Committee Chair Ms. Vaughn opened the meeting at approximately 6:16 p.m. Members of the Committee in attendance were Ms Vaughn, Ms. DePledge and Mr. Licht. Present from Council were Mr. Hoefle, Mrs. Quinn-Hopkins, Mr. Evers and Council President D’Ambrosio.
In attendance from the Administration were Mayor Morley, Finance Director Slocum and Police Chief Reik.
Also in attendance were members of the public.
Ms. Vaughn: The only reason I brought this up was so we can see what the carry-over was from last year. Mr. Slocum?
Mr. Slocum: We are carrying over an encumbered about $800,000 and an unencumbered about $730,000. The reason for the increase had to do with the decrease in spending that occurred within the City. As an example there was $50,000 expenditure in the Police Department that was not even encumbered or spent last year – fixing their bay door that still has to occur. That number was carried forward into the budget. The tax collections dropped in this budget by
$265,000. There are areas of concern with it. Some of the primary drivers in the decrease are Eaton, CEI – those are the two big ones. There was a slight positive with the WalMart – $15,000 over the previous years.
Ms. Vaughn: So, basically there is a little over $700,000 to spend this year as part of the carry-over.
Mr. Slocum: Right. That is exactly what will happen.
Ms. Vaughn: I wanted to preface this meeting with what we have to start to work with and what you anticipate us collecting so we have an idea in our heads how little we have to spend and the decisions we have to make.
Mr. Licht: As an observation and a curiosity as to where the number came from – you look at the change from 2012 to 2013 in the income tax – and to you point that we lost about 5% or $125,000. You have accounted for that with Eaton and the other closings. My curiosity is where is the faith that we are going to be able to go almost 2% higher than what we finished last year. Where is that expected to come from?
Mr. Slocum: The belief is that the economy is strengthening and that the 2% additional will be coming from the strengthening economy. I am hoping we will be able to attract some other businesses within the City. That is really where it is coming from. It would be easy to sit there and say I will budget the $6,575,000 we collected last year but I am trying to give you where we think it is probable. I can’t guarantee it. But, I think it is probable that things are picking up within this country. Right now the Cleveland area is getting hit the hardest right now but we do believe that will turn. It is not a big turn either. 1%-2% is not a huge turn.
There were no further questions or comments.
2014 REVENUE DISCUSSION
Ms. Vaughn: The most significant part of this evening’s meeting is that everyone is familiar with the 2014 revenue projections. Mr. Slocum has been very good with his projections since the time I have worked with him so I am comfortable with most of his figures. We just got notified of $292,851.46 reduction in taxes – which we all knew was coming because we each had been notified that our taxes were to be changed. Because our taxes may have gone down we forgot to realize the City income went down too – considerably. That was anticipated but unexpected. Everyone should have received the same information I received on the real estate taxes. The 2014 General Fund Revenue Budget is another piece of information you may want to take a look at. It is revenues by accounts. I asked Mr. Slocum to do this for a particular reason. I spent considerable time going from department to department adding up electricity and telephones to see how much we were spending overall for utilities and other things. This gives us a clearer picture of what we are spending for everything. It also indicates the revenues and how they have decreased dramatically since 2009. Not only in our General Fund but also our Restricted Funds. With that I will turn our discussion to the General Revenues – Mr. Slocum?
Mr. Slocum: Why have the real estate taxes gone down from last year to this year? There is no revaluation that has occurred. The very specific answer is the partial shutdown at CEI has worked itself into the taxable valuation. In 2013 CEI utilities were taxed at $56 million – almost $57 million of assessed property. For 2014 that has dropped to $24 million. That is the lion’s share of where our loss is in fact occurring. The bottom line is you probably have another $15 million or so coming at us sometime in the future when that plant goes totally dark. I have tried to get an explanation and our County Auditor has no idea – they rely on the State. I talked to the State and all I get is that they cannot discuss it with me and that I should talk to the County Auditor who has been useless to me. I cannot get a good answer as to – is this number accurate? How do I know that the number the State is giving the County is accurate? Trust us – I know how that is.
Mr. Licht: Is the account for this revenue the #4101 – the $129,000…
Mr. Slocum: Between the #4010 and underneath the #4208 Homestead Reimbursement and the #4216 Roll Back Reimbursement – you will see that in this fund and the police and fire pension fund and the bond retirement, the fire levy and the road levy. Those three numbers together for each fund really come off property taxes. The bottom two the State picks up and the top one our taxpayers pay directly. But, it is determined by the valuation. When we look at Schedule A which comes from the County Auditor they have $1.1 million something coming off into the General Fund – that will balance to the total of those three. All I do with the other two is ballpark what I think the percentage is. Those percentages will change because the State is rolling back what they are reimbursing which I am not as concerned about this year because I don’t think any of our levies are affected yet but the nonpayment by our actual taxpayers here – we see that in the top number. The other two numbers come directly from the State and once they say what they are paying that is what we are going to get.
Mr. D’Ambrosio: Can you give the two numbers regarding CEI – what their property tax was based on before and what it is now?
Mr. Slocum: This is called Public Utilities Tangible – in 2013 we had a valuation of $56,835,480 and in 2014 that has dropped to $24,200,760 – a change of about $32,000,000.
If you look at the estimate of property on the Schedule A you will see that right on top. There are three categories – Residential, Commercial/Industrial and the third line is the Public Utilities.
Some of the other items in this budget are locked solid as to the numbers. The Local Government is coming from the County or State – the first one #4201 Local Government we get through the County.
Mr. Licht: Is that Local Government stabilized?
Mr. Slocum: No, it is down $35,000 from last year.
Mr. Licht: Right, but last year we lost $304,000 and the year before we lost 30% which was about another $300,000.
Mr. Slocum: It depends on what the Governor is going to do. They are out to screw the cities and they are doing a good job.
Mr. Licht: It does not seem as drastic as last year.
Mr. Slocum: It is not as drastic but is still hurts – it is a 4% cut. $35,000 is half of a person.
Mr. Licht: A total of $790,000 since 2009.
Mr. Slocum: The Inheritance Tax – last year we got $68,000 and we are going out on a limb by showing $6,000 – that will go down to zero next year. This is for people who died in 2012 and prior where the estates have not settled and we have not received any money from the settlement. In 2012 we had $202,000.
Mr. Licht: Internet Cafes – $93,000 – $94,000.
Ms. Vaughn: They are gone.
Mayor Morley: The County’s portion of the Casino funds is almost $700,000 but they are not giving anything to the cities. The next time I see the Commissioners I am going to bring it up. I don’t know if I am going to get anywhere but Lake County’s share was $696,000. I think that is quarterly.
Mr. Slocum: The Recycling Grant – there is a decrease in revenue there. That really is not affecting us because whatever we get in that grant you will see that exact amount going out at the end of next year which will be refunded to our residents because they are the ones paying the recycling. That will be down to zero next year because the County is doing away with that program. #4481 Republic Auditor Collections – we are showing an increase of $32,000 – again the money we get will go right out to Republic. I have to have a place to park this in the budget so when we get the money I can pay it – I will have $75,000 in the budget going out to Republic. Its real affect on the General Fund is nil.
On everything else in the General Fund I am open for questions as to how we come up with it. You use your professional judgments as to where you think it will be at. Last year we did a lot better with Court fines and budgeted $110,000 and collected $128,000. It seems to be trending on the $128,000.
Mr. D’Ambrosio: It is amazing that we are losing that much. In 2009 it was $13 million.
Ms. Vaughn: You can see exactly what is happening.
Ms. DePledge: Do you anticipate the Local Bed Tax going up eventually?
Mr. Slocum: We have retained an attorney and are going after them criminally. They have just discontinued paying us. I just ran numbers today – providing they don’t make their December payment which is due the end of January they will owe us about $72,000 already.
Ms. Vaughn: What have they said is their reason for not paying?
Mr. Slocum: Right now I am going through lawyers. I have had problems with them paying their withholding and their profit tax. We have retained Atty. Schneider to go after them criminally but there has not been a lot of movement. The charges have not yet been filed and it has been three months. I am dealing with our Law Director on this. I anticipate we should collect this money. But, if we don’t collect it I will not have the money to transfer out of the Stadium Fund to the Bond Retirement fund – it will come out of the General Fund.
Ms. Vaughn: Anytime we have a setback like that it has to come out of the General Fund. We are on a very thin, tight rope this year.
Mr. Slocum: In that Stadium Fund – we have lost the grant now. Where we were getting $240,000 in previous years and they reduced it to $198,000 – now it has really been reduced.
Ms. Vaughn: Where was the grant from?
Mr. Slocum: From the Lake County Bed Tax.
Mr. Licht: I brought this up in the past – I don’t know if this is the right forum or if it can branch off from this meeting. In Fund #212 Storm Water Management Fees. That is based on a $6 charge we charge all property owners. I have mentioned – the way the County does it is different – they set a base rate for each residential unit and take the amount of impervious area of each individual property and calculate it and divide it by a number.
Mr. Slocum: Conceptually I do not have an issue with that.
Mr. Licht: All I was going to suggest is maybe we should think and talk with City Engineer Gwydir about setting money aside for him to do the initial evaluation of the properties. I talked to him a little bit – it does not sound like it will be overly expensive – a couple of thousand dollars. And then yearly you do not have to do the massive… you can look at building permits
to see if there have been any improvements done to the properties and adjust it that way. It is that one time of having our City Engineer take a look at the properties and then we can make a determination of what the residential base unit will be and we can start raising a little more revenue in this account. We all know we have problems with our storm water. When I look at the account and the amount of money in it I don’t know what we will fix with that amount of money. I don’t know what amount of money this will generate but maybe we look at also raising the residential from $6 to $12. It is a one time a year fee. I know residents will not like it but I also know they do not like their basements flooding.
Mrs. Quinn-Hopkins: The County has a storm water management program. We had them come in to talk to us – myself, Mr. Semik and Mr. Morley. Their fee is $16 but they make it more fair so a place like WalMart who today is paying $6 for their property like every other resident – they would make it appropriate to the size of the building.
Ms. Vaughn: That is what Mr. Licht is talking about.
Mrs. Quinn-Hopkins: Plus, they have a program of how to manage that money and make it assessable when you need it.
Mr. Slocum: I think the problem of the City joining that program was that we had no control over how the money was spent. They could raise $100,000 and use it to fix a problem in Perry.
Mr. Licht: They have a template. The City can mimic our program after theirs. We can look at the template and tweak it to what works best for our City.
Mr. Slocum: Let’s talk about the elephant in the room. If you are really going to change the storm water system in this City you are not talking $100,000 – you are not talking $1,000,000 – you are talking $10,000,000, $20,000,000, $25,000,000. This is just chicken feed fixing it.
Mr. Morley: Willoughby’s initial cost was $62,000,000.
Ms. Vaughn: I had a discussion with Mr. Gwydir after the last Council meeting – they have already received a letter from the EPA similar to what Euclid got and ended up in Court. I asked where we were to get the money from. He said we would have to increase our sewer rates. The EPA could make us do it.
Mr. Morley: That came from the study we had done. They sent a letter to us and to Willoughby. We may have to do it anyhow. The County approached me about talking to them about going in with them on their program. I will sit down and talk with them and go from there.
Ms. Vaughn: I agree with Mr. Slocum – we would have no control on how they would spend the money and we need the money. We don’t need to share it with another City.
Mrs. Quinn-Hopkins: I think it would be wise to hear their story as it is today so we have a clear understanding of exactly what it is. They may have changed it since the last time we heard the story. Maybe it would work – maybe it wouldn’t. But we owe it to ourselves and the City to hear it one more time.
Mr. Slocum: I don’t know what assurances are in any agreement we would sign. We may be able to protect the City’s interest depending on how it is structured.
Mr. Licht: There are different levels – level 1 community and level 2 communities.
Mr. Morley: The short discussion they had – but it goes back to the same old thing – we can get a loan from them at a low interest rate but as Ms. Vaughn, Mr. Slocum and I talked about at our meeting we can keep getting small interest loans but have 25 loans – we still have to pay them and that is where we are at. We took a lot of loans with Issue 2 money and we have to pay them – even though they are at 1.5% interest. There will be a time when we have to stop. From what Mr. Miller said at the meeting we had that is what it would be – we can get loans – they would do some of the engineering. I do not have a problem with talking to them and sending it to Council to discussion in Service/Utilities Committee and we can maybe make a decision for our residents.
Mr. D’Ambrosio: I would listen to them but if I recall I remember one reason we went out on our own was because they said some of that money would be used for clerical and secretaries. I believe Steve Guard was here at the time and we decided we were going to do it ourselves because we knew that $6 would go right toward the storm water situation and not pay for clerical or newsletters. We can talk to them and listen but that is a question I would ask.
Mayor Morley: Mr. Licht is right. $80,000 is not going to do anything for us. I have met with Mr. Slocum and am getting some decisions from Mr. Klammer as to things we want to do at the harbor and South Riverview – if we can use some of the money in the bigger fund. I have Mr. Gwydir working on some stuff for the harbor and have another meeting tomorrow with North and South Riverview.
Mr. D’Ambrosio: There are some things smaller amounts of money like that can do. I know it is storm water but a lot of times when they say the system is overloaded – which they are – it is infiltration. But there is also infiltration that comes from the house to the main – not necessarily the mains leaking into the mains. Sometimes there are programs that can be done where the streets and laterals get lined. Some of this storm water money may be able to be used for something like that. You could probably correct small problems – not the ones that cost $62 million. But there are some things that can be done with small amounts of money.
Ms. DePledge: Ultimately, the bigger picture here is the government and how they cut the Local Government funds and want to look at regionalization of all our services and combine resources to save money – that is where all that pressure is coming from. That is where they are trying to drive all these communities together.
Ms. Vaughn: It has not worked anywhere I am aware of.
Mayor Morley: I have talked to Mr. Slocum and all the Directors and staff. They are going to provide their “Wish List.” The Directors are going to be more involved in the budget then before. I have asked the Directors to see what capital improvements are needed in their Departments. Hopefully we will have something in the near future.
Mr. D’Ambrosio: Mayor, next time you have your staff meeting – and Mr. Slocum and Chief Reik – thank the Directors. I think they are doing a great job – there is hardly any money they have to spend and they do a great job with minimal resources.
Ms. Vaughn: We had some money in the budget last year to get some things we did not get. That is why there is a big carry-over. There is the wall in the Police Department – we planned on a new computer system which we badly need – none of this was done for reasons I don’t know and will not comment on. They have done a wonderful job of managing money – they are tighter than I am.
Mr. Slocum: Talking about computers. We are going to be investing in computers. The computers in the Police Department were replaced last year. We still have 30+ computers that must be replaced before April 7th of this year because Windows XP will no longer be serviced. So, it will be open season for hackers into XP. Chief Reik got a letter from the state that if he was using XP he would not be allowed to tie into their system. That is a good rule.
There were no further questions or comments.
Mayor Morley: This will be under $12,500 but I wanted you to be aware of this.
Mr. Slocum: The Captains have requested the ability and to be honest with you they have already published that they are raising their daily parking rates to $8 and $6 prepaid. They raised it without the knowledge that they had to get our approval to do it. We had that in one of our side letters. We would like to agree with the Captains to allow them to do it for one year and what they will do for us is – they have experienced in the past where they have sold out their parking lots and when they do they will then sell tickets to our parking lot on a prepaid basis on a dated – I will get a report from them that tomorrow they have issued 50 prepaid tickets. That money is in the bank because they will pay it at the end of each month in full. So, whether they actually park with us or not we will be able to see how many tickets we collect.
Mr. D’Ambrosio: They will have a stub that we would collect.
Mayor Morley: The stub will be marked prepaid and they will issue the money to us once a month.
Ms. Vaughn: Does Council have to have a motion to accept?
Mr. Slocum: I don’t think we need to.
Mr. Licht: There is no expense – this is revenue.
Mr. Slocum: It is something we are allowing the Captains to do under the contract. The Administration believes we have the ability without Council approval and I don’t think we need to get your approval but we would like to get your concurrence. This is what we are looking at and if there are any issues let’s put them on the table before we say to go with the Captains.
Ms. Vaughn: What a nice way to go with the Captains.
Mr. D’Ambrosio: Thank you.
Mrs. Quinn-Hopkins: When the Captains first started wasn’t the parking ticket $4?
Mr. Slocum: Yes.
Mrs. Quinn-Hopkins: And it is currently $5 and now they are adding $3 and their revenue to us as to how much money they give us is down a lot. If you were going to try to increase your business wouldn’t you try to make it friendlier? This is not making it friendlier.
Mayor Morley: That is not our lot – our lot is staying at $5.
Mrs. Quinn-Hopkins: But the Gold Lot will be $8.
Mayor Morley: $6 prepaid.
Mr. Slocum: I think they have found they were selling out their Gold Lot on a consistent basis and they consider this a revenue enhancement for them. It will not negatively impact people coming there because they still have the alternate choice to go across the street.
Mayor Morley: Their goal is to sell all the prepaid at $6 instead of $8 to their season ticket holders or whoever. That may help us because people may go across the street and maybe our lots will fill up. The first meeting we had with them was about 2 hours and it was a good meeting. I was over there today talking with Mr. Seymour about a few things.
Mr. Slocum: On game day if they have not sold out they will have $8 on their side and we will have $5.
Mayor Morley: You know we had a 4 or 5 month war over $13,000. We got a $13,000 check from them today. We had a good first meeting and hopefully our relationship will be different. Some things may be coming down the line and we will work together – we are talking about the festival and a few other things.
Mr. Licht: You said it was in the side letter that the City would be made aware of changes?
Mr. Slocum: They agreed in the side letter that parking would not exceed $5 and that they could go up to $10 for special events. They are trying to tidy up the agreement.
Mr. Licht: I am trying to understand why that was initially put in there by the City? Because for them not to tell you originally.
Mr. Morley: Their reasoning was because their labor cost went up over the last few years. That was part of their reasoning.
There were no further questions or comments.
RECOGNITION OF PUBLIC
There was no one who wished to speak.
The meeting was adjourned at 6:54 p.m.