Village Council Special Public Budget Meeting Minutes 20140416

A SPECIAL PUBLIC BUDGET MEETING OF THE VILLAGE COUNCIL OF THE VILLAGE OF RIDGEWOOD HELD IN THE SYDNEY V. STOLDT, JR. COURT ROOM OF THE RIDGEWOOD VILLAGE HALL, 131 NORTH MAPLE AVENUE, RIDGEWOOD, NEW JERSEY, ON WEDNESDAY, APRIL 16, 2014, AT 5:00 PM.

1. CALL TO ORDER – OPEN PUBLIC MEETINGS LAW – ROLL CALL

Mayor Aronsohn called the meeting to order at 5:02 P.M., and read the Statement of Compliance with the Open Public Meetings Act. At roll call, the following were present: Councilmembers Pucciarelli, Riche, and Mayor Aronsohn. Also present were Roberta Sonenfeld, Village Manager; Heather Mailander, Village Clerk; and Stephen Sanzari, Chief Financial Officer (CFO). Councilmembers Hauck and Walsh were absent.

Mayor Aronsohn led those in attendance in the Pledge of Allegiance to the flag and asked for a moment of silence in honor of the American men and women serving in our Armed Forces, as well as those serving as first responders.

2. COMMENTS FROM THE PUBLIC

Mayor Aronsohn stated that they would now have comments from the public and advised anyone wishing to address the Village council to come forward. There were no comments from the public at this time, and Mayor Aronsohn closed the time for public comment.

3. DISCUSSION ITEMS

To get started, Ms. Sonenfeld said she wanted to emphasize a couple of things. The first is that this is not the budget introduction, and normally, at this point in the process, there is a lot less information available than what is available now. Furthermore, there are some numbers that still need to be reviewed.

This is a preliminary review of the budget, representing a culmination of the budget discussions to date between Village management and the various Department Supervisors, as well as between the Councilmembers and the Department Supervisors, and there are still some adjustments that could be made to this budget. Ms. Sonenfeld will be disseminating a lot of information tonight, which represents the beginning of the decision phase for the budget. Therefore, Ms. Sonenfeld invited the public to engage in a conversation. The next budget meeting is scheduled for Monday, April 21, 2014, at 6:30 P.M.

Ms. Sonenfeld noted that this not only the start of the decision process for this budget, but it is also the start of a longer-term conversation and longer-term plans for how to strategize and deliver government services going forward.

A. REVIEW AND WRAP UP OF 2014 BUDGET, 2014 CAPITAL BUDGETS, AND SETTING OF 2014 TAX RATE

In the budget process to date, the Village Council directed the Village Manager to come up with a 0% tax increase for 2014, and to come up with a $3 million capital budget. Ms. Sonenfeld commented that they have completed at least two rounds of budget reviews and worked with some of the Departments. Departmental reviews have been held with the Village Council over the past three weeks, and based on those reviews and conversations, further adjustments to the numbers have been made. Generally speaking, anticipated revenue has been maximized. In many cases, the actual revenue figures from 2013 were used. There is not much room in this budget. Actual expenses for 2013 were used as a guideline for expense appropriations in 2014. It was assumed that there would be no change or diminishment in any services to residents.

Councilman Pucciarelli pointed out that when Ms. Sonenfeld referred to “maxing out anticipated revenue,” it is important to distinguish that it is unlike the private sector, where revenue that has never been received can be anticipated. In the public sector, only revenue that has been realized in the prior year can be included in the budget, with very few exceptions.

Ms. Sonenfeld began by looking at expenses that need to be covered, which are supplemental expenses over and above those included in the 2013 budget, and are expenses that must be funded upfront. In 2013, the figure for one-time revenue and fund balance of $3.827 million was used. It was necessary to figure out how to address that in the 2014 budget year. There is a year-to-year increase in debt service of $835,000, which also must be dealt with in the 2014 budget. In addition, there are contractual salary increases of $212,290; health insurance increases of $321,000; and terminal leave increases, over and above what was paid out in 2013, of $101,000. Councilman Pucciarelli asked if that is anticipated terminal leave, and Ms. Sonenfeld responded that it is terminal leave which she is sure must be paid. Councilman Pucciarelli added for clarification that the number does not represent the establishment of a reserve against the unfunded liability that is already known. Continuing with the supplemental expenses, incremental snow removal costs total $365,452, which has already been spent; seasonal staff, which was a grant last year that was used in two areas, of $118,548; and election expenses for the Municipal Election of $50,000; salary raises for non-union and management staff of $50,000; two new Police Officers, including salaries, benefits, uniforms, and training, in the amount of $80,000; and grass disposal/NJDEP license expenses of $65,000. Ms. Sonenfeld noted that these expenses must be covered, because they are contractual in nature, except perhaps for the salary raises, which could be discussed. The supplemental expenses currently in the budget that Ms. Sonenfeld believes should be covered include expenses for police vehicles in the amount of $100,000; Board of Adjustment support in the amount of $33,000; an added amount for snow removal for 2014 of $40,000, which would cover one snowstorm; an added part-time staff member in the Information Technology Department, to be paid $35,000; and expenses for the e-ticket system in the amount of $15,000, all of which total $262,000.

Moving over to the revenue side, Ms. Sonenfeld pointed out that there are some risks, as well as some opportunities. Parking tickets could be a risk, because currently, there is not any staff to deal with parking tickets. There are the usual weather-related risks associated with Graydon Pool, as well as some risks in recycling revenue due to the tougher standards and potentially lower prices. Moreover, because revenues have been estimated closer to the 2013 actual spent figures, when the fund balance is replenished in 2015, there is a risk that it will not be replenished at the same amount.

There are also some opportunities in 2014. There will be a full-year impact felt from the increase in the side job fees, which could be as much as $200,000 over that of 2013. That is one of the areas referred to earlier by Councilman Pucciarelli in which revenue can be anticipated. There could also be an increase in building permits, given the state of the economy.

Ms. Sonenfeld then discussed the sources of funds, and the use of surplus and trust funds. She commented that, in order to get to the 0% tax increase, some of the fund balance would be used, as has been done in the past. The fund balance is replenished every year by revenues that are over and above the anticipated revenues, or actual revenues. It is also replenished by expenses that are overestimated. Therefore, Ms. Sonenfeld suggested using $3.1 million of the surplus balance, leaving a remaining balance of $1.3 million. This is comparable to what was done in previous years. There is also a Recycling Trust Fund with a balance of nearly $600,000, although nearly half of it was taken for allocation against budget items, and another $150,000 was taken to offset the tax levy in order to get to the 0% tax increase. The Snow Removal Trust Fund of $211,000 was completely depleted in 2013, due to the harsh winter.

There are some one-time revenues that are anticipated for 2014. These are in addition to the fund balance, and they include the Recycling Trust Fund; a reserve from the Federal Emergency Management Agency (FEMA) that will be used; Green Acres grant money; and the reserve for debt service. There will also be deferred charges from the parking facility for 2011 and 2012, when the Village moved money to make up a deficit in the Parking Utility, and which the Parking Utility is now paying back to the Village; and the capital fund balance. The total for all of those one-time revenues is $1.343 million. In 2013, the one-time revenues totaled $877,540.

Regarding debt service, Ms. Sonenfeld noted that it increases significantly year-to-year. The principal and interest payments on the outstanding debt are approximately $4.8 million, which is $835,000 more than in 2013. Money must be found to offset that increase. Some of it has been offset by Green Acres grants; a FEMA reserve; and the Open Space tax levy. One of the things Ms. Sonenfeld believes must be reviewed and considered is to look at long-range budget forecasting and planning. She hopes to work with the Financial Advisory Committee (FAC) in that area. Councilman Pucciarelli asked if most of the debt service increase is due to an increase in the principal, because he recalled that the Village was able to obtain a very good interest rate in 2013. Mr. Sanzari explained that the large increase is from the 2013 bond sale, resulting in a $600,000 principal payment in the 2014 budget.

Reviewing the supplemental expenses against the sources of funds, Ms. Sonenfeld stated that the supplemental expenses, including the ones that must be covered, as well as the ones that she believes should be covered, total $5,995,830, which she and the Councilmembers must figure out how to fund. The three areas of funding being discussed are: fund balance; one-time revenues; and one-time budget allocations, which bring the supplemental expenses down to $4.9 million. Ms. Sonenfeld stressed the fact that this is all preliminary, and could change. Mayor Aronsohn asked how much of that was due to snow removal expenses, and Ms. Sonenfeld responded that snow removal expenses totaled $365,000; the increase in debt service was $835,000; and the contractual expenses covering salaries, insurance, and terminal leave totaled approximately $600,000. All of those expenses must be covered.

In reviewing the preliminary budget, Ms. Sonenfeld commented that, based on the 0% tax increase, and all of these sources and uses of funds that she discussed, the amount to be raised by taxation totals $30.975 million, which would be a decrease in taxes of $5 per year based on the average assessed value of a home in Ridgewood.

Councilman Riche commented that unless he misunderstood what Ms. Sonenfeld stated, there is currently a total of $1.037 million in unfunded expenses versus the funds to be raised. Ms. Sonenfeld responded that they are unfunded by one-time events, but they will be funded through revenue increases and expense decreases in the budget. Regarding the anticipated revenue from the FEMA reserve in the amount of $452,000, Councilman Riche asked if the Village already has that money, or if it is anticipated. Ms. Sonenfeld responded that it has been received. Councilman Riche asked what, if any, anticipated FEMA money is in the budget. Ms. Sonenfeld answered that approximately $300,000 is anticipated to come from FEMA. In addition, she pointed out that the amount of surplus that is being recommended to be used in 2014 is $3.1 million, with $300,000 to be received from FEMA. Ms. Sonenfeld reminded everyone that she recommended going $100,000 lower in remaining surplus for 2014 in the fund balance account. The reason she is comfortable with that recommendation is because the $300,000 that is anticipated from FEMA will be applied to that account, and those funds have not yet been received by the Village. Mayor Aronsohn pointed out that the $300,000 is not reflected in the budget. Mr. Sanzari explained that the situation is very similar to that in 2013, when the fund balance was anticipated, and FEMA money was received during the year. Mr. Sanzari added that it is anticipated based on an approval that was obtained by FEMA, and it is now just a matter of getting the funds, which could take another two or three months.

Ms. Sonenfeld stated that there is a discussion to be had about utilizing approximately $5 million of the fund balance and other associated one-time revenues and allocations. She emphasized that the $5 million is not a change, but represents $1 million of added risk over what was done in 2013. This is the trend that the Village has followed over the past couple of years, according to Mr. Sanzari. One possibility suggested by Ms. Sonenfeld was partially funding the unfunded liabilities by tax increases. If taxes were raised by .5%, it would equate to $22 per resident per year, or less than two dollars per month, and the Village would raise $225,000 by doing that. A 1% tax increase would equal $50 per resident per year, and it would raise $450,000 for the Village. Ms. Sonenfeld reiterated that expenses and revenues will be reviewed again to see if there any other expense savings or revenue enhancements that can be made, and that will be done prior to the meeting on Monday.

Councilman Pucciarelli asked a question about the number for the capital debt service, and Mr. Sanzari explained that there is a line in the budget to be introduced for a $140,000 for capital funding, which is the same level as in 2013. Councilman Riche commented that when the Department Directors made the budget requests, specifically capital requests, Councilman Riche thought they made some compelling arguments for them He asked Ms. Sonenfeld if she could perhaps prioritize the most important items to be funded out of the capital budget, and to see if they could be funded if a tax increase were to be approved. Ms. Sonenfeld reminded everyone that the initial budget requests were double the amount shown in this budget presentation. In addition, Mr. Sanzari is currently in the process of canceling out old capital projects and re-appropriating the funds for new projects. Ms. Sonenfeld assured Councilman Riche that some money can be found through that process. Mayor Aronsohn asked if it would be possible to have a list before Monday of the various capital requests. Councilman Riche pointed out that none of these discussions cover Ridgewood Water. He noted that there was a project being considered to sell some of the properties owned by Ridgewood Water, and Councilman Riche wondered whatever happened to the project. Mr. Sanzari responded that there was a capital ordinance introduced and adopted in 2013 for that project, and he would get that information for Councilman Riche.

Ms. Sonenfeld stated that she wanted to introduce some challenges and opportunities going forward. Taking the contractual obligations as a whole, there are approximately $26.7 million in contractual obligations in a budget of approximately $46 million. That represents more than 57% of the budget. The importance of that is, that aside from long-range planning against those numbers, they are hard, but not impossible, to move. In fact, the terminal leave figure for this year is a risk for 2015. To the extent that there are, in particular, several retirements from the Police Department in 2015, terminal leave will increase. As stated earlier, there are 11 confirmed retirements in 2014, which will cost the Village $420,000 in terminal leave this year. The same 11 retirements will cost the Village $271,000 in 2015, and approximately $100,000 in 2016, for a total of $791,950 over three years. Ms. Sonenfeld pointed out that there is also an unused Trust Fund that contains $479,000. The $420,000 payment has already been budgeted, so the Trust Fund will not be touched this year. That will also help in the event that there are some unanticipated retirements.

Councilman Riche pointed out that the health insurance premium paid by the Village annually exceeds the entire salaries of the Fire Department, and is very close to the total salaries of the Police Department. Councilman Pucciarelli pointed out that, unlike other municipalities, Ridgewood is absorbing more of the increase in health insurance than other municipalities do because the contribution level was frozen in previous collective bargaining agreements. While everyone else must pay 1.5% of their salary, or 35% of the premium, toward health care benefits, a disproportionate percentage of that is falling on Ridgewood taxpayers because the contribution level was frozen for any unions under contract at the time the contribution level was established. Councilman Pucciarelli assured everyone that will not be the case in future collective bargaining agreements. Councilman Riche asked of the $5.9 million pay for health insurance, how much is paid for current employees versus retired employees. Mr. Sanzari said he did not know the actual dollar figures, but the monthly premium for current employees is approximately $335,000, and the premium for retirees is approximately $238,000 per month. That does not include any employee contributions. Councilman Riche asked if retirees contribute to their healthcare premiums after they retire, and Mr. Sanzari responded that they do not, except for those under an old contract which provided that employees would pay for their healthcare premiums after they retired, but that is a rather small amount. Councilman Pucciarelli added that, as everyone is aware, the terminal leave policy must also be reviewed, because it is unfair to pay at today’s rate for a sick day that was not taken at a lower rate several years previously. That becomes the equivalent of a very large severance payment. Mayor Aronsohn explained for the benefit of the public that terminal leave, which is something that is virtually unknown in the private sector, is payment for unused sick days when public employees retire. In the private sector, unused sick days disappear upon retirement, but government employees get paid for their unused sick time. That puts a tremendous burden on municipal governments, although Mayor Aronsohn is aware that the law has changed for new hires, and now provides a $15,000 cap. Ms. Sonenfeld mentioned the policy on compensatory time, and Councilman Pucciarelli stated that the current policy does not seem to discriminate effectively between salaried and non-salaried employees, which must be clarified. Ms. Sonenfeld commented that the management team will be meeting tomorrow to discuss the new Human Resources Policy Manual, and the big topic will be compensatory time, and how it is implemented throughout the Village. Ms. Mailander interjected that she left information about that for each of the Councilmembers, and asked them to read it prior to April 23^rd, because it will be discussed at the Village Council meeting on April 23^rd.

Continuing her discussion regarding the budget going forward, Ms. Sonenfeld believes in tweaking the budget year after year, although the management team has been successful in decreasing the important numbers this year. Ms. Sonenfeld does not believe there is a lot of fat left in the 2014 budget. Going back to the comment made by Councilman Pucciarelli, Ms. Sonenfeld agreed that salaries and steps, as well as longevity, must be reassessed. Moreover, the 2% cap must be used as a tool going forward. In addition, the Village must begin to do government differently. That includes delivering services differently; treating people in the organization differently; and treating clients (residents) differently. As far as delivering services, that means collaboration with the County, as well as with other municipalities; potential in sourcing and outsourcing; and the possibility of using a Six Sigma productivity tool in the organization, to make it more effective and more customer-friendly. As far as people are concerned, the staff needs to be empowered, and the focus needs to be on staff and leadership development, as well as on succession planning. On the client side, a way must be found to measure client satisfaction. Ms. Sonenfeld gets feedback from residents who are unhappy, as well as residents who are happy, but all of that information is anecdotal. It is very hard to gauge client satisfaction, and what their critical customer requirements are. Once that information is obtained, the Village can change its processes to deliver a better product to the residents in a more effective and efficient way, which will make them happier.

Finally, Ms. Sonenfeld noted that the Village Council’s directive was $3 million for the capital budget, and that she would follow Councilman Riche’s recommendation to prioritize the capital budget requests. She also reiterated that all of this budget discussion is preliminary, and some of the numbers still need to be tweaked. A lot of information has been disseminated, and it is important to remember that this is only the beginning of the decision phase for Village management. Ms. Sonenfeld asked for public feedback and input on the budget.

Mayor Aronsohn thanked Ms. Sonenfeld for her presentation on the budget. He also thanked Mr. Sanzari and Ms. Mailander for their work on the budget, as well as all of the Department Supervisors. Governing and budgeting are not easy tasks, and a lot of constraints are placed on municipalities as far as budgets are concerned. Everyone is been very cooperative, and Ms. Sonenfeld echoed that sentiment. She appreciated the honesty and candor of the Village staff, and the thoughtfulness that they put into the process. Ms. Sonenfeld especially thanked Ms. Mailander for her guidance, and the members of the FAC for their help.

Mayor Aronsohn continued by saying that Ms. Sonenfeld gave everyone a lot of information to digest in a very well-organized way, and everyone should come to the meeting on Monday prepared to make some decisions.

Finally, Mayor Aronsohn addressed Ms. Sonenfeld’s suggestions about doing things differently. Structural changes are needed in Ridgewood, and certain things need to be looked at differently. Mayor Aronsohn is also very enthusiastic about Ms. Sonenfeld’s recommendations regarding delivering services differently; treating staff members differently; and focusing on client satisfaction.

Councilman Pucciarelli asked a question about the Trust Fund listed on the page with the unfunded liabilities. He wanted to know what the Trust Fund is. Ms. Sonenfeld explained that it is money that was put aside to be used for future retirements. Councilman Pucciarelli asked if that is a specific Trust Fund for that purpose, and Ms. Sonenfeld answered that it is. Councilman Pucciarelli asked if the money is to be used for compensatory time, and Mr. Sanzari answered that it would be used if someone who is entitled to compensatory time, sick time, or vacation time retires during the year, the money could be used for those payments. Ms. Sonenfeld noted that the 11 confirmed retirements are being charged against the budget, not against the Trust Fund. Councilman Pucciarelli asked what the source of income is for the Trust Fund. Mr. Sanzari explained that every year, funds are added to the Trust Fund from the prior year’s budget.

Councilman Pucciarelli joined Mayor Aronsohn in thanking the numbers of the FAC who helped the Councilmembers to look at the budgets prepared by the Department Supervisors in a different format. In particular, Mac Highet attended all of the budget meetings that were held, and made a great contribution to the process, with no compensation from the Village. Councilman Pucciarelli said he also thought that the Department Supervisors were very professional, and were very understanding in the efforts to try to keep the 0% tax increase possible.

Councilman Riche thanked Mr. Sanzari for all of his efforts in the budget process, as well as Ms. Sonenfeld. He commented that the new format is great, and very easy to understand. It gives the Councilmembers a better sense of concentrating on specific areas, instead of micromanaging the budget.

4. ADJOURNMENT

There being no further business to come before the Village Council, on a motion by Councilman Riche, seconded by Councilman Pucciarelli, and carried unanimously by voice vote, the meeting was adjourned at 5:45 P.M.

                                                                                                                                                                                                                                    _____________________________

                                                                                                Paul S. Aronsohn

                                                                                                        Mayor

_________________________________

            Heather A. Mailander

                Village Clerk