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HomeMy WebLinkAboutMinutes - Finance Committee - 02/10/2014 -C .Finance AdministrationI0215N.MasonFor~’t_CoLLins !&0522 ____________________97Oc221.6782~tax Council Audit &Finance Committee Minutes 2/10/14 10:00 to 12:00 CIC Room Council Attendees:Mayor Karen Weitkunat,Bob Overbeck,Ross Cunniff Staff:Mike Beckstead,Ed Bonnette,Mike DeKock,Bruce Hendee, Randy Hensley,Tom Leeson,Sandra O’Brian,Gerry S.Paul, John Voss,Wendy Williams,Katie Wiggett Others:Dale Adamy,Beth Flowers (AIR),Bruce Freestone (AIR), Gerry Horak,Kevin Jones (Chamber of Commerce),Doug Leavell (AIR),Eric Sutherland Approval of the Minutes Mayor Karen Weitkunat moved to approve the minutes from the January27 meeting.Bob Overbeck seconded the motion.Minutes approved unanimously. *Due to the tightness of timing,Mike Beckstead asked that Council Finance Committee adjourn their meeting after the first two topics and adjourn after the URA Meeting.Council Finance agreed to this change. AIR Proposal Bruce Hendee presented a supplemental appropriation request by Arts Incubator of the Rockies (AIR).AIR submitted a proposal before,but was asked to come back with a new financing plan.However,City Council did elect to raise funding for AIR in 2012/2013 above the line in the budget process.The Economic Health Strategic Plan calls for increased support of Arts in the community,and Sustainability Staff believes AIR’s program aligns with the Economic Health Strategic Plan. AIR was created in 2011 through a partnership between Beet Street,the City of Fort Collins and Colorado State University’s School of the Arts.AIR is an ecosystem that partners creative and business professionals to furnish artists,businesses and communities with the tools and support they need to ultimately succeed. Located in the historic Carnegie Library Building in downtown Fort Collins,AIR has the potential to serve artists and creative professionals in the ten Intermountain west states. 0 From 2011-2013,AIR has operated at a loss.However,they expect that with help,they can start becoming self-sustaining in 2014.Below is a summary of their request: •AIR request an additional $150,000 to be paid out in three payments o $75,000ql2ol4 o $37,500Q2 2014 o $37,500cz3 2014 •Funding will be secured by an agreement between the City and AIR that outlines the conditions of funding •AIR has a commitment for $75,000 in matching funds already secured Staff gave Council Finance several items to consider: •AIR spent $235 K in 2013 for a website,a questionable use of funds •This request occurs out of sequence with the City’s normal budgeting process •The 2014 City budget appropriated $60,000 to support AIR activities in 2014;this money has already been paid and was used to pay off 2013 debts •The additional $150,000 request only addresses AIR’s funding needs for the first quarter of 2014 •The Harvests proposal is for $239,000,a substantial amount •The AIR service area includes a 10 state Intermountain region •$2 and $3 million 3-year ramp-up period needed to attain self-sufficiency Bruce also noted that there are many positives to helping AIR succeed.There is a potential for Fort Collins to become a cultural hub and a potential for new life for the Carnegie Building. Bruce said that AIR’s need for funding is critical,and their ability to succeed should be apparent by end of Qi 2014.Staff wants to be diligent in monitoring any program the City aids financially,so has set up funding conditions for AIR.Staff recommends adoption of an appropriation Ordinance subject to these conditions: 1.AIR staff will provide a timeline of activities,deliverables and performance milestones acceptable to the City for 2014. 2.Distribute City funds in quarterly payments. 3.All payments must be matched $1 for every $1 from other verified sources prior to distributing City funds. 4.City funds may only be used to support AIR. 5.AIR staff must meet with the Economic Health Office on a monthly basis. 6.AIR finances will be reviewed monthly by the City Finance department. At any time,if one of the above conditions is not met the City reserves the right to halt all payments from this appropriation.In addition,the funding of AIR under this appropriation will be secured by a grant agreement or similar document stating explicitly the activities funded,deliverables to be provided,and performance milestones to be achieved by AIR. Ross then asked if Staff truly recommends adopting this proposal.Bruce answered that there are many concerns;however,Economic Staff do believe there is value in AIR’s program and want to back the pairing of art and business. r r ins Mike Beckstead said that looking at the proposal purely from a financial perspective,he has three questions: 1.Why,after two years,does AIR need another quarter to know whether it can become self- supporting? 2.With many other competing needs for the money requested,is this truly the best investment? 3.How much additional money will they need over the next two years? Mike concluded that there is clearly a rational for supporting AIR,but there are many concerns and cautions as well.Bruce responded that it is the innovation of AIR that Staff supports funding,and innovation is risky. The Mayor asked what the City’s level of financial oversight has been with AIR in the past when we’ve loaned them money.Bruce replied that AIR had not been sending any financial reports in to Finance or Economic Development until recently when the City did an in-depth review of AIR’s financials.The Mayor said that the purpose of the money we loan to AIR in the future need to be clear and their use needs to be clearly reported. Ross asked to see a report of where the money from the past three years has been spent.He is concerned because opportunity cost cannot be seen outside the budget cycle and asked that footnotes be included showing where the money is going and how AIR is held accountable. Bob asked if the set of conditions being proposed for AIR have been used in the past.Bruce said that they are new and are the result of negotiations with the applicant.Bob asked what happens to the appropriated money if the applicant is not able to meet all conditions.Bruce replied that the money would stay in the innovation fund. Ross noted that he is for AIR’s basic business model,but he wants to ensure financial accountability. The mayor agreed;the City supports the arts,but it also is enforcing a good policy of accountability that will help avoid future problems.Bruce noted that these kind of conditions will become standard. Council Finance supports moving forward with negotiations with AIR. TIF—Exempt Tax Districts Analysis The URA has applied TIF financing to eight projects in the North College district and two projects in the Prospect South district.Mike Beckstead presented staff’s analysis on the effects of TIF on the viability of projects,public benefits acquired and District Taxing entity impact. Mike walked through a summary of all deals generating TIF,pointing out that the number for RMI has been revised because TIF was overestimated for that project.With the exceptions of RMI and Summit, the percentage of total URA cost to total increment has been below 75%.Through the City’s investment in these deals,the City reaped significant public improvements and benefits.Citing improvements such as intersections,roundabouts and street improvements,Mike said that TIF acts as public improvement funding,not just as a developer incentive. 0 Cftyof ~Eortc&~s Staff has been asked to examine the hypothetical scenario of the projects having been completed without TIF.In total,the ten projects are anticipated to collect $24,066 in TIF,and that money would have gone to other taxing entities if the projects could have been completed without the TIF support. Mike emphasized the importance of realizing that this scenario is hypothetical as it is improbable that the projects would have occurred without TIF.Mike also showed that,if the URA used the DDA’s current 50%model,available funding would be have been reduced by $14M,again assuming that the projects would have been completed at their current level without TIF support.While we cannot know what would have happened if the funding had been reduced,we do know that 4 of the 10 projects used more than 50%.North College road improvement funding of $3.8M would not have been available and 5 large projects that generated public benefit would not have been funded with a 50%share model. Ross asserted that we can only say that the projects would have been impacted without TIF,not that they would have failed,because we cannot know what would have happened. Mike noted that the URA has implemented the following significant process improvements: •Reorganization allowing for an independent review by Finance •Changes to the method for estimating Tax Increment generated by a project —County Estimate of Value as basis •Increased consultation with outside legal counsel •New financial parameters and pay over time approach Ross asked that RMI and Summit be highlighted on slide 4 to emphasize that they are not models for future projects.Ross also asked that the term “Place-Making”for public improvements be changed as it does not accurately describe all the improvements listed.Mike said that they can change the term “Place-Making”;it had been used to emphasize the URA’s blight remediation role.The Mayor wanted to keep the term because it speaks to City’s larger vision.Ross suggested that it remain but be used only to label improvements that truly fit the description of place making. Ross asked how the URA tracks whether these improvements actually get done.Tom Leeson answered that the developers are not reimbursed until they have provided reports.While Ross would like to see a 50%share model used eventually,he said that he feels it is the smaller tax districts that are most strongly affected by TIF and that 50%share with only these smaller districts could be used in future projects while still achieving excellent public improvements. The Mayor commended Staff on the many improvements to TIF and URA policy.The City is learning how to use this tool effectively and,even though mistakes have been made in the past,Staff can tell a positive story of growth. Sustainable Purchasing Update Gerry Paul said that the City of Fort Collins is a recognized leader in the sustainable purchasing arena and is working to develop processes,practices,policies and metrics that will increase the percent spent in sustainable materials,products and services.In March 2012,the Green Purchasing Institute completed an evaluation of the City’s Sustainable Purchasing practices and program.At the time,the City did not have a formal Sustainable Purchasing Program,so the 2013-2014 Purchasing Budget included a dedicated resource to develop a comprehensive Sustainable Purchasing program based on the input from the Institute and best-in-class peers. City ofFortCoLLins Gerry walked through the following 2013 sustainable Purchasing Accomplishments: Created Foundation for Metrics and Reporting of Spend Analytics •Established Definitions for Green/Sustainable Purchases •Published Green/Sustainable Purchase Criteria Checklist •Developed Abbreviated Commodity Code List to Capture Spend Categories •Initiated P0 Coding as Sustainable V/N and Assigned Commodity Codes •Benchmarked with Best In Class Peer Agencies •Mandated Office Depot Business Solutions for all Office Supplies —October 2013 •Total Green Spend increased: •01—31% •02—34% •03—37% •04—43% •Initiated 30%Post Recycle Content (PCR)Mandate —October 2013 •PCR Purchases increased: •01—57% •01—67% •03—70% •01—85% •Launched External Sustainable Purchasing Web Site with Enviro Portal Links •Piloted DocuSign Electronic Agreement Routing and Signature •Enrolled in the State Electronics Challenge &submitted 2013 Benchmark Report Bob asked Gerry about the dynamic reduction in Commodity Codes,from 270 to only 37.Gerry replied that we’re in a state of evolution,moving toward the industry standard.This reduction of codes makes it much easier to track green spending and set goals. Gerry also noted that,while we are enrolled in the State Electronics Challenge (SEC),we are not yet to bronze level.We are working with the departments to improve,using SEC standards. Gerry presented Purchasing’s 2014 Work Plan: •Implement sustainable Purchasing reports using newly developed iDE commodity codes •Target 3-5 high impact commodity codes to convert to greener alternatives —track progress •Incorporate Sustainability &Triple Bottom Line into RFP Evaluation •Complete DocuSign pilot and deploy for all Purchasing contacts &renewals •Standardize Acquisition &Use of Printers/Copiers Across City •Develop Purchasing literacy course for City wide training i.e.Sustainable Purchasing 101 Ross said that he is glad to see Staff will be standardizing acquisition and use of printers and copiers as that will undoubtable have a large impact in cost savings and energy reduction.Mike Beckstead added that Purchasing will provide 3 levels of copiers/printers to allow for some flexibility based on individual need.The Mayor thanked staff for their report and the many improvements. $~QiHn~dLins Briefing on Forming a Parking Fund Rand Hensley explained that parking financial transactions currently are accounted for in the City’s Transportation Fund,a fund which includes other transportation departments such as Streets,Traffic, Engineering and FC Moves.Transportation Fund revenues come primarily from taxes and fees,such as General Fund taxes,the Highway Users Tax Fund,development review fees,and others.However,while the Parking department used to receive some funding from those sources,is it now funded entirely from revenue generated by Parking operations. The ability for Parking to be self sustaining was made possible in 2010,when revenues from Parking operations became sufficient to pay for parking-related operations and maintenance expenditures. Because Parking is a self-sustaining operation,a recommendation was included in the recently- completed Parking Plan to move parking-related financial transactions out of the Transportation Fund into a new fund exclusively for Parking. Randy presented the following benefits of forming a Parking Fund: 1.Provides a cleaner,more transparent method of demonstrating that Parking is self-funded 2.Helps facilitate the evaluation of Parking offers in the Budgeting for Outcomes process 3.Helps the public better understand where Parking revenues are being used and the services they provide 4.Accumulation of unused revenues in a Parking reserve fund will make it easier to fund and justify one time major maintain and repair projects in parking facilities Mike Beckstead added that there is a parking problem in Old Town,and having a separate Parking Fund will help us identify how to raise future revenue to fix that problem.Ross noted that the transparency of such a fund would show the public that Parking Funds do not go into the General Fund. Ross asked why revenues in 2013 decreased,but expenditures did not.Randy explained that the reserves were used for special projects.To make that clear,Staff will break the revenue down to 2 categories:revenue reserves and straight revenue. John Voss explained that this fund can be created by the Chief Financial Officer without Council vote. Council Finance Committee asked that the fund still be put on the Council Work Session agenda or in a Staff Report to ensure Council and the public are aware of the new fund.