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HomeMy WebLinkAboutMinutes - Finance Committee - 10/03/2024 - Finance Administration 215 N. Mason nd Floor Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com Council Finance Committee Hybrid Meeting CIC Room / Zoom October 3, 2024 4:00 - 6:00 pm Council Attendees: Mayor Arndt, Emily Francis, Kelly Ohlson Staff: Kelly DiMartino, Tyler Marr, Travis Storin, Denzel Maxwell, Teresa Roche, Jenny Lopez Filkins, Ginny Sawyer, Terri Runyan, Max Valadez, Joe Wimmer, Nina Bodenhamer, Drew Brooks, Monica Martinez, Kaley Zeisel, Brad Buckman, Dana Hornkohl, Dean Klingner, Victoria Shaw, Jill Wuertz, Zack Mozer, Randy Bailey, Trevor Nash, Garrison Dam, Jordan Granath, Logan Bailor, Renee Reeves, Dave Lenz, Jen Poznanovic, Jo Cech, Carolyn Koontz Other: Josh Yde, CPA, Plante & Moran, PLLC Timothy St. Andrew, CPA, Plante & Moran, PLLC Meeting called to order at 4:00 pm NOTE: The minutes from the September Council Finance Committee meeting will be distributed with the November meeting packet. A. Audit Results Randy Bailey, Accounting Director Trevor Nash, CPA, Controller Josh Yde, CPA, Plante & Moran, PLLC Timothy St. Andrew, CPA, Plante & Moran, PLLC SUBJECT FOR DISCUSSION Independent Auditors’ Report on 2023 Financial Statements Independent Auditors’ Report on Compliance for Major Federal Programs EXECUTIVE SUMMARY Plante & Moran will be presenting an overview of the Results of the 2023 Financial Statement Audit. This report covers the audit of the basic financial statements and compliance of the City of Fort Collins for year-end December 31, 2023. NOTE: The Annual Comprehensive Financial Report is available in print on request, and accessible online here: https://www.fcgov.com/finance/files/fy23-acfr-final-web-version.pdf?1724173021 GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Staff seeks input on areas of priority or concern, other than those established in this Report to the City Council, for matters of recordkeeping and/or the City’s internal control environment. Otherwise, there are no specific questions to be answered as this is a 2023 year-end report. BACKGROUND/DISCUSSION In compliance with Government Auditing Standards, the City undergoes an independent external audit on an annual basis. Plante & Moran finalized its financial statement audit and compliance report on June 29, 2024, and the firm is required to report the results of the audit to those charged with governance. Attachment 1 to this agenda item contains the full report, findings of note are summarized below: Identified Deficiencies (Attachment 1, pages 3-5): Other findings/deficiencies identified by the auditors but not rising to the level of a significant deficiency can be found in the Report to the City Council. Staff will provide a written response to the audit findings at a fourth quarter Council Finance Committee meeting. The final 2023 Single Audit report on Compliance for Major Federal Programs is expected to complete by the third week of October and will be provided to Council Finance Committee at that time. DISCUSSION / NEXT STEPS; GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Staff seeks input on areas of priority or concern, other than those established in this Report to the City Council, for matters of recordkeeping and/or the City’s internal control environment. Otherwise, there are no specific questions to be answered as this is a 2023 year-end report. Kelly Ohlson; I remember in the past, there were suggestions and ideas shared after previous audits. Travis Storin; in any given year, we will receive between two and seven verbal comments on things we can improve. These don’t rise to the level of a finding. It is a question of materiality. It is a judgmental position that we might take. We defer to our auditors if it is a material issue. Kelly Ohlson; slide 4 (see above) the last bullet – Does that mean there are things you are recommending but they don’t rise to a certain level? Are those things staff will end of doing? Tim St. Andrew; these are things that as we were going through the audit and testing, we noticed balances were off a little bit on these three items, but we did the analysis, we concluded that it didn’t rise to the level that was significant, but it is high enough that we needed to report it to you that we did have uncorrected adjustments. They are not reflected on the financial statements. Kelly Ohlson; so, what happens to these ideas – asking staff? Travis Storin; it would be kind of textbook that we are posting these. If you had a ‘no hitter audit’, there would be no findings on these schedules. A big lens for us is if it is going to affect a fund balance or not. That is a big determinant on whether it is something that would want to create some urgency around fixing. Tim St. Andrew; these are not findings – they are unrecorded adjustments but not significant enough balances to be findings. Randy Bailey; we prioritize all of these things. For example, the Tourism Improvement District, that was something that we did not include in any of our prior ACFRs. Because of this finding and the consult That we had, we included it in our FY23 ACFR starting this year. Going forward, we will operationalize that and it will be in our ACFR going forward. Kelly Ohlson; slide 6 (see above) – what is the specific definition of a Federal Single Audit? Does that mean you pulled out some things as we had more expenditures that $29.4M from the federal government in 2023. Josh Yde; this is money that was spent -you may have received some advanced funding such as APRA that hasn’t been spent yet. Any city or any entity that spends over $750K would be subject to a single audit. As part of the process, we receive a schedule of federal expenditures. There are strict guidelines that we must follow. The CIFA is our single audit plan and roadmap. We look at based on dollar amount, what the major programs are and then if they have had any issues in the last two years, that is how we decide which programs we are testing. We make sure we have the right coverage, depending on the facts of any year, we either have to do 20% or 40% coverage. Out of the $29M, we need 40% coverage. It is the same process every year, really grant specific and dollar specific which programs we test. Kelly Ohlson; if you were to grade how the organization is doing compared to other local governments. I just want to make sure we dot the I’s and cross the T’s. Josh Yde; I think you are doing very well, and you have a great team in place. Keep in mind that there has been a lot of change this year, on your end as well as a new audit firm and new auditing standards (GASB) that had a major trickle-down effect. The bar is low for findings, and it is more common than not to have findings. I would say overall, you are doing very well from a compliance to audit, preparation and readiness standpoint. Mayor Arndt; thank you. It is healthy to have audits. The Tourism Improvement District is new – this is our second fiscal year. That is why we switch auditors; you see new things and it is a healthy process that shows us ways to improve. Thank you for helping us be better. B. CCIP Project Options Travis Storin, Chief Financial Officer Ginny Sawyer, Project Manager Joe Wimmer, Financial Analyst SUBJECT FOR DISCUSSION Capital Improvement Quarter-Cent Tax Renewal EXECUTIVE SUMMARY The purpose of this item is to update the Council Finance Committee (CFC) on continued development into building a package of projects for the capital tax renewal. This renewal is targeting the November 2025 election. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What questions do committee members have regarding the current projects and/or timeline? 2. Are there projects the committee would recommend to remove or add? BACKGROUND/DISCUSSION The current Community Capital Improvement Program (CCIP) tax will expire on December 31, 2025. Staff is currently working to create a package to offer voters as a renewal in November 2025 for a tax that would run from January 1, 2026, to December 31, 2035. To date staff has: • Demonstrated the traditional use of this tax being implemented at approximately 50% transportation- related projects and 50% identified capital projects. • Shared lessons learned from previous tax measures. • Confirmed the desire that package projects serve a diversity of needs throughout the community and focus on projects identified and vetted by the public through planning processes. • Compiled and vetted potential projects submitted by departments. Timeline to date has included Council touch points at a February 2024 work session, March 2024 CFC, April 2024 work session, and July 2024 CFC. Proposed Council timeline going forward includes: October 3, 2024, CFC (scheduled) - November 12, 2024, Council work session (scheduled) - January/February 2025 CFC (to be scheduled) - May work session (to be scheduled) - July work session (to be scheduled) - July/August 2025 ballot referral (to be scheduled) This schedule also anticipates public outreach and engagement starting in early 2025. Potential Projects The proposed project list to date is attached. The list represents project costs far over what the quarter-cent tax would collect. Continued refinement on the list will include prioritization of projects through Council direction and public input, identifying scalable projects, and cost refinement. This list includes transportation-related projects and newly identified projects. A few specific projects and details of note:  Following the last CFC meeting, staff took feedback to look at which funding sources and which projects truly align in the parks and recreation area. Council also recently had a work session specifically focused on the use of 2050 tax. Based on these discussions, the Mulberry pool project remains in the 2026-35 capital sales tax list ($10M) with an understanding that multiple funding sources will ultimately be needed.  Staff has continued to vet the potential use of a $10M Affordable Housing Fund as the seed money for an on-going revolving loan fund. The overarching goal would be to create sustainable affordable housing funding and provide an ability to go “narrow and deep” with funding as opposed to “wide and shallow.” There are still many details to be determined and based on work and conversations to date it seems feasible to: - Issue a sales tax revenue bond against the $10M affordable housing fund dedication. - Bond proceeds of approximately $7.5M would be available in year one to loan to an affordable housing developer(s) at a favorable below-the-market interest rate. - Developer would pay back loan creating money for future loans and projects.  Further discussions with Operation Services, Culture Services, and the Museum of Discovery have potentially narrowed the scope of the downtown trolley building improvements into two specific activities: 1. Identify and complete necessary improvements to make the downtown trolley building “ready” and feasible for a yet to be determined use; and 2. Find temporary storage for the Museum artifacts to allow for downtown trolley barn improvements and the inventory and auditing of the objects. There is still work and refinement to be done on this project.  Additional project list changes since July CFC: o The following projects are no longer listed: - Lincoln Center Kitchen Renovation - Community Shared Commercial Kitchen - LaPorte Avenue Re-design o The following projects have been added - Timberline Recycling Center Improvements Naming Having common nomenclature on tax measures can be beneficial during public outreach and throughout the term of the tax when describing funding sources. Previous programs have included: Designing Tomorrow Today Project RECAP Choices 95 Building Community Choice Building on Basics And the current program: Community Capital Improvement Program (CCIP) Considerations for the renewal are listed below. Capital by Design Capital Improvement Tax Quarter Cent Capital DISCUSSION / NEXT STEPS; GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What questions do committee members have regarding the current projects and/or timeline? 2. Are there projects the committee would recommend to remove or add? - Kelly Ohlson; naming ideas - names matter – the morale of the story – my history POST 2001 – 1994 tax- lost 60/40 – changed called it Open Space passed 65/35 - People don’t know what capital is – Community is far better than Capital - Community By Design Ginny Sawyer: at this point in the game, are projects all scalable. The work that we will continue to do is in identifying how much scalability will still leave a project viable. We will try to refine for Council as we go. Prioritizing and understanding is our march forward as we go…. Emily Francis; I would like to see Soft Gold Park refresh on the list for this – it needs to be redone Dean Klingner; can you share your vision? There are improvements at Soft Gold that could be 2025 eligible. Emily Francis; it is a poorly designed park. It is not user friendly and how it abuts to the natural area has caused a lot of environmental issues with for example, folks camping there. It is conducive to illegal behavior due to its location - no homes close. The design and environment - Dean Klingner; the team has been hearing that feedback – even in the 2050 conversation, we have heard a lot about the taking care of what we have component as parks age. What you are saying about Soft Gold resonates with our team in terms of there are enough changing factors going on that it will rise to the top. We are confident in that. What I would say today is that one way or another, we will do some thinking around whether 2050 or CCIP is the best option or a combination strategy. It may be that we just extend what we are thinking about for the north side of the river. Emily Francis; Hickory Spur is practical but is kind of depressing - except for when the goats are there Emily Francis; am I correct that at one time we adopted a plan for a new City Hall? Travis Storin; the Civic Center Master Plan is adopted. Emily Francis; are we considering any funding for that? Ginny Sawyer; I would say that we are, and the removal of the downtown park shop is a key chess move in advancing the Civic Center Master Plan and the Trolley Barn as well but not to such a large extent. We have to move the park shop. Emily Francis; I know that is a gap in funding for Elizabeth Max. Was that considered as part of this since it did not have an identified funding source? Kaley Zeisel; we are still trying to identify all of our funding sources; as Travis said, the 2050 tax is one, also having conversations with CSU about partnering and looking at other grant funding opportunities. In terms of CCIP, we have 88 bus stop upgrades Travis Storin; it may be fair to characterize CCIP as kind of a backup plan. I think we are in the $2-4M gap range depending on how much 2050 contributes. Monica Martinez; we do think 2050 will cover a lot of it –there is also this question around timing. We have not yet received the Small Starts funding, our application is in but if we do not get that funding, that will also change the picture. Emily Francis; could we put it on the list just so I know it is on the radar. Emily Francis; did we do Linden St? Monica Martinez; yes Emily Francis; as we talk about 15-minute communities. I know we have spent a good amount downtown, but I would also like to see investment in community centers. Have we thought about CCIP as a way to do that? Mayor Arndt; a large share of that pie chart (slide #8) is Active Modes Travis Storin; our precedent has been that roughly 50% of the tax going into the transportation system. I would applaud our engineering team – they have allocated that almost entirely around active modes and accessibility concepts. Kelly Ohlson; slide 5 (see above) Capital Tax - Lessons Learned Why are we now allowing flexibility? We have never needed flexibility because we built what was promised every single time. Travis Storin; when we talk about flexibility, let’s just say we penciled in $5M for the trolley barn and then a historic foundation produces a grant for us and – the ballot binds us to that $5M, even if we don’t need it anymore - so we don’t have flexibility for spend in that type of use case. Kelly Ohlson; maybe you refine the final language that would allow you to do those things so that future staff and Council will know that that flexibility means. Dean Klinger; if you look at the current 2016-2025 and look at the mix in there and you have a specific named projects like SE Community Center, and another half if pedestrian programs like bike overpasses and underpasses – not naming a specific project – we have a really impressive track record of taking that specificity and going out and matching grants, doing as much as we can with that money. So, it is a balance between naming the types of improvements – not detailed – balance between having some projects on there that are very clear in name versus some projects that are more like programs. Affordable Housing is the other one on there. Kelly Ohlson; the pie chart slide #8 (see above) Culture is 7% which is almost as large as Housing and Environment - they got a small percentage. Then, if you look at Transportation / Active Modes and Parks and Recreation that equals 82% Big problem for me Travis Storin; know that the common denominator for that is $166M, so a $10M investment in Housing is going to reflect on there at 6% - If it were to remain at $10M, when we narrow this down with the full Council to $100M then it is 10% investment Mayor Arndt; it is a capital tax, so besides the Carnegie Center, do we have more capital Cultural expenses – in general I don’t associate Cultural Services with capital projects Emily Francis; the point that Ginny is trying to make is that larger capital expenses are seen in Transportation and Parks and Recreation – I see your point Kelly that it takes up a lot of the pie chart especially when we just passed a tax for Parks and Transportation. Kelly Ohlson; my concern is just where the money is being spent – for me it is too heavy there Wildlife and wildlife habitat-less habitat damage because you are allowing controlled access - there is no reason in 2024 and beyond that we cannot have a net gain in wildlife and habitat and doing these same things about access. We should have a net gain on habitat and wildlife. Thank you for looking at the Timberline Recycling Center – that was a good idea to take that inhouse. Tough when it is seven people plus staff – going to get challenging and difficult. Streetscapes – prioritization – for this amount of money – scalable – if I had to cut, Streetscapes don’ t make it through the sieve for me. Something else would fall off, a dog park, a bike part, the other park that was mentioned, etc. Mulberry Pool, the housing fund – this is going to get tough. Emily Francis; streetscapes, are lower for me as well. Mayor Arndt; I did have a question about dog parks. Have we ever tried to reimagine what they should be like? So many other cities have great dog parks Central Park in NYC – Cherry Creek in Denver ($20 tags). Gravel and fencing - I can’t go there. Dean Klingner; that is good feedback. We are definitely aware of the importance of dog parks. They are very popular and there is a demand for more. Emily Francis; they are heavily used as it is the only place to take them. Kelly Ohlson; 10% off of the big chunk items in transportation which would still be enough to fund 3-5 more projects. Travis mentioned that is historical precedent, but it not required by any rule or law. To consider for future Work Sessions – what 10 – 20% off would look like and what it would free up. Things like the Farm, dog parks, the Trolley Barn would never get money through a budget system. This is how that gets funded. Things that fall out of the normal process. Consider trimming some of the ‘fun projects’ down too. It is about what we choose to prioritize – final decision comes down to the 7 of us. If we do a good job, it will reflect the community. Mayor Arndt; I am so appreciative of the careful work, the intentionality, transparency, internal rigor that are part of this process. That is what makes this successful – the trust you build over time is impressive. I am very proud. C. Transfort Appropriation Monica Martinez, Sr. Manager FP&A SUBJECT FOR DISCUSSION Transfort Supplemental Appropriation EXECUTIVE SUMMARY This supplemental appropriation request addresses a clean-up of grant budget projections to align with confirmed award amounts as well as an anticipated need for additional budget in order to continue current Transfort service levels through year end. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED • Does Council Finance Committee support an off-cycle appropriation of federal grant revenue? BACKGROUND/DISCUSSION Yearly Transfort Reconciliation Process The BFO cycle requires that revenue be projected up to three years in advance of actual receipt of revenue. For Transfort, this means that yearly FTA grants such as the main 5307 operational grant and the paratransit 5310 grant, are projected using estimates based on prior year amounts, anticipated trends, or anticipated changes to the federal funding bill. Confirmed award amounts for each grant then typically become available in the spring of the award year. Due to this timing, Transfort will require a yearly reconciliation process that appropriates confirmed award amounts for grants used to reimburse that City fiscal year’s expenses. This supplemental appropriation will update award amounts for 5307 and 5310 grant amounts. Notably, the amount to be appropriated for the FTA’s FY23 5307 represents the entirety of the grant. This grant had previously been anticipated for use during the 2025/2026 BFO cycle but will now be used for the 2024 City fiscal year. This places Transfort on a healthy reimbursement track wherein one 5307 operational grant is used per year and that FTA grant year is lagged one year behind the City fiscal year requesting reimbursement. Transfort Budget Update Transfort’s 2024 operational budget is currently appropriated to $22.3M. This includes the $1.2M in 2050 Tax that was approved during the 2024 Mini-BFO process. At this time, it is anticipated that to end the year at current service levels Transfort will need an additional appropriation of $1.3M. This additional appropriation will be funded by approximately $900k in grant revenue that is available due to award amounts increasing significantly since initial budget estimates. The remaining $400k will be funded by unanticipated grant revenue from prior year reimbursements. The main drivers in expense increases are listed below: 1) $250k: 2023 hourly bus operator conversions and the addition of a transit supervisor position. These increases were made once staff identified the availability of grant funding in both 2023 and 2024 due to low budget projections. 2) $350k: increases to vehicle repair services costs including and $85k repair on a bus damaged three years ago 3) $200k: snow removal costs due to the loss of the advertising contract 4) $400k: bus-stop-to-bus-stop due to continued discontinued service on routes 11 and 12 5) $100k: contingency It is anticipated that the 2050 tax portion of Transfort’s budget will see savings of approximately $.6M. This is because the appropriated budgets represented a full year of expense while the necessary updates to salaries were not effective until July of 2024. As the mini-BFO offers outlined specific costs intended for the 2050 tax, staff intends for unused funds to drop back into 2050 reserves instead of allowing them to fund other Transfort operational expenses. DISCUSISON / NEXT STEPS: GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Does Council Finance Committee support an off-cycle appropriation of federal grant revenue? The committee supports the off-cycle appropriation of federal grant revenue. Other Business 2025 Council Finance Committee Meeting schedule. Committee confirmed that we are to continue with the same meeting cadence for 2025. Hybrid meetings will take place on the first Thursday of the month from 4-6 pm. Meeting Adjourned