HomeMy WebLinkAbout2007-05-03 Budget Committee Minutes
BUDGET COMMITTEE MEETING
May 3, 2007 PAGE 1 of 7
City of Ashland Budget Committee Meeting
Draft Minutes
May 3, 2007 6:00pm
Civic Center Council Chambers, 1175 East Main Street
CALL TO ORDER
Chairman Thompson called the Citizen’s Budget Committee Meeting to order at 6:03pm
on May 3, 2007 in Council Chambers at 1175 East Main Street, Ashland, Oregon.
ROLL CALL
Councilors Chapman, Hardesty, Hartzell, Jackson, Navickas and Silbiger were present.
Budget Committee members Bond, Heimann, Thompson, Stebbins, Everson, Levine,
and Gregorio were present.
STAFF PRESENT: MARTHA BENNETT, CITY ADMINISTRATOR
LEE TUNEBERG, ADMINISTRATIVE SERVICES/FINANCE DIRECTOR
JOE FRANELL, INFORMATION TECHNOLOGY DIRECTOR
DICK WANDERSCHEID, ELECTRIC UTILITIES DIRECTOR
SCOTT JOHNSON, ELECTRIC OPERATIONS SUPERINTENDENT
BRYN MORRISON, ACCOUNT REPRESENTATIVE
MIRANDA IWAMOTO, ACCOUNT CLERK II
PUBLIC INPUT
Thomas G. Paterson submitted a letter to the committee. Please see attached.
INFORMATION TECHNOLOGY
Information Technology Director, Joe Franell, presented the Information Technology
budget. Mr. Franell started with the structure of the department.The department is
divided into Computer Services, Internet and High Speed/Data. He reported that last
year, the department was separated into 5 divisions, the aforementioned ones and also
Cable TV, and Promotions/Customer Relations. Mr. Franell also explained that
Computer Services is supported internally, the Internet division is associated with
coaxial cable (revenue and expense) and the High Speed/Data division is any product
line (revenue and expense) delivered over direct fiber.
Mr. Franell continued with the major accomplishments of the last year (see attached
handout). Mr. Franell talked about how the restructuring of the department also meant
reassigning job duties. He said that Mr. Richard Holbo’s primary responsibility is
internal support and that Mr. Michael Ainsworth is managing AFN. Mr. Franell also
BUDGET COMMITTEE MEETING
May 3, 2007 PAGE 2 of 7
addressed his salary. Last year, 90% of his salary was expensed to AFN, this year it is
split between the 3 divisions.It was reported that Mr. Franell’s salary is expensed 40%
to Internet, 10% High Speed, and 50% Computer Services. Committee member Levine
asked about the experience and qualifications of Mr. Ainsworth. Mr. Franell explained
that Mr. Ainsworth has years of cable experience from Hawaii. He also voiced his
confidence in his staff and their work.Other accomplishments mentioned were the
development and deployment of the Utility Billing system, completed transition from
cable television to a private third party, launched wireless internet, launched digital
telephone service and the formation of an Information Technology (IT) Steering
Committee. Mr. Franell explained that the IT Steering Committee is developing a
technology plan for the City.
Mr. Franell followed with the distribution of the IT budget (see attached graph). The
budget is divided 36% for Computer Services, 49% for Internet and 15% for High
Speed/Data. Mr. Franell also explained the budget over time (see attached graph).
However, it was reported that it’s hard to compare exactly what’s happened since the
divisions went from 5 to 3. Councilor Hartzell asked about how the customer base has
changed over the last three years. Mr. Franell stated that he will provide the committee
with that information. He also said that Cable TV has about 2800 customers which was
higher than predicted and was pleased with the customer loyalty. Mr. Franell also
reported that the cable television contract states that the City will receive 7% of
revenue.
The 2008 proposed budget was broken down as 45% for Salaries & Benefits, 44% for
Materials & Services and 11% for Capital Projects (see attached graph). Mr. Franell
stated that the 11% for Capital Projects represents bringing network up to “full health”
and for long term viability.
Mr. Franell continued with the major responsibilities of the Computer Services division
(see attached handout). These responsibilities include support of all City computers,
software, servers and telephone system. Mr. Franell also discussed how the Computer
Services budget has increased. It was reported that this increase is due to a 10%
increase in health benefits, the 50% portion of Mr. Franell’s salary, Mr. Holbo’s salary
(80% in this division) and the remainder is for mandated salary increases.
Councilor Silbiger inquired about whether or not Computer Services is responsible for
maintaining the City’s website. The answer was no, and that it is managed by the
Communications Manager.
Committee member Thompson inquired about an increase in Materials & Services on
page 3-18. It was explained that was replacement of computer equipment. Committee
member Levine asked about the additional $45,000. Mr. Franell said he would bring the
details back to the committee.
Committee member Heimann inquired as to why the number of employees stayed the
same since the IT department is no longer managing cable television. Mr. Franell
BUDGET COMMITTEE MEETING
May 3, 2007 PAGE 3 of 7
explained that the IT department provides all of the support to Ashland Home Net
(lessee) for cable services (installs, maintenance, etc.). It was reported that when the
head end was leased, the Head End position was the only one that wasn’t needed. Mr.
Franell stated the same amount of support work is being performed and that it is a full
workload. Ms. Thompson asked if the $94,000 cable television revenue pays for the
technicians. It was answered yes. Ms. Thompson also inquired about whether or not it
is more expensive to hire own employees instead of contracting it out. Mr. Franell
explained that contracted services don’t always provide the same level of service and
quality of work. It was also reported that the City would have to pay a premium price
because contractors would have to travel from out of town. Ms. Thompson asked about
putting the responsibility on the lessee to hire contractors or employees. Mr. Franell
explained the importance of maintaining a closed cable system. He said that sloppy
cable work can cause a lot more problems because the system may be infiltrated by
radio frequency. Installing cable is very technical and if done incorrectly can create an
unreliable system. Mr. Franell explained that a lack of customer service and trust could
potentially cost more than the actual cost of maintaining the system.
Mr. Levine stated that he heard that an ISP could run the system more efficiently.
Mr. Franell reported that nothing has prevented the ISP’s from providing ancillary
services but they haven’t done that, nor have the ISP’s marketed. Councilor Silbiger
said that a few years ago, a group of local ISP’s were brought together and asked to
help find a solution for the system. It was reported that at that time the group was
unable to propose a viable solution.
It was reported that the technicians cost approximately $230k and are responsible for
both cable and internet support. The technicians are responsible for installation,
answering service calls and providing preventative cable maintenance. The committee
asked how the technicians were weighted for salary expense. It was reported that the
technicians’ salaries are expensed to different divisions but weighted towards Internet.
Committee member Gregorio inquired about the revenue decrease in High Speed but a
significant revenue increase for Internet. Mr. Franell answered that SOU has switched
to statewide system and therefore, High Speed revenue has decreased.
Mr. Franell reported that the City might become a retailer and try to market more
services. He also said that there is a consolidated list coming out that specifies which
ISP is serving what address. Mr. Gregorio asked when IT will know if it’s paying off.
st
quarter of FY 08 (July, August, September).
Mr. Franell said that it will be the 1
Mr. Heimann asked why the City is dealing with ISP’s. Mr. Franell replied that it’s
important to encourage high tech business in the Rogue Valley and that the open carrier
network (wholesale) has provided business opportunities here. Mr. Franell explained
that evaluation of the situation will continue and the City will have a better outlook after
st
the 1 quarter of FY 2008.
BUDGET COMMITTEE MEETING
May 3, 2007 PAGE 4 of 7
Councilor Hartzell asked about a large increase to salaries across all three divisions.
Mr. Franell explained that when the transition from 5 to 3 divisions happened, the
salaries from the 2 cut divisions were transferred into the 3 current divisions.
Mr. Heimann inquired about fringe benefits accounting for 50% of salary. Administrative
Services/Finance Director, Lee Tuneberg said that some employees do have a 50%
benefit relationship and that ratio can be affected by the level of employee, benefit
selection (full-family, single, etc), and length of service.
The committee inquired about digital telephone. Mr. Franell explained that it is a new
service that will be available for both residential and business owners.
Ms. Thompson clarified that the revenues and expenses for Internet and High Speed
are associated with the Telecommunications Fund, and that Computer Services is
associated with the Central Services Fund. The answer was yes. Ms. Thompson
continued and called attention to page 4-62, which shows a loss of $400,000 for 2008.
Mr. Franell answered that the department is operationally cash positive without the debt.
He continued to explain that the department has to fix the system this year so that it’s
up to speed. Mr. Franell stated that approximately $300,000 is being spent for capital
projects this year but that will not be a constant for future years. A bulk of the $300,000
is for a cable modem termination system.Mr. Franell also spoke about greater than
expected revenues in the Telecommunications Fund this year which will enable the debt
payments to be paid a year ahead of schedule.
Mr. Franell talked about the Information Technology Business Plan. Mr. Franell said the
plan is available on the City of Ashland website under Information Technology, 5-year
Plan.
Mr. Levine asked about the useful life of cable and the total build out cost for AFN. It
was answered that the life of cable depends on the type of material used and that the
longest life used was 20 years. Mr. Tuneberg answered that the cost of AFN was
approximately 9 million.
Mr. Levine also asked about whether or not Mr. Franell would entertain the idea of
someone else taking over AFN. Mr. Franell stated that he is open to discussion and
any proposals would be considered.
Mr. Heimann inquired about the future projections showing investment going up and
return going down. Mr. Tuneberg explained that the contribution to debt service
increases in 2008. He said the goal is to maintain the asset and pay the costs
associated with the asset and then still use the asset to pay towards debt service. Mr.
Gregorio asked about how the projected ending fund balances stay the same since
each year is showing a deficit. Mr. Tuneberg answered that it’s dependent upon
whether or not contingency is spent and that the model adds the contingency to the
beginning fund balance for the following year.
BUDGET COMMITTEE MEETING
May 3, 2007 PAGE 5 of 7
It was reported that there are no job vacancies in the IT Department.
It was also reported that the IT Department was not subject to the 5% cut. City
Administrator, Martha Bennett, explained that a 5% cut package wasn’t asked for
because AFN balances. Ms. Bennett stated that any department that balanced was not
asked to cut 5%. It was reported that Computer Services was not subject to the 5% cut
because Computer Services is not part of the General Fund and because the budget
was balanced by holding revenues flat and streamlining expenses.
Mr. Franell presented the committee with department performance graphs (see
attached handout). It was reported that 59% of work was completed the same day for
AFN and for Computer Services.
The committee inquired about marketing the Utility Billing software. Mr. Franell said that
some businesses have expressed interest and they are looking into options of
marketing it. However, it will have to go through the Legal Department first.
Mr. Levine asked if there are retail partners involved anywhere in AFN. Mr. Franell
answered no, not to begin with but yes, lately. Mr. Franell stated that if retail partners
want to absorb some of the capital expenditure then the City is willing to work with them.
However, if they just want to benefit and not invest then the City isn’t as interested in a
type of partnership.
Mr. Franell continued with the significant budget changes such as the transition of cable
television, designating revenue/expenses into the new appropriate divisions and turning
a temporary employee into a full-time employee. Mr. Franell reported on the challenges
for FY 08 (see attached handout). Mr. Franell spoke about a lack of funding for 24/7
support and the problems it can cause for certain departments such as Fire and Police.
The proposed additions for FY 08 include moving a .5 FTE Police Computer Support
position to full-time (1.0 FTE). That position (the .5 FTE) is currently paid for by DEA
forfeiture money. It was reported that the workload is such that the position should be
full-time instead of part-time. Mr. Franell reported that although the position (because
it’s a tech position) is under operational control of the IT Department, the monies will be
paid from the Police budget. The other add is to pay on-call to provide 24/7 support to
the various departments. The committee asked if the system can be accessed over the
internet and the answer was that the City will still have to pay on-call.
Everson/Navickas ms to accept the Information Technology budget as presented.
All Ayes.
Councilor Jackson left at 7:57 pm.
BUDGET COMMITTEE MEETING
May 3, 2007 PAGE 6 of 7
ELECTRIC
Dick Wanderscheid, Director of Electric Utilities and Scott Johnson, Electric Operations
Superintendent, presented the Electric Department budget. Mr. Wanderschied
explained that the electric utility service in Ashland was started in 1909. Mr.
Wanderscheid stated that the utility brings in 1.1 million dollars in franchise revenue to
the City and that the Electric Users Tax provides 2.6 million.
Mr. Wanderscheid started with the major responsibilities of the department (see
attached handout). The responsibilities include maintaining the City’s electric
distribution system and hydro generator, managing the relationship with BPA and
providing community energy programs. Mr. Wanderscheid continued with the structure
of the department. The Electric Department has 2 divisions: Electric and Conservation.
It was reported that the major accomplishments of FY 06-07 were completing a
Supervisory Control and Data Acquisition feasibility study, applying for Clean
Renewable Energy Bonds (CREB) for the community solar project, obtaining building
designs for the storage building and upgrading the hydro generator controls.
Mr. Wanderscheid followed by discussing the budget over time (see attached graph).
Mr. Wanderscheid explained that the variance of the budget relates to the weather. Mr.
Wanderscheid also pointed out that there is a significant difference between what was
budgeted for 2007 and the 2007 actual numbers.He explained that this is because
neither the $500,000 solar project nor the $220,000 covered storage building will be
finished this year. However, the projects will be worked on this upcoming year and so
the converse is true for 2008.
Mr. Wanderscheid also provided a graph depicting the Electric Department’s revenues
(see page 3 of handout). It was reported that revenues are made up of both
miscellaneous fees and the sale of electricity. Mr. Wanderscheid said that the 2008
projected increase is due to a 2% growth in KWh sales, and $500,000 in CREB sales.
Mr. Wanderscheid explained the distribution of the FY 08 budget. He reported that the
majority of the budget (48%) is for the purchase of wholesale power from BPA, 26% is
for Materials & Services, 10% is designated for Capital Projects and 16% is for the
Salaries & Benefits for the 21.1 FTE in Electric.
The significant budget changes from 2006-2007 include increased capital spending for
the solar project and covered storage building, mandated salary increases per union
contract, and reduced power costs. Mr. Wanderscheid explained that BPA reduced its
wholesale rates and therefore, the Electric Department’s expense will decrease by
about $520,000. Mr. Wanderscheid also spoke about the significant and unavoidable
increases in material and gear costs. It was reported that materials have increased
about 50% from a year ago and that the price has tripled from a few years ago. Mr.
Wanderscheid also spoke about eliminating the BPA surcharge and then increasing
rates by an equivalent amount. Mr. Wanderscheid said this would be revenue neutral to
the Electric Fund but it will generate additional funds for the General Fund. It was
BUDGET COMMITTEE MEETING
May 3, 2007 PAGE 7 of 7
reported this was necessary because BPA is no longer working with a cost recovery
adjustment clause and instead, have included those costs in the base rates. The
elimination of the surcharge is expected to occur January 1, 2008.
Mr. Wanderscheid ended his presentation with the upcoming challenges (see attached
handout). Some of the challenges addressed were the relationship changes with BPA
(negotiating new contract), the continued increase in material costs, the installation of a
new switch gear at the hydro generator, and completing the community solar project.
Mr. Wanderscheid summarized the overall Electric Department budget as being down
and explained that the department tried to stay as flat line as possible. He also stated
that they are able to increase costs by cutting into the ending fund balance instead of
increasing electric rates. Committee member Everson asked about how the following
year will look because of the money being drawn from the ending fund balance. It was
answered that the BPA rates should be lower or the same and therefore, electric rates
shouldn’t have to be increased. However, the situation will have to be reassessed.
Committee member Stebbins inquired about the BPA surcharge elimination and its
effect on the General Fund. Mr. Wanderscheid explained that the BPA surcharge is not
subject to Electric Users Tax right now. However, if it’s rolled into rates, then it’s subject
to the Electric Users Tax. The impact on the customer is 2% and that extra money will
go into the General Fund.
Mr. Gregorio inquired about the CREB revenue. Mr. Wanderscheid said that the vision
was to sell the output of the system to citizens (voluntary). The goal is that 80 -100% of
the debt service cost of the bonds will be paid by those who take part of the system.
The City needs 375 to 400 people to voluntary choose to increase their bill by $8.50 per
month and they will receive about a $34 payment each year. The bonds need to be
sold by December 31, 2007. City Council will be evaluating the project.
Councilor Hartzell inquired about long term projections. It was answered that it’s hard to
make projections because future BPA rates are unknown.
Heimann/Silbiger ms to accept the Electric budget. All Ayes.
ADJOURNMENT
The meeting was adjourned at 8:35 pm.
Respectively Submitted,
Miranda Iwamoto
Account Clerk II
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Information Technology
Department
City Of Ashland
Proposed Budget for 2007-2008
May 3, 2007
Structure of Department
Information Technology has Three Divisions
Computer Services Division
Internet Division
High Speed/Data Division
1
Major Accomplishments in FY
2006-2007
Restructured the IT Department
Deployed and Converted to a New, Internally
Developed Utility Billing System
Completed the Transition of the Cable Television
Division to a Private Third Party
Launched Wireless Internet (afnAnywhere)
Launched Digital Telephone Service (VOIP)
Formed an IT Steering Committee and Completed a
First Draft of the Technology Plan for the City
Distribution of Budget
$469,000 , 15%
$1,166,000, 36%
Computer Services
Internet
$1,584,000, 49%
High Speed
2
IT Departmental
Budget Over Time
$3,500,000
$3,000,000
$2,500,000
CustomerRelations
$2,000,000
CableTV
HighSpeed
Internet
$1,500,000
ComputerSrvcs
$1,000,000
$500,000
$0
Departmental
2008 Proposed Budget
$351,000 , 11%
$1,438,000, 45%
1,428,000, 44%
Salaries and Benefits
Materials and Services
Capital Projects
3
Major Responsibilities of
Computer Services Division
Support of All City Desktop and Laptop
Computers/Workstations (220)
Support of All City Software Applications
Support of All City Servers
Support of City Telephone System
Computer Services
Budget Over Time
$1,200,000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
4
Computer Services
2008 Proposed Budget
$30,000 , 3%
$335,700, 29%
$799,900, 68%
Salaries and Benefits
Materials and Services
Capital Projects
Major Responsibilities of
Internet Division
Installation of Coaxial Connections to Residences
and Businesses
Management of Relationship with Retail Partners
Internet Service Providers
Digital Phone Service Providers
Cable Television Service Provider
Maintenance of Coaxial Network
Management of Four Linux Servers
5
Internet
2008 Proposed Budget
$193,000 , 12%
$545,000, 34%
Salaries and Benefits
Materials and Services
$847,000, 54%
Capital Projects
Major Responsibilities of
High Speed/Data Division
Sales and Installation of Direct Fiber Connections
to Businesses and Residences.
Maintenance of Fiber Network
17 Miles of Fiber Optic Cable in the City
12 Miles of 48 Count Fiber to Medford (Jointly
Owned)
40Optical Nodes (Each Serves Up to 300
Addresses)
Management of Seven Linux Servers
6
High Speed
2008 Proposed Budget
$94,000, 20%
$128,000 , 27%
Salaries and Benefits
Materials and Services
Capital Projects
$246,000, 53%
Computer Services
Completed Work Past 12 Months
700
600
500
400
300
200
100
0
Type of
issue
7
Computer Services
Time to Resolution Past 12 Months
1000
900
800
700
600
500
400
300
200
100
# Resolved
0
in
Timeframe
Ashland Fiber Network
Completed Work Past 12 Months
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Type of
issue
8
Ashland Fiber Network
Time to Resolution Past 12 Months
700
600
500
400
300
200
100
# Resolved
0
in
Timeframe
Significant Budget Changes
From 2006-2007
Completed Transition of Cable Television Services
Cable Television Revenue and Expenses are Now
Included as a Part of the Internet Category.
Customer Relations/Promotions Expenses are No
Longer Captured as a Separate Item but are Now
Applied Appropriately as Part of the Internet and
High Speed Categories
Temporary Telecommunications Technician (AFN)
Moved to Employee at a Cost of $4568.
9
Challenges for FY 2008
Major Challenges
Re-establishment of Network Health
Cable Modem Termination System (CMTS)
Switch/Router Replacements
Increased Demand for Support (Hardware and Software)
Increasing Demand for 24 X 7 Critical Systems Support
Areas of Focus
Continued Integration of City Database Sources
Designing and Implementing an Integrated Public Safety Data
Network
Industry Trends
Gigabit Ethernet Service Drops
WiMax (Next Generation Wireless)
Mobile Applications
IP Video
Proposed Add for FY 2008
Increase 0.5 FTE Police Department Computer Support
Technician position to 1.0 FTE
Budget implication of $39,786 from the General Fund
Remains in APD Budget but under operational control of IT
Department
Add on-call pay to provide 24X7 support for critical technology
systems in the City.
The estimate of the budget implication is $3000 -$10,000 per
year and will only be paid as used.
10
Electric Department
City Of Ashland
Proposed Budget for 2007-2008
May 3, 2007
Major Responsibilities of
Department/Division
Maintain the City’s Electric Distribution System.
Manage our relationship with BPA for wholesale
power.
Maintain and operate the City’s Hydro generator.
Provide Electrical Contracting service for the City.
Provide electric and water use efficiency programs
for Ashland citizens and businesses.
Provide renewable energy programs.
Provide energy assistance and energy efficiency
programs for low income households.
1
Structure of Department
Electric Division
*Supply
*Transmission
*Distribution
Conservation
*Electric
*Water
*Air Quality
Major Accomplishments in FY
2006-2007
Completed a Supervisory Control and Data
Acquisition (SCADA) feasibility study.
Successfully applied for Clean Renewable Energy
Bonds (CREB’s) for our Solar Project.
Completed design documents for enclosing the
Department’s covered storage building.
Began work to upgrade the controls at the City’s
hydro generator.
2
Budget Over Time ( million $)
$14.50
$14.15
$14.00
$13.69
$13.50
$13.00
$12.64
$12.55
$12.50
$12.00
$11.50
2006 Actuals2007 Budget20072008
ProjectedProposed
Actuals
Electric Revenues (Million $)
$13.50
$13.00
$12.50
$12.00
$11.50
$11.00
2004200520062007p2008p
3
2008 Proposed Budget
$2.11 , 16%
Million
$6.30 , 48%
Million
$3.40 , 26%
Million
Salaries and Benefits
Materials and Services
Capital Projects
$1.35 , 10%
Wholesale Power
Million
Significant Budget Changes
From 2006-2007
Increased capital spending for the enclosure of the
covered storage building and Solar project. These
were not completed last year so funds are carried
over to this year.
Increased salary and benefit costs.
Increased electrical material and gear costs.
Reduced wholesale power costs from BPA.
FTE’s are held constant.
Elimination of BPA surcharge and increase rates as
proposed but not implemented last year. This
change is revenue neutral to the Electric Fund but
generates additional funds for the General Fund.
4
Challenges for FY 2008
Preparation for major changes in our relationship
with BPA.
A continuation of the significant cost escalation of
electrical materials and gear.
Continued work on moving load from the Pacific
Power substation on Nevada St. to the BPA
substation on Mountain Ave.
Completion of the Community Solar project.
Complete the installation of the new switch gear at
the City’s hydro generator.
5