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Home My WebLink AboutMinutes - Finance Committee - 04/21/2014 -C .Finance AdministrationI0215N.Mason2~FIoorFortCoLLinsE~!~o8o522 ~7ft221.6782 -fax Council Audit &Finance Committee Minutes 4/21/14 10:00 a.m.to 12:00 noon CIC Room Council Attendees:Bob Overbeck,Ross Cunniff Staff:Darin Atteberry,Mike Beckstead,Megan Bolin,Carrie Daggett,John Duval,Harold Hall;Bruce Hendee,Tom Leeson,Jeff Mihelich,Lawrence Pollack,John Voss,Katie Wiggett Others:Rob Kauffmann,Alberta;Ron Lautzenheiser,CAG;Neil McCaffrey,CAG;Tim Kenney,CAG;Kevin Jones,Chamber; Bob Brown,CAG;Dean Hoag,CAG Approval of the Minutes Bob Overbeck asked that the April 11 minutes be amended to include the following information under bond ratings:“Bob Overbeck met with Jim Manier and Mike Beckstead to discuss bond ratings.The interest rate environment is positive due to a shortage of high yield paper in the market.”Ross Cunniff asked that his request for an analysis of what would happen if only 155k sq.ft.was leased be included in the April 11 minutes.Minutes will be amended to reflect requested changes. Bob Overbeck moved to approve the minutes from the March 17 meeting.Ross Cunniff seconded the motion.Minutes approved unanimously. Actuary Annual Pension Valuation Report (GERP) John Voss explained that Council Finance annually reviews the Actuary Annual Pension Valuation Report for the General Employee Retirement Plan (GERP).The GERP review covers Plan highlights,economic and demographic assumptions,unfunded actuarial accrued liabilities,and the solvency /sensitivity model.The Unfunded Liability at the end of 2013 was $14.7M compared to $15.7M in 2012.The only change to the Plan’s assumptions was to the assumed investment return,which was lowered from 6.8%to 6.5%. Ross asked if the new target allocation is based on historical data.Mike answered that it is based on both Staffs own research and the actuary’s historical average. The 2013 investment return of 18.7%exceeded the 2013 Plan return assumption of 6.8%.Positive investment returns added to supplemental and payroll contributions exceeded retiree payouts which contributed to a year over year market value increase of $5.2 million.The future impact to the Plan from the increase in market value is a projected reduction in the end date for supplemental contributions from year 2033 to year 2025.The market value calculation recognizes total asset gains and losses in the 0 Cityof ,EoflCQW!~ current year.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 $3.2M to an Unfunded Actuarial Liability of $14.7M.This change will not impact the Plan’s anticipated cash flows or the City’s credit rating. The General Employees’Retirement Committee reviewed and approved the 2014 actuary report in at their March 13th meeting.Staff recommends the City continue to fund the current $1.12M supplemental contribution. Council Finance supports the changes to GERP and recommends moving forward. Policy Review —Reserve/Fund Balances Mike Beckstead said that Council Finance has been reviewing policies over the last few years.Staff has proposed to Council Finance that these policies be broken into three categories: 1.City Council Approved 2.Council and URA Board Approved 3.City Manager and CFO Approved John Voss reviewed the updated Fund Balance Minimum Policy.Bob Overbeck asked for Staff to explain the many changes to this policy.John explained that Staff used Government Finance Officer Association best practices when updating the policy and had both updated and defined terminology.John outlined all changes made to the funds’requirements.No change was made to the General Fund or Golf Fund;no minimums are now required in the policy for Special Revenue Funds.In the Utility Funds,Staff simplified and combined various minimums,changing all except purchased power to 25%of operating expense.Mike Beckstead noted that John Voss had worked closely with Utilities to set these new limits. Ross asked where the information on things like why we have purchase power can be found.Staff will follow-up with a memo.Bob asked that under 5.6,the word should be changed to shalL Staff will make that change. Council Finance can make no recommendation on the policy until questions are answered. *Due to the tightness of timing,Mike Beckstead suggested that Council Finance Committee adjourn the meeting until after the URA Meeting.Bob Overbeck adjourned the Council Finance meeting until after the URA meeting. Other Business Council Finance postponed the discussion on the Budget Policy in favor of discussing questions about the mall deal in the remaining time. Bob Overbeck asked if we can split the difference—issue 34 of the bonds now and 34 later.Mike answered that the equity and construction financer has been clear that all capital must be aligned at the same time to avoid any financing being contingent on a future event i.e.the issuing of the second half of the bonds. Bob asked if the $72M is recognized in Alberta’s balance fund.Attorney Rob Kauffman replied that all the r ,Eo~cQllm~oLLmns money goes into the district’s account and is never seen on Alberta’s balance sheet. Ross noted that currently,we are signing up for 3 years of carrying cost.Bob asked if it is possible to drop that down to 2 years of carrying costs.Mike answered that the amount of time is driven by IRS tax code;the City Attorney’s Office would need to look into that possibility.Bob asked that Staff look into the option of a 2 year call provision. Bob asked if Staff researches business partners,such as Alberta and Walton,to see if they have had any legal issues,bankruptcies,etc.Do we use some sort of background check to insure that they are a good corporate partner?Staff responded that we do not do research to that extent.Ross said that he would like to know if the companies we elect as corporate partners are viable and not prone to half-finished projects. Darin said that he would like to know what due diligence Council wants from Staff concerning researching business partners.Council should outline that for Staff so we can perform that research in the future.Bob agreed,noting that he would like to know as much as possible about our business partners at the beginning so we can anticipate future problems. Darin noted that projects such as the mall deal are extremely complicated and future amendments are possible.Mike noted that Centerra’s contract was considered a “living document”and had seven amendments. Mike then addressed Ross’s question about what would happened to the Metro District cash flow if only 155k sq.ft.of space was leased in the mall. •Without additional leasing,signed leases would become void •Developer would have access to a limited portion of both the bond proceeds and the construction loan •What ultimately gets built and who occupies it is unknown Ross said that this information is useful.He then asked,in the case of a stalled project,how would Alberta act and how could the City still benefit from the deal.Kauffman answered that 3M of the first 23M in released funds would already have gone to the underpass. Ross asked if we can ensure that the moving of Sears is at least completed,even if the project is stalled. In exchange for releasing the funding early,could we stipulate that Sears be complete before the next $1OM is released? Ross asked whether Council could see the past and present data on leasing for the mall.Mike said that he would ask for that information.In the future,Staff will be receiving updates on leases,including the numbers for what is new to Fort Collins. Ross also asked for a model for the mall opening at less square footage than anticipated.This analysis was provided to Council on April 2t. Attachment Origin and Purpose of Purchase Power Reserve Memo (Follow Up to Reserve Fund Balances Discussion)