MINUTES OF A BUDGET WORK SESSION HELD BY THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, TUESDAY, APRIL 2, 1991 AT 5:30 P.M.

Mayor Howes called the meeting to order. Council Members in attendance were Julie Andresen, Joyce Brown, Joe Herzenberg, Nancy Preston, Arthur Werner and Roosevelt Wilkerson. Council Members Alan Rimer and James C. Wallace were unable to attend the work session. Also in attendance were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Finance Director James Baker, Public Works Director Bruce Heflin and Town Attorney Ralph Karpinos.

Mayor Howes stated that the primary purpose of this evening's

session was to provide guidance to the Town Manager in the development of the FY 1991-92 Town budget documents. Mayor Howes noted that budget adoption was scheduled to occur at the Council's May 28th meeting.

Town Manager Horton presented an overview of the proposed budget, noting that a property tax rate increase of two cents would be needed if the Council chose to add a part-time legal advisor and eight public safety officers to the Town's payroll. Mr. Horton said that updated estimates projected an increase of $12 million in the property tax base, yielding an anticipated $65,000 increase in property tax revenues. He provided updated projections for other taxes and fees, noting that staff estimated that a tax increase of 1.7, rather than 2 cents, would be needed to fund the proposed public safety officer and part-time legal advisor positions.

Mr. Horton reviewed other possible budget-related adjustments, including possible changes in refuse collection methods, increasing the cable television franchise fee, and reducing transportation-related capital projects.

Council Member Wilkerson inquired about the scope of possible decreases in utility franchise fees during the fourth quarter of the current fiscal year. Mr. Horton said the Town staff estimated that fees for the entire year would be approximately $50,000 less than expected. Council Member Wilkerson inquired about the trend in fees anticipated. Mr. Baker responded that third quarter receipts during the current year were three percent less than the previous year. He added that current year projections had been based on an anticipated increase of two to five percent above the previous year. Council Member Wilkerson expressed concern that deferral of expenditures might place the Town in financial difficulties similar to the State. Mr. Horton noted that the Council had a fair amount of flexibility in determining the deferral or postponement of expenditures such as future debt service commitments.

Council Member Wilkerson asked why the preliminary budget report had not included an option for placing a cap on merit pay increases. Mr. Horton responded that the Council had the option of selecting any figure as a merit pay cap. He noted the importance of making pay adjustments for good work performance.

Noting the Town's limited personnel resources compared to private industry, Council Member Wilkerson suggested that the Town reconsider its strategy on making comparisons to other agencies and municipalities.

Council Member Werner inquired whether there was currently a cap on merit pay increases. Mr. Horton said yes, noting that it was approximately $450,000 during the current year. He added that a detailed study on benefits would be provided to the Council for their April 9th budget work session.

Council Member Andresen requested a clarification of fund balance approaches. Mr. Horton provided an overview of fund balance methods, noting that conservative guidelines outlined by the Local Government Commission were used as a template. He noted that a gradually increasing fund balance of eight to ten percent was highly desirable. Mr. Horton noted that a healthy fund balance had assisted the Town during recent financially difficult times. Council Member Andresen inquired about expected short-term changes in the Town's fund balance. Mr. Horton said the balance would likely continue to be very stable. Council Member Andresen noted that the Town's auditor had recommended incremental increases to the Town's fund balance. Noting the auditor's high standards, Mr. Horton said this approach was well advised.

Council Member Wilkerson said that the conflicting trends in property tax and the utility franchise tax were counterintuitive. He inquired why these divergent trends were occurring. Mr. Horton said that there were at least two possibilities: mild climatic conditions and/or a catching up of the property tax base. Mr. Baker added that the projected increase in property tax revenues was much lower than previous years. He noted that the projection was made by the County Tax Supervisor based on gross receipts to date. Council Member Werner asked whether the utility franchise tax projections were based on stable weather patterns. Mr. Baker said it was very difficult to pinpoint the causality and trends of utility franchise taxes. Council Member Wilkerson said that growth would be integrally tied to both taxes. Mayor Howes said that the staff would have a firmer fix on the property tax valuation for the Town in the near future.

Council Member Brown inquired about the method used to determine the cap on merit pay increases. Mr. Horton responded that the Personnel Department projected a distribution of increases over an overall range, with the aggregate amount being budgeted in individual departments. Noting current economic difficulties, Council Member Brown emphasized the need for a careful examination of the Town's merit-based compensation system. Council Member Brown also suggested that Town departments explore strategies for reducing utility usage, expecially electricity. Mr. Horton stressed the importance of setting a goode example in terms of utility conservation. He noted that consistent conservation efforts could make a very significant difference over time.

Council Member Brown inquired about the viability of a directive to cut Town utility costs by a predetermined amount. Mr. Horton stressed the important roles of energy management techniques and the proposed new accounting system in determining energy usage and costs by individual Town departments.

Council Member Brown said that further reductions could be made in the Town's use of paper, such as the invitations for the Town Hall Dedication Ceremony. She also suggested that the Council consider not including funding for the Public-Private Partnership Conference trip within next year's budget. Council Member Brown asked why the landfill tipping fee had been raised to $21 per ton rather than $21.50 per ton. Council Member Preston said the Landfill Owner's Group had emphasized the importance of balancing costs with the necessity of continued recycling and related landfill programs.

Mr. Heflin said that the Town's Landfill Fund was in fairly good standing. He stated that efforts had been made to mitigate the impact of tip fee increases on landfill users. Council Member Brown inquired whether tipping fees of surrounding counties had been evaluated. Mr. Heflin said yes, noting that fees in some portions of the State approach $30 per ton. Council Member Brown noted that Durham County was considering an increase to thirty- six dollars per ton in the near future. Mr. Heflin observed that setting landfill fees was a tenuous process. Mr. Horton said that the Landfill Owner's Group had taken a responsible and conservative approach in beginning to pay the costs for a landfill liner, equipment, engineering studies and related costs.

Council Member Preston inquired whether a $700,000 addition to the fund balance was being recommended during the next fiscal year. Mr. Horton responded that the $700,000 figure was proposed as a means of continuing to protect the Town's long-term fiscal integrity. Council Member Preston asked whether the principal focus was to maintain a fund balance of approximately $1.2 million. Mr. Horton said this was correct. Council Member Preston requested a review of fund balances in recent years. Mr. Baker said that the balance had been fairly consistent for the past five years. Council Member Preston inquired where unexpended funds, such as the non-hiring of the Public Safety Director, accumulated. Mr. Baker said that these funds ultimately resided in the fund balance. Mr. Horton stated that some unexpended funds were used to offset anticipated revenues that were not received. Mr. Baker noted that the Town's operating funds generated investment income of approximately $350,000 per year.

Council Member Andresen requested a review of the proposal for the addition of a part-time legal advisor in the Police Department. Mr. Horton said the proposal asked the Council to consider the addition of an attorney with a background in criminal law, for a period of sixteen to twenty hours per week. Mr. Horton said the advisor could provide a higher level of training and advisement to the Police Department than current staffing permitted, because the individual would spend his or her time in the Police Headquarters.

Noting that legal advisory services were being provided to the Police Department at a lower level of service than ten years ago, Council Member Herzenberg said he supported the Manager's and Attorney's recommendation concerning the proposed addition of a part-time legal advisor.

Council Member Andresen inquired about public safety utilization rates. Mr. Horton responded that the staff could adapt staffing levels based on utilization rates outlined by the Council. Mr. Horton noted that a consultant study recommended a Town utilization rate of approximately forty percent. Council Member Andresen inquired about the Police Department's service component. Mr. Horton responded that consistent emphasis was placed on maintaining good police-community relations. Council Member Preston inquired about the size of the current public safety officer recruit class. Mr. Horton responded that four persons were currently in Town's public safety recruit school.

Council Member Werner inquired about the status of the public safety system evaluation report to the Council. Mr. Horton said the report would consider every dimension of the current system. He also stressed the importance of Council guidance in examining the public safety system. Council Member Werner said he preferred not to eliminate all user-friendly Police services as a means of budget reduction. He emphasized the need for continued good rapport between citizens and public safety officers. Council Member Herzenberg noted that there had been a surge in burglaries approximately ten years ago, shortly after the introduction of the public safety system. He noted that the higher incidence of break-ins was principally attributable to higher gold and metal prices.

Mayor Howes said the Council looked forward to the report on the public safety system. He stressed the need for a more deliberate approach on this matter than could be followed during the current budget process.

Public Works Director Bruce Heflin briefly reviewed the concept of a pilot curbside refuse collection program. Mr. Heflin said the implementation of the pilot program would be quite straightforward, including an interactive orientation process for neighborhood residents. He added that implementation of the pilot program was proposed for early 1992, with a follow-up report to the Council occuring after completion of the program. Mr. Heflin also noted that exemptions from the program could be provided to elderly and physically impaired persons.

Noting that once per week refuse pickup was not an undue hardship, Council Member Werner said implementation of such a program was relatively easy. Council Member Werner suggested that the Town stop picking up grass clippings and yard waste, and encourage their composting by individual homeowners. Mr. Heflin noted that new State legislation would prohibit landfilling of yard wastes after 1993. He also concurred with the desire not to provide pick up of yard wastes. Council Member Werner said it was relatively simple to educate the public about composting of yard wastes.

Council Member Brown inquired whether composting would be included as an element of the pilot program. Mr. Heflin said that the final details of the program had not been determined. Solid Waste Planner Blair Pollock said the program would be patterned after the one implemented by the City of Seattle, Washington. He added that demonstrations of the program would occur at three area sites on April 20th. Town Manager Horton stressed the importance of collecting good data from the curbside pilot program. Mayor Howes noted that the Council was quite divided on the pilot program, having approved it by a vote of 5-4. He expressed his opinion that twice per week refuse pickup was highly valued by members of the community.

Council Member Preston said she had been contacted by one of her neighbors, expressing concern about possible deterioration of neighborhood appearance as a result of once per week refuse collection. Council Member Preston noted that although the curbside program was well-designed, she was ambivalent about its implementation. She inquired about positives and negatives of the once per week rearyard collection proposal. Mr. Heflin said program implementation offered potential savings of $80,000 to $100,000. He added that the proposed program would build on the Town's existing refuse collection system. Mr. Heflin said the main difference for the collection would be that more and heavier cans would need to be emptied into larger bins , meaning that it would no longer be possible to combine refuse from two or three homes. Mr. Heflin said that negative outcomes would include a greater number of staff injuries, longer traveling distances between residences, and the virtual elimination of the task incentive system. Mr. Horton said based on the City of Decatur, Georgia's experience, it was very likely that the number of staff injuries and hours would increase under the proposed system. He added that the biggest obstacle to public acceptance would be that if refuse collection were missed once, it would be two weeks between pick-ups.

Council Member Werner noted that cardboard and magazines constitued a high percentage of waste volume. Mr. Heflin responded that there was currently no active market for these materials. Mr. Pollock said it was likely that a market would open within the next year for magazines. He stressed that the significant challenge of this program would be the segregation of different types of paper. Mayor Howes said that separation at the source would be essential.

Council Member Andresen noted that Alamance County had banned cardboard from its landfill. Mr. Heflin noted that Alamance County had a number of large landfill users regularly generating a large volume of cardboard. Council Member Andresen commended the Public Works Department for its educational programs on composting and other waste volume reduction methods. Council Member Andresen said she had a number of concerns about once per week refuse collection.

Expressing her support for a pilot program, Council Member Brown inquired how recycling would fit into the pilot program. Mr. Heflin responded that levels of recycling participation in the pilot neighborhoods would be actively monitored. He added that the staff would report back to the Council on possibly bringing recycling programs in-house in the future. Council Member Brown asked whether yard wastes were segregated from garbage at the landfill. Mr. Heflin said no, although brush was placed in a different location at the landfill. He noted that the staff was studying the feasibility of large-scale composting programs.

Council Member Werner expressed his support for greater business participation in recycling programs. He also suggested that the Chamber of Commerce, Downtown Commission and other agencies could play vital roles in business recycling programs.

Council Member Wilkerson expressed his support for the pilot program and once per week backyard refuse collection. He noted his enthusiasm for receiving the staff's report on an in-house recycling program. Council Member Andresen inquired whether the Town or a regional committee would administer the program. Council Member Wilkerson said this merited further discussion in the future.

Council Member Wilkerson suggested that the staff pursue a proposal to collect magazines and set them aside in the landfill until a recycling market became available. Council Member Wilkerson said he was interested in devising a composting program for Town residents. He also noted that the City of Durham had recently implemented a pilot backyard refuse collection program with rollout carts.

Mayor Howes urged the staff to develop a program for periodic disposal of household hazardous wastes. He also inquired about the status of recycling programs for apartment residents. Mr. Heflin noted that three hundred and twenty-five additional apartment units would possibly be served by the recycling program. Mr. Pollock added that approximately thirty percent of apartment residents were currently receiving recycling pickup. Mayor Howes said the Town's recycling program was well-designed, but appeared to be piecemeal in its overall scope. Council Member Wilkerson requested detail concerning the breakout of costs for the traffic control loop system. Council Member Brown said she supported a fee system for refuse collection, similar to those used by other communities.

Council Member Brown also expressed her support of in-house recycling programs. She also requested information about costs for residential and commercial refuse pick-up.

The session concluded at 7:33 p.m.