December 1, 2006, Work Session

Summary of Action Taken

Minutes

The re-scheduled Work Session of the Clarion Borough Council was held on December 1, 2006, at the Clarion Borough Offices.

President Wilshire called the meeting to order at 8:00 a.m.

Councilmembers present included Mr. Zerfoss, Mr. Herman, Ms. Leonard, Ms. Vavrek, Ms. Moore, Mr. German, and President Wilshire. Ms. Freenock, Solicitor French, Mr. Ragon, Mayor Stroup, and Chief Hall were also present. Mr. Stutzman was absent.

Citizen Comments: There were none.

Administration: President Wilshire stated the main purpose of the meeting is to review the Proposed 2007 Budget, which Council will vote to advertise at Tuesday’s Council Meeting. Before looking at the budget, President Wilshire wanted to take this opportunity to briefly recount incidents that led to today and the possibility of approving a budget that requires an increase of 5 mills.

Clarion Borough is facing some financial challenges due to a number of factors such as: gross over-estimation of returns for the new Emergency Municipal Services Tax, and the elimination of 1 mill of real estate tax and the per capita tax at the same time. Add the problem that may have been created with inappropriate transfers within the budget involving grant funds and other sources and Clarion Borough has a perfect storm for budget problems. President Wilshire commented the Borough recently received a management letter from the auditors for the year that ended December 31, 2005. As done in the past, the letter is being made public today. The letter cites several instances of improper transfers. While any management actions will continue to be reviewed and appropriate action taken, the Borough needs to focus on the coming year’s budget. Realizing that Clarion Borough is facing serious financial concerns, Council previously approved the hiring of a special financial consultant, Susquehanna Associates, through a grant with the Department of Community and Economic Development, who are present today. President Wilshire reported Ms. Freenock, the Borough Manager, has been working with all the Councilmembers and the financial consultants in developing the Proposed 2007 Budget. At this time, President Wilshire turned the meeting over to Ms. Freenock to review the budget and financial plan.

As background, earlier this fall, Ms. Freenock stated Phil Scrimenti from the Governor’s Center gave a presentation to Council and was instrumental in the Borough securing an Early Intervention Grant. The purpose of the grant is two-fold. The first part of the program is what Council will hear today that involves the development of an Emergency Management Plan and the 2007 Budget. The second part, which will occur in the spring, is an internal control audit. Ms. Freenock noted the budget Council received doesn’t contain a fee schedule because Council can adopt it by resolution at a later date. As long as there is no fee schedule, the one adopted last year will remain in effect. Ms. Freenock proposes that Council not consider changing the fees until the various committees meet to determine if increases are warranted. In addition to reviewing that, Ms. Freenock wants to look at filing a refund with the IRS for fuel taxes the Borough has paid and also try to recapture some state taxes that have been paid on utility bills in the past. At this time, Ms. Freenock introduced Mr. Jeff Weiss and Mr. Sam Lynch with Susquehanna Group Advisors, who are the consultants that the Borough has been working with over the past couple months.

Mr. Jeff Weiss, President of Susquehanna Group Advisors, stated they have been working with Ms. Freenock and other Borough employees for about 1½ months to come up with the budget. The Early Intervention Program has a couple different phases to it. Normally, the Emergency Plan is done a little later in the process. However, with the approval of the State, Susquehanna Group switched it around to do the Emergency Management Plan now and then do the other phases in late winter/early spring. The plan, which will be presented today, is one of the phases of the financial management plan that DCED is providing through the grant. The Emergency Management Plan will help the Borough get through 2006 and then provides a recommended budget for 2007. Mr. Weiss passed out the document to everyone, including the media, and asked if Council wanted to go through the recommendations.

President Wilshire stated yes, because Council will have to adopt the 2007 budget. Therefore, each area should be discussed.

Since Susquehanna Group has been at the Borough, Mr. Weiss informed Council they have looked at some of the spending that has occurred out of a few different places and identified what is eligible and what is not eligible to be paid out of specific funding sources; for instance, Liquid Fuels or Highway Aid Fund. Susquehanna Group identified all the expenditures paid from General Fund that actually qualify to be paid by Liquid Fuels funds instead. Mr. Weiss recommended the Borough reimburse that money from Liquid Fuels back to the General Fund, which will help the Borough’s cash flow position. Susquehanna Group wanted to ensure that there would be enough cash to cover payroll through the end of the year and also for the Borough to be able to repay the 2006 Tax Anticipation Note. Mr. Weiss feels that should not be a problem. This does not include repaying any of those funds that the Borough borrowed from specific other sources in 2005. Susquehanna Group recommends these repayments occur in 2007.

These borrowings are reflected in the Borough’s 2005 audit report as payables. The plan includes an exhibit, which shows the estimations through the end of December and a prediction of where Susquehanna Group feels the Borough will end up. Council can review this information later. As far as the 2007 Budget, Mr. Weiss recommends repaying all the money that was borrowed from the Pension Fund and CDBG funds. This should be done as soon as possible. Changes in accounting procedures are recommended to change where expenditures are charged. This will make the Borough more accountable and allow more accountability to actually come out of the financial system. Susquehanna Group recommended some reallocation of where some of the expenses were charged and actually using the fund that’s available. Instead of paying something from the General Fund, as long as the expense is eligible to be paid from Liquid Fuels, the recommendation is for the expense to be paid immediately from the appropriate fund. Mr. Weiss recommended the Borough continue with the Tax Anticipation Note for 2007 in the amount of $300,000. The Borough will repay the one at the end of 2006. The 2007 TAN will get the Borough through until the property taxes start to come in. The Borough can then repay the money that was borrowed early in the year.

President Wilshire verified the Borough has the money to repay the 2006 TAN.

Mr. Weiss stated yes. Susquehanna Group recommends the Borough reallocate some of the taxes. Taxes will increase from 18.8 mills to 23.8 mills. Again, some of the funds have been reallocated. This will allow the Borough to get through 2007 and repay all the funds that need repaid. Mr. Weiss stated Mr. Lynch and he appreciated all the help everybody has given during this process, which is normally done over a longer period of time. Mr. Weiss appreciates the State helping the Borough to ensure that the contract was approved quickly so the Borough could get started right away.

When Council hired the financial consultants, President Wilshire reported it was brought out that this process would be educational for the manager and staff. The employees could learn from the consultant in terms of proper accounting. President Wilshire asked Ms. Freenock to go over each major category of the Proposed 2007 Budget. The main reason is for Councilmembers to understand what is included and raise any serious concerns now. At Tuesday’s Council Meeting, Council will give permission to advertise the budget. The budget will be open for a certain period of time for public review. President Wilshire believes a Special Council Meeting will be held on December 18, 2006, to adopt it.

Ms. Freenock reported the revenues are labeled ‘C’ and are calculated at the new proposed tax rate. The delinquency rate picks up some of what’s been delinquent in the past and also the historical delinquency rate. Per capita was repealed when Council instituted the Emergency Municipal Services Tax, EMS Tax. Earned income tax is relatively stable. Ms. Freenock commented the EMS Tax will be addressed later but expects an increase in that tax. The licensing and permit fees will remain the same at this point.

Mr. Zerfoss inquired if these fees can be changed throughout the year; for instance, pool rates and charging for Autumn Leaf Festival.

Ms. Freenock commented that will be adopted by resolution sometime later in 2007. These figures are projected. If fees are changed, the revenues will more than likely increase.

In reference to ALF, President Wilshire stated the Borough has met with the Chamber of Commerce in terms of possibly a proposal where the Chamber will cover the overtime costs incurred by the Borough during that event. That can be used for the general budget.

Mr. German inquired what street opening permit fees are and why it’s lower.

Whenever the water company needs to dig up the road to replace or repair a line, Ms. Freenock reported the company has to pay $100 to the Borough. That was high this year due to the installation of the traffic light at Eighth Avenue and Wood Street. Ms. Freenock feels it’s reasonable to lower it and feels it’s better being under than over on the revenue figures.

Ms. Freenock stated state and vehicle fines may increase if the parking meters are installed along Fourth Avenue from Main Street to Wood Street, as approved previously. Just in case they aren’t, the revenue is close to what has been coming in. District Justice and Prothonotary payments have been declining over the years and are reflected in the budget. The grant coded 351.090 is the Early Intervention Grant, which will not be received until 2007. Ms. Freenock reported the Borough is entitled to recapture wages for the Public Works employees when he/she works on PennDOT roads. Mr. Stutzman and the employees have been documenting time sheets and will continue to do so. As long as the backup is available, Ms. Freenock stated the transfer from Liquid Fuels will be deemed valid.

Mr. German asked if the documentation is a new procedure.

Ms. Freenock said yes.

President Wilshire asked if the transfer from Liquid Fuels will take away from actual paving projects.

Ms. Freenock stated no. Paving projects usually cost between $30,000-40,000. This year, $35,000 has been budgeted for whatever project Council decides to do. Ms. Freenock thinks the salt building needs to be replaced and is estimated to cost $32,000.

Moving into the expenditures, general government is first. Council will notice each department contains FICA, Medicare, and workers compensation line items, which are separated differently than in the past. Ms. Freenock asked Mr. Lynch to explain.

Mr. Lynch stated part of the new accounting procedures changes insurance so it’s recorded in General Fund versus being paid out of the Escrow Fund. The worker compensation is a calculation based on the percentage of the job rate; i.e. police officer, public works employees, or sales. That is run through the Payroll Fund. The remaining insurance items will be identified on a line item themselves so Council can see what’s actually being spent. For instance, there is general liability, professional liability (composed of two different sources, public officials and police officers liability), commercial auto (all Borough vehicles), and surety and fidelity (insurance the Borough has for crime for its employees). Mr. Lynch reported it was co-mingled before and now is broken out and identified in the General Fund, which is the way it should be.

President Wilshire questioned if these bills were paid earlier from other accounts.

Mr. Lynch agreed and stated it was a percentage calculation based on wages. The money was transferred to the Escrow Fund and the insurance bills were being paid using that money. That has now been identified and placed in the General Fund where it is shown separately. The workers compensation figure will be calculated based on job codes set by the State. The Borough will now be showing a true picture of its accountability handling it in this way.

Under Administration, Mr. Zerfoss inquired whom the regular full-time employee wages covers.

Ms. Freenock commented those wages are her wages and half of Ms. LaVan’s. Ms. LaVan’s remaining wages are taken from the zoning regular full-time wages line item. As Council recalls, Ms. Dunlap was originally the part-time police secretary. That position was eliminated. However, there have been occasions this year where a meter enforcement officer was called in to cover from time-to-time due to vacations or because Ms. LaVan and she were training on the software. That pay was charged to the police department part-time category. However, since that person was actually filling in for administration, Ms. Freenock feels it would be more appropriate to charge that individual’s wages under part-time administration. This will probably occur again.

Mr. Herman inquired why the professional services are $45,000.

Mr. Lynch noted that is for this grant. The revenue of $35,000 for the grant will actually wash out in this expenditure line item.

Ms. Freenock pointed out capital outlays is $7,500, which will be used for a new telephone system and some computer upgrades. The extra telephone parts have all been used and the Borough is short one phone. This system is from the 1980’s. Ms. Freenock believes phones will be bought on a lease-purchase system. Building and grounds is for utilities and maintenance of all Borough-owned buildings. Public Safety and Public Works now show a line item for overtime wages rather than including regular and overtime all as one as done in the past. Medical buy back is also separated.

Mr. Zerfoss noticed regular full-time wages for police in 2006 was $383,000 and for 2007 is $331,260 and questioned if the overtime separation brought that down. The Borough has the same number of officers and new wages are set by contract.

Ms. Freenock reported the overtime is part of the reason why it’s lower. Also, the 2006 Budget contemplated 26 pays when in reality there are 27. The Borough will process an extra 2006 payroll, which reduces next year’s liability.

Mr. Zerfoss questioned who part-time police employees are.

President Wilshire stated that’s the meter enforcement officers.

Mr. Zerfoss inquired if the 2007 Budget includes a new police car, the cameras for the back of the cars, and another full-time officer.

Ms. Freenock stated the car and cameras are included but another officer is not.

Mr. Zerfoss stated that a larger police force is needed.

Mayor Stroup stated philosophies have changed and overtime is being balanced in a practical way in order to meet the needs of the officer, the contract, and the public. The time of year as far as when the college students are in session is taken into account when scheduling the number of officers on duty.

Mr. German somewhat agrees with Mr. Zerfoss and asked if every possibility was given; such as, considering part-time employees. The major crimes that have occurred recently, and will continue to occur, seem to stem from University students or activities. Mr. German asked if the University was looked at.

Mr. Herman asked Chief Hall to address that.

Chief Hall agrees with Mr. Zerfoss. The University does help the Borough.

Mr. German inquired if they carry firearms.

Chief Hall stated they do now.

Mr. Herman added the University has 2 officers on every shift at all times.

President Wilshire agreed Mr. Zerfoss brought up some good points and asked if any grants are available to help fund personnel.

Mr. Herman reported the Committee is looking at a couple areas.

President Wilshire asked if it’s fair to say an additional officer will be looked at in next year’s budget.

Mr. Herman feels that’s a fair assessment.

Mr. Lynch informed everyone Council is looking at roughly two mills of tax for an extra officer.

Mr. German verified part-time has also been looked at.

Mr. Herman stressed that’s a whole different scenario.

Moving on, Ms. Freenock noted worker’s compensation is also included under fire, which was not done in the past. A new category was created for Emergency Management, which is necessary in order for the Borough to seek federal funds for reimbursement in the case of a disaster. A minimum amount was placed in that area.

Mr. German questioned why operating supplies under Public Works is low compared to previous years.

Mr. Lynch reported that particular line item paid many bills that qualified for Liquid Fuels. Rather than pay the bills from General Fund and then reimburse from Liquid Fuels once a year, these expenditures will be paid directly from Liquid Fuels. This will give everybody a true picture.

Ms. Freenock stated debt service is for the parking meter payment and the Tax Anticipation Note. There is a transfer from the Street Lighting Fund to General Fund for utilities that were paid in error. Council will have to determine whether to increase the mill in the Recreation Fund or whether the General Fund will continue to supplement recreation. Liquid Fuels Fund reflects the increase in revenue that the State notified the Borough it will receive for 2007. The Street Light Fund was reduced by 1.2 mills. Only certain expenditures can be paid from this specific tax.

Mr. Zerfoss recalled that millage was increased last year.

Mr. Lynch discovered that Fund was paying electric bills for other facilities from this account in error. Therefore, these electric bills will be paid from the appropriate item in the General Fund, resulting in a decrease in Street Lighting.

President Wilshire verified when a separate millage is designated for a purpose it is restricted to pay only those specific bills.

Mr. Lynch agreed. The mill should be used for the intended purposes only.

Ms. Freenock reported the Fire Equipment Fund has historically been a pass-through account where a minimum balance was maintained and the rest was forwarded to the Fire Department. However, the Borough Code does provide that any expenses related to the fire company such as, utilities or maintenance of the building can be deducted. This year, $4,300 was held to do that. Council will have to decide how to handle that next year. The Library Fund is basically a pass-through account.

Ms. Freenock stated that historically the General Fund transfers money to the Recreation Department to balance it each year. Since 2002, that account has been running in a deficit. General Fund transferred funds to cover Recreation; however, in 2005, it caused the General Fund to go into a deficit position as well. As far as the operating expenses for the pool, the budget that was prepared with the YMCA indicates the Borough was over budget by $10. The pool receipts were $16,508, which is low due to the bad weather.

Mr. Lynch stated the deficiency in the pool itself is predicted at $9,400; but total deficiency in this fund is $25,900.

Mr. Zerfoss questioned if the expenses for 2007, amounting to $48,300 includes the pool, park, and Toby. If so, is there a breakdown for each department.

Ms. Freenock stated it’s combined but can be separated.

Mr. Zerfoss asked for these figures.

Mayor Stroup asked if utilities are just for the park.

Ms. Leonard commented no. The portion just for the park, which is water and electric, amounts to $4,872.28. This doesn’t include December’s bills. The Recreation Committee has scheduled a meeting with the Little League representatives on Monday at 5 p.m. to discuss the expenditures. Mr. Zerfoss has declined to attend since he is on the Board of Directors for Little League.

Ms. Freenock reported the Pension Fund is where the state contributions are deposited. If anyone has any questions, he/she may ask.

Mr. Zerfoss verified the 5-mill increase in taxes will cover everything that the Borough has to be paid back.

Mr. Weiss agreed.

Mr. German asked if the consultants plan to attend the Council Meeting.

Mr. Lynch will attend, if Council wishes.

Just for information, President Wilshire reported it’s not certain that the Clarion Area Authority sale will be completed by the end of the month as previously stated and asked the consultants if that figure was projected in the budget.

Mr. Weiss doesn’t recommend Council project that until it’s actually received.

President Wilshire asked Ms. Freenock to explain the EMS Tax.

Ms. Freenock commented the Ordinance that was adopted by Council did not contain an income threshold and specified the tax be collected in the first quarter in which the employee works. A lot of municipalities across the State believed there was a threshold included and that the tax could be collected $1 a week. This is not the case. Therefore, Ms. Freenock stressed the Ordinance, as it stands, specifies everyone employed within the Borough must pay the $52 EMS Tax; $5 for the School District and $47 for the Borough. The tax must be collected the first quarter in which the individual is employed. Council believed the legislature was going to pass an amendment to the bill that would have an income threshold and allow it to be collected $1 a week. That occurred; however, Governor Ed Rendell vetoed it. Ms. Freenock noted it’s too late to amend the Ordinance and therefore it will be enforced as written. Next year, Council can revisit this issue and determine whether an amendment is needed.

President Wilshire verified it’s too late to amend it for 2007.

Ms. Freenock agreed.

President Wilshire asked what that will do to the budget. There are quite a few minimum wage employees in the Borough; at least 600 at the University alone.

Ms. Freenock has no idea how many employees this may be and did not even try to guess that figure. It’s better to be on the conservative side. The University is going to require a revamping of their payroll system.

Mayor Stroup asked how the EMS Tax was calculated in the Proposed 2007 Budget.

Ms. Freenock stated it is based on what was received this year. This leads into the next issue of the wage tax. Currently, the employers in the Borough withhold earned income tax from his/her employee and forward it to the appropriate municipality where he/she resides. Ms. Freenock would like Council to pass a resolution that all wage taxes that are withheld in the Borough must be paid to the Borough’s tax collector, who will then forward them to the appropriate municipality. This is the only way to guarantee the Borough’s collecting the amount of EMS Tax the Borough’s entitled to. The Borough’s collector can get a list of employees and compare the list with who paid the tax. The Borough’s not privy to that information.

President Wilshire asked what additional cost that will be for the collector to do this job.

Ms. Freenock reported Ms. Beary is researching that and is working with the University since that’s the largest employer in Clarion. Ms. Beary isn’t sure if it will be a cost per individual or a blanket fee. Hopefully, Ms. Beary can provide this figure by Tuesday.

Mr. Herman commented Council has questioned that month after month and thinks the Borough is collecting less than what it’s entitled to. It’s probably going to other municipalities. There has to find a way to get a true rendering of what is owed to Clarion Borough and there’s no time like the present.

Ms. Freenock feels the additional cost will be paid by what the Borough collects. A proposed letter explaining the EMS Tax and also the proposed language for a resolution was included in the packet for everyone’s review. The letter explaining the EMS Tax will be forwarded to all employers.

As mentioned earlier, President Wilshire reported Council must authorize to re-pay the 2006 TAN. Also, a new 2007 TAN Resolution will be presented. This is on the recommendation of the financial consultants.

Ms. Freenock stated the bid results were included in the packet and recommends Council approve the bid from S & T Bank with an interest rate of 4.21%.

Ms. Freenock commented a Public Hearing for the CDBG Grant for 2007 has been scheduled for December 21, 2006, at 10 a.m. in the Borough Offices. This is to receive public input for suggested 2007 projects.

Mr. German questioned if that’s been done in the past.

President Wilshire stated yes. Usually no one attends the hearings.

Ms. Freenock held one earlier this year and no one was present.

Mr. Weiss reported the Borough’s required to hold public hearings. It’s very rare that someone shows up.

President Wilshire asked Council to review the proposed 2007 Council Meeting and Work Session dates, which will need to be approved to advertise at Tuesday’s Council Meeting.

Mr. German asked if the July Council Meeting and November Work Session are going to be determined tonight.

Ms. Freenock stated the July Council Meeting should be July 3rd, but that will probably be the night the fireworks are held. Council can either move it to the next day or the following Tuesday, July 10th. November’s Work Session is the first day of hunting and a big shopping day and could be moved to the following day, November 28th.

After a short discussion, President Wilshire announced July’s Council Meeting will be July 10th and November’s Work Session will be November 28th.

President Wilshire stated a list of terms that will expire at the end of the year for certain boards or commission was included in the packet. The Borough Office usually notifies these individuals to see if he/she is willing to serve another term. If anyone is interested or has suggestions, he/she should contact the Borough Office.

Mr. German noticed there has been a vacancy in the General Employee’s Pension Committee since 2005.

Ms. LaVan commented Mr. Dana Savage served on both pension committees. His term expired last year on the General Employees’ Pension Committee. Mr. Savage did not return the Borough’s call, creating the vacancy. Usually those meetings are held at the same time, so one individual can serve on both committees.

President Wilshire announced an Executive Session will be held at the end of the meeting concerning possible litigation. No action will be taken.

Downtown Committee: Ms. Moore had nothing to report.

Public Works: Mr. Zerfoss thanked Mayor Stroup and the Chairman of Public Safety for working with the news media to remind everyone the Snow Removal Ordinance went into effect last night. The Public Works employees are working night shift operation. Everything is ready for the bad weather when it arrives.

Mr. Zerfoss stated the Committee will ask for permission to bid for Clean-Up Day services for 2007. This year, the bids went out a month before and only one bid was received. One company asked the Borough to consider bidding it earlier next year. By bidding it now, Mr. Zerfoss hopes more than 1 bid will be received.

Public Safety: Mr. Herman reported the Committee discussed the purchase of a police car and should be ready to proceed at Tuesday’s meeting.

Mr. German asked if Clarion Ford provided information.

Mr. Herman stated more information will be available Tuesday as to if the Borough has to bid it or can go a different route.

Mr. German clarified if the Borough has to bid it.

Mr. Herman prefers to research it more before commenting further.

Housing and Zoning: Ms. Vavrek had nothing to report.

Recreation: Ms. Leonard repeated the Committee, minus Mr. Zerfoss, will be meeting with the new president and vice president of the Little League Board of Directors, which changes yearly. The meeting will be held Monday at 5 p.m. at the Borough Offices to discuss in depth the use of the fields at Paul A. Weaver Community Park.

Mayor’s Report: Mayor Stroup commented the Chief and High School Administration are working together to ensure the safety of the students and further investigate other possibilities to make it better. They should be commended for working together on this issue.

Manager’s Report: Ms. Freenock thanked the Governor’s Center and Susquehanna Group for all the work that they’ve done over the last 6 weeks. The consultants did an outstanding job, which is appreciated.

President Wilshire thanked Ms. Freenock and Ms. LaVan for their hard work this year, especially with the budget situation.

Old Business: There was none.

New Business: There was none.

Correspondence: There was none.

President Wilshire called for an Executive Session to discuss possible litigation, beginning at 9:08 a.m.

President Wilshire reconvened the Work Session at 9:58 a.m. and stated the Executive Session concerned possible litigation. No action was taken.

On a motion by Mr. Zerfoss with a second by Mr. Herman, the Work Session was adjourned at 9:59 a.m.

______________________________

Nancy K. Freenock

Borough Manager