3:30 P.M.Work Session Public Safety Training Room

CITY OF OREM

CITY COUNCIL MEETING

56 North State Street Orem, Utah

September 12, 2017

3:30 P.M.WORK SESSION – PUBLIC SAFETY TRAINING ROOM

CONDUCTINGMayor Richard F. Brunst

ELECTED OFFICIALSCouncilmembersSam Lentz, Tom Macdonald, Mark Seastrand, David Spencer and Brent Sumner

APPOINTED STAFFJamie Davidson, City Manager; Brenn Bybee, Assistant City Manager; Greg Stephens, City Attorney; Richard Manning, Administrative Services Director; Bill Bell, Development Services Director; Karl Hirst, Recreation Department Director; Scott Gurney, Fire Department Director; Gary Giles, Police Department Director; Charlene Crozier, Library Director; Chris Tschirki, Public Works Director; Steve Earl, Deputy City Attorney; Jason Bench, Planning Division Manager; Steven Downs, Assistant to the City Manager; and Jackie Lambert, Deputy City Recorder

EXCUSEDDebby Lauret

UPDATE – Major Crimes Task Force

Chief Gary Giles introduced BJ Robinson of the Orem Police Department, as well as Officer Dennis Harris of the Utah County Major Crimes Task Force, an organization with which the Orem Police Department was involved.

Officer Harris explained that he had been in law enforcement for thirty-eight years and in narcotics, specifically, for nearly eighteen years. He said that unfortunately, every family had been impacted by drugs in one way or another.

Officer Harris reviewed the history of Utah narcotics issues, and stated that prior to 1987 larger police forces worked on their own drug cases. This was problematic because nobody shared information on different cases occurring throughout the State. Even though they were successful in some ways, they were never able to make substantial progress in solving drug problems in the area. He explained that the Net Narcotics Enforcement Team ran from 1989 to 1997, during which time he was involved through the Sheriff’s Office. He stated that there was a significant amount of gang activity taking place in Utah County in 1997, at which point he was reassigned to the gang unit. Subsequently in 1998, the chiefs came together to form the Major Crimes Task Force. Currently, the Major Crimes Task Force was comprised of forty-five officers from Federal, State, and local law enforcement agencies. After 9/11, the Federal government determined that it was important for them to work more closely with local resources. As such, local law enforcement had developed a good working relationship with Homeland Security, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Federal Bureau of Investigation (FBI).

Officer Harris explained that the Major Crimes Task Force was split up into two sections: (1) DTOs (officers working with Drug Trafficking Organizations) and (2) SET teams (officers assigned to address local problems). Since 2012, most participating forces have had SET officers assigned to them. DTO officers were responsible for investigating, dismantling and disrupting drug trafficking organizations which were routinely connected to Mexican cartels. They had done about two or three wiretaps a year as part of these efforts. Prior to 2012, the most heroin that the Major Crimes Task Force had ever seized in one year was eight pounds. They had since expanded their efforts across State borders and officers had become federally certified in order to do so. Utah County was now known as the “Iron Curtain” of drug trafficking; dealers no longer wanted to come through Utah County. After changing their seizing methods in 2013, the Major Crimes Task Force seized up to 106 pounds of heroin, 105 pounds of meth, six pounds of cocaine, 227 pounds of marijuana and 1200 pounds of spice, all of which amounted to approximately $16 million worth of drugs.

The Major Crimes Task Force had been recognized as one of the best task forces in the western United States, and was by far the best in the State of Utah. In 2013, they were involved in the largest heroin bust to date, which occurred in Phoenix, Arizona, in collaboration with multiple agencies. They had seized ninety pounds of high grade heroin valued at over $6 million, as well as $500,000 in cash and twenty-two vehicles; seventy-two felony arrests were also made at that time. In 2014, the Major Crimes Task Force seized 169 pounds of heroin, 106 pounds of meth, ten pounds of cocaine, 327 pounds of marijuana and ninety-one pounds of spice, all of which amounted to approximately $19 million worth of drugs total. Officer Harris shared some case examples that took place in 2014. He reported that in 2015 they seized 143 pounds of heroin, seventy-one of pounds meth, nineteen pounds of cocaine, 343 pounds of marijuana and dab (highly concentrated amounts of THC), all of which amounted to approximately $16 million in drugs. He displayed several images of the drugs seized in 2016, and noted that so far this year (2017) they had seized 479 pounds of marijuana, thirty pounds of heroin, sixty-nine pounds of meth and three pounds of cocaine.

Officer Harris stated that oftentimes there was a lot of crime associated with marijuana because there was so much money involved. He reviewed several marijuana cases in Utah County. He also discussed a case in Salt Lake County in which a dealer had been manufacturing and selling highly lethal pills.So far, in this particular case they had seized $3.1 million and it was estimated that the manufacturer and dealer had killed approximately forty people throughout the United States. Officer Harris stated that the dealer was using Bitcoin instead of standard currency to buy and sell his drugs on the dark web. At the time of seizing, there were sixty pending orders valued at $20,000 each.

Between the years 2008 and 2012, eighty heroin users died in Utah County. In 2016 alone, there were twenty-seven heroin-related deaths in Utah County. Officer Harris stated that heroin and opioid deaths in Utah County were the biggest issue that the Major Crimes Task Force faced. The problem was multi-faceted in that it involved prescriptions from doctors, pill presses, and orders being sent from research labs in China. The Major Crimes Task Force had been working with customs and border patrol to identify and track these types of packages that were passed through the postal system. Anytime these packages were ordered and sent to a residence in Utah County, the Major Crimes Task Force paid a personal visit to that house. Sometimes people ordered these drugs by the thousands.

Officer Harris reported that last year there were twenty-four violent felonies in Utah County, including numerous homicides, attempted homicides, aggravated robberies, and other crimes. The gang unit was reinstituted to address the issue.

Mr. Spencer asked where the marijuana was coming from, to which Officer Harris said a lot came from Colorado, California, and now Nevada. He said he worried about marijuana sweeping through Utah at some point. He explained that Colorado was a good case study for examining what types of effects the legalization of marijuana could have on a population. Marijuana was not an FDA-approved substance; Officer Harris stated, therefore, that he was against its legalization for medicinal purposes.

Mayor Brunst said marijuana altered the brain and was particularly harmful to younger generations. Officer Harris further explained the side effects of marijuana usage, noting that oftentimes users displayed a lack of motivation.

Mr. Macdonald asked Officer Harris to further explain the dark web, as was previously mentioned. Officer Harris explained that the dark web was an encrypted site where dealers could sell and trade drugs in an online forum that was difficult to trace. He stated that the Task Force was working with Homeland Security to train officers in navigating the dark web.

Mr. Macdonald asked what happened with the cash that was seized in raids. Mr. Harris said the money was returned to the State of Utah. There was subsequent discussion regarding whether or not this was a good practice.

Mr. Harris concluded by stated that he was proud of the Orem Police Department. As an organization, they were doing what was necessary to support and protect the City’s residents.

UPDATE – UTOPIA/UIA Financial Synopsis

Mr. Nelson said he sat on the Finance Committee for UIA. Using the aid of a Power Point presentation, he discussed net income andexplained that the “Operating Profit Loss” was the area of the budget that UTOPIA controlled. The pledge dollars of all cities went towards the bond and UTOPIA had little control over theinterest expense. He stated that the depreciation expense was a function of investment. One reason they focused on the net income loss was because it fluctuatedfrom one-time monies received. One such example was theRUS settlement, which was a one-time gain of $10 million. Mr. Nelsonreviewed interest expenses and explainedthat every year the City paid the pledge payment to the trustee who made the bond payment. UTOPIA was required to record that payment as debt, and theinterestwas required to be accumulated at their going rate for that month. He said the number was growing and would continue to do so assuming the City continued to make the pledge payments.

Mr. Davidson said the interest amount did not represent Orem’s share alone, but all cities. Mr. Nelson said that was correct.

Mr. Macdonald asked if it was fair to say the City went from $18 to $21 million, because they paid UTOPIA $3.3 million with the intent that UTOPIA would eventually pay the City back. Mr. Nelson answered affirmatively, and said Orem also paid a pledge into UIA as well. He further explained that UIA was where all current construction and activity was happening such as bonding and new connections.

Mayor Brunst said the $10 million from the RUS settlement went to UTOPIA for construction and not to UIA. Mr. Nelson said this was correct. He explained that a lot of the funding was spent on refreshing the system and purchasing new equipment, as well as some construction. Mr. Nelson reviewed UIA’s financial statement which included outstanding bonds, bond payment and depreciation. He said fluctuations occurred in the years when bonds were paid off.

In response to a question from Mr. Macdonald, Mr. Nelson said UTOPIA had enough in cash reserves that they were gradually covering their budget. Furthermore, cities had been paying into the operating expenses as well. Mr. Nelson said he was not sure how much cash was available in UIA’s reserves.

Mr. Davidson asked if there was an IRU arrangement in place. Mayor Brunst said UIA paid UTOPIA to offset operating costs. Mr. Nelson explained that the IRU payment was considered a lease payment and was an expense in UIA’s budget. Mr. Davidson said the City could increase the IRU payment to cover the short fall, but in so doing that would leave the City with less money in UIA to continue to build the system. Mr. Nelson added that anything that benefitted UTOPIA was spread across eleven cities.

Mayor Brunst said the loss in UTOPIA each year consisted of the depreciation, interest and capital payments the City was making on the bonds. Essentially, they had lost $13 million in payments that the 11 cities collectively made, which was then listed as a debt in UTOPIA’s accounting books.

Mr. Macdonald said the City’s depreciation and the interest expense were approximately the same as the City’s debt payment. Mr. Nelson confirmed this to be the case, and there was subsequent deliberation the matter.

Mayor Brunst explained that UTOPIA was showing a $20 million loss each year whereas UIA showeda positive cash flow. The City owed $65 million for UIA bond debt plus interest, and there had been a $15 million stimulus in the last seven years as well as a $10 million RUS settlement. In total, they had spent $90 million over the last seven years. UIA’s approved Fiscal Year 2017 budget showed both the operating side as well as the capital expenditure side, and the expenditure side was what concerned him. The proposed Fiscal Year 2017 budget showed $17 million for capital expenditures, which was coming out of bond debt that was passed. Essentially, if they were going through $800,000 to $1 million a month that would amount to the totalfunding for the year, which was why they were in need of additional bond debt. He said hopefully they could reach a point where they received a higher take rate rather than floating additional bond debt. Alternatively, they could implement a model where the customer helped cover some of those costs instead of having the cities handle all expenses.

Mr. Seastrand asked Mayor Brunst to clarify what he was trying to suggest. Mayor Brunst said they needed to find other ways to further construction projectswithout adding more debt onto Orem City every month.

There was subsequent discussion regarding expenditures versus revenue. Mr. Seastrand said investing in capital drew in new customers; marketing efforts alone could only do so much in this regard. He explained that by bringing in new customers they were securing a profit stream to cover the debt. Mayor Brunst asked if there were other ways to increase funding for capital expenditures other than increasing debt.

Mr. Davidson asked if Mayor Brunst had heard of ways that other utility companies had expanded their networks other than through the means of debt. Mayor Brunst answered in the negative. Mr. Davidson explained that pledging network assets to meet their obligation made them healthier as an organization. Mayor Brunst said operations had been ongoing for 13 years, and that they should be generating enough revenue by now without having to go further in debt. There was continued discussion regarding the budget numbers that had been presented. Mr. Davidson concluded that when used judiciously, debt could be an advantage and benefit to organizations for growing additional capital.

LEGISLATIVE UPDATE

Utah House Representative Brad Dawdiscussed some of the legislation he was working on, specifically how referendums and initiatives had been done in a number of areas. He worked with the Utah League of Cities and Towns (ULCT) to review areas of Code that were confusing, contradictory and problematic.

Mayor Brunst said there had been fourreferendums/initiativesin the City within the last four years, and he asked if this was typical. RepresentativeDaw said some cities had been inundated, thereby tyingacity’s hands for an inordinate amount of time. In some cities, the “opposition” groups distributed information using the official seal of the city to make it look like it was coming from the Council, but in fact misinformation on an issue had been distributed. Therefore, the legislature wanted to put clear guidelines in place for the process associated with initiatives and referendums that both sides could agree upon. ULCT would be weighing in on the matterand hopefully a proposal would be presented in November.

Representative Daw said acannabis initiative was coming forward, which concerned him a great deal. He was concerned with the misinformation that had circulated on the issue, as well as the public safety concerns that would ensue should the initiative pass.

Mr. Sumner asked Representative Daw to discuss the opinions of medical experts regarding medicinal cannabis. Representative Dawexplained that the notion that doctors were uniformly against cannabisas medicine was untrue. However, they still needed definitivedata on how to properly use medicinal cannabis, and what dosage amounts were safe. It was difficult to conduct research on this issue due to legal restrictions, and therefore it was hard to track down credible information. Furthermore, they still needed to define the best disbursement methods.

Mayor Brunst asked about tax reform. RepresentativeDawexplained that the“Our Schools Now” initiative was a proposal to increase sales and income taxes by a certain percentage; the revenues generated would then be earmarked for education. Mayor Brunst asked if the initiative made specific recommendations on how the funds would be spent. RepresentativeDaw stated that it did make some recommendations; however, it couldn’t be too prescriptive otherwise it would become easy to repeal. He then briefly discussed the lobbying efforts behind this issue.

Mayor Brunst asked about reform for corporate and food taxes. RepresentativeDaw said he had heard proposals foreither removing the taxes completely, or changing the amounts. He discussed the factors that went into taxing different goods.

Mr. Davidson said Orem was looking at tax reform closely because the City needed to broaden its base. He said that from the State’s perspective, they had more funding to work with and therefore more flexibility for absorbing tax reform.

Mayor Brunst stated that the City was responsible for providing services to its residents. Anytime those services were jeopardized financially, the City must consider tax reform as a means for addressing the problem; however, this was always a difficult discussion.