MINUTES OF A BUDGET WORK SESSION HELD BY THE MAYOR AND COUNCIL OF THE TOWN OF CHAPEL HILL, NORTH CAROLINA, TUESDAY, MAY 24, 1994

Mayor Broun called the work session 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, Parks and Recreation Director Mike Loveman, Public Works Director Bruce Heflin and Transportation Director Bob Godding.

Landfill Matters

Council Member Chilton reported that the Landfill Owners Group had agreed by a 2-1 vote to recommend a $1 increase in the existing landfill tipping fee. He added that funding of $2,600 Landfill Fund fund balance was also recommended to fund three pedestrian-oriented recycling containers, which would be located at sites to be determined in the Towns of Carrboro, Hillsborough and the Town.

Council Member Protzman said the proposal was a good compromise. He inquired about the visibility of the proposed recycling containers. Council Member Chilton said this matter would be handled by each of the communities. Mayor Broun said it appeared that there was Council consensus to instruct the Manager to proceed on the assumption of a $1 per ton increase in the landfill tipping fee. Mr. Horton said all three governing bodies would need to agree on the change before it took effect.

Swimming Pool Senior Discounts

Mr. Horton reported that the cost to reestablish the discount for senior patrons of the Community Center pool facility would be about $3,000 per year. Council Member Pavão suggested that the Parks and Recreation Commission discuss the matter at its next regular meeting. Mr. Horton said the staff could adjust the budget if necessary to handle the discount program.

Chapel Hill/Orange County Visitors Bureau

Mayor Broun said the Visitors Bureau was requesting that twenty percent of the Town's hotel-motel tax proceeds be given to the Bureau for funding of its programs. Mr. Horton reported that although hotel-motel tax proceeds had grown steadily during the current year, there would be a temporary reduction when the Carolina Inn closed for renovations. He stated that these losses could be covered by use of funds from the Town's fund balance.

Mr. Horton noted that although ten percent of the hotel-motel tax had been set aside for visitor services and cultural programs in the past, additional funds could be provided if the Council wished.

Council Member Pavão said he was very pleased with the Visitors Bureau's operations and how the Bureau utilized its funds. He stated that the Visitors Bureau had done a very good job of marketing the community to area visitors. Noting that the Visitors Bureau had had a positive impact, Council Member Pavão urge Council Members to consider funding the Visitors Bureau request. Noting that total hotel-motel tax funding of $50,000 was presently proposed, Mayor Broun inquired whether it would be possible to accommodate the Bureau's funding request of $67,000 without the need for a property tax increase. Mr. Horton said either a tax rate increase or service adjustment would be needed.

Council Member Capowski asked whether typical annual funding for hotel-motel tax allocations had been about $35,000 annually. Mr. Horton said there had been occasions when the Council asked to have more funds set aside for hotel-motel allocations. Council Member Capowski inquired about the proposed process for reviewing allocations. Parks and Recreation Director Mike Loveman said applications for hotel-motel tax allocations would be received through 5:00 p.m. on Friday, May 27th, with staff making recommendations on funding applications to the Council at the June 27th meeting.

Council Member Capowski asked why the Council should accommodate the Visitors Bureau as a special case. Council Member Pavão said the Visitors Bureau had requested funding on two previous occasions. Stating that the Visitors Bureau brought additional dollars to the community, Council Member Pavão requested that the Council approve the funding request. Council Member Brown said she believed that about three years ago the Town did not object to Orange County seeking authorization to assess a hotel-motel tax of up to three percent and this was considered as the Town's contribution to the Visitor's Bureau. Mr. Horton said this summary was essentially correct. Council Member Brown said although the Visitors Bureau had done good work, it was difficult to tell whether the Bureau or a better economy had generated increased spending in the community. She stated that possible funding for the Visitors Bureau would have to be made within the context of other programs in light of the County's hotel-motel tax being levied with the Town's prior consent.

Mayor Broun suggested a compromise wherein the Council would provide some hotel-motel tax funding to the Visitors Bureau. He added that any increase in total hotel-motel tax allocations should not necessitate a property tax increase. Noting that the proposed contingency fund consisted of a total of $84,000, Mr. Horton said that the Council had previously directed that $18,000 of these funds be used to fund Senior Center programs. Mayor Broun suggested allocating a total of $66,000 to visitor and cultural services, with 50% of these funds being allocated to the Visitors Bureau and the balance to other hotel-motel tax applicants. Council Member Chilton asked whether other funding requests had been received. Mr. Horton said yes, adding that the application deadline was Friday, May 27th at 5:00 p.m. Council Member Chilton asked whether Mayor Broun was suggesting that the Arts Center receive funding from the remaining $33,000 in allocations. Mayor Broun said yes. Council Member Powell asked whether the Visitors Bureau would receive 10% of hotel-motel tax proceeds in addition to the proposed $30,000 allocation. Mayor Broun said no.

Noting that the Visitors Bureau's latest guide primarily focused on the Town, Council Member Pavão said he had a slight problem with the notion that the Visitors Bureau was solely a County endeavor. Council Member Evans said she did not understand this notion either. Stating that the business community had originally supported providing up to thirty percent of the hotel-motel tax proceeds for support of visitor service programs, Council Member Evans said she supported allocating a fixed percentage or dollar amount for the Visitors Bureau, with additional funds being set aside for cultural grants.

Noting the countywide nature of the Bureau's activities, Council Member Chilton said he believed that funding for the Visitors Bureau should be from the County's portion of the hotel-motel tax. He noted that the County could possibly raise its occupancy tax from 1% to 1 1/4% while the Town reduced its hotel-motel tax by 1/4%. Mayor Broun noted that it would not be possible to accomplish this in the current budget cycle. Noting past difficulties in dealing with funding equity matters, Council Member Chilton said part of this decision was in the hands of the Orange County Commissioners. Council Member Chilton said his suggestion seemed to be a logical one.

Council Member Brown said that the Visitors Bureau had been established through the expressed desire and impetus of the Orange County Commissioners as a countywide organization. Stating that the Council's primary responsibility was to its Town constituents, Council Member Brown suggested that the Council not allocate a large amount to the Visitors Bureau.

Council Member Pavão said the Bureau's efforts were focused on establishing a long-range visitor marketing program for the entire community. He stated funds allocated for the Bureau's programs were an investment in the County's and Town's future. Council Member Evans noted that if income from hotel-motel taxes decreased, there would a similar decrease in the fixed percentage allocated to the Visitors Bureau.

Council Member Waldorf said it might be important to give support to the Visitors Bureau as a means of reestablishing some goodwill in the community after the prior controversy about the proposed meals tax. Council Member Capowski said the North Carolina High School Athletic Association and other visitor-related agencies would also likely be requesting hotel-motel tax allocations from the Council. Expressing his support for the Mayor's proposed compromise, Council Member Capowski also said he had a problem evaluating the Visitors Bureau separately from other agencies.

Council Member Waldorf also expressed her support for the Mayor's proposed compromise. Council Member Pavão said although he preferred that the Council fully fund the Bureau's request, he would rather have the Council provide about half the request rather than none at all. Mayor Broun said while the Visitors Bureau was not better than other groups, it was different. He stated that a direct function of the Bureau was to promote hotel occupancy in Orange County. Council Member Capowski emphasized the importance of considering all organizational funding requests in context.

Council Member Brown requested that staff review how contingency funds in the Town budget had been used in the past. Mr. Horton said $84,000 was set aside for contingency purposes in the proposed budget, although $50,000 would probably be adequate to cover these needs. He noted that the Council had previously tentatively agreed to set aside $18,000 for the Senior Center. He noted that the Council could set a lower contingency fund level if it wished. Stating that some unanticipated expenses occurred each year, Mr. Horton said in previous years contingency funds had been used to help keep local daycare centers open and many other items. Council Member Brown asked whether $50,000 was a standard figure for contingency purposes. Mr. Baker said this was an approximate annual average.

Mayor Broun suggested that the Council take a straw vote on the possibility of allocating $66,000 from Town hotel-motel tax funds for visitor and cultural programs. Council Members Protzman, Evans and Pavão said they thought more funds should be allocated for these activities. Mayor Broun asked whether all nine Council Members informally concurred that $66,000 of hotel-motel funds should be allocated for visitor services and cultural programs. Council Member Powell inquired whether this only applied for the next fiscal year. Mayor Broun said this was correct. Council Member Broun said it was very rarely the case that a fixed amount in a budget was taken out in subsequent budgets. Council Member Waldorf inquired whether the Council would make the final decision on actual program funding recommendations. Mr. Horton said this was correct.

Council Member Chilton said it was inappropriate to try to say that the Visitors Bureau was qualitatively different from other programs and services. He suggested that the Council let the Visitors Bureau make its case along with other agencies seeking funding, rather than trying to resolve the matter this evening. Noting that it was likely that other large agencies would apply for hotel-motel funding, said he thought this evening was the wrong time to decide on the Bureau's funding request.

Council Member Protzman said he thought the Visitors Bureau was qualitatively different from other agencies since it was the only organization whose sole purpose was to fill hotel and motel rooms in the County. He suggested that the Council at least attempt to provide the Bureau with some funding during the next fiscal year. Council Member Pavão said he concurred that the Town should provide a fixed amount to the Bureau in recognition of its efforts to attract visitors to the area. Council Member Chilton asked why it was necessary to act on the request this evening. Council Member Pavão said the Bureau was in the process of printing the latest edition of its visitors guide. Council Member Powell expressed her concurrence with Council Member Protzman's suggestion that the Council provide some funding for the Bureau's operations.

Council Member Capowski inquired about the feasibility of entering into a performance agreement with the Visitors Bureau wherein the Bureau would get a certain percentage of any increase in hotel-motel tax revenues. Mr. Horton said although staff could construct an agreement of this type, it would need to be carefully worded.

Mayor Broun suggested that the Council allocate a significant fixed amount to the Bureau, such as $30,000 which would be about 10% of hotel-motel tax revenues. Council Member Capowski said this would leave approximately $36,000 for other agencies. Mayor Broun noted that $15,000 of 1993-94 hotel-motel tax allocations had been earmarked for the Town's Bicentennial observance. Mayor Broun noted that the straw vote for allocating a significant fixed amount for the Visitors Bureau passed by a vote of 6-3.

Mr. Horton said it would be helpful for the staff to receive additional guidance from the Council on how the balance of hotel-motel tax funds should be allocated. He noted that the Council had indicated at a prior meeting that it wished for a percentage of allocations to be made for smaller grants. Council Member Chilton said this was correct. He added that the Council had also requested that newer organizations also be given strong consideration for funding.

Council Member Powell inquired why the Council had previously supported the ArtsCenter. Mr. Horton said the Council had concluded that the ArtsCenter brought visitors to the community and also had been of value to the community. Council Member Powell said although she was not opposed to assisting the ArtsCenter, she did not know whether to place the ArtsCenter in the category of other cultural activities and groups. Mayor Broun said he believed that it was worthwhile for the Council to continue to significantly support the ArtsCenter. Noting that she was not opposed to the Center, Council Member Powell said she and her husband had been especially supportive of the ArtsCenter and Art School at its inception.

Council Member Evans inquired where organizations such as the New Hope Creek Corridor Committee would receive funds. Mr. Horton said allocations of this type were generally from contingency funds.

Council Member Protzman inquired about the possibility of using performance agreements for handling some activities such as teaching art classes, which was currently handled by both the ArtsCenter and the Town. Mayor Broun said some activities of this type were already taking place.

Mayor Broun said he sensed that the Council supported allocating about $9,000 for smaller and first-time projects. He inquired whether there was consensus on this matter. Council Member Chilton said that several weeks ago he had proposed applying goals similar to those used by the Human Services Advisory Board, whereby approximately 75% of grants were for larger organizations and 25% of funds were for smaller and newer agencies. He also noted the importance of providing funding for new or special areas of needs which had development in the community.

Sidewalk Needs and Financing

Council Member Evans said she wished to explore options for having more than $30,000 available for sidewalk projects. She inquired about the possibility of using extra Intermodal Surface Transportation Efficiency Act funds for sidewalk projects. Mr. Horton said Gorman Gilbert of the North Carolina Department of Transportation had indicated that up to $150,000 would likely be available to fund improvements in the West Franklin Street area. Public Works Director Bruce Heflin said it would likely take about $150,000 to complete sidewalk and street repairs in the West Franklin, Merritt Mill, Roberson and Graham Street areas.

Council Member Evans inquired whether funds could be transferred between the Transportation and General Funds. Mr. Horton said this could be done for specific purposes, within certain limits. Council Member Evans suggested the possibility of using savings from reduced transit routes to help pay for sidewalk projects. She inquired whether it was necessary for the Town to provide midday bus service to the Town's park and ride lots. Mr. Godding said many commuters wished to have access to their vehicles at park and ride lots at any time of the day. Council Member Evans said the south side park and ride lot might be more heavily used by University and Hospital staff, rather than by students. Mr. Godding said staff could report back on a report by the State Department of Transportation concerning users of the Town's park and ride lots. Council Member Evans inquired whether the $65,000 to $90,000 in anticipated annual savings from the refinancing of the Town's parking facilities had been allocated. Mr. Horton said since these savings were not absolutely certain, the projected savings had not been allocated.

Council Member Waldorf inquired whether funds from staggered hire of new positions, such as bus drivers, could be used to fund sidewalk projects. Mr. Horton said projected salary savings constituted the largest component of the Town's reappropriation rollover. Mr. Godding noted that new bus drivers would need at least three weeks of training prior to operating a bus on a regular route. Mr. Horton said rollover funds from salary savings were used an ongoing safety margin for the Town's fund balance. Mr. Horton also noted that on occasion the Town received higher than anticipated mid-year revenues and lower than anticipated expenses. He stated that the staff would be glad to provide Council with information about funds which became unexpectedly available during the fiscal year. Mayor Broun said this was a good idea. Mayor Broun added that he was working hard with the Transportation Advisory Committee to get additional sidewalk funds for the Town. Noting that the Town had a small amount of money for sidewalk improvements, Council Member Brown suggested that the Council examine alternative funding sources for sidewalk projects.

Council Member Capowski said he was not sure that roadway and sidewalk improvements were the best use of community development funds in the Graham Street area. He suggested that the Council study other possible uses of community development funds.

Council Member Powell asked whether sidewalks were being proposed for both sides of streets. Mr. Heflin said this varied by location. Council Member Powell said she was especially concerned about constructing sidewalks in areas where trees would need to be removed.

Council Member Waldorf suggested that the staff provide a quarterly update on new funds possibly available for sidewalk projects. Council Member Protzman said the Council might not wish to spend all newly identified funds for sidewalk projects. Mr. Horton said staff could make the report as part of the quarterly report process.

Proposed Bus Fare Increase/Impact of Service Cuts

Council Member Evans noted the importance of spending funds on marketing of the Town's bus and trolley system.

Council Member Chilton inquired whether the Transportation Board projections were realistic in attempting to balance the Transportation Fund budget. Mr. Godding said the Transportation Board did not favor increases in bus fares and passes due to inconsistency with objectives of the Town's Comprehensive Plan. He added that the Board recommended service reductions on some routes. Mr. Godding said the Transportation Department had received about a half-dozen calls about the possibility of providing bus service to the new library facility on Library Drive along Estes Drive. Mr. Godding said staff had not determined how this might be accommodated. Council Member Chilton inquired whether approximately $60,000 would be saved by implementing the Board's recommendations. Mr. Godding said this was approximately correct. Council Member Chilton inquired about the Town's projected additional revenues from raising the bus fare from 60 cents to 75 cents. Mr. Godding said the increase would yield about $43,400. Mr. Horton said the Town of Carrboro's budget assumed that there would be an increase in bus fares.

Noting that the matter involved more than financial considerations, Council Member Brown said the Council should do everything possible to keep transit ridership as high as possible. Council Member Brown also said she would support other changes in order not to increase bus fares. Council Member Protzman inquired about the fiscal impact of raising bus pass prices, rather than bus fares.

Mr. Horton said staff had performed some calculations in this regard. He noted that patrons purchasing bus passes and tickets received a significant discount compared to regular fares. Council Member Evans asked whether senior citizens received a discount for bus fares. Mr. Godding said that the University and the Town sold bus passes. Council Member Brown asked whether the University, Town of Carrboro and the Town all sold bus passes. Mr. Godding said this was correct. He briefly reviewed the method for calculating bus fare pricing and related discounts. Council Member Brown asked whether staff had information on bus pass and ticket utilization. Mr. Godding said staff could provide this information. She said this wasn't necessary.

Council Member Capowski said bus pass users were paying approximately 45 cents for a bus ride costing approximately $1.50. He stated that even with a fifteen cent increase, bus rides would still be a very good bargain for riders.

Council Member Chilton said he had an alternate proposal to not increase regular bus fares. He stated that cutting three of the four midday "A" routes would save an estimated $31,000, cutting the Saturday "G" route would save $34,000 and increasing bus pass prices would raise an additional $29,000, totalling savings of about $90,000. Mr. Horton said it was possible to proceed as Council Member Chilton suggested without the need for a bus fare increase. Council Member Chilton said bus pass prices could be increased a little bit while maintaining existing bus fares. He added that the routes proposed for service reductions were two of the system's least used routes. Mr. Horton noted that the system evaluation was done on the basis of economics alone. He added that the bus pass price increase would be about 17%, with a 3% reduction in ridership anticipated as a result of the pass price increase.

Council Member Waldorf asked whether Council Member Chilton's proposal allowed for reserve funding. Council Member Chilton said the reserve contribution would be about $20,000. He added that it was very unlikely that he would support another reduction in transit service in the near future.

Council Member Brown requested additional information about services for transit patrons having special needs. Mr. Godding stated that a transit patron had indicated that he had a visual impairment. He stated that depending upon the severity of the impairment the patron be eligible for E-Z Rider special transit service. Mr. Godding said another patron used weekend E-Z Rider service, but sometimes found it difficult to schedule rides due to heavier demands on Saturdays.

Mayor Broun inquired about the downside of Council Member Chilton's proposal. Mr. Horton said the primary drawbacks were reduced service and that the Town's transit partners, the University and Town of Carrboro, would be negatively fiscally impacted by the proposed adjustment in pass and ticket prices.

Council Member Chilton noted that the University would receive about $45,000 less from the proposed adjustment in bus pass fares. Mr. Godding said the University would have to pay an additional $20,000 to $25,000 under this scenario. Council Member Capowski inquired where the University would get additional funds. Mr. Godding said one possibility would be to increase bus pass prices.

Council Member Waldorf inquired about the average annual increase in transit operating costs over the last three years. Mr. Godding estimated that operating costs had increased by an average of 3 to 4%. He added that local costs had increased significantly due to the decreased availability of federal operating assistance.

Council Member Chilton said his proposal was to combine increased revenues with reduced services. Council Member Capowski expressed concern that the proposed service cut might result in displacing some bus passengers into automobiles. Council Member Brown noted that the Council had requested the transit service evaluation outlining ways to make the system more efficient. Mayor Broun requested a straw vote on Council Member Chilton's proposal. All Council Members favored the proposal. Mr. Horton said he would immediately communicate the proposed service and bus pass price changes to the University and Town of Carrboro as soon as possible.

Need for Additional Police Officers

Council Member Waldorf noted that she had previously distributed a memorandum to the Council, outlining the importance of adding new police officers. Mayor Broun inquired whether any Council Members thought the number of proposed new police officers should be reduced. Hearing none, Mayor Broun suggested that the Council continue discussion of other budget matters.

Other Budget-Related Matters

Noting that the Council spent a lot of time on smaller budgetary items, Council Member Brown suggested that the Council explore other items, especially larger items, in greater detail in future budget processes. She stated that staff proposed to purchase two new refuse collection trucks at a time when the collection system method was in a possible state of flux. Council Member Protzman inquired whether operations could continue satisfactorily without the new trucks. Mr. Horton said he did not think so. Public Works Director Bruce Heflin said the Town had a fleet of eleven trucks, some of which were used for brush collection and some of which were used as back-up trucks. He noted that one of the trucks proposed for replacement was fourteen years old and had the equivalent of 160,000 miles on its odometer. Mr. Heflin emphasized the importance of having both good front-line and back-up trucks to provide consistently reliable service to citizens.

Council Member Evans asked whether staff had investigated the possibility of contracting for side-loading trucks. Mr. Heflin said no private companies offered side-loading collection trucks. Mr. Horton said side loaders were inefficient. He stated that staff was attempting to gradually phase out the use of side-loading trucks.

Noting that there had been a proposal to raise the total amount of human service grants from $90,000 to $104,000, Mayor Broun inquired about possible funding sources for the additional $14,000 in funding. Council Member Chilton said he believed that the Council could examine the budget for possible sources.

Council Member Protzman said if the Council wanted to impact future budgets, it needed to more closely examine personnel-related costs.

Mr. Horton said it was the people, not capital, which compromised the majority of costs in most budgets. He added that although the Town was doing more contracting, staff needed to consider more opportunities for contracting. Council Member Brown suggested that there were more efficient ways to handle non-personnel costs in the Town's budget.

Council Member Capowski said he had found the current budget to be the easiest one of the three Town budgets he had been involved with as a Council Member. Council Member Capowski commended the Manager, Mayor and Finance Director for their leadership in the budget process. He stated that the Town was generally in very good financial condition. Mayor Broun also commended the Council and staff for a good budget process. Mayor Broun said he did not have any doubt that the Manager could find $14,000 for additional human services program funding if the Human Services Advisory Board had difficulty in making allocations to agencies. He stated that $90,000 was a quite generous amount to allocate for Town human service contributions.

Council Member Protzman said he did not think the Town would be able to have two budgets in a row without property tax increases. Council Member Protzman also said he thought the budget process had been very good. He emphasized the importance of balancing broad-based budget decisions rather than making sequential incremental decisions.

Stating that he had worked with and for number of non-profit organizations, Council Member Chilton said non-profit staff tended to have a passionate desire to get things done resourcefully with small amounts of money. Adding that funding for human services had not increased in four or five years, Council Member Chilton requested that the Manager attempt to identify $14,000 for additional human services program funding. Council Member Evans noted that once the amount of human service allocations was increased, it was very unlikely that future allocations would ever be for lesser total amounts. Mayor Broun noted that the straw vote of the Council indicated that the Manager should attempt to locate an additional $14,000 in funding for human services if necessary to fund additional requests.

Council Member Brown said she was willing to discuss future budget suggestions at a later time. Council Member Waldorf said future budget suggestions could be discussed after adoption of the 1994-95 budget on June 6th. Mayor Broun said the Council could also adopt the budget on June 13th. Council Member Powell suggested that the Council consider initiating a process to increase the hotel-motel occupancy tax.

Mayor Broun said the Council could meet on June 6th or 13th to adopt the proposed budget. Council Member Chilton suggested that the Council discuss future budgets on June 6th, following adoption of the proposed 1994-1995 budget. Mayor Broun suggested that the Council adopt the budget on June 6th, followed by a brief future budget planning session.

The session concluded at 10:26 p.m.