bond election. He stated that he does not want to wait until the year of 2011 for another bond election. He referenced all of the bond elections that have been held or are coming up from the local school districts to keep up with the growth experience in the City. He added the City is not keeping up with building roads to the schools and there are serious issues of traffic congestion, with air quality, public safety, and it may affect the City's economic development. Council Member Espino reiterated his suggestion for having an interim bond election sooner rather than later and he wants staff to come back to the Council with a proposal on how much more debt service can be realized. He talked about a figure of $78,000,000 had been thrown out; however, he felt that was not enough. He pointed out that Council Member Jordan had suggested $120,000,000. Council Member Espino felt there was justification for this. He referenced a community outcry in 1998 for street improvements and there was a $120,000,000 bond package that was principally for roads. He felt the City could do something like that now. He asked how much more could the City afford with no tax increase. He felt different options needed to be presented to the Council for a bond election. He emphasized again that the City is in an emergency mode on roads. He talked about two issues, one of which was when funding was approved by the voters; it takes so long before it is realized in the street repairs. He stated that the second issue is having to tell the citizens the City can not repair the roads or there is not enough maintenance dollars either to keep the roads from falling from fair to poor. He pointed out that the City's TPW Department has indicated that it would take $30,000,000 to do this on an annual basis and this is not going to happen. He emphasized that the City is in a road crisis. He reiterated that he wanted the City staff to come back to the Council in this budget process with a proposal for an interim bond election, with a proposed debt capacity and different modeling scenarios for the Council to consider. Council Member Davis stated that she will not argue that the Council has made a decision to move forward with the sale of the CO's. She added that she wanted to address Council Member Espino's point on an interim bond package. She stated that she needs a better CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 72 of 99 understanding of what the City is capable of doing and when. She pointed out that from the presentations given by City staff yesterday, she understands that if the City sell $8 million in CO's in 2008, then this will allow the City at 2010 to have a $78 million bond election with a 20 year pay out and in 2011 a $175 million bond package for a 20 year pay out. She added she has no problem with putting something forward that is primarily a road package. She has a problem with just an aerial road package. She stated that she does not have growth in her district, as it is landlocked. She emphasized the balance, between the two needs for road repair and new roads, is precarious and there is not enough money for either of them alone and certainly not to take care of all of the needs together. She talked about if the City just puts forward an arterial package which just addresses the growth side, which is crucial, then the people in Central City who have lived here longer and have paid more taxes can not get their streets fixed, can not get curbs or sidewalks. She does not want to get into a situation where the City is only concentrating on the growth side crisis and not concentrating on the Central City side. She apologized to Council Member Espino that her comments yesterday were not intended to offend him or to indicate that he was only interested in District 2. She added she understands that there are growth areas in all parts of the City. She added her concern was if the City only concentrates on those growth areas, then it will not provide any thing to central city. Council Member Espino stated that he appreciated the comments and he understands that it needs to be a roads package as he has part of the central city in his district. He added that there should be a consultation with Council Members and neighborhoods about the roads. He pointed out that there was set aside $50,000,000 for neighborhood streets, but that is still not enough. He talked about supporting Council Member Davis' comments and that it should be a roads package. Mayor Pro tem Hicks agrees with Council Member Davis and pointed out that she is right. She indicated that she also has people in her district who have been tax payers for 40 to 50 years and they have no new streets. She agreed that in order to have an interim bond package that the City is going to have to consider the citizens that have lived here many, many years, as well as the new growth areas. She felt it was a good compromise. Council Member Moss indicated that he agreed with Council Member Davis that the City needed a balanced program. Council Member Moss talked about the new growth areas and new arterial streets and pointed out that anything the City does needs to be couched with the private sector so that if the City is putting in bond funds the City needs to receive complimentary support from the private sector in order to get those street systems in place. He talked about the use of community facility agreements. He added he did not feel the City should be doing the whole bill. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 73 of 99 Council Member Burdette stated that by far the people that are in his district are within the intercity and within Loop 820. He reminded the Council that what the City is seeing are increased tax revenues coming from where bare land has now been developed with houses and commercial properties and this growth and expansion is providing jobs. He felt it was crucial that the City do what needs to be done and not stifle the growth. He added he felt the City did need a balance with new arterial streets in the growth areas and maintenance of streets in the intercity area. He cautioned the Council that the new arterial streets are needed to address the growth and that the City needed to careful not to impact the growth so that it stops or becomes stagnant as this could certainly affect the tax revenues for the City. He added that he agrees with Council Member Espino that the interim bond package needs to address the arterial street problem in a meaningful way. Council Member Jordan he stated that he is probably the only Council Member that has a district out of the intercity. He stated that he made a comment yesterday that may have been misunderstood and he clarified that there is a perception in his district that everything is going downtown. He added he felt the Council has done a good job of balancing the needs for the entire City. He added that there is a lot of the development that affects the City's arterial streets. He stated that there are a lot of moving pieces. He talked about the Southwest Parkway project and what a benefit it will be for his district. He added that he felt what the Council needed to do was a better job of taking care of entire city and the time is now to really focus on the arterial interconnections in the City and in the districts. He added he felt the Council has done a good job working with each other in order to not become so oriented on the districts and to look at the entire needs of the City. Council Member Jordan referenced the bonds sold in 2004 and that they were sold at a competitive market interest rate. He added that he assumed that the City staff was looking at the bonds issued prior to that time as to whether they needed to be refinanced for a more competitive interest rate. He felt it would be beneficial for the City Council to receive a one-page document that reflects what was discussed yesterday during Assistant City Manager Montgomery's presentation. He stated that the City will have the $8,000,000 in CO's and that the City had the capability to issue another $350,000,000. He stated that he was still unclear how all of the pieces fit together. He requested a point paper for the Council before the Council goes to budget. He pointed out the work being done by the task force on gas wells looking on how that money is going to be used and one of the suggestions was to address the traffic situations. (Council Member Davis left the retreat at 9:47 a.m.) Assistant City Manager Montgomery indicated that she would provide the point paper. She reviewed the situations that allow the City to have some debt capacity. She talked about defeasance of some of the outstanding debt rather than reissuing new bonds at a lower interest rate. She talked about paying off$48,000,000 in debt in principle early so that it is no longer a CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 74 of 99 liability for the City. She clarified what this does for the bond holders and how it allows the City to pay off the liability and the bond holders still receive their payments. It also allows the City to increase the debt capacity. She explained that one of the scenarios was to adjust the tax rate so that it generates $8,000,000 more per year to go into the debt service fund and away from the City's general operating fund each year. She stated that this is the tradeoff. Assistant City Manager Montgomery stated that another point she wanted to make was that she met with representatives of First Southwest Company, the City's bond consultants. She referenced page 21, slide 42, of the handout materials. She reviewed the scenarios shown. She stated the First Southwest representatives suggested after hearing the Council's discussion that if the City wanted to have a bond election sooner than 2011, then the Council could consider options 1, 2, and 3 and then look at Option 4b - $78,000,000 in new projects (forgetting about the ERP portion). She added it could be combined with the capacity of Option 5, which would give the City a $250,000,000 bond program that could be taken to the voters in November of 2008. She added then the bonds could be sold in 2009 and the City could then incur the debt service in 2010. She pointed out that one of the issues the City's has with the selling of the bonds is that the CAFR is late so the bonds have to be sold with private placement. She stated that this would allow the City to get voter authorization and utilize the City's current cash flow so that the bonds do not have to be sold immediately. She added that she was encouraged by the comments from First Southwest in that something could be taken to the voters by as early as November 2008. Council Member Scarth requested clarification about foregoing Option 4A and whether the $50,000,000 would be included with the $250,000,000 for the ERP. She stated that if Option 4A was included with Option 5 then the amount would be only $183,000,000. She stated that this occurs because the payoff for the ERP is only a 10-year payoff so it eats up more of the City's capacity. Council Member Scarth questioned how then would the City pay for the ERP. Ms. Montgomery indicated that it had been suggested that perhaps some of the gas well revenues would be used because it is a one-time cost, and not on going. Council Member Jordan requested clarification that the $250,000,000 capacity was independent of anything that could come out of the Gas Well Task Force recommendation. She indicated that this was correct. She emphasized also that it allows the City to do the first three items shown on the list she reviewed. Council Member Jordan recommended that the budget be put together using that scenario. City Manager Boswell advised that to help quantify the impact of the $8 million which would not be part of FY 07/08, but would be part of the budget in FY 08/09. He stated that this CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 75 of 99 figure represents about two cents on the tax rate that would shift from the O & M side to the debt service side. City Manager Boswell then addressed the question of whether the City staff was looking at refunding opportunities. He stated that the City has already done a lot of that. He indicated that he remembers that the last one that was done, the City was told that there would not be any more opportunities to do so. He stated that this is one thing that the First Southwest representatives look out for and well as plenty of investment bankers that are also looking at it for their benefit. Council Member Espino spoke about the issue of not waiting until November 2008 for the bond election. He indicated that he realized that a May 2008 election was ambitious; however, the roads continue to deteriorate and there is no relief on IH35W. He pointed out that the school districts are going to continue to build schools. He stated that he is intrigued about combining the $78 million and the $175 million and that would be a pretty substantial amount. He then the City would have to forego a bond package for other city facilities, i.e., parks, community centers and libraries. He stated that he was just trying to come up with a road package. He reiterated that he was not sure November 2008 was as soon as possible. He added that he thinks Council Member Davis' recommendation of adding neighborhood streets to the arterial streets and creating a "road only" package is a fair and principled compromise. He reiterated he wants an interim road package for the election in May 2008. Council Member Jordan stated his position was to move forward as aggressively as the City can afford. He added that he was still unclear and as to whether the recommendation was to move forward with the issuance of the CO's and to have an interim bond election for roads. Ms. Montgomery stated that the interim bond election was in addition to issuing the CO's. He felt it would be helpful to have the paper that shows everything. City Manager Boswell clarified again what was shown on the informational material and stated that it allows the issuance of the CO's in the next three years to finish 2004 projects, replenishes the $21 million for the equipment note authority for fire apparatus and other equipment and provides for the Options for 4a or 4b. Council Member Scarth questioned whether there was any practical difference in rushing some of this with the capacity that the City has to engineer and construct additional projects. He pointed out all of the projects that the City is doing. He stated that his point was can the City get to them even if they are voted by the citizens. He added is the City making promises that they cannot keep. City Engineer Doug Radamaker spoke before the Council on the fact that the capacity needs to be address and that the City is at capacity in order to be able to deliver. He added that CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 76 of 99 he felt they could get a lot of work done from the engineering standpoint and the design. He pointed out that there was no need to expedite the design unless the project can be constructed. He explained that the City is trying to increase the capacity and expedite the capital projects and is bringing in a consultant to look at this issue. He expressed concerns for the City making a promise to taxpayers that more will be done when it cannot be done. He talked about the selection of a consultant to help with this process. He stated in terms of what can be delivered right now, they will need help. Mayor Moncrief pointed out that information was important to know. He stated that what he is hearing from the Council is that the Council is good to go with the critical capital needs package, with the compromise for arterials and neighborhood streets. He felt the City needed to expedite the process with the ability to deliver the goods. He stated he was not sure how the Council was going to strike that balance. He added that it was going to be up to the Council to work with each other in order to determine what has to done in each of the respective districts and what is best for the common good. Mayor Moncrief added that the Council has to work together to partner up on some of the projects. He stated that it is critical that the Council works together. He requested concurrence from the Council Members. Council Member Espino stated that just to be clear and for the record, the Council is in agreement on the critical capital needs package to issue the CO's and the City staff is going to come back to the Council with some modeling scenarios on an interim road bond package election that will have neighborhood streets and arterials, with input from the Council and the citizens on the streets. He added that Mr. Radamaker will get back to the Council with the capacity issues. He added that the City is not going to wait to 2011 to widening streets that need to be widened now. He also requested timetables from the City staff on the May 2008 election and November 2008 election. Council Member Espino reiterated the need for the modeling scenarios so that the Council can make their decision. Mr. Radamaker stated that it is going to be imperative to have the Council's support and the issuance of the CO's to complete the 2004 bond projects. He stated the 2004 bond program is on track and the design is being done a year early and he feels the City will complete the program at lease six months earlier than the deadline the City presented to the taxpayers. Council Member Jordan advised that the Council's Infrastructure and Transportation Committee had seen the information and the bond package was coming in on time and on budget. Mayor Moncrief felt Council Member Scarth's question on capacity was very timely. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 77 of 99 City Manager Boswell indicated that the timing of the election is one question and the reality of the financial capacity is when the City sells the bonds. Council Member Espino indicated that it is all going to factor in. He reiterated that he wanted the Council to feel the sense of urgency. GASB 45 City Manager Boswell stated that what he heard yesterday was that the Council was interested in the recommendation of moving $5 million from the health insurance reserves into a trust for the GASB 45 liability, as well as continuing the expansion of the wellness program. He also heard that the Council was interested in restricting new employees after January 1, 2008 and their dependants to "access only" health benefits upon their retirement. City Manager Boswell pointed out the recommendation coming forward from Council Member Moss regarding a health savings plan that the City could initiate coincidentally with that change in policy. He advised that he does not know if the City staff has had an opportunity to address this since the discussion; however, he added he wants some time to do some work on that concept. He added that the plan is to do that in short order. Mayor Moncrief felt the Council was comfortable with that approach. He expressed appreciation to Council Member Moss for his recommendation. He advised that it is timely and was an effective tool on the state level. Employment Retirement Fund Mayor Moncrief stated that he was aware there were three items that had been reserved for extensive discussion today and a lot of it took place yesterday. He stated that the Council needed to make a decision. Mayor Moncrief advised that before the Council gets into this discussion, he wanted to make some comments. He stated first of all he thinks the City treats the employees and retirees better than most and it is reflected in all elements of Fort Worth family whether it is the police, fire, management, or general employees and it is obvious to the people who work in local government and who watches what the City does. He stated that it is reflected in the length of time that they stay with the City. He pointed out that with police and fire it is a little bit different. He stated there is not a lot of turnover and people stay with the City because it is a good place to be. He stated there is a reason for that which is when people are happy and comfortable and have an opportunity to advance and address their dreams, wants and needs, they will stay put. He talked about settling differences and working for the common good. He spoke about the number of events that have occurred over the years, placing the City in a deep hole that the City has to dig out of, i.e., the $411 million in the retirement fund. He spoke about beginning the process to close the gap. He pointed out that it is going to be a difficult decision and probably one of the most important decisions the Council is going to be faced with now and for CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 78 of 99 the future. He stated it is going to affect the Councils in the future. He pointed to the passionate discussions that have been held and stated he is convinced that everyone has expressed themselves on what they truly believe is in the best interest of the City and taxpayers. Mayor Moncrief requested that as the Council works towards recommendations today and works towards middle ground, he wanted the Council to respect each others differences and reasons for their positions. He has listened to the Council and to the City staff and watched the process. He added that he felt it has been a fair process. He pointed out that there have been employee groups that have expressed themselves and lobbied hard with their positions. He added he respects those positions. Mayor Moncrief pointed out that whatever is done will not make everyone happy nor does the Council anticipate it to be that way. We have the fiduciary responsibility to close the gap and have the decision to a make. Council Member Jordan stated that he wanted to clarify a point made yesterday. He advised that historically two years ago when the majority of the Council was elected, one of first issues they had to face was the retirement fund and the shortfall. He stated that the Retirement Board came in and gave the Council recommendations on how to fund a shortfall. He stated one was the Ad Hoc COLA and the other was to restore a contribution rate of 3% by the City and 2% by the employees. He pointed out that this Council indicated that they wanted to shrub that and really take a look at it, look at the numbers and make sure they are right. He pointed out that the Council put him on the Retirement Board due to his financial expertise. He stated that yesterday the comment was made that the employees' groups and the Retirement Board had recommended the 3/2 contribution and had made a commitment that was what they wanted and that was what they were recommending. Council Member Jordan indicated he wanted to set the record straight and that over the two year period, the employees have never really changed that the 3/2 contribution was the solution. He stated that what it really comes down to, looking at the actuarial numbers, is the 5% contribution rate and Ad Hoc COLA as originally recommended will bring the City within the funding period. Council Member Jordan stated that as a financial advisor and after looking at the actuaries, he is the one that came up with the recommendation for the City to pay all 5% of the contribution. He stated that he made this recommendation based on the fact that he felt the City got more bang for buck and did not loose the refund period. He stated that everyone is passionate about the issue and everyone wants to fix the fund issue. He wanted to point out that it was not the employees groups that changed their opinions, it was his recommendation that he took to the Council and the Retirement Board that it was better for the City to do all 5%. He stated that in that vein, it may be worthwhile to do a polling of the employees as he is now recommending that the City forego the pay raises to do part of the funding. He did ask the actuaries to run some more numbers to get some alternatives. He stated that he is ignoring the issue of overtime momentarily. He advised of adding the 5% contribution and Ad Hoc COLA into the FY 07/08 budget cycle, which is the $15 million, the funding period goes to 27 years in the first year that the contribution is done. He stated that this is regardless of CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 79 of 99 how the 5% is broken out. He then stated that if the 5% is broken out, with 2.5% next year and 2.5% the following year, the fund goes into a 21-year period in the second year. He stated the real solution in his mind is that the two major impacts are the contribution rate and Ad Hoc COLA and the City needs to fund those and fund those the best the City can. He stated there is a relationship in the retirement fund and the total compensation package and he felt Jose Moreno did a good job in his presentation of showing the interrelationships. He stated that it did demonstrate that the City takes good care of its employees. He stated that this point in time, the City is at 3.3% above median on salaries, but lagging the benchmark for what is being put in the retirement fund. Council Member Jordan explained the situation that the City faces when employees who are not vested leave the City and their contributions have to be refunded. He added because of that factor over a 30-year period, it could mean the City may have to put in another $100 million in the fund to replace those refunds that are paid to the employees leaving the City's employment. Council Member Jordan reiterated that the City needs to make it a priority and put in the 5% and the 5% is the taxpayers' money either way. He also advised that since he is also recommending that the City forego pay raises, he felt perhaps the employees needed to be asked. He pointed out that the Total Compensation Committee did recommend that if the City paid the 5% that the City should forego the pay raises. He stated that he has a problem with the 2% pay raise and then it has to be taken back with a 2% participation rate. He recommended the employees be asked. Mayor Moncrief suggested taking the overtime issue last. He reiterated what Council Member Jordan just stated. He pointed out that if the Council asks the employees to have an election and if they choose to do the 3/2 contribution, it will take longer to close the gap. He said from the beginning that he thought the employees needed to have some participation in the process. He expressed his opinion on the public perception and that is let the City pay it all and the employees may be sitting back and letting the City do it. He added he felt the employees should be asked and to have an election. He stated that if they decide that is not what they want to do, then the City takes whatever steps are necessary with the 5% and the City will go forward and with the understanding that there will not be pay raises. He felt the employees needed to make the decision. Council Member Espino he stated he joins with the Mayor and Council Member Jordan in that it is such a difficult decision; however, the approach as they presented makes a lot of sense. He pointed out that this has been a difficult issue. He recommended that the City go to the employees and see what their answer is going to be. He supports the Ad Hoc COLA. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 80 of 99 Mayor Pro tem Hicks stated that Council Member Jordan was correct and that she also wants to go back to the employees to see what they want to do. She pointed out that there has to be a trade off She stated that while the Council made a commitment that there would be pay raises this year; that was way before what the Council knows now. She stated that she wants the employees' feedback on what they are willing to do. She expressed concerns that the City can only resolve these issues if they go into it in a partnership with the employees. She wants a vote by the employees before the Council makes a decision on the 5% Council Member Moss stated that he agrees; however, there was one issue that troubled him. He stated that if the City goes with the employees contributing some portion to the retirement fund, for example the 2%, then how is the City going to fund the refunds for employees that leave the City who are not vested. He felt that this issue is on the table also. City Manager Boswell requested a clarification on the refund issue. Council Member Jordan pointed out that as he understands it now there are two forms of contributions to the retirement fund, one is the City's and one is the employee's. He was told that approximately 20% of the new hires will leave the City before the five-year vesting period. He stated that those employees who have contributed to the retirement fund and chose to leave the employment will be able to take the money that they have contributed with them when they leave. He stated he asked the Retirement Board actuary to look at this issue, he stated that they computed it out and over a 30-year period it had a delta of $100 million in the unfunded requirement. He added that the funding put in by the City remains, but the employees' contribution is refunded upon their termination with the City. He suggested that perhaps this number needed to be looked at again. City Manager Boswell stated that he was just unclear as to whether Council Member Jordan was suggesting that this policy be changed so that employees could not get their contributions back. He stated that he was not suggesting changing the policy. He stated that this was the reason he recommended the 5% City contribution so that all of the funding will stay in the fund. Council Member Burdette stated that he understands the contribution by the City in the amount of 5% either over one or two years. He also now understands Council Member Jordan's recommendation that in the long run it will save the City money when the City makes the total contribution. He has no problem with presenting the questions to the employees of the 3/2 contribution participation or that the City contribute the 5% with the understanding of foregoing any salary increases during the budget year. He stated one of the concerns that he sees is that the employees are going to ask what the City means by foregoing a wage increase. He stated does it mean the 1.2 lag increase, or merit increase or step increase, etc. He felt the next problem they employees will ask is if they vote to pay the 2% contribution, then how much are the wage CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 81 of 99 increases going to be. Council Member Burdette pointed out that under the law, there is a 90- day notice process and if the employees vote in October this will be past the time the Council needs to make a decision on how to set the budget in September. He stated that the City cannot wait until October for a vote. He stated that beyond those concerns, he has no difficulty with the City doing the 5% contribution. City Manager Boswell requested clarification from the City staff on the 90-day notice and he felt that notice was a requirement if it was a benefit reduction. Assistant City Attorney Laetitia Brown stated that Senate Bill 976 allows the City to call an election at any time, to vote and canvass the election results. She clarified if the City calls the election, the Retirement Board has 90 days to approve or disapprove. She stated that the City can call the election as soon as it wants to do so. She clarified that the 90-day notice to the employees is for a benefit reduction. Council Member Burdette asked for clarification if foregoing a wage increase was a benefit reduction. Ms. Brown indicated that would not be considered a reduction. Council Member Burdette indicated that answered one of his questions; however, the answer regarding the amount of the wage increase is unknown until the Council sets the budget. City Manager Charles requested a clarification was to what the Council's intention is for going to the employees. He questioned whether it was just some sort of polling or survey or whether it was an actual election to increase the contribution. Council Member Jordan talked about having an aggressive public information process to the employees explaining why the Council is recommending this decision to forego the pay raises and address the contribution to the retirement fund. He stated that he did not know the process. He stated that perhaps it was an election or perhaps it was just going to the employees groups. He felt it was an education program process with the facts with feedback from the employees on their recommendation. He added he did not know if it was called a survey, a vote or feedback. City Manager Boswell reiterated the same concerns raised by Council Member Burdette and that was if the employees choose to vote "no" and they want to keep their pay increases then they are going to ask what are the pay increases. He stated on the other hand, if the employees vote "yes" and forego the pay raises, then they will want to know what is included as raises. He added that the City needs to be clear that it will be all forms of pay, market lag, across the board, step increases, merit, etc. He stated that this is a set of questions that will be asked. He added that employees will want to know what the City's commitment is and that brings in the timing on the budget and sequencing is important and what are the tradeoffs. He emphasized that the Council will need to make a decision on that and in advance of the budget being finalized. He pointed out that this could become a problem. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 82 of 99 Council Member Burdette followed up with another question on if the City contributes 5% this year and there are no wage increases, then what about next year and the year after that, etc. He stated that the employees will want to know that answer as well. Council Member Scarth stated that he felt the employee polling or election was the important piece. He pointed out that the Council makes the decisions on the wages every year based upon what the City can afford and what the economy is doing. He talked about the 1.5% lag that was promised last year is the piece associated with the 3/2 contribution or 5% split. He felt the 1.5% is the tradeoff for the 5% contribution, whether the contribution is paid in one year or split 2.5% in one year and 2.5% in the next year. He stated that the Council makes the decision every year based upon the City's budgetary requirements as to whether the City can afford the raises for now and the future. Council Member Scarth stated that he felt this is what would be taken to the employees as the tradeoff He stated that it was clear to him that should be the number. He stated that the Council decides whether raises are given or not based upon the results of the budget expenditures/revenues. He indicated that he felt the best thing for the City is to pay the entire 5% and forego the 1.5% salary lag increase. He felt this should be part of the employee survey or polling or election. Mayor Moncrief posed a question to the City Manager if he felt he knew where the Council is heading. He added that there was a need for a more definitive idea of what the final product was going to be. He asked the Council if they agreed that 1.5% was the figure that was being talked as the pay raise that would not be given if the 5% contribution option is selected. Council Member Burdette indicated that he felt there should not be a suggestion that the employees are going to get anything else. Mayor Moncrief interjected that the City does not need to make false promises. Council Member Jordan indicated that the City is going to have to come up with a combination for the $15 million. Council Member Jordan stated that if there are savings in the overtime budget, which the Council has not seen nor talked about, it could be applied to the 5%. He stated that this will have an impact. He clarified with the City Manager that the 1.5% lag, plus the Ad Hoc COLA was a 3.2% pay raise or the $4.1 million. City Manager Boswell stated that the $4.1 million was the market catch up lag at 1.5%. Council Member Jordan indicated that the Council will have to say that the City has a place holder for a 3.2% pay raise which includes the commitment from last year and use it towards retirement under the total compensation thought. He stated that the question to the employees is are the employees willing to forgo that or would they rather have the pay raise and give back the 2%. City Manager Boswell stated that the Council would be committed to the 3.2%; however, it will not be an equal tradeoff in the dollars to getting to a balance. He added something else will have to be sacrificed in the budget for that figure. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 83 of 99 Mayor Moncrief requested clarification on the figure of the 3.2% and what it represents. City Manager Boswell stated that it is actually including 1.5% increase for an across the board salary increase. He pointed out for the increase in the contribution to the retirement fund, the City is going to have to come up with more money to do it. He state that is brings up the sensitive topic of the step increases because those are considered automatic, however, the Legal Department states that they are not and it is a discretionary action by the City Council. City Manager Boswell stated that if the Council is going to say literally that there are going to be no increases in pay and that all of the money that would have gone into that will now go into the retirement fund that might mathematically have to be part of the balancing act. He is just trying to look at the numbers and see how they add up. He pointed out that the City is going to have to be very clear with the employees on what the tradeoffs are going to be. Council Member Espino stated that he is not ready to take a position on the step increases. He went back over the numbers presented and advised of he was interested in the position that the employees would have to forego the $4.1 million in the lag as well as the $4.5 million in other increases and then the Council would have to come up with the other $7.9 million. He added that he still has not reached a real decision on this issue. Mayor Moncrief stated that it was obvious that it needed to be well defined before it is taken to the employee groups and there are no questions and everyone is clear on what the tradeoffs are going to be. He felt it was the right thing to do and to take it to the employee groups and let them be a part of the process as it will affect the City and employees for a long time. Mayor Moncrief confirmed with the City Manager what the Council is looking for. He stated that the overtime issue is now remaining. He stated that it is difficult and it is unfortunate that the City has had a spiking problem with overtime and what has lead to that. He stated that it was obvious that management is trying to take steps to address the issue and moving forward to get a better handle on the problem. He talked about it historically. He talked about the use of it rather than hiring new employees. He talked about the use of public dollars for the delivery of city services. He stated that there has been talk about eliminating overtime all together. He stated it is time for decisions to be made. He know there has been a suggestion by creating the separate overtime account and he felt it did have merit to be a hybrid approach and then the suggestion of eliminating overtime all together. He felt this was too extreme. He then talked about the suggestion on a cap and he is suggesting this to the Council today and not an 8% cap, not a 15% cap, but a 12% cap which will take the City to middle ground. He wanted the Council to look at that; he wants to run at the numbers and determine that there is not an adverse or unfair CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 84 of 99 result or unintended consequence or punishes employees that have worked for the City for a long time. Mayor Pro tem Hicks stated that she felt it was a reasonable compromise. She stated that she was one of the first to admit that she asks a lot of the police department for enforcement in her district. She pointed out issues along east Lancaster and on the south side. She pointed out that City Manager Boswell had indicated that the City would never be able to totally get rid of overtime. She stated that there are always going to be hot spots in the community. She talked about the City's success rate in dealing with crime. She pointed out that the City has a lot of skin in the game on the overtime issue. She stated that the employees are asked to deal with the many service requirements with the use of overtime. She emphasized that the City has to look at increasing the work force. She stated that in looking at the numbers, it appears that the City is trending down somewhat; however, she did not feel the City is where it needs to be. She stated that in supporting the 12% cap, she wanted to see an update in six months towards next budget season where the City needs to see some real progress continue in dealing with the issue of spiking. She pointed out that if not progress is made then the Council will have to come back and deal with short fall. She indicated that she did feel it was a management issue; however, if the Council does not see some trending down then the issue is going to have to be addressed again. She supports it the cap. Mayor Moncrief clarified with Mayor Pro tem Hicks that she is requesting a one year sunset provision to come back and look at the spiking issue. She stated that really she wants less than a year, perhaps six months from now for an interim report. She added that definitely she wants to put it back on table in one year when the Council is look at their budget. Council Member Espino stated that he felt the Council Members were trying to find middle ground on difficult issues. He questioned whether it was fair to eliminate overtime from the definition of retirement earnings, when the Council Members require the police and firefighters to be out in difficult situations. He indicated that he did not think it was fair. He stated that he was concerned about the spiking and he felt the 12% cap was a middle ground and with the sunset provision recommended by Mayor Pro tem Hicks. He felt it was a good middle ground and he supported it. Council Member Moss indicated that he supported the 12% cap and to look at it in six months. He pointed out that the Council and the City does require work to be done and to be done in a timely fashion in order to meet the needs and requirements of the City. He pointed out that if there is a continuous requirement that the employees are required to work overtime hours in order to meet the City' requirements, then it needs to be looked at in six months to see of the 12% is reasonable. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 85 of 99 Council Member Burdette stated that he was not in favor of approaching the spiking of overtime in this capping manner. He supports the City Manager's recommendation for a number of reasons. He felt the City had a retirement system put that was put in place and modified and not operating properly. He pointed out that time has proven that a mistake was made when overtime was included as a part of the definition of earnings. He stated that the City Manager's recommendation is not to eliminate overtime, it is simply to take that term out of the definition of earnings so that it will not be used to calculate the rate of retirement pay. He pointed out that anyone that works overtime will continue to do so and the City will continue to provide contributions for those earnings. He indicated that he wanted to change the system. He added he is not confident that the City can manage their way out of it. He stated that it should be assigned on the basis of need and who can fulfill the requirement. He reiterated he endorses the City Manager's recommendation. He added that the use of overtime does not apply to all of the classes of employees and the other employees are subsidizing the other overtime employees. Council Member Jordan talked about the total compensation package and career management is getting back to the holistic approach. He talked about the audit and that it pointed out the spiking of overtime in the high three years before retirement. He stated that the Council has gone through it and identified and looked at different professions and looked at different tools in the tool chest to get the job done. He talked about firefighters working overtime to complete a shift. He talked about the civil service rules and overtime is part of their normal shift work. He stated that during the budget cycle he indicated that the Council was going to also look at the scheduling of employees. He stated that it was not just an overtime issue; it is the impact on the retirement system and fund. Council Member Jordan indicated that what had been suggested is that the City Council has a role in the retirement fund. He indicated that what is going to be recommended is that the Retirement Board come to the Council twice annually with a status report. He added that what Mayor Pro tem Hicks is a very good idea and consistent with what is being done. He stated that it needs to be looked, determine the results, etc. Council Member Jordan supported the 12% cap and to look at it in six months. Council Member Scarth pointed out that in November of 2006, the Council asked City management to specifically look at the overtime issues and put in some controls. He added that he hears out in the field that employees are being held accountable and confronted when the overtime appears to be getting out of line. He stated that it has been part of the programmed approach to get the job done. He pointed out that the issue has been is it a system that has been manipulated by some to suit their retirement benefits. He talked about the 15% cap, which he felt was too high and then talked about the 8% cap. He stated that he could support the 12% cap. He stated that the Council has seen reductions, particularly in one area; however he does not want to let the pressure up. He supports looking at it in six months; however, he suggested that CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 86 of 99 the City staff prepare a monthly or quarterly report to Council and look at what the statistics in a graft form so that the Council can look at these reports forever and the Council can track it. Council Member Silcox talked about the Council direction to the City Manager on better management of overtime in order to address the spiking issue. He pointed out that the process has been started and go a year and see what effect it has had. He stated that thel2% cap was better than the 8%. He indicated that he wants to see what happens in a year's time on this issue. He reiterated that instructions have been delivered to the City Manager about having the managers put on the controls on the overtime, give them one year to address the issue and then take a look at it. City Manager Boswell stated that Council Member Davis left her position with him which was to move forward with the Audit/Finance Committee and City Manager's recommendation. He stated that he is clarifying the items included in the cap. He pointed out that the City staff s scenarios on the 8% and 15% are not just caps on the overtime earnings going into the retirement system, but included any type of compensation increase, i.e., promotion, special merit increase, etc. Council Member Silcox requested clarification and stated that the City Manager is stating that the 12% cap will be on any remuneration as far as retirement is concerned. Mr. Boswell stated that is what the proposed 8% and 15% caps were modeled on. Mayor Moncrief stated he felt the City Manager had an idea of where the Council wanted to go and needs to do some configuring on what the final numbers will reflect. He felt this was reasonable middle ground. He felt that Council Member Scarth's suggestions with a monthly report to the Council showing by graft what the overtime issue looks like and whether or not the tools that are being put into place are effective and efficient. Assistant City Manager Joe Paniagua spoke about the 12% earnings cap and his conversations with Ruth Ryerson, Executive Director of the Employees Retirement Fund. He stated that it was his understanding that one way to do this was within the first year. He stated that the fourth year out the City will be at a base, the next year it will be times 12%, and then the next year at 12% on top of that, and so on. He emphasized that it was 12% growing. He gave as an example if an employee earns 30% of the base, the question is are then the contributions collected on everything above that 12%. He asked Ruth Ryerson, Executive Director to the Employees Retirement Fund to respond. Ruth Ryerson, Executive Director of the City's Retirement Fund, spoke before the Council on the mechanics of how this process would work. Assistant City Manage Paniagua CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 87 of 99 pointed out that it takes into account the raises. It was clarified that it would work this way with any cap. Ms. Ryerson also explained how the issue of overtime would work in this situation. Council Member Jordan asked if she had seen this in other pension funds. She indicated that she had with a 15% cap. Mayor Moncrief clarified with Ms. Ryerson that it would be an effective tool to achieve what the City is trying to accomplish and she agreed. Mayor Moncrief advised of the next item on the agenda, which were the "hot button" items. Mayor Moncrief recessed the retreat at 11:00 a.m. He reconvened the meeting at 11:25 a.m. (Mayor Pro tem Hicks left the meeting at 11:00 a.m.) List of"Hot Button" Topics with Timeline— Charles R. Boswell City Manager Charles Boswell referenced the list of"hot button" issues and advised that these items needed to be presented to the Council, with the need to spread them out over a period of time. He wanted to provide the Council with where these issues stand and to provide more information on each of them. He reviewed the following list and advised that staff was prepared to respond questions. Housing Trust Fund — Pre-Council presentation on the issue July 10, 2007 Request for Council's approval and appropriation of$2 million July 17, 2007 Allocated to the Housing Trust Fund; Request Council approval And adoption of the proposed program guidelines and procedures regarding the Trust Fund. Council Member Espino stated that the Housing Trust Fund has already come to Council for use of the fund dollars and leveraged with other monies identified by the Housing Finance Corporation. He stated that the Director of the Housing Department has developed criteria on accountability and oversight of those funds. He pointed out that it has been almost one year since this was approved and he recommended the Council move forward on this and the staff can meet with the Council if there are questions are concerns. He added that the Quality Affordable Housing Task Force has been working very diligently and they will probably become a standing committee due to the housing issues in the City. Council Member Espino encouraged the Council to move forward with this issue. Mayor Moncrief suggested that the City staff meet with the Council Members within the next two weeks and added that he would look to Council Member Espino to get this item on the Council's agenda. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 88 of 99 Homeless Issues Draft 10-year Homelessness Plan August 10, 2007 Focus Group Discussions October 15, 2007 Public Hearings November 23, 2007 Council Action December 11, 2007 City Manager Boswell stated that Mayor Pro tem Hicks had indicated that another dedicated police officer was needed for the area in East Lancaster. Assistant City Manager Joe Paniagua stated that he had talked to the Chief of Police regarding that issue and they are looking at other resources. Mayor Moncrief indicated that he felt it was justified. He advised of the visit he and other Council Members had made to the homeless camps in that area and that there was only one officer for that area. He indicated that he felt Mayor Pro tem Hicks request was more than justified. He talked about the issue of homelessness being important to him and to the people in Fort Worth. He stated it is a priority that something must be done and it exists in all districts. Mayor Moncrief stated that he felt the City has tremendous momentum of dealing with homelessness and Otis Thornton, the City's Homelessness Coordinator, has taken it upon himself to better understand the situation. He has even spent the night in the Presbyterian Night Shelter. He provided additional information on this issue. He talked about the 10-year plan and to customize it for Fort Worth. HUD Findings Resolution Enter into an agreement with outside audit firm to complete reconciliation, which will be voted on by the City Council on July 10, 2007 Assistant City Manager Dale Fisseler explained that the City staff wants to expedite the contract through a City Manager's authorization and will come to the City Council at a later date with the final numbers in order to prepare a resolution for the Council's consideration. Smoking Ordinance Memo to Council regarding the process, public hearings feedback, and June 19, 2007 Proposed timeline for Council Action Meeting with Stockyards Business Between June 19 and July 17 Council Workshop to discuss process-to-date, ad-hoc work group July 17, 2007 CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 89 of 99 Recommendations, public feedback, update on other cities, staff Recommendations and to receive input from Council on proposed Ordinance amendment language Law will draft ordinance amendment as directed by Council. August 9, 2007 Then there will be a public hearing. Issue will be placed on Council Agenda for a vote August 21, 2007 Council Member Espino expressed appreciation to the City staff for meeting with the Stock Yards businesses. He pointed out that they may also make recommendations. He stated that he would like to see any alternatives that may have been presented by them to the ad hoc committee. Council Member Jordan stated that he wanted to see any comments from the Restaurant Associations as well as other interested parties. Mayor Moncrief stated that it is a delicate issue and people are going to be affected, even the people who are in compliance and who want to see what the City is going to do before they make significant investments to address the smoking issue. He emphasized that the sooner the City did this, the better it would be for all parties. Sign Ordinance Send memo to Council regarding proposed schedule for completing June 14, 2004 Part 1 of the ordinance update Convene Citizen Advisory Committee to review the Late June or early July Ordinance and provide feedback Conduct public meetings for feedback Mid to late July of 2007 Brief Central City Revitalization and Economic August 7, 2007 Development Committee on public comments and ordinance Revisions; receive authorization to conduct public hearings Brief Zoning Commission August 8, 2007 Zoning Commission conducts public hearing September 12, 2007 City Council conducts public hearing and takes action on the October 2, 2007 ordinance CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 90 of 99 Provide feedback City Manager Boswell reviewed the list with associated time line. Council Member Silcox requested clarification as to whether the billboard issue was part of this process. Fernando Costa, Director of Planning and Development, spoke before the Council and indicated that it was to address all business signs and on premise signs. He added that the billboard signs could be included. He advised of the proposed draft and that Council Member Davis wanted to participate in that drafting. There was further discussion on whether the billboards are not part of the scope and Mr. Costa indicated that he did not know for sure. Council Member Silcox expressed his concern that the City's current ordinance does not allow for billboard relocation. He pointed out that in the construction of State Highway 121, it is going to cost the city, state or the taxpayers to take down the billboards since the City does not allow relocation. There was discussion on proposed legislation that would address this issue. City staff clarified that it did not pass in the legislature. Council Member Silcox referenced the situation that occurred in downtown regarding the City having to purchase the several billboards and what it cost the City. He suggested that the problem could be solved if the City provided for some reasonable relocation. He stated that he did not want the taxpayers to have to pay for the billboards, even though a number of people do not like billboards. Assistant City Manager Dale Fisseler pointed out item number 7 on the list and indicated that the City staff is working with two of the major sign companies on this issue on Evans/Rosedale and he felt sure that they were going to come up with a compromise. He added that perhaps this approach could be done city- wide. Council Member Jordan indicated that he had worked a long time on this process with Council Member Davis and Bob Riley, former Director of the Development Department, and others and it has been a long process and it is now time to come forward with it, He indicated that it does not address billboards and looks more at business signs. He wanted to point out an issue that the City needs to look at this time that the City needs to consider carefully. He spoke about issues in his district where there are new home projects and realtor signs are posted advertising those new locations. He stated that his concern is more from a traffic issue and that is the people posting the signs just stop in the middle of the street and block the traffic. He stated that the police department needs to be proactive and issue them tickets as this is a safety concern. Director Costa indicated that the Council should be received a memo next Tuesday, with a summary of the draft ordinance and he added that there is no reference to billboards. Mayor Moncrief stated that another issue under the sign ordinance is the electronic signs and he did not want the City of Fort Worth looking like Las Vegas. There was a brief discussion about what the current regulations are on the books now to address this issue. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 91 of 99 Planning and Development Fee Study Revised draft presented June 8, 2007 Final draft acceptance June 15, 2007 Distribute copies to the Development Advisory Committee June 22, 2007 Brief Development Advisory Committee and seek input on July 16, 2007 staff recommendations Pre-Council Presentation August 7, 2007 Incorporate results into final budget document August— September 2007 Complete ordinance amending fees effective October 1, September 1, 2007 2007 Presentation to Council for Action September 18, 2007 City Manager Boswell stated these fees relate to the recommendation found in the Zucker Study to match up the revenues with costs and adjust the fees and thus ties in with the budget process. Evans-Rosedale Billboard Sign Relocation Presentation to Central City Revitalization and Economic August 7, 2007 Development Committee Pre-Council Presentation August 14, 2007 Negotiate terms under which the current sign owners will relocate August 24, 2007 the billboard signs located within the development area Presentation to City Council for Action September 4, 2007 Rental Registration Staff/Citizen work session to complete SWOT analysis of June 14, 2007 alternative proposals Staff/Citizen work session to get citizen input on how to June 12, 2007 prioritize the alternative proposals Update Council on citizen review process and outcomes; seek August 7, 2007 input on next steps CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 92 of 99 City Manager Boswell stated that he felt the City staff was behind in getting it implemented. He emphasized that this would schedule would bring to the Council the citizens' input over summer and then bring it forward to the Council for consideration of adopting the ordinance. Council Member Scarth indicated that the City staff was going back to the realtors and getting their input. He questioned when this would come forward. Carl Smart, Director of Code Compliance, indicated that on August 1 the City staff would bring back those suggestions from the realtors as a result of the public hearings. Overside Vehicle Parking Draft on-street code amendments July 15, 2007 Draft off-street code amendments July 15, 2007 Seek Council direction on moving forward with an Ordinance Bill August 14, 2007 for on-street amendments and direction on how to proceed with off- street amendments Council Member Espino spoke about the need for this in order to deal with the onstreet parking of heavy commercial vehicles and buses. Red Light Cameras—Develop Automated Red Light Camera Evaluate existing vendor contracts eligible for interlocal cooperative June 2007 purchasing Evaluate current operations June 2007 Evaluate vendors June 2007 Determine whether the city for which the vendor is working has an interlocal cooperative purchasing contract in place with Fort Worth. If yes, proceed to the next step; if no, seek the City's agreement and both Councils' approval of same. Select contract/vendor June 2007 Develop a contract with vendor July 2007 Seek Council authorization August 2007 Establish ranking and effectiveness criteria for locations based upon August 2007 the prior 18-month history Select locations/upgrade City infrastructure September 2007 Install first 10 red light camera intersections January 2008 Evaluate effectiveness of cameras at the end of the first year and January 2009 submit reports CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 93 of 99 City Manager Boswell reviewed the above timeframe and referenced the number of steps. He emphasized the need for the City to get the contract in place by September 1, 2007. Transportation Public Works Director Robert Goode explained that if the City has a contract in place with a vendor before September then the City of Fort Worth will not have to abide by the new legislation that was recently passed. He also advised of looking at interlocal agreements with other cities and how they are doing and with the need to do this before September. He stated that they are in full mode of moving forward. There was a brief discussion on where the associated fine revenues are distributed. Special Events Policy Meet with Downtown Fort Worth, Inc., to receive feedback July 11, 2007 Hold a public hearing July 26, 2007 Brief Council regarding proposed ordinance August 7, 2007 M& C to City Council for approval August 27, 2007 City Manager Boswell pointed out that these were issues brought to the Council several months way back. He added that Mr. Goode was working with Downtown Fort Worth, Inc., on this issue and they were working on a policy that would address events that could conflict with events at the City's convention center. He indicated that they are working towards a good policy that addresses all issues. Council Member Espino expressed his concerns that if the special events policy has Down Fort Worth Inc. as the body that recommends the special event permits, he does not want to impact or hurt new festivals that promote diversity. He wanted to be sensitive to all festivals in the crafting of the policy and he does not want it to be just their policy. Director Goode stated that it is not just their policy, but they are creating a broad base community process and all of the Chambers are part of the process. Residential Restrictions on Sex Offenders Brief Council in Executive Session July 2007 Council Member Silcox pointed out that when the City shuts down the training center for the Trinity River Vision project, there is also little motel that will be demolished which currently houses sex offenders. He questioned what plan is in place to address this issue and where do they go. Council Member Silcox requested clarification as to whether the restriction would handle that situation and he added he does not want them filtering out in the community. He wants to know about this situation and he felt the City needed to keep an eye on it. Council Member Espino indicated that the City was waiting on an Attorney General's opinion. He added this is going to be a difficult issue for the Council to consider, even if the City imposes CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 94 of 99 residential restriction on these offenders. He stated that the question will be how effective it will be and there are constitutional issues. City Attorney David Yett stated that there is a lot of questions on the legality and effectiveness of these restrictions. He added that the City staff will be prepared to address the legal issue and be looking to the Police Chief as to how effective they are as an enforcement tool. Mayor Moncrief stated that he wants that game plan as well for that motel and its location. Impact Fee Policy Complete Technical Report Late June 2007 Engage Technical Committee July 2007 Presentation to Capital Improvement Advisory Committee July 2007 Present draft Policy to Development Advisory Committee August 2007 Present policy alternatives to Council September 2007 Public Meetings September to December 2007 Council Action on Policy December 2007 City Manager Boswell stated that this is going to be tough issue and it is one that he would like to get resolved before his leaves the City. He wants to keep with the timeline. He pointed out that a lot of work that has been done in this regard. Council Member Burdette stated he wanted to see if it can be accelerated. He pointed out his concern with the current plats that are being filed and that they will be considered grandfathered and they do not have to meet new policy. He felt it was important in the new growth areas where new developments continue to occur and there is a need for new roads. Council Member Espino also concurred with those statements and shared the concerns and he wants it expedited. He added that the Council needed to have a quick expedited process on what the City is going to do about street impact fees. City Manager Boswell stated that the City staff is fine with that recommendation; however, the City tries to have citizen and industry input and may come to at an expense to the expedited process. Mr. Goode indicated that there are some posting requirements of 90 days that have to be done before the item is brought before the Council. He stated that the staff has built in some community involvement in that process. City Manager Boswell indicated that the City staff can go back and retool the process to see how expedited it can be. Council Member Jordan added this relates to the bond package and everything else to be done and it is needed to address the street issues. Mayor Moncrief also added that the City staff needed to on the accelerator and include some public input. He pointed out that he believes that the citizens understand that there is a role for the development to play and partner up with the City to address the transportation needs. He pointed out that these exist in other places throughout the state. He encouraged the process to be expedited. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 95 of 99 Facilities Master Plan Receive draft Facilities Master Plan from the consultant (Carter June 29, 2007 Burgess) Department review of their portions of the plan to ensure accuracy July 6, 2007 Consolidate Department Comments and prepare final draft July 13, 2007 Present final draft to Department Heads July 18, 2007 Present final draft to the Community Advisory Board July 19, 2007 Recommended changes from the Department Heads and the August 3, 2007 Community Advisory board will be included for the final version of the Master plan Brief City Council on the final Facilities Master Plan and August 14, 2007 recommend the next steps to take City Manager Boswell stated this could impact the bond program and is another program that falls under Director Robert Goode. Mayor Moncrief made one quick suggestion. He stated that part of the master plan deals with City Hall and he knows there are differences of options on where and what it is should be, i.e., new building, renovation of the historic post office building, where it should be located, etc. He stated that the City needs to address the needs of the growing City and the growing staffing. He felt the options have indicated that from a dollar standpoint the best investment that the City can make is using the old post office building and again recognizing there are differences of option and whether it is a priority for the City. He indicated that he wanted the Council to think seriously about the use of the gas well revenues and as a one time expenditure. He added he feels it is a justifiable use of those dollars to provide a fitting seat of government for the dynamic City and to be able to do what the City does best and that is to hang onto the historical structures; to light up the south end of downtown with the Lancaster Corridor; take that commuter rail to back door of building, etc.. He felt these were opportunities that are presenting themselves. He wanted the Council to think about it and he is not asking the Council Members to react or take a position on it. Council Member Silcox indicated that he does not support the plan and the post office building is too small and just adding another building to the City's number of annex buildings. He pointed out that there is land on Lancaster that could be purchased for a new building to be built that would fit the City's needs. He pointed out that the post office building does not have room for expansion. He reiterated that the City should look at other land and plans for a new facility that would fit the City's needs and to bring departments back into City Hall and allow for future expansion. He spoke in support of saving the post office building but just not as a city hall. He added if the City's operations move to the post office it will just become another annex of buildings of city services spread out all over town. He felt the public needed to be involved in this process. He pointed out that he was aware that Council Member Davis and Mayor Moncrief wanted to put City Hall in the post office CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 96 of 99 building. He added that he did not want to put City Hall in the post office building just to attract more development to the Lancaster Avenue Corridor area. He felt there needed to be a lot more discussion on this item before a decision is made. He reiterated he felt the City needed a new City Hall building, with more expansion for the future and it should be a stand alone item. Mayor Moncrief explained the reason that he presented his suggestion to the Council and it was not to open up the debate on the issue at this time. Gas Well Revenue Policy Ad Hoc Committee adopts recommendations in response to City June 25, 2007 Council changes Ad Hoc Committee presents recommendations to the City July 31, 2007 Council City Council conducts public hearing September 4, 2007 City Council adopts policy September 18, 2007 City Manager Boswell reviewed the timeline. Mayor Pro tem Hicks indicated that she wants to see the results of the public input after the public meeting and after the rental registration public meeting. Council Member Jordan indicated that he has not attended meetings he wants to make sure they are addressing certain issues, one of which is a tax decrease utilizing these funds. Police Crime Lab Report to Council on the feasibility of utilizing an East July 17, 2007 Lancaster site for the crime lab Develop preliminary cost estimates and seek approval for July 17, 2007 funding from the Crime District Board Presentation to City Council for action July 31, 2007 Assistant City Manager Joe Paniagua advised the Council that the timeline to purchase the building was 45 to 90 days. Trinity River Vision— Central City Proiect Management Plan Negotiate contract with consultants June 16, 2007 Allocate Trinity River Vision TIF funds for the contract in July 16, 2007 combination with Trinity River Vision Authority funds Presentation to Council for award of contract August 7, 2007 CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 97 of 99 There was no discussion on the above project. Trinity River Vision — Central City Utility Relocation Design and Engineering Contract Select Engineering Consultant June 11, 2007 Negotiate Contract with consultants June 17, 2007 Allocate Trinity River Vision TIF 9 funds for the contract in July 17, 2007 combination with water, sewer, and storm water funds Presentation to Council for award of contract August 7, 2007 There was no discussion on the above project. BLG Cats La Grave Field Development and Property Transfer Apply for approval of site plan to Zoning Commission July 11, 2007 Council Action on action of Development Plan; approval of July 17, 2007 Zoning and Site Plan; authorization of Purchase Agreement of City owned land There was no discussion on the above project. Council Member Moss indicated that he was out of the room when the item on the Housing Trust Fund was presented. He asked about the Housing Trust Fund and that he has not seen all that will be addressed with those funds and how they are used. He stated that one of the problems that the Housing Department has is land acquisition and the City has used HUD funds in the past. He talked about the assemblage of properties in order to do a better development for housing project. He stated that staff has problems in getting good appraisals and buying the properties for what they are really worth. He questioned whether the $2 million in additional funds can be added to the Housing Department to do land assemblage and not just use it generally it on vacant land that needs to have houses. Council Member Espino advised that the Housing Trust Fund was created for the rehabbing of existing housing stock and to provide infill housing and he added land assemblage could be part of that. He advised of how the funds will be used for housing rehab and other priorities, within the concept of infill housing. He pointed out that the federal government is cutting back with the housing dollars and he added that there was more flexibility with trust fund and the Housing Finance Corporation. He added that Jerome Walker, Director of Housing Department, visited with the Council about their concerns. Council Member Moss stated that he CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 98 of 99 felt the $ 2 million was not enough. Council Member Espino stated that he agreed but he is looking at future monies from gas wells and he is looking to the Gas Well Task Force for funding for housing needs and capital needs and placement in endowment funds. He stated that to create a housing trust fund was a major accomplishment. He talked about Austin, Texas, and their housing stock and a bond issue in that city to address it and in Los Angeles, California, to address housing issues. He also posed the question of what are some sources of funds to address this issue. Council Member Espino advised Council Member Moss of the next meeting of the Quality Affordable Housing Task Force and invited him to that meeting. Mayor Moncrief pointed out that this completed the work as far as the agenda was concerned. Wrap-up— Charles R. Boswell City Manager Boswell provided the wrap up of the meeting. He thanked the Council for their engagement on the issues and congratulated the City staff for their work in this process. He stated that the staff has accomplished the goal of laying out the challenges and providing a balanced budget in August. He wanted to be clear about the budget in August and that the employees understand that they are not going to see all of the comps issues. He talked about the tax rate reduction and that probably was not a possibility. He stated he has heard the Council as to retirement and what they want to see, also on GASB 45 and the other issues and he added that the City staff will take all of the input and provide the missing information that was requested and working diligently on the budget document. Mayor Moncrief provided his wrap up of the meeting. He hoped the Council benefited. He stated that it was a process of understanding the challenges and working together and finding middle ground. He stated that he was pleased with the retreat and it has been positive and he was proud of the Council and the way they work together. He pointed out that the public expects this and demands it and that is responsible action from the Council. He commended the staff and their work to make the Council look good and in order to do that they sacrifice time from their facilities and activities. He felt they loved the City deeply. He felt all of the Council and staff are doing what they feel is in the best interest of the citizens for now and future. He talked about change and challenges. He talked about the test of the Council and working together and using the best and brightest and options from which to choose. He felt the Council provided direction to the City staff during this process. He added he is proud to be the Mayor of the City of Fort Worth. He stated that the employees are a priority for the Council. He talked about meeting the needs of the citizens and their wishes. CITY OF FORT WORTH CITY COUNCIL RETREAT MINUTES OMNI MANDALAY HOTEL FRIDAY, JUNE 15, 2007 & SATURDAY, JUNE 16, 2007 Page 99 of 99 With no further presentations or discussions, Mayor Moncrief adjourned the Fort Worth City Council Budget Retreat at 12:16 p.m., on Saturday, June 16, 2007. These minutes approved by the Fort Worth City Council on the day of , 2007. Approved: Michael J. Moncrief Mayor Attest: Marty Hendrix, TRMCIMMC City Secretary