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HomeMy WebLinkAboutMinutes - Finance Committee - 08/18/2014 -r *Finance AdministrationC~t~(0 215 N.MasonL2Floor P0 Box 580 Fort Collins,CO 80522 870.221.6788 970 221 6782 fax fcgov corn Council Audit &Finance Committee Minutes 8/18/14 10:00 a.m.to 12:00 noon CIC Room Council Attendees:Ross Cunniff,Bob Overbeck,Mayor Karen Weitkunat Staff:Darin Atteberry,Mike Beckstead,Kelly DiMartino,John Duval,Jeff Mihelich,Lawrence Pollack,Lance Smith,John Voss,Katie Wiggett,Wendy Williams Others:Dale Adamy;Kevin Jones,Chamber of Commerce Approval of the Minutes Ross Cunniff moved to approve the minutes from the July21 meeting.Bob Overbeck seconded the motion.Minutes approved unanimously. Recommended Budget Overview Mike outlined several improvements made to the Budget process.The 2015-2016 Budget process, called Budgeting for Outcomes (BFO),began with the completion of the City Strategic Plan in March. The strategic plan replaced the Request for Results and Outcome maps previously completed by the BFO Teams.Other improvements included significant citizen outreach,increased citizen participation on the BFO teams,and the use of the City’s financial software system to create metrics for offers.City staff also modified offers to On-Going and Enhancements which significantly reduced the total number of offers and allowed for year to year cost comparison by the budget teams. As always,the budgeting process involves many challenging choices due to cost issues and funding priorities.The City Manager’s 2015-2016 Recommended Budget reflects community priorities and seeks to continue the high level of service expected by the community. Mike walked through the revenue assumptions used in developing the 2015-2016 budget.Staff is assuming moderate Sales and Use Tax revenue growth,including additional mall revenue in 2016.The budget takes into account the fact that the quarter cent taxes may not be renewed in 2016.Ross asked if the mall assumption relies on the original square footage projection.Mike answered that it does. Mike also walked through Funding Opportunities included in the Budget,noting that unanticipated or volatile revenues are included in the Budget,but are conservatively budgeted for one-time expenses rather than on-going expenses. Anticipated Utility rate increases of 2.0%for Light and Power and 3.0%for Wastewater are included in both 2015 and 2016.The increase in Light and Power is driven by PRPA pass through,and the increase City ofFortCoLLins in Waste Water is driven by capital improvements. Wage adjustments assume an overall 2.0%increase each year,which is below initial market data for the Front Range.Benefit cost inflation is forecasted at 11.5%and 3.7%in 2015 and 2016,respectively, which includes the financial impact from national health care reform (the Affordable Care Act).There are no changes planned for pension contributions. Bob asked which inflation numbers Staff looks at to make their assumption.Mike answered that Staff looks at national trends from the last 10 years as well as local experience to make projections. Mike presented the following significant cost increases included in the 2015-2016 budget: Total Salary Costs $2.0 Health Care Reform $0.9 Benefits Cost $1.4 PFA Contribution per IGA $1.5 IT Equipment Replacement &Lease $2.0 Transit Service Annualize (including S.7M CSU funded)$2.4 General Fund Impact from Cons Trust Fund to Trails $0.7 Total $10.9 Darin explained that these costs are ones that the City does not necessarily choose,but costs that must be taken care of.Lawrence noted that some of these costs are imbedded in other budget offers while some have offers of their own. The City Manager’s Recommended Budget is in the process of being finalized and published.It will reflect a balance of ongoing programs and services with enhancements that directly address the strategic objectives in the City Strategic Plan.The City Manager’s 2015-2016 Recommended Budget will be delivered to City Council and be available to the public on August 29,2014. Building on Basics (BOB)—Update John Voss explained that Council Finance had requested an updated on the status of Building on Basics (BOB).This dedicated quarter cent sales and use tax was approved by voters on November 2,2005 and expires on December 31,2015.In 2005,voters approved 13 specific projects with an estimated value of $56.2M. Karen asked why no inflation was assumed in 2005.John answered that,while Staff does not have data on why inflation was not included with all projects in 2005,policy does include inflation now.In 2006,Staff did apply an estimated inflation of 3.5%to construction projects.John noted that this was the first dedicated revenue project that included O&M and O&M was set for 7 years. John provided detailed summaries of each of the 13 projects,emphasizing that revenue is expected to exceed the forecast made in 2005 and all project commitments will be completed by 2016.Operating and maintenance (O&M)commitments will be provided through 2022.Though there was a shortfall in revenue in 2006 and 2009,this shortfall was mitigated by economic growth and interest earned. City ofFortColLins Ross asked why the O&M on the Senior Center Improvements was committed at 315M,but disbursed at 35GM.John Voss answered that he is looking into that change. The Mayor asked how City staff ensures that O&M is used correctly when it is appropriated but not used within the calendar year.John answered that this money is tracked and placed in a fund allocated to O&M. These funds are audited by McGladrey or by the City. Darin said that the story of these 13 projects should be told to the community.The Mayor agreed that messaging how these projects have been completed is important.She also asked that the rationale behind O&M be made clearer in BOB 2.0. General/Fund/Capital Improvement Policies Mike explained that staff is proposing a method for updating the remaining three financial policies.Staff seeks Council Finance’s concurrence on the recommended direction.Staff recommends combining the three policies into a single General Financial Policy,incorporating parts of these policies into other administratively approved policies (e.g.HR Administrative Policy)and moving some elements to a new CFO Finance Operating Policy. Mike explained that these policies as originally written were meant to be part of a budget policy,but were later adopted as the City’s Financial Management policies.In the updating these policies to be true Financial Management policies,Staff recommends categorizing the policies as 1)Financial Management Policies —Approved by Council,2)URA Financial Management Policies —Approved by Council/URA Board, and Financial Management Policies —Approved by City Manager or CFO. John Voss went through the General Policies,Fund Policies,and Capital Improvement Funds Policy, explaining staff’s recommendations for each.Mike asked if council was philosophically aligned with the proposed changes.Ross answered that he approves the method of change generally,but will appreciate more details after the changes are made.Staff will bring the updated policies to Council Finance later in 2014.Ross also asked that the policies that are not council approved be made public on the City’s webpage to ensure transparency.Darin and Mike agreed that,once finalized,these policies will be made public. Other Business Bob asked that Council Finance review the updates on the mall agreement. Darin explained that he will sign an amendment to the mall agreement with four minor changes.Mike explained that,of these four changes,two were minor changes and the other two were changes in wording for transparency and acknowledgement.The changes are as follows: 1.Approval for a 7.25 foot underpass ratherthan the originally planned for 8 foot underpass 2.Agreement that Alberta shall put $300k in construction savings into the activity center 3.Acknowledgement that the City manager will approve the agreed to tenant mix 4.Acknowledgement that Alberta has the discretion to move around unrestricted funds from the $SOM of bond money Darin will sign the agreement,which will allow Alberta to move forward with the bonding process.Alberta expects to close on the bonds by late September.Mike noted that the bonds are expected to close at 6.5%. With such a good interest rate,there will be a reduction in total debt service and the bonds will be paid off sooner.