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| The following summary minutes have not been approved by Simpsonville City Council. An official copy of the minutes will be available after adopted by City Council at City Hall 118 NE Main St. Simpsonville. Pursuant to the Freedom of Information Act, notice of this meeting date, time, place and Agenda was posted on the bulletin board at City Hall and faxed to the newspapers, radio stations, television stations and any concerned citizens. |
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SIMPSONVILLE CITY COUNCIL SPECIAL WORKSHOP SESSION AUGUST 18, 2008
CALL TO ORDER : Mayor: Call the August 18, 2008 Special Workshop Session of Simpsonville City Council to order. Madam Clerk, will you call the roll please? We don’t have a nameplate for you down there, yet. Trust me, I’m going to need that.
ROLL CALL: Ms. Zeller: Councilmember Bridges: Here Councilmember Garrett: Here Councilmember Sanders: Here Councilmember Bagwell: Here Councilmember Curtis: Here Councilmember Larson: Here Mayor Waldrop: Present
Mayor: Thank you.
INVOCATION Mayor: Is there anyone here who would like to ask blessings upon this meeting in their own person way? All right, hearing none, Mr. Larson, would ask blessings upon this meeting in your own personal way, please.
PLEDGE OF ALLEGIANCE Mayor: Will you all join us now in the Pledge of Allegiance to our Flag, please.
BUDGET AMENDMENTS Mayor: The first and only item on our agenda is Mr. Hawes, you want to talk to us about some amendments to the 2008-2009 operating budget, so lead on, you lead so well.
Mr. Hawes: Yes sir, Mayor and Council, the Staff has reviewed a number of issues that have cropped up over the past month and a half regarding actions by the State, specifically their decision to cut, across the board, 3% that affected the City of Simpsonville with the depletion of the funding for State aide to subdivisions. The Staff is also very carefully watching the development trends in the City.
Mayor: Excuse me for interrupting, could you explain that State aide to subdivisions for those that may not understand where that money comes from.
Mr. Hawes: Certainly. State aide to subdivisions is an allocated, formulaic payment from the State to Cities and Counties based on population. That is a census population number and a static number based on the 2000 census until the next official census comes out. That number is a, payment from the State funds the City to the tune of about four hundred ninety thousand dollars, ($490,000.00) this year. The State Legislature acted this past week to cut that 3% to all Cities and Counties, so it is an effective cut to our revenue streams that is just a forewarning of concern that I wanted to make the City Council aware of. We wanted to look at aspects of the budget that might be adjusted to account for that and other trends that we are observing. As I mentioned, development trends as well as the cost of fuel. For all citizens, everybody is bearing that cost now. Thankfully, it is beginning to decline a little bit. Hopefully it continues on that downward swing, but we have to watch it very carefully in knowledge that it is a very significant portion of the cities expenses with all the diesel trucks we operate and the city police, fire and all the vehicles in general that the city operates. So, that particular line item is very carefully watched in view of the fluctuations in gas prices we have all observed over the past one and a half or so years. What I place before you is a suggestive revision of the budget that identifies some changes that we can make. I can list the primary changes that are identified in here. We are basically looking at minimizing capital purchases to the tune of one (1) refuge truck, one (1) new refuge truck to be placed in the G. O. Bond to be issued in October as part of the overall G. O. Bond that will finance the cities portion of the new rescue vehicle for the fire department and also the refinancing of lease/purchase fire trucks. The two (2) that were purchased three years ago. We have also included in that G.O. an $85,000 tub grinder. The effect of this basically takes this out of the cash payment for capital that we were originally contemplating.
Mayor: But we are buying more stuff, you’re adding more stuff that we didn’t have before. Is that correct?
Mr. Hawes: No. It was originally in the budget, but it is now being repositioned into a G.O. rather than straight capital cash purchase. The rest of the capital is basically being removed from the budget, from the capital project’s fund, other than the dispatch, upgrade and the live track software. The live track software is still in the capital project’s fund. As you all are aware, the county of Greenville acted to support the cities ten year plan for its fire district, for its fire service area and issued the bonds and adjusted the revenue stream necessary to support that plan to the tune of nine hundred ninety thousand dollars ($990,000) this year for the new fire service vehicle, the rescue vehicle that been basically a mandate for our fire service area. The county is supporting that with 75% funding by county residents and 25% by city residents. This particular budget you have in front of you is balanced at twelve million eighty seven thousand dollars, ($12,087,000.00). The revenue streams have been adjusted regarding development fees, a decline that has been observed over the past 2 – 3 months and that decline does continue as it has as a reflection of the economic times that all of us are operating in cities, businesses, so forth and other county revenues has adjusted as well with regard to the fire service area, that millage that was contemplated that was not issued this year, may be deferred to next year. Not millage, dept service, I’m sorry, bad choice of words. The debt service, about two hundred ninety five dollars, ($295,000) that was considered this year in the fire service area that we scaled back that request at the county to nine hundred ninety thousand, ($990,000) from $2.75 million. Other revenue was adjusted in smaller amounts. The operating expenses were adjusted from the administration department, removing the consultation fees, the consultant fees for the comprehensive plan. We are going to work that in house rather than bear the expense of those consultations. Police department has been adjusted basically as a hiring freeze. The fire department, public works, those have been adjusted primarily, almost entirely, or entirely not almost both fire and public works were adjusted with additional fuel line item. We added $136,000 in new money to those line items to adjust for the cost increases that we are observing or projected or could happen with fuel.
Mayor: So that’s no adjustment in gallons consumed, that’s just adjustment is cost?
Mr. Hawes: We are expecting gallons consumed to not increase over last year.
Mayor: Any allowance for them decreasing?
Mr. Hawes: We are working in every way possible to decrease that, however we are actually trying to absorb the cost of traveling to the new landfill which is not going to decrease miles or use of the use of the vehicles by any stretch of the imagination. So we really can’t decrease. We’re trying to absorb that as best we can in the purchase of the tub grinder is a direct impact to that particular line item.
Mayor: So the increased driving to get to the landfill sort of offset these actions you’ve taken to reduce consumption?
Mr. Hawes: Pretty much. It does offset it, absolutely. The tub grinder offset some of that increase, though that would be existent were we not to purchase it.
Mayor: I just wanted to be clear that you are taking some action to reduce our consumption but that is fruitless because it is offset by this extra mileage.
Mr. Hawes: It is not fruitless in the net effect of it, but every bit helps. But, it is negated as far as showing up in the budget by the fact that we have more miles to travel than we did last year, to the landfill. That explained capital expenses. Total expenditures have been cut, basically by moving some things into the G,O, and the aforementioned activities to the tune of four hundred seventy five thousand dollars, ($475,000) off the budget. So we went from $12,562,000 to $12,087,000.
Mayor: Are we talking about the total budget?
Mr. Hawes: That’s the bottom line. Total expenses and total revenue.
Mayor: On the capital projects fund I noticed that the total has been reduced from $1,779,000 to $842,000 and I see what you have eliminated, well.
Mr. Hawes: The BFSA was a great portion of that. We didn’t do the larger bond at the county level. As you all digest, I would like to introduce Ms. Teresa Cawley, she has been a long-time advisor to the city on financial matters.
Mayor: Can I ask one more question, please?
Mr. Hawes: Oh, please. I’m sorry. I thought you were through.
Mayor: I just noticed that we got, we now have, a separate, additional page, I guess for the Heritage Park Amphitheatre that wasn’t here before. Explain that to me, because it doesn’t seem have the salaries, wages or anything.
Mr. Hawes: Gladly, the Heritage Park Amphitheatre, when we did the original budget, was expected to have, show September, well August, July, August, September, October. Basically a four month working period. The venue opened July 4 th and had a great opening. However, the booking realities of the situation with touring acts. They basically had booked all their summer shows. They are starting to book their fall shows. We are looking at shows in September and October. However, we had expected revenues that were going to basically offset the operating costs of the amphitheatre for this fiscal year. We felt that it was prudent to identify some impact to the general fund at the end of the fiscal year from the fact that we had two months of non-revenue producing activity. So that is where the hundred and two thousand dollars is.
Mayor: So this is just a catch up. But we really couldn’t get promoters in here and show them that facility and talk about booking until in was absolutely complete and I believe that was after July 4 th , right?
Mr. Hawes: That is correct.
Mayor: So, now that we have had those in here: Have we had the promoters come in and take a look?
Mr. Hawes: We’ve got three promoters looking to book shows here for the rest of the fall and next year.
Mayor: So, in fact, that is what delayed getting something booked?
Mr. Hawes: Partially it is. It was really that and the fact that the bands like to book about 3 or 4 months in advance and the fact that the venue was not complete until July 4 th , We certainly worked with promoters to look at July and August but they wanted to see it done and I can understand that. So July and August were good months to prep the facility and they were used for that but they were not revenue-producing months.
Mayor: I just wanted to make sure that we were not being turned down for any other reason other than the fact that they just couldn’t see the facility. I had a hand here. Mr. Curtis.
Mr. Curtis: Russ, what is your level of confidence that we will, that this is the only hit that the budget is going to take from the amphitheatre? Do you feel confident that we are going to be able to put enough acts, things in there to pay for operating expenses throughout the rest of the year?
Mr. Hawes: Beyond the $102,000 we are confident of that.
Mr. Curtis: O.K.
Mayor: Ms. Bagwell.
Ms. Bagwell: What number, what price did you come up with when you made the adjustments for the vehicle operating expenses? Where did you take gas to, for instance?
Mr. Hawes: I believe it went to$3.95 a gallon paid by the city for diesel and $3.36 for gasoline. Now that is less federal excise and state tax,
Ms. Bagwell: What does that calculate to if we were looking at, and I ask that question for a specific reason. If we were talking street gallons, not city gallons, since we don’t pay those taxes?
Mr. Hawes: You are looking at about $3.75 and $4.60 in unleaded and diesel.
Ms. Bagwell: So $3.65, you feel comfortable with gas not going beyond that?
Mr. Hawes: $3.75
Ms. Bagwell: $3.75.
Mr. Hawes: It’s our best projection. If it goes to $4.00, we are really concerned about that. We really don’t want to tax people or ask them to bear the cost of something that doesn’t exist yet.
Ms. Bagwell: I just wanted to make sure we had looked all those and that is was an average.
Mayor: Anyone else? All right, back to your introductions.
Mr. Hawes: We’ve got the lovely Ms. Cawley here. She is a principal with Southern Municipal Advisors. She has worked for the city on a number of very important issues, primarily, bonds, complicated financial matters and analysis. With regard to this situation I thought it was important to Council to listen to a third party that has looked at the specifics that we are bringing up to you right now. Ms. Cawley can explain some of the nuances and implication of any action that is taken here on in.
Ms. Cawlie: It is a pleasure to be here tonight and it is good to see everyone again and meet some of you. As Russell said he and the Mayor thought it would be a good idea to look over the budget and, based on the budget that you adopted on June 10 versus the proposed budget that is being adopted now. What potential ramifications or implications could be associated with doing nothing or doing something meaning less or more. As Russell has pointed out to you, some of the major changes in the budget, I just wanted, since this is a, I think this is a real difficult issue you are having to deal with. You know, there are a lot of circumstances that have gone into place to bring us to where we are tonight. So, I want to be very careful to understand what changes have been made and that any questions that you have, Russell can answer all the questions and maybe I can add some additional insight into some of the answers. I just wanted to reiterate, if you could just turn for a moment to the second page of your handout which shows your revenue summary. If you look at the, let’s take the number in parenthesis first, under building permits. When you adopted your budget in June, the budget that was adopted showed a little over $900,000 in building permits. Staff is recommending that this has decreased by $300,000, which is roughly a third of building permits and that is based upon as you all well know, I don’t have to tell you,the national trend, well the local trend has survived much better than most parts of the U. S., there has been a slow down. I know that Russell has shared with me current numbers for the fiscal year that does show the decrease in building permits. I don’t think it would be wise to assume that that’s going to pop up instantly. So that’s a big number that you are looking at in your budget this year. If you look down in the fire district contract, that’s almost $300,000 as well and the taxes in the fire service area. So those two line items alone are roughly $600,000 of your revenue budget. You will see a line item near the top that is a positive number that shows operating millage increase and staff has included that so you see exactly, or I wouldn’t say exactly, approximately what the increase would be if, according to statute, the maximum you could increase taxes for operational purposes in any given year is the addition of the CPI plus your population growth. In the case of Simpsonville, that’s over 7%. We had one of the highest one in the county this year. So that is what the $175,000 is. That 175,000 was not in the fiscal year 09 budget that you adopted in June. This budget before you tonight would be balanced only if that increase took place. So I wanted you to understand where that number comes from. Then, if you could go to next to the last page, the capital projects fund. The reason that when the Mayor brought the significant decrease in the overall capital projects fund was because, as Russell said, everything that was related to the fire service area General Obligation Bond that Greenville County issued which included the refunding of pumpers and purchase of the rescue truck. That was skewing the numbers, somewhat, so we pulled those out because that is the dept of Greenville County . So, now when you see this line item of $855,000, that includes the refinancing of the two pumpers which you will see down under fire department of $285,000, that would be the city’s portion. Then your 25% of the heavy rescue truck would be $187,500. Then if you would jump down for a moment to Public Works, the G.O. also includes the refuge truck of $148,000 and the tub grinder of $85,000. So what happens, in essence, those are no longer paid with cash out of the general fund but rather they are paid with the General Obligation Bond. Due to the timing of your General Obligation Bond later this year, near the end of the year, your first payment wouldn’t be due until next year, fiscal year 10. So I want to be very clear that there is no debt service payment if you go to the very next page. You’ll see under 2008 G.O. principal reduction you’ll see that $200,000 has been removed from the budget which relates to debt service. Based upon the items that are currently, that would be your last page now I believe, your capital projects fund is the last page. The bond issue of $754,000 would of a debt service of approximately $146,000, which you know is a little over 2 mills in the city. So it is very important that, if you go forward with the General Obligation Bond this year, even though there is no payment this year, it will be, you will be obligated the full credit of the city to either budget for, or increase millage for, in fiscal year 10 to make that debt service payment. So it is important, I just want you to keep in mind, that that obligation does not show up in 09 simply because of the timing of your bond issue. That would over and above any operational issues that you might have. Are there any questions?
Mayor: Anybody? Go ahead.
Ms. Cawley: It’s been asked by staff, you know, what should we do, how should we deal with it? We have an adopted budget, we have the issues with the state having to cut back, we have fuel cost issues, we have declining permits. How do we deal with these issues? Certainly, a budget, as the administrator has well put it, is an estimate based on, hopefully the best information you have at the time. Give that, what are your options? Certainly, one of your options is to do nothing, which you would basically stand on the adopted budget that you supported in June. That certainly a decision that can be made. The downside of that decision could potentially be permits stay at levels like we’re seeing. Gasoline goes up. Various and asundry other issues could happen with the county. So it becomes almost a balancing act. Is that a risk you want to take? The reason you are somewhat having to come to this decision over the next couple of weeks is the county auditor requires that any millage increases by municipalities or taxing districts has to be by the county by September 15 th in order to be on the tax bill this fall. So if we’re going to make a decision for any change, it has to be made over the next couple of weeks in order to get it on this year’s tax bill. You certainly have the option of increasing your tax base to the maximum % of the CPI plus the population. That certainly, under the scenario that you are looking now, staff has shown you that that will balance the scenario. Again, things could get better, things could get worse. You know, it is a really tight call of making the budget with a CPI plus population increase. One of the areas that the city has faced over the last few years is a declining fund balance. So one of the things that we have to make sure that, as we are preparing for the future, that we preserve the fund balance. We don’t have the numbers for fiscal year 08. At this time the audit has not been done, so we don’t really know the answer to hopefully it’s at least break even for fiscal year 08 but, with the declining permits in the fourth quarter and the rising fuel rates, it’s going to be really tight for fiscal year 08. The city currently benefits from a double A category rate from S & P and the top A rate category from Moonies, the fund balance really will be at risk, if there is a continued downward trend, there will be a rating risk if we didn’t begin to rebuild fund balance again to the levels in your financial policies. You are significantly below what your financial policies require in the fund balance. A third option would be, it would really be, do nothing, it would be to say ok, we’re going to across the board departmentally and pick some number that you and staff reasonably projected that you would basically tell department heads that cost have to be cut X percent. We’re not going to raise taxes but we’re going to try to cut cost as much as we can for these 10 months and as we’re in the coming winter and spring months focus really hard on what do we need in the next budget cycle to continue to have a strong city and have strong financials so that we don’t have issue tax anticipation notes every year. As you know, we issued a tax anticipation note in July to cover that shortfall between now and January when the taxes come in but there is some concern because of the issues that have been presented before you tonight that December could be extremely tight if things continue at the level that they currently are. When asked, what is my recommendation for you to make tonight? I think you can choose any of the three options. Which is, do nothing, raise taxes, cut cost or some combination of raise taxes and cut costs. But recognize that there can be pros and cons to every decision. It is very difficult to go back when you have to do an amended budget when you are faced with some of the issues you are faced with. So, with that, I would be happy to answer any questions or provide any more thoughts if you have questions.
Mayor: O.K. Anyone have questions? Mr. Garrett.
Mr. Garrett: This $475,000, that is from a tax increase, I presume on the first page, there?
Ms. Cawley: On the revenue, that is correct. That would be the CPI plus population, if you approve that.
Mr. Garrett: So, if we did a roughly one and one half to two percent across the board cut, that would basically make up that amount?
Ms. Cawley: It would be approximately that amount, that is correct. I’m not speaking to expenditures at the line item level outside of capital. I really don’t, I can’t tell you what is required in those line items. You pretty much have to take those at face value.
Mayor: Anyone else? So $175,000 is the number that we are, I don’t want to say, out of balance, but that’s the magic number, that’s the shortfall that we will potentially have. Is that correct?
Ms. Cawley: That is correct. And obviously, as Russell explained to you, the amphitheatre, which is a new piece with roughly a hundred thousand. I mean, who knows what your shows are going to net. You haven’t been in that business before so whether that will or won’t happen, no one really knows at this point.
Mayor: That number is $105,000? Mr. Hawes: $102,500.
Mayor: Well, as I have said before, as I said initially on this budget process, this is a terrible time for our citizens. It’s like every government entity that we associate with lined up trying to get their increase. We have people out there struggling to pay for the high gasoline prices and high food prices and struggling to keep their jobs. I’ve talked to people that said their companies are cutting back on expenses and other things, perhaps personnel from time to time so this is a real tough call. If we just go for a millage increase we’re piling but, at the same time, I hear what you’re saying about, that we have to protect the integrity of the city and the operations of the city. It sounds to me like this comes down to almost an ethical decision. Is it ethical to go to our tax payers when they are struggling so much to ask for more? Is there potential in what we are doing and what we have to cut back on expenses like they are doing. Is that the right thing for government to do, to do what everybody else is doing to cut back? Having said that, do we get out police force or our armed forces to go attack these people that are coming in and taking taxes from our people. Of course, I’m just being silly now, but the point is, we have others that were getting into our pockets and now we want to stick our hand down in it, too. This is a tough call.
Ms. Cawley: If might can add, regardless of the decision you make for the next 10 months, I think it is critical to recognize what more and more municipalities, counties, taxing districts across the state are and that is the benefits and implications of 388. I put a ceiling on what you can raise the millage in any one year. While this year you can raise your millage at, statewide it is considered a higher level except at some of the coastal areas at over 7%. If your permits are down this much already, it’s extremely likely that your population when the budget control board issues the number next year. While it could certainly be the same, you know, it could be 3% next year. Some places have 1%, 2%. There is no guarantee that you can raise taxes next year. So what I particularly recommend is that, as you move forward in each budget cycle, that you look at that particular budget year but you have to look at the future as well. Because, you may not need the operating millage persay, in that particular year but next year you may be hiring new policemen or new firemen or new capital expenditures and with such a little amount potentially of operating increase, you want to make sure every year that you are looking 2 and 3 years down the road for what your obligations may be at that time. So I think what we’ve all learned over these past 2 years is that we really have to focus on what is the maximum that the tax increase may be. Because it can be zero. It could be 15% as in some of the coastal areas. None of us know what it will hold. So we really need, as we go forward during the next budget cycle, to focus on that when we are making our decision on that.
Mayor: You’re talking about that cap that Legislature put on our ability to raise taxes. In the interest of protecting the public from us evil local people, in fact, it is causing cities to do exactly what we are talking about doing here, to make increases while we can for fear of not being able to make them when we need them. Mr. Curtis.
Mr. Curtis: What I’m hearing is and I can be plain spoken so I’m just going to say it as I see it. The state has meddled in our affairs to the point where we are no longer able to run the tight ship that’s been ran in this city for 20 years where we have not raised taxes, knowing full well that we could, in any following year adjust if that became necessary, if the circumstances warranted, we could adjust. They have taken some availability to adjust away from us and why, I have no earthly idea. Would you say that’s an accurate?
Mr. Hawes: Let me not try to speculate on what the General Assembly was doing, but what she just told you is correct. What you are doing is gambling on the future. If you don’t take it this year, you night not have it next year. One of the things I think she pointed out to you that is exceptionally important is, if you are going to go forward with these capital purchases and float this bond, you’re looking at 2 mills next year. You don’t know if next year you will have the ability to levy an additional 2 mills. Well the debt, that’s not included, that right. The debt is not included in the cap.
Ms. Cawley: There is no limit on the G.O. portion like that 2 mills. But you would be limited on your operational budget increase. The Legislature did implement the ceiling on what you can raise in any one year.
Mayor: Anything else?
Question: This note. They ask about the fire district contract. What, I’m not sure I’m clear on why that made such an adjustment.
Mr. Hawes: Originally, there was contemplated 2.75 million dollar offering that would allow us to get into the building of the fire station, the new headquarters, and this was at the county level and the city would have to bear a portion of that cost, 50% of that cost. Not of the 2.75 but of the total cost and its associated cost such as architectural fees. We decided at budget session not to pursue any tax increase at the time based on the fact that that could be looked at in the following year and it certainly can be looked at in the following year. So we indicated to the county to do just a $990,000 offering which allowed us to purchase a rescue vehicle that is a mandate of the county and to refinance or refund the lease of two pumpers going forward into a G.O. So that’s why there was such a change there.
Mayor: For clarification. What is, refresh our memory, what is our portion for this rescue vehicle? What is our cash out?
Mr. Hawes: $187,500. The vehicle is $750,000.
Ms. Sanders: One time. One time, in this budget only?
Mr. Hawes: It’s financed. It’s in the G.O.
Ms. Cawley: We’ve been making payments every year.
Ms. Sanders: It will only show up, the $187,000, this time?
Ms. Cawley: I’m sorry?
Ms. Sanders: It will show up this one time?
Ms. Cawley: If you look on the capital projects funds, it shows $187,500, but you’re not paying for that out of cash. This year. It would be paid by the bond issue and I believe it is amortized over 6 years is the projection.
Mayor: We won’t even make that first payment until then.
Ms. Cawley: Until the fiscal year 10. That’s the same with the refinancing of the two pumpers, the tub grinder and the refuge truck that is shown on your last page.
Mr. Hawes: That’s the $140,000, almost $200,000 I guess it was what it ended up being. It will appear as an additional item in next fiscal year’s budget because that will be the debt service on that particular issue. Next year.
Mayor: What if we didn’t buy the refuge truck and the tub grinder? How would that affect the bond issue and how would that affect the total budget?
Mr. Hawes: It drops it $40,000.
Ms. Cawley: It would lower your bond payment for the next 6 years by approximately $40,000 in today’s market. That would be the payment over 6 years. It would not affect your budget this year from a cash standpoint.
Mayor: Mr. Garrett.
Mr. Garrett: I know this is going to be a guesstimation but that tub grinder, what kind of income do you think we can gain from that?
Mr. Hawes: Our projections are that that tub grinder will pay for itself in 2 years in saving of trips to the landfill and wear and tear on the vehicles. Some ability to possibly sell some of the mulching that is created and possibly to rent it to other counties, cities or municipalities that may want to utilize a piece of equipment such as that because they are facing the same issues that we are, as well.
Ms. Sanders: Do you know how much that will reduce our tipping fees, also? Or are you counting that as part of what it will reduce what we will take?
Mr. Hawes: It does have some impact on that. It does not change what we had in the budget for tipping fees because we had contemplated having that tub grinder bought.
Mayor: O.K. I hear wheels turning. Mr. Bridges.
Mr. Bridges: She laid out three options but I really don’t see that we’ve got but two. That is the second one or the third one which is increase the taxes or cut cost. I don’t think, I think it is too risky to do nothing.
Mr. Garrett: If I understand, what we’re saying is, if we didn’t raise taxes but went back and cut more out of the budget to make it work this year, we could be in even worse situation next year, possibly?
Ms. Cawley: It’s possible. It is definitely possible, this scenario is completely plausible that it could happen. As you can see more than 60% of the number we’re looking at today, if you look on the expenditure side, when you try to figure out, ok what expenses is there’s been a conservative view taken on the amphitheatre to prepare for not having the first couple of months of revenue. I mean, I think that everyone is extremely hopeful that the acts will be strong and that we will not have to dip into that but this is providing a contingency for a shortfall of not having 12 months in the amphitheatre. You could, I guess, well not I guess, there is, if you don’t mind me saying Councilman Garrett, I guess, Councilman Bridges had a fourth option. It is not one that I would recommend but I think you need to know what all options you have out there. You issued a tax anticipation note in July. There’s no prohibition on the city issuing another tax anticipation note closer to end of the year if we are in the situation that the revenue haven’t changed, expenditures are at these proposed levels near the end of the year. It is certainly not a positive thing to do two tax anticipation notes in one year but it certainly is an option if that is where you found yourselves.
Mayor: Wouldn’t that just add more cost?
Ms. Cawley: That’s correct. It would be a more interest cost.
Mayor: Now we’re talking about a seven and one half 7 1/2 mil increase, here?
Ms. Cawley: 7.3
Mr. Hawes: Seven and one half percent, 7 1/2 % which is 2.9 mil.
Mayor: 2.9 mil, total.
Mr. Hawes: And that’s 7 1/2% of 48.6.
Mayor: And what would that cost on this imaginary $100,000 home that nobody in Simpsonville actually has.
Mr. Hawes: Eleven dollars, $11. Mayor: How much?
Mr. Hawes: $11
Mayor: $11 a year. So if one had a $200,000 house, it would be $22.
Mr. Hawes: That is correct.
Mayor: So if we had a $500,000 commercial building, it would be $550.
Ms. Cawley: This is an annual number.
Mr. Hawes: These are annual.
Mayor: The silence is deafening.
Question: So, if we raise the millage to 2.9 mil, $175,000 is the maximum revenue that it would generate?
Mr. Hawes: In this year, but it would carry on to future years, as well.
Ms. Cawley: The value of your mil, approximately the millage rate will be reset when the tax bills are sent out but is roughly $60,000 a year for now.
Ms. Bagwell: Is that assuming that the property values have increased or is that using the property values that were used from last year? I just kind of want to know if that is a conservative estimate.
Ms. Cawley: Russell what was the tax collection?
Mr. Hawes; The rate?
Ms. Cawley: No, currently, was it 2.7 million for tax collection.
Mr. Hawes: 2.715 if I remember correctly.
Ms. Cawley: For fiscal year 08. So the budget for current taxes is 2 million 792 so it’s assuming pretty much status quo for 09.
Mr. Hawes: .3. Very small growth assumed at all.
Mayor: Mr. Bridges.
Mr. Bridges: We hear a lot about housing values dropping. I don’t suppose the county is going to drop the values on them.
Answer: May I address that.
Mayor: You may, if you are an expert in the field.
Answer: To be an expert in the field would be a stretch but being in the Real Estate industry, I have not seen values in our area consistently dropping. Certain areas, yes, we’ve seen some decrease. I think Mr. Larson would agree with me, I’ll let him speak for himself. Simpsonville has had, it’s stood pretty steady from what I’ve seen in the financing part of it all. If not increased to some extent. We have not seen the change in this area where others have. To dispel the national myth.
Mayor: Mr. Larson.
Mr. Larson: It’s definitely changed a bit, but the ball hasn’t fallen out like in other parts of the country. We have seen a lot. We’re doing a lot more short sales to get people out of foreclosure.
Mayor: Anyone else? Well I will submit there is a fifth option. There is an option to, you know, in the private sector what companies do before they do anything else, is cut cost and then they take drastic action if they have to do that. So, I submit that we have another option on the table and that is we do an across the board cut in our expenditures and, in addition to that, have a millage increase. So that accomplishes what everybody in this room has talked about trying to do tonight. It fattens up the available cash. It tightens up our spending. Everybody shares the pain. I kind of like the sound of that.
Question: I had a question I was going to ask before you said that. On the Heritage Park in the amphitheatre, why are none of these expenses being covered by the Hospitality Tax?
Mr. Hawes: The Hospitality Tax is basically at its limit. The economy has down turned, Hospitality Tax growth which has been on the range of 5% every year, really more than that, every year. It has basically stagnated, plateaued. If we can get through the bump in the economy I think we can see some growth in the revenue line again. At this time, there is no more to place into that line.
Question: So what we are budgeting here is what the hospitality tax is not bringing in? It is the difference?
Mr. Hawes: Correct.
Comment: I like what the Mayor said as far as our fifth option, but you know, I think when you talk about individuals and businesses cutting back. You know, you don’t go out to eat as much or you don’t buy a new suit or clothes or whatever. But there is only so much you can cut back in the city. I mean, like the fire department, the police department, sanitation pick up. You can’t. I think we ought to be careful we don’t start gnawing away at the quality of life here as we cut back. I guess the point that the fire department and police department especially are still able to function at their excellent level they have now.
Mayor: I wouldn’t argue with that at all. I certainly agree with that. I don’t want to cut the quality of our service. But, at the same time, when the water gets rough, everybody’s got to bail.
Ms. Sanders: Unforeseen was the fact that gas was going to spike this year and so I would say we are in an emergency and we’re not cutting any of the departments back drastically unless we’re doing baseline budgeting. We haven’t cut into what we funded them last year so we are not decreasing in that sense. We are decreasing the amount we’re spending which is what we are arguing about. We’re not decreasing the amount of services at all. We’re arguing about how much less we’re going to spend this year, I would think, in my mind.
Mr. Curtis: Are we talking about, I guess, giving each department an amount, say your going to have to go back and cut that amount.
Mayor: That would be my proposal, my proposal would be an across the board of about 1 ½% in expenditures. That’s, when you look at the numbers on that, it is a very small amount to cut. That alone would cover the shortfall. In addition to that, take advantage of the tax increase that is available to us this year. That would eliminate the need, Ms. Cawley, if I am correct, that will eliminate the need for a tan later in the year, or perhaps you’re not the one to ask that to. Mr. Hawes. Would that eliminate the need for a second tan?
Mr. Hawes: It doesn’t necessarily because the effects of a tax increase does not occur until January anyway. But, what it does is protect against future issues arising. It just strengthens the position of the city with regards to fund balance and going forward and sending a very strong that we are willing to address the concern as they come up to the standard which saves bond rating and so forth.
Mayor: Plus, the cut in expenditures should take care of the second tan beforehand so it kind of like wearing a belt and suspenders at the same time.
Mr. Hawes: It could help. I cannot guarantee without knowing what the future holds over the next 3 or 4 months.
Mayor: I don’t think any of us can predict that. Mr. Curtis can tell us.
Mr. Curtis: I would contend, based on what we’ve heard we could all these things and still have problems if this is not a bump. If the economy truly turns down.
Mr. Hawes: Correct.
Mr. Curtis: If this is so. It may be prudent.
Ms. Sanders: The 2.9 mils we are allowed by the state to increase is based on CPI and our growth. What was our growth this past year? Do you know? Can you tell me that? It gave us the 2.9?
Mr. Hawes: 3.6? Is that correct?
Ms. Sanders: And we are counting on it not being a growth of 3.6 next year which is creating the fact that we won’t have the 2.9 next year. You don’t see 3.6% growth?
Mr. Hawes: Based on the building permits I’m seeing. I’m not seeing a whole lot of growth at all. Because it is year to year growth they are looking at. They are looking at a flash point of one year. No, I expect our growth to be down compared to this current year, yes.
Ms. Sanders: 3.6 is that this year or was that last year’s growth.
Mr. Hawes: Right, it was growth in year, calendar 07.
Ms. Cawley: 07, because the budget control issues that number in April of each year. Just to give you a point of reference. The Greenville County cap for instance in the unincorporated areas throughout the county was 5.62%. So you can see that the city had certainly a higher growth than the unincorporated county.
Mr. Hawes: We had a good growth rate this past year. We were the highest in Greenville County .
Ms. Bagwell: It’s very possible that that may continue and that 2.9, 3.9 15 as you put it would be possible for next year. What we have to do is we have to look what could be worse case over the next few years. With the economy slowing as I’m hearing you say and as I heard Mr. Curtis say, with the economy slowing and having no guarantees of that picking back up within the next 6 months to a year, next year we could just be flat-lined basically with zero increase, zero anything.
Ms. Cawley: I think it is very possible that you could have 0% growth as far as the inflation number based on the inflation number so far for calendar year 08. I think it more likely than not that you will have an increase allowable under inflation. But I think if you look at the leading economist. No one has a crystal ball but everyone is sitting back and waiting. The next 6 months are going to really tell. I think it became, the market was a bit astonished, I’m not sure why, but the market reacted astonished the day that Fannie Mae and Freddie Mac may have a Federal bail out. Again, I think it is over the next while, closed and foreclosures are disclosed, what’s going to happen in that market and I think there’s a reaction as well for people because they are afraid it could be them next year so then they hold back as well. We all do that.
Ms. Bagwell: I have another question for Ms. Cawley if that is acceptable. CPI and growth. What is CPI?
Ms. Cawley: The Consumer Price Index.
Ms. Bagwell: That is not a fixed number as you just described it so what are we allowed as a, is that number constant, CPI and growth so those two combined give us the…
Ms. Cawley: Those two combined, what the statute did, it said the Budget Control Board is going to issue in the spring of each year and usually it’s around the first of April, it was a little earlier this year in March, but they will issue according to the state’s statistics, what the population growth is for your incorporated area as well as what the CPI, Consumer Price Index, is state wide. So that South Carolina , everyone is put on a level playing field basically for the cost of goods. The Consumer Price Index, if you will, if you purchase an item today that costs $100, how much is it going to cost you to by that item next year. Under this scenario, it would be $103.60. But is does not take into account if you have to add personnel, if you have to have capital cost outlay. That is simply says what’s the cost of what you are doing this year going to be next year. And it changes every month. The Federal Government puts out that number every month on a national level what the CPI is.
Ms. Bagwell: So, even if we don’t have any growth, it would still be some number.
Ms. Cawley: It appears for, we’re halfway through calendar year 08, certainly we do have inflation this year. The Feds have done everything they can to keep inflation under control but again, no one can predict the future but it is unlikely that there would not be CPI increase for next year.
Ms. Bagwell: So we don’t know what number it is but it would be something.
Mayor: Well, unless anyone has any other questions or comments, Mr. Garrett.
Mr. Garrett: I don’t know why it bothers me so but this $187,000 rescue truck, what happens if we don’t buy it? I mean, it’s not bought yet, we haven’t ordered it. What happens if we don’t buy it?
Ms. Cawley: The city presented to the finance committee back on June 17 the second year of the 10 year capital improvement program for the fire department which we presented the 10 year plan last year and the county basically in your fire service area contract, while they cannot bind to future counsel, they acknowledged your 10 year capital plan and that you would be coming back every year as part of that increase. You would be coming back every year for those years you needed an increase either operational or from a debt service stand point in the fire service area. As part of that presentation, the City presented its needs in the fire service area. Told Greenville County what percentage they were requesting at the county support based upon the number of calls that the truck would make in that service area versus incorporated city. Under that scenario, the city committed to the county that it would fund 25% of the rescue truck. The county has already signed the bond purchase agreement and the funds are now sitting at the county treasurer’s office for you all to draw down. So the county has incurred that debt on behalf of that fire service area. But that money cannot be spent until the city has its matching portion. If, for any reason, the county did not spend those proceeds, the county would have use those proceeds to buy down bonds early at a premium and I do think it would make it difficult for the city in the future to go back and ask the county for support in the fire service area if after the fact, we did keep our commitment to them on an annual basis. The other thing you should keep in mind to make the decision even more difficult, fiscal year 10 is another reassessment year. So, in addition to the millage issue, it will be reassessment.
Mayor: O.K. Any more questions, comments, ideas?
Mr. Larson: I was just going to throw out this opinion about the fire truck, the rescue truck. With the county agreeing to pay 75% of the cost, it is going to be a vehicle that lasts us 20, 25 years and if you divide $187,000 by 25 years, that is a great bargain for the city to get that top of the line piece of equipment that you know,..
Mr. Garrett: I agree with you. But if I can get a Mercedes for $50,000 and I don’t have $50,000, that is not a good deal.
Mayor: I would add that that is good, rational thinking but what that doesn’t show is and I’m not speaking for or against it, I’m just giving additional information. What it doesn’t show is, we’ve got to hire additional personnel for it and now we’re hearing we don’t have a place to park it so we’re going to have to have a building to park it in, I think. It is additional fuel consumption, additional maintenance and upkeep and so I mean, what you are seeing here is just the purchase price. Like your Mercedes you’ve got to have a $500 service every six months. So anyway, you might want to factor that in, too.
Mr. Garrett: I guess what irritates me more than anything else is the reason we’re having to purchase that truck.
Mayor: Well, once again, we are at the bottom of the food chain. We don’t have big enough teeth to bite back. Mr. Larson.
Mr. Larson: If we sort of went with the fifth option say across the board cuts and the mil increase, how is that going to effect the General Fund and when we get reevaluated by the bond folks?
Ms. Cawley: I think it’s going to depend on how your fiscal year 08 numbers, I mean I think your biggest impact on your current rating is behind us and they are not going to make a decision negative or positive on your rating in the middle of a budget year because we don’t know how is going to actually end up. If it were any decision during this current fiscal year on a rating, it would be because of a positive or negative impact in the fiscal year 08 audit. From a cash standpoint, a budget cut and a milleage increase as the administrator has said, should, under this scenario, be break even. So it would have no impact on your General Fund, good or bad.
Mayor: Well, if we do both…
Ms. Cawley: Well, no, the General Fund would not go up or down. Because if you did a combination of both it would cover the budget items.
Mr. Hawes: I think the Mayor is saying, he would actually cut it to the effect of the $175,000 and then add another $175,000 in, which would add to the General Fund. That’s why I was saying I think that’s the strongest movement that the city could make with regard to building Fund balance.
Ms. Cawley: I’m sorry, I thought you meant split it down the middle.
Mayor: O.K. I knew what I meant.
Ms. Cawley: That’s all that matters.
Mayor: Was that a question or was that a motion? What say the rest of you? I hear people tapping their feet. I feel heat.
Mr. Hawes: This isn’t a voting session anyway, so.
Mayor: Well, it works out. I got them worked up now, you mean I’m going to have to let them go.
Mr. Hawes: Suspend your rules and go for it.
Mayor: No, we just love being together so much, we will just come back tomorrow night.
Mr. Hawes: That is what the meeting tomorrow night would be for, if there were some action.
Mayor: That puts a new twist on it. Is there anyone who has any questions, now that we know when we lay awake tonight, thinking about this, are there any questions you would like to have answered by midnight tonight?
Mr. Hawes: If I could ask Ms. Cawley a quick question.
Mayor: You can ask anybody a question. Go right ahead.
Mr. Hawes: Should we discuss the fire district, should City Council decide we were talking about a deferred millage levy and so forth, you want to cover that?
Ms. Cawley: Sure. That is completely up to you.
Mayor: If you’ve got something to cover, cover it.
Mr. Hawes: O.K. Ms. Cawley probably would be best to describe this because this is a …
Mayor: Sensitive issue?
Ms. Cawley: Some of you may recall when we presented to the county finance committee earlier this year the 10 year capital improvement program that was developed by the city included for fiscal year 10 the city and FSA portion of the headquarters. The city had proposed that half of the cost for the new headquarters should be born by the fire service are because as in most cities, the headquarters certainly makes a lot of calls to the fire service area when you look at the size of the fire service area versus the size of the incorporated city, it is much larger. The county had approved at finance committee and by third reading of an ordinance earlier in the summer that the fire services area would pay for one half of the cost of the headquarters and at the finance committee meeting the city had agreed that it would pay its 50% portion. In agreeing to do half of the headquarters, since the county has to issue the debt for the fire services areas such as Simpsonville, Mauldin and Fountain Inn, it’s the county’s responsibility to go to the relating agencies, it’s the counties time that goes into each one so since all three cities have a 10 year plan it seemed to be more efficient for everyone for the county to go to market every other year with the bond required for the fire service areas. A few days before the bonds were sold this year, in conversations with the city, there seem to be some concern that the city would not issue the debt for its 50% portion of the headquarters in calendar year 09 as the county was going to do. So before the pricing, we had two series, Mauldin and Simpsonville were selling bonds at the same time. We pulled out of the City of Simpsonville , the headquarters building so we pulled out roughly 1.35 million or actually 2.7 million total that we pulled out of the bond issue. And so that, in case the city determined it was not going to issue its portion of the headquarters, they decided to hold it off for a year or two. The county’s issuance wouldn’t be at risk for the fire service area. If the city chooses to issue debt for the headquarters in fiscal year 10 the discussion that we have had was if you are going to consider raising revenues in any fashion, would you rather deal with it all at one time? If so, you could adopt an ordinance that would give you the option to issue the debt for the headquarters building by September 15 th of next year, but you would not issue the debt until you had once again gone back to the county next year to see if they approve it again for an issue which would be next August and then you would issue your debt basically simultaneous with that. It does not commit you, it does not require that you issue debt in the future but it simply gives you the option that you approve it to be issued by September 15 and then you wouldn’t have to come back and address it again. If the county approved it, then you could automatically issue the debt at that time. No millege would be levied until you issued bonds.
Mayor: Would we also have the option at that time, if things are not looking so rosey, of refusing to issue that debt? We’re putting in place a trigger, but do we have a safety.
Ms. Cawley: That’s right and you would not ask the county for them to issue their 50% next year, either.
Mayor: And the effect of the ordinance just goes away when you don’t issue the dept.
Ms. Cawley: Right.
Mr. Hawes: But it keeps your options open for next year.
Mayor: Mr. Curtis.
Mr. Curtis: It sounds that that would show intent to the public so that we would be very transparent in what we intended to do. If you set a trigger up like that then you are telling the public a year in advance, basically. This is what we are looking to do and this is why and give them an option to have input on it if they feel strongly that they don’t want the kind of fire protection that they have been enjoying, that they can address that to us between now and then.
Mayor: Fire protection is something that is real hard to enjoy. Well, unless your house is burning down, then you can enjoy it, so I get your meaning. I just couldn’t resist. I’m trying to lighten up a little bit because this is so heavy. All right, anyone else have any better jokes? Or any viable comments? All right, anything else you want to throw on us while you’re piling on?
Mr. Hawes: No, not at all. I can have that ordinance prepared for tomorrow night’s meeting if you all would like that.
Mayor: Do I hear any descent on having it prepared for tomorrow night? All right, I hear no objections, so have it prepared and we will decide. That will give you something to do during the day, tomorrow. All right, anything else. Ms. Cawley, thank you for coming and thank you for sitting in the hot seat. We weren’t too rough on you, I don’t think. It was good to see you.
Ms. Cawley: Well, it is a difficult decision.
Mayor: Well, that’s why they pay us the big bucks. All right. Anyone else have anything else they would like to add to this? Mr. Curtis.
Mr. Curtis: I’ve been going over some of these budget items I know we’re talking about making cuts. There are some line items in this budget which I understand Ms. Cawley does not feel that she should be addressing but if we want her to make changes to these line items, would we need to do that as part of this process? Or is that, how would we, for instance, there is a, I don’t like picking on other people without picking on us. There is a travel fund in here for City Council and some of those funds may have already been spent. I don’t know what portion of them have been spent, what portion of them have not, but I’m certainly willing to make cuts to that line item. I think it says to the rest of the people that work for the city that we are willing to look at cuts across the board and that includes those things that affect us. So, if I wanted to do that, if we wanted to make those changes, do we need to do that as part of this session tomorrow, today? How would we go about doing that, just to make sure I don’t lose my opportunity there.
Mayor: My intent with my fifth option was to, us and every expense in here gets cut. That includes us.
Mr. Curtis: Well, I probably would like, if the money exists here, I would probably like to see more than a 1.5% cut to that. I think that it is appropriate that we be leaders and lead the way.
Ms. Cawley: As far as when you could do it, you could do it as part of the process if you wanted to do a balanced budget but it’s already been appropriated, you can also choose not to spend it and at the end of the year, there is excess money left over. You just want to make sure that, if there is an expenditure that it is appropriated for but you can’t have a savings without having to make a budget change.
Mayor: Kind of like the self-imposed exile. Ms. Bagwell.
Ms. Bagwell: I noticed, he brought the travel fund up but I think that was supposed to be travel slash. I’m sorry I have to because it’s on here and if it’s on here it was supposed to be travel slash office expenses or something and I just want to make sure that it is correct on here because if it is just travel then we need it for the other option we were looking that it can be used for that.
Mayor: I didn’t understand the question. It can be used for stationery?
Ms. Bagwell: Yes, basically that’s what we were talking about.
Mayor: You’re not suggesting that we cut the whole thing out, so.
Ms. Bagwell: I’m just saying renew at this point. That’s my only issue. But it was not renamed properly. It’s just renamed travel fund. Mayor: O.K. so I see what you’re saying.
Mr. Hawes: What would you like it to be renamed? Cause we can…
Ms. Bagwell: Could I call you both on that because I have my notes on my previous book on what we had decided to rename it?
Mr. Hawes: I have no problem with renaming it whatever City Council would like. So it’s accurate. We can make sure that happens.
Ms. Bagwell: It was a minor change, it was travel slash...
Mr. Hawes: If you will propose that name to me I will have it in tomorrow night’s…
Ms. Bagwell: I’ll do that.
Mr. Garrett: Mr. Mayor.
Mayor: Yes sir, Mr. Garrett.
Mr. Garrett: Now your fifth proposal now I want to get this straight before I go home and stay awake all night. On a possible cut of 1 1/2% millage increase.
Mayor: Or pick a number. If you want to go to 10% we’ll cut it.
Mr. Garrett: One and a half.
Mayor: One and a half is what I am suggesting because that seems to be the magic number that would cover that shortfall.
Mr. Garrett: 2.9 mil, that equals out to about 1 ½ .
Ms. Cawley: As you are making these decisions for the operating budget, make sure that you’re making the decision at the same time for the issuance of the G.O. debt for this fiscal year which includes the refinancing of your current two pumpers, the $187,500 for the rescue vehicle, the refuge truck and the pumper. I mean tub grinder, I’m sorry not pumper, tub grinder.
Mayor: That’s all included in this revised budget.
Ms. Cawley: It’s included but not the debt service payment. You’re going to need an additional 2 mils to cover the debt service on those bonds. So I just want you to be clear that that increase is not a …I’m sorry. You will have no choice if you issue the G.O. debt this year. The auditor has to levy the millage to pay for it.
Ms. Bagwell: Could you repeat that. I want to make sure we all hear what you just said.
Mayor: O.K. calm down over here.
Ms. Cawley: If you issue the G.O. bonds for the items that are listed in the capital projects under the G.O. bonds this year. Unless you have excess money in your budget next year, you will be required to issue sufficient millage to cover the debt service payment of roughly $145,000 next year. Even if you don’t approve it next year, the county auditor will levy it in order to pay the debt service. So I just want you to know that has to be taken care of in the next budget in addition to anything you do in the next budget.
Mayor: So, we may need to take option number five plus eliminate all that tub grinder and stuff.
Ms. Cawley: Only pieces that would be difficult to eliminate is the refinancing of your current two pumpers. Historically, you pay for those under your Master lease. But that payment has been removed from your current budget. There is no payment at all for it because it is anticipating the General Obligation Bond to refund because the FSA took over 50% of that obligation. And then the rescue piece of $175,000, it is possible to not do that but then you all would have to back before County Council and explain why their money was, the FSA’s money would have to be used to pay off the bonds because you aren’t going to buy the truck.
Mayor: Maybe Burns could get us one for $175,000. All right, anyone else, any other questions, any other comments? Any other smart alec remarks? O.K. Anything else for us Mr. Hawes?
Mr. Hawes: No sir. Mayor and Council, I appreciate you coming out on a special Call Meeting on a Monday night. Appreciate you coming out tomorrow night as well.
Mayor: Ms. Cawley.
Ms. Cawley: I will not be here tomorrow night. I will be overseeing your milleage request at County Council for third reading.
Mayor: You can only be in one place at a time?
Ms. Cawley: I’m committed to your tomorrow.
Mayor: Mr. Holmes do you have anything, any wisdom to share with us. I suppose everybody has said what they want to say. I will entertain a motion.
Ms. Sanders: I move to adjourn this meeting. Mayor: Thank you Ms. Sanders. Do I hear a second?
Mr. Larson: Second.
Mayor: Mr. Larson, seconds. All in favor signify with say Aye (AYE), opposed no. Aye’s have it. We’re adjourned. Thank you all for your interest.
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