MINUTES OF A BUDGET PUBLIC HEARING AND WORK SESSION HELD BY THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, TUESDAY, MAY 17

MINUTES OF A BUDGET PUBLIC HEARING AND WORK SESSION HELD BY THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, TUESDAY, MAY 17, 1994

Mayor Broun called the hearing to order. Council Members in attendance were Joyce Brown, Joe Capowski, Mark Chilton, Pat Evans, Lee Pavão, Barbara Powell, Jim Protzman and Rosemary Waldorf. Also in attendance were Town Manager Cal Horton, Assistant Town Manager Florentine Miller, Finance Director James Baker and Town Attorney Ralph Karpinos.

Item 1 Public Hearing on Manager's Recommended Budget

and Capital Improvements Program

Mr. Horton said his budget proposal would not necessitate a property tax rate increase. He added that the proposal also added seven police officers, included debt service for the sale of $1.8 million of open space bonds, increased total annual hotel-motel grants from $33,000 to $50,000 and annual human services funding from $70,000 to $90,000. Mr. Horton said the proposed budget also included funding for some capital projects, a 4% average increase in employee compensation, an increased landfill tipping fee of $1 per ton and increased funding for support of the Senior Center.

Mr. Horton also stated that staff was still in conversation with the City of Durham about 1994-1995 transportation funds. He said staff was confident that the discussions would conclude with funding in the earlier estimated range.

Phillip Sullivan, a homeowner in the Oaks Villas subdivision, said retired persons with fixed incomes were especially concerned about sudden increases in costs. Mr. Sullivan said he was concerned about the proposed four percent pay raise for all Town employees. He also expressed concern about the proposed addition of nineteen full-time employees. Mr. Sullivan stated that other industries were downsizing, laying off employees and freezing compensation. He added that although there had been no property tax rate increase, the valuation of many homes had increased between 15% and 40%. Noting that deficits were projected in the Town's budget over the next five years, Mr. Sullivan urged the Council to consider laying off staff to offset future projected deficits. He also suggested that the Council continue to seek legislative authorization for Home Rule. Stating that personnel costs were about 65% of the Town's proposed budget, Mr. Sullivan said he favored reducing the number of Town personnel.

James White, a member of TaxWatch, said the Town owned and serviced a number of automobiles. He urged the Council to sell these cars and reimburse individuals for use of their private automobiles. Mr. White also suggested privatization of some municipal services such as refuse collection. He also stated that the Town received about $143,000 in Town library funding from Orange County. Mr. White said about $80,000 of this sum was from County residents while the remaining $60,000 was from Town residents. He suggested that if the Town were unable to work out an equitable agreement, the Town should reject this support and have non-Town residents pay a suitable fee for library services.

Leslie Wyatt expressed concern that the Town's trolleys were not

accessible to handicapped persons. She stated that this inaccessibility did not project a good image of the trolleys.

Ruby Sinreich said she opposed the proposed increase in local bus fares. Ms. Sinreich said the projected 5% who would not ride buses after the fare increases were most likely poorer persons who most needed bus service. She urged the Council not to penalize those who could least afford not to ride buses. Noting that crime rates had decreased recently, Ms. Sinreich suggested that the Council consider reducing the number of proposed new police officers.

Shelly Green, speaking on behalf of the Orange County Visitors Bureau, urged the Council to continue a comprehensive local visitors program. Ms. Green requested that the Council allocate twenty percent of the Town's hotel-motel tax proceeds to the Orange County-Chapel Hill Visitors Bureau for operations. She urged the Council to make a long-term commitment to attracting more visitors to the Town.

James Goldstein briefly reviewed a series of handouts he distributed to the Council. He stated that the Town's personnel roster contained an eleven position discrepancy between the Town's 1993-94 and 1994-95 budgets. Mr. Goldstein also expressed concern that the Town's overall travel and training expenses had increased by about 52% over the past two years. Mr. Goldstein said he was concerned about how taxpayer funds were being used.

Item 2 Hearing on Proposed Changes to Downtown Service District

Mr. Horton said the purpose of this evening's hearing was to receive comments from downtown business and property owners about the proposed downtown service plan. He stated that the current Downtown Service District tax rate was 6.2 cents per $100. Mr. Horton noted that under State law, any changes in the district service plan would need to be adopted by July 1st.

Robert Humphreys, representing the Downtown Commission, said potential changes to the service plan had evolved into a debate of whether or not to continue trolley service in the downtown area. Mr. Humphreys said while the Commission supported continuation of trolley service, it did not favor using service district tax revenues to support enhanced lighting or increased police services in the downtown area. He suggested that the Council use the funds for trolley services or repeal the service district tax altogether. Mr. Humphreys said trolleys played an important role in promoting and enhancing the downtown area. He stated that the staff's recommendation to discontinue the trolley service was based solely on trolley ridership.

Council Member Waldorf asked whether the Commission had discussed projects other than the trolley service to enhance the downtown area. Mr. Humphreys said the Commission felt that continued trolley service was the best means to promote and enhance the downtown area. Noting that trolley ridership was quite low, he said one possibility was to make trolleys more rider-friendly.

Mayor Broun said based on discussions with taxpayers of the special service district, he thought there was a split in opinion about the utility of trolleys and the district itself. Mr. Humphreys said he believed there was a certain amount of negative opinion against the trolleys. Mayor Broun said he did not think the trolley route should be thought of as a standard transit route. Noting that the trolleys were not accomplishing the objectives desired by the Council, Mayor Broun suggested exploring ways to enhance the performance of the trolley service.

Mr. Humphreys suggested forming a group to evaluate trolley service in the downtown area. Council Member Capowski said the Council was seeking suggestions to improve trolley services. Mr. Humphreys said supplemental police and lighting were not a better use of service district tax funds than operating trolleys. Council Member Capowski asked who was responsible for paying downtown service district taxes. Mr. Horton said property owners in the district were responsible for paying the tax. Mr. Humphreys said residential properties, including Granville Towers, were excluded from the district. Council Member Capowski asked whether most properties in the district were retail businesses. Mr. Humphreys said most of the businesses were customer-service type businesses.

Council Member Capowski asked what percentage of businesses could not benefit from trolley service. Mr. Humphreys said whatever was good for the area was also good for all downtown professionals and retail tenants. Noting that the Town made annual contributions for trolley operations, Council Member Brown inquired how the downtown trolley purchases had been funded. Mr. Humphreys said ten percent of funds had consisted of contributions from merchants and others, while the remaining ninety percent of funding was from State and Federal funds.

Noting that he personally liked the trolley, Council Member Protzman inquired about the possibility of privatizing the trolley service. He stated that the City of New Bern had a successful private trolley service. Council Member Protzman said he agreed that supplemental police and lighting programs were an inappropriate use of funds for the downtown service area. He suggested that if the Council could not reach clear agreement about the utility of trolley operations, the Council should consider discontinuing or privatizing trolley services. Mayor Broun said not all service district tax funds were used for trolleys. Mr. Horton said other programs totalled about $6,000 per year. Mr. Humphreys said $10,000 of $29,000 for a streetscape pilot program was from downtown service district funds. Council Member Protzman said downtown property owners should not have to disproportionately fund the pilot streetscape project since it would benefit the entire Town. Council Member Evans said the trolley's route was somewhat confusing. She stated that making the routing clearer might increase use of the trolley.

Kathleen Lord, 171 East Franklin Street, said trolley service had been important to her business. She stated that the question before the Council was not whether or not to keep the trolleys, but how to best use downtown service district tax funds. Ms. Lord suggested the possibility of installing unique gas lights or changing police uniforms to interesting period costumes as two possible uses of the funds. She stated that if the funds could not be used for betterment of the district, the tax should be repealed.

Shelley Green said most trolley riders during daytime hours tended to be local residents, rather than visitors to the area. Ms. Green suggested that ancillary uses of the trolley might be useful in helping to make it self-sustaining. She urged the Council to more vigorously pursue charter rental of the trolleys, possibly for two-hour time periods. Ms. Green also said hoteliers and meeting planners might want to take advantage of this type of service. Ms. Green said she was willing to help further explore these possibilities. Mayor Broun inquired about restrictions on the use of trolleys. Mr. Horton said federal law prohibited municipalities from operating charter services. He added that a private vendor could provide the type of service outlined by Ms. Green.

Margaret Skinner, Marketing Director of the Carolina Inn, said local hotels had a great deal of demand for this type of vehicle. She said the Carolina Inn could use the trolleys to transport guests to programs at the Kenan Center and other buildings on the University campus.

Noting that he had voted to continue trolley service during the current fiscal year, Mayor Broun said he did not think that the trolleys had proved their worth as a good use of Town funds. Mayor

Broun also said he was willing to give the trolleys one more chance with specific performance criteria.

Council Member Waldorf asked whether federal restrictions barred proceeding with Ms. Green's suggestions. Mr. Horton said no, noting that Ms. Green's idea merited further investigation. Council Member Waldorf suggested that merchants, hoteliers and the Visitors Bureau and others work together to on developing possible alternative uses of the trolley. Council Member Pavão said he agreed wholeheartedly that the Visitors Bureau and Downtown Commission should work together to improve the usage and image of the trolleys. He added that adaptable uses of the trolley were a good idea.

Council Member Capowski said he agreed that it was probably not fair to evaluate the trolley compared to other bus routes. He suggested that the Council give the trolleys one last opportunity to perform adequately. Council Member Capowski asked whether there was any reason that the Downtown Commission or Visitors Bureau could not promote the trolleys. Mr. Horton said no, adding that such promotion would be encouraged. He added that Ms. Green's comments about marketing were on target and exciting.

Council Member Protzman expressed concern that the Town might be taking on a task, marketing of the trolleys, for which it was not well-equipped. He stated that there was evidence from around the nation that some privatized charter services were successful.

Council Member Brown inquired who owned and held title to the trolleys. Mr. Horton said the Town had title to the trolleys. He added that if the trolleys were sold to a private vendor, it would be necessary to recover at least their fair market value since the trolleys had been purchased with State and Federal grant funds. Mr. Horton said although the trolleys were not good buses, they were good promotional vehicles. He also noted that private operators could use the trolleys when they were not being used for regular service.

Council Member Brown requested a staff response to Ms. Lord's earlier concerns about trolley accessibility. Transportation Director Bob Godding said the vehicles were not lift-equipped for accessibility purposes. Mr. Godding said lifts could be added at a cost not known at this time.

Mayor Broun said he sensed that the Council wished to continue operation of the trolley with greater private utilization through the marketing efforts of the Visitors Bureau, Downtown Commission and others. Mr. Humphreys said although the Commission was willing to assist in these efforts, it was somewhat limited in how this could be accomplished. Mr. Godding briefly reviewed the process for private companies to charter the Town's trolleys and other vehicles. Noting that there had not been much private demand for use of the trolleys, Mr. Godding said the trolley routes could be serviced by regular buses as needed if the trolleys were chartered by private concerns. He also said the Town's contract with the Downtown Commission provided for sixty hours of promotional service at no additional cost to the Commission. Mr. Godding said most of these additional hours were used for tours of the Town's historic districts.

Council Member Brown suggested that the Downtown Commission should be responsible for marketing the trolleys. But she suggested that the Council establish measurements to determine whether acceptable improvements in trolley service had been made during the next fiscal year. Council Member Waldorf said this was a very good idea. Mayor Broun suggested that staff draft criteria for evaluating trolley service sometime during the next few months. Mr. Horton said staff would be glad to work with the Visitors Bureau, Downtown Commission and other interested parties in drafting these criteria. Noting that governmental power resulted from the consent of the governed, Council Member Chilton said the question before the Council was how much General Fund money should be used to support downtown-related services.

Council Member Capowski said he was surprised to see how much crime was occurring in the downtown area. He added that although supplemental police patrols might be a good idea in the downtown area, the downtown service district tax was not the proper resource to pay for this program.

Mr. Horton inquired whether the Council's current consensus was not to change services in the downtown service district. Hearing no objections from the Council, Mayor Broun said this was correct.

Item 3 Work Session on Budget

Referencing earlier remarks by Phillip Sullivan, Council Member Brown noted that the Council had adopted a resolution seeking the General Assembly's approval for the Town to have broad flexibility called Home Rule. She said that Mayor Broun, Manager Cal Horton and herself had had a meeting with North Carolina Speaker of the House Dan Blue, who indicated that the Town could not count on receiving authorization for Home Rule in the near future. Mayor Broun added that he had raised the matter with Governor Hunt in a recent meeting. Mayor Broun said he had indicated the concerns of Town residents about the matter.

Council Member Pavão suggested that the Council discuss the Orange County-Chapel Hill Visitor Bureau's funding request. Mr. Horton noted that staff was recommending an increase in hotel-motel tax allocation funding from a total of $30,000 to $50,000. He said that the Visitors Bureau was requesting total funding of $67,000 from the Town.

Council Member Pavão said the Town should definitely consider some type of contribution to the Bureau. He said the bureau had been helpful in attracting additional visitors to the Town and Orange County.

Noting that the Council had received the funding request from the Visitors Bureau only short time ago, Council Member Capowski said he had a number of questions about the request. Council Member Pavão said he was asking the Council to consider the matter, rather than immediately vote on the request. Council Member Brown said the Council would have to take funding away from other agencies to fully fund the request. Mr. Horton said the Council could choose to reduce costs elsewhere or increase the property tax rate. Council Member Brown noted that in earlier discussions, the Council had agreed to designate a portion of hotel-motel tax revenues to smaller agencies and organizations. Noting that she was generally disposed to give additional funding to the Visitors Bureau, Council Member Waldorf requested that staff provide a history of hotel-motel tax funds. Council Member Pavão said the bureau's main purpose was to market the community and bring more visitors to the area.

Noting that some parts of Orange County had no hotels or motels, Council Member Chilton said he was interested to know whether the Town or other parts of the County benefitted more from the Bureau's efforts. Council Member Chilton said he was reluctant to change a system wherein a county-wide function was funded by a county-wide tax. Council Member Evans said she would appreciate receiving additional information from staff about the purpose of hotel-motel taxes. Mr. Horton said the hotel-motel tax had been established to provide some property tax relief. He added that the Council was only bound to operate within existing State legislation about the hotel-motel tax.

Council Member Capowski suggested that staff contact Margaret Skinner at the Carolina Inn to see how long the Inn would be closed for renovations. He also inquired whether the University was willing to offset hotel-motel tax revenue losses associated with temporary closure of the Inn. Council Member Capowski said the existing hotel-motel tax rate was not very high when compared to other communities around the State and nation.

Mayor Broun asked whether there were any other budget-related matters to be discussed this evening. Council Member Brown suggested that the Council discuss Landfill Owner's Group's equity concerns regarding tipping fees. Mayor Broun said it was important to get a clear procedure on these matters. Noting that the Council had tentatively agreed to allocating funds for a $1 increase in the landfill tipping fee, Mr. Horton said the staff would need to find about $12,500 in other funding if the Council agreed to raise the fee to $1.50 per ton, as suggested by the Orange County and Town of Carrboro representatives on the Landfill Owners' Group. Noting that the Landfill Owners Group would discuss landfill tipping fees at its May 19th meeting, Council Member Chilton said he preferred to discuss the matter further at a future budget work session. Council Member Chilton said he would report back to the Council on the matter.

Stating that there had been no evaluation of solid waste programs from the past two years, Council Member Brown said she was still not satisfied that the proposed Landfill Owners Group budget was a good one. She inquired whether the budget would provide the most waste reduction for the least amount of funds. Council Member Brown suggested that the Council use the solid waste goals and objectives of the three local governing bodies to evaluate how to proceed on the handling of solid waste.

Council Member Evans said that in the past taxes had generally been raised to pay for and retire bonds. She noted the possibility of increasing the property tax rate by one cent to pay for the retirement of additional parks and recreation bonds. Mayor Broun asked whether Council Member Evans favored this approach. Council Member Evans said when citizens voted in favor of bonds, they generally anticipated the possibility of increased property taxes to pay off the bonds in the future. Council Member Evans said she also favored the provision of additional funds for sidewalk construction.

Council Member Chilton said although a bus fare increase to 75 cents was within the range of reason, he felt raising the fare was not an appropriate thing to do for the sake of $43,400. Council Member Chilton also said he favored maintaining the bus fare at 60 cents rather than asking poorer residents of the community to shoulder the burden of increased fares. He stated that raising the fare would create an unfair situation and a regressive tax. Council Member Chilton suggested that the matter merited additional discussion by the Council.

Noting that crime rates had been decreasing, Council Member Brown inquired about the possibility of reducing the number of proposed new police officers to offset the need for an increase in bus fares. She also requested that staff examine other options to maintain the current bus fares. Stating that the Council could choose to reduce other services, Council Member Chilton said the Council did not have to increase the tax rate to have no increase in bus fares.

Noting that the Town's hotel-motel tax rate was generally quite low, Council Member Powell inquired about the possibility of raising this percentage. Mayor Broun said increasing the rate would require legislative action. Council Member Powell suggested that the Council discuss the matter further. Noting that Orange County was only using 1% of the 3% it was authorized to collect, Council Member Brown suggested that the Council further discuss the matter with County officials in the near future. Council Member Capowski asked how many hotels in Orange County were not in the Town's limits. Ms. Green said approximately 8% of the hotel rooms in Orange County were located outside of Town limits. Council Member Capowski said he concurred with Council Member Brown that the matter should be further discussed with Orange County officials.

Council Member Protzman said he hoped the Manager could find about $43,000 in the budget to negate the need for a proposed increase in bus fares from 60 cents to 75 cents. Council Member Protzman also said he did not favor raising bus fares since the effect would tend to be regressive in nature, placing a burden on persons least able to pay higher fares.

Noting that staff had recently indicated that the cost of a typical bus trip was about $1.49, Council Member Capowski said even a 75 cent bus fare was heavily subsidized. Council Member Capowski also said that many people purchased annual bus passes through the University. He stated that a 75-cent bus fare seemed to be quite reasonable.

Mayor Broun briefly reviewed the list of budget items for further discussion by the Council including funding of the Visitors Bureau, sidewalks, landfill tipping fees, the possibility of a bus fare increase and the possible addition of new police officers. He noted that the Council had scheduled a budget work session for May 24th and a special meeting on June 6th to adopt a budget.

Noting that the Council could discuss all matters but the Visitors Bureau funding this evening, Council Member Waldorf said the Council could possibly adopt the budget on Monday evening, May 23rd. Council Member Brown disagreed that there was a need to adopt the budget so soon.

Council Member Brown suggested that the Council might need only one rear-loading refuse truck, rather than the two trucks suggested in the proposed budget.

Council Member Protzman suggested that the staff prepare a final budget for consideration of the Council at its May 23rd meeting. He said this approach would provide a vehicle for rigorous debate by the Council and possible closure of the current budget process.

Stating that the Council's budget process was well ahead of other bodies' budget processes, Council Member Capowski suggested that the Council not adopt its budget too early, in anticipation of possible changes by other governing bodies.

Council Member Evans inquired about funding of the Blue Line bus route. Transportation Director Bob Godding said negotiations on this matter were continuing. He said the Triangle Transit Authority had agreed to absorb a cost increase of $69,000 next year for peak hour Blue Line service. Mr. Horton said staff had made an initial assumption that the City of Durham would act more favorably than they had to date regarding allocation of State and Federal transit funding.