LEGISLATIVE, FINANCE, AND ADMINISTRATION COMMITTEE
The Legislative, Finance, and Administration Committee meeting was held on August 24, 2009 at 6:00 p.m. with Chairman McGlumphy presiding. Members present were Mr. Salters, Mr. Leary, and Mr. Shevock. Dr. Jones was absent. Members of Council present were Mr. Hogan, Mr. McGiffin, Mr. Ruane, Mr. Slavin, and Mrs. Williams. Mayor Carey was also present.
AGENDA ADDITIONS/DELETIONS
Mr. Salters moved for approval of the agenda, seconded by Mr. Leary and unanimously carried.
Review and Recommendation - Filling of Critical Positions - System Operator I
During their meeting of February 23, 2009, members recommended approval of the Hiring Freeze for Fiscal Year 2008-2009, but to allow the hiring of critical positions through the review and approval of the Legislative, Finance, and Administration Committee and City Council. It was suggested that there be a “standing” agenda item to consider the filling of critical positions and, if there are no positions to consider, the item could be removed.
Mr. Anthony DePrima, City Manager, reviewed a request to recruit and the hiring justification outline to fill the position of System Operator I in the Public Utilities Department. Mr. DePrima explained that the incumbent of this position responds to incoming calls regarding problems and complaints at the Dispatch Center, which operates 24 hours per day, 7 days per week. He stated that if the position is not filled, the work will be performed by other employees who must be paid at the overtime rate of time-and-a-half, and that it would be more cost effective to fill the position than to pay the overtime.
In response to Mr. Salters, Mr. DePrima stated that the position is currently occupied and that the incumbent is planning to retire. He noted that several weeks of on-the-job training, as well as ongoing formal training, will be required for the selected applicant. Mr. DePrima stated that similar vacancies have previously been filled by in-house applicants with field experience who have technical knowledge of the City’s electrical and water systems. If this occurs, Mr. DePrima noted that a new vacancy would occur for a field position, and members of the Committee would then have to determine whether that position would be filled. He added that, under the IBEW contract, the position must be offered first to IBEW members. Mr. DePrima noted that the incumbent of this position is required to have the ability to remain calm in emergency situations, as well as a strong technical background.
In response to Mr. Leary, Mr. DePrima stated that an amount equal to approximately half of the position salary would be required if current employees performed the duties of this position at an overtime rate, possibly more if weekend hours are needed. He noted that excess overtime could also create fatigue among current workers.
Mr. Ruane requested that Committee members be informed whether vacant positions are budgeted in the current year when a permission to recruit is brought before the Committee, and that a plan for funding the position be provided if not accounted for in the budget.
Mr. McGlumphy noted that the starting salary for the position is $52,000 per year and that System Operators’ earnings in 2008 ranged from $69,000-$77,000 per year, including overtime pay. Mr. McGlumphy felt that this was a relatively high rate of pay and requested staff to analyze the position to determine if the salary is appropriate and develop a position description that reflects the level of technical knowledge required.
Mr. DePrima noted that the salary rate for this position is established in the IBEW contract and that any adjustment would require negotiation with the union.
It was Mr. Salters’ feeling that $52,000 was an acceptable salary for the position, since the incumbent functions as an electrical systems operator and is responsible for ensuring that a high level of service is maintained throughout the City.
Mr. Leary moved to recommend that staff be granted permission to recruit for the position of System Operator I, as requested. The motion was seconded by Mr. Salters and unanimously carried.
Proposed Ordinance - New Business License Categories and Associated Fees/Adjustments
Mr. Scott Koenig, Public Services Manager, presented members with proposed amendments to Chapter 26 - Businesses, Article II - License, Section 26-35 - Licenses Required; Fees, of the Dover Code, as follows:
Mr. Koenig proposed the elimination of the following unused business license categories:
• Bowling Alley Operator
• Dental Lab
• Outdoor Music Festival Promoter
• Taxidermist
• Parking Lot or Garage Operator
• Television Repairman
• Telephone Answering Service
He stated that if an application is received for one of the above businesses, it will be grouped in the “All Other” category, with an associated fee linked to the number of employees, as identified in the ordinance. He indicated that if a need did arise in the future for licenses in these categories, staff would approach Council to request to add them back into the ordinance.
In addition, Mr. Koenig stated that staff is proposing the addition of the following business license categories:
• ATM Machines (off Bank Premises) $49.00
• Fitness Trainer $67.00
• Home Day Care $25.00
• Real Estate Development Corporation $333.00
He estimated that the revenue generated by licensing these categories would be $7,000-$15,000, based on current conditions.
In addition, Mr. Koenig stated that, in preparation for the recently expanded gaming venues authorized by State legislators, staff is proposing the addition of the following business license categories:
• Sports Betting and Horse Racing (simulcast) - Mr. Koenig noted that sports betting and horse racing activities would be licensed separately, and the licensee would incur a fee at a rate of $0.00046 of the aggregate gross receipts of the activity, with a minimum license fee of $121. He indicated that these fees would amount to approximately $460 per $1 million of aggregate gross receipts. Mr. Koenig estimated an annual revenue of $2,300-$4,600 per activity (sports betting and Simulcast), if Council adopts these licensing fees, which would place fees for these activities at a level comparable to those assessed to contractors and manufacturers.
• Gaming Positions - Mr. Koenig reported an error in the Committee Action Form (CAF) related to this item and explained that the intent of the CAF is to create a Gaming Position License category at $150 per position; however, the video lottery license fee would remain at $121 per machine. Mr. Koenig stated that there were 3,129 video lottery machines licensed in FY 2010, which have generated fees of $378,609. He stated his understanding that Dover Downs plans to remove 340 of the existing 3,129 slot machines and to install 311 seated and standing gaming positions. Under the proposed amendment, he estimated that the 311 positions would generate a revenue of $46,650 per year for the City in future years, with total revenue generated by both activities estimated at $384,119, representing a net revenue increase of $5,510 for the City.
In response to Mr. Hogan, Mr. Koenig noted that eliminating the proposed licensing categories should not cause a decrease in revenue because, if received, these types of applications would be placed in the “Other” category, which generates fees based on the number of employees. In addition, he noted that the new licensing categories added would either generate fees that are not presently being captured (as in the case of ATM machines and home day care providers who are not currently licensed), or create increased fees (in the case of fitness trainers and real estate developers which are currently taxed at $49 in the “Other” category, but would be increased to $67 and $333 respectively under the new ordinance).
Responding to Mr. Hogan, Mr. DePrima, City Manager, stated that the licensing fee for the gaming positions was established at a level that would offset the City’s anticipated loss from the proposed removal of the 340 slot machines. In addition, he explained that when slot machines were first introduced in Dover, Council opted to group them in the existing category with coin-operated electronic video machines with an established fee of $121 per machine, rather than to develop a new category specific to this enterprise.
In response to Mr. Ruane, Mr. Koenig stated that the fees for the proposed new categories were developed by comparing these categories with existing comparable business activities.
Responding to Mr. Ruane, Mr. DePrima explained that, while the laws of other states typically authorize the hosting municipality to receive a percentage of gross proceeds from casinos, Delaware State law makes no such provision. He stated that the business license tax is authorized by the State and is the appropriate mechanism to capture this type of revenue, and that Dover Downs should be charged licensing fees, just as other local businesses are charged.
Mr. Slavin stated his understanding that the video machines are owned by the State rather than Dover Downs and expressed discomfort with charging a fee to an entity who is not the owner. He stated his appreciation for the City’s efforts to identify new revenue streams, but believed the proposed fees amounted to a “tax on success”. He noted that Dover Downs is the largest private employer in the City of Dover, employs a number of Third District constituents, and affects the lives of many residents of the Dover community. He believed that this type of “overtaxing” is bad for the overall business climate. He stated that, although he is not a voting member of the Committee, he is opposed to the proposed change and plans to vote against it if it appears before Council.
Mr. Koenig stated his belief that video games in arcades are also typically leased rather than owned.
Mr. DePrima felt that business license fees should be required for new ventures at Dover Downs out of a sense of fairness and equity to other business owners who must be licensed, and that the new licensing fees were not oppressive.
Mr. Edward Sutor, President of Dover Downs, stated that Dover Downs and Dover Motor Sports have been good citizens to the City of Dover and would like to continue this relationship. He stated that Dover Downs is in agreement with the current amounts proposed for business licensing, but the company is concerned about setting a precedent for collecting revenue and the possibility that the City may raise rates in the future. Mr. Sutor explained that Dover Downs is the largest taxpayer in the City of Dover and Kent County, paying over $720,000 to the City of Dover in real estate taxes and slot fees, $2.9 million in electric fees, and $361,000 in water fees per year, and over $1.8 million per year in taxes and fees to the City of Dover and Kent County. He stated that the company is three (3) times larger than the second largest taxpayer in Dover (Dover Mall), and ten (10) times larger than the third largest (General Foods). In addition, Mr. Sutor noted that the categories being proposed for licensing apply to no other entity than Dover Downs and Dover Motor Sports and believed that, from a legal standpoint, these fees might be considered arbitrary.
Mr. Sutor requested that members consider table games, sports betting, and horse racing as separate enterprises when establishing licensing fees, as each activity is unique. He emphasized that sports betting will not generate a large amount of revenue for Dover Downs, as funds are deducted from profits to pay for a risk manager (hired by the State), the remainder is split 50/50 between the company and the State, and 10% of the total goes to the horsemen, leaving less than 39% of profits for Dover Downs. He requested that the commission that Dover Downs receives from the State be taxed, rather than the company’s gross profits. He stated his willingness to discuss with the City’s administration those details regarding the company’s revenues that are subject to public disclosure as specified by the U. S. Securities Exchange Commission (SEC).
In regards to horse racing, Mr. Sutor noted that Dover Downs offers racing activities both locally and out of State. He explained that there are live races held at Dover Downs and that clients at Dover Downs can also bet on races that are held out of State. He acknowledged that it is appropriate that these local activities are subject to City tax. However, the company also receives approximately 3% of the revenue generated by out-of-state customers who bet on races that take place in Dover. Mr. Sutor did not feel that this activity should be subject to local tax, stating that imposing this tax would be analogous to charging General Foods for goods that are produced in factories outside of Delaware.
Mr. Sutor stated that he had been informed by his attorney that if the City attempts to “cut in” on lottery revenues, the City may be required to obtain a license, as the State mandates that no one participate in sports betting without a license. He reiterated his desire for Dover Downs to remain a good citizen and requested Council to evaluate the licensing process fairly.
In response to Mr. Hogan, Mr. Sutor expressed his disappointment with the recent Federal Appeals Court ruling which states that sports betting in Delaware would violate a 1992 federal ban on such wagering. Mr. Sutor stated that a great deal of money has been expended and a number of employees hired by Dover Downs in anticipation of initiating sports betting. He indicated that the company had not, as yet, officially received a copy of the ruling. Mr. Sutor noted that the company has had nine (9) straight quarters of declining revenue and 2% of the workforce has been laid off due to the sagging economy and marketplace competition. He also noted that they have had to “shelve” approximately $100 million of potential expansions until such time as a more favorable administration and legislature in the State will consider reducing gaming taxes, as has been done in Florida, Illinois, and New York.
In response to Mr. Ruane, Mr. Sutor stated that the revenue generated by each slot machine amounts to approximately $210 per day. Mr. Ruane expressed an interest in dialoging with Dover Downs to discuss ways that the casino and the City could partner together to benefit the community and the company. He noted that the City provides policing and other services to Dover Downs, and that perhaps the company would be interested in discussing making a commitment to community redevelopment in an area of need as an alternative to collecting fees that amount to approximately 0.34¢ per video machine per day. Mr. Sutor stated his willingness to pursue this discussion; however, he noted that the company pays approximately half a million dollars every year for police services and pays for a variety of other City services as well.
Mr. Leary stated his opposition to the proposed changes, indicating that he did not find this proposal in keeping with Council’s stated instructions to staff at the time the budget was prepared to avoid increasing fees or taxes during the challenging economic times.
Staff recommended adoption of the proposed changes to Chapter 26 - Businesses, Article II - License, Section 26-35 - Licenses Required; Fees, of the Dover Code and requested authorization to put these changes in ordinance form for Council action.
Mr. Salters moved to recommend adoption of Proposed Ordinance #2009-20 (Attachment #1), with the amendment to the Committee Action Form, as specified by Mr. Koenig. The motion was seconded by Mr. Ruane and carried with three (3) yes, and one (1) no ( Mr. Leary).
Proposed Amendment - Related to Charter Amendments
Ms. Cheryl Russell, Tax Assessor, provided members with Ordinance #2009-17, proposed amendments to the City of Dover Code that will implement the recommendations of the International Association of Assessing Officers (IAAO) and the City of Dover Charter amendments that were adopted by City Council during their meeting of January 26, 2009. Ms. Russell reviewed the proposed amendments to the ordinance as follows:
Chapter 2 – Administration, Article IV - Officers and Employees, Division I - Generally - Section 2-201 - Compensation and Expenses for Mayor, Council, Employees and Other Elected or Appointed Officials
This portion of the amendment refers to changes in the Tax Appeals Committee, Section 47 of the Charter, and would change the title of the Assessment Appeals Committee to the Board of Assessment Appeals and allow civilian members to hear appeals.
Article I - In General, Section 102-1 - Annual Valuation and Assessment
Ms. Russell explained that this portion of the ordinance refers to changes made to include the annual assessment date and to strike the requirement that property valuation and assessment be performed by a certified independent appraiser. She indicated that the audit recommended the addition of a property being valued as to its status, its ownership, and its current market value. She noted that if a property is 50% complete by the annual assessment date, the Assessor’s office will be allowed to add the amount to the Assessment Role, and if the building is partially complete by the billing date, the Assessor can bill on the percentage complete as of January 1.
Taxation, Article VI - Exemptions; Tax Appeals Committee, Section 102-181 - Tax Appeals Committee
Ms. Russell stated that this amendment refers to the changes made to the Tax Appeals Committee (Section 47 of the Charter). The name of the committee; appointment term, number of members, and qualifications of Board Members are outlined in this ordinance amendment. She noted that qualifications for Board members, including a real estate, property appraisal, property law, or accounting background, were added at the suggestion of contacts from other jurisdictions and the IAAO.
Article VI - Exemptions; Tax Appeals Committee, Section 102-182 - Authority to Exempt Real Property from Taxation
Ms. Russell noted that this amendment states that City Council will no longer be the sole and final authority for exemption of real property and that this authority will lie with the Board of Assessment Appeals or Superior Court. The amendment also gives the Assessor the authority to grant exemption to common tax-exempt entities without approval of the Board of Assessment Appeals; however, notification will be given to Council when these approvals are given. Ms. Russell explained that the IAAO audit advocated saving time for the Board of Assessment Appeals by granting the Assessor authority to exempt property owned by the U. S. Government, the State of Delaware, Kent County, and the City, which are exempt under the Delaware Code. In addition, she stated that Title 9, § 8110 of the Delaware Code states that no parkland owned by civic organizations is liable to taxation and assessment, and Title 9, § 9105 exempts property owned by governmental, religious, educational, or charitable organizations; therefore, she noted that the Assessor’s Office added provisions to grant the Assessor authority to grant exemptions for properties in these categories. She noted that disputed cases would be presented to the Board of Assessment Appeals and that, under this proposal, she would grant exemption and inform Council of the amounts removed from tax rolls.
Article VI - Exemptions; Tax Appeals Committee, Section 102-185 - Appeals This amendment states that the Board of Assessment Appeals or Superior Court shall be the sole and final authority to increase or decrease the value of real property in the City.
In response to Mr. Salters, Ms. Russell stated that the proposed ordinance would grant the Assessor final authority to grant tax exemption to entities such as the City and County, who are exempt under Delaware Code. She stated this would save time by eliminating the need for these requests to be heard by the Board of Assessment Appeals.
Mr. Ruane suggested that the per diem amount of $50.00 listed in Line 30 be changed to $75.00 to remain consistent with the rate of reimbursement for members of other committees.
Referring to Line 102 of the proposed ordinance, Mr. Ruane felt that the role of the Board of Assessment Appeals should not be broadened to be the “sole and final authority to exempt real property located within the city from municipal property taxes”, believing that this authority should be retained by Council. He stated that if the intent was to allow the Board of Assessment Appeals to participate in the exempting of properties, this should be specifically stated. He agreed that the City Assessor should be empowered to grant tax exemption to those properties that are exempt by federal and state law, provided that those properties are used for the purposes that underlie the exemption, and recommended that the proposed ordinance be reworded accordingly. Mr. Ruane suggested that an outline should be prepared for Council as to the different kinds of exemptions and who will have a role in them.
In addition, Mr. Ruane stated his belief that Line 136 of the proposed ordinance is unnecessary and exceeds the intent of the role of the Board of Assessment Appeals. He stated that City Council should continue to set the value of real property through its annual adoption of a tax roll, and that the role of the Board of Assessment Appeals is to rule in instances where there is a challenge to the value that has been set for a property, not to set, increase, or decrease the value of real property.
Mr. McGlumphy suggested that Ms. Russell review the proposed ordinance in light of Mr. Ruane’s suggestions and make the recommended revisions. Ms. Russell stated she would review the amended ordinance with Mr. Nicholas Rodriguez, City Solicitor, and bring it back to the Committee for review.
Revenue/Cost Saving Ideas Submitted for Consideration (Items #21 - 30)
Mr. McGlumphy requested that, due to time constraints, agenda item # 3, Revenue/Cost Saving Ideas Submitted for Consideration (Items #21-30), be deferred until a subsequent meeting.
Mr. Leary moved for adjournment, seconded by Mr. Salters and unanimously carried.
Meeting Adjourned at 6:28 P.M.
Respectfully submitted,
William P. McGlumphy
Chairman
WPM/JS/ac/rr/tm
S:ClerksOfficeAgendas&MinutesCommittee-Minutes20098-24-2009 LF&A.wpd
Attachment
Attachment #1 - Proposed Ordinance #2009-20 - New Business License Categories and Associated Fees/Adjustments