HomeMy WebLinkAbout07-31-19 #1 a
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OFFICE OF THE CITY CLERK
KAREEMAH FOWLER, CITY CLERK
PERSONNEL & FINANCE JULY 31, 2019 5:00 P.M.
Committee Members Present: Karen White, Regina Williams-Preston, John Voorde, Jo
M. Broden (late)
Committee Members Absent: None
Other Council Present: Tim Scott, Dr. Oliver Davis, Jake Tesha(late)
Other Council Absent: Gavin Ferlic, Sharon L. McBride
Others Present: Graham Sparks, David Moses
Presenters: Dan Parker, Laura O'Sullivan
Agenda: Budget Overview from Department Heads
Committee Chair Karen White called to order the Personnel and Finance Committee meeting at
5:00 p.m. She introduced members of the Committee and proceeded to open the floor to main
motions.
Committeemember John Voorde made a motion to recess and reconvene in the full Council
Chambers. Committeemember Regina Williams-Preston seconded this motion which carried by a
voice vote of three(3) ayes.
The Personnel and Finance Committee reconvened at 5:04 p.m. in the full Council Chambers.
Committee Chair White stated, We do have a quorum. Today is July 3151 and this our 2020
Citywide Budget Overview Meeting. We do have the following departments that will be giving
their presentation. I would like for the audience to know that we as the City as well as the
Administration, we had a separate meeting to talk about the accomplishments that the various
departments have made. This particular budget process now until the end we're going to be
focusing on the 2020 budget in terms of what is being requested, looking at what was requested
for 2019, as well as look at why different positions are being asked for. Also, the question would
be that if these positions are not filled, then what would be the impact? So again, we're looking
forward to having a full budget process as we continue to move forward. The PowerPoints are
available on our website. We will continue hosting information on our website. For those of you
who this may be the first (1St) time you're joining us, I would encourage you to go back and look
at the last three(3)budget processes. You will see that the questions and the various responses are
also on the website. That will give you a frame of reference in terms of moving forward.
INTEGRITY1 SERVICE'ACCESSIBILITY
JENNIFER M.COFFMAN BIANCA L.TIRADO JOSEPH R.MOLNAR
CHIEF DEPUTY/DIRECTOR OF OPERATIONS DEPUTY/DIRECTOR OF POLICY ORDINANCE VIOLATION CLERK
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Council President Tim Scott stated, Chair, could I ask that we establish one (1) rule during this
that we allow each presenter through all these meetings go through the entire presentation, and we
ask questions at the end?
Committee Chair White replied, We have to leave time for public as well. Council Members, are
you in agreement?
Councilmember Dr. Oliver Davis interjected, I'm at peace.
Committeemember Williams-Preston stated, Ok.
Budget Overview from Department Heads
Dan Parker, City Controller with offices located on the 12th floor of the County-City Building,
stated,First(1St)of all,thank you.Thank you,Councilmember White for putting all these meetings
together. And thank you Council Members for being here to do our budget overview as well as the
first four (4) departments for the budget discussion of 2020. First (1St), some housekeeping types
of items. There are a number of paper copies of the presentation available if any Council Members
would like any. We do have those available and as you said Councilmember White, the
presentation is available on our website as well. In terms of the format of tonight, I'm actually
going to hand it over to Laura O'Sullivan, the Mayor's Chief of Staff, to give an overview of the
strategic priorities contained in the 2020 budget. I will then do an overview of the finances of the
overall budget. And then we will get into each of the individual departments. So, if there are no
questions at this point then I will ask Laura to come up.
' Chiefof Staff for the Mayor of the Cityof South Bend with offices located on
Laura O'Sullivan, C e y
the 14th floor of the County-City Building, stated, Thank you Dan and good evening Council. I'll
just be walking you through the series of slides on our budget overview. And I just want to point
out before I get started that this is exactly that, an overview. And then as each department head
meets with you we'll get further into the details. But this is meant to set the stage of the upcoming
presentations. So, the first 1St slide here I just want to talk a little about the context for the 2020
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budget. As you know, in 2020 the Fiscal Curb is here. So, that's somethingto take into
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consideration. We are projected to have a $1.4 million decrease in property tax revenue. We'll be
continuing our strategic priorities with investments in neighborhoods and communities. And that
remains paramount for the budget this year. We are planning for long term financial stability with
the budget in 2020. We're much lower in significant capital spending but we're higher on
maintenance costs and ongoing strategic initiatives.
She continued,Just going over our strategic priorities,we have the three(3)buckets of making the
basics easy, delivering good government, and investing in people and places. So, with the basics
we want to make sure we have a safe community for everyone to thrive and a robust and well-
planned infrastructure. As far as good government goes, we want to make sure we have a well
governed and administered City. Investing in people and places, we want to make sure we have a
strong and inclusive economy, thriving public spaces and culture and vibrant, welcoming
neighborhoods. This chart (referencing a slide in a presentation which is available in the City
Clerk's Office) shows our resource allocation for those priorities that I just mentioned. And just to
touch on a few of them you'll notice that sixty percent (60%) of our budget covers safety and
infrastructure. We will have a decrease in our percentage on thriving public spaces and culture.
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That's because we'll be wrapping up most of the parks and trails projects. And then also, we'll be
maintaining our levels towards the Administration. You'll also note that there are percentage
increases for neighborhoods in this budget as well.
Councilmember Jake Tesha arrived at the meeting at 5:10 p.m.
Ms. O'Sullivan went on, So, what's included in this budget? This is, as I said, a preview of the
overall budget with more details to come from our department heads. But, we are focusing on
making a safe community for everyone.The Council will focus on each of these slides and requests
from Council and how we'll be addressing those in the budget. So, under safe communities for
everyone, the Council requested we include various programs and initiatives to combat violence
and foster a sense of community in the City. So, in 2020 we'll be proposing a creation of the
Community Initiatives Department under the Mayor's Office. This is where we'll host GVI, the
SAVE Team and various other violence prevention initiatives that have been brought to us from
both Council and from different community members. We've also had the request for full funding
of the South Bend Police Department sworn officers, the expansion of the Fire Department
community paramedicine program and additional inspectors for the Code Enforcement RSVP
program. Next we'll talk a little bit about robust and well-planned infrastructure. We've had the
Council request additional funding for streets. You'll note in the 2020 proposed budget that we'll
have an increase in income tax subsidy for street maintenance and paving. That will increase or
maintain the number of lane miles paved in 2019 from the 2019 original budget. In a sense, we're
trying to do more with less here. We're also talking about continuing the funding for traffic
calming. The 2020 proposed budget includes $250,000 specifically for traffic calming. As far as
Light Up South Bend goes we have $200,000 set aside for Light Up South Bend. We'll also
continue to invest in our Waste Water capital projects and drainage projects, and this is in
accordance with the five (5) year capital plan.
She continued, Moving on to strong and inclusive economy, the Council has requested additional
resources towards our Diversity Inclusion team for the proposed budget for 2020.This will include
resources to provide diversity training for outside organizations. Additionally, we will continue to
work with CBDG and funding for the housing finance gap assistance, continue funding for small
business development workforce development program, and funding for initiative financing
options including micro-lending. As far as thriving public spaces and culture go, as I mentioned
earlier, we'll be completing the My South Bend Parks & Trails Initiative, but we'll be continuing
funding for the parking garage improvements. We'll also be funding resurfacing for the tennis and
basketball courts in the community. And we'll also begin our campaign to fund the improvements
for the Morris Performing Arts Center. As Aaron mentioned in his goals and accomplishments
session, we'll be working towards the Morris 100th Anniversary in the coming years and the
fundraising campaign around that. Under vibrant and welcoming neighborhoods, we've had the
request to continue funding for curbs and sidewalks and the home repair program.The 2020 budget
will include significant funding for both of these initiatives. And will also continue funding for
neighborhood organization support. We'll be putting significant funding for neighborhood
planning and neighborhood empowerment grants through the Department of Community
Investment. For well governed and administered City,we'll continue to promote transparency with
our new data tools and continue to be responsive to the increasing APRA requests that we're
receiving. We'll continue to fund parental leave, and our new volunteer time off policy. We'll be
completing the implementation of our new financial software system. And continue the
implementation of our enterprise wide Cityworks solution. We'll also continue funding our
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employee and recognition and employee wellness initiatives that includes continuing investment
in the active wellness clinic.
Mr. Parker stated,This is the second(2nd)half of the 2020 budget overview where we actually get
into the numbers in the 2020 budget. So up on the slide(referencing the presentation) and in your
packets is the overview of the entire 2020 budget. As you can see in there, the proposed
expenditure is $354 million. So, actually a little bit less than where we were at last year. Last year
we were at around $367 million. So, a slight decrease in expenditures and we'll walk through not
only today, but as we get through the departments, the reasons behind those decreases. A couple
of things I want to highlight on here, so as Laura mentioned, right at the top we are in this Fiscal
Curb year. 2020 is a Fiscal Curb year where the property tax cap has gone into full effect in St.
Joseph County. And you can see property taxes are expected to decrease. That's directly a result
of those property tax caps going into effect. So, the decrease is about $1.4 million. It is actually
better than what we were anticipating. If you remember, we came before this committee several
months ago and anticipated closer to a $2 million decrease. So, it's actually a little bit better than
we were anticipating. A lot of that is being driven by a stronger than expected increase in net
assessed value. Weof the estimates from DLGF that are drivingnot onlyincreases in 2019
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property taxes over what we budgeted,but also in 2020 that's expected to continue.
He continued, We're expecting increases in local income tax. So, if you realize that the local
income tax distribution period is offset from the actual period they're actually collecting the local
income tax, so theperiod we will actuallyreceive local income taxes in 2020 for the year ended
June 30, 2019. So, the period in which the local income tax is actually collected is already over.
The economy remained fairly strong during that period. So, we anticipate local income tax will
increase in 2020. And that two-point-five-percent(2.5%) estimation is an average of the past three
(3) years. So, we took an average of the past three (3) years increases and got a two-point-five-
percent(2.5%)increase for the budget. A couple of things to point out in charges for services.You
see a fairly strong increase there. A substantial portion of that, not all of it, but about $1.6 million
or $1.7 million of that is based largely on an accounting change we are making with our Central
Services Department, which we'll talk more about when we get into the Admin and Finance
presentation later on today. But where we used to not recognize revenue and instead decrease
expenses, we are now recognizing, or we will be in 2020, recognizing both revenue and expenses
for the Equipment Services Division in Central Services. So,that increase in charges for service is
offset largely by increasing in the supplies line down on the expenditures. So,that's what's driving
the $1.8 million in the supplies. So, it's not a net increase, it's just sort of a difference in how we
are accounting for that.
He went on, Moving down to interest earnings, again, large increase expected there. That's largely
driven by us being fairly conservative in our 2019 budget. Despite yesterday, or today, the Federal
Reserve lowering interest rates, we do expect our interests earning on our cash on hand to remain
fairly strong right around two percent(2%) to two-point-five-percent (2.5%) in 2020. And we use
that expectation of about two-point-two-percent(2.2%) against our expected cash balance on each
fund do derive interest earnings of right around$3 million for 2020. Moving down to transfers and
inter fund reallocation reimbursements. One (1) of the stories that you will hear again and again
throughout these budget presentations is that we are really working hard to contain inter-fund
allocations. So,you see that there's a pretty substantial drop in inter-fund allocation reimbursement
and a corresponding drop in other inter fund allocation down at the bottom on the expenditure side.
A lot of that is driven byIT and a dropin the allocation for IT expenses, which we'lltalk
p e about a
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little bit later in the overview, as well as Denise is here to talk about it tonight and in more detail.
But we are really trying to make sure that those allocations are controlled as they go out to the
different departments. And then finally debt proceeds,just to highlight this as well. Debt proceeds
looks like a fairly substantial increase from a percentage perspective. We did not budget for very
much debt in 2019. And in 2020 we are not anticipating issuing any bonds and are not budgeting
for issuing any bonds. That $4.3 million for debt proceeds is all capital leases. So actually,
borrowing money to fund capital projects, things like vehicles, equipment, those kinds of things.
He continued, Getting into a little bit more about the 2020 budget. One (1) of the things that I
didn't mention but you guys probably all noticed is that in the 2020 budget the bottom line,revenue
in excess of expenditures is about a$10.4 million deficit for 2020. First(1st) thing to note on that
is it is less than our 2019 budget deficit of$32 million and there are good reasons why that deficit
exists that we will get into now. The 2020 budget, it's important to realize it is balanced in what
we call our General Plus Funds,which is our General Fund and our income tax funds. So,we have
a balanced budget in those funds which drive the majority of the operations for governmental types
of activities. So, it's really important that we have a balanced budget in there. So, the question
logically becomes where did that $10.4 million deficit come from? And it's really largely driven
byfour (4) things. There's a capital spend in reserve from wastewater. So that accounts for $3.4
p p
million of that deficit. So,intentionally recognizing that we don't need to issue debt to fund capital
in every instance. There are instances where it makes sense to fund capital investment from
reserves. And we believe this is one (1) of those instances. So, we're going to spend down a little
bit of our reserve on the capital waste water side. And then a targeted spend down of reserves in
internal service funds. So, internal service funds are funds that serve the government, so, things
like Central Services that are taking care of our vehicles, and our radio, print jobs, those kinds of
things. Things like our health insurance fund. So, the fund that pays for employee medical costs
on our health insurance. Funds that serve the internal government largely, and this is not true in
every case, but largely it doesn't make sense to carry a large balance in those funds. There's no
need necessarily to carry a large balance because the general rule of internal service funds is that
you're going to allocate those costs out to all the departments.
He went on, So, our health insurance for example is going to receive revenue unless we do some
things like we did this year, and we'll talk about that. It's going to receive revenue equal to its
expenditures every year because we're going to allocate all the costs of that fund out to the
departments. So, the departments are going to reimburse the fund for its total cost. So, it makes
sense to keep a certain amount of money in there in case costs are higher than we anticipate they
will be, but there's no real need to keep a large balance in there. And over the past several years
because costs have actually been lower than we anticipated, the balance in those funds has been
growing. So,there's a good reason to actually spend down those Funds and get their cash balances
more to where we would want them to be and not take that money from the departments in the
current year. That's probably the biggest portion of that $4.3 million driving that $10.4 million
deficit. So, those top two (2) items on there are very intentional decisions that the Administration
made to try and make sure that we are making the best use of our cash on hand and not issuing
debt when it's not necessary. The bottom two (2) are things that the Administration in better times
maybe would not have entered into but revenue challenges are requiring us to spend down reserves
in street maintenance funds and solid waste operations. Street maintenance funds, Laura just
mentioned that we are transferring more money into our road maintenance funds- Motor Vehicle
Highway and Local Roads and Streets- in 2020 than we did in 2019.
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Committeemember Jo M. Broden arrived at the meeting at 5:22 p.m.
Mr. Parker went on, So,we're funding more of that cost from City money, from income taxes. And
because less of that money, revenue is coming from the gas tax and wheel tax. So, the gas tax and
wheel tax, the amount of money we expect to bring in there is not keeping pace with the
expenditures for roads, so we are funding more from income tax. But even with that additional
funding from income tax it's still not able to keep pace and we're spending down some additional
reserves in the street maintenance Funds to the tune of about$1.4 million. That still is expected to
keep us above our cash reserve requirement. So,we can handle it for 2020 but it can't be something
that we do year after year after year. So, there needs to be some kind of additional discussion and
we are having those discussions on how we continue to fund streets and roads year after year. So
that's the first (1St) part there.
He continued,And solid waste operations,right now it's showing about a$640,000 deficit. That is
another area that we might be able to make it work for 2020 but the revenue for solid waste
operations is not keeping pace with the growth in expenditures. So, there's going to have to be
more discussions between Administration and Council about how we can adjust the operations to
make those numbers work. By and large those four(4)reasons are what's driving that$10.4 million
deficit. As I say in that bottom, and I'll try to break it up in the interest of time, that bottom bullet
there, what we're doing with this budget and it showed by our sort of contraction in costs for$367
million down to $365 million is recognizing that we have revenue challenges that are not going to
go away. Taxes are not going to be increasing at the level that we would want them to. So, we
need to make sure that we're working toward long term sustainability with this budget. We are
designing to make use of current resources where we can. We want to make sure that we're not
sitting on money where it's not necessary as long as we have sufficient resources to draw a good
bond ratingand all those things,we want to make sure we're makinguse of those current resources.
But we also want to plan for the future when income taxes may not be as good as they are currently,
or the economy might not be as good, and the needs may raise above where they are currently as
well. So that's the goal that this is one (1) step towards the long-term sustainability. And it goes
back to something Laura mentioned which is this is really getting us to a point where we are
sustainably funding our operations.
He went on, I did want to put this up (referencing a slide in the presentation)just so that Council
members can see. This is our General Plus Fund. Which, again, is the General Fund, our Local
Income Tax Fund and our Economic Development Income Tax Fund. And I did want to point out,
as I mentioned, these three(3) funds are balanced. So,there is a balanced budget in these three(3)
funds which can fund the primary or majority of governmental operations of the City. One (1)
thing to notice here is these three (3) funds do have a significant transfer out liability. If you look
towards the bottom of the expenditures section on the transfers out (referencing a slide in the
presentation), we're expected to transfer out about $13 million out of these three (3) funds into
other funds. Largely that's funding areas like DCI, areas like Code, that are accounted for as
different funds but are funded by income tax funds. As well as from things like streets that I just
mentioned that we increased our income tax for that this year. But compared to a $9.4 million
transfer in, there is a net transfer out of these funds into other funds to fund additional priorities.
He continued, With that, that's sort of the overall view of the finances. Laura mentioned several
times there will be much,much more information as we get into each individual department. Each
individual department will be going through their numbers that add up to that overall picture. So,
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I wanted to walk Council Members through the format of the 2020 presentations so that you all
know what to expect as we get into not only the four(4)departments today but over the next eleven
(11) weeks what department heads will be presenting. The first (1St) thing they will be presenting
is their department goals and challenges and then we'll get directly into the proposed budget
overview where they talk about the numbers similar to how I talked about changes in operating
income or changes in expenditures. There will then be slides highlighting operational budget
changes including personnel changes, so promotions, new positions, etcetera. Or highlighting
some kind of significant increase or decrease on a particular initiative or particular item in the
budget. There will be a slide on capital projects. Not every department will have capital projects
that they will be presenting. And actually, I don't know that any of the four (4) presenting today
have capital projects, but many departments, obviously, Public Works and VPA will have capital
projects that they will be presenting.We're defining capital projects for the purpose of these budget
presentations to be significant,one(1)time,non-operational requests. And I did also want to note,
as it says on the slide there, per guidance from the DLGF, which is the Department of Local
Government Finance downstate,the City will begin appropriating capital projects one(1)time and
carrying the appropriation forward to future years as needed. You all have been around for a while
and you probably have seen the issues, ever since I've been here we've seen issues, where we
expected to spend a certain amount on a project in a given year, appropriated the amount, didn't
end up spending the amount because the project took longer than expected or had change orders
or whatever, and then have had to come back the next year and re-appropriate that amount.
He went on, The DLGF has told us we can, per Indiana Law, appropriate that money for a capital
projects one (1) time, approve that project, say Council approved Howard Park for example, and
carry forth that appropriation to future years so that if Howard Park takes two(2)or three(3)years
to fully spend that appropriation, it will carry forward because it has already been approved by
Council. So, I just want to note that slight change in how we're going to be appropriating capital
projects going forward. So, departments will go through special initiatives as applicable and then
we will leave time for questions at the end. Each department will have a budget packet that is
included in what we send out to Council Members as well as in the paper copies. That budget
packet will be a copy of the PowerPoint presentation that each department head will be going
through. A copy of the budget summary sheets by fund, that will not be presented by department
heads but is there for Council Members' reference. So, you can see all the budget summary sheets
by individual funds. It has cash levels in there and it gives a little bit different look at the overall
budget. A staffing summary, so each department budget packet will include a staffing summary
which will show changes from 2019. But I do want to point out that more information on staffing
will be presented at the salary ordinance budget hearing on September 16th. And finally, the last
thing in the budget packet is the line level budget detail. So, you will be able to get down to the
individual line level what the proposed spending is. I did want to highlight the order of the budget
presentations, this was sent out to Council Members and the public. Today we're on one (1), and
we have ten(10).
Committee Chair White opened the floor to questions from Committee and Council Members.
Councilmember Dr. Oliver Davis asked, In terms of the appropriations being carried forward, is
there a limit to how many years it can be carried forward?
Mr. Parker replied, So, there is not a limit to how many years it can be carried forward. But what
we want to do is when the project is first (1St) approved by Council, there's a definite timeline. So
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CITY OF SOUTH BEND OFFICE OF THE CLERK
if we expect something to take three (3) years, each year that it gets carried forward, it will be
included in the budget, it just won't necessarily need to be approved by Council. And so, you'll be
able to see this project if it goes three (3), four(4), five (5), six (6) years you'll be able to see this
project is stretching on and you'll be able to ask what is going on.
Councilmember Dr. Davis followed up, Is there any other way, besides us being able to see in the
budget, to have any other requirements to give some kind of update with that? Because my fear
would be is that it would be forgotten in the budget because with everything else we have to do
we could miss that.
Mr. Parker replied, Well actually, I hear your question, and I think it's a good one (1). I think that
this will enhance the ability of Council to make sure those kinds of items are attended to. You'll
see it in the budget it'll already be approved but it'll be a part of the overall budget and you'll be
able to see that the cash balance is sufficient to handle those additional capital projects.
Councilmember Dr. Davis stated, I suggest it would be highlighted in some form or fashion so we
will be able to know.
Mr. Parker followed up, And these by and large projects that span multiple years are going to be
large scale projects, like Howard Park is a great example. I would anticipate Council is going to
be updated on it for other reasons beyond the budget as well.
Committeemember Jo M. Broden stated, Thank you for your presentation and the work that went
into it. You used the word significant in a number of your definitions with regard to the process
going forward. What's your definition of significant and what's been communicated to staff
regarding that?
Mr. Parker replied, That's a good question as well. We didn't put a dollar value on it. From an
accounting standpoint we have a dollar value of what defines a capital asset. So, that's what we're
going to capitalize and put in our financial statements. We didn't define a specific dollar value
because each department may have a different dollar value. What's significant to the Building
Department may not be significant to the Department of Public Works.The values of those budgets
are so different. What I will say is that every cent, whether it's significant or insignificant will be
included in the budget package because you have the line level detail. But what gets highlighted
is the capital requests that are significant one(1)time items that are not recurring. You'll see things
like a lot of vehicles. So, there's a lot of vehicles, software implementation, things like that.
Committeemember Broden followed up, And then the guidance from DLGF, was that by way of
an audit recommendation? Or was that just independent,you caught it and now we're going to start
implementing it?
Mr. Parker replied, We're essentially independent. The DLGF puts on workshops where
municipalities and counties can go to them and ask questions about how to appropriately
implement budget. And this was something we had asked them because we had seen in the Indiana
Code.They confirmed that we are allowed to do it this way. I think it lessens the burden on Council
because what you will see is the project one(1)time, you'll approve the total amount and once that
project gets approved,whether it takes one(1)year or two(2)years,the total amount won't change.
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Committeemember Broden then asked, And then are there other related administrative guidelines
with that change in terms of how you represent it in the statements? To us as Council then on an
ongoing basis to the public?
Mr. Parker replied, So as I said, it will be carried forward and will be included in our budget. So,
the appropriation will be there. It just won't be voted on by Council every year.
Committeemember Broden stated, Okay, and I understood that forwarding thing, whatever when
it first (1st) appears. And my last question is with regard to the 2020 budget packets. When will
those be available to the public to peek in on and to fully look at those in advance of each of these
meetings? And where might they find that?
Mr. Parker replied, Both good questions. Our goal is when we send it out to Council, to also post
it on our website. So,the moment you guys see that, they should also be available online. And the
intention is to have that forty-eight (48) hours before the Council hearing. I realize I didn't quite
make it for the first(1st) one(1)but that is the goal.
With no further business,Committee Chair White adjourned the Personnel and Finance Committee
meeting at 5:35 p.m.
Respect 1 Submitted,
.rc�.t vn •
Karen ite, Committee Chair
EXCELLENCE ACCOUNTABILITY INNOVATION INCLUSION EMPOWERMENT
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