Councilmembers present: Dwight Thompson, Mayor pro tempore (6:40 p.m.); Alan Kiest, Carolyn Armanini, Mary Jane Goss, Nate Herzog, Roger Olstad, Ed Sterner

Staff present: David R. Hutchinson, Mayor; Karen Haines, City Administrator; John Hawley, Finance Director; Sarah Phillips, Community and Government Affairs Manager; Dennis Peterson, Police Chief; Susan Stine, City Clerk

Others present: One visitor

Mayor David Hutchinson called the study session meeting to order at 6:10 p.m.

City Administrator Karen Haines discussed the administration’s approach to retaining long-range financial stability and presented current programs and future concepts for achieving this goal.

Finance Director John Hawley reviewed the city’s current fiscal reserve policies and presented a recommendation to reduce the general fund reserve by 2 percent or approximately $110,000. In response to questions from Cmbrs. Kiest and Armanini, Hawley discussed bond reserve requirements and budget impacts.

Haines reported on the administration’s response to the proviso regarding operational efficiencies included in Ordinance 904/Adopting the 2004 Budget. The proviso required a report from the administration evaluating and making recommendations amounting to reductions of $100,000 through consolidation and efficiencies in city staffing and personal services contracts.

Haines discussed the process and staff work related to the review of all city operations and contracted services in response to the requirements of the proviso. She reported that the administration concluded that all departments with the exception of police and public works have only the minimum number of employees to provide basic services and to allow for vacation and sick leave coverage. Haines said that the impact of cuts to departmental budgets other than police and public works would eliminate flexibility in the provision of basic services. Therefore, the determination would be to reduce $100,000 from the public safety department by adjustments to staffing level, personal service contracts and/or other related operational expenses. The police chief would determine where the cuts would be taken.

Kiest expressed surprise that the administration’s response is so narrowly focused. Haines agreed that the conclusion is narrowly focused; however, she said that the process of review was not.

In response to a question from Armanini, Haines said that the conclusion reached in the process of the review was that there was no way to avoid a reduction in staff, and she noted that elimination of a position in the response to the budget proviso is not a message the administration wants to send to the staff at this point.

Cmbr. Dwight Thompson arrived at the meeting at 6:40 p.m.

There was discussion by councilmembers as to whether or not the administration had responded satisfactorily to the proviso.

Hutchinson asked the council to consider the dynamics of budgeting in this discussion and noted that the administration has responded to the proviso.

Hawley reviewed information regarding the general fund projected financial picture and provided an update based on financial information through March 2004.

Hawley also reviewed the potential impacts of Initiative 864 if it is placed on the November ballot and approved by voters. He noted that due to the timing of the vote and the 2005 budget process, the mayor’s recommendation is to prepare two budgets if the initiative is on the ballot. He discussed the option of placing a property tax levy lid lift on the November ballot also to take effect only if I-864 passes. He said that city reserves would have to be used while service reductions are implemented if the levy lid lift failed and the initiative passes.

There being no objection, the study session meeting was adjourned at 7 p.m. to allow the mayor and council to participate in the reception for commissioners.

Susan Stine, City Clerk

David R. Hutchinson, Mayor

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