SUMMARY OF A BUDGET WORK SESSION HELD BY THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, THURSDAY, FEBRUARY 21, 1991 AT 7:30 P.M.

Mayor Howes called the proceedings to order, noting that the Council would meet with local delegation of the State General Assembly at 7:30 a.m. on Friday, in Ballroom C of the Carolina Inn. He also noted that the Council would hold a joint meeting with the Orange County Commissioners on March 6th at 5:30 p.m. in the Council Chamber, to discuss the proposed visitor services authority and impact tax.

Council Members in attendance were Julie Andresen, Joyce Brown, Joe Herzenberg and Alan Rimer. Also in attendance were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Finance Director Jim Baker, Personnel Director Pat Crotts, Inspections Director John Davis, Planning Director Roger Waldon, Police Chief Arnold Gold, and Town Attorney Ralph Karpinos.

Personnel

Personnel Director Pat Crotts thanked the Council for this evening's opportunity to meet with them. She emphasized the importance of the Personnel Department maintaining current services and programs during tight times. Ms. Crotts added that recruiting and the provision of training were significant concerns.

Council Member Andresen inquired whether other communities had imposed limited salary increases. Ms. Crotts cautioned that flat dollar increases tended to compress salary scales, while across the board salary increases were more effective. Council Member Andresen inquired whether no market adjustment was a preferable alternative to lesser merit increases. Ms. Crotts said this was correct. Council Member Andresen said she liked the performance based pay plan. She noted that the Town was doing a good job of keeping up with market rates. Mayor Howes stressed the importance of the Town keeping up with market competitors in terms of market adjustments. Council Member Brown inquired about the Town's turnover rate. Ms. Crotts responded that the present rate was about eight percent, compared to ten or eleven percent in the recent past.

Council Member Rimer inquired about the nature of cafeteria-style benefits for employees. Ms. Crotts responded that these types of programs offered a menu of benefits to balance the needs of individual employees. She noted that these types of programs took a great deal of capacity to manage. Council Member Rimer inquired about the incidence of double insurance coverage between working spouses. Ms. Crotts responded that double coverage was quite uncommon. Council Member Rimer inquired about the level of communication between local municipalities concerning adjustments in current year personnel budgets. Ms. Crotts responded that many calls had been made between governments, but little definitive information was available about specific actions.

Council Member Rimer said he was shocked by the lack of automation proposals during budget overview sessions. Given the pervasive nature of computer-generated reports, Council Member Rimer expressed his support for additional automation expenditures.

Town Manager Horton said that the Personnel did do a great deal of additional work due to the inadequacy of the payroll system. He noted that a proposal for a computer-based payroll system would be outlined in the budget proposal to the Council.

Town Manager Horton also indicated that he would offer a possible records management proposal for the Police Department. Council Member Rimer asked whether there was any way to determine the amount of time savings from computer operations compared to hand calculations. Mr. Horton stated that approximations were possible. He added that the Town's inadequate cost accounting system would receive paramount attention.

Council Member Andresen inquired whether the market rate had ever decreased. Ms. Crotts said that the rate tended to remain static or grow less slowly, rather than decrease. Council Member Andresen inquired about possible strategies for containing escalating health care costs. Ms. Crotts responded that many health insurance factors were out of the Town's control. She added that the Town's wellness programs played a role in containing health care costs. Council Member Andresen inquired about anticipated percentage increases in near-term health care costs. Mr. Horton responded that health insurance had a general pattern of fifteen percent annual increases over five year periods. Council Member Brown inquired about possible Congressional action to contain health care costs. Ms. Crotts responded that the general expectation was that individual employers would absorb an increasing portion of health care costs.

Council Member Brown inquired about literacy programs. Ms. Crotts responded that efforts were underway to develop an in-house literacy program for Town employees. Council Member Herzenberg inquired about the status of the Town's wellness program. Ms. Crotts responded that she was developing such a report for the Council's consideration. She noted that the report would emphasize safety aspects and worker's compensation and risk management programs. Council Member Herzenberg requested that the Town's in-service programs emphasize the need for courtesy to citizens.

Town Manager Horton noted that the Risk Manager position had not been filled to date, with these responsibilities being handled by a variety of staff throughout the organization.

Mayor Howes inquired about the possible impact of the anticipated negligible adjustment in State employee's salaries on Town salaries. Ms. Crotts responded that this would likely aid in holding down market adjustments.

Mayor Howes said he was very proud of the Town staff and Personnel Department and the overall workplace climate. He expressed hope that this important asset of the Town would not be adversely impacted by difficult budget choices.

Inspections

Inspections Director John Davis noted that his department was in a constant state of implementing new building codes. He stressed the need for inspectors to attend training classes to learn new code applications and interpretations.

Council Member Andresen requested a comparison between the Southern and North Carolina Building Codes. Mr. Davis responded that the Southern Code standards were slightly less demanding than those in the North Carolina Code. He noted that on balance, the Southern Code was slightly better.

Council Member Andresen inquired whether conservation toilets were included in the Southern Code. Mr. Davis responded that they were not. Mr. Horton responded that such items tended to be handled on a local exception basis. Council Member Andresen asked whether individual conservation units would meet the current Code. Mr. Davis said probably not, adding that any possible changes to the Code could be considered by the State. Council Member Brown noted that several conservation toilets were currently being marketed. Council Member Andresen emphasized the importance of bolder thinking in terms of water conservation programs. Council Member Rimer inquired about the possibility of inspectors fostering energy conservation measures in new building proposals. Mr. Davis responded that this was possible. Council Member Rimer inquired whether there was adequate staff to maintain current service levels in the Inspections Department. Mr. Davis said yes.

Emphasizing the Council's limited role in construction quality, Council Member Andresen inquired about the overall status of home quality throughout the Town. Mr. Davis responded that the vast majority of homes in the Town were very well constructed. Mr. Horton added that it was possible to meet every element of the Building Codes with poor workmanship or overall appearance. Mr. Davis said that some of the best housing in the State was located in the Town. Council Member Rimer inquired about the Town's registered survey requirements. Mr. Davis responded that these requirements had to be met prior to the issuance of a certificate of occupancy.

Planning

Planning Director Roger Waldon briefly reviewed significant issues currently facing the Department. He noted that development activity was currently at a relatively high level compared to other communities in the area. Mr. Waldon said that the Town staff was doing a good job of balancing the development and policy demands.

He also emphasized the important evolving role of small area plans as a development tool for the Council, particularly in undeveloped areas.

Council Member Andresen inquired about the proposed scope of the small area planning process. Mr. Waldon said that the planning process would yield a very detailed parcel by parcel overview of development suitability. He added that transfer of development rights from one portion of a site to another might be facilitated. Council Member Andresen emphasized the need to provide timely review of development proposals. Mr. Waldon noted that developers were advised that permits would be available six weeks after Council approval. He said that larger developments required longer time periods. Council Member Andresen said that some developers had said that the process to up to six months. Mr. Horton said that some delays were caused by submittal of inadequate materials for staff review.

Council Member Brown inquired about the rationale for questions in the Planning overview memorandum to the Council. Mr. Waldon said he wanted to present an overview of potential development issues facing the Council in the near term. Mr. Waldon added that traffic reduction alternatives and alternatives to automobiles were being evaluated by the staff. Council Member Andresen inquired whether the public facilities ordinance was still being actively considered. Mr. Waldon responded that a number of alternatives could be examined, including the provision of more sidewalks, bikeways and mass transportation or reconfiguration of preferred land-use development patterns.

Council Member Brown inquired whether the Transportation Board had been asked to review transportation alternative proposals. Town Manager Horton said yes, noting that a formal resolution was being drafted for Council consideration. Mayor Howes noted that large tracts of land could be used to generate traditional or neo-traditional living patterns in the community.

Council Member Herzenberg said that some individuals might be interested in viewing a videotape of a recent planning seminar held at the Institute of Government. He emphasized the need for seminars and dialogues of this type to occur on a more frequent basis.

Council Member Rimer said that the Town did a fairly good job of strategic planning. He expressed concern that the Council was possibly in the process of gradually dismantling the existing mixed-use ordinance. Council Member Rimer emphasized the need for the Council to take reflective time to consider and discuss these types of issues. He suggested that the Council's time might be better focused on long-term planning matters rather than individual development applications. Council Member Rimer said it was not possible to ask the Planning staff to do speedy reviews and long-term planning simultaneously. He requested that the staff provide a rough outline of time spent on each aspect and outline any needs for additional resources.

Mayor Howes said that the Council had a tendency to micromanage development. He expressed concurrence with the need for strategic planning. Mayor Howes also noted that the Council's formal role was a part-time policymaking board. He emphasized the need to use the Council's available time more effectively.

Council Member Andresen said she disagreed that the Council engaged in microplanning. She noted that most development projects were greatly improved following review by Town advisory boards and the Council. Council Member Andresen emphasized the need for adequate time for quality reviews. Council Member Herzenberg noted that the Council had an occasional tendency to spend a great deal of time discussing minor details of development plans. Council Member Andresen emphasized the need for clearer policy direction by the Council and stronger recommendations by the staff. Town Manager Horton said the staff had a history of providing strong recommendations. He suggested possibly delegating some decision making to the Planning Board through the review process or giving greater discretion to the staff.

Council Member Rimer suggested that some authority of the Council be divested back to the Planning Board. Council Member Andresen noted that the Council would ideally only need to deal with policy-related planning issues. Council Member Rimer stressed the need for policy modification over time. Council Member Andresen expressed concern that the Town's Design Guidelines were not sufficiently specific in some areas. Council Member Rimer said his point was to emphasize the need to identify prudent expectations within a workable system.

Finance

Finance Director Jim Baker thanked the Council for the opportunity to meet with them this evening. He briefly reviewed the department's objectives, noting standard objectives such as maintaining financial records for unqualified audit opinions on an annual basis. Mr. Baker said that the volume of activities had grown in the department while the level of staffing had remained stable. Mr. Baker briefly reviewed departmental statistics. He noted that upgrading of data processing capabilities would require additional resources.

Mr. Baker said that the Town enjoyed relatively stable tax rates and a very good bond rating. He noted that the Town had also maintained competitive wages and benefits for its employees.

Council Member Rimer inquired about the proposed timeframe for implementation of cost center accounting. Mr. Baker said that a formal proposal would be presented to the Council in the draft budget document. Town Manager Horton said it would take eighteen to thirty-six months to begin realizing the fruits of any new cost accounting system. Council Member Rimer inquired whether implementation was plausible during the current fiscal year. Mr. Horton said this would not be as productive as desired.

Council Member Rimer requested a brief review of the Town's purchase order process. Mr. Baker reviewed the process. Council Member Rimer inquired about methods for sorting purchase orders by category. Mr. Baker responded that some types of sorting were more easily accomplished than others. He noted that the cost accounting system would facilitate better tracking of expenditures and provide a means for organizing costs for programs and services.

Council Member Brown inquired about the types of new resources required for the system. Mr. Baker said additional personnel and computer hardware and software would be needed. Town Manager Horton emphasized that a great many projects involved guesstimation and a great deal of staff work. Council Member Andresen inquired whether the Town would continue to have a line-item budget. Mr. Horton said this was most likely in the near future. Council Member Andresen noted that the Town's fund balance was quite low in the recommended range. Mr. Baker said that the current balance was approximately $1.2 million, compared to the moderate range of $1.4 to $1.5 million. Council Member Andresen inquired about the Town's level of debt service. Mr. Baker said that approximately $1.6 to $1.8 million was set aside for debt service.

Council Member Andresen said she favored the introduction of a local bill to enable the enaction and collection of an entertainment tax. Council Member Brown suggesed that the entertainment tax rate did not need to be the same for all events. Council Member Rimer suggested that a flat rate could be used for larger events, with a sliding scale for smaller ones.

Council,Member Rimer said that the ability to aggregate costs programmatically was a powerful tool beyond pure cost accounting. Mr. Horton emphasized the importance of accumulating data in a proper form. Council Member Brown asked whether the additional system costs were a one-time or on-going expense. Mr. Horton responded that equipment acquisition would largely be a one-time expense, while personnel, maintenance and replacement costs would be on-going.

Mr. Horton noted that three more budget work sessions were scheduled to occur in April. He added that the interim budget report and more detailed budget information would be provided to the Council in the near future. Council Member Andresen inquired whether several budget options would be presented. Mr. Horton said a major emphasis was being placed on presenting a zero tax rate increase budget. He added that several budget and service level alternatives would also be presented.

Council Member Andresen inquired whether a zero tax increase budget would necessitate any decreases in service levels. Mr. Horton stated that interpretations of service levels tended to differ by individuals.

Council Member Herzenberg suggested that the Council might use the work sheets provided by the Manager as a means of feedback on budget concerns. Town Manager Horton said he would appreciate this approach as a means of giving shape to the budget proposal. Council Member Rimer asked whether additional public safety personnel could be included in a zero tax increase budget. Mr. Horton responded that he had not drawn any final conclusions on a budget proposal. He noted that it would be extremely difficult to add these positions without an increase in the tax rate. Council Member Andresen stressed the need to identify areas for possible funding cuts. Mr. Horton said it might be possible to target programs, rather than broad percentage cutbacks. He added that a zero tax increase or tax decrease budget would invovle no easy choices for the Council.

The meeting adjourned at 9:45 p.m.