Loading...
HomeMy WebLinkAboutMinutes - Finance Committee - 05/18/2015 -_____C .Finance Administration____I 0 ——II•2MFloorI-Ort COLLInS Fort Collins,CO 80522 970.221.6788 /~tflt~rt!!!!!=jaIIIII_PIIIIIIII_IIIItIIIIII%_~_%%.%22s2~tax Council Audit &Finance Committee Minutes 05/18/15 10:00 am to 12:00 Noon CIC Room Council Attendees:Mayor Wade Troxell,Ross Cunniff,Gerry Horack Staff:Darin Atteberry,Mike Beckstead,John Duvall,John Voss,Josh Birks,Travis Storm,Nancy James Others:Joel Stewart,Jim Manire Approval of Minutes Ross Cunniff made a motion to approve the March 16,2015 Council Finance Committee minutes.(No meeting was held in April.)Gerry Horack made a second to the motion.The minutes were approved unanimously. Introductions Prior to the remaining agenda items,Mike introduced Nancy James,who replaced Katie Wiggett a week ago in the admin role.Nancy comes to Financial Services from Utilities.He also introduced Travis Storm,who joined Financial Services in April,as the Accounting Director.Travis was previously the Director of Financial Planning and Analyses for Kaiser Permanente in Atlanta,GA,and an auditor for KPMG prior to that. GERP Update The actuary firm engaged on the GERP is Milliman,Inc.The presentation was led by Joel Stewart,who puts together the annual review of the General Employees’Retirement Plan,which covers plan highlights,economic and demographic assumptions,unfunded actuarial accrued liabilities,and the solvency/sensitivity model.The presentation reviewed the Plan’s Actuarial valuation for year ending 2014,and discussed the impact to the Plan from investment return sensitivity,which included: •Pension Plan Overview •GERP Plan Summary •Valuation Results Solvency Model Cityof~Eofl$ins Pension Plan Overview All benefits and expenses must be provided for by current assets,future contributions and future investment returns.Mike added that over the last three years the estimates have become more conservative as a couple of significant things have taken place,1)we have increased the supplemental contribution from the City from a little over $500,000 to a little over a $1,100,000.We did this for the first time in 2013.This is bringing down the City’s unfunded pension liability;and 2)three years ago,the anticipated annual return was 7.5%;after a study and analysis it was initially brought down to 6.8%and is now down to 6.5%,which is a reasonable benchmark number.The reduction in anticipated investment returns would,in isolation,increase the City’s unfunded pension liability,but it is currently staying the same because we have had some fairly strong returns,and because of the supplemental contribution increase. GERP Plan Summary Demographics as of 1/1/2015: •Total Participants =431 (113 Active,184 Retired,113 Term Vested &21 Beneficiaries) •Active Participant Ave.Age =59.0 &Ave.Years of Service =25.7 (Employees hired before 1/1/1999) Plan Summary: •Normal Retirement Date (NRD)=Age 65 (Early retirement would produce a slightly reduced payment.) •Benefit Payable at NRO =Final Ave.Monthly Salary x 1.5%x Years of Service •Benefit Example assuming $65,000 average salary and 25 years of service ($5,417 x 1.5%x 25 =$2,031 Key Assumption: •Investment Return Assumption =6.5% •Life Expectancy •City Contribution —10.5%of Salary +Supplemental Contribution (currently $1.12m) Valuation Results •The plan assets returned 6.0%during the 2014 plan year on a market value basis.The average annual return over the last 21 years is 6.4%.The assumed rate of return for the 2014 plan year was 6.5%. •At the end of 2014,the market value of assets was $45,722.416,up from the previous year ending market value of $44,692,556. o Total Pension Liability (TPL)$57,796,305 o Fiduciary net Position (FNP)$45,772,416 o Net Pension Liability (NPL) =TPL—FNP $12,073,889 o FNP as a %of TPL 79.11% 2 C City ofFortCoLLins The City Manager indicated that overall this is a very good position for the City to be in,as many cities have a much higher unfunded pension liability.Mike concurred that the decision in 1999 to discontinue the General Employees’Retirement Plan was very well thought out. Financial/Economic Impacts: The 2014 investment return of 6%was less than the Plan return assumption of 6.5%.Investment returns added to supplemental and payroll contributions exceeded retiree payouts which contributed to a year over year increase of $1.0 million to the Fiduciary Net Position (FNP).Supplemental contribution end dates fluctuate annually based on actual Plan economic and demographic performance. New accounting standards (GASB 67 and 68)change the reporting requirements for the city from Net Pension Obligations of $3.7M to a net Pension Liability of $12.1M.However,this change will not impact the Plan’s anticipated cash flows or the City’s credit rating. The Council Finance Committee asked what the average monthly salary was for people currently in the program. The current average is $65,000.It was further questioned why the average salary wasn’t shown for retirees who are retiring in the program.Staff will make this update for next year. The Council Finance Committee also questioned why we are not using use tax revenue to pay down the liability of the Plan.Staff indicated that this conversation has not taken place to date,but is one that we can certainly have.Staff further proposed that before the 17/18 budget is complete,that a decision be made on whether a shift be made on how we handle this liability,which also ties into the discussion of whether or not we have a policy in place that deals with the additional revenue from use tax within a year.Staff will schedule this item prior to July,August at the latest,for budgetary purposes. The Council Finance Committee also asked what happens to the money that is left over after all recipients and beneficiaries have received all of their appropriate funds.Staff’s follow-up report indicates that after the beneficiaries are paid their vested amounts,the remaining monies will be refunded to the City.This information is referenced on pages 33-34,section 6,in the General Employees Retirement Plan document. City Debt Capacity Mike introduced Jim Manire,the City’s Financial Advisor who works for the City and guides us in making sure the City evaluates all of the alternatives and proceeds in the correct way in regard to future bond issuances and debt issues,etc.Mike further explained that Staff worked with Jim to evaluate the current debt capacity of the City in anticipation of some future borrowing needs of the city associated with projects such as Parking,a Regional Police Training Center,Vine/Lemay intersection,Climate Action Plan.Debt capacity was analyzed assuming a commitment to maintain the City’s current Moody’s credit rating of Aaa. Jim’s presentation provided information in a general capacity.Debt capacity is a range that will vary based on economic conditions,type of debt taken on,funded from existing or new revenue sources,etc.Without new of$~cQThn~oLLIns revenue sources a range of $75M to $100M is estimated.With new revenue sources (mill levy or sales tax)a range of $125M to $150M is estimated.The analysis excludes Utility debt supported by rate revenue. The total debt on the governmental side,excluding Utilities is about $SSM,which includes the ODA and the URA. The City alone is in the low $40M range for total debt,with $6M that will being paid off in 2018,which is associated with the 215 Mason Street building and the Civic parking structure.What is left is the Police Facility which was refinanced in 2012 at 1.82%. The City currently has a Aaa Issuer and GO rating by Moody’s.Moody’s description of a Aaa rating is obligations that have been judged to be of the highest quality,subject to the lowest level of credit risk.There are only 24 other cities with Moody’s Aaa (qualifier is population;medium size American cities).Fort Collins is in a very elite class in this regard. Multiple weighted factors are used by Moody’s to determine a rating: •Economy/Tax Base 30% •Finances 30% •Management 20% •Debt/Pensions 20%(Half of this is pension related) Most important is budgetary actuals and performance.Moody’s has an Annual Surveillance Cycle —each rating is reviewed annually by the agencies who publish them. The City Manager stated that the report on both of these items (GERP Update and the City Debt Capacity),are very good news for the City,and are solid statements about our city and financial situation. The Council Finance Committee stated that they would like to continue to see more conversation with Council about overall capacity. Woodward Governor —Rebate: Ross asked Staff when the Woodward agreement was signed,if the City set aside the funds intended for repayment when they met their side of the obligation.Staff indicated that that is not generally done at the time an agreement is signed,but rather when the revenue comes in.The Revenue Dept.within Financial Services coordinates with Planning and Utilities on a monthly basis and Finance records the liability associated with all of the rebates that they have earned.There is capacity in the General Fund to pay this liability. Ross further asked if using the funds this way match the intended use of the expansion fee buckets,and wanted an explanation on how staff chose the three different funds that were used,and how that fits the expenditure. John Duval stated that this item was placed on the agenda less than 24 hours in advance and could not be posted.The question is related to the legal opinion that Council received previously that is confidential,and cannot be discussed without an executive session,which cannot be held as it was not posted in ample time.In the general sense that nexus isn’t the issue;the opinions that Council were given doesn’t depend on that. 4 (S 4b~Lins Ross asked Staff if the City has previously used the various fee funds in this way.Staff stated that with the exception of affordable housing,the City has not rebated capital expansion fees in the near term past. Economic Health Policy Staff introduced and reviewed the Financial Policy webpage for the new council member’s information.Each year Staff will review a third of the policies that are listed in the policy section of this webpage. The Fort Collins City Council has adopted Financial Management Policies pursuant to the provisions of Article V, Section 12 of the City Charter,to guide the administration,management,deposit and investment of City funds. In addition,City Council and staff have committed to regularly review and update these Financial Management Policies.The current Economic Development financial policy was last updated in 1999.Staff presented the Council Finance Committee with an updated policy for their review.The bulk of the new policy comes from documents previously approved by City Council in recent years.The new financial policy will replace the existing policy in its entirety. In addition,Economic Health Office staff is currently finalizing a proposed update to the 2012 Economic Health Strategic Plan.The update responds to a City Council request to evaluate changes to the existing strategic plan and seeks alignment with the objectives of the Sustainability Service Area (formed in 2012).The update introduces five themes around which to organize the City’s economic health activities: •Community Prosperity •Grow Our Own •Place Matters •The Climate Economy •Think Regionally The City Manager stated that a council member recently received a call from a cluster grant applicant who did not get selected.Bob did not know a whole lot about the program,but Josh has done a really good job of relaying the information.It was very methodical,and streamlined. The Council Finance Committee asked staff if they periodically review performance relative to the policy.Staff indicated that they look very closely at the performance they get out of the money invested.They self-report at the end of each year.They will also extend programs over to other departments to continue to improve processes. The Economic Health Policy will be placed on the Council Consent Agenda in the near future. 0 City of~flCQ~ins Other Business The City Manager requested that the time of the Council Finance Committee meetings be moved back to begin at 9:30 a.m.vs.10:00 a.m.,as Leadership ends at 9:30 a.m.It was agreed by all that this would be acceptable. It was also requested that the date of the next meeting currently scheduled for June 15th be moved to another date due to the Weld County Transportation Summit being held on the 15th1 of June.Staff will schedule the meeting on another day,and notify all members and the public. The City Manager closed the meeting by stating that credit goes to the City Council and the Council Finance Committee for driving improvements for all of these programs. Meeting Adjourned at 11:44 a.m.