Finance Advisory Committee

MINUTES JOINT CITY COUNCIL AND FINANCE ADVISORY COMMITTEE CITY OF DEKALB MAY 12, 2015 The Joint City Council and Finance Advisory Committee meeting of May 12, 2015, was called to order at 5:00 p.m. by Mayor John Rey. ROLL CALL Council members present were: Mayor John Rey, Alderman David Jacobson (arrived at 5:20 p.m.), Alderman Bill Finucane, Alderman Michael Marquardt, Alderman Bob Snow, Alderman Kate Noreiko, Alderman David Baker, and Alderman Monica O’Leary. Finance Advisory Committee members present were: Chair Mike Peddle, Connie Golden, Tom Teresinski, Mike Verbic, and Lynn Neeley. Others present: City Manager Anne Marie Gaura, Assistant City Manager Patty Hoppenstedt, Finance Director Cathy Haley, Fire Chief Eric Hicks, Police Chief Gene Lowery, Streets Superintendent Mark Espy, Community Development Director Ellen Divita, Account Technician Carri Parker, and City Clerk Suzanne Pupino. Not Present: Finance Advisory Committee members Thomas Gearhart and Dave Conlin. BUDGET PRESENTATION FY2016 – GENERAL FUND City Manager Gaura stated there would be three meetings with the Council and the Finance Advisory Committee (FAC) to discuss the FY2016 budget. Staff will be present at all three meetings in order to present information and encouraged Council and the FAC to ask questions as they proceed. City Manager Gaura also stated that public participation would be welcome at the end of the presentations. SUMMARY MEMO Finance Director Haley stated her presentation would identify the future needs of the City, best practices, and long-term planning adding this is something that the City needs to strive towards. Finance Director Haley also stated that each City department has met with her and the City Manager to discuss their proposed budgets. Finance Director Haley explained that the bulk of the City’s revenue is from sales tax. FAC Member Teresinski asked mentioned two recently closed stores and asked if the City is anticipating them to be replaced in the budget. Finance Director Haley replied that she held the sales tax for the budget flat and did not account for new stores in the budget. The impact of the loss of the two stores mentioned is minimal to the total of sales tax revenue - approximately 1%. City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015  Joint City Council and Finance Advisory Committee Meeting May 12, 2015 Page 2 of 8 Alderman Jacobson asked about other stores that have recently closed - Big Lots, etc. - and asked if the City knows what the impact will be. Finance Director Haley responded that the City is already feeling the impact of the closing of those stores. Alderman Jacobson asked if it was known what the impact of GE closing would be. Finance Director Haley stated that the City is not provided that information and that she trended the information for four years on a monthly basis. Committee Chair Peddle commented that it’s hard to know what a company’s impact will be based on their structure. Committee Chair Peddle asked if $99 is the entire Local Governmental Revenue source (LGDF) amount. Finance Director Haley stated it’s the income tax amount and is the City’s main LGDF revenue source. The City receives other distributions but income tax is the largest. Committee Member Teresinski asked if the income tax is the one still in debate in Springfield. Finance Director Haley replied it was. Committee Chair Peddle asked why there’s a gap between budgets if the June levy was set in December and if it’s the difference between the budget and estimate. Finance Director Haley stated there’s a difference because it’s an estimate. Due to foreclosures, the City does not collect 100% of the levy. Committee Member Teresinski asked Finance Director Haley for a listing of one-time items on accounting adjustments in order to measure actual expenditures. Finance Director Haley stated she did make several accounting changes based on recommendations from the audit team and added there’s been an audit note every year to consolidate funds. Finance Director Haley stated that the Economic Development Fund will be merged with the General Fund. Several items within the General Fund Support Department will be dispersed amongst other departments within the General Fund. An example used included the Emerald Ash Borer project – it was in Department 35 but has now moved to the Street Department making it more transparent and accountable. City Manager Gaura added that the Economic Development Fund will be an item for Council to review for expenditures as the Egyptian Theatre is requesting assistance in their operating expenses. Finance Director Haley then discussed the salary component of her presentation. Committee Member Teresinski asked if the amount suggested is an annual increase plus steps. Finance Director Haley replied it was. Assistant Finance Director Miller added that AFSME appears lower because their contract starts in January, so it’s not showing a full year. Finance Director Haley added that it does include the cost of living adjustment (COLA) and steps. City Manager Gaura stated that contracted services for new infrastructure will be reflected in the budget explaining it is a way for the City to deal with an increase in demand and contract out if needed. Committee Member Teresinski asked if those are incremental to the budget presented. Finance Director Haley replied they were not and were all incorporated in the budget. City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015  Joint City Council and Finance Advisory Committee Meeting May 12, 2015 Page 3 of 8 Committee Chair Peddle asked what the Economic Development Strategies are. City Manager Gaura explained this ties into the Americas Best Communities Grant (ABC Grant). She stated as the City goes through the grant process, we will see what the City’s contribution will be. So they budgeted $50,000 in expenditures and $35,000 in revenue coming from Frontier, we do not know if the City will have that $15,000 expenditure or what the role of the non-profit sector is going to be. If the City make it to the next round we are looking at a grant of $100,000. Then if we make it to the final round it could be $1, $2 or $3 million dollars and could be beneficial to the community. Mayor Rey added that the second round moves from 50 communities to 15, of which 8 of them will be selected to present their projects and go into the final round of 3 communities. City Manager Gaura explained the after having conversations with Alderman Jacobson and NIU, it is suggested to do some targeted response to particular neighborhoods. The neighborhood to focus on was identified in the housing study, generally north and west of NIU (Neighborhood #3). It is being recommended to defer the Comprehensive Plan another year, and address the issues that are in Neighborhood #3. City Manager Gaura added to the budget assumptions new requests presentation with the property on South Fourth Street, known as Protano’s. The City’s next step would be to work with a consultant to submit the paperwork to IEPA for additional grants for the remediation of the Protano’s site. She also added that staff would like to contract minute services directly related to the Planning & Zoning Commission. The Planning & Zoning Committee meets bi-weekly and this will reduce time administration staff is spending time on developing minutes and have a faster turnaround. The Architectural & Engineering Services (A&E) are a consultant team to assist with high demand in projects. She added that the City has seen an increase in development inquiries. Mayor Rey asked about the replacement of vehicles, if those are outside of the fleet replacement fund. Finance Director Haley replied, yes, instead of transferring funds, we just bought them out of the operating fund, there is a capital category that says vehicles and it is very clear. These vehicles are being purchased using restricted revenues collected by the Police Department for seizures, forfeitures and DUI activity. Finance Director Haley stated that we have unique challenges for the City of DeKalb as it is currently sharing its tax revenue with DeKalb County. City Manager Gaura commented that there is a separate item at a future COW meeting and will have staff prepare a memo explaining these agreements, there’s two agreements that the city has that are long term agreements that financially tie us to the County. One of which is DeKalb Marketplace, and the second is the interchange at Peace Road. Committee Chair Peddle stated that the agreements with the County can be misleading to people if they do not see the other side. This was an agreement with the County (sales tax) that was mutually beneficial. The County allowed the property to be in the City and the City allowed the County to have extra in their sales tax. The County changed property to be in the City to allow for 1% in Sales Tax and the City allowed for the County to have the share. City Manager Gaura discussed the Illinois Municipal League (IML) forecasts. She stated that Mayor Rey, Alderman Snow, Alderman Naylor and herself went to Springfield and met with Metro West Government. She stated that Governor Rauner has asked for a 50% reduction in LGDF City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015  Joint City Council and Finance Advisory Committee Meeting May 12, 2015 Page 4 of 8 payments, but the Mayors are lobbying against this to not to have any reduction. Finance Director Haley and City Manager Gaura reached out to our counterparts in surrounding municipalities to see what they are doing, and they are preparing their budgets as normal and not including a LDGF reduction. Staff recommends not moving forward on any new proposed purchase until the State adopts its budget. If there is a LGDF reduction, staff would come back to the Council with specifics. Committee member Teresinski mentioned that the LDGF makes up for $2 million of the $34 million operating budget. BEST PRACTICES Finance Director Haley stated that Best Practices identify specific policies and procedures as contributing to improved government management, it aims to promote and facilitate positive change rather than merely to codify current accepted practice. She added that the Finance Division is a good example, by pulling it out of the City Manager’s Office and making it a department is a best practice. Finance Director Haley also mentioned other best practices would be in the staffing. Having the right people in the positions that they have the experience. She stated that the future changes in Human Resources (HR) and Information Technology (IT) are two of the main areas of concern. She asked Police Chief Lowery and Fire Chief Hicks to comment on the experiences they are having with these two departments. Chief Lowery summarized the difficulties he and the police department has had to adjust to with regard to technology. Chief Hicks stated that the IT division is greatly understaffed. Assistant City Manager Patty Hoppenstedt commented on the HR issues. The HR Director at other municipalities view this role as a vital link to success to managing the people. This could be the most important business partner the City could have. This person would not be just doing open enrollment, it’s about creating a talent management plan which we do not currently have. The programs that are not in place that could be with a professional HR Director, for example, insurance compliance with employment law, developing a personnel manual or benefits handbook, ensuring health and safety procedures are adequate, creating and maintaining a comprehensive talent management plan, mentoring/training program, and managing a comprehensive evaluation process. City Manager Gaura added that the City has been reactive, not proactive. The best example is the Police Department, Police Chief Lowery has been able to implement and transform the Police Department from reactive to proactive in the Community Policing initiative. Alderman Snow asked if you could have one not both, which one is more important. City Manager Gaura stated she would like to defer that answer until Saturday as she would like to sit and discuss it with department heads and gather the most appropriate information to answer that question. Committee Chair Peddle commented that when in contact with an officer, they give out cell phone #, and if unable to reach officer they are calling the 9-1-1 center. City Manager Gaura stated that she has seen in other municipality, everyone has voicemail. Committee Chair Peddle suggested an enhanced 3-1-1 system would be great, maybe not in this fiscal year, but would be good to have. City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015  Joint City Council and Finance Advisory Committee Meeting May 12, 2015 Page 5 of 8 Assistant City Manager Hoppenstedt added that we have not provided the resources to HR and IT that they need to function efficiently. Committee Chair Peddle added that you can use your resources very quickly if you do not maintain your HR function in a timely and competent fashion. Excluding the Police Department, all you need to have is one civil rights complaint and the organization grinds to a halt dealing with the federal government dealing with a civil rights case. Every employee needs to know the basics, the way you behave in a professional environment. If you do not hire someone, you need to have the training available to not put yourself in that situation. Alderman Noreiko commented that if you have the HR Director, and she/he is respected by employees and management and that both groups can come together and stop things from snowballing to the point that an employee feels that their only recourse is to go to a Federal Civil Rights Division. It’s one of those costs that the HR Director will save that you never know the amount. Alderman Marquardt asked if both positions are included in the budget. Finance Director Haley answered, yes. Alderman Marquardt followed up asking if the technology was included. City Manager Gaura replied, no, we want to get a key person in that position to identify the issues and develop a plan of attack. Committee member Verbic mentioned that these points highlight the need to our Council and now with new Council we have an opportunity to define the mission and goals so we do not have things spring up in the future, in addition to meeting the needs of our citizens. DETAILED BUDGET City Manager Gaura discussed the development of Goals and Mission of the City. She stated that Assistant City Manager Hoppenstedt is working with Center of Governmental Studies on the Strategic Plan. The center has begun their community workshops, seven city sessions, and will make sure they represent each community. We will have this information this summer and will be able to put together statements and goals. Mayor Rey added the six tenants from the March 2014 strategic discussion “best practices” underlines the entire budget preparation, goals and mission discussion. Alderman Noreiko commended the City on the ability to identify the problems and concerns. She stated that there are some hard decisions to make and we may not be able to do everything, but it is very important that we move forward. The steps forward are very critical. Alderman Jacobson appreciated the fact that we are undergoing the strategic plan. He believed there is a major glaring gap as the Council is going to be brought the plan to finalize it. He mentioned that the Council should be leading the plan as elected officials and they need to step it up and lead the City. He stated that we should be much more engaged as a Council, meeting much more regularly and to continue give the directions necessary for the staff to do what they need to do. He did not think it is all appropriate to meet at the end of the process and basically be handed a process that was written and ready to go. He said that the Council should be meeting Quarterly to discuss these processes. City Manager Gaura stated that they wanted to wait until the completion of the initiative, Center of Governmental Studies (CGS) recommended that we wait until that process was complete before moving forward. Secondly, this was the proposal that the Council accepted. She added that she has City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015  Joint City Council and Finance Advisory Committee Meeting May 12, 2015 Page 6 of 8 seen strategic plans done differently. What management has heard, is that DeKalb is different; DeKalb is very participative. That is the structure of the contract that the Council approved. Once the strategic plan is in place it becomes and living document and on a quarterly basis we should have the plan on the Council agenda and looking at what we did and will be doing in the future. Assistant City Manager Hoppenstedt stated that working with CGS is what the Council approved and moving forward with the various steps that were outlined and getting feedback from the community, and the Council will be included in the individual meetings in each ward, so that the Council can participate and be part of the group discussions. She added that CGS will compile the information that was learned in these meetings and will be presented to the City Council so that decisions can be made of the priorities and goals for the City of DeKalb for that 10 year strategic plan. Committee Member Teresinski added that the process can take time, the CGS, at one point was going to be a dual strategic plan done with NIU, not by NIU. He asked if that is still something that is a step in this process. City Manager Gaura replied the strategic plan, was talked about in the past as a more collaborative process on the comprehensive plan, and that would be a future discussion that was earlier in the presentation, as staff recommendations are to hold off on doing the comprehensive plan; but to address the strategic plan, she believed NIU specifically CGS, are underwriting the additional costs for the meetings, the proposal only had seven meetings, through the course of conversations with staff they realized that just seven was not going to provide enough input so the additional meetings are at no cost. She added that we have recently brought an agenda item to the Council amending the agreement, a no cost agreement that stipulated that not only was the timeline extend but at no cost to the City, CGS and NIU are absorbing that cost. Committee Member Teresinski asked if we can see an output document. He added that this would be helpful for those who want to understand what is happening, if NIU has done this for other communities which is a public document, that document could be shared and we can look at the outcomes and what it will provide to you. City Manager City Manager Gaura replied that we can ask CGS, her best answer is that it will be a hybrid, it will give an example such as, goals/missions with an action, then assigned to staff member, and completion date. The City would make this a living document to achieve the goals of the Council. Committee Member Teresinski asked if it is possible to get St. Charles’s strategic plan or any other entity, that City Manager Gaura or Assistant City Manager Hoppenstedt or Economic Development Director Divita are aware of. Assistant City Manager Hoppenstedt stated that they can request copies of those, CGS has been directed to look at different plans, so they have an idea of what the deliverable should look like. BUDGET YEAR END CHANGE DISCUSSION Finance Director Haley discussed the Changing in Fiscal Year-End Memorandum. City Manager Gaura added that there are several reasons for this change, for example, the property tax levy; being able to tie the tax levy into the budget process. She stated that she has seen it first hand in Schaumburg by having a different fiscal year you will have the ability to go out to bid earlier making it easier for capital planning. By doing this we will be able to do some of the projects City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015  Joint City Council and Finance Advisory Committee Meeting May 12, 2015 Page 7 of 8 earlier. Anyone new onto the Council, gives the new Council members ability to have an orientation period. It is no small task, but feel that doing a six month budget will be better, do a shorter term so you can see some of the impact, then switching. This does go to best practices, we see a trend of a lot of municipalities going to a January 1st fiscal year for best practice as it makes it easier to manage a lot of things. Committee Chair Peddle suggested that this is actually a topic better discussed when the Committee has a longer period of time. Mayor Rey confirmed that Committee Chair Peddle has accepted a motion on the floor from Committee Member Verbic, is there a second or for the motion to be withdrawn. Committee member Verbic stated he would be happy to withdraw his motion. The consensus was to come back to the changing of the fiscal year at another time when there is more time to discuss. 5 – YEAR GENERAL FUND PROJECTION Finance Director Haley stated that the 5-year General Fund projection is 70% personnel costs. She added that we could have retirements and staff with lower level salaries are not incorporated. She mentioned that we are flat, and with the economy this could also pickup. Committee Member Teresinski appreciated the fact that there is recognition of the flat numbers. He mentioned that we get into a deficit in year 3, and increasing deficits in years 4 and 5, does not include any other enterprise fund support. He asked if we will need to include these to see what the value will be. Finance Director Haley replied as this will become more in-depth on Saturday when we talk about alternative revenue options. She stated she will discuss some revenue discussions about the Airport as well. Mayor Rey asked if other financial goals will be articulated in the budget document, as we talked about the 25% general fund balance goal, fund balance targeted for a 25% balance. Mayor Rey asked if there be other goals that will be in the document. Finance Director Haley answered that the financial policies will be discussed on Wednesday. City Manager Gaura stated that staff is transitioning to a Government Finance Officers Association (GFOA) budget model, where there is a wealth of information that will be included in the final document. She added that by this time next year, when the budget document is sent out it should include the entire budget document so all of those charts, graphs, analysis and detail that you saw in Finance Director Haley’s presentation will be in the budget document. LONG-TERM LIABILITIES Finance Director Haley went over the Long-Term Liabilities handout and stated that this was a request from the Council. She added that these are some of the long-term liabilities that are sitting out there that we want to make sure that they are brought to light and so they are not forgotten. City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015  Joint City Council and Finance Advisory Committee Meeting May 12, 2015 Page 8 of 8 City Manager Gaura commented that there will be a lot of information provided and the goal is to make any revisions, bring those forward and try to finalize the budget for the June 8th Council Meeting. Finance Director Haley and City Manager Gaura both stated that your feedback/questions in emails and phone calls are appreciated and they are thankful for everyone reaching out to them with different perspectives of the budget. Mayor Rey asked if there was any public participation at this time. The Public responded with, “Not at this time.” He then concluded with thanking the city staff for their presentations, thanking both City Council and Finance Advisory Committee with dedicating their time and he is looking forward to the ongoing meetings. CONFIRMATION NEXT MEETING DATE AND TIME Next Meeting Confirmed - Saturday, 8:30 a.m. - 12:00 p.m. Mayor Rey mentioned that City Manager Gaura has eluded to June 8th will be a public meeting and first reading of the budget and second reading will be on June 22. Finance Director Haley stated that the agenda and water rate study was sent out today and remainder of the agenda will be sent out tomorrow. City Manager Gaura will have a presentation on the water rate study on Saturday. ADJOURNMENT Mayor Rey requested a move to adjourn, moved by Alderman Noreiko, seconded by Committee member Verbic. Meeting adjourned at 7:15 p.m. __________________________________________ SUZANNE PUPINO, City Clerk Minutes prepared by Account Technician Carri Parker City Council approved minutes on July 6, 2015 / Finance Advisory Committee approved minutes on July 14, 2015