SPECIAL COUNCIL MEETING

A Special Council Meeting was held on May 23, 2007 at 6:00 p.m. with Council President Williams presiding. Council members present were Mr. Carey, Mrs. Russell, Mr. McGlumphy, Mr. Slavin, Mr. Hogan, Mr. Salters (arrived at 6:29 p.m., departed at 7:30 p.m., and returned at 8:26 p.m.), and Mr. Ruane. Mr. McGiffin was absent.

Council staff members present were Mr. DePrima, Mrs. Mitchell, and Mrs. Clendaniel.

AGENDA ADDITIONS/DELETIONS

Mr. Carey moved for approval of the agenda, seconded by Mrs. Russell and unanimously carried.

6:00:49 PMPRESENTATION - 2007/2008 BUDGET OVERVIEW

Council President Williams explained the guidelines to be used during the budget review process. In order to expedite this process and without objections, she stated that members should refrain from repeating concerns and that as chair, if this is being done, she will request that members bring their comments to an end to allow other members an opportunity to speak. Council President Williams advised members that an introduction and presentation of the budget would be provided and requested members to hold all questions and comments until the end of the introduction. Council President Williams also requested that questions regarding specific budgetary items be held until that specific budget is being discussed.

Mr. DePrima provided a brief introduction and presentation of the 2007/2008 Draft Budget (Exhibit #1). He noted the addition of a new fund entitled “Governmental Capital Projects Fund” which was approved by Council in the Financial Policy.

Revenue

Mr. DePrima provided a presentation of the Revenue estimates for fiscal year 2007/2008 (See Exhibit #1).

Responding to Mr. Ruane, Mr. DePrima concurred that the actual carry forward balance is approximately $3.4M; however, the policy requires the carry forward balance to be 8%. As a result, Mr. DePrima stated that the difference has been allocated to various expense accounts. Mr. Ruane reminded members that as previously directed by Council, any excess carry forward balance is to be allocated to the Library Reserve account. Concurring, Mr. DePrima explained that the actual excess amount, as a result of the City’s audit, is the amount that will be transferred to the Library Reserve account. Mrs. Mitchell explained that once the audited balance is obtained, the excess amount is reduced by any project money that was carried forward which is re-appropriated and that any amount remaining over 3.5% of the 8% is then transferred to the Library Reserve account.

Mr. Ruane requested that before members begin to review the Library account, staff provide a report that depicts the process for allocating funds from the carry forward balance and what staff estimates this amount to be as of today. He also requested clarification as to why the amount being shown as a balance in that fund is not the amount being carried in the monthly reports. Mr. Ruane stated that the amount shown in the Library Reserve account is different from the monthly reports to date, explaining that it appears that some funds, in the amount of $344,000, have been removed from that account and requested that staff provide an explanation.

In regards to the report, Mr. McGlumphy requested that staff include details regarding any funds from the carry forward balance that have been spent in other areas.

P.F. P. Salary Calculations (Non-Bargaining Employees)

Mr. DePrima provided a presentation of the Pay for Performance and Staff Changes for fiscal year 2007/2008 (See Exhibit #1).

With regards to the Market Analysis, Mr. Ruane stated the proposed is not what the Market Rate Maintenance procedure is as described in the PAS Study. The policy Council adopted suggested that the Market Survey methodology be used for updating the Pay Plan and recommended against what is being proposed by staff, which he felt is actually a COLA increase.

Responding, Mr. DePrima stated his recollection was that the PAS Study discouraged COLA increases based on inflation rates, since there is no true correlation and explained that the increases are based on market salary surveys. He explained that if a PAS type study is desired every year, it would be a costly endeavor. It was his feeling that such a study, at an estimated cost of $50,000 to $60,000, would be beneficial to have conducted every 5 or 6 years.

For clarification, Mr. Hogan noted that the City maintains a pay scale that provides for ranges. After completion of the survey, the pay ranges are changed; however, an individual is only provided for an increase based on their performance and does not receive an additional increase as a result of the pay scale adjustment.

Mrs. Russell advised members of her opposition to the Pay for Performance system in its entirety.

Mr. McGlumphy stated that the PAS Study was initiated due to the large deviation between the union and non-union employees and it was felt that there was a need to bring the non-union employees “up to grade”. He agreed that a market study should not be accomplished every year; however, in reviewing the proposed calculation worksheet, the percentages seem to have increased substantially over the past two (2) to three (3) years. It was his opinion that the non-union employees have been provided increases more than what was originally intended and that at this time, there is a need to re-review the program.

In response to Mr. Slavin, Mr. DePrima explained that the PFP Study was to re-calibrate and re-adjust the non-bargaining employees. He referred to page 176 of the Budget and stated that the labor grades and ranges were created from the PAS Study. The labor grade ranges have been increased annually based on the market rate, this year being 3.5%. As was previously mentioned by Mr. Hogan, Mr. DePrima explained that although the labor grade range would increase, a current employee would only receive an increase based on their evaluation (PFP increase). He confirmed that the PAS Study assisted the City in addressing a salary structuring problem and was meant to re-calibrate the salary and positions over a finite period of time. Responding to Mr. Slavin, Mr. DePrima stated that the finite period of time would be approximately five (5) years. He stated that individual job titles may change in value and may need to be re-calibrated.

Responding to Council President Williams, Mrs. Tieman indicated that 28% of the non-bargaining employees are below market - 40% are at market and 15% are above market. Mr. DePrima explained that there will always be employees at “below market” since most new hires are hired within that range. Of the 28% of the non-bargaining employees below market, Council President Williams requested that staff provide the percentage of those employees that are new hires. She also requested the percentage of those employees that are “over market” and why they are at that point.

Mr. Hogan stated his strong belief in a pay-for-performance system, feeling that employees that do a good job, should be provided more of a salary increase. There are two (2) issues necessary that need to be reviewed to assure that such a system continues to work: 1) an adjustment in the range; and 2) the percentages for the pay-for-performance increase. It was his feeling that the pay-for-performance table represents too high of percentage increases. The table is the key to what the current employees’ raises will be and it was his feeling that members should be paying particular attention to the proposed PFP table.

With regards to the pay grades, Mrs. Russell requested that staff provide job classifications, titles, and pay grades assigned.

Mr. Ruane stated that there were several reasons for agreeing to conducting the PFP system, one of which was due to the fact that the City, on average, was over-paying 11.2% at the entry level for all positions with some positions overcompensated as much as 41%. He questioned if the PFP system has changed this problem and if staff has a means of quantifying that the entry levels are no longer in the same situation. Responding, Mr. DePrima felt confident that these issues have been resolved with regards to the non-bargaining employees; however, the real issue is with the bargaining units. The last time the IUE contract was negotiated, the entry level pay grades were reduced.

Mr. Ruane also alluded to the fact that the savings the City could realize through the adoption and implementation of the PFP system totaled over $450,000 annually and questioned if such savings have been realized. Responding, Mr. DePrima felt that the savings have been realized; however, in order to quantify the savings, it would take a substantial amount of staff’s time. He explained that many of the savings are of common sense, such as the change to the IUE Contract, and the entry level salaries being substantially reduced. When these and non-bargaining new employees are hired, their salary is based on an entry level pay grade. Mr. DePrima stated that these savings are evident in reviewing last year’s budget for salaries, noting that there has been a decrease. This was due to there being several retirements, with employees whose salaries were much higher than that of the employee hired to fill the position.

Relative to the proposed promotions, it was Mr. Ruane’s understanding that according to the PAS Study, when an employee’s position is being re-classified, all employees in that particular classification would perform a PCQ. He stated that this would help eliminate some of the morale problems amongst employees, noting that some employees are being recognized for the “extra” work they are doing while others are not.

 

Mr. DePrima advised members that the final decision as to whether to include new positions for the Tax Assessor’s Office or to hire an outside firm to conduct the work has not been made; however, he noted that funds have been included in the budget under the salaries for this purpose.

With regards to the new positions requested, Mr. McGlumphy advised members that the amount budgeted in the table does not necessarily reflect a full year’s salary. He explained that this is due to the time frame necessary to fulfill the position if approved. He stated that when totaling the salaries, these amounts total $916,475, which is not reflective of a full year, explaining that several of the positions have only been budgeted for either a half of a year or three-quarters of a year. Mr. McGlumphy stated that a full year’s cost for filling these positions would be $1,103,213, which will increase next year with any salary adjustments. He requested that members pay particular attention and understand what is being requested.

Mr. Slavin noted that some of the new positions being requested will result in additional revenues for the City.

Mr. DePrima stated that although the costs for the requested new positions for part-time employees has been included in the budget, they were not included in the presentation for new position recommendations.

Mr. Hogan moved for a brief recess, seconded by Mr. McGlumphy and unanimously carried.

Meeting Recessed at 8:03 P.M. and Reconvened at 8:15 P.M.

Mr. Carey moved to reconvene, seconded by Mr. Hogan and unanimously carried.

Review of 2007/2008 Draft Budget - Water/Wastewater Fund

Mr. DePrima provided a presentation of the Water/Wastewater Fund for fiscal year 2007/2008 (See Exhibit #1). He introduced Mrs. Sharon Duca, Water/Wastewater Operations Manager, and Mr. Ron Lunt, Public Utilities Manager who reviewed and explained details regarding this section of the proposed budget.

Mr. Slavin moved to recess until Thursday, May 24, 2007 at 6:00 p.m. The motion was seconded by Mr. Carey and unanimously carried.

Meeting Recessed at 8:51 P.M.

THURSDAY, MAY 24, 2007 - 6:00 P.M. - 8:00 P.M.

By motion of Mr. Hogan, seconded by Mr. Salters, the Special Council Meeting reconvened on Thursday, May 24, 2007 at 6:03 p.m. with Council President Williams presiding. Council members present were Mr. Carey, Mrs. Russell, Mr. McGlumphy, Mr. Slavin, Mr. McGiffin, Mr. Hogan, Mr. Salters, and Mr. Ruane. Council staff members present were Mr. DePrima, Mrs. Mitchell, Mrs. McDowell, and Mayor Speed (departed at 7:15 p.m.).

Mr. McGiffin apologized for being absent from the meeting of May 23, 2007 and advised members that he listened to the deliberations of that meeting.

Review of 2007/2008 Draft Budget - General Fund

Mr. DePrima provided a presentation of the General Fund for fiscal year 2007/2008 (See Exhibit #1).

Mayor Speed indicated that after the review of the Mayor’s Budget, it will be necessary for him to depart the meeting in order to attend a League of Local Governments Meeting. However, he assured members that he would remain throughout the discussion of the Mayor’s Budget. As a result of his previous commitment, he requested the opportunity to make additional comments on the budget, as follows:

Mayor’s Budget: Referring to the Salary and Economic Development line items in the Mayor’s budget, Mayor Speed stated that the amounts do not reflect what he had submitted. He explained that both of these amounts were changed without his permission and without his knowledge. Although he agrees that the budget is that of the City Manager’s, it was his opinion that for the Mayor’s budget, staff should not be permitted to make any adjustments. Such adjustments in the Mayor’s budget, if they are to be made, should be accomplished by City Council only.

Responding to Mr. Ruane, Mayor Speed explained that Economic Development included amounts for Kent County Tourism and the Central Delaware Economic Development Council (CDEDC). He included an increase for Kent County Tourism from $10,000 to $15,000 from last year, which was not changed by the City Manager. Mayor Speed indicated that there was an increase for the CDEDC from $16,000 to $20,000 from last year and that the City Manager reduced this amount by $5,000, which decreases the budgeted amount by $1,000 from last year.

Mr. Ruane recollected that during the past year, there was some concern regarding the inactivity of the CDEDC. He felt that there should be a meeting regarding economic development and how the City has traditionally participated with the CDEDC, which may have resulted in the inability to explore other options in this regard. Mr. Ruane felt that the City should keep all options open and suggested that the additional funds originally requested by the Mayor be included in the budget unearmarked.

Mr. Ruane moved that the amount of $15,000 proposed for CDEDC be maintained in the budget with the understanding that it be, in the generic sense, for economic development without a specific designation for a specific agency, seconded by Mr. McGlumphy.

Although he does not necessarily disagree with the motion, Mr. Slavin requested that the motion be withdrawn at this time. He explained that members have made substantial progress in reviewing the budget without taking specific actions, which in his opinion will occur at a more appropriate time after the general review.

Mr. Ruane withdrew the motion, as did the seconder.

Mr. Slavin noted that the budget, as presented, is proposed by the City Manager and that it is not the City’s Budget until such time that it is enacted by City Council. With this in mind, he questioned the original requests of the Mayor for the Salary and Economic Development line items within the Mayor’s Budget. Responding, Mayor Speed stated that an amount of $55,000 was submitted for the Salary line item and $46,000 was submitted for the Economic Development line item.

Pay for Performance: Mayor Speed stated his opinion that the percentage increase proposed in the PFP Calculation Worksheet are high, particularly for those listed “below market”.

Unfunded Liability: Mayor Speed relayed his surprise that there is no amount included in the budget for the unfunded liability. He reminded members that as was indicated last year by the Actuary, the smaller amount of money allocated to the unfunded liability in the current year will have a much greater impact on the total than allocating a larger amount in future years. He suggested that members of Council include an amount in the budget to be allocated for the unfunded liability.

Members conducted a review of individual departmental budgets within the General Fund.

Mr. Ruane felt that members of Council should have more details with regards to the City Manager’s budget, more particularly the Legal Fees line item.

Mr. McGlumphy requested that the City Manager provide members with specific details regarding the legal fees.

Mr. Slavin moved for a brief recess, seconded by Mr. McGiffin and unanimously carried.

Meeting Recessed at 7:17 P.M. and Reconvened at 7:33 P.M.

Mr. Salters moved to reconvene, seconded by Mr. Carey and unanimously carried.

Members continued their review of the departmental budgets for the General Fund.

With regards to the Police Department’s budget, Mr. Slavin reminded members that there was a recommendation submitted by the Sex Offender Review Committee to create a Sex Crimes Unit, which would require two (2) additional full-time employees to the force. He requested that Lt. Bernat be requested to provide cost estimates based on this recommendation.

In response to Mr. McGiffin, Mr. Koenig advised members that the Emergency Management position has not been included in the Public Services budget. If the position is included, the plan for future years, would be to add to the Fire Marshal’s Office and create a Fire Marshal/Emergency Management Division. His estimate is that the salary would be $45,000 - $55,000 per year. The entire costs for such a program is estimated at $100,000.

At the request of Mr. McGlumphy, Mrs. Tieman indicated that the details regarding the Emergency Management position will be developed and provided to members for their review and consideration. Mr. DePrima explained that the direction of Council regarding the addition of this position was given after the draft budget was prepared, which is why this position and its associated costs was not included in the draft budget submitted to members.

Responding to Mr. Ruane, Mr. Koenig stated that the safety vests have not been included in the budget and that it would cost approximately $2,600 to purchase five (5) vests ($650 each). Mr. DePrima stated that he does not support the safety vests since he does not feel that inspectors should be entering dangerous places, explaining that they should contact the police when these situations occur. He explained his fear that the vests would create a false sense of security for the inspectors.

In response to Mr. McGlumphy, Mrs. Townshend indicated that the inspectors have been very clear of their desire to have the safety vests. She reminded members that City Council has requested pro-active code enforcement. Unfortunately, the areas that are in the most need of code enforcement are located in the areas that are the least safe. There have been efforts to begin conducting manual housing inspections, which includes some dangerous areas. Mrs. Townshend assured members that the inspectors are fully aware of their need to have police escort when necessary; however, she stated that when being escorted in these areas, the police have the safety vests and the inspectors do not. Should someone decide to begin shooting, the police officer would be protected while the inspectors would not have any protection.

It was Mr. McGlumphy’s opinion that considering the safety issue involved, $2,600 is not a lot of money.

Mr. Slavin moved to recess until Friday, May 25, 2007 at 6:00 p.m. The motion was seconded by Mr. Hogan and unanimously carried.

Meeting Recessed at 9:02 P.M.

FRIDAY, MAY 25, 2007 - 6:00 P.M. - 9:00 P.M.

By motion of Mr. Carey, seconded by Mr. Salters, the Special Council Meeting reconvened on Friday, May 25, 2007 at 6:04 p.m. with Council President Williams presiding. Council members present were Mr. Carey, Mrs. Russell, Mr. McGlumphy, Mr. Slavin, Mr. McGiffin, Mr. Hogan, Mr. Salters, and Mr. Ruane. Council staff members present were Mr. DePrima, Mrs. Mitchell, Mrs. McDowell, and Mayor Speed.

Council President Williams noted that staff has provided members with copies of detailed information in response to the requests that have been made during the budget hearings. In addition, she noted that the agenda has been revised to include a discussion for a COLA increase for retirees as requested by Mr. Hogan.

Review of 2007/2008 Draft Budget - Electric Fund

Mr. DePrima provided a presentation of the Electric Fund for fiscal year 2007/2008 (See Exhibit #1).

In response to several concerns regarding the costs of the Power Plant to the City, Mr. DePrima explained that the Power Plant Operations has not been included in the City’s budget since it is not a department of the City and that such operations is a contracted service with NAES; however, there is a line item in the budget for Power Plant Operations. He advised members that these costs are noted on page 32 of the budget and that the capital expenses are noted on page 33. Mr. DePrima also referenced detailed information that was provided to members by Mrs. Mitchell, Finance Director/Treasurer.

Responding, Mr. Ruane indicated that as it is being reported, he finds it difficult to understand the budget expense details. In an attempt to understand the cost centers and the drivers for increasing the rates, of which members of Council will be considering in the approval of the budget, Mr. Slavin suggested that Mr. Blaha, General Plant Manager, make a brief presentation to members regarding this issue before the adoption of the budget.

Mr. Ruane referred to page 151 of the CIP, and noted that there is a $75,000 allocation for the Frazier Substation. He reminded members that this was originally associated with the Civic Center. It was his understanding that the substation will not be relocated and, therefore, questioned why these costs have been included in the budget. Responding, Mr. Lunt, Public Utilities Manager, stated that although the substation will not be relocated, there will be some transmission line work and upgrades to the substation if the Civic Center comes to fruition. He advised members that the upgrades are necessary for reliability within the 69Kv line, and that the $75,000 are the costs associated with an engineering study to move the transmission line. Since the use of these funds has changed, Mr. Ruane suggested that staff either provide members with another explanation why funding should be allocated for the Frazier Substation or that it be deleted from the budget.

For clarification, Mr. DePrima suggested that this page and the $75,000 be deleted from the budget at this time, explaining that it is necessary for staff to further review this project to determine if any funds will be necessary for this year or that it be deferred until the next year.

In response to Mr. Ruane, Mrs. Mitchell explained that during the review of the Electric Rate Study this past fall, members were advised that there would be a $20M Bond Issue for the feeders 3 and 4 ($15M) and for substation projects ($5M). She reminded members that the details regarding this matter was provided during the analysis of the Rate Study. She stated that staff included the actual debt service in the Rate Study when the cost of service and rates were presented to Council this past fall (November 2006) and assured members that Council was advised that a $20M Bond Issue was included in the cost of service study.

Mr. Ruane requested that, in the future, staff provide these types of details during the budget review to assist members in recollecting such issues.

With regards to the engineers, Mr. Lunt stated that within the salary structure of the Engineering Budget, an engineer has been included. Also, funds have been included in contractual services for engineering services. He advised members that it is difficult to obtain an engineer with any real distribution experience, which are rare; therefore, the plan is to hire a graduate student to be employed as a contract employee for six (6) months. At the conclusion of the six (6) months, provided the employee has proven capabilities and qualifications to perform the work, they would then be employed as a City employee. Mr. Lunt stated that the engineering position has been open for a couple of years and that this is the only solution he has been able to develop to fill the position. As a graduate student, there will be a substantial amount of training required.

In response to Mr. Ruane regarding the salary, Mr. Lunt stated that the City’s current pay range is adequate for a graduate student. As this individual becomes experienced, he indicated that the salary would need to be increased in order for them to remain employed with the City. He advised members that the annual salary for an experienced engineer would be $125,000 to $150,000; the City’s current pay range for an engineer is $55,000 - $65,000. Responding to Mr. McGlumphy, Mr. Lunt indicated that most towns rely on contractual services for this type of work.

Discussion - COLA Increase for Retirees

At the request of the retirees, Mr. Hogan referred to information distributed to members with regards to a COLA increase for retirees (Exhibit #2). He advised members that to fully fund a 1% COLA, the cost would be $283,518. He noted that if the COLA was not fully funded, it would increase the City’s long-term liability and to fund the COLA without fully funding, would cost approximately $25,904. Although he understood that no decisions would be made at this time, it was Mr. Hogan’s hope, when appropriate for a vote, that members would approve a COLA to the retirees, whether it be fully funded or not.

Responding to Mr. Salters, Mr. Chappy Lucas (civilian member to the General Pension Board and retiree) explained that there was a disagreement with regards to the process for consideration of a COLA, which is why the matter has come before members during the budget review rather than its review by the Pension Board with a recommendation to Council.

Mayor Speed indicated his opposition to any COLA that is not fully funded and explained the financial burdens that the City’s retirement system is placing on the City’s tax and rate payers. It was his opinion that the obligations that the City has already incurred should take priority over new obligations.

Mr. Lucas advised members that one of the reasons why the COLA request is presented during the budget review process is because up until a few years ago whenever the Pension Board recommended and Council approved a COLA increase, it went right into the unfunded liability. There was no funding by the City, it simply became an obligation of the fund. Last year, 2006, was the first year that in addition to a COLA increase, the Pension Board recommended that the increase be fully funded. By doing this, members are attempting to avoid increasing the unfunded liability; however, by doing this, it places the request to become before members during the budget review process rather than it simply being a part of the unfunded liability for the City.

Mayor Speed apologized for the misunderstanding regarding the manner in which a COLA should be considered. It was his recollection that previous COLA requests were considered by the Pension Board, whose recommendation was then presented to Council and acted upon before the draft budget was developed and presented to Council. It was his opinion that this is the means in which such a COLA request should be handled in the future.

Council President Williams announced that members of Council realize that the process was flawed and felt assured that it will be corrected for the future.

Mr. McGlumphy moved for a brief recess, seconded by Mr. Hogan and unanimously carried.

Meeting Recessed at 7:04 P.M. and Reconvened at 7:25 P.M.

Mr. Carey moved to reconvene, seconded by Mr. Slavin and unanimously carried.

Final Discussion/Action and Wrap-Up

Council President Williams suggested that each member be given the opportunity to relay any concerns regarding the budgetary process and to identify those items included in the budget that may require additional work to be accomplished by staff before taking final action.

Mr. Slavin relayed his appreciation to the budget team for the quantity and quality of the information provided during this budget review. He felt that once members have the opportunity to identify the issues, there is a need for members to pause and reflect on the discussions that have occurred, review their notes, etc., after which time, members could reconvene the following week to further review the issues and then a poll of Council could be taken to give staff direction for finalizing the budget. Mr. Slavin noted that the Revenue Forecasting, which was issued in March, was utilized to develop the draft budget. He requested that staff provide members with an updated Revenue Forecasting to determine if there is any variation than what was projected.

Rather than a poll of Council, Mr. McGlumphy suggested that members present their issues and concerns to the City Manager and that he be directed to develop a budget to be presented for Council’s review.

Mr. Carey felt that the Mayor’s requests with regards to his salary and economic development should be considered for inclusion, as well as the $15,000 for vehicle insurance for the Fire Department, and the Emergency Preparedness position. He also felt that an additional ambulance (2^nd ambulance for 24 hour shift) should be included.

Mrs. Russell also felt that the Mayor’s requests with regards to his salary and economic development should be considered for inclusion. She suggested that the Pay for Performance program should be reviewed in its entirety. It was her opinion that the 1% COLA for retirees should be included as well as the Insurance for the Fire Department. She also supported the additional ambulance.

Mr. McGlumphy suggested that consideration be given to fully funding the pension liability. He would like for there to be a return of the $800,000 for the debt savings to the reserves or rate stabilization fund increase. He felt that there should be a “time-out” on the Pay for Performance to recalibrate the calculation worksheet. Mr. McGlumphy suggested an overall reduction in spending in the operations budget to approximately 5%-6%, that there be an analysis of funds to examine budgeted revenues compared to actual revenues, revised revenues compared to actual revenues, examine budgeted expenditures, revised expenditures compared to actual expenditures. He also requested a comparison of beginning balances to ending balances and review the carry forward balances. He requested that there be a department spending analysis comparing adopted expenditures to actual expenditures to determine if departmental expenditures increase during the latter part of the year. He suggested an examination of the annual budgets and external audit reports for the last three (3) or four (4) years. Mr. McGlumphy also requested consideration of a new way of conducting the budget process, suggesting that it would be more conducive if the City Manager and Senior Administrator submit the draft budget to the Legislative, Finance, and Administration Committee to allow citizen representatives as well as the City’s Finance Director/Treasurer to ask questions regarding the budget. It was his feeling that this would reduce the amount of time currently required of Council in their review of the draft budget.

Responding to Mr. DePrima, Mr. McGlumphy stated that he would distribute the information he has regarding the spending analysis and that the City Manager does not have to accomplish the requested analysis for the final review of the budget.

Mr. Slavin indicated his concern with regards to the unfunded liability and the COLA, explaining his concurrence with the Mayor and that if the City is going to fund a COLA, it should be funded fully and not create more of a deficit. He relayed grave concern with the Pay for Performance and indicated that he never really appreciated such a procedure. It was his opinion that members of Council have an obligation to honor past commitments and decisions and requested that members consider the Library Reserve and the commitment for the Library not to fade and continue to be very strong. With regards to new items, Mr. Slavin suggested that members review the downtown BID Tax, which has been a wonderful mechanism to fund Main Street Dover; however, with the increased activity downtown, it was his opinion that it is serving as a disincentive to double tax property owners downtown, an area the City is attempting to revitalize. Lastly, he suggested that members consider the recommendation of the Sex Offenders Committee regarding the establishment of a Sex Crimes Unit.

Mr. McGiffin stated that with this being his first year, at this time, he is unable to formulate any concrete position on any particular items. He is open to consider suggestions of any members.

Mr. Hogan relayed five (5) major issues: 1) the electric rate increase in the amount of 9.75%, explaining that although he understands that the rate stabilization fund is necessary, when it is necessary for the City to consider a rate increase, he has difficulty understanding the need to transfer $1.8M for the future, when the future is now. He suggested that this be reduced by $1M to reduce the electric rate increase; 2) the City has a transfer from the Electric Fund to the General Fund; however, he suggested that only $6M be transferred this year and take the $576,000 to be used to help reduce the electric rate increase; 3) He agrees and supports a 1% COLA increase for retirees and would prefer that it be fully funded; 4) He does not agree with the percentages provided on the Pay for Performance worksheet and felt that they should be reduced; and 5) He also would like for the City to include an additional payment to reduce the unfunded liability, no matter how small.

Mr. Salters stated that he would support a modest increase in the Mayor’s salary as well as an increase for City Council. It was his feeling that the prioritized items that were discussed at the Retreat should be given attention. He relayed concern regarding the escalation of the budget, particularly with the increase in personnel. If a COLA is approved for retirees, he felt that it should be fully funded. Mr. Salters stated that he would like to see that the Community Development Block Grant (CDBG) funds be put back into the budget to be used by the City and that these funds should not be given to outside agencies or individual contractors. He relayed his support for additional police patrol for the Quality of Life in the Target Area and suggested the consideration of a curfew for this area. It was his opinion that it is necessary to continue to provide adequate funding to the Rate Stabilization Fund.

Mr. Ruane requested that corrected pages be provided to members for their final review of the draft budget, noting that some of those corrections are noted in the memorandum provided by the Finance Director/Treasurer, dated May 18, 2007. In terms of the Mayor’s salary, he would like for members to recommend the establishment of the Compensation Commission rather than members taking action on the salaries for the Mayor or Council. Also, within the Mayor’s budget, the line item for economic development, he suggested that the details include economic development generically and not to be specifically assigned to the CDEDC. Mr. Ruane stated that the audit amount in the Finance Department’s budget, should be increased to $20,500. The request for the emergency preparedness position proposed for the Fire Marshal’s Office should be resubmitted, with specific costs for the position. He relayed support for the inclusion of $2,600 for the purchase of vests in the Inspections Budget for each of the inspectors. He also felt that the Frazier Substation should be deleted, which will decrease the Electric Engineering Budget by $75,000. Based on the testimony by the City Assessor, Mr. Ruane stated that the $1.1M proposed for the newly established Government Capital Projects fund should be deleted so that a false over-statement of revenue is not given. It was his opinion that the Library needs a stable funding source and requested that the City Manager provide some sample residential and commercial property tax increases if a one cent, two cent, and three cent dedicated to the library fund to eliminate any nebulous and confusing type of funding for this project. He also felt that members should not approve any electric rate increase without another mini-review of cost centers to determine if any of these costs can be reduced. Mr. Ruane stated his support for funding the Rate Stabilization Fund, feeling that it will be very necessary due to the volatility of the market.

Council President Williams thanked all staff for their efforts with regards to the draft budget and its presentation to Council. As was previously mentioned, she concurred that the City should have a fully funded pension liability and that any COLA should not add to this unfunded liability. She also relayed concern with the Planning and Inspections Department, explaining that the City of Dover is continuing to grow and with that she would like to be assured that there are enough planners and inspectors to avoid problems that have occurred in other jurisdictions within the State of Delaware. She concurred with Mr. McGlumphy with regards to the replacement of the Contingency Fund. She would like for there to be more aggression in the hedge market, feeling that the City could realize improvement if there was a financial buffer. Council President Williams urged members to support alternatives for the replacement of the CAMA software utilized by the Tax Assessor’s Office. With the understanding that the City may be eligible for additional COPS money for the Sex Offender Enforcement Unit, she suggested further evaluation as well as the reassignment or reallocation of manpower within the Police Department to avoid any delay in some of the enforcement issues regarding Sex Offenders.

Mayor Speed reminded members that he relayed his concerns during the previous evening. Although he does not have any issues regarding the concept of not designating funds (for economic development) specifically for the CDEDC, he explained that there is a caveat, that being that a part of the improvement process currently being conducted by the CDEDC is that they have asked for additional resources. He advised members that the current budget request is actually a reduction in the resource as compared to previous years. Mayor Speed also recommended that staff provide specific details with regards to the results of particular requests (showing where the necessary funds will be taken from or the tax increase that would be necessary).

After much discussion regarding the process in order to develop a revised draft budget, Mr. DePrima indicated that the Budget Team will develop of list of items (based on the comments of Council), along with their associated costs, revenue sources, etc. to be brought back to members for further consideration and direction to staff.

Mr. Ruane requested that the electric presentation be included during the next session.

Mr. Slavin moved to recess until Thursday, May 31, 2007 at 6:00 p.m. The motion was seconded by Mr. Carey and unanimously carried.

Meeting Recessed at 8:11 P.M.

THURSDAY, MAY 31, 2007 - 6:00 P.M. - 9:00 P.M.

By motion of Mr. Carey, seconded by Mr. McGiffin, the Special Council Meeting reconvened on Thursday, May 31, 2007 at 6:02 p.m. with Council President Williams presiding. Council members present were Mr. Carey, Mrs. Russell, Mr. McGlumphy, Mr. Slavin, Mr. McGiffin, Mr. Hogan, Mr. Salters, and Mr. Ruane. Council staff members present were Mr. DePrima, Mrs. Mitchell, Mrs. McDowell, and Mayor Speed.

Power Supply/Power Generation Cost Center Presentation

In response to the request of members, Mr. DePrima provided a presentation on the City’s power supply and generation cost centers as well as the revenues such as capacity credits and emission rebates (Exhibit #3). He introduced representatives of PACE, Mr. Keith Mills and Fred James, who addressed each of the cost centers.

Responding to Mr. Ruane regarding the dramatic variances, Mr. Mills advised members that initially, for fiscal year 2006/2007, when PACE was hired by the City, there were no forward hedges in place. In a very short period of time, in order to preserve the price target for cost of service, hedges were needed to be put in place in an expedited manner. In doing so, the market was on a trend up and encroaching against that target; therefore, hedges were put in place to preserve that cost of service target. He noted that there was not a lot of hurricane activity, high heat degree days, etc., which caused the gas market to drop dramatically. Since these occurrences are the main drivers for power prices in the forward market, they brought power prices down along with it. On a forward basis, Mr. Mills stated that this is not typically the way the program is designed, explaining that it is designed to take pieces of the market further out into the future. Therefore, the first power year was sort of an anomaly given the fact that the hedges were necessary to be placed in an expeditious manner. Currently, PACE is taking positions out further in the market to provide better positioning upon the actual arrival of a cost of service amount.

Mr. Mills further explained that the idea is to remove the volatility out of the market equation in order to arrive at a cost of service number that is acceptable and at a risk tolerance that is satisfactory. He assured members that appropriate action is being done to address these concerns for the future.

Elaborating, Mr. James stated that there are multiple objectives in the hedging program and that these objectives continue to be discussed over time as they may shift. When PACE was hired by the City, the objective was clearly price stabilization since the market was up against the budget and there was not a lot of tolerance for remaining unhedged where the market could increase without protection. The only opportunity to provide protection was at the current forward pricing levels which was done. The objective was achieved in terms of providing price and cost stabilization. He stated that the market dipped and has since rebounded, which provided a buying opportunity. In terms of addressing the future objectives, there is a desire for continued cost stabilization and to accomplish this in an environment that allows them the opportunity to take advantage of those buying windows. The opportunity was not available last year since they were fully hedged through the period and there was no need or cause to purchase additional energy when the market dipped. Although this is the objective, Mr. James stated that this was not available this past year because the only means of budget protection was to almost completely hedge out the current power year at a time when it was not the most opportune time to purchase energy.

In response to Mr. McGlumphy, Mr. James stated that the Rate Stabilization Fund provides additional flexibility to avoid having to take “offensive” hedges, like those that were taken last summer, which are designed to protect