Closed Caption Log, Council Worksession
Wednesday, July 31, 2002

Note: Since these log files are derived from the Closed Captions created during the Channel 6 live cablecasts, there are occasional spelling and grammatical errors. These Closed Caption logs are not official records of Council Meetings and cannot be relied on for official purposes. For official records or transcripts, please contact the City Clerk at (512) 974-2210.

MAYOR GARCIA: GOOD MORNING, EVERYBODY. (10:07.) THERE BEING A QUORUM OF THE COUNCIL IN THE ROOM, I WILL CALL TO ORDER THE WORK SESSION OF THE AUSTIN CITY COUNCIL, WE ARE CONVENING AT -- IT'S 10:07. ON WEDNESDAY, JULY 31st. WE ARE AT THE ONE TEXAS CENTER, 505 BARTON SPRINGS ROAD, IN THE THIRD FLOOR TRAINING ROOM IN AUSTIN, TEXAS. WE HAVE ONE ITEM, A BIG ONE. IT'S AN IMPORTANT ONE. THE PRESENTATION OF THE PROPOSED BUDGET FOR FISCAL YEAR 2002-2003 FISCAL YEAR 2002-2003. LET ME MAKE SOME INTRODUCTORY REMARKS, THEN I WILL PASS IT ON TO THE CITY MANAGER. EVERY CITY IN THE COUNTRY AND I KNOW EVERY CITY IN TEXAS, EVERY MAJOR CITY IN TEXAS, IS GOING THROUGH THE SAME THING THAT WE ARE GOING THROUGH. A BUDGET SHORTFALL. DALLAS IS DOING IT ONE WAY. THEY HAVE LAID OFF SOME FOLKS. HOUSTON IS I THINK A LITTLE BETTER OFF THAN THE OTHER CITIES. YESTERDAY THE CITY MANAGER AND I WERE IN SAN ANTONIO VISITING WITH THE CITY MANAGER, TEXAS AGGIE, COUNCILMEMBER WYNN, AND THEY ARE STILL ABOUT -- WHAT DID HE SAY? $30 MILLION AWAY FROM BEING ABLE TO BALANCE THE BUDGET. SO ... THE CITY MANAGER TODAY WILL -- WILL PRESENT TO THE COUNCIL AND TO THE COMMUNITY A BUDGET THAT -- THAT I GUESS THE BEST WAY TO DESCRIBE IT IS A RESPONSIBLE BUDGET. ONE THAT -- ONE THAT, YOU KNOW, TAKES INTO CONSIDERATION THE SEVENS THAT WE PROVIDE OUR COMMUNITY AND AT THE SAME TIME TRIES TO PROTECT THE INTERESTS OF OUR EMPLOYEES. AT LAST REPORT, I DON'T THINK WE WERE LAYING OFF ANYBODY AND THE CITY MANAGER WILL TALK A LITTLE BIT MORE ABOUT THAT. BUT -- BUT I WANT TO SAY ONE FINAL THING BEFORE I TURN IT OVER TO THE CITY MANAGER. THAT IS THAT -- THAT THE EMPLOYEES OF THE CITY OF AUSTIN HAVE BEEN TREMENDOUSLY COOPERATIVE IN HELPING THE CITY ADDRESS THIS -- THIS SITUATION AND I FOR ONE, AND I SPEAK -- I THINK THAT I SPEAK FOR THE WHOLE COUNCIL WHEN I SAY WE APPRECIATE THAT. WE NEED TO KEEP OUR VIBRANT, WE NEED TO KEEP OUR CITY LIVABLE. AND WHAT OUR EMPLOYEES DO, GOES A LONG WAYS TOWARDS DETERMINING OR ESTABLISHING THAT PARTICULAR LEVEL OF SERVICE. SO CITY MANAGER, THIS IS YOUR SHOW. SO -- TO YOU ARE ON.

FUTRELL: WELL, IT'S HARD TO MAKE THESE PRESENTATIONS ENTERTAINING. SO BEAR WITH US, BECAUSE WE ARE REALLY TO TELL YOU A STORY. IT'S A STORY OF WHAT IS OUR PROBLEM, HOW DID WE GET HERE AND WHAT ARE WE DOING TO FIX THAT PROBLEM. WHAT THE MAYOR SAID IS ABSOLUTELY TRUE. WE ARE NOT ALONE IN THIS. THERE IS NOT A GOVERNMENT OR A LOCAL OR A CITY ANYWHERE IN THE COUNTRY WHO IS NOT DEALING WITH EXACTLY THE SAME PROBLEM THAT WE ARE DEALING WITH. THEY ARE ALL REDUCING THEIR BUDGETS IN SIZE AND SCOPE. AND THAT'S WHAT WE ARE DOING. SO ALTHOUGH OUR CHALLENGE WAS NOT UNIQUE, I BELIEVE BOTH OUR APPROACH AND OUR OUTCOME WILL PROVE TO BE UNIQUE. MANY CITIES IN TEXAS AND IN OTHER STATES HAVE ALREADY RESORTED TO LAYOFFS AND PAY CUTS. AND MANY OTHERS WILL DO SO SOON. MANY CITIES WILL LIKEWISE BE FORCED TO RAISE TAXES. AND TODAY WE ARE PRESENTING TO YOU A BUDGET THAT PROVIDES ALL OF THE BASIC SERVICES OUR CITIZENS DEPEND ON, AND YET A BUDGET THAT MITIGATES THE EFFECT OF THESE REDUCTIONS ON EMPLOYEES. AND MOST IMPORTANTLY, WE HAVE AVOIDED LAYOFFS, PAY CUTS OR A TAX RAISE AS PART OF THIS PROPOSED BUDGET. SO I AM, IN PRESENTING THIS BUDGET TO YOU, WANT TO ALSO HIGHLIGHT ANOTHER PIECE THAT THE MAYOR MENTIONED IN HIS INTRO, WHICH IS THE EXTRAORDINARY LEVEL OF COOPERATION AND COLLABORATION WE HAVE FOUND WITH ALL OF OUR STAKEHOLDERS, I DON'T JUST MEAN OUR COUNCIL OR OUR BUSINESS COMMUNITY, OR OUR CITIZENS, BUT IN PARTICULAR OUR EMPLOYEES. I HAD OVER THE LAST TWO MONTHS OVER 40 DIFFERENT BUDGET PRESENTATIONS WHERE WE HAVE BEEN OUT IN THE COMMUNITY TALKING ABOUT WHAT ARE THE CHALLENGES IN THIS UPCOMING BUDGET? AND NO GROUP HAS TOUCHED ME MORE THAN THE CITY OF AUSTIN EMPLOYEES, OUR WORKFORCE. WITH ALL THE NEWS WE WERE FACING, WITHOUT EXCEPTION, THESE MEETINGS HAVE INCLUDED SUGGESTIONS AND COLLABORATIVE THINKING, A REAL PARTNERSHIP WITH OUR EMPLOYEES. AND IT'S IN THE SPIRIT OF THAT COLLABORATION, AND WE HAVE UP ON THE -- ON THE SCREEN FOR YOU, IT'S A LITTLE HARD TO SEE AT THIS -- AT THIS SCALE, BUT IT'S THE SPIRIT OF THAT COLLABORATION THAT BECAME OUR BUDGET THEME, WHICH WAS BRIDGING THE GAP TOGETHER. WHAT YOU WILL SEE ON OUR NEW PEDESTRIAN BRIDGE ARE EMPLOYEES FROM EVERY SINGLE CITY DEPARTMENT STRETCHED OUT ALONG THE LENGTH OF THAT BRIDGE BECAUSE THOSE ARE THE PEOPLE WHO ARE GOING TO MAKE THIS BUDGET WORK FOR THIS COMMUNITY AND FOR THIS CITY. SO THE FOLLOWING OVERVIEW OF THE PROPOSED BUDGET IS GOING TO BE ORGANIZED REALLY AROUND FIVE QUESTIONS. HOW DID WE GO FROM WINDFALL TO SHORTFALL, THIS IS A LITTLE BIT OF HOW THE STORY BEGAN. WHAT WERE OUR EARLY STRATEGIES TO PREPARE FOR THAT SHORTFALL? THEN WHAT WERE OUR FOUR BUDGET OBJECTIVES? HOW DID WE ACTUALLY CLOSE THE GAP? AND THEN DID WE MEET OUR FOUR OBJECTIVES? IN BALANCING THE BUDGET. RUDY AND JOHN AND VICKI ARE GOING TO FOLLOW-UP WITH MORE DETAIL ON THE BUDGET AND WE AS PROMISED TO COUNCIL EARLIER IN MAY WILL DO A BENEFITS PRESENTATION FOR YOU, ALSO. SO LET'S START WITH HOW DID WE GO FROM WINDFALL TO SHORTFALL? PUTTING IT IN PLAIN ENGLISH, WE ARE SIMPLY SPENDING MORE THAN WE ARE MAKING. OUR EXPENDITURES OR OUTSTRIPPING OUR REVENUE. A STATUS QUO BUDGET NEXT YEAR, A BUDGET WHERE WE BUDGET AS WE BUDGETED IN 2002-2003 .2002-2003 02, WOULD GET US A VIRTUAL BUDGET, NOT A REAL BUDGET, A VIRTUAL BUDGET. THIS IS IMPORTANT BECAUSE THIS IS REALLY ONE OF THE BUDGET MESSAGES. IF WE APPROPRIATE ALL OF OUR FUNDS ON HAND, 2001 WILL BE APPROVING A BUDGET THAT CANNOT BE FULLY IMPLEMENTED. THE DAY AFTER THAT BUDGET WAS PASSED, WE WILL HAVE TO IMMEDIATE BEGIN FREEZING BUDGETED FUNDS AND POSITIONS. IN FACT, BUDGETING NEXT YEAR AS WE DID THIS YEAR, THE LIGHTS GOING ON AND OFF IS A LITTLE PSYCHEDELIC EFFECT FOR EVERYONE AS WE MOVE FORWARD WITH THIS -- IF WE BUDGET NEXT YEAR AS WE DID THIS YEAR, WE WOULD HAVE $75 MILLION SHORTFALL. WE WOULD BE SPENDING $75 MILLION MORE THAN WE MAKE. NOW, IT'S HARD TO UNDERSTAND THE MAGNITUDE OF THAT SHORTFALL. HOW BIG OF A PROBLEM IS $75 MILLION IN THE CONTEXT OF ALMOST A $2 BILLION BUDGET? SO TAKE OUT YOUR ENTERPRISE DEPARTMENTS. THOSE PROFIT MAKING DEPARTMENTS THAT PAY FOR THEMSELVES AND THEN PAY THE GENERAL FUND. AND TAKE OUT OUR FIRST RESPONDERS FOR PUBLIC SAFETY. ONE OF THE CITIZENS -- THE CITIZENS PRIMARY PRIORITY FOR SERVICE AND WHAT YOU HAVE LEFT IS ABOUT 236 MILLION. IF YOU WERE TO TAKE ALL OF THAT 75 MILLION, YOU WOULD BE TAKING IT BASICALLY FROM A POT OF MONEY THAT IS ABOUT 236 MILLION. THAT'S A WAY FOR YOU TO SEE AND UNDERSTAND THE SCOPE OF THE PROBLEM IN TRYING TO CLOSE THIS BUDGET. LOOKING BACK ON THIS POINT, HOW WE WENT FROM WINDFALL TO SHORTFALL, IT'S REALLY THREE STEPS, AND IT TOOK A DECADE. FIRST OF ALL, EVERYONE KNOWS THIS, WE EXPERIENCED PHENOMENAL GROWTH IN THE '90'S, VERY FEW CITIES HAD THE LEVEL OF GROWTH THAT AUSTIN HAD. WITH GROWTH COMES AN INCREASE IN DEMAND FOR CITY SERVICES. IN FACT WE DOUBLED OUR GENERAL FUND BUDGET IN 10 YEARS. IT MAKES SENSE. A LOT OF PEOPLE WERE MOVING TO AUSTIN. NOW A SPECIAL NOTE IN TALKING ABOUT THAT DEMAND FOR SERVICES IS THE DEMAND FOR PUBLIC SAFETY. IN THIS PROPOSED BUDGET, WE WILL SPEND 54% OF THE GENERAL FUND REVENUE ON THE PUBLIC SAFETY ALONE. POLICE, FIRE AND EMERGENCY MEDICAL SERVICES. THAT MEANS THAT 95% OF ALL OUR SALES AND PROPERTY TAX WILL GO TO FUND PUBLIC SAFETY. NOW GO TO YOUR SECOND STEP. BIG POPULATION GROWTH, BIG INCREASE IN DEMAND, THE GENERAL FUND BUDGET DOUBLES. WE LEVERAGE THE ECONOMIC BOOM OF THE 1990'S AND WE LEVERAGED IT TO LOWER THE CITY'S PROPERTY TAX RATE. WE GREW FROM THE 40th TO THE 15th MOST PROSPEROUS CITY IN THE NATION DURING THE 1990S. BECAUSE OF THAT, WE WERE ABLE TO RELY A PHENOMENAL GROWTH OF SALES TAX AND USE THAT TO REDUCE OUR PROPERTY TAX RATE. IN FACT WE REDUCED THE PROPERTY TAX RATE 30% OVER THAT PERIOD OF TIME. AND WE LOWERED THAT RATE 8 OUT OF 10 YEARS. AND WE DID THAT IN ORDER TO DO TWO THINGS: WE WERE COMING OFF OF A RECESSION FROM THE 1980'S, IT WAS A WAY TO HELP REBUILD THIS LOCAL ECONOMY; AND PROBABLY MORE IMPORTANTLY, WE HAD INCREDIBLY LARGE INCREASES IN VALUATIONS. SOARING PROPERTY VALUATIONS THAT CREATED LARGER AND LARGER TAX BILLS FOR THE CITIZENS OF AUSTIN. SO THAT IS ONE OF OUR WAYS OF REDUCING THAT BURDEN. DESPITE HAVING THE LOWEST PROPERTY TAX RATE OF ANY MAJOR TEXAS CITY, AUSTINITES STILL PAY ONE OF THE HIGHEST TAX BILLS AND THAT IS IMPORTANT TO NOTE. BECAUSE OF LOWERING THE CITY'S TAX RATE DURING THE 1990'S, THE CITY OF AUSTIN TAX RATE CURRENTLY COM PRIZES ONLY -- COMPRISES ONLY 18% OF THE TOTAL OVERLAPPING TAX RATE. THE BIGGEST SERVICE PROVIDER AND 18% OF THE OVERLAPPING TAX RATE. IN FACT, IF THE PROPOSED COUNTY TAX INCREASE OCCURS NEXT YEAR, THE CITY'S TAX RATE WILL BE LOWER THAN THAT OF THE SURROUNDING COUNTY. AND IF THAT HAPPENS, IT MAY BE THAT WE WILL BE THE ONLY MAJOR CITY IN TEXAS WHERE THE SURROUNDING COUNTY TAX RATE EXCEEDS THE CITY'S TAX RATE. NOW, LET'S GO TO YOUR THIRD STEP. BIG GROWTH INCREASE, BIG INCREASE OF DEMAND, LOWERED OUR PROPERTY TAX RATE, LEVERAGED THE PHENOMENAL GROWTH -- IN SALES TAX, BUT WE ALL KNOW WHAT THE THIRD STREP WAS, THE PHENOMENAL GROWTH OF THE 1990'S IS OVER. CORRESPONDINGLY THE SALES TAX REVENUE GROWTH IS OVER. AND IN FACT IS NEGATIVE. WELL, WE RECOGNIZED THAT THIS WINDFALL GROWTH IN SALES TAX WOULD COME TO AN END AND ALMOST TWO YEARS AGO WATCHING FOR THE EARLY WARNING SIGNS, WE BEGAN PLANNING AND PREPARING FOR AN END FOR THAT LOSS OF SALES TAX. WE BEGAN AGGRESSIVELY PURSUING VACANCY SAVINGS AND REDUCING CAPITAL EXPENDITURES. SO I GUESS THE BOTTOM LINE IN THIS PART OF THE STORY, THE WINDFALL TO SHORTFALL, IS THAT FIXING THIS PROBLEM IS NOT ROCKET SCIENCE. WE ARE DOING JUST WHAT ANY FORTUNE 500 COMPANY WOULD DO IN THE PRIVATE SECTOR AND WHAT ANY OF YOU WOULD DO IN YOUR HOUSEHOLD IN THE SAME SITUATION. WE ARE GOING TO HAVE TO CUT BACK OUR EXPENDITURES TO MATCH OUR REVENUE. SO WHAT WERE OUR EARLY STRATEGIES? WE SEE IT COMING, WHAT WERE OUR EARLY STRATEGIES? IN JANUARY OF 2001 WE BEGAN TO SEE THE SLOWDOWN AND WE BEGAN TO REACT INFORMALLY IN THE ORGANIZATION TO SLOW DOWN HIRING. BY AUGUST OF 2001, WE HAD INSTITUTED A FORMAL PROCESS, A BUSINESS JUSTIFICATION REVIEW FOR THE HIRING OF ANY EMPLOYEE IN THE CITY. STATEMENT WE FROZE THE PURCHASE OF UNBUDGETED CAPITAL. BY OCTOBER OF 2001, IN THE WAKE OF SEPTEMBER 11TH, WE FROZE LOWER PRIORITY BUDGETED CAPITAL AND PLACED SOME CASH C.I.P. PROJECTS ON INDEFINITE HOLD. BY NOVEMBER WE WERE IN AN ALL DAY DEPARTMENT DIRECTOR RETREAT ON THE BUDGET, WE WERE TRAINING AND IMPLEMENTING THE CORE SERVICE ANALYSIS. IN DECEMBER, WE PROVIDED COUNCIL WITH AN ECONOMIC FORECAST OR STRUCTURAL IMBALANCE AND WE DISCUSSED THE FEED FOR TAX ANSWER -- THE NEED FOR TAX ANTICIPATION NOTE FOR THE UNANTICIPATED UNBUDGETED HOMELAND SECURITY COST THAT HAD OCCURRED. NOW, JANUARY AND FEBRUARY OF THIS YEAR, OF 2002, WE PRESENT COUNCIL WITH UPDATE AND WE TALK ABOUT OUR BUDGET TOOLS, SPECIFICALLY THE CORE SERVICE ANALYSIS AND OUR INITIATIVE TO REVIEW AND REVISE GENERAL FUND FEES. BY FEBRUARY COUNCIL HAD ISSUED A $4.8 MILLION TAX AN OPERATION NOTE. IN -- ANTICIPATION NOTE. IN MARCH WE FORMALLY BEGAN TO FREEZE POSITIONS IN THE CITY. WE ARE SEEING A CONTINUING DECLINE OF SALES TAX REVENUE. REMEMBER WE HAD BEEN STRATEGICALLY HOLDING POSITIONS OPEN AS PART OF THE BUSINESS REVIEW PROCESS. BY APRIL WE PROVIDED COUNCIL WITH A COMPLETE VIEW OF OUR CRITERIA FOR THE CORE SERVICE ANALYSIS AND WE HAD SOME UNEXPECTED RESULTS. CONTRARY TO SOME EXPECTATIONS, THE ANALYSIS WE PERFORMED SHOWED THAT BY FAR THE LARGEST PART OF OUR BUDGET IS SPEND ON CORE OR BASIC CITY SERVICES. IN MAY WE PROVIDE COUNCIL WITH THE FIVE-YEAR FORECAST. NOW, MOST IMPORTANTLY IN MAY, WE CHANGED OUR BUDGET PROCESS. THIS IS A BIG SWITCH FROM PRIOR YEARS. THE FORECAST THAT WE PRESENTED TO COUNCIL WAS PREPARED ON A STATUS QUO BASIS, MEANING THAT WE MADE NO PRESUMPTIONS AS TO THE POLICY ISSUES SUCH AS WHAT THE TAX RATE SHOULD BE OR THE LEVEL OF THE UTILITY TRANSFERS. INSTEAD WE INVOLVED COUNCIL IN THE BUDGET PROCESS ON THE FRONT END. WE HELD TWO FULL-DAY RETREATS INTENDED TO ILLICIT -- FROM COUNCIL THE POLICY DIRECTION THAT WE SHOULD USE IN PREPARING THIS BUDGET. RATHER THAN PRESUMING A POLICY FRAMEWORK AND PRESENTING IT TO YOU TO VALIDATE. WE WORKED WITH COUNCIL ON THE FRONT END ON THE DESIGN OF THIS PROPOSED BUDGET. WE GOT SOME VERY CLEAR INSTRUCTIONS, A CLEAR UNDERSTANDING OF COUNCIL PRIORITIES AS WE APPROACHED THIS CHALLENGE. LET ME SUMMARIZE SOME OF THE BIG ONES. TO USE ONLY ONE-HALF OF THE FISCAL YEAR 2002-2003 -- OF THE FOR 2002 ENDING BALANCE. TO INCREASE AUSTIN ENERGY'S TRANSFER FROM 8.8% OF ITS REVENUE TO 9.1%. THAT'S A PRUDENT AND NECESSARY MEASURE GIVEN OUR ECONOMIC CLIMATE, OUR ECONOMIC ENVIRONMENT. THE TRANSFER FROM AUSTIN ENERGY, IS A WAY FOR AUSTINITES, THE CITIZENS THAT OWN THIS UTILITY TO RECEIVE A DIVIDEND FROM OUR UTILITY. A UTILITY THAT WE ARE FORTUNATE TO HAVE AS A REVENUE SOURCE FOR THE GENERAL FUND. HOWEVER, I WANT TO NOTE THAT THIS CHANGE DOES TAKE THE TRANSFER TO THE MAXIMUM ALLOWED UNDER THE 1999 COUNCIL RESOLUTION. THE NEXT ONE WAS TO ESTABLISH A PUBLIC HEALTH RESERVE OF 33 MILLION. FOR MANY YEARS WE HAVE KEPT ABOUT 33 MILLION IN RESERVE TO HELP FUND PRIMARY CARE, INDIGENT PRIMARY CARE. 33 IS NOT A MAGIC NUMBER. IT'S ABOUT A THREE-YEAR CONTINGENCY FUND. IF YOU WERE TO LOSE YOUR FUNDING FOR THE CLINICS, THE DISPROPORTIONATE SHARE OF FUNDS, YOU WOULD HAVE THREE YEARS TO DEVELOP AND IMPLEMENT A NEW FUNDING SOURCE TO PROVIDE FOR INDIGENT PRIMARY CARE. BUT IN ADDITION TO THAT, THE CITY HAD AN UNEXPECTED AMOUNT OF LEASE REVENUE, AN ADDITIONAL AMOUNT OF 6.3 MILLION. THE COUNCIL GAVE US DIRECTION THAT WE COULD USE THAT EXCESS TO HELP BALANCE THIS BUDGET. WE TALKED TO YOU ABOUT OUR GENERAL FUND FEE ANALYSIS. YOU APPROVED THAT. AND YOU GAVE US VERY CLEAR DIRECTION ON AFFORDABLE HOUSING. AT THE BUDGET RETREAT YOU TOLD US THAT THIS WAS NOT THE TIME TO REDUCE OUR INVESTMENT IN AFFORDABLE HOUSING. AND IN FACT IN THIS PROPOSED BUDGET WE HAVE INCLUDED THE 3.1 MILLION LEVEL APPROVED BY COUNCIL IN THE CURRENT YEAR. YOU ALSO GAVE US VERY CLEAR DIRECTION ON SOCIAL SERVICE CONTRACTS. ONCE AGAIN, YOU TOLD US THAT IN A TIME, IN A SLUGGISH ECONOMY, WHEN THINGS ARE ROUGH IN A COMMUNITY, YOU DID NOT WANT TO CUT SOCIAL SERVICE CONTRACTS. SO THIS BUDGET HOLDS ALL SOCIAL SERVICE CONTRACTS CONSTANT AND IN ADDITION TO THAT, IT REAUTHORIZES, IT PUTS BACK ON THE TABLE, THE ONE-TIME 500,000 FOR BASIC NEEDS THAT YOU APPROVED THIS YEAR. AND WE HAVE PUT THAT IN THERE WITH THE EXPECTATION THAT THE COUNTY WOULD ALSO AGREE TO MATCH THOSE FUNDS IN THEIR UPCOMING BUDGET YEAR. SO THAT'S OUR PROBLEM, THAT'S HOW WE GOT HERE. THAT WAS THE BUDGET RETREAT WITH COUNCIL POLICY DIRECTION SUMMARIZED. SO AS WE WENT AWAY TO TRY TO BALANCE THIS BUDGET, WHAT WERE THE BUDGET OBJECTIVES? AND I HAD FOUR OBJECTIVES. AND I WANT TO RUN THROUGH THEM WITH YOU. FIRST, RECOGNIZING IT'S GOING TO TAKE TWO YEARS TO CLOSE A SHORTFALL OF THIS SIZE, I SET A GOAL OF CLOSING THIS BUDGET WITH 60% OF THE GAP THROUGH ONGOING REVENUE INCREASES AND ONGOING EXPENDITURE REDUCTIONS. 60% OF THE MEASURES WE TOOK TO CLOSE THIS BUDGET ARE ONGOING. NOT ONE-TIME SOLUTIONS. SECOND, I SET THE GOAL TO OPERATE AS LEAN AS POSSIBLE ADMINISTRATIVELY. TO SEND A VERY STRONG SIGNAL TO THIS COMMUNITY THAT OUR COMMITMENT IS WE WOULD CUT OURSELVES, ADMINISTRATIVELY AND IN MANAGEMENT COSTS, BEFORE WE WOULD CUT DIRECT SERVICES TO CITIZENS. THIRD, WE REQUIRED EACH DEPARTMENT TO WORK SMARTER. TO WORK MORE EFFICIENTLY. THAT THAT WAS GOING TO BE THE MANTRA AS WE MOVE THROUGH 2003 AND 04. FURTHER AUTOMATION, CONSOLIDATION, THAT EVERY DEPARTMENT WOULD PRODUCE WAYS TO WORK SMARTER. FOURTH, THIS WAS A PERSONAL BUDGET OBJECTIVE, BUT I BELIEVE IT IS ONE THAT THE COUNCIL SHARES IN TERMS OF VALUE. I WANTED TO BALANCE THIS BUDGET WITHOUT LAYOFFS. THOSE WERE THE FOUR GOALS. THOSE OF YOU THAT WERE HERE AS I WAS IN THE MID TO LATE '80'S, REMEMBER VERY PAINFUL LAYOFFS. WE WENT BACK AND LOOKED AT ALL OF THE MEASURES THAT WERE USED TO BALANCE THE BUDGET THEN. AND MADE SOME DECISIONS ABOUT SOME GOOD TOOLS AND SOME TOOLS THAT DIDN'T FEEL SO GOOD. AND LAYING OFF PEOPLE WERE ONE OF THE THINGS THAT I WANTED TO AVOID. SO HOW DO WE CLOSE THE GAP? YOU NOW KNOW THE OBJECTIVES. WE STARTED WITH YOU IN THE BUDGET RETREATS WITH ABOUT A $72 MILLION GAP. WE GOT AN ADDITIONAL HIT TO THAT GAP WHEN A NEW ESTIMATE CAME FORWARD ON OUR ASSESSED EVALUATION, WHERE WE LOST ALMOST ANOTHER 3 MILLION, SO NOW WE ARE AT 75 MILLION. THE REASON THAT I GO INTO THIS DETAIL IS I WANT TO TELL YOU THAT A DAY AFTER WE WENT TO PRESS TO PRINT ON THE BUDGET, WE DID GET THE CERTIFIED ROLLS AND THERE WAS ANOTHER SLIGHT ADJUSTMENT IN THE VALUATIONS. SO WHAT IS IN THIS BUDGET BASICALLY DOES NOT ACCOUNT FOR ABOUT 470,000 OF ADDITIONAL REVENUE. SO FIRST OUR GAP GREW, THEN IT DROPPED DOWN JUST A LITTLE BIT WITH THE FINAL CERTIFIED ROLL. SO THERE IS $470,000 THAT IS NOT ACCOUNTED FOR IN MY PROPOSED BUDGET TO YOU. NOW, THE STRATEGY FOR CLOSING THIS SHORTFALL HAD THREE COMPONENTS. ONE-TIME SOURCES. REMEMBER, I WANTED TO SPEND MORE NO THAN 40% OF THE MEASURES TO CLOSE THIS BUDGET WITH ONE-TIME SOURCES. WE HAVE TALKED ABOUT SOME OF THE MAJOR ONES. BUT ONE OF THOSE IS 50% OF THE -- OF THE FISCAL YEAR 2002-2003 2002 ENDING BALANCE OR 13 MILLION. ANOTHER ONE WAS THE EXCESS HOSPITAL LEASE REVENUES OF 6.3, ALL OF THESE ARE ONE-TIME SOURCES WE MAY NOT BE ABLE TO RELY ON IN A FUTURE BUDGET. THEN THERE WERE OTHER IDEAS. ... IN ADDITION WE DEIF HE EVERED THE TRIANGLE SQUARE PARKLAND, THAT IS BEHIND SCHEDULE AND NOT NECESSARY TO PURCHASE IT AT THIS POINT AND WE DEFERRED THE OPENING OF THE DEL VALLE FIRE STATION FOR THIS YEAR. THOSE ARE EXAMPLES OF THE BIG ONE-TIME SAVINGS THAT ARE PART OF THIS BUDGET. MOVE ON TO THE SECOND COMPONENT. ONGOING REVENUE STRATEGIES. IN CLOSING THE GAP, WE INCLUDED THE FOLLOWING REVENUE STRATEGIES IN THIS BUDGET. THE TRANSFER FROM 8.8 TO 9.1. GOT TO ABOUT 2.6 MILLION, IN ADDITIONAL ONGOING REVENUE. INCREASING OF THE GENERAL FUND FEES BASED ON THE ANALYSIS WE DID WITH OUR CONSULTANT OF OUR GENERAL FUND FEES GOT US ABOUT ANOTHER 1.6 MILLION. ONCE AGAIN AN ONGOING REVENUE SOURCE. HERE'S THE MOST IMPORTANT PIECE, THIS WAS NOT SOMETHING THAT WE HAD A FINAL DETERMINATION FROM COUNCIL ON, SO THIS IS OUR PROPOSAL AS WE MOVE FORWARD IN THIS BUDGET. I HAVE PREPARED THIS PROPOSED BUDGET USING THE NOMINAL OR CURRENTS TAX RATE OF .4579 CENTS. WE ARE NEITHER LOWERING OR RAISING THE PROPERTY TAX RATE AS PART OF THIS BUDGET PROPOSAL. AND PART OF THE LOGIC THAT WENT INTO THAT DISCUSSION IS DESPITE THE TACT THAT WE HAVE A VERY SLUGGISH ECONOMY IN AUSTIN, WITH LAYOFFS STILL OCCURRING IN THE PRIVATE SECTOR ALMOST DAILY, IN THE PAPER, WE HAVE CONTINUED TO HAVE RISING ASSESSED VALUATIONS. SO TAX BILLS STILL HAVE A FAIRLY BIG IMPACT ON OUR CITIZENS. AND WE HAVE DECIDED TO PRESENT TO YOU AT THE CURRENT TAX RATE. NOW, THE LAST PIECE OF THIS IS ONGOING EXPENDITURE STRATEGIES AND THIS IS THE HARD PART. THIS IS WHERE WE SPENT THE THE BULK OF OUR TIME. IT IS THE LAST PART OF THE BUDGET STRATEGY TO FALL INTO PLACE. FIRST, WE HAD MANY STRATEGICALLY HELD VACANT POSITIONS. REMEMBER Remember , PART OF THE PREPLANNING TO PREPARE FOR THIS, WE PERMANENTLY ELIMINATED 50% OF THE VACANT POSITIONS, MANY OF WHICH HAVE BEEN VACANT FOR MORE THAN A YEAR. SOME OVER TWO YEARS. THAT'S DONE. THAT GOT US $6 MILLION IN PERMANENT CUTS TO OUR BUDGET. THE NEXT, REMEMBER THE OBJECTIVE OF TRYING TO OPERATE VERY LEAN, IS WE FOCUSED HARD ON CUTTING ADMINISTRATIVE AND MANAGEMENT COSTS. DEPARTMENTS WERE TOLD TO DO A PERMANENT 5% ADMINISTRATIVE MANAGEMENT CUT THAT GOT US $1.6 MILLION. AND OUR SUPPORT SERVICES DEPARTMENT PRODUCED ANOTHER 8.5 MILLION IN ADMINISTRATIVE CUTS. IF YOU TAKE ALL OF THE CUTS, THESE AND THE ADMINISTRATIVE CUTS THAT FELL INTO OTHER CATEGORIES, IN TOTAL WE HAVE REDUCED OUR ADMINISTRATIVE OVERHEAD, OUR ADMINISTRATIVE AND MANAGEMENT COSTS, BY ALMOST $17 MILLION IN THIS BUDGET. AND THAT IS STEP 1. WE INTEND TO FURTHER DECREASE THAT FOR '04. NOW, AT THIS POINT YOU HAVE ABOUT $16 MILLION LEFT TO GO TO BALANCE THE BUDGET. WE ASKED EVERY DEPARTMENT TO GIVE US ANOTHER 10% PRIORITIZED LIST OF CUTS WITH IMPACT STATEMENTS AND WE SPENT WEEKS PAINFULLY POURING OVER EACH AND EVERY ONE OF THOSE PROPOSALS, TRYING TO BALANCE THE INTEREST AND NEEDS OF ONE DEPARTMENT AGAINST ANOTHER, ONE CONSTITUENCY GROUP AGAINST ANOTHER, TO SEE WHAT COULD WE ACCEPT AS PART OF THOSE CUTS. THE MOST TIME CONSUMING PART OF THE BUDGET PROCESS, THE MOST PAINFUL, BUT IT WAS FRUITFUL. WE ACHIEVED A FURTHER REDUCTION OF 12.1 MILLION IN ONGOING EXPENDITURE CUTS. SOME OF THESE WERE FURTHER ADMINISTRATIVE CUTS. SOME OF THEM WERE FURTHER ELIMINATION OF VACANCIES. AND SOME OF THEM WERE STRATEGIC REDUCTIONS IN PROGRAMS. WE DIDN'T TAKE THE 10% ACROSS THE BOARD. IN FACT WE DIDN'T TAKE THE ENTIRE 10% AT ALL. BUT WE STRATEGICALLY WENT THROUGH THEM. EACH DEPARTMENT TOOK A DIFFERENT LEVEL OF THIS CUT DEPENDING ON WHAT WE THOUGHT WE COULD DO WITH THE LEAST IMPACT TO CITIZENS. IN SOME CASES WE ADDED BACK FUNDS. WE ADDED BACK FUNDS TO LIBRARIES. WE ADDED BACK FUNDS TO PARKS AND WE ADDED BACK SOME FUNDS TO HEALTH. ULTIMATELY WE HAD TO BALANCE THE BUDGET, BALANCE INTEREST, WHEN WE WERE SURE WE UNDERSTAND THE IMPACT OF EACH OF THOSE RECOMMENDATIONS WE TOOK THEM. THE FINAL PIECE OF ONGOING EXPENDITURE CUTS WAS PARTICULARLY PAINFUL. THIS IS WHERE I THINK OUR EMPLOYEES HAVE RALLIED IN A WAY THAT CERTAINLY MAKES ME PROUD. I AM NOT RECOMMENDING PAY FOR PERFORMANCE OR MARKET ADJUSTMENTS FOR ONE YEAR. AS PART OF THIS BUDGET. YOU KNOW THAT WE HAVE INVESTED HEAVILY IN PAY FOR PERFORMANCE AND MARKET OVER THE LAST FEW YEARS. IN FACT, 29 MILLION IN MARKET ADJUSTMENTS ALONE OVER THE LAST FIVE YEARS. NOW, THOSE WERE IMPORTANT STRATEGIES AND A RED HOT JOB MARKET, TROUBLE WITH RECRUITING AND RETENTION IN THE LAST PART OF THE '90'S, BUT I BELIEVE WE ARE NOW POSITIONED WHERE WE CAN HOLD FOR ONE YEAR TO HELP BALANCE THIS BUDGET. THIS GETS YOU JUST FOR PAY FOR PERFORMANCE 3.8 MILLION IN ONGOING EXPENDITURE REDUCTIONS AND IT ALSO IS ABOUT ANOTHER MILLION OF, WHICH WAS THE AVERAGE THAT WE WERE SPENDING ON MARKET ADJUSTMENTS TOWARD THE END, BY NOT DOING MARKET FOR ONE YEAR. SO DID WE ACHIEVE THE OBJECTIVES? THE BUDGET IS NOW BALANCED. DID WE ACHIEVE THE FOUR OBJECTIVES THAT WE TALKED ABOUT? FIRST, I WANTED TO REDUCE THE BUDGET WITHOUT LAYOFFS AND I ACHIEVED THIS IN THE PROPOSED BUDGET. WE ELIMINATED ALMOST 10% OR 321 POSITIONS OUT OF THE GENERAL FUND NON-FIRST RESPONDER POSITIONS. WE SAVED ONGOING $14 MILLION AS PART OF THAT CUT. ONLY A SMALL PERCENTAGE OF THOSE POSITIONS WERE FILLED. BECAUSE OF THE PREPLANNING THAT WE HAVE BEEN DOING, IN FACT ONLY 22 OF THE 321 HAD EMPLOYEES. ALL OF THOSE EMPLOYEES WHO WILL BE NOTICED TODAY THAT THEIR POSITION IS PROPOSED TO BE ELIMINATED IN THE BUDGET WILL RECEIVE SIMULTANEOUSLY A REASSIGNMENT TO ANOTHER POSITION IN THE CITY THAT KEEPS THEIR PAY WHOLE. CUTTING EMPLOYEE PAY RAISES AND MARKET ADJUSTMENTS WAS A DIFFICULT DECISION. BUT IT ALLOWS US TO GUARANTEE THAT ALL CITY EMPLOYEES WILL KEEP THEIR JOBS. OUR PROPOSED BUDGET HAS NO LAYOFFS AND NO EMPLOYEE TAKES A SALARY CUT. NOW, I WANT TO TALK ABOUT WHAT WE DID TO MITIGATE THAT IMPACT. IN ORDER TO MAKE SURE THAT CITY EMPLOYEES DIDN'T TAKE A PAY CUT, NO PAY RAISE, BUT AN INCREASE IN BENEFITS, THIS BUDGET ABSORBS THE INCREMENTAL COST OF HEALTH AND DENTAL BENEFITS FOR '03. IN ADDITION TO THAT, SO NO EMPLOYEE WILL PAY MORE FOR HEALTH OR DENTAL BENEFITS, WE WILL COVER IT. ADDITIONALLY, WE ARE ADDING ONE PAID PERSONAL HOLIDAY, ONE ADDITIONAL PAID PERSONAL HOLIDAY ANNUALLY FOR CITY EMPLOYEES AS A WAY TO REWARD THEIR PARTNERSHIP TO US IN THIS BUDGET PROCESS. ALL OTHER BENEFITS, INCLUDING STABILITY PAY STAY THE SAME. AND I WILL TELL YOU THAT TO STAY COMPETITIVE IN THE JOB MARKET, IT WILL NOT BE MY RECOMMENDATION TO EXTEND NO PAY AND NO MARKET FOR MORE THAN ONE YEAR. IT IS MUCH LIKE NOT REPLACING YOUR VEHICLES FOR MORE THAN ONE YEAR. YOU WILL GET BEHIND AND IT WILL BE VERY DIFFICULT TO CATCH UP. SO THIS IS A STRATEGY THAT ALTHOUGH IT GETS US ONGOING EXPENDITURE CUTS, IT'S NOT SOMETHING THAT I'M GOING TO BE RECOMMENDING ON AN ONGOING BASIS. THE SECOND GOAL WAS CLOSING 60% TO ONGOING EXPENDITURES OR REVENUES. I DIDN'T QUITE ACHIEVE IT. IT'S 59% IN THIS BUDGET. 59% ONGOING OR PERMANENT -- ARE PERMANENT CUTS OR REVENUE ENHANCEMENTS AND 41% ONE-TIME SOLUTIONS. THIRD, I SET THE GOAL OF OPERATING AS LEAN AS POSSIBLE, I HAVE ALREADY TOLD YOU THAT WE HAVE CUT ALMOST $17 MILLION OUT OF ADMINISTRATIVE SUPPORT AND MANAGEMENT COSTS. FINALLY, I REQUIRED EVERY DEPARTMENT TO WORK SMARTER. EVERY DEPARTMENT PRODUCED ONE MAJOR PROCESS IMPROVEMENT AND WE ARE GOING TO CONTINUE TO DRIVE THIS HOME IN '03. I WANT TO GIVE YOU JUST A SIMPLE EXAMPLE. IT'S ONE OF MY FAVORITES BECAUSE OF ITS SIMPLICITY. EMERGENCY MEDICAL SERVICES LOOKED AT THEIR BUDGET AND SAW THAT THEY WERE SPENDING MOST OF THEIR OVERTIME THE SAME TWO HOURS OF A DAY. SO WHAT'S HAPPENING? THEY WORK A 24 HOUR SHIFT. START AT 9:00, GET OFF AT 9:00 THE NEXT MORNING. WELL, WHAT HAPPENS AT 7:00 IN THE MORNING? RUSH HOUR. CAR WRECKS. SO AT THE VERY END, A TIRED CREW IS BEING CALLED OUT INTO TRAFFIC TO GO TO WRECKS AND FENDER BENDERS. THE NEW CREW COMES ON BOARD TO AN EMPTY STATION, YOU ARE PAYING THEM, AND YOU ARE PAYING A FATIGUED CREW OVERTIME. THEY BUMPED BACK THEIR SHIFT CHANGE TWO HOURS AND DRAMATICALLY CUT THEIR OVERTIME. A SIMPLE SOLUTION AND THERE ARE IDEAS LIKE AND SOLUTIONS LIKE THAT ALL THROUGH THE CITY AND NOW WE HAVE A BURNING PLATFORM TO SEEK THEM OUT, TO FIND THEM, AND TO CLOSE THOSE GAPS. WE HAVE FIVE CONSOLIDATIONS UNDERWAY. EITHER BEING PLANNED OR PILOTED IN '03. LAW ENFORCEMENT, PURCHASING, FLEET, INSPECTIONS, WE HAVE 268 INSPECTORS IN NINE DEPARTMENTS. THERE IS SOME SYNERGY THERE. AND PROJECT MANAGEMENT. THIS IS WHAT YOU ARE GOING TO FIND IN THE BUDGET. IN PUBLIC SAFETY WE MOVED YOU TO [INAUDIBLE] OFFICERS PER THOUSAND IN TWO YEARS, NOT FIVE, IT'S IN THIS BUDGET. THERE ARE TWO NEW AREA COMMANDS FOR POLICE THAT WILL HELP US IMPROVE WHERE WE ARE HAVING POOR RESPONSE TIMES. TO PRIORITY 1 CALLS. WE HAVE ESTABLISHED A LONG DESIRED WALKING BEAT IN A HIGH CRIME AREA IN CENTRAL EAST AUSTIN OFF OF 11th AND 12th STREET. THAT HAS TWO GOALS FOR US. A COMMUNITY RELATIONS GOAL AND A CRIME FACTORS. WE HAVE STARTED A PUBLIC SAFETY INTERNSHIP PROGRAM THAT IS BEING PILOTED IN THE FIRE DEPARTMENT TO HELP US WITH DIVERSITY AND RECRUITMENT. YOU HAVE TASK FORCE STAFFING FOR THE FIRE DEPARTMENT IN THIS BUDGET AND YOU HAVE ADDED 10 ADDITIONAL PARAMEDICS TO OPEN THE FAR SOUTHEAST AUSTIN STATION. UNDER AMERICANS WITH DISABILITIES ACT INITIATIVES, WE HAVE THREE WHAT I THINK ARE THREE DRAMATIC IMPROVEMENTS. THERE IS AN A.D.A. SUMMER YOUTH EMPLOYMENT PROGRAM HERE FOR SMALL INVESTMENT TO TRY TO ATTACK A 76% UNEMPLOYMENT RATE WITH DISABLED INDIVIDUAL IN OUR COMMUNITY WHO ARE WILLING AND ABLE TO WORK. THIS IS A KEY STRATEGY OF THE MAYOR'S COMMITTEE FOR PEOPLE WITH DISABILITIES. IT IS BASED ON THE PREMISE THAT IF YOUNG, DISABLED PEOPLE IN OUR COMMUNITY CAN GET SOME JOB EXPERIENCE, IT WILL HELP CUT THAT 76% UNEXPLOIT RATE AS THEY MOVE -- UNEMPLOYMENT RATE AS THEY MOVE INTO ADULTHOOD. WE HAVE A TOTAL OF 1.6 MILLION AVAILABLE FOR THE CONTINUATION OF NEW SIDEWALKS AND CURB CUTS. THAT INCLUDES 250,000 IN NEW FUNDING. AND HERE IS A BIG ONE. SOMETHING THAT WE HAVE BEEN LOOKING FOR FOR OVER FIVE YEARS. 500,000 FUNDING THAT WE ARE PULLING FROM THE CAPITAL METRO QUARTER CENT IS BEING PROPOSED TO DEVELOP A MASTER PLAN OF INVENTORIES OF SIDEWALK REPAIRS AND CURB CUTS CITY-WIDE. A WAY FOR US TO FOCUS OUR RESOURCES ON WHERE THE BARRIERS ARE THE BIGGEST. AND IN PRIMARY CARE AND HEALTH AND HUMAN SERVICES, YOU ASKED US DURING THE BUDGET RETREAT TO THINK THROUGH HOW TO CREATE A 24-HOUR, SEVEN DAY A WEEK CLINIC ASSOCIATED WITH BRACKENRIDGE HOSPITAL. TO HELP LOOK AT THE OVERFLOW PROBLEM FROM BRACKENRIDGE EMERGENCY ROOM. AND WE HAVE INCLUDED THAT AS A STUDY OF IMPACTS AND OUTCOMES AND WE WILL BE PROPOSING SOMETHING TO YOU FROM THE HEALTH CARE HOSPITAL RESERVE FUND. WE HAVE MAINTAINED YOUTH EMPLOYMENT AND ASSISTANCE PROGRAMS. THE OUTCOMES WILL STAY THE SAME, BUT WE HAVE COMBINED THE MANAGEMENT OF FOUR YOUTH EMPLOYMENT PROGRAMS TO ACHIEVE A SAVINGS. WE HAVE FULL STAFFING FOR THE PEAK DEMAND PERIODS AT THE DAY LABOR SITE, BUT WE ARE REDUCING, BASICALLY ELIMINATING THE SUNDAY HOURS ON THE DAY LABOR SITE. THOSE RAN FROM 7:00 TO 11:00 ON SUNDAY AND THERE WERE VERY FEW PEOPLE USING IT AT THAT TIME. WE HAVE INCREASED THE PHARMACEUTICAL CO-PAY. NOW, THIS IS IMPORTANT, WE STRUGGLED WITH THIS AS WE MOVED THROUGH THIS BUDGET. THE CO-PAY GOES FROM 5 TO $10. BUT IT IS THE FIRST PHARMACEUTICAL CO-PAY INCREASE SINCE 1996. DESPITE LARGE INCREASES IN THE COST OF PHARMACEUTICALS IN RECENT YEARS. WE DID THIS AS A TRADEOFF. THIS CHANGE WILL ALLOW US TO MEET THE CURRENT DEMAND FOR PHARMACEUTICAL SERVICES WITHOUT CHANGING THE INCOME ELIGIBILITY FOR THIS SERVICE. WE THOUGHT THAT WAS MORE IMPORTANT THAN THE $5 CO-PAY. PARKS, RECREATIONS AND LIBRARIES, THE MOST IMPORTANT STATEMENT HERE IS NO FACILITY IN EITHER DEPARTMENT WILL BE CLOSED OR WILL HAVE REDUCED HOURS OF OPERATION. ALL POOLS, PLAYGROUND SITES AND RECREATIONAL FACILITIES WILL BE OPEN AND OPERATIONAL AT CURRENT YEAR LEVELS. WE PROVIDE FOR THE MOWING OF ARTERIALS, INCLUDING SOME NEW KEY ARTERIALS, SOUTH FIRST AND HOWARD LANE, BUT WE HAVE INCREASED THE MOWING CYCLE BY THREE DAYS. IT WILL BE AT APPROXIMATELY 17 DAYS. WE ARE RESTORING FULL NORMAL OPERATING HOURS FOR ALL LIBRARIES, WITH ALL THE STAFFING AND RESOURCES IT TAKES TO DO THAT. WE HAVE PROVIDED FULL FUNDING FOR BOOK BUDGETS AND CATALOGING. UNDER TRANSPORTATION INITIATIVES, WE WILL BE USING THE SECOND YEAR OF THE QUARTER CENT FROM CAPITAL METRO TO DO OUR REGIONAL MOBILITY AND SAFETY PROJECTS, SIDEWALKS, BIKE PROJECT, TRAFFIC SIGNALS, INTERSECTION IMPROVEMENTS FROM THAT FUNDING SOURCE. YOU WILL APPROPRIATE ANOTHER $15 MILLION IN '03 FOR THE PURCHASE OF RIGHT-OF-WAY RELATED TO SHHH 45 AND 183 -- TO SH 45 AND 183 A. AND APPROPRIATING 14.5 MILLION FOR STREET RECONSTRUCTION PROJECTS. AND MOST IMPORTANTLY, WE TOOK A HARD, COLD LOOK AT THE CUTS THAT WERE PROPOSED IN SIGNS AND MARKINGS AND SIGNALIZATION, A MEAT AND POTATO OPERATION WITH A VERY BIG IMPACT FOR EVERY CITIZEN IN THIS COMMUNITY, AND RESTORED FUNDING IN THOSE AREAS. IN '03, THE FOLLOWING FACILITIES ARE EXPECTED TO OPEN: FAR SOUTHEAST AUSTIN E.M.S. STAYING, THE RUIZ BRANCH LIBRARY AND THE CASWELL TENNIS CENTER. THE FOLLOWING PROJECTS ARE EXPECTED TO BEGIN CONSTRUCTION IN '03: CARVER LIBRARY EXPANSION, CARVER MUSEUM, TERAZAS LIBRARY EXPANSION, AB CANTU PAN AM REC CENTER, SOUTH SOCCER COMPLEX AND CENTRAL EAST AUSTIN FORENSIC FACILITIES. I WANT TO HIGHLIGHT A FEW UNUSUAL BY KEY CITY INITIATIVES THAT ARE ALSO IN THIS BUDGET. FOR THE FIRST TIME IN '03, WE WILL BE PUTTING SOME CITY FACILITIES ON GREEN CHOICE POWER. WE INTEND TO PUT CITY HALL, TOWN LAKE CENTER, ONE TEXAS CENTER, THE R.B.J. BUILDING AND THE DEWITTY CENTER IN EAST AUSTIN AS A STARTING PLACE FOR THE CITY TO BEGIN PARTICIPATING IN GREEN POWER. WE HAVE INCREASED OUR WATER QUALITY POND MAINTENANCE. WE ONLY HAVE ONE CREW WORKING WATER QUALITY POND MAINTENANCE. WE ARE ADDING TWO ADDITIONAL CREWS. WE ARE TRIPLING THAT RESOURCE IN ORDER TO KEEP OUR OBLIGATION UP TO SPEED IN MAINTAINING WATER QUALITY POND, PARTICULARLY OVER THE AQUIFER. FOR THE FIRST TIME, WE ARE FUNDING AUTOMATED LOW WATER CROSSING GATES ON OUR KEY DANGEROUS HIGH FLOOD LOW WATER CROSSINGS THAT CURRENTLY HAVE TO MANUALLY BE -- HAVE BARRICADES CARRIED TO THEM AND MANUALLY HAVE THEM REMOVED. AND FINALLY, WE HAVE BEEN OPERATING WITH -- BEEN OPERATING WITH OUTDATED DIGITAL MAPPING DATA SINCE 1997. THAT'S THE MOST RECENT HIGH RESOLUTION MAPPING DATA THAT WE USE FOR VERY CRITICAL ENVIRONMENTAL PLANNING AND UTILITY PLANNING. AND SO THIS BUDGET INCLUDES A COMPLETE FLYOVER TO UPDATE THAT 1997 DIGITAL AERIAL MAPPING. IT IS AN IMPORTANT TOOL FOR A WHOLE VARIETY OF PLANNING THAT WE DO IN THE CITY AND WE DO NOT HAVE CURRENT DATA. SO TO SUM IT UP, WE ARE NOT ALONE. WE ARE DOING THE SAME THING EVERYONE IS DOING. BE LEADERS, HOUSEHOLDS, AND OTHER GOVERNMENTS. OUR ROLE IS SIMILAR IN SOME WAYS. WE ARE GOING TO HAVE TO FIND WAYS TO DO MORE WITH LESS, TO WORK SMARTEDER. JUST LIKE -- TO WORK SMARTER, JUST LIKE EVERYBODY ELSE, BUT OUR WORLD IS ALSO DIFFERENT IN OTHER WAYS. I WANT TO END WITH THIS, BECAUSE TO ME THIS IS A VERY IMPORTANT POINT. UNLIKE THE PRIVATE SECTOR, WE ARE NOT ABLE TO ELIMINATE BASIC CITY SERVICES. THE PRIVATE SECTOR CAN SAY IN A DOWNTURN, WE WOULDN'T PRODUCE THIS WIDGET ANYMORE OR WE WILL CUT THIS SERVICE LINE. A CITY DOESN'T GET TO SAY WE WON'T BE PICKING UP YOUR GARBAGE THIS YEAR UNTIL TIMES GET BETTER. IN FACT OUR DEMAND IS INVERSE OF THE PRIVATE INDUSTRY. IN A SLUGGISH ECONOMY, DEMAND DIMINISHES FOR PRIVATE BEES. IN A SLUGGISH ECONOMY DEMAND INCREASES FOR CITY SERVICES. WE HAVE A 17% INCREASE IN DEMAND HAPPENING AT THE HEALTH CLINICS, OUR PARKS AND RECS ARE USED HEAVIER, OUR LIBRARIES ARE USED HEAVIER. OUR DEMANDINGS UP WHEN THE ECONOMY GOES DOWN AND THAT'S WHAT MAKES US DIFFERENT AS WE HAVE TO TALK ABOUT HOW TO APPROACH THIS BUDGET. SO GIVEN THAT OUR ROLE AS A SERVICE PROVIDER IN A TROUBLED ECONOMY IS CRITICAL TO THE WELL-BEING OF THE COMMUNITY, I THINK THAT WE HAVE PREPARED THIS BUDGET TO PROTECT PUBLIC SAFETY, TO PROVIDE BASIC SERVICES, AND TO MAKE SUBSTANTIAL, ALMOST A 60% HEAD WAY TOWARDS A STRUCTURALLY BALANCED BUDGET. SO I'M PROUD TO PRESENT IT TO YOU. I LOOK FORWARD TO WORKING WITH YOU DURING THE DELIBERATIONS. AND RUDY IS GOING TO GO OVER SOME OF THE DETAILS OF THE FINANCES. I SAW COUNCILMEMBERS MAKING A LOT OF NOTES, WHY DON'T WE GO TO SOME QUESTIONS NOW, THEN MORE QUESTIONS AFTER MR. GARZA COMPLETES THE -- THE -- THE -- HIS PRESENTATION. COUNCILMEMBER SLUSHER YOU SEEM TO HAVE A HIGH PILE OF QUESTIONS THERE --

SLUSHER: WELL, ACTUALLY I WAS JUST TAKING NOTES ON WHAT SHE SAID. I DON'T HAVE A LOT OF QUESTIONS AT THIS TIME. I'M VERY IMPRESSED WITH THE JOB THAT THE CITY MANAGER AND EMPLOYEES HAVE DONE IN A VERY TOUGH BUDGET SITUATION AND WITH ALL OF THE EXTRA DUTIES THAT THEY HAVE -- HAVE BEEN PILED ON THEM LATELY WITH THE STRATUS AGREEMENT AS WELL. SO I'M -- I'M VERY I AM POLICED WITH THAT. I WILL -- I AM VERY IMPRESSED WITH THAT. I WILL WAIT ON QUESTIONS UNTIL LATER.

MAYOR GARCIA: COUNCILMEMBER ALVAREZ, YOU ARE IN PLACE 2. 2. ANY QUESTIONS AT THIS TIME OR ARE YOU GOING TO WAIT UNTIL ALL OF THE PRESENTATIONS ARE MADE.

ALVAREZ: YEAH, I THINK THAT I MIGHT HAVE MISSED THIS, I WASN'T ON THE DAIS AT THE TIME. THE BASIC SERVICES, DID YOU MENTION HOW WE WERE TREATING THE -- THE SOCIAL SERVICE CONTRACTS AND -- I MIGHT HAVE MISSED THAT.

FUTRELL: JUST TO RECAP QUICKLY, COUNCIL MADE IT VERY CLEAR TO US IN THE BUDGET RETREAT THAT THEY THOUGHT OUR OBLIGATION WAS IMPORTANT IN THE SOCIAL SERVICE CONTRACTS IN A BAD TIME, THEY ARE HELD HARMLESS, THEY ARE AT CURRENT YEAR LEVELS. AND IN ADDITION TO THAT, WE HAVE GONE ON AND PUT IN THE 500,000 FOR THE ADDITIONAL BASIC NEEDS MONEY THAT WE HAD DONE AS A ONE-TIME. NOW WE ARE HOPING THAT THE COUNTY WILL MATCH US AS THEY DID THIS YEAR FOR THOSE FUNDS AND THAT'S BASICALLY OUR CHALLENGE BACK TO THE COUNTY.

ALVAREZ: I APPRECIATE THAT. CERTAINLY I'M VERY IMPRESSED ALSO WITH THE WORK THAT HAS GONE ON. I THINK IT'S BEEN A TREMENDOUS EFFORT AND I REALLY THINK THAT THE PRIORITIES THAT WE ALL HAVE ARTICULATED ARE PRETTY WELL REPRESENTED AND LOOK FORWARD TO FURTHER DISCUSSIONS ON THESE ISSUES.

FUTRELL: THANKS.

DUNKERLY: I WILL SAVE MY QUESTIONS FOR LATER, BUT THIS WAS A MASTERFUL JOB OF CLOSING THAT BIG GAP. I REALLY APPRECIATE THE I DON'T LAYOFFS AND THE INTACT SOCIAL SERVICES, THOSE WERE VERY, VERY IMPORTANT.

FUTRELL: THANK, BETTY.

WYNN: CITY MANAGER, THE $17 MILLION CUT IN ADMIN OVERHEAD SUPPORT, MANAGEMENT, APPROXIMATELY WHAT -- WHAT IS THAT AS A PERCENTAGE? HAVE YOU --

FUTRELL: NOW, ISN'T THAT INTERESTING, WHERE IS VICKI? VICKI IS ACTUALLY WORKING ON THIS NUMBER RIGHT NOW, I DON'T HAVE IT. BUT LET ME TELL THE BACKDROP FOR IT. BEFORE WE STARTED THIS PROCESS, WE WERE AT 7.7% OF ADMINISTRATIVE COST TO OPERATING COST IN THE GENERAL FUND. AND OVERALL CITY-WIDE IT WAS 9.7%. NOW, THE PROBLEM WITH THOSE NUMBERS IS WHAT'S YOUR BENCHMARK? SOMETIMES THE FEDERAL GRANTS ALLOW UP TO 20%, BUT THAT'S NOT OUR MODEL. NON-PROFITS WILL BRAG IF ONLY 10 CENTS OF YOUR DOLLAR GOES TO -- 10% GOES TO ADMINISTRATIVE OVERHEAD. BUT WE HAD TROUBLE FINDING WHERE THERE WERE CONSISTENT WAYS PEOPLE REPORTED WHAT THEY LOADED IN ADMINISTRATIVE AND SUPPORT COSTS, MANY PEOPLE DON'T REPORT THAT NUMBER AT ALL. VERY FEW CITIES HAVE IT. AND IN FACT WE DIDN'T FIND ANY THAT HAD IT. BUT WE DID FIND SOME PRIVATE INDUSTRIES THAT SEEMED TO HAVE A CONSISTENT WAY OF WORKING THROUGH THAT NUMBER. AND ONCE AGAIN IT VARIES A LITTLE BASED ON THE KIND OF BUSINESS YOU ARE IN. SOME ARE A LITTLE MORE HEAVILY WEIGHTED TO THE SUPPORT SIDE THAN OTHERS. BUT A 5% SEEMED TO BE -- A RANGE REALLY OF 3 TO 5% SEEMED TO BE A REALLY LEAN NUMBER. MY GOAL IS 5%. ON THE GENERAL FUND SIDE WE STARTED AT 7.7, WE ARE WORKING ON WHERE THAT TOOK US. THE CUTS WE MADE, WHERE THAT TOOK US. BUT WE ARE GOING TO CONTINUE TO WORK ON ADMINISTRATIVE REDUCTIONS IN '03 IN PREPARING FOR THE '04 BUDGET. I WILL GET YOU THAT PERCENTAGE WHEN WE ARE ABLE TO WORK IT THROUGH.

WYNN: APPROXIMATELY THE $17 MILLION MIGHT BE IN THEORY REDUCING SORT OF THE GENERAL FUND OVERHEAD AND ADMIN FROM SAY 7.7 TO --

FUTRELL: I WAS HOPING, VICKI IS GOING TO DIE THAT I'M GOING TO THROW A NUMBER OUT THERE, I WAS HOPING THAT IT TOOK ME TO 6, AND THAT IN '03 I COULD DROP IT A PERCENT. BUT I WILL GET BACK WITH YOU ONCE WE HAVE RUN THE NUMBER. I WILL TELL YOU HOW EVEN WE HAVE CATEGORIZED COSTS IS PROBABLY NOT AS CONSISTENT. ONE OF THE THINGS THAT WE ARE GOING TO DO IN '03 WE ARE GOING TO SCRUB HOW WE -- YOU KNOW, LOG ADMINISTRATIVE COSTS AND MANAGEMENT COSTS SO WE HAVE A BETTER AND MORE ACCURATE NUMBER. TO ME THIS IS A -- THIS IS A CONFIDENCE ISSUE, A TRUST ISSUE IN THE COMMUNITY. THAT THEY BELIEVE THAT GOVERNMENT IS WILLING AND ABLE TO OPERATE AS LEAN AS A PRIVATE BUSINESS. AND THAT'S THE GOAL.

WYNN: ALL RIGHT. THANK YOU.

MAYOR GARCIA: COUNCILMEMBER THOMAS?

THOMAS: I JUST COMMEND STAFF AND CITY MANAGER FOR THE HARD WORK THEY ARE DOING. JUST ONE QUESTION WHEN YOU WERE TALKING ABOUT THE -- ABOUT THE CO-PAYMENT FROM 5 TO 10, WHAT IS THAT IN THE CLINICS?

NO, THIS IS ACTUALLY -- I WILL GET YOU MORE DETAIL ON THIS, BUT THIS IS ACTUALLY THE PEOPLE WHO ARE NOT USING OUR CLINICS, WHO ACTUALLY USE PRIVATE DOCKS, BUT COME TO US FOR THEIR PHARMACY CO-PAYS. PRIVATE DOCS. THE DILEMMA OF WHAT TO DO WITH THIS PROBLEM, THE RISING PHARMACY COSTS IS THAT HAD WE -- IF WE HAD CHANGED THE ELIGIBILITY TO BE ELIGIBLE FOR THE PHARMACY AND KEPT THE CO-PAY THE SAME, WE WERE CONCERNED THAT WE WOULD TRIGGER PEOPLE CHANGING FROM THEIR PRIVATE DOCS AND MOVING INTO OUR CLINIC SYSTEM. AND OUR CLINIC SYSTEM IS PRETTY MUCH AT CAPACITY. SO WE REALLY WORKED HARD TO MAKE SURE THAT WE KNEW THE CAUSE AND EFFECT OF WHAT WE WERE GOING TO DO. BY RAISING THE CO-PAY ONLY $5, WE BELIEVE MOST PEOPLE WILL STAY, THAT THE BENEFITS WILL STILL BE GREAT ENOUGH, THEY WILL STAY WITH THEIR PRIVATE DOCS TO KEEP THE INCOME ELIGIBILITY THE SAME. THAT THAT'S OUR BEST CHANCE OF CONTINUING TO SERVE THAT DEMAND AND NOT SWITCHING PEOPLE INTO OUR CLINICS WHERE WE DON'T HAVE TO HAVE THAT HAPPEN. AND THERE'S A LOT OF DETAIL BEHIND THAT. I CAN WALK YOU THROUGH IT OR EVEN DO A ONE ON ONE WITH YOU ON IT. IF YOU WOULD LIKE.

THOMAS: OKAY. I WILL DO A ONE ON ONE.

FUTRELL: OKAY.

THOMAS: THANK YOU.

FUTRELL: SURE.

MAYOR GARCIA: I, TOO, WANT TO COMMEND THE CITY MANAGER AND HER STAFF. I THINK THAT -- THAT IN DIFFICULT TIMES LIKE THIS, WE BASICALLY HAVE LEARNED ONE OR TWO THINGS. NUMBER ONE IS WHAT WAS DONE IN THE LATE '80'S IS NOT GOOD FOR THE CITY. IF YOU LOOK AT THE BOND SALES SCHEDULE THAT IS COMING TO COUNCIL TOMORROW, YOU SEE THAT WE HAVE BOTH IN FISCAL YEAR '03 AND IN FISCAL YEAR '04 STREET RECONSTRUCTION COSTS THAT ARE VERY SIGNIFICANT. TO A CERTAIN EXTENT, I'M NOT GOING TO TRY TO PUT A NUMBER TO IT, THOSE COSTS ARE THERE FUNDAMENTALLY BECAUSE WE DIDN'T DO CERTAIN MAINTENANCE IN THE LEAN YEARS OF THE LATE '80'S. WE DON'T WANT TO DO THAT. WE DON'T WANT TO BURDEN OUR FUTURE BUDGET, FUTURE TAXPAYERS WITH AN EXPENSE THAT WAS ATTRIBUTABLE TO SOMETHING, SAVING A LITTLE TODAY AND SPENDING A LOT TOMORROW. NUMBER 2 IS, I THINK THAT WE NEED TO ASK THE CITIZENS OF THIS COMMUNITY TO HELP. IF IN ESSENCE THE CITY IS NOT PROVIDING THE SERVICE IN FISCAL YEAR '03 THAT WE WERE PROVIDING IN FISCAL YEAR FISCAL YEAR '99 OR 00, THEN I THINK WE NEED -- WE AS A COMMUNITY NEED TO COME AND HELP. THIS IS OUR CITY, WE LIKE IT HERE. WE BRAG ABOUT IT AND QUITE FRANKLY A LOT OF PEOPLE THINK THAT -- THAT WE DO A LOT OF THINGS VERY WELL. AS I WAS MENTIONING TO YOU EARLIER, WE WERE IN SAN ANTONIO YESTERDAY, AND ONE OF THE THINGS THAT WAS TOLD TO US THAT -- THAT WAS THAT WHEN SAN ANTONIO FACES A DIFFICULT DECISION, ONE OF THE QUESTIONS THAT THE MAYOR ASKED US, WHAT IS AUSTIN DOING? WE HAVE DEVELOPED A LOT OF MODELS FOR DOING THINGS VERY WELL HERE, WE ARE VERY PROUD OF THAT. IT HAS COST US MONEY AND NOW WE CAN USE THOSE MODELS TO DO THE THINGS THAT WE NEED TO DO. BUT ONE OF THE THINGS THAT NEEDS TO BE DONE IS A HEALTHY RESPONSE, NOT JUST FROM OUR EMPLOYEES WHO ARE MAKING A SACRIFICE BY NOT -- NOT RECEIVING THE PAY FOR PERFORMANCE OR THE COST OF LIVING ADJUSTMENTS, THAT THE REST OF US IN THE COMMUNITY, YOU KNOW, COME FORTH WITH IDEAS, COME FORTH WITH SERVICES THAT -- THAT CAN -- THAT CAN HELP THE CITY RIDE THIS MINI STORM, IS THAT A PROPER -- MAYBE NOT A MINI STORM, BUT A STORM, AN ECONOMIC STORM. BUT IN ESSENCE PREPARE OURSELVES FOR THE NEXT GOOD-TIME PERIOD THAT I'M SURE WILL BE COMING. NOT AS EARLY AS WAS ORIGINALLY PREDICTED, BUT -- BUT THE AMERICAN ECONOMY HAS ALWAYS MANAGED TO COME BACK AND I'M SURE THIS WILL ONE, PROBABLY IN A DIFFERENT FORM. LIKE THE CITY MANAGER SAID, WE CANNOT DO THINGS LIKE THE PRIVATE SECTOR. I WAS READING IN THE WALL STREET JOURNAL TODAY WHERE CAR COMPANIES, HONDA, A PROUD JAPANESE COMPANY, IS GOING TO CHINA TO PRODUCE CARS THAT THEY ARE GOING TO BRING AND SELL IN JAPAN. SO -- SO THE WHOLE WORLD ECONOMIC ORDER IS -- IS TAKING SOME TWISTS AND TURNS AS COMPANIES STRUGGLE. AMERICANS WILL BE BUYING MORE AND MORE CARS, ESPECIALLY FORD, THAT ARE MADE IN BRAZIL. SO WE NEED TO UNDERSTAND THAT ECONOMIC ORDER AND DO -- DO THE THINGS THAT ARE NECESSARY TO MAINTAIN THE STANDARD OF LIVING THAT OUR PEOPLE HAVE -- HAVE BECOME ACCUSTOMED TO. SO AGAIN CITY MANAGER, CONGRATULATIONS. I THINK THAT -- THAT THIS BUDGET IS ONE THAT -- THAT THE COUNCIL WILL DISCUSS AND -- AND I'M SURE THERE WILL BE A LOT OF QUESTIONS AND -- AND WE WILL BE -- WE WILL BE MAKING A DECISION STARTING ON SEPTEMBER THE 9th FOR FIRST READING. I'M NOT GOING TO ASK THAT WE DO ALL THREE READINGS THAT FIRST DAY. I WOULD LIKE FOR US TO DO FIRST READING THAT FIRST DAY. SEPTEMBER THE 10th FOR SECOND READING. AND THERE THE COUNCIL -- IF THE COUNCIL SEES FIT TO DO SECOND AND THIRD THAT WOULD BE FINE, BECAUSE THE FOLLOWING DAY IS A VERY IMPORTANT DAY IN THE HISTORY OF THIS COUNTRY, AND THAT'S THE -- THE OBSERVANCE OF THE SEPTEMBER 11TH TRAGIC EVENTS. IF WE DON'T DO IT ON THE 10th, WE WILL HAVE TO COME BACK ON THE 12th TO FINISH OUT THE THIRD READING. SO -- SO CITY MANAGER. [ONE MOMENT PLEASE FOR CHANGE IN CAPTIONERS] (11:01 A.M.)

... DURING THE UP COMING PRESENTATIONS. I'LL BE REAL BRIEF ON THESE NEXT COUPLE OF SLIDES. THE TOTAL REVENUES IN THE '03 BUDGET ARE $1.4 BILLION. AND AS EXPECTED, UTILITY REVENUES MAKE UP ALMOST 60% OF THAT TOTAL. WHILE PROPERTY TAXES AND SALES TAXES ARE THE SIGNIFICANT REVENUE SOURC FOR THE GENERAL FUND, ON A TOTAL OPERATING BASIS THEY ACCOUNT FOR ONLY 20% OF THE TOTAL REVENUES T REMAINING 20% COME FROM OPERATING REVENUES SUCH AS USER FEES AT THE AIRPORT, CONVENTION CENTER USER FEES, HOTEL TAXES, OTHER USERS FEES, PERMITS, INTEREST EARNINGS AND SO FORTH. EXPENDITURES FOR THE ENTIRE PROPOSED BUDGET, OPERATING PROPOSED BUDGET ARE ALSO $1.4 BILLION ELECTRIC AND WATER, WASTEWATER UTILITIES ACCOUNT FOR 40%, WHILE THE GENERAL FUND MAKES UP 25% OF THE TOTAL BUDGET. TOTAL DEBT SERVICE ACCOUNT FOR 20%. THE REMAINING 15% IS MADE UP FROM THE OTHER ENTERPRISE FUNDS SUCH AS AIRPORT, CONVENTION CENTER, SOLID WASTE, AND ALSO INCLUDING THE LIABILITY AND WORKER'S COMP FUND. I'LL BE REVIEWING WITH YOU AT THE END OF THE PRESENTATION THE BUDGET SCHEDULE TO GIVE YOU AN IDEA ON WHEN YOU WILL MORE SPECIFIC PRESENTATIONS ON EACH OF THOSE FUNDS. TO FOCUS ON THE GENERAL FUND. THE GENERAL FUND IS THE TAX-SUPPORTED FUNDS AND PROVIDES FUNDING FOR ALL BASIC SERVICES SUCH AS PUBLIC SAFETY, PARKS, LIBRARIES, AND AS A RESULT IS WHERE WE SPEND MOST OF OUR TIME AND OUR FOCUS ON. GENERAL FUND REVENUES. GENERAL FUND REVENUE SOURCES IN THE '03 BUDGET TOTAL $476.6 MILLION. THIS INCLUDES ARE ONGOING REVENUES AS WELL AS SOME ONE-TIME SOURCES WHICH WE DISCUSSED DURING THE MAY RETREAT AND ADDITIONAL SAVINGS AS WE'LL DISCUSS FURTHER AS I GO THROUGH THESE INDIVIDUALLY. BUT LET ME POINT OUT SOME OF THE KEY ONES. AS YOU CAN SEE ON THE PIE CHART, ON TOTAL REVENUE SOURCES, PROPERTY TAXES CONTINUE TO MAKE A SIGNIFICANT SOURCE OF 31.7. THIS IS A HEALTHY POSITION FOR THE CITY TO BE IN. THIS IS IN CONTRAST TO JUST THREE AGO WHEN PROPERTY TAXES ACCOUNTED FOR 28% OF TOTAL REVENUES. SALES TAX ACCOUNTS FOR 24% OF THE TOTAL REVENUES. AND AGAIN, THREE YEARS AGO SALES TAX WAS 30% OF TOTAL REVENUES. AND AS WE ALL PAINFULLY KNOW, SALES TAX IS A VERY VOLATILE REVENUE SOURCE, AND SO WE ARE DEFINITELY GOING INTO THE RIGHT DIRECTION WITH THAT SHIFT BETWEEN PROPERTY TAXES AND SALES TAX. COMBINED, THE PROPERTY TAX AND SALES TAX MAKE UP ABOUT 60% OF THE TOTAL GENERAL FUND REVENUES. THE TRANSFERS FROM THE ELECTRIC AND WATER, WASTEWATER UTILITIES ACCOUNT FOR 20% OF TOTAL REVENUES. THE REMAINING REVENUES ARE COMPRISED FOR CHARGES SUCH AS E.M.S. FEES, MUNICIPAL COURT FINES, FRANCHISE FEES SUCH AS REVENUES FROM SOUTHERN UNION GAS AND TIME WARNER PERMIT REVENUE, INTEREST EVENINGS AND OTHER MOUSE REVENUES. JUST TO GO INTO A LITTLE MORE DETAIL ON SOME OF THE MORE MAJOR REVENUE SOSHSES AND THOSE FOUR ACCOUNT FOR 80% OF OUR TOTAL CURRENT REVENUES. PROPERTY TAXES AND THE MANAGER -- AS THE MANAGER DISCUSSED WITH YOU, BECAUSE OF THE TIMING REQUIRED TO GET THE BUDGET PRINTED, WE ACTUALLY PRINTED THE PROPOSED BUDGET THE DAY BEFORE WE RECEIVED THE CERTIFIED ROLL. AND JUST TO PUT THAT IN TIMING PERSPECTIVE, WE ACTUALLY GOT IF BUDGET BOOKS THIS MORNING. WE WOULD HAVE WAITED ONE MORE DAY OR EVEN A FEW HOURS WE WOULD HAVE BEEN COMPROMISING GETTING THE BUDGET DONE ON TIME T PROPOSED BUDGET ASSUMES AN 8 .7% GROWTH IN NET TAXABLE VALUE. AS YOU RECALL, WHEN WE DID THE FIVE-YEAR FORECAST WE WERE ASSUME AGO 10.1% GROWTH IN VALUE. WE DID RECEIVE SEVERAL WEEKS AGO BEFORE THE CERTIFIED ROLL AN UPDATED ESTIMATE OF 8.7%, WHICH IS WHAT IS INCLUDED IN THE PROPOSED BUDGET. THAT TRANSLATED TO A REVENUE LOSS OF APPROXIMATELY $2.9 MILLION AS COMPARED TO THE FORECAST. AND THE MANAGER ALSO IDENTIFIED TO YOU ONCE WE DID RECEIVE THE CERTIFIED ROLL, THE ACTUAL GROWTH IN THE VALUATION WAS 8.9%, AND HENCE THE $400,000 IN ADDITIONAL UNACCOUNTED FOR PROPERTY TAX REVENUE. THE NEXT FEW SLIDES I'LL GO INTO EVEN MORE DETAIL ON THE PROPERTY TAX. SALES TAX FOR FISCAL YEAR '03 IS BASED ON A 2% GROWTH OVER THE CURRENT YEAR ESTIMATE, AND YOU RECALL THROUGHOUT THIS CURRENT FISCAL YEAR WE'VE DONE SEVERAL ADJUSTMENTS DOWNWARD BASED ON OUR ACTUAL EXPERIENCE. OUR CURRENT YEAR ESTIMATE FOR THE FISCAL YEAR IS ASSUMING A 5.6% NEGATIVE GROWTH AS COMPARED TO FISCAL YEAR '01. AGAIN, THE FISCAL YEAR '03 BASED IS BASED ON A 2% GROWTH OF THAT NUMBER. WE BELIEVE WE'VE SEEN THE WORST OF OUR LOSSES, BUT IN RECENT EXPERIENCE CONTINUES TO INDICATE THAT THAT REVENUE IS UNSTABLE AND DIRECTLY TIED TO THE ECONOMY. AND THE LAST SEVERAL WEEKS THE ECONOMY HAS ALSO BEEN SHAKEN UP. THE TRANSFER FROM THE ELECTRIC COMPANY, FROM AUSTIN ENERGY, AS THE MANAGER STATED WAS DISCUSSED DURING THE MAY RETREAT AND THAT IS BASED ON A 9.1% RATE OF RETURN. AND THE WATER TRANSFER IS BASED ON MAINTAINING THE CURRENT RATE OF 8.2% OF TOTAL REVENUES. THIS SLIDE SHOWS THE GROWTH IN THE TAX VALUATION BY INDIVIDUAL CATEGORY. THE NUMBERS ON TOP REPRESENT THE TOTAL GROWTH VALUE WHILE THE NUMBERS INDICATED ON THE BOTTOM ARE FOR EXISTING PROPERTY VALUES. THE TOTAL GROWTH FOR SINGLE-FAMILY RESIDENTIAL PROPERTY, INCLUDING NEW CONSTRUCTIONS AND ANNEXATIONS, WAS 14%. WHILE GROWTH ON EXISTING PROPERTY WAS 10.4%. ALTHOUGH BY STATE LAW, A HOMESTEAD CANNOT INCREASE BY MORE THAN 10% IN ONE YEAR. THE REASONS FOR THE DIFFERENCE BETWEEN THE 10% CAP AND 10.4% IS FOR THOSE SINGLE-FAMILY RESIDENCES THAT ARE NOT HOMESTEAD SUCH AS RENTAL PROPERTY -- RENTAL SINGLE-FAMILY RESIDENCE OR PROPERTIES THAT ARE SOLD THROUGHOUT THE YEAR. AND ONE ENCOURAGING SIGN THAT THIS SHOWS TO US IS THAT SINGLE-FAMILY RESIDENTIAL VALUES CONTINUE TO BE STRONG; ALTHOUGH MAYBE NOT AS STRONG AS IN PRIOR YEARS, THEY ARE NOT NEGATIVE, AS WAS THE CASE IN THE ECONOMIC DOWNTURN OF THE '80s. SO THAT IS GOOD NEWS. BUT AGAIN, IT DOES NOT GO BACK TO THE YEARS WHEN THE ECONOMY WAS STRONG. JUST TO GIVE YOU A EXAMPLE, IN 1999, SINGLE-FAMILY RESIDENTIAL VALUES GREW BY 21%. AND EVEN LAST YEAR THEY WERE ALMOST 16%. SO WE ARE SEEING SOME POSITIVES, BUT TRULY THERE IS A SLOW-DOWN. MULTI-FAMILY RESIDENTIAL VALUES GREW BY 8%. ALSO A REDUCTION IN THE RATE OF GROWTH AS COMPARED TO LAST YEAR WHEN GROWTH WAS 13%. FOR OUR COMMERCIAL PROPERTIES -- FOR EXISTING PROPERTIES GREW 1.8%, NEW CONSTRUCTION BOOSTED IT TO 6.8%. THE TWO AREAS WHERE GROWTH IS SHOWING A MUCH DIFFERENT THAN LAST YEAR AND PRIOR YEARS IS IN LAND AND PERSONAL PROPERTY. LAND, ALTHOUGH ISSUING A GROWTH OF 6.7% IS MUCH LESS THAN THE GROWTH OF LAST YEAR, WHICH WAS 24%, PERSONAL PROPERTY OF WHICH INVENTORIES REPRESENT THE MAJOR COMPONENT SHOW A LOSS OF 10 OPINION 7% IN EXISTING -- 10.7% IN EXISTING PROPERTIES AND NEGATIVE 6.4% OVERALL. ALTHOUGH SOME OF THIS LOSS IS DUE TO DEPRECIATION, THIS IS VERY SIGNIFICANT AS COMPARED TO THE GROWTH RATES FROM PRIOR YEARS, SUCH AS LAST YEAR'S GROWTH FOR PERSONAL PROPERTY IS 15.6%. OR EVEN TWO YEARS AGO, PERSONAL PROPERTY GREW AT A RATE OF 10.4%. AND TO SUMMARIZE, OVERALL THE GROWTH IN THE PROPOSED BUDGET IS 8.7. GROWTH ON EXISTING VALUES IS 3.8. THE DIFFERENCE BETWEEN THE CERTIFIED ROLL AND THE NUMBERS IN THE PROPOSED BUDGET ARE VERY, VERY INSIGNIFICANT. ACTUALLY IT'S TWO TENTHS MUCH ONE PERCENT. SO THE CHANGES WON'T BE VERY MATERIAL AT ALL. ONE OF THE OPPORTUNITIES, AND THE MANAGER TALKED ABOUT THIS DURING HER INTRODUCTION, WHICH IS SOMETHING I -- THIS GRAPHICALLY FURTHER SUPPORTS HER COMMENTS IS THAT THE OPPORTUNITIES THAT GROWTH IN VALUATION PRESENTS TO THE MANAGER AND THE COUNCIL, AND THAT'S THE OPPORTUNITY TO REDUCE THE TAX RATE OR KEEP IT CONSTANT. AS YOU CAN SEE ON THIS GRAPH, THE CITY OF AUSTIN HAS BEEN VERY RESPONSE NIBL LOWERING THE TAX RATE IN DIRECT CORRELATION WITH THE GROWTH IN PROPERTY TAX VALUES. FOR INSTANCE, IN FISCAL YEAR 1998-99 WHEN VALUATIONS GREW BY 1.8%, THE CITY LOWERED THE TAX RATE BY OVER TWO AND A HALF CENTS. AS YOU CAN SEE OVER THE LAST FIVE YEARS, NOT INCLUDING THE UPCOMING FISCAL YEAR, THE CITY HAS REDUCED THE TAX RATE BY 8 CENTS OR ALMOST 15%. IN THE CURRENT YEAR, THE CITY TAX RATE ACCOUNTS FOR ONLY 18% OF TOTAL TAX RATE FOR A TAXPAYER WITHIN AISD. THE PURPOSE OF THIS NEXT SLIDE IS TO PUT INTO PERSPECTIVE THE IMPACT FOR A HOMEOWNER WITH A HOME OF AVERAGE VALUE. THE FACTOR -- JUST TO REVIEW THE FACTORS, THAT IS TO MAINTAIN THE CURRENT TAX RATE AT .4598 PER HUNDRED DOLLAR VALUATION AND AVERAGE HOME VALUE OF $175,000, WHICH IS THE AMOUNT WE RECEIVED FROM THE APPRAISAL DISTRICT. YOU CAN SEE BASED ON THE AVERAGE VALUE OF LAST YEAR, WHICH WAS $158,000, THE ANNUAL TAX BILL WAS $727. BASED ON THE SAME TAX RATE AS PROPOSED WITH THE INCREASED -- AS PROPOSED AND WITH THE INCREASED VALUATION OF 175,000, THE ANNUAL TAX BILL IS NOW PROJECTED TO BE $804 OR AN INCREASE OF $77 PER YEAR. MOVING ON TO EXPENDITURES, AGAIN, JUST TO BE A VERY QUICK OVERVIEW, THE MANAGER HAS GONE OVER SOME OF THE HIGHLIGHTS AND YOU WILL BE RECEIVING MORE DETAILED INFORMATION THROUGHOUT THE DEPARTMENTAL PRESENTATIONS, BUT I DO JUST WANT TO GO OVER SOME OF THE KEY HIGHLIGHTS ON THIS GRAPH. AS CONTINUED TO BE THE TREND, PUBLIC SAFETY ACCOUNTS FOR OVER HALF OF THE ENTIRE GENERAL FUND BUDGET AT 53.7%. THIS IS EVEN AN INCREASE IN THE PERCENTAGE OF THE TOTAL BUDGET AS COMPARED TO THE CURRENT FISCAL YEAR APPROVED BUDGET WHEN PUBLIC SAFETY ACCOUNTED FOR ONLY 51%. PUBLIC RECREATION AND CULTURE WHICH REPRESENTS PARKS AND LIBRARY DEPARTMENTS MAKE UP 9.9% OF THE TOTAL GENERAL FUND BUDGET. AND PUBLIC HEALTH PRERJ REPRESENTS THE HEALTH OPERATIONS AS WELL AS THE GENERAL FUND, MAP AND INDIGENT CARE COSTS. URBAN GROWTH MANAGEMENT INCLUDES THE BUDGET FOR NEIGHBORHOOD PLANNING AND ZONING AND THE GENERAL FUND PORTION OF THE WATERSHED. THE 2.1% REPRESENTS THE BUDGET FOR THE TRANSPORTATION DEPARTMENT AT $10 MILLION. AND JUST VERY QUICKLY, TO GO OVER THE TRANSFERS PORTION, THAT'S COMPRISED OF SEVERAL TRANSFERS SUCH AS THE TRANSFER TO THE SUPPORT SERVICE FUNDS, THEREFORE TO THE INFORMATION SYSTEM DEPARTMENT, OR SUSTAINABILITY TRANSFER, C.I.P. AND TRANSFERRED CONTINGENCIES. A QUICK RECAP OF OUR EXPENDITURES IN THE GENERAL FUND PROPOSED BUDGET, TOTAL EXPENDITURE GROWTH IS 2.19% OVER FISCAL YEAR 2002 BUDGET. WHICH IS 466 MILLION. THIS IS A VERY MODEST GROWTH ESPECIALLY AS COMPARED TO THE GROWTH RATES IN PRIOR YEARS. THE 2002 BUDGET REPRESENTED A GROWTH OF 6% OVER THE 2001 BUDGET. HOWEVER, DURING THE HIGH ECONOMIC TIMES, THE BUDGET WAS ALSO GROWING BY SIGNIFICANT LEVELS. SUCH AS IN FISCAL YEAR 1999, THE BUDGET GREW BY OVER 16% OVER THE 1998 BUDGETED, AND THE 2000 BUDGET GREW AT 13% OVER THE 1999 BUDGET. SO YOU CAN SEE AS SHOWN ON THIS SLIDE THAT THE EXPENDITURE GROWTH FOR THE '03 BUDGET IS MUCH LESS THAN IN PRIOR YEARS. TOTAL GENERAL FUND F.T.E.s IN THE PROPOSED BUDGET ARE 4960. AS SHOWN HERE, PUBLIC SAFETY FIRST RESPONDER POSITIONS WHICH INCLUDE POLICE AND FIRE AND E.M.S. PARAMEDICS ACCOUNT FOR 52% OF THE TOTAL F.T.E.s AT 2558. CIVILIAN F.T.E.s TOY TALL 2300. 2372. AND AS NOTED, THE CITY MANAGER -- AS THE CITY MANAGER NOTED EARLIER, WE DID ELIMINATE 321 POSITIONS. 232 OF THOSE WHICH WERE DIRECTLY IN THE GENERAL FUND. THESE NEXT FEW SLIDES ARE JUST GOING TO BE VERY QUICK REVIEW OF THE NUMBERS. THE MANAGER TALKED ABOUT OUR PROCESS OF SEVERAL REDUCTIONS INCLUDING THE LAST ROUND OF 10% REDUCTIONS. AND SOME STRATEGIC DECISIONS TO PUT BACK SOME FUNDING. BUT TO GIVE YOU AN IDEA OF WHERE WE ARE CURRENTLY AND WHERE WE ARE GOING INTO THE PROPOSED BUDGET, YOU CAN SEE IN THIS FIRST SLIDE HERE, PUBLIC SAFETY WENT FROM THE CURRENT AMENDED BUDGET OF 243.4 MILLION TO 256 AS INCLUDED IN THE PROPOSED BUDGET. AN INCREASE OF APPROXIMATELY $13 MILLION OVER THE AMENDED BUDGET OR GROWTH RATE OF 5.2%. THIS DOES INCLUDE THE ADDITIONAL COST FOR THE 60 OFFICERS TO MEET 2.0 AND OTHERS AND -- AND SOME OF THE OTHER PUBLIC SAFETY INITIATIVES. ON THIS SLIDE YOU WILL NOTE THAT AMONG PARKS, LIBRARY, MUNICIPAL COURT, THE PROPOSED BUDGET IS A REDUCTION OF $4.3 MILLION OVER THE AMENDED BUDGET. HOWEVER, BECAUSE SOME OF THE COSTS, ONGOING COSTS CONTAINMENT, THE PROPOSED BUDGET REFLECTS ALMOST THE SAME LEVEL OF EXPENDITURES AS INCLUDED IN THE CURRENT YEAR ESTIMATE. AND AGAIN, I JUST WANT TO -- AS WE GO INTO THE INDIVIDUAL DEPARTMENT PRESENTATIONS, WILL YOU GET MORE DETAILED INFORMATION ON THESE INDIVIDUAL BUDGETS. AND FINALLY, AS FAR AS DEPARTMENTAL PRESENTATIONS, THE -- THESE NEXT THREE DEPARTMENTS, TRANSPORTATION, WATERSHED AND NEIGHBORHOOD PLANNING AND ZONING, THE SLIDE IS A LITTLE BUSY, BUT I WANTED TO GIVE YOU A GOOD PERSPECTIVE OF WHAT WE'RE LOOKING AT. WHILE THE TRANSPORTATION FUND -- ACTUALLY WHILE THESE THREE DEPARTMENTS APPEAR TO STAY FAIRLY CONSTANT WITH THEIR AMENDED BUDGET, THE MANAGER TALKED ABOUT SEVERAL CONSOLIDATIONS AND SEVERAL PROCESS IMPROVEMENTS. ONE OF THE PROCESS IMPROVEMENTS IMPLEMENTED IN THE FISCAL YEAR TWOOI BUDGET WAS THE REALLOCATION OF THE FUNCTIONS OF THE INFRASTRUCTURE SUPPORT SERVICE FUND. '03. BASICALLY WHAT THAT DID WAS DISTRIBUTE SOME OF THOSE COSTS. YOU CAN SEE FOR INSTANCE IN THE TRANSPORTATION FUND THEIR AMENDED BUDGET OF 10.2 MILLION. WITHOUT THAT REALLOCATION, THEIR PROPOSED BUDGET IS 9.4 MILLION. IN THE WATERSHED DEPARTMENT, 8.3 MILLION COMPARED TO 8.2 WITHOUT THE REALLOCATION. NEIGHBORHOOD PLANNING AND ZONING 4.2 MILLION COMPARED TO 3.5 MILLION. THE MANAGER DID GO CLEARLY INTO THIS NEXT SLIDE SO I WON'T SPEND ANY TIME ON IT. THIS IS THERE FOR INFORMATION AND FOLLOWS EXACTLY WHAT THE MANAGER WENT OVER DURING HER PRESENTATION. THE ENTERPRISE FUNDS WILL ALSO BE PART OF YOUR WORK SESSIONS, AND YOU WILL RECEIVE MORE DETAILED INFORMATION REGARDING EACH OF THE ENTERPRISE FUNDS. HOWEVER, I DID WANT TO POINT OUT ONE OF THE KEY AREAS THAT I KNOW COUNCIL IS CONCERNED ABOUT AND THE PUBLIC IS ONE OF THE AREAS THAT THEY FOCUS ON AND THAT IS IN RATE INCREASES. THERE WILL BE NO RATE INCREASES IN WATER AND WASTEWATER, NO RATE INCREASES, NO COST OF SERVICE RATE INCREASES IN AUSTIN ENERGY. THERE IS A SLIGHT FUEL CHARGE ADJUSTMENT. HOWEVER, THE AREAS THAT THERE ARE SOME RATE INCREASES IS IN THE DRAINAGE UTILITY FUND WHERE WE ARE IMPLEMENTING OR PROPOSING TO IMPLEMENT THE SECOND YEAR OF THE COUNCIL APPROVED COST OF SERVICE STUDY. YOU CAN SEE THE INCREASES AS SHOWN. THE RESIDENTIAL RATE IMPACT OF 11% OR AN IMPACT OF 58 CENTS PER MONTH. THE COMMERCIAL RATE IS 34% INCREASE, AN IMPACT OF ALMOST $24 A MONTH. AGAIN, THIS IS JUST IN LINE WITH THE COST OF SERVICE STUDY PRESENTED TO COUNCIL IN AUGUST OF LAST YEAR. IN SOLID WASTE SERVICES, WHILE THERE ARE NO INCREASES TO THEIR BASIC SERVICES, THERE ARE SOME INCREASES ASSOCIATED WITH CODE COMPLIANCE VIOLATIONS REGARDING THE ADMINISTRATIVE AND LEGAL FEES. THE CAPITAL BUDGET, WHICH IS ALSO PART OF -- YES, SIR.

MAYOR GARCIA: SOME OF THE COUNCILMEMBERS WERE NOT ON THE COUNCIL AT THE TIME THAT THAT STUDY WAS DONE ON THE DRAINAGE, SO IF YOU COULD SEND A SUMMARY, ONE SHEET OR TWO SHEETS OF WHAT THAT STUDY WAS, COST OF SERVICE STUDY.

WE'LL GET THAT OUT TO YOU.

MAYOR GARCIA: WE'LL REVIEW THAT.

THE CAPITAL BUDGET, WHICH IS GOING TO BE LOCATED IN VOLUME 4 OF THE SIX VOLUMES THAT YOU WILL BE RECEIVING WHEN YOU GET BACK TO YOUR OFFICE, IS A TOTAL OF $470 MILLION IN NEW APPROPRIATIONS. YOU CAN SEE THERE THE BREAKOUT OF GENERAL GOVERNMENT IS $100.9 MILLION AND THE ENTERPRISE CAPITAL BUDGET 369 MILLION. THE BOND PROGRAM APPROPRIATION OF THAT $100 MILLION IS $44.9 MILLION. WE WILL BE HAVING A PRESENTATION ON THE 1998 BOND PROGRAM DURING THE WORK SESSION PRESENTATIONS OF AUGUST 21. AT THAT TIME WE'LL HAVE MORE DETAIL ON THE 1998 BOND PROGRAM. AND EACH INDIVIDUAL DEPARTMENT WILL GO OVER THEIR INDIVIDUAL CAPITAL BUDGET FOR FISCAL YEAR '03. MAYOR AND COUNCIL, THAT CONCLUDES THE OVERVIEW OF THE PROPOSED BUDGET. HOWEVER, I DID WANT TO GO VERY QUICKLY OR AT LEAST SHARE WITH YOU THE BUDGET SCHEDULE. THERE IS AN ITEM ON TOMORROW'S AGENDA TO APPROVE THE PROPOSED SCHEDULE. INCLUDING THE PRESENTATIONS AND THE BUDGET READINGS. NEXT WEEK WE'LL START OFF WITH THE PRESENTATION ON PUBLIC SAFETY. AVIATION AND SOLID WASTE. THE NEXT DAY ON AUGUST 8th, WE PROPOSAL TO HAVE A PUBLIC HEARING ON THOSE PRESENTATIONS AND THOSE DEPARTMENTS. THE FOLLOWING WEEK THERE IS NOT A COUNCIL MEETING; HOWEVER, WE ARE PLANNING TO HAVE A -- THIS SAME PRESENTATION PROVIDED TO THE CHAIR PERSONS OF EACH OF THE BOARDS AND COMMISSIONS. ON THE 21st, WE PROPOSAL TO HAVE THE BUDGET PRESENTATION FOR TRANSPORTATION, NEIGHBORHOOD PLANNING, WATERSHED, OUR PUBLIC WORKS, WATER AND WASTEWATER AND AUSTIN ENERGY DEPARTMENTS, AS WELL AS THE PRESENTATION ON THE 1998 BOND PROGRAM. ON AUGUST 22nd, WE'LL HAVE THE PUBLIC HEARING ON THOSE SAME DEPARTMENTS AND ON THE CAPITAL BUDGET. THE PRESENTATIONS ON THE 28th ARE SCHEDULED TO BE PARKS -- PARKS, LIBRARY, HEALTH, PRIMARY CARE AND HOUSING DEPARTMENTS T PUBLIC HEARING ON THE 29th WILL BE A PUBLIC HEARING ON THOSE DEPARTMENTS AS WELL AS THE GENERAL PUBLIC HEARING ON THE OVERALL BUDGET. AND THE BUDGET READINGS, AS YOU CAN SEE, ARE SCHEDULED FOR SEPTEMBER 9th, 10th, AND I FAILED TO ACTUALLY CORRECT THIS. WE ARE SCHEDULED FOR THE 9TH, 10th, AND 11th, HOWEVER, WE ARE COMING FORWARD WITH AN ACTION ITEM REQUESTING WE NOT MEET ON THE 11th BUT SCHEDULE THE 12th INSTEAD IN CASE THAT DATE IS NEEDED. THAT CONCLUDES OUR OVERVIEW, MAYOR AND COUNCIL.

FUTRELL: WE DO HAVE A SHORT PRESENTATION ON BENEFITS, WHICH IS SOMETHING THAT YOU HAD ASKED US TO BEGIN ADDING AGAIN INTO OUR BUDGET PRESENTATIONS, AND THEN OBVIOUSLY JOHN, VICKY AND RUDY ARE AVAILABLE FOR ANY MORE DETAILED QUESTIONS.

MAYOR GARCIA: LET ME SEE IF THERE IS QUESTIONS OF YOU OR MR. GARZA BEFORE WE GO INTO THE BENEFITS. COUNCILMEMBER SLUSHER.

SLUSHER: I HAVE ONE. ON THE IMPACT ON THE AVERAGE HOMEOWNER, IS THAT JUST FROM THE CITY OR IS THAT THE CUMULATIVE?

THAT IS JUST FOR THE CITY.

SLUSHER: IT'S NOT THE OVERLAPPING. THAT'S WHAT I THOUGHT. THANKS.

ALVAREZ: MAYOR?

MAYOR GARCIA: COUNCILMEMBER ALVAREZ.

ALVAREZ: I'M LOOKING BACK AT PAGE 7 WHERE THE TAX RATE IS. I GUESS OVER TIME ILLUSTRATED. SO BASICALLY THE TAX RATE FOR THIS COMING YEAR IS GOING TO BE THE SAME AS THE TAX RATE FOR LAST YEAR, BUT THE REASON FOLKS MIGHT SEE AN INCREASE IN HOW MUCH THEY ARE PAYING FOR PROPERTY TAXES HAS TO DO WITH THE APPRAISALS.

THAT'S CORRECT.

ALVAREZ: BUT THE TAX RATE ITSELF WILL ACTUALLY REMAIN FIXED.

THAT'S CORRECT.

ALVAREZ: AT LEAST UNDER THE PROPOSED BUDGET.

FUTRELL: AND I THINK IT'S IMPORTANT TO NOTE FROM WHAT WE'RE HEARING, WE WILL BE THE ONLY OF THE FOUR TAX JURISDICTIONS NOT RECOMMEND AGO TAX INCREASE.

MAYOR GARCIA: RATE INCREASE.

FUTRELL: EXCUSE ME. RATE INCREASE.

MAYOR GARCIA: ANYTHING FROM THIS SIDE OF THE TABLE? MR. STEVENS.

FUTRELL: YOU LET JOHN OFF AWFULLY EASY HERE. [LAUGHTER] VANESSA, DO YOU WANT TO RUN US THROUGH BENEFITS HERE?

SURE.

FUTRELL: TOM, ARE YOU GOING TO COME UP AND JOIN US?

GOOD MORNING, MAYOR AND COUNCILMEMBERS. MY NAME IS HAVE A NECESSARY SAT DOWNY LITTLE, THE DIRECTOR OF YOU HAD IMAGINE RESOURCES AND CIVIL SERVICE. LET ME START BY SAYING THAT KIND OF IN LIGHT OF WHAT THE CITY MANAGER SAID REGARDING HER DIRECTION ON PAY AND BENEFITS, THE INTENT OF THIS PRESENTATION IS TO TALK ABOUT THE CHANGES IN BENEFITS. SHE GAVE A LOT OF INFORMATION RELATED TO PAY, AND WE WANT TO CONCENTRATE ON THE BENEFIT CHANGES. SHE ALSO PROMISED TO HAVE A BENEFIT PRESENTATION, AND WE'RE GOING TO GO OVER THAT. THE DECISIONS IN THE CITY EMPLOYEE BENEFITS PACKAGE REFLECT CAREFUL CONSIDERATIONS OF SEVERAL FACTORS. THE BUDGET SHORTFALL, AFFORDABILITY, AND OUR COMMITMENT TO CITY EMPLOYEES. WE ADDRESSED SEVERAL OBJECTIVES WITH THIS PACKAGE. I THINK THEY ARE WORKING ON THE SLIDES. FIRST WE HAVE A BASIC BUSINESS NEED. WE NEED A COMPETITIVE PACKAGE TO RECRUIT AND RETAIN EMPLOYEES. THAT'S ALWAYS DIFFICULT TO DO. WE NEED COST EFFECTIVE BENEFITS TO MEET THE BROADEST NEED OF THE WORKFORCE. AND WE NEED TO ENSURE THAT EMPLOYEES HAVE A CORE LEVEL OF COVERAGE. AND FINALLY, WE NEED TO ASSIST EMPLOYEES TO BE PHYSICALLY AND MENTALLY FIT. AND THAT'S WHERE OUR BENEFITS -- WHAT OUR BENEFITS DO.

MAYOR GARCIA: LET ME SEE IF OUR COMPUTER-DRIVEN OVERHEAD -- IS THAT -- ARE YOU GETTING TO ANY OF THE SLIDES OR --

NO, I THINK I'M ON THE FIRST ONE.

MAYOR GARCIA: ARE WE CONSISTENT WITH YOUR PRESENTATION ON THE SLIDES?

NOT QUITE YET.

FUTRELL: YOU DO HAVE A HARD COPY HANDOUT IN FRONT OF YOU. I KNOW THE PEOPLE VIEWING WILL NOT BE ABLE TO SEE IT. DON'T FEEL ANY PRESSURE THERE WHATSOEVER ON THAT LAPTOP.

MAYOR GARCIA: IF WE COULD GET THIS ON THE SCREEN.

FUTRELL: SHE'S TRYING.

MAYOR GARCIA: WHILE THAT'S HAPPENING, LET ME ALSO REFER TO, AGAIN, A JULY 31st "WALL STREET JOURNAL" ARTICLE ON SOMETHING THAT IS CALLED CONFLICTING CLAIMS. DOCTORS AND INSURANCE BRAWL OVER SOFTWARE THAT SHAVES BILLS. AND WHAT'S HAPPENING, THERE'S A -- THERE'S A LITTLE CHART THAT SHOWS EMPLOYEES HEALTH BENEFIT COSTS PER ACTIVE EMPLOYEE GOING FROM 3500 OR 3700 IN 1994 TO 5,000 IN THE YEAR 2000. AND THAT CHART GOES -- THAT HAS A BIG SPIKE, AND SO THIS PARTICULAR PRESENTATION IS IMPORTANT IN THE CONTEXT OF WHAT IS HAPPENING NOT JUST HERE BUT THROUGHOUT THE COUNTRY.

FUTRELL: WE MAYBE HAVE -- I WAS ABOUT TO ANNOUNCE A TECHNICAL MELTDOWN. BUT I THINK WE'RE THERE. GO AHEAD, VANESSA.

I THINK WE'RE PROBABLY ON SLIDE 3. I TALKED A BIT ABOUT WHAT OUR BENEFIT OBJECTIVES WERE. ON SLIDE 4 -- GO AHEAD AND CHANGE THAT. IN OUR PLAN THIS YEAR, LET ME BEGIN BY STATING WE ARE PROPOSING NO NEW MAJOR MEDICAL PLAN CHANGES. THIS IS OUR MAINTENANCE YEAR. THE CITY OF AUSTIN WILL CONTINUE TO OFFER TWO MAJOR MEDICAL PLANS. THE CITY MEDICAL PLAN, WE'RE SELF-INSURED, AND ONE HMO, AMEAL. AS IN PREVIOUS YEARS, THE CITY WILL CONTINUE TO PAY 100% OF THE EMPLOYEES' PREMIUMS. THIS IS THE SAME AS LAST YEAR. LET ME START TALKING ABOUT MEDICAL. AS YOU KNOW, THE COST OF HEALTH CARE HAS INCREASED FOR MANY EMPLOYERS. THIS IS NOT A NEW REVELATION. A MAY ARTICLE IN THE AUSTIN AMERICAN-STATESMAN CALLED IT THE PERFECT STORM IN A DEPICTION OF SOAKING EMPLOYEES AND EMPLOYERS IN THE TRIPLE WHAMMY OF HIGHER HEALTH CARE COSTS, A SHAKY ECONOMY, AND RISING UNEMPLOYMENT CLAIMS. IN FACT, WE RECEIVED SOME OF THAT SOAKING. THE MEDICAL PREMIUMS IN OUR CITY MEDICAL PLAN INCREASED AN AVERAGE RATE OF 11.7% FROM LAST YEAR. SO THE CITY MANAGER HAD SOME DIFFICULT CHOICES TO MAKE. HAVE THE EMPLOYEES PAY FOR HIGHER RATES IN A YEAR WITHOUT A PAY INCREASE, OR HAVE THE CITY ABSORB THE COSTS. AND AS THE CITY MANAGER MENTIONED, IN OUR COMMITMENT TO OUR EMPLOYEES, THIS BUDGET REFLECTS THE DECISION NOT TO INCREASE THE HEALTH INSURANCE PREMIUMS THIS YEAR. THE COSTS FOR NOT INCREASING THESE MEDICAL PREMIUMS TO EMPLOYEES IS $336,000. CONSEQUENTLY IN JANUARY OF 2003, THE CITY EMPLOYEES WILL CONTINUE TO PAY THE SAME PREMIUMS AS IN 2002. AND LAST YEAR -- AS LAST YEAR WILL CONTINUE TO OFFER THE HMO PREMIUMS AT THE SAME COST AS THE CITY PLAN. ON THIS NEXT SLIDE, WE WILL SHOW YOU THE PROPOSED EMPLOYEE MEDICAL PREMIUMS.

MAYOR GARCIA: THIS IS ONE OF THOSE EXPENDITURES I THINK THAT WE TRANSFERRED SOME MONEY TO A FUND. IT'S A BENEFIT FUND. DON'T WE HAVE A BENEFITS FUND?

WE HAVE A BENEFITS FUND, THAT'S CORRECT.

MAYOR GARCIA: WHAT WOULD BE HELPFUL TO THE COUNCIL IS IF WE COULD HAVE -- AND I DON'T KNOW WHETHER IT'S IN THE REST OF THE PRESENTATION, BUT A FUND FLOW THROUGH THAT FUND TO SEE, YOU KNOW, HOW THAT FUND IS AFFECTING -- IS AFFECTED BY THE INCREASED EXPENSES OR, YOU KNOW --

THAT PARTICULAR INFORMATION IS NOT IN THIS PRESENTATION, BUT WE'LL MAKE SURE YOU GET IT.

MAYOR GARCIA: YEAH. FOR THOSE -- WELL, OF COURSE EVERYBODY HERE KNOWS THAT SO I'M NOT GOING TO EXPLAIN ANYTHING. I THOUGHT THE NEW COUNCILMEMBERS WOULD NOT BE AWARE OF THAT, BUT OUR NEW COUNCILMEMBER PROBABLY KNOWS MORE ABOUT IT THAN ANYBODY ELSE. [LAUGHTER]

AS I MENTIONED, OUR EMPLOYEE MEDICAL PREMIUMS ARE NOT CHANGING. LET ME GET A LITTLE BIT ON DENTAL, WHICH IS OUR NEXT SLIDE. IN THE EMPLOYEE DENTAL ASSISTANCE PLAN, WE'RE PROPOSING AN INCREASE TO OUR DENTAL REIMBURSEMENT LEVELS. THIS MEANS OUR DENTAL PLAN WILL PAY MORE IN THE AREAS OF PREVENTIVE, BASIC AND MAJOR MEDICAL DENTAL PROCEDURES. THE SLIDE INCLUDES SOME EXAMPLES OF THE INCREASED AMOUNTS IN THOSE AREAS. FOR EXAMPLE, UNDER PREVENTIVE CARE, LET'S PICK ONE, THE ADULT CLEANING. I THINK THAT'S THE SECOND ONE. WILL BE REIMBURSED AT $57.356789 THIS IS A 31% INCREASE FROM THE CURRENT PLAN. $57.35. NOW, WE LOOKED AT A LOT OF INFORMATION AND WE MADE THAT DECISION TO INCREASE OUR DENTAL REIMBURSEMENT LEVELS BASED ON THE DATA WE RECEIVED FROM OUR CONSULTANTS. THEY LOOK AT OUR MEDICAL AND DENTAL INFORMATION EVERY YEAR, AND AFTER REVIEWING THIS EARLIER THIS YEAR, THEY ADVISED US THAT OUR DENTAL PLAN WAS NOT AS COMPETITIVE AS OTHER EMPLOYEES AND REALLY COULD BE ENHANCED. IT'S BEEN ABOUT FOUR YEARS SINCE THE CITY LAST CHANGED OUR DENTAL REIMBURSEMENT LEVEL, SO IT WAS TIME TO LOOK AT THOSE AGAIN. IN ADDITION, THIS DECISION WAS REINFORCED THROUGH OUR WORK WITH AWR BENEFITS UR BENEFITS ADVISORY EMPLOY HE. FIRE AND POLICE ALL HAVE REPRESENTATIVES THAT SERVE ON THIS COMMITTEE. THIS IS ONE OF THEIR PRIORITY RECOMMENDATIONS. AND I ACTUALLY THANK THE COMMITTEE FOR THEIR ASSISTANCE WITH THIS. WE TOOK TOWERS INFORMATION, IT WAS REINFORCED WITH THE BENEFIT COMMITTEE, AND WE MADE THIS PARTICULAR CHANGE. THE COST FOR THIS DENTAL ENHANCEMENT REFLECTS A 33.7 RATE INCREASE. AS WITH THE MEDICAL INSURANCE RATES, WE ALSO MADE THE DECISION HERE IN THE PROPOSED BUDGET NOT TO PASS THE INCREASE TO EMPLOYEES THIS YEAR. CONSEQUENTLY, EMPLOYEES WILL CONTINUE TO PAY THE SAME PREMIUMS AS LAST YEAR. AND THE COST FOR NOT INCREASING THE DENTAL PREMIUMS TO EMPLOYEES IS $214,000. THE TOTAL COSTS FOR NOT INCREASING BOTH THE MENTAL AND DENTAL PREMIUM IS $550,000. THIS NEXT SLIDE INDICATES THE PREMIUMS FOR THE DENTAL. THE CITY PAYS 100% FOR EMPLOYEES FOR DENTAL, AND THE EMPLOYEES PAY THE COST FOR THEIR DEPENDENTS. THAT'S BASICALLY BEING HELD HARMLESS. ONE OF OUR LAST AREAS TALKS ABOUT RETIREES. LAST YEAR WE WERE ABLE TO MAKE SOME MAJOR MEDICAL CHANGE TO THE RETIREES' MEDICAL PLAN. WE OFFERED THE CITY MEDICAL PLAN FOR RETIREES, AND THAT WAS A BIG CHANGE. THIS YEAR WE'RE NOT PLANNING ANY CHANGES TO THEIR PLAN DESIGN. WE WILL STILL OFFER THE CITY MEDICAL PLAN AND AMEIL AS WE DO WITH ACTIVELY EMPLOYEES. AS LAST YEAR, THE RETIREES WHO CHOOSE AMEIL WILL CHOOSE THE SAME PLAN. THIS DOES INCLUDE SMALL MONTHLY INCREASES TO THE RETIREE MONTHLY PREMIUMS. AND THE RETIREE RATES ARE PAID ON A MONTHLY BASIS. FOR EXAMPLE, AND I BELIEVE THIS MAY BE THE NEXT SLIDE, THESE MONTHLY INCREASES RANGE FROM $6.70 IN THOSE UNDER 65, AND $10.33 FOR 65 AND OLDER TO A MAXIMUM OF $33.79 FOR EMPLOYEE AND FAMILY UNDER 65. THESE, AGAIN, ARE MONTHLY RATES. WE DID OUR BEST TO KEEP THESE RATES MODEST IN LIGHT OF THE INCREASED HEALTH CARE COSTS. AND IN SOME OF THE WORK THAT WE'VE DONE IN LOOKING AT OTHER CITIES, THESE ARE VERY COMPARABLE. IN CONCLUSION, THIS BENEFIT PACKAGE PROPOSED TO YOU IN THIS BUDGET, DOES A COUPLE DIFFERENT THINGS. IT MAINTAINS THE EMPLOYEES AT THE CURRENT COMPETITIVE RATES AND LEVELS WHILE ENHANCES OUR COVERAGE WHERE MOST NEEDED. IT MAINTAINS OUR MEDICAL AND DENTAL PLAN WITH NO PREMIUM INCREASES FOR EMPLOYEES AND DEPENDENTS. IT PROVIDES BENEFITS TO RETIREES AND THEIR FAMILIES. AND LAST, IT'S AFFORDABLE FOR THE CITY. AND WITH THAT, I'LL BE HAPPY TO ANSWER ANY QUESTIONS YOU MAY HAVE.

MAYOR GARCIA: CAN YOU THROW SLIDE 5 ON THE -- YES. WE HAVE -- ON THIS ONE, WE HAVE SOME OF THE EMPLOYEES THAT ARE EMPLOY ONLY AND SO ON. HOW MANY OF OUR EMPLOYEES -- I DON'T KNOW WHETHER WE KEEP THIS STATISTIC, THAT ARE MARRIED AND HAVE FAMILIES COVER THEIR FAMILIES? AND HOW MANY OF THEM JUST TAKE THE EMPLOYEE-ONLY? DO WE KNOW THAT? PARTICULARLY AS IT REGARDS TO LOWER PAY EMPLOYEES.

OKAY. THAT INFORMATION I DON'T HAVE AVAILABLE IN THIS PRESENTATION. WE'LL GET THAT FOR YOU. BUT THE SLIDE ITSELF TALKS ABOUT THE NUMBER OF EMPLOYEES THAT ARE COVERED UNDER EACH OF THESE AREAS.

MAYOR GARCIA: THAT'S RIGHT. THAT'S WHY I'M FOLLOWING IT. LET'S SAY, FOR INSTANCE, WE HAVE ON THE EMPLOYEE AND FAMILY WE HAVE 1800 EMPLOYEES THAT HAVE EMPLOYEE AND FAMILY. YET WE HAVE EMPLOYEE ONLY, WE HAVE 5,000. AND I DON'T KNOW WHETHER THAT TELLS A STORY ABOUT THE NUMBER OF PEOPLE THAT WORK FOR US THAT CANNOT AFFORD THE 131.43 TO COVER THEIR FAMILY, BUT THEY GET COVERED THEMSELVES. AND THEN MAYBE IF THEY ARE LOWER PAY, MAYBE THEY ACCESS INDIGENT CARE FOR THEIR FAMILIES. I KNOW WE HAD THIS DISCUSSION IN CONJUNCTION WITH OUR PARTNERS, DOMESTIC PARTNERS ISSUES BACK IN THE DAYS THAT WE HAD THAT DISCUSSION. I WOULD LIKE TO KNOW HOW MANY OF THE EMPLOYEES THAT WE HAVE THAT HAVE FAMILIES COVER THEMSELVES ONLY AND NOT COVER THEIR FAMILIES. BECAUSE I THINK THAT'S A HEALTHY COMMUNITY INITIATIVE. I MEAN THAT'S A HEALTHY COMMUNITY ISSUE THAT WE NEED TO ADDRESS BECAUSE WE WOULDN'T WANT THE EMPLOYEE TO HAVE THE COVERAGE AND HAVE THE FAMILY BE INDIGENT. THAT'S ONE OF THE THINGS THAT WE HAD IN THAT SITUATION WITH DOMESTIC PARTNERS. OF COURSE, WE'RE NOT BRINGING THAT BACK UP, BUT, YOU KNOW, PARTICULARLY ALSO, YOU KNOW, WHERE THE EMPLOYEE MAY NOT BE MARRIED, BUT IS LIVING WITH SOMEBODY AND HAS CHILDREN. YOU KNOW, THAT'S THE SITUATION THAT OFTEN FINDS SITUATIONS WHERE THE DEPENDENTS ARE NOT COVERED. SO I WOULD LIKE FOR US TO LOOK AT THAT ISSUE PARTICULARLY TO OUR LOWER PAYING EMPLOYEES.

OKAY. WE'LL SEE IF WE CAN FIND THAT INFORMATION FOR YOU.

MAYOR GARCIA: QUESTIONS? NOW I GUESS WE OPEN IT UP. THANK YOU.

FUTRELL: I THINK ONE THING JUST TO STRESS IN CLOSING, WE HAVE HAD A LOT OF THINGS ON OUR PLATE OVER THE LAST FEW MONTHS, BUT WE KNOW ARE RIGHT SMACK IN THE MIDDLE OF TRYING TO DECIDE WHERE WE'RE GOING WITH BUDGET, AND WE ARE HOPING TO FOCUS IN AUGUST EACH OF THE WOULD BE SESSIONS AND THEN THE PUBLIC HEARINGS THE FOLLOWING THURSDAY SO THAT YOU CAN GET A FULL DISCUSSION OF THE MORE DETAILED INFORMATION IN EACH OF THESE SECTIONS IN THE BUDGET. SO, YOU KNOW, UNLESS WE HAVE AN EMERGENCY REQUEST, WE ARE GOING TO BE HOLDING THE WORK SESSIONS FOR FULL BUDGET DISCUSSIONS ALL THROUGH AUGUST TO PREPARE YOU FOR YOUR DECISIONS IN SEPTEMBER.

MAYOR GARCIA: QUESTIONS? THIS IS THE ONLY ITEM WE HAVE ON THE AGENDA TODAY. SO IF THERE'S NO QUESTIONS OR COMMENTS, I'LL ENTERTAIN A MOTION TO ADJOURN.

WYNN: SO MOVED.

MAYOR GARCIA: THERE'S A MOTION AND SECOND. ALL IN FAVOR SIGNIFY BY STANDING UP AND LEAVING. THANK YOU VERY MUCH, CITY MANAGER.