Acta

COUNCIL RETREAT The Council Retreat was held on March 26, 2012 at 5:00 p.m. with Council President Leary presiding. Council members present were Mr. Anderson (arrived at 5:03 p.m.), Mrs. Russell, Dr. McGlumphy, Mr. Lynn, Mr. Bonar, Mrs. Williams, Mr. Hare, and Mr. Hutchison. Mayor Carey was also present. Council staff members present were Police Chief Hosfelt, Mrs. Mitchell, Mrs. Townshend, Mr. Koenig, Mrs. McDowell, and Ms. Devine. INTRODUCTION Mr. Hutchison moved for approval of the agenda as presented, seconded by Mr. Bonar and unanimously carried. Mr. Scott Koenig, City Manager, advised members that the purpose of the Council Retreat was to discuss how to set up the Fiscal Year 2012/2013 budget, to review City’s economic and organizational standings, and to discuss the direction in which Council would like to see matters progress over the next several months. This would facilitate adoption of the budget and allow staff to progress city services and complete several projects that were underway. Mr. Koenig reviewed the agenda and informed members that his priorities for FY13 are narrowly focused on issues related to the budget and the organization and infrastructure of the City. He emphasized that his focus would only be expanded with Council direction. He advised members that the numbers, as presented, were based on departmental budget inputs for FY13 through the first round of budget meetings. He stated that the initial capital plans were included in the budget and an initial review of capital projects was completed. Some capital projects that were included in the FY 2011/2012 budget were removed either because: a) staff believed they were no longer necessary, or b) the projects could be completed in FY12. As an example, he stated that a capital project was scheduled for FY13 for Information Technology; however, staff discovered a less expensive solution to implement the project in FY12, so it was reverted to an expense for this year. REVIEW OF FINANCIAL MODELS Mrs. Donna Mitchell, Controller/Treasurer, provided members with a budget summary document entitled 2012-2013 Preliminary Budget (Exhibit #1). She explained that the budget summaries provided included every fund; however, she would review the financial forecast for each fund separately. She advised members that the presentation included information regarding the current status of the FY13 budget but did not include the out years because staff was still refining the Capital Improvement Projects (CIPs) and debt requirements. Electric Fund Mrs. Donna Mitchell, Controller/Treasurer, reviewed the 2012-2013 Preliminary Budget (Exhibit #1). Referring to Page 6, Mrs. Mitchell reviewed the Electric Revenue Fund and reminded members that these were preliminary numbers. She stated that staff was waiting for additional information from The Energy Authority (TEA) and, until that information was received, the Electric Fund could not be finalized.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 2 Mrs. Mitchell explained that the beginning budget balances in Electric and Water/Wastewater were higher than staff had anticipated because some of the revenues for FY11 were higher than projected; for example, the Direct Sales to Customer revenue, which, based on volume, was budgeted at $96,595,300 came in at $99,859,602. Mrs. Mitchell informed members that she has contacted TEA regarding the Generation Fuels for Power Supply because of her concern that the plant operating costs may have been duplicated in this amount, which would result in the expense being very overstated. In response to Mrs. Williams, Mrs. Mitchell explained that, according to City Policy, the Electric Fund was favorable by $2,345,150; however, if the generation fuels amount was overstated by as much as $4M, then the City would be $6M over according to the policy. She reminded members that a $6M Power Cost Adjustment (PCA) Credit was included in the Preliminary Budget and that an overestimate of $4M would substantially change the rate. She explained that the rate analysis must be completed and the numbers “sured-up” to really know. Responding to Mrs. Williams’ question regarding the affect on ratepayers if the Electric Fund were $6M over, Mrs. Mitchell stated that the $6M PCA Credit included was approximately 6% (approximately 1% per million) and that another 6% would amount to a total reduction of 12%. Mrs. Mitchell explained that one of the assumptions built into the budget was a 15% cost-sharing for employee healthcare, which reduced the City’s total cost by approximately $250,000. Mrs. Mitchell informed members that she added a new line item to each of the three (3) funds for Other Employment Expenses. She explained that in the past, each department budgeted for retirement payout and vacation sell-back benefits, the amount budgeted did not always reflect what actually occurred, resulting in the City overbudgeting. Vacation sell-back was overbudgeted by approximately $133,000 in FY12. To eliminate this overbudgeting, Mrs. Mitchell stated that for FY13 the monies for these expenses were budgeted in this separate line item. If a department requires funds for a retirement payout or vacation sell-back, the required funds would be transferred from this line item to the department to cover the expense. By making this change, staff was able to reduce the amount by budgeting based on experience. In response to Mr. Anderson, Mrs. Mitchell explained the Other Post-Employment Benefits (OPEB) Unfunded Liability was previously budgeted as a lump sum extra amount; however, for FY13, this amount was budgeted in the department expenses as a percentage of the payroll for all of the OPEB; therefore, members will no longer see this line item. The line item will remain for Pension Unfunded Liability because only the normal cost is included in the department expense, not the amortization of the unfunded piece. Mrs. Mitchell stated that this was reflective of the new rules and reminded members that Pension is a closed plan but OPEB is not. Concurring with Mrs. Williams, Mrs. Mitchell stated that staff has not budgeted for contingencies in Other Employment Expenses and that this was also the approach for the Capital Improvement Projects (CIP). She noted that staff’s thought was that if something essential were to break, the City has reserves and staff could then go to Council for approval.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 3 Mr. Scott Koenig, City Manager, reemphasized that the preliminary budget included the premise of 15% employee cost-sharing for healthcare. He stated that there was no increase in healthcare costs passed on by the State; therefore, the total cost of the healthcare package for the City could remain the same in FY13 as it was in FY12; the difference in the amount budgeted for FY13 included the anticipation of a cost-sharing agreement of 15% per employee class. Mr. Koenig informed members that the preliminary budget included the elimination of two (2) positions in the electric utility: one (1) budget supervisor, which was a non-bargaining position, and one (1) vacant lineman position. Mr. Koenig stated that another administrative assistant in the electric department had assumed the administrative duties which were previously assigned to the budget supervisor. Mrs. Mitchell reminded members that the high electric revenues for FY12 were the result of the plant being called on extensively last year, including running for approximately one (1) month during the extremely hot summer. Mrs. Mitchell reviewed the Electric Improvement & Extension (I&E) Fund Summary on Page 7 of the 2012-2013 Preliminary Budget (Exhibit #1), explaining that this is the Capital Fund for the electric utility. She explained that the Transfer From Electric for $4,050,000 was increased from $3,500,000 in FY12 because staff wanted to ensure that the expenses were covered since the CIP was increased. She stated that $550,000 of this amount was budgeted for the VanSant capacity upgrade, which staff anticipated would allow the City to get more capacity out of that plant. However, should Council choose not to transfer the entire $4,050,000, the $550,000 could come out of the Reserve Balances, keeping the amount in the electric fund, which could be given back to the rate payers. In response to Dr. McGlumphy, Mrs. Mitchell indicated that only specific projects and estimates were being included in the FY13 CIP; contingencies were not being included. Mr. Koenig stated that a final report was pending from TEA regarding investing in the future capacity of the VanSant Plant. Additionally, staff was awaiting an analysis regarding investing in Units 1 and 2. Mr. Koenig stated his belief that the investments for Units 1 and 2 were included in the preliminary budget, pending the analysis. Therefore, he explained that there could be significant changes to the I&E Fund. While reviewing the information with members, Mrs. Mitchell stated her realization that the Depreciation Reserve Balance was overfunded according to the policy, and that she would take the $550,000 out of that for the VanSant capacity upgrade project. Mr. Koenig reminded members that the City was receiving pressure from the State of Delaware regarding electric rates; therefore, the status of this fund and the rate study analysis would be very important to the discussion with the Governor’s Office about competitive municipal electric rates. In response to Mrs. Williams, Mr. Koenig concurred that Units 1 and 2 do not have a shelf life and explained that there are differing opinions regarding whether it would be beneficial to open the Units for inspection since they are over 40 years old.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 4 In response to Mrs. Williams, Mrs. Mitchell confirmed that the Power Cost Adjustment would not drop below 6.3%. Responding to Mr. Anderson, Mrs. Mitchell stated that the Green Energy Payment runs about $129,000 to $130,000 per year and she projected that it would stay about the same. Water/Sewer Fund Mrs. Donna Mitchell, Controller/Treasurer, reviewed the Water/Wastewater Fund 2012-2013 Preliminary Budget (Exhibit #1, Page 4). Mr. Scott Koenig, City Manager, informed members that the employee headcount related to Water/Wastewater will remain relatively static; however, there were two (2) open positions, one (1) Heavy Equipment Operator position in water construction and one (1) Water Serviceman position in the Water Department, which staff will be requesting to reclassify/downgrade to Equipment Operator I positions in order to get a crew back in on the jet trucks to jet sewer lines and continue with an aggressive maintenance program for the sewer system. Mr. Koenig stated that this would improve the amount of lines jetted and help with the identification of I&I, which would allow staff to be more realistic about the condition of the system. Mr. Koenig stated that there will also be two (2) retirements, one (1) at the water treatment plant and one (1) in the pump station crews, which staff would request to fill. He reminded members of the importance of having the pump station crews filled because they rotate between the 45 pump stations and, in anticipation of the future development of the Calpine project, it will be essential to fill the water treatment plant position because there could be as much as an additional 1.2M gallons of extra water into the system per day. Regarding the Other Expenses line items, Mrs. Mitchell explained that, due to retirements, the amount for Retirees’ Healthcare would increase in all funds, particularly in the General Fund. Therefore, although there were savings in the operating department, these were offset by the payment of retiree healthcare. Mrs. Mitchell advised members that allocations in the CIP are currently higher than normal because debt service has lagged. She indicated that this will reduce future debt service needs; therefore, she believed that the City could sustain the debt service in the future and rates should not have to be increased. Mr. Koenig informed members of two (2) items not included in the proposed budget. He indicated that Council voted several few weeks ago to invest up to $6M in the Calpine project, and that some those funds may relate to water infrastructure investment. He stated that if the City were to issue debt for this, it might be possible to incorporate the debt service into the existing rate and a rate increase might not be necessary. He noted that improvements may potentially be required for the Calpine project, including the extension of a water line, a water tower, and enhancements to the water treatment plant. These water projects were not incorporated in the CIP because the costs and details had not yet been determined.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 5 Mr. Koenig stated that the Calpine project would also require improvements to the sewer infrastructure, and the City has had preliminary discussions with Kent County about the possibility of the County owning the wastewater pump station. He stated that, ideally, the pump station would be the first connection off the East Dover Bypass Line and, traditionally, the County has wanted to own those stations that have direct access to lines, so there might be capacity in the existing rates to expand debt to cover those types of infrastructure improvements without expanding the actual rate. He reminded members that Council recently voted to turn the Dover East Pump Station over to Kent County, which allowed the City to move the design and construction of a pump station located in East Lake Gardens (that had caused some complaints) forward in the Capital Plan by one (1) year, without negatively affecting the Capital Plan. Mr. Koenig advised members that the aforementioned changes were some of the adjustments being made to the Capital Plan after consideration of the needs of the system, customer complaints, and the City’s ability to utilize the rate. Mrs. Mitchell stated that, once the CIP was “trued up,” she would be able to provide members with an updated Five (5) Year Forecast in May. Mrs. Mitchell reviewed the Water/Wastewater Improvement and Extension Fund Summary, 2012-2013 Preliminary Budget (Exhibit #1, Page 5), stating that there were positive budget balances and no financing needed for this Fund in FY13. In response to Dr. McGlumphy, Mr. Koenig stated that staff was not anticipating any rate increases for Water/Wastewater for FY13. General Fund Mrs. Donna Mitchell, Controller/Treasurer, provided members a FY 12 - Summary of General Fund Adjustments and potential impact on FY13 (Exhibit #2) and reviewed the changes, which resulted in a reduction in the General Fund of nearly $2M. Mrs. Mitchell reviewed the General Fund Cash Receipt Summary, 2012-2013 Preliminary Budget (Exhibit #1, Page 1). She stated the there were increases and decreases in the projected revenue for FY13 and that the most significant increase was projected for Police Extra Duty. She explained that the 2012/13 Preliminary amount of $574,400 covered extra duty wages and that an additional $80,000 (calculated based on the previous year’s extra duty hours) was also included in order to bill the customer a flat rate. Mrs. Mitchell explained that Investment Income was decreased because investment earnings are down and that the revenue for Trash Fees decreased because out-of-City service was discontinued to several areas; however, the Receipts Subtotal reflected an overall revenue increase in the amount of $33,187. In regard to the Interfund Service Receipts, Mrs. Mitchell informed members that the Interfund Service charges were decreased due to the fact that the City reduced the headcount and operating expenses and, as a result, not as much was being charged to the utilities.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 6 In response to Mr. Anderson regarding the Capital School District Revenue line item under Grants, Chief James Hosfelt, Police Department, stated that the Capital School District agreed to fully fund one (1) of the two (2) School Resource Officers. Responding to Mrs. Russell and Mr. Anderson, Mrs. Mitchell stated that the Recreation Grants funding was for the reimbursement of the State of Delaware Department of Natural Resources and Environmental Control (DNREC) stewardship of the Silver Lake Grant for two (2) years, which has been completed. Mrs. Mitchell provided members with a three (3) page Transfer Tax Update (Exhibit #3). She explained that she increased the projected transfer from Transfer Taxes to $1.2M for FY13 based on her anticipation that the previous years’ trend will continue. Mrs. Mitchell continued to review the General Fund Expense Summary, 2012-2013 Preliminary Budget (Exhibit #1, Page 2). She explained that the proposed budget included an increase in Debt Service for the street program and library as well as an anticipated increase in Insurance. Mrs. Mitchell stated that, as proposed, the budget projects a shortfall of $1,763,264. Mrs. Mitchell reviewed the Governmental Capital Projects Fund Summary, 2012-2013 Preliminary Budget (Exhibit #1, Page 3). Mrs. Mitchell discussed staff ideas for reducing the budget. In regard to the Recreation Program, Mrs. Mitchell reminded members of the email they received regarding a program revenue analysis completed by Mr. Zachery Carter, Director of Parks and Recreation. She asked for Council’s thoughts regarding the possibility of closing the White Oak Facility. She stated that money would be saved on utilities and staff time for evening hours because the staff would be relocated to the Pitts Center at Schutte Park and programs would be offered only at this location. Mrs. Mitchell explained that, as a result, the City may need to reduce the number of programs offered, beginning with the less profitable programs. She informed members that she briefly reviewed Kent County’s program fees and determined that a thorough review would be necessary to determine if the City offers duplicate programs and whether the program fees are comparable. Mrs. Mitchell requested that members provide their opinion regarding this matter. In response to Mr. Hare, Mr. Koenig stated that the open-gym rate for the Pitts Center does not differ for City residents and non-residents. Mr. Hare inquired if staff has ever considered charging non-residents and suggested a $2.00 to $3.00 charge. Mr. Leary requested that Mr. Carter and his staff review the prices. Mr. Koenig explained that the White Oak facility needs either investment or progression toward closing. He explained that closing this facility would eliminate all facilities that address residents on the east side of the City and there could be possible transportation and access issues with all residents using the Pitts Center.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 7 Mr. Koenig reiterated that the options were to invest in the building or close it; however, the City would continue to maintain the playgrounds and ballfields at White Oak Park. Mrs. Williams observed that the park at Silver Lake, besides the Pitts Center, was used the most and does not have a building and inquired about the possibility of constructing a pavilion or “rain haven” at the White Oak Park site. In response, Mr. Koenig stated that there was not a pavilion in the back of the White Oak Park site but that one (1) was located behind the building, and confirmed that a building was not a prerequisite for City of Dover residents to use parks. Mrs. Williams stated that the City forces those with deteriorating buildings to make repairs or demolish their buildings and questioned why the City would not do the same. In response, Mr. Koenig stated that staff would not object to demolishing the White Oak facility but that it would need to be a conscious decision with the support of Council. In response to Mr. Leary, Mr. Koenig stated that he and Mrs. Mitchell were of the opinion that if the building were closed, this would be a permanent decision, and Mrs. Mitchell reminded members that the building has an aging HVAC system. Mr. Bonar requested staff to provide utilization figures for members’ consideration prior to making any decision in regard to the White Oak facility, stating that this area has been targeted as a place where children need activities, and transporting them from the White Oak/Towne Point area would be problematic. Mrs. Russell reminded members that representatives of the Boys and Girls Club did not want a facility located at White Oak Park because they felt that it was a bad area; however, she stated that if the building were closed, the City would not be providing the youth on that side of Dover recreational opportunities. She stated that if staff were to establish recreation in all areas of the City, that they should start investing in something that they believe in because children deserve these types of services. Mr. Koenig explained that the building at White Oak Park has no basketball court or indoor recreational opportunities like the Pitts Center, rather it has meeting space and staff offices. He stated that another possible option, which had not yet been investigated, would be to close City programming at the facility, move staff out, and offer it to a non-profit organization that would run programs there and be willing to maintain it to a reasonable standard in accordance with all building codes. He explained that this option had not been explored outside of conversations between he and representatives of the Boys and Girls Club, who want to build a new facility on the west side of the City. Mr. Koenig stated that Council would have to decide whether the City should make a conscious decision to pull staff from the White Oak facility and not program for public use for the building, and then either: a) develop a closure and demolition plan, or b) seek a third party non-profit group that would be interested in leasing the facility. He cautioned that this would place the City in a landlord situation, which not be ultimately advantageous to the City. Mrs. Williams suggested that staff consider contacting Dover Housing Authority since they have an adjacent property and have funds for recreational programs for children.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 8 In response to Mr. Leary, Mr. Koenig and Mrs. Mitchell stated that the White Oak facility costs between $30,000 and $50,000 per year, from an operating standpoint. Mr. Koenig stated that staff would prepare a cost-benefit analysis regarding the closure of the White Oak facility. In response to Mr. Anderson, Mr. Koenig explained that there was a $30,000 roof planned for the White Oak building; however, there were ongoing costs associated with operating and maintaining the facility, including heat and air conditioning. PILOT PROGRAM Mrs. Donna Mitchell, Controller/Treasurer, provided members an email from Mr. James Keener, Assessor’s Office, dated March 26, 2012 regarding the PILOT (Payment In Lieu of Taxes) Program (Exhibit #4). She explained that the City’s PILOT Program still must be developed and brought to Council for consideration; however, she wanted members to receive Mr. Keener’s comments. She highlighted that the Mayor’s PILOT Task Force Final Report emphasized the importance of working with the affected constituency to reach agreement in developing a program. Mrs. Williams stated her opinion that the City should not accept the State’s formula for PILOT. It was her opinion that if the City’s policy states that PILOT payments are determined based on a percentage of the overall operating budget, the State should be held accountable to this policy and staff should ensure that payment is received. In response to Dr. McGlumphy, Mr. Koenig stated that, currently, there were 33 vacant positions throughout City operations and staff recommended the complete deletion of 12 positions; zero (0) in the Water/Wastewater Fund, two (2) in the Electric Fund, and ten (10) which are either allocated among the funds or General Fund. He explained that, as prepared, the budget anticipated the elimination of 12 out of 27 full-time vacant positions, reminding members that six (6) of the 33 vacant positions were part-time. Mr. Koenig advised members that the City currently has a $1.7M gap in the budget, including a reduction in the head count in the General Fund, 15% cost-sharing for healthcare (which he indicated is a large number), and bonding of the street program for the next two (2) years. Although there were no capital maintenance costs for the streets program included in the number, the budget was still $1.7M short. Mr. Koenig explained that the sanitation budget revenue has decreased because out-of-City trash customers have decreased from approximately 700 to 200. He noted that approximately 200 individuals in Little Creek and Kitts Hummock (the City’s electric service territory) have City electric service and were kept on as trash collection customers because their electric service could be cut for non-payment of trash services; therefore, the cost to collect from those customers was not very high. Mr. Koenig stated that if the crunch with personnel issues continues, these 200 out-of-city trash customers would be the first to be cut in order to reduce the stress on the manpower in sanitation.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 9 Mrs. Mitchell informed members that there were no raises for any labor category or non-bargaining employees included in this budget. In response to Dr. McGlumphy, Mr. Koenig stated that there was no trash fee increase included in this budget with the $1.7M gap; however, a document was provided in regard to potential trash fee increases which would be discussed later in the evening. Responding to Mr. Lynn, Mrs. Mitchell reported that the 15% healthcare cost-sharing would save $256,778. Mr. Koenig stated that a key part of the proposal, if implemented, was staff’s recommendation that anyone who retires after July 1, 2012 would continue to contribute 15% of their healthcare premiums for life. In response to Mrs. Williams, Mr. Koenig stated that there would be approximately 40 employees eligible for retirement in FY13 and that there was an anticipated concern that if the 15% healthcare cost-sharing were implemented, especially beginning July 1, at least half of those employees would retire. Responding to Mr. Lynn, Police Chief Hosfelt stated that there would be 16 employees eligible for retirement in the Police Department in FY13 and that, currently, six (6) of those were definite. Mrs. Mitchell reminded members that union negotiations and Health Benefits Committee discussions were ongoing and that the 15% healthcare cost-sharing proposal had not been finalized. Mr. Koenig stated that from a budgeting standpoint, the 15% healthcare cost-sharing created a significant savings in the budget; however, real organizational issues could result. Mr. Koenig provided members and reviewed a document regarding trash service, entitled “City of Dover, Sanitation Department, FY 2011 Actual and FY 2012 Budget” (Exhibit #5). He reminded members that during the Council Retreat of November 9, 2011, the creation of a Trash Utility and Enterprise Fund was discussed as one of the ways to help decrease the $1.7M gap in the General Fund. However, he stated that staff has gravitated slightly away from turning it into an Enterprise Fund at this time because an Enterprise Fund requires a great deal of accounting, which would increase the workload of the Finance Department. Mr. Koenig stated that one of the ways to close the $1.7M gap in the General Fund would be to raise $1M related to the trash service. He explained that under the current rates, staff estimated $1.85M in revenue, and increasing the rate to raise an additional $1M would equate to $2.8M in revenue, which would basically cover the expenses in the Sanitation Department (although it would not cover all of the allocated expenses for items such as vehicle maintenance, billing, or collection of revenue associated with the sanitation fee). He stated that this proposal would result in an increase in the average composite rate of $14.37 to $22.13; therefore, the average residential account would increase from approximately $11.70 to $18.02. He stated that this type of trash fee increase could have negative implications, including complaints from some residents on fixed incomes and members of the business community; however, noted that this was one way to reduce obligations under the City’s trash collection system.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 10 Mr. Koenig reminded members that the City’s trash collection system had become more complicated in the last five (5) years due to the additions of curbside recycling and yard waste. He stated that there was an assumption that the nation would be starting to come out of recession during FY13 and that one of the “street level” indicators would be more trash, which would result in an increase in the amount of tonnage taken to the landfill. Mr. Koenig explained that the City’s system was designed around residential collection; however, there were 400 to 500 commercial customers receiving City trash service. If the City were to release these customers to the private sector, their costs would likely go up and their service would be different. However, these customers might benefit by gaining more space on their parking lots since the private sector uses front overhead dump mechanisms while the City utilizes a side-loader, which requires more maneuverability. He reminded members that the City does not typically provide trash service to newly constructed commercial buildings; they are required to hire a private hauler. Mr. Koenig stated that considering an increase in trash collection fees to recover $1M, versus considering an increase in the tax rate, would result in an approximate 50% increase in the trash collection fee. Responding to Mr. Anderson, Mr. Koenig stated that, at this point, staff has not considered privatization of the whole operation, explaining that Kent County contracts the whole operation for about $4.10 per housing unit, and the difference between the County and the City is density and maneuverability. The City would still have costs related to managing the contract and customers. In response to Mr. Hare, Mr. Koenig confirmed that the current residential trash service costs $4.00 per container and that the City does not offer pay-as-you go. Mr. Koenig stated that the City currently uses a private collector for recycling, with the City owning the containers and the private collector providing the truck and manpower to pick up the container and take the trash to the transfer facility, and, generally, staff does not receive many complaints about the service. Mr. Koenig advised members that the City would lose approximately one-third (1/3) of its snow plowing operation if trash collection were privatized. Responding to Mrs. Williams, Mr. Koenig stated that for FY13 staff proposed that instead of purchasing two (2) new trucks, two (2) automated trucks be refurbished at a cost of $250,000. If the City were to replace the entire fleet, at the present time it would cost between $2M and $3M in vehicles, plus the percentage rate for yearly maintenance. Mr. Koenig voiced his opinion that trash is a signature service for the City of Dover and that he would put the City’s manpower up against any private sector area. Confirming Mr. Leary’s statement, Mr. Koenig stated that privatization of the City’s trash collection would be an irrevocable decision due to the costs involved to resume.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 11 Dr. McGlumphy stated that during the Council Retreat of November 9, 2011, raising the trash fee by $7.69 was discussed, and he questioned the amount of the current proposal. Responding, Mr. Koenig stated that this proposal would result in an average differential of $7.66 and that the $11.70 rate would be increased to $18.02 for residential collection; resulting in an increase of $6.32. Mr. Koenig reiterated that this would be one way to close the gap by a little more than 50%. By unanimous consent, members took a brief recess. Meeting recessed at 6:35 p.m. and reconvened at 6:50 p.m. STAFFING LEVELS AND RECOMMENDATIONS Mr. Scott Koenig, City Manager, provided members with and reviewed a five (5) page document regarding staffing levels and organizational needs (Exhibit #6). Mrs. Mitchell stated that the total headcount for FY13 was projected at 351 full-time employees, with 270 in the General Fund, 36 in the Water/Wastewater Fund, and 45 in the Electric Fund; and 26 part-time temporary employees, including committee and commission members. She indicated that the current total was 363 employees. Mr. Koenig explained that there were currently 33 vacant positions throughout the City, that staff’s proposal was for the elimination of 12 full-time positions, and that these were reflected in the current FY13 proposed budget. He reviewed the recommendation for each vacant position, explaining the organizational and departmental personnel changes that occurred during FY12. He stated that since July 1, 2012, five (5) positions have been filled and reminded members that staff was currently recruiting for four (4) additional positions. Mr. Koenig stated that in order to bring forward requests to hire, three (3) tiers of positions were created. The Tier I positions, which were critical to service delivery, were scheduled for consideration at the Special Legislative, Finance, and Administration Committee meeting scheduled for March 27, 2012, the Tier II positions were anticipated to be considered at the April 23, 2012 Legislative, Finance, and Administration Committee meeting, and no time line had been set for the Tier III positions. Mr. Hutchison stated his opinion that Council should consider the creation of a Financial Advisory Committee, consisting of three (3) to four (4) people with extensive backgrounds in finance and business, to serve as advisors to the Controller/Treasurer. Mr. Koenig explained that the Public Utilities and Public Works Director positions were recommended as Tier III positions and were included in the budget proposal with a target start date of October 1, 2012. He anticipated bringing these positions forward for permission to recruit in June or July 2012, as it would take several months to recruit and fill these positions. Responding to Mr. Lynn, Mr. Koenig clarified that the positions related to the Library would need to be included in the FY13 budget and filled in advance of moving into the new Library facility because the Library Pages will assist with the moving process.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 12 In response to Mrs. Williams’ question regarding the status of the sale of the current Library facility, Mr. Koenig stated that the State of Delaware has performed an appraisal of the facility; however, the component of the State that was planning to utilize the facility wanted to turn it into a Gold-Certified Leadership in Energy and Environment Design (LEED) Building. This would increase the price of purchase plus improvements a significant amount, which did not meet the Governor’s cut for the Governor’s budget; therefore, the purchase of the library was not included in the Governor’s budget package. Staff has since met with Senators Bushweller, Ennis, Bonini, and Representative Carson. In meeting with Senator Bonini, a State Bond Bill Committee member, staff requested that he write the language for the purchase of the property into the Bond Bill, which he had indicated he was working on. Responding to Mrs. Williams, Mr. Koenig stated that the sale of old library was intended to pay down the debt of the short term loans for the financing of the library. In response to Mrs. Williams, Mr. Koenig indicated that all of these positions were included in the budget, as presented with a $1.7M shortfall. Mr. Hare stated his opinion that in addition to filling positions, there were a number of inequities throughout City personnel that needed to be examined and addressed. In response to Mr. Anderson, Mr. Koenig stated that the average department head salary was above $80,000. Mr. Koenig reviewed Pages 3 through 5 of the document regarding staffing levels and organizational needs (Exhibit #6) and indicated that these pages outlined the current distribution of employee divisions under each Council appointee and included two (2) scenarios for possible reorganization. He explained that these scenarios should be discussed by Council, as he would not be comfortable implementing these organizational changes, which include Council appointed employees, without Council’s consent. Mr. Koenig stated his intent to reduce the number of department directors in an effort to allow directors to function as directors, with the ability to delegate work down to mid- and low-level management. He emphasized that the City has reached the point in which members of staff are struggling to accomplish their work, and this was beginning to affect their work and personal lives. DISCUSSION ABOUT REVENUES Mr. Koenig reiterated that the proposed budget includes a $1.7M gap in the General Fund, which would be 6¢ on the tax rate; however, if the trash fee increase were adopted, that would reduce the gap by $1M; therefore, the tax rate could be increased by only 3¢. Responding to Mr. Lynn, Mrs. Mitchell stated that the maximum amount of funds that could be transferred from the Electric Fund to the General Fund without affecting the City’s bond rating would be 8%, which was included in the proposed budget. She indicated that she would not recommend going any higher, although Council would be authorized to do so if desired.

COUNCIL RETREAT OF MARCH 26, 2012 PAGE 13 Mr. Koenig stated his opinion that there were no significant gains to be made by reducing staff and that the City had gone as far as it could in staff reductions. Mr. Koenig stated that large sources of revenue did not include building permits or business license fees but did include the trash fee. He indicated that Council has not considered an increase in property taxes in two (2) years. Members discussed the merits and demerits of increasing trash fees and property taxes. Mr. Anderson stated his opinion that an Enterprise Fund made sense because the City would break even and questioned where staff would be able to cut $700,000 from the proposed budget. Responding, Mr. Koenig stated that it would be difficult; however, possibilities could include reducing the trash truck refurbishment by 50%, eliminating vehicle replacements, and eliminating the additional police officer position and possibly one (1) additional General Fund position. PRIORTIES FOR NEXT YEAR Priorities for next year were not discussed. OPEN DISCUSSION There was no open discussion. By unanimous consent, Council President Leary declared the meeting adjourned. Meeting adjourned at 8:32 P.M. Respectfully submitted, Thomas J. Leary Council President TJL/tm/dd/js S:\AGENDAS-MINUTES-PACKETS\Council-Minutes\2012\03-26-2012 RETREAT.wpd Exhibits to Original Minutes Exhibit #1 - 2012-2013 Preliminary Budget Exhibit #2 - FY12 - Summary of General Fund Adjustments and Potential Impact on FY13 Exhibit #3 - Transfer Tax Update Exhibit #4 - Email from Mr. James Keener, Assessor’s Office, dated March 26, 2012 Regarding the PILOT Program Exhibit #5 - City of Dover, Sanitation Department, FY 2011 Actual and FY 2012 Budget Exhibit #6 - Staffing Levels and Organizational Needs

EXHIBIT #1 Council Retreat of 03/26/2012

EXHIBIT #2 Council Retreat of 03/26/2012

EXHIBIT #3 Council Retreat of 03/26/2012

EXHIBIT #4 Council Retreat of 03/26/2012

EXHIBIT #5 Council Retreat of 03/26/2012 City of Dover Sanitation Department FY 2011 Actual and FY 2012 Budget FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 REVENUES Actual Budget Projection Projection Projection Projection Projection Overhead Trash Revenue 2,172,665 2,050,000 1,851,600 1,851,600 1,851,600 1,851,600 1,851,600 (from the budget report) Revenue Adjustment - - 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Non Allocated Departments Operating I&E Total Total Revenues 2,172,665 2,050,000 2,851,600 2,851,600 2,851,600 2,851,600 2,851,600 Tax Assessor 270,570 270,570 Fire 654,036 223,399 877,435 EXPENDITURES Library 1,033,149 2,829,484 3,862,633 Personnel Costs 667,518 763,197 630,600 636,906 643,275 649,708 656,205 Recreation 795,672 38,453 834,125 Materials & Supplies 48,824 122,720 31,400 31,714 32,031 32,351 32,675 Planning Commission 403,328 403,328 Administrative Expenditures 181,635 169,332 226,310 228,573 230,859 233,167 235,499 Public Inspections 541,987 541,987 Contractual Services 1,283,030 1,350,600 1,314,400 1,340,688 1,367,502 1,394,852 1,422,749 Life Safety 517,806 517,806 Overhead Charges (10%) - 330,249 330,249 333,551 336,887 340,256 343,658 Code Enforcement 280,350 280,350 Depreciation Expense 185,310 185,310 198,282 204,230 210,357 216,668 223,168 Economic Development 219,854 219,854 Total Expenditures 2,366,317 2,921,408 2,731,241 2,775,663 2,820,911 2,867,002 2,913,954 Police 12,783,109 301,818 13,084,927 Streets 835,415 454,599 1,290,014 Gain/(Loss) (193,652) (871,408) 120,359 75,937 30,689 (15,402) (62,354) Sanitation 2,181,006 212,446 2,393,452 20,516,282 4,060,199 24,576,481 Budget FTE Headcount 13 12 11 11 11 11 11 Sanitation % 10% Assumptions & Comments: Fiscal Year - Budgeted Revenue $2,050,000 or $170,833 per month average = $160,575; Dropped to $152,665 in February; Allocated Departments Operating I&E Total Sanitation Assumes 1% increase for expenses starting in 2014, except Contractual Services where a 2% increase is used; Human Resources 331,227 331,227 - Overhead Calculation = Sanitation ratio of all direct expenses in General Fund Budget; Multiplied 10% by total Budget of Internal Service Customer Services 852,059 852,059 82,980 Divisions that provide administive support; Customer Service, Finance, PW Administration, Central Services & Fleet Maintenance; Utilizes Temp Agency Help when needed; Budgeted in Administrative Expenses Current Rates & Revenues Rate # of Accts. Monthly Annual City Manager 574,437 574,437 - In City Rates $11.70 9,949 $116,403.30 $1,396,839.60 Information Technology 674,316 6,680 680,996 - Rates vary depending on size of can $15.20 289 4,392.80 52,713.60 Finance 798,185 798,185 77,734 and number of pickups/cans $23.40 15 351.00 4,212.00 Public Services-Administration 388,662 388,662 37,851 $39.00 253 9,867.00 118,404.00 Facilities Management 910,730 910,730 - $46.80 3 140.40 1,684.80 Central Services 645,888 645,888 62,902 $78.00 34 2,652.00 31,824.00 Vehicle Maintenance 706,270 706,270 68,782 Out of City Rates $42.75 192 8,208.00 98,496.00 City Clerk 268,348 268,348 - $142.50 3 427.50 5,130.00 Mayor 85,673 52,198 137,871 - $2,845.88 1 2,845.88 34,150.56 Council 115,379 115,379 - 10,739 $145,287.88 $1,743,454.56 Grounds Maintenance 983,732 46,549 1,030,281 - Bulk Pick Up $9,000.00 $108,000.00 $154,287.88 $1,851,454.56 Insurance 529,537 529,537 - Average Revenue per account $14.37 $172.40 7,864,443 105,427 7,969,870 330,249 Average Revenue needed to cover cost of service $22.13 $265.52 % Increase 54.0% 3,391,064 S:\ATTACHMENTS & EXHIBITS\Council Exhibits\2012 Exhibits\03-26-2012\Sanitation Budget

EXHIBIT #6 Council Retreat of 03/26/2012 Date Employee Name Department Job Title Salary Benefits Total Recommendation / Status 1 6/10/2011 Ed Baker Facilities Management Central Services Director 94,623.97 25,324.77 123,670.12 Delete From Budget 2 6/24/2011 Ron Swaggard PS- Streets Field Supervisor 1 51,947.08 14,546.65 66,493.73 Delete From Budget 3 6/24/2011 Elaine Edwards Human Resources Human Resources Coordinator 53,133.66 17,956.40 72,137.41 Recommend Filling - Tier 3 4 7/14/2011 Christopher Boyce Police -Uniform Police Officer 49,912.23 29,842.08 79,754.31 Recommend Filling - Tier 3 5 8/31/2011 Terry Tieman City Manager Senior City Administrator 96,220.97 24,838.42 124,852.72 Delete From Budget 6 8/31/2011 Leigh Ann Goulet Library Library Page - PT (18 hours/wk) 10,239.81 783.44 11,023.25 Recommend Filling - Tier 3 - Change Hourly Rate (Union) 7 9/2/2011 Amber Clendaniel City Clerk Administrative Assistant 38,190.95 12,636.22 50,827.17 Recommend Filling - Tier 1 8 9/7/2011 Robert Perry PS-Sanitation Motor Equipment Operator I 36,312.28 14,529.98 50,842.26 Delete From Budget 9 9/12/2011 Shawn Smith PS-Sanitation Motor Equipment Operator II 31,118.85 13,948.17 45,067.02 Recommend Filling - Tier 2 10 9/21/2011 Michael Albert Planning Planner II 40,963.52 13,541.08 55,312.05 Filled by Tracy Harvey as Planner I 11 9/30/2011 Randy Boyd PU - Electric 1st Class Linemen 66,951.00 20,668.98 87,619.98 Delete From Budget 12 10/4/2011 Paul Reichelt PU - Construction Heavy Equipment Operator II 51,183.43 19,846.59 80,846.02 Recommend Filling - Tier 2 as an MEO II 13 10/21/2011 Wendy Vossberg Central Services Central Mailroom Clerk 29,054.00 10,802.99 41,878.99 Recommend Filling - Tier 2 14 10/28/2011 Jamie Roy IT LAN Analyst 48,292.46 14,647.83 62,940.29 Delete From Budget 15 11/15/2011 Scott Koenig Public Services Public Services Manager 110,810.56 21,078.79 134,073.60 Recommend Filling - Tier 3 16 11/28/2011 Francis Stevens Sanitation Motor Equipment Operator 1 28,657.71 11,281.82 39,939.53 Delete From Budget - $25,000 to Temp Help in Sanitation 17 12/14/2011 Denise Roberson Library Library Clerk 1 - PT (18 hours/wk) 18,896.57 1,445.66 20,342.23 Recommend Filling - Tier 1 18 12/17/2011 Daniel Lopez Library Library Page - PT (18 hours/wk) 13,881.47 1,061.88 14,943.35 Recommend Filling - Tier 3 - Change Hourly Rate (Union) 19 1/6/2012 Wilber Myers Facilities Management Building Craftperson II 51,183.43 14,073.05 65,256.48 Delete From Budget 20 1/9/2012 Ron Lunt Public Utilities Public Utilities Manager 116,124.15 26,546.29 144,959.42 Recommend Filling - Tier 3 21 1/27/2012 Lisa Gardner Electric Dept. Budget and Support Sup. 46,227.19 14,246.05 62,340.11 Delete From Budget 22 2/4/2012 Douglas Hidgon Library Library Clerk 1 - PT (18 hours/wk) 18,896.57 1,504.43 20,401.00 Recommend Filling - Tier 1 23 2/17/2012 Tom Stubbs Police/Facilities Mgt. Custodian II 36,687.71 18,535.74 60,148.65 Delete From Budget 24 2/3/2012 John Durk Water Water Serviceperson 31,390.00 20,304.76 52,296.76 Recommend Filling - Tier 2 as an MEO I 25 3/16/2012 Jessica Smith Library Library Clerk 1 - PT (18 hours/wk) 8,071.71 617.37 8,689.08 Recommend Filling - Tier 1 26 3/23/2012 Joel Martin Wastewater Utility Maintenance Mechanic 1 34,935.71 18,534.32 53,470.03 Recommend Filling - Tier 2 27 3/30/2012 James Flint Fleet Mechanic 1 42,986.57 13,632.48 56,619.05 Recommend Filling - Tier 3 - Considering Upgrade (6 months 28 3/30/2012 Monica Farling Library Library Clerk 1 - PT (18 hours/wk) 12,529.92 958.64 13,488.56 Recommend Filling - Tier 1 29 4/5/2012 Ed Graves Inspections - Code Inspector 1 38,356.80 12,795.39 55,028.49 Recommend Filling - Tier 1 30 4/20/2012 Jody Stein City Clerk Administrative Assistant 31,443.08 19,996.37 51,439.45 Recommend Filling - Tier 1 31 5/20/2012 Cheryl Jackson Human Resources HR Clerk 44,053.86 15,937.29 92,120.91 Recommend Transfer of AA from CM - Budget Neutral 32 5/30/2012 Andrew Polasko Water Treatment Plant Water Treatment Operator 46,740.85 19,576.10 67,965.75 Recommend Filling - Tier 2 33 5/31/2012 Floyd Anderson Central Services Materials Expediter 44,191.89 13,509.75 61,567.64 Delete From Budget 1 7/7/2011 M. Brad Holloway Police - Civilian Communication Operator** Filled 2 7/20/2011 Harry Whiteman Police - Civilian Communication Operator*** Filled 3 6/8/2011 Tony DePrima City Manager City Manager Filled 4 9/30/2011 Matthew Harmon Police-Uniform Police Officer*** Filled 5 8/29/2011 Danny Ranger Police - Uniform Police Officer*** Filled 6 11/11/2011 Ray Wheatley Electric Engineering Substation Relay Foreman Recruiting 7 11/1/2011 Matthew Carey Fire Fire Dispatcher Recruiting 8 8/31/2011 John Thompson Public Utilities Substation Technician ll Recruiting 9 4/5/2012 Tom Embert Electric Engineering Substation Technician ll Recruiting

Distribution of Employee Positions Under Each Appointee

Current Distribution of Employee Divisions Under Each Appointee

Proposed Distribution of Employee Divisions Under Each Appointee

Proposed Distribution of Employee Divisions Under Each Appointee (Scenario 2)