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HomeMy WebLinkAboutAgenda - Mail Packet - 7/21/2015 - Council Finance Committee & Ura Finance Committee Agenda - July 20, 2015 - Cafr Online At Http://Www.Fcgov.Com/Finance/Pdf/Cafr-2014.PdfCouncil Finance Committee & URA Finance Committee Agenda Planning Calendar 2015 RVSD 07/13 mnb July 20 TOPIC TIME WHO CFC Auditors Report 30 min T. Storin K. Smith DDA Bond Interest Adjustment 30 min M. Robenalt Pension Liability Funding 30 min M. Beckstead URA Aug 17 TOPIC TIME WHO CFC 2016 Budget Revisions 30 min L. Pollack Use Tax Utilization Policy - Discussion 30 min T. Storin URA Sept 21 TOPIC TIME WHO CFC Annual Adjustment Ordinance (clean-up) Review 15 min L. Pollack Downtown Parking Structure Financing 30 min M. Beckstead J. Birks URA Oct 19 TOPIC TIME WHO CFC URA Future Council Finance Committee Topics: Revenue Diversification - Sales Tax on Services, Admissions Tax, Cloud Service Tax Future URA Committee Topics: Finance Administration 215 N. Mason 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com AGENDA Council Finance & Audit Committee July 20, 2015 9:30 a.m. to 11:30 a.m. CIC Room – City Hall Approval of the Minutes from the June 23, 2015 meeting 1. Auditors Report 30 minutes T. Storin K. Smith 2. DDA Bond Interest Adjustment 30 minutes M. Robenalt 3. Pension Liability Funding 30 minutes M. Beckstead Finance Administration 215 N. Mason 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com Council Audit & Finance Committee Minutes 06/23/15 2:30 – 4:30 p.m. Community Room Council Attendees: Mayor Wade Troxell, Gerry Horack, Ross Cunniff Staff: Mike Beckstead, Jeff Mihelich, John Duvall, John Voss, Josh Birks, Jessica Ping-Small, Travis Storin, Peggy Streeter, Nancy James Others: Kevin Jones – Chamber of Commerce APPROVAL OF MINUTES Ross Cunniff made a motion to approve the May 18, 2015 Council Finance Committee minutes. Gerry Horack made a second to the motion. The minutes were approved unanimously. Mike indicated that he will be deferring the July 20th calendar item – Long Term Revenue Diversification due to Jessica leaving her position on July 3rd; she has accepted a job with Advanced Energy. The posting for her position will be going out later this week or early the week of June 29th. EXEMPT ORGANIZATION – POTENTIAL CODE UPDATES Chapter 25 of the Municipal Code allows organizations that meet the definition of charitable, per city code, to purchase tangible personal property for use in the organizations’ activities free from city of Fort Collins sales and use tax. Recently, Colorado case law was discovered that may have a substantial impact on staff’s interpretation of the charitable organization definition. Staff is recommending City Council consider amending the code to mitigate the impact of the case law to a substantial number of the city’s 300 exempt organizations. The general direction sought and specific questions were proposed to CFC: • Does CFC support potential code changes to amend the definition of charitable organization? • Does the CFC support one of the options presented by staff? The current Code allows the entities exemption from paying sales and use tax on purchases but does not exempt them from collecting sales tax if selling tangible goods. 2 Issue to Address: • In fall of 2014 staff denied an application for exemption based on definition. • During appeal process, City Attorney’s Office discovered a ruling from the CO Supreme Court: o Definition of charitable organization the same as Fort Collins o CO Supreme Court interpreted definition differently than staff has historically Impact of Ruling: 23% (70) of City Exempt Organizations would no longer qualify under existing definition. Staff feels that this would have a big impact locally, thus is requesting that a review be made to the current code and consider the following options: Option 1) No code change Option 2) Redefine “charitable organization” to align with the past application of the definition Option 3) Amend code to exempt any religious or charitable organization that has been granted tax exempt status by the state or eligible for tax exemption under state law. Secular charities and religious organizations have to be treated equally by definition. Moving forward, there are pros and cons in regard to each option. Staff’s recommendation is to take the 3rd option, which would amend code to exempt any entity granted tax exemption from the State: • Allows existing organizations to retain exemption • Supports local charitable organizations • Reduce staff time and subjectivity of definition • Simplified process for charitable organizations • Diminishes confusion for retailers After discussion, it was determined that CFC would take staff’s recommendation to take Option #3. John Duvall stated that by amending the code to include the state’s definition, any entity that meets the City’s definition of the code will also meet the state’s definition. When the state amends their code, the City will then have to amend its code as well. 2014 YEAR END FINANCIAL HIGHLIGHTS A recap of revenue, expenditures and debt was reviewed by CFC. The financial condition of the City continues to be healthy, as reported by John Voss. Revenues increased as did expenditures. The population continues to grow, and with it, a demand for more services. Outstanding debt continues to decline. There are two broad categories in accounting – Governmental Activities and Enterprise Activities. Governmental activities are described as those activities that do not lend themselves to be fully funded by User Fees and are wholly or partially tax supported (Transportation, Police, Fire, Parks, Natural Areas, etc.) Enterprise activities are 3 those activities that are 100% funded by User Fees (Light & Power, Water, Wastewater, Storm Drainage, and Golf). REVENUE City Funds • Sales and Use tax and Capital Impact fees lead Revenue increase Governmental Revenue • Capital grants down, primarily MAX o Capital grants are one time. Operating grants are ongoing – which is where we’d like to see the most growth in because it supports operations. • 2014 Sales & Use tax up 15.4% • Impact fees driving increase in Charges for Services 2014 Governmental Revenue • Sales & Use tax is the primary source of revenue at 51%, (Sales tax is 60% of the General Fund) Interest Earnings • Interest rates continue historic low, except slight rise in 2015 • Unrealized gains and losses washout when held to maturity Enterprise Fund Revenue • Light & Power revenue declines, while the other Enterprise Funds see increased revenue EXPENDITURES Expenditures by Service Area – (including capital). Spending overall has not changed a whole lot over the years. • Utilities $222.7 • PDT $ 79.0 • Comm. & Operations $ 54.3 • Police $ 37.2 • PFA (City Portion) $ 20.8 Energy Purchased • Efficiency programs appear to be working. • Megawatt-hours per capita declines an average of -1.8% • The City tracks what has been paid for purchased power (for resale), which went down this year from $80.3 to $80.1. • Demand charges from PRPA will be included in next year’s report. Personnel Costs - 2014 Full Time Equivalent • Personnel costs have risen in all service areas, attributed by growth in full time employees and compensation. 4 • Total employees for all Service Areas = 1,294.9 Classified & Unclassified; 362.3 Hourly for a total of 1,657.1 • Gross Pay - $99,823,79% • Benefits - $27,258,21% • 2014 Employee Benefits - $27,258 (in thousands) DEBT Outstanding Debt • Debt per person - $1,784 (1986 – with a population of 87,740) • Debt per person - $814 (2014 – with a population of 155,400) • Per capita debt in 2014 is 46% less than 1986 Compliance with Debt Policy • Annual debt service cannot exceed 5% of governmental revenue. o Revenue (does not include one-time large capital grants, as per policy) $229.5 M o Debt Service $ 5.4 M o DS/Revenue $ 2.20% o DS Policy Limit $ 5.00% Fund Balance in General Fund • 2013 Ending $60.7 • 2014 net $13.2 • 2014 Ending $73.9 2014 YEAR END FUND BALANCE REVIEW An overview of the past year was presented by John Voss. Fund balances are primarily considered for funding one-time offers during the Budgeting for Outcomes process. To a lesser extent available monies are also used to fund supplemental appropriations between BFO cycles. Fund Balance definitions were reviewed to include: Non-spendable, restricted, committed, assigned, and unassigned – which are listed in order from most constrained to least constrained. Restricted balances can be available with some constraints or available for nearly any purpose. A high level overview of all City Funds with total balances available, were reviewed by staff and Council Finance members. Mike stated that our General Fund balances went up by 35M from 2013, which is a positive for the City. 5 All City Funds • 2014 Total $397.5 • Appropriated, Min. Policy, or Scheduled $266.7 • Available but with some Constraints $108.4 • Available for Nearly any Purpose $ 22.4 General Fund – Year End 2014 • 2014 Total $ 74.0 • Appropriated, Min. Policy, or Scheduled $ 64.6 • Available but with some Constraints $ 1.9 • Available for Nearly any Purpose $ 7.5 Sales Tax Recapture Discussion An initiative that came out of the Council retreat concerning “Sales Tax Recapture” was discussed. It was suggested that the City look at the property adjoining our neighboring communities and assess what tools could be put into place to incentivize and partner with our neighboring communities to share possible sales tax revenue that will be generated when this property is developed. Other Business Ross requested a financial update on staff’s assessment on what is being considered as new additions, and not new additions, for the Mall Committee. Staff will include this material at the next Mall Committee meeting. Meeting Adjourned at 4:16 p.m. COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Travis Storin, Accounting Director Kevin Smith, Assurance Partner, McGladrey LLP Date: July 20, 2015 SUBJECT FOR DISCUSSION Independent Auditors’ Report on 2014 Financial Statements Independent Auditors’ Report on Compliance for Major Federal Programs EXECUTIVE SUMMARY McGladrey will be presenting the Report to the City Council. This report covers the audit of the basic financial statements and compliance of the City of Fort Collins for year-end December 31, 2014. 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 2014 year-end report. BACKGROUND/DISCUSSION Every year the City is required to be audited in compliance with Government Auditing Standards. McGladrey finalized its financial statement audit on June 30, 2015 and compliance report on July 10, 2015 and the firm is required to report the results of the audit to those charged with governance. There were no findings identified related to Federal grants in the Compliance Report. Financial misstatements identified by the auditors that were deemed immaterial for adjustment, misstatements identified by the auditors that were corrected by the City, and control deficiencies identified by the auditors can be found in the Report to the City Council, Exhibit A. Staff will provide a written response to the audit findings and misstatements at the October Council Finance Committee meeting. ATTACHMENTS 1. Report to the City Council 2. Compliance Report 3. Comprehensive Annual Financial Report City of Fort Collins, Colorado Compliance Report December 31, 2014 Contents Report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements performed in accordance with Government Auditing Standards 1 – 2 Report on compliance for each major federal program, on internal control over compliance and on the schedule of expenditures of federal awards required by OMB Circular A-133 3 – 5 Schedule of expenditures of federal awards 6 – 8 Notes to schedule of expenditures of federal awards 9 Summary schedule of prior audit findings 10 Schedule of findings and questioned costs 11 – 12 Corrective action plan 13 1 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor’s Report Honorable Mayor and Members of the City Council and City Manager of the City of Fort Collins, Colorado Fort Collins, Colorado We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado (the City), as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated June 30, 2015. Our report includes a reference to the City’s adoption of GASB Statement No. 67, Financial Reporting for Pension Plans – an Amendment of GASB Statement No. 25. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Denver, Colorado June 30, 2015 3 Report on Compliance for Each Major Federal Program, Report on Internal Control Over Compliance and Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 Independent Auditor’s Report Honorable Mayor and Members of the City Council and City Manager of the City of Fort Collins, Colorado Fort Collins, Colorado Report on Compliance for Each Major Federal Program We have audited the City of Fort Collins, Colorado’s (the City) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended December 31, 2014. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance. Opinion on Each Major Federal Program In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2014. 4 Report on Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133 We have audited the financial statements of the governmental activities, business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Fort Collins, Colorado as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated June 30, 2015, which contained unmodified opinions on those financial statements. Our audit report includes a reference to the City’s adoption of GASB Statement No. 67, Financial Reporting for Pension Plans – an Amendment of GASB Statement No. 25. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. 5 The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Denver, Colorado July 10, 2015 6 City of Fort Collins, Colorado Schedule of Expenditures of Federal Awards Year Ended December 31, 2014 Federal Pass-Through Federal Grantor/ CFDA Entity Identifying Federal Pass-Through Grantor/Program Title Number Number Expenditures Department of Agriculture (Passed through City of Greeley): Emergency Watershed Protection Program 10.923 68-8B05-A-13-01 $ 148,220 Department of Housing and Urban Development Community Development Block Grants (Direct): Grant Year 2010 / 2011 14.218 B-10-MC-08-0008 33,500 Grant Year 2011 / 2012 14.218 B-11-MC-08-0008 (10) Grant Year 2012 / 2013 14.218 B-12-MC-08-0008 24,190 Grant Year 2013 / 2014 14.218 B-13-MC-08-0008 718,260 Grant Year 2014 / 2015 14.218 B-13-MC-08-0009 592,057 Subtotal 1,367,997 Home Investment Partnership Programs (Direct): Grant Year 2010 / 2011 14.239 M-10-MC-08-0209 4,789 Grant Year 2012 / 2013 14.239 M-12-MC-08-0209 39,636 Grant Year 2013 / 2014 14.239 M-13-MC-08-0209 5,173 Grant Year 2014 / 2015 14.239 M-14-MC-08-0209 131,383 Subtotal 180,981 Total Department of Housing and Urban Development 1,548,978 Department of Justice (Passed through the Colorado Division of Criminal Justice): RJ JA Block Grant 16.523 11-DV-08-23 6,482 RJ Juvenile Diversion Grant 16.523 None 66,919 Subtotal 73,401 JAG Grant 16.738 2013-DJ-BX-0149 58,405 Total Department of Justice 131,806 Office of National Drug Control Policy (Direct) HIDTA Grant 95.001 G14RM0020A 137,787 Department of Transportation National Highway Traffic Safety Administration (Passed through Colorado Department of Transportation): DUI Grant 20.601 None 17,929 Police LEAF Grant 20.601 None 13,212 Subtotal 31,141 2013 Seatbelt Grant Click It or Ticket 20.604 None 6,988 Total National Highway Traffic Safety Administration 38,129 (Continued) 7 City of Fort Collins, Colorado Schedule of Expenditures of Federal Awards (Continued) Year Ended December 31, 2014 Federal Pass-Through Federal Grantor/ CFDA Entity Identifying Federal Pass-Through Grantor/Program Title Number Number Expenditures Federal Highway Administration (Passed through Colorado Department of Transportation): Great Outdoors Colorado 20.205 STEM455-105 200,000 FC Bikes - CMAQ 20.205 14 HTD-649742 115,708 Jefferson Street/SH 14 Intersection 20.205 ACQ M455-088 (16525) 12,684 Drake/Shield Intersection Improvements 20.205 SHO M455-108 (19059) 36,256 Mason Street Transportation Corridor - NRRC Trail Underpass 20.205 AQC M455-071 (15279) 743,275 Bryan Ave Bridge at Larimer #2 20.205 BRO M455-092 (167984) 457,879 Shields/LaPorte Bridge Repairs 20.205 BRO M455-100 (17905) 73,077 North College CMAQ and Enhancement Program 20.205 ACQ M455-079 (16489) 32,002 US 287 - Conifer to Willox 20.205 STE M455-106 (18401) 299,706 Harmony Bridge Replacement 20.205 STU M455-092 9,972 Horsetooth/Timberline Improvements 20.205 ACQ M455-010 (19307) 263,446 Shields/Vine Intersection Improvements 20.205 STU M455-108 (18877) 149,010 Total Federal Highway Administration 2,393,015 Federal Transit Administration (Cluster) (Formula Grants - Capital 5309) (Direct): 2010 Capital 20.500 CO-04-0086-00 58,516 2011 Capital - State of Good Repair 20.500 CO-04-0102-00 204,302 2009 Small Starts Mason Project 20.500 CO-03-0206-01 16,474,008 2011 Small Starts Mason Project 20.500 CO-04-0104-00 377,858 Subtotal 17,114,684 (Urbanized Area Formula Grants - 5307) (Direct): 2013 Capital & Operating Grant 20.507 CO-90-X217-00 794,625 2012 Capital & Operating Grant 20.507 CO-90-X210-00 3,231 08/09 Flexed FHWA CMAQ 20.507 CO-95-X004-00 160,091 CMAQ 2012-2016 Flexed 20.507 CO-95-X015-00 1,153,853 2,111,800 Total Federal Transit Administration (Cluster) 19,226,484 Total Department of Transportation 21,657,628 Institute of Museum and Library Services (Direct) IMLS High Park Fire 45.301 MA-10-13-0562-13 57,905 (Continued) 8 City of Fort Collins, Colorado Schedule of Expenditures of Federal Awards (Continued) Year Ended December 31, 2014 Federal Pass-Through Federal Grantor/ CFDA Entity Identifying Federal Pass-Through Grantor/Program Title Number Number Expenditures Environmental Protection Agency (Passed through the Colorado Department of Public Health and Environment): 2013-2014 Radon Grant 66.032 None 9,946 Department of Veterans Affairs Veterans Adaptive Sports Grant (Direct) 64.034 2015-ASG-16 213 (Passed through the U.S. Olympic Committee): VA Paralympics Grant 64.034 VA-ASP-2015-01 15,000 Total Department of Veterans Affairs 15,213 Department of Energy (Direct) ARRA - Smart Grid Investment Grant 81.122 DE-OE0000357 2,061,603 Federal Emergency Management Agency (Direct) FC-001 River Ponds Swr Headcut 97.036 None 9,719 FC-002 Pdre/Spg Crk Trail Bnk 97.036 None 836 FC-003 Gibbens Bank Repair 97.036 None 14,853 FC-004 ELC Trail/Bank repair 97.036 None 116,929 FC-007 Kingfisher Point Bank 97.036 None 62,548 FC-010 Arapahoe Bends Headcut 97.036 None 18,422 FC-018 Lincoln Brdg Revetment 97.036 None 975 FC-019 Prspct Rd Brdg Sed Rmvl 97.036 None 3,904 FC-020A Pdr Rvr Trl Slp-Timb R 97.036 None 95 FC-020B Pdr Rvr Trl Slp-Timb R 97.036 None 1,270 Engineering 97.036 None 433 L&P 97.036 None 4,551 Stormwater 97.036 None 4,607 Vegetative Debris Disposal 97.036 None 13,913 Total Federal Emergency Management Agency 253,055 Total Expenditures of Federal Awards $ 26,022,141 See Notes to Schedule of Expenditures of Federal Awards. City of Fort Collins, Colorado Notes to Schedule of Expenditures of Federal Awards Year Ended December 31, 2014 9 Note 1. Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the City of Fort Collins, Colorado (the City) and its discretely presented component unit for the year ended December 31, 2014. All federal financial assistance received directly from federal agencies, as well as federal financial assistance passed through other governmental agencies expended during the year, is included in the schedule. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States and Local Governments and Nonprofit Organizations. Therefore, some amounts presented in the schedule may differ from amounts presented in or used in the preparation of the basic financial statements. Because the schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in fund balance/net position or cash flows of the City. Note 2. Significant Accounting Policies Revenue from federal awards is recognized when the City has done everything necessary to establish its right to revenue. In the governmental funds, revenue from federal grants is recognized when they become both measureable and available. For proprietary funds, revenue from federal grants is recognized when they are earned. Expenditures of federal awards are recognized in the accounting period when the liability is incurred. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, wherein certain types of expenditures are not allowed or are limited as to reimbursements. Negative amounts shown on the schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through identifying numbers are presented where available. Note 3. Subrecipients Of the federal expenditures presented in the schedule, the City provided federal awards to subrecipients during the year ended December 31, 2014, as follows: Amount Federal CFDA Provided to Program Title Number Subrecipients Community Development Block Grant (CDBG) - Entitlement Grants 14.218 $ 1,105,978 Home Investment Partnership Program 14.239 177,511 ARRA - Smart Grid Investment Grant 81.122 232,764 10 City of Fort Collins, Colorado Summary Schedule of Prior Audit Findings Year Ended December 31, 2014 Corrective Action or Number Comment Status Other Explanation Findings Related to Federal Awards Significant Deficiency in Administering Federal Awards 2013-001 The City does not have an adequate system for ensuring that certain Corrected program income requirements of the CDBG program are being met. 11 City of Fort Collins, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2014 I. Summary of the Independent Auditor's Results Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting: . Material weakness(es) identified? Yes No . Significant deficiency(ies) identified? Yes No . Noncompliance material to financial statements noted? Yes No Federal Awards Internal control over major programs: . Material weakness(es) identified? Yes No . Significant deficiency(ies) identified? Yes No Type of auditor's report issued on compliance for major programs: Unmodified . Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Yes No Identification of major programs: CFDA Number Name of Federal Program or Cluster 14.218 Community Development Block Grants 20.500 and 20.507 Federal Transit Administration Grants 81.122 ARRA - Smart Grid Investment Grant Dollar threshold used to distinguish between type A and type B programs: $780,664 Auditee qualified as low-risk auditee? Yes No (Continued) City of Fort Collins, Colorado Schedule of Findings and Questioned Costs (Continued) Year Ended December 31, 2014 12 II. Findings Related to the Financial Statement Audit as Required to be Reported in Accordance with Generally Accepted Government Auditing Standards A. Internal Control None reported. B. Compliance findings None reported. III. Findings and Questioned Costs for Federal Awards A. Internal Control None reported. B. Instances of Noncompliance None reported. 13 City of Fort Collins, Colorado Corrective Action Plan Year Ended December 31, 2014 Anticipated Current Date Number Comment Corrective Action Plan of Completion Contact Person None reported COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Matt Robenalt, Downtown Development Authority Executive Director Jennifer Hensley, Downtown Development Authority Financial Coordinator Date: July 20, 2015 SUBJECT FOR DISCUSSION Consideration of an amendment to the Downtown Development Authority’s (DDA) 2010 bond series reducing the spread on the rate adjustment date. EXECUTIVE SUMMARY The DDA’s 2010 bond series is set for a rate adjustment at the 5-year mark in 2015. Great Western Bank, the bond series purchaser, has offered a rate reduction resulting in an estimated savings of $143,000 in interest expense over the remaining 5 year life of the bonds. This adjustment would be executed through an amendment to each bond, Series 2010A (Taxable Tax Increment Revenue Bonds) and Series 2010B (Tax-Exempt Tax Increment Revenue Bonds). Currently these bonds are to reset at 4.5% over the 5 year U.S. Treasuries, the amendments would reduce the spread on the two series to 3.5% over the 5 year U.S. Treasuries on Series 2010A and 4.25% on Series 2010B. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Staff is seeking the following direction from the Council Finance Committee (CFC): 1. Does the CFC need any additional information regarding the bond amendments? 2. Does the CFC support amending the 2010 series of bonds? BACKGROUND/DISCUSSION The 2010 bond series collectively were issued on September 21, 2010 for $12,500,000. The initial interest rate fixed for the first five years is 4.5% over the 5 year U.S. Treasuries on both bonds. Series 2010A is currently at 6.08%; Series 2010B is at 4.01%. These bonds were issued for various TIF investments, culture and arts funding, grants and funding to the City, and DDA programs and projects. Current balance collectively is $9,140,000; final payment on the bonds is in December 2020. Ordinance No. 90, 2010 and DDA Resolution 2010-05 authorized the issuance of these bonds. The DDA Board is scheduled to act on a resolution requesting Council support of the amendments to reduce the interest rates on the Series 2010A and 2010B bonds at their August 13 th meeting. City Council will see this item at the August 18 th meeting. ATTACHMENTS 1. PowerPoint Presentation 1 DDA 2010 Bond Series Amendments Council Finance Committee July 20, 2015 2 Overview • Current Status • Amendment Details & Impact • Recommendation • Direction Sought 3 Current Status • Issued September 21, 2010 for $12,500,000; Series 2010A (Taxable Tax Increment Revenue Bonds) & Series 2010B (Tax-Exempt Tax Increment Revenue Bonds) • Interest rate fixed for the first five years is 4.5% over the 5 year U.S. Treasuries; Series 2010A - 6.08%, 2010B - 4.01% • Issued for various TIF investments, culture and arts funding, grants and funding to the City, & DDA programs and projects • Current balance = $9,140,000; final payment December 2020 4 Amendment Points • Set for a rate adjustment at the 5-year mark; offered a rate reduction to be executed through amendments to each bond series at a fee of $6,250 • Bonds are to reset at 4.5% over the 5 year U.S. Treasuries, amendments would reduce the spread on the two series to 3.5% over the 5 year U.S. Treasuries on Series 2010A and 4.25% on 2010B Impact: Estimated savings of $143,000 in interest expense over the remaining 5 year life of the bonds. 5 Staff Recommendation • City Council support of the amendments to Series 2010A and Series 2010B Bonds to reduce the spread on the rate adjustment date of December 1, 2015. 6 Questions for Council Finance • Does the CFC need any additional information regarding the bond amendments? • Does the CFC support amending the 2010 series of bonds? 1 COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Mike Beckstead, Chief Financial Officer Date: July 20, 2015 SUBJECT: General Employees’ Retirement Plan (GERP) funding status review EXECUTIVE SUMMARY: The GERP is a retirement program for employees hired before January 1, 1999. Less than 7% of active employees continue to earn benefits under this program. Plan assets are held in trust and had a market value of $45.7 million at 2014 year end. The pension liability was $57.8 million, leaving a Net Pension Liability (NPL) of $12.1 million. Under current assumptions and funding commitments the plan is forecasted to be fully funded by 2028. Today’s discussion will revisit the current funding commitment and consider whether or not to accelerate closing the gap. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Stay the course by continuing supplemental contributions of $1.12M per year. 2. Ask staff to bring forward alternative methods of reducing the Net Pension Liability at a more accelerated pace. BACKGROUND/DISCUSSION: The current funding commitment is to supplement the payroll based contributions (10.5%) with an additional $1.12 million a year until the NPL is close to zero. This annual contribution is included in the 2015-16 budgets. Under current assumptions the NPL can be discontinued by 2028. However, changes in assumptions and differences in investment earnings can change this date by many years. In the past 3 years it has change from 2042 to 2025 to currently 2028. History of the plan, demographics and other background data are presented in the presentation slides. ATTACHMENTS: 1. Presentation slides General Employees Retirement Plan Mike Beckstead 7-20-15 Retirement Plan • Established January 1, 1971 • Closed to new members January 1, 1999 • Defined Benefit • years of service • 1.5% per year • average of highest 5 consecutive years • Example • 20 years x 1.5% x $55,000 = $16,500 benefit per year • No COLA in retirement 2 Participant Data Year Ending Actives Terminated Vested Retired / Beneficiary Total 2014 113 113 205 431 2013 128 121 190 439 2012 140 129 185 454 2011 155 136 171 462 2010 169 135 170 474 2009 212 114 171 497 2008 229 115 163 507 2007 235 131 159 525 3 Present Value of Projected Benefits 4 $32.7 $35.0 $33.6 $28.8 $31.2 $29.3 $28.7 $26.5 $4.9 $4.3 $4.3 $7.7 $9.6 $9.2 $8.5 $8.5 $13.9 $13.9 $15.5 $15.5 $16.1 $18.9 $21.6 $25.1 $51.5 $53.2 $53.4 $52.0 $56.8 $57.3 $58.8 $60.1 $0 $10 $20 $30 $40 $50 $60 $70 2007 2008 2009 2010 2011 2012 2013 2014 Millions Active Term Vested Retired Market Value of Assets 5 $45.8 $33.0 $37.3 $39.4 $37.0 $39.5 $44.7 $45.7 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 2007 2008 2009 2010 2011 2012 2013 2014 Millions Investment Policy category allocation Minimum Target Maximum Equities/Stocks Domestic 35% 45% 55% International 5% 15% 25% Fixed Income/Bonds 30% 40% 50% _____ TOTAL 100% Current portfolio distribution in red (approximate) 6 Return on Investments 7 7.5% 7.5% 7.5% 7.5% 6.8% 6.8% 6.5% 6.5% 12.2% -26.5% 20.5% 11.1% -3.1% 11.6% 18.7% 6.0% -30% -20% -10% 0% 10% 20% 30% 2007 2008 2009 2010 2011 2012 2013 2014 Assumed Return on Investments Actual Return on Investments Unfunded Actuarial Liability 8 $5.4 $10.1 $10.7 $9.7 $13.8 $15.7 $14.7 $14.6 $0 $2 $4 $6 $8 $10 $12 $14 $16 2007 2008 2009 2010 2011 2012 2013 2014 Millions Recent Major Assumption Changes • Investment Return • 7.5% through 2010 • 6.8% 2011-2012 ($3.7 M increase to UAL) • 6.5% beginning 2013 ($1.6 M increase to UAL) • Mortality Tables • In 2010 updated to most recent actuarial industry standard ($1.3 M increase to UAL) • In 2014 applied generational scaling ($830k increase in UAL) • Increased Supplemental Contribution to $1.12M in 2013 9 Unfunded Actuarial Liability 10 $5.4 $10.1 $10.7 $9.7 $13.8 $15.7 $14.7 $14.6 $8.4 $8.9 $10.8 $8.1 $7.2 $0 $2 $4 $6 $8 $10 $12 $14 $16 2007 2008 2009 2010 2011 2012 2013 2014 Millions Unfunded Actuarial Liability UAL without assumption Changes Allocation of Supplemental 11 $000s General 26.5% $296.8 Recreation 4.2% 46.8 Transit 4.3% 47.9 Transportation 8.3% 93.0 Light & Power 11.9% 132.8 Water 9.9% 111.1 Wastewater 12.9% 144.5 Storm Drainage 2.5% 27.7 Utility CSA 6.2% 69.8 Equipment 4.5% 50.2 PFA 1.4% 15.6 Other City Funds 7.5% 83.9 100.0% $1,120.0 Solvency forecast at year end 2012 12 Solvency forecast at year end 2014 13 New GASB in 2015 • Replace UAL with Net Pension Liability (NPL) • Smoothing eliminated • NPL was $12.1 M in 2014 14 SENSITIVITY ANALYSIS 1% Decrease 5.5% Current Assumed Rate 6.5% 1% Increase 7.5% Pension Liability $63.4 $57.8 52.9 Fiduciary Net Position 45.7 45.7 45.7 Net Pension Liability 17.7 12.1 7.2 Fiduciary Net Position as % of Total Pension Liability 72.1% 79.1% 86.3% Net Pension Liability is dependent on future actual returns Residual Pension Dollars • After all beneficiaries are paid, the remaining monies will be refunded to the City. • Article XIV, Section 6 of the Plan • Last payment about 2065 • Youngest active member is between 35-39 15 Funding Alternatives • Fully Fund over the next few years with available revenue • Increase annual supplemental • Develop policy parameters on when to change and how to set amount of supplement • Stay the course of $1.12M supplemental contribution each year 16 Fully Funding In Near Term Pros • Ease the mind of Plan participants • Investments now have time to earn more money • Future Council’s can use future revenues on community priorities Cons • Lump sum now will be invested in a market that has seen an unusually long period of above average gains • In conflict with dollar-cost-averaging principals • Reduces resources available for current Council Priorities • Doesn’t guarantee it will stay fully funded • If returns exceed assumptions, excess funding may not be returned to City until after 2065 17 Council Finance Committee Direction to Staff 18 Options 1. Stay the course by continuing supplemental of $1.12M per year. 2. Ask staff to bring forward alternative methods of reducing the Net Pension Liability at a more accelerated pace.