The Brookings City Council and its budget committee got its first look at a strategic plan proposed to be implemented in the 2013-2014 budget that could affect water rates and development over the next few years.
Details of that, the costs of employee retirement benefits and staffing were also addressed during a work session Wednesday evening. It was the first workshop the city held as it prepares next year's budget.
SDC funds and debt
City Manager Gary Milliman said the city has in past years used System Development Charges (SDCs) to pay debt owed on wastewater treatment plant improvements. SDCs are supposed to recoup the cost of infrastructure new development demands on the system.
"It was a political move," said Mayor Ron Hedenskog.
"The proponents of the wastewater treatment plant sold a package to the citizens. They anticipated a 3 percent growth rate in the city and the SDCs would cover the debt (of plant improvements). Well, we never had a 3 percent growth rate. It never materialized."
And in the past three years, as SDC money went to pay off up to $1 million a year in debt, those funds dwindled andndash; and water and sewer rates increased.
The city refinanced and bundled together a few of its debt obligations last July, lowering the amount of debt payments and percentage rates and increasing the length of the debt by only nine months, Hedenskog noted.
"We're running out of SDC funds," Milliman said. "It's like we have $900,000 in debt and only $20 coming in the door."
Between that savings from the bond consolidation and the rate hikes users incurred in February, the city plans to return to using SDC funds for what they were originally intended: capital improvement projects. Paying off debt using SDC funds is permissible, but isn't meant to serve as a primary source of funding (debt), Milliman said.
"That was fine for a few years, when we were in a housing boom," Milliman said. "We had a lot of SDCs coming in. The city was using hundreds of thousands of dollars in SDCs, and a large portion was going to the debt payment. Now that SDCs aren't flowing in, the availability of those funds for debt service is expiring."
Finance Director Janell Howard said she'd never heard of a municipality using SDC funds to pay off debt before.
"Lock this in your mind: This is a strategic change," Hedenskog said. "Now we can (use SDCs to) send infrastructure outside the city."
The city plans to build a 1-million-gallon water tank at the airport. It will enhance the existing water system, could provide water to existing and future development and will assist the city with emergency preparedness.
And that will require spending SDC funds.
Residential water and wastewater users saw what even city council members called an outrageous hike in fees when the received their bills in February. The 9.86 percent hike is meant to be collected for debt service, and the annual increase is anticipated to drop dramatically andndash; potentially to 2.74 percent by 2015-2016.
It costs more, too, to operate a wastewater treatment plant on an ocean hillside, and chemical treatments differ as well, Milliman said.
The council and budget committee also looked over the number of employees the city has had over the years andndash; which through attrition, retirement, hiring freezes and mergers has remained almost exactly the same since 2003-04.
At that point, there were 47 Full Time Equivalent employees; today there are 47.5. The numbers don't reflect the true number of employees, but the number of people it takes to do the needed work. For example, four individuals, each working a 10-hour work week, would be equal to one FTE. A full-time employee is also one FTE.
The city has, however, replaced some of its employees and duties with sub-contractors, which has, on one hand, given them more flexibility with what needs to be done and how much is paid, and on the other, can give the impression things aren't getting accomplished.
"After we're all done patting ourselves on the back, that we're down to '04 numbers, how much are we subbing out that we were doing before?" asked Councilor Jake Pieper. "Our rates are up, but our employee numbers are the same."
Milliman noted that demand for services has also grown within the city.
"We're getting more calls; a failed utility, maintenance, someone isn't picking up cigarette butts at the park," he said. "That person doesn't exist anymore. There are going to be some adjustments in the public's perception of what we do. It'll be an experience to go through this process."
Another subject about which councilors were interested is how the Public Employee Retirement System, or PERS, affects the city's bottom line.
Public employees fall into one of three PERS tiers, depending on their date of hire. Those tiers determine how much the city pays to PERS for each employee.
That money andndash; a percentage of an employee's salary andndash; is paid by municipalities to a pool of funds that is, in turn, invested. Retirees received guaranteed pensions from revenue generated by those investments.
If the investments do well, PERS doesn't usually have problems paying dividends to its retirees andndash; but can when if the economy tanks.
Another situation that can change things occurs when the number of working employees shrinks and retiree numbers increase, as is occurring throughout Oregon now. Then, the percentage paid by municipalities to the pool must increase to keep up with the guaranteed pensions paid to retirees.
For example, said city Finance Director Janell Howard, the current percentage of the center tier employees, those hired between 1997 and 2003, is 19 percent. That is expected to increase 4 percent to 23 percent this year. PERS costs the city of Brookings about $120,000 a year.
The council will discuss the budget at a meeting in early April.