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HomeMy WebLinkAboutMinutes - Finance Committee - 10/21/2013 -_____C .Finance Administration____I 0 215N Mason——2~FIoorI-Ort CoLLins Fort Collins,CO 80522 970.221.6788~970221.6782-fax Council Audit &Finance Committee Revised Minutes 10/21/13 10:00 to 12:30 CIC Room Council Attendees:Mayor Karen Weitkunat,Bob Overbeck,Ross Cunniff Staff:Darin Atteberry,Mike Beckstead,Josh Birks,Marty Heffernan,Mark Jackson,Tom Leeson,Jessica Ping-Small, Peggy Streeter,Steve Roy,John Voss,Katie Wiggett Others:Dale Adamy,Kevin Jones (Chamber of Commerce) Approval of the Minutes Bob Overbeck moved to approve the minutes for the September16 meeting.Mayor Karen Weitkunat seconded the motion.Minutes approved unanimously. *For timing purposes,the items were not addressed in the order they appeared on the agenda. Revenue Policy Review Jessica Ping-Small noted that the most significant change to the Revenue Policy is the inclusion of 5 revenue principles that give staff and City Council a foundation for making sound financial decisions that will provide the citizens of Fort Collins a diverse,stable and fair revenue stream equipped to provide the services necessary to keep Fort Collins great.She presented the followings principles: 1.Maintain a diverse revenue base 2.Maintain a stable revenue base 3.Cultivate revenue sources that are equitable among all economic levels 4.Generate adequate revenue to maintain core service levels 5.Maintain healthy reserves These principles were presented to Council Finance and the Futures Committee in 2012 and again to Council Finance in January 2013 as part of the ongoing revenue diversification study.Staff has incorporated suggested modifications in the policy. Mike Beckstead noted that the reason a “three-legged stool”approach was said to not be practical in Fort Collins is that municipalities that do incorporate such an approach depend on high property tax or a city income/occupational tax.Without those two taxes to depend on,across the Front Range, municipalities commonly depend on sales and use tax.Fort Collin’s revenue from sales &use tax is in 0 0 cftyof ~flCç~~s the lower end of the middle compared with other Front Range communities.Staff would like to maintain and continually improve Fort Collins’diverse revenue base. On principle 3,Ross Cunniff asked whether the City should consider removing sales tax on food to be more equitable.Mike Beckstead referred him to a recent memorandum that went out to council explaining the importance of sales tax on food and explaining the rebates we offer to make the tax more equitable to low income residents. Ross Cunniff suggested adding a sixth principle:“Fees for Service are fairly born by those who use those services.”While this guideline is addressed in the policy,it could be highlighted.Ross also asked to see the study on the impact taxing services would have in Fort Collins.Jessica will provide the study to Council Finance.Ross then asked whether tax on internet sales was moving forward as a possibility. Jessica replied that it is being looked at nationally,and staff has estimated that,if internet sales are taxed,it will generate an additional $3 M in revenue.The impact is not overly large because several large companies such as Wal-Mart already collect sales tax on their online products. Financial Management Policy Format and Introduction Mike Beckstead said that staff is in the process of updating and consolidating all the financial policies and bringing them to Council for approval.Staff has drafted an introduction to the Financial Policies that states Council’s ability to deviate from policy when it is in the City’s best interest.An example of the need for such a provision is seen in the current matter before the Council concerning the interest rate proposed on a loan between the City and the URA.A deviation from the current investment policy is proposed to Council because of short fall in estimated revenue and an increase in interest costs from the September 2011 estimates.Steve Roy added that Council has always had the ability to make an exception to policy per City Charter;however,it is advisable to incorporate and institutionalize language that allows Council to make those exceptions. Bob Overbeck said that he is concerned about there being too many exceptions or amendments made to City policy.The best practice would be to address any mistake made and insure that that mistake not be made again.Mike replied that Staff has learned many lessons through the Capstone Project. Evidence of what staff learned can be seen in the new policy that Josh Birks drafted for TIF’s that establishes clear boundaries for using that financing method.Also,staff now bases rates off of the County’s estimate of value which factors in revenue generation rather than the project cost.Council Finance appreciates staff’s transparency and willingness to continuously improve. Bob Overbeck noted that he would like to see the lessons learned from TIF for RMI and Capstone in writing.He also requested that in the future,Staff present stress tests for financing projects presented to the Council Finance Committee.Bob asked if other organizations were public about mistakes that they made in TIF projection,sharing in order to help others learn from their mistakes.Josh replied that since URA law is state specific,the number of URA’s we’d be comparable to is limited;we are currently involved in state groups that discuss issues with URA’s. New Fees Review Jessica Ping-Small noted that street maintenance is currently funded primarily through sales tax including the designated Y4 cent sales tax that has a sunset date of December 31,2015 and the Keep Fort Collins Great sales tax.Although sales tax initiatives have been supported multiple times by citizens, cityof~rtC~Lins relying on an expiring sales tax has risks such as revenue variability and potential expiration.Staff has explored the feasibility of a Street Maintenance Fee (SMF)to replace the ¾cent designated sales tax. Jessica also noted that Park and Trail Maintenance is currently funded though the General Fund and 5735K of Conservation Trust Funds that were diverted from trail construction in due to funding shortfalls.Staff has drafted a Park Maintenance Fee (PMF)to generate $735K annually which would allow the Conservation Trust Funding to go back to trail construction. Ross Cunniff noted that he certainly wants to fund Parks without using the Conservation Trust. However,discussing the two possible fees together may be confusing,so Ross suggested that Council Finance focus first on the more urgent matter of the sun setting street maintenance tax.Council Finance agreed that they want to discuss Park Maintenance separately at a later date and that they would like to be brought a broader discussion with all potential funding options. Mike Beckstead called attention to the example fee breakdown for the Street Maintenance Fees.A triple bottom line analysis showed that this fee would be very hard on small businesses such as fast food businesses which would be required to pay $10,334 annually.Ross Cunniff noted that the cost of the fee would be passed along to the customer,in that way non-residents would still pay the fee just like they currently pay the tax. Council Finance discussed various alternatives to the fee including creating a fee specifically for parks (not limited to maintenance)and building sidewalk maintenance into the trail fee Darin concluded that when the ¾cent tax expires in December 31,2015,the City has 3 options: 1.Continue the tax another term 2.Vote to continue the tax in perpetuity 3.Move to some other funding mechanism such as the proposed fee. Ross Cunniff noted that he would like to see more alternatives to the ¾street maintenance tax.If we do opt for a fee,we need to ensure that there is equity between users and nonusers.Bob Overbeck asked that staff look at the possibility of putting a fee on parking permits or yearly vehicle licenses.Ross Cunniff asked for an estimate of how much sales tax revenue comes from out-of-City users. Council will discuss the options at a work session in November.Staff will incorporate Council Finance’s suggestions into the presentation for November. Updates Mike Beckstead noted that the Long Range Financial Plan has been moved out to 2014 given other priorities in 2013.Completing this task will remain on Financial Services work plan but will be delayed. A matrix the details council priorities identified and discussed at the May Council retreat is being developed by Diane Jones and will be presented to the council at the November retreat.This matrix will illustrate how each of the priorities identified are addressed within the current budget,through the budget revision process or through staff goals. Staff will bring an appropriation for the Flood on November 19.The appropriation is still in development staff anticipates the total appropriation will be around $2.7M with funding provided by FEMA and the state covering all but approximately 5350K. 0 Cityof ,E~~Ccfflns Foothills Mall Financial Review Mike announced that there will be an Open House at the Mall on October30 from 4-7 p.m.All are welcome to attend. He then explained that the planned development at Foothills Mall associated with the Redevelopment Agreement and incentive package approved by Council on May 7,2013 has several modifications and revisions that will be going back to the Planning &Zoning Board in November 2013 and January 2014. These changes will have a minor impact on the financial incentive package. In summary,the deal is intact,there is no change to the incentive package,and the financial return to the City is substantially unchanged.Details from the discussion are highlighted below: 1.The Foothills Mall has reduced in size by approximately 10%. 2.The opening of the Mall is delayed approximately 1 year. 3.The Foothills Activity Center is planned at 18K square feet and to be located in between Macy’s and the planned parking structure. 4.Estimated sales per square foot have increased from $350 to $378 based on known tenants that will occupy the Mall. 5.The incentive value of $53M to support the public improvements is unchanged. 6.The par value of the bonds has declined slightly from $73M to $71M. 7.The maximum bond payment amount is unchanged at $180M 8.Sales tax remitted as part of the Sales Tax Revenue Pledge is unchanged at $9M. 9.Net new sales tax revenue has increased from $108M to $117M. Bob Overbeck asked that the bullet on slide 3 and slide 18 should be changed to “Maintained cap on maximum bond payments at $180 M =x in interest.”Bob also asked that staff highlight the issuance and drop dead dates for the bonds. This information will be brought to Council at the December 3 meeting. Next Steps Staff will add the tentative dates for all future policy updates to the long-term planning calendar. Staff will bring funding options for Park and Trail Maintenance to Council Finance as a separate discussion in the near future.Staff will also incorporate Council Finance suggestions to the Street Maintenance Fee presentation before bringing it to Council in November.