Finance Advisory Committee

MINUTES CITY OF DEKALB COMMITTEE OF THE WHOLE JOINT CITY COUNCIL AND FINANCE ADVISORY COMMITTEE MEETING SEPTEMBER 14, 2015 The City Council of DeKalb, Illinois held a joint meeting with the Finance Advisory Committee on Monday, September 14, 2015 in the City Council Chambers of the DeKalb Municipal Building, 200 South Fourth Street, DeKalb, Illinois. Mayor Rey called the meeting to order at 5:02 p.m. A. ROLL CALL City Clerk Jennifer Jeep Johnson called the roll, and the following members of the City Council were present: Alderman Dave Jacobson, Alderman Bill Finucane, Alderman Michael Marquardt, Alderman Bob Snow, Alderman Kate Noreiko, Alderman Dave Baker, Alderman Monica O’Leary, and Mayor John Rey. City Clerk Jennifer Jeep Johnson called the roll, and the following members of the Finance Advisory Committee were present: Mike Peddle, Connie Golden, Tom Teresinski, Dave Conlin, Mike Verbic, and Lynn Neely. Committee Member Thom Gearhart was absent. Also present were: City Manager Anne Marie Gaura, Assistant City Manager Patty Hoppenstedt, City Attorney Dean Frieders, Finance Director Cathy Haley, Police Chief Gene Lowery, Fire Chief Eric Hicks, Community Development Director Ellen Divita, Interim Public Works Director/City Engineer John Laskowski, and City Clerk Jennifer Jeep Johnson. B. ITEMS ALSO ON THE REGULAR AGENDA C. CONSIDERATIONS 1. Water Rate Interim Public Works Director/City Engineer John Laskowski provided a background for the evening’s conversation, including an explanation of the Water Rate Study from May 2015, and its history in front of the Council. He explained that the study addressed both the supply and the distribution of DeKalb’s water, and analyzed how much money would be needed to fund the maintenance required for our infrastructure system, as well as what needs to be done to maintain the system as proposed. Randy Patchett of Burns McDonnell provided a recap of where DeKalb stands via the water study, as well as additional background and comparative information. The City Council approved these minutes on September 28, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015. Committee of the Whole Meeting September 14, 2015 Page 2 of 5 Water System Master Plan – Services Performed 1. Water Consumption: He explained DeKalb’s water consumption breakdown, and identified it as “reasonable” compared to other communities. 2. Water Supply: He explained the capacity of the supply wells and the demand placed upon them, identifying them as “adequate to service existing and projected population” but recommended rehabilitation. 3. Water Treatment: He stated raw water was generally of good quality, and added that the City is using the most economical treatment approach for current needs; there is some recommended servicing. 4. Water Storage: He explained current storage availability, and described it as “adequate”; painting of three water towers is recommended. 5. Water Distribution: He explained the water distribution means, as well as projected usage. He identified two conditions used to identify need for improvements: 1) hydraulic capacity; and 2) water main break history. 6. Water Distribution Recommendations: Replace water main to alleviate hydraulic issues, as well as those with a history of breaks. He explained that this process would be to be completed over a 30 year period. He added that all new water mains in the City should be constructed to a minimum of 8 inches in diameter. 7. 10 Year Capital Improvement Plan Summary: Mr. Patchett explained the approximate cost estimated for the proposed maintenance, totaling $13,134,000. Provide a workable schedule to replace system, identify the amount of water main to be replaced per year, and take into consideration water main diameter, age, break history, and relative importance of each pipe. 8. Rate Study Process: He explained the process as occurring in the following three steps: 1) financial planning, 2) cost of service, and 3) rate design. 9. Typical Bill Competitiveness: He stated that compared to other Illinois communities, DeKalb’s existing water rates are reasonably priced, identifying us as typically on the mid-low end. 10. Key Assumptions: He explained that no growth in customer accounts or usage was forecasted, based on relatively flat history. 11. Funding the Capital Plan: He explained the projected funding plan. The City Council approved these minutes on September 28, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015.  Committee of the Whole Meeting September 14, 2015 Page 3 of 5 12. Revenues Under Existing Rates Are Not Sufficient to Meet Requirements: He explained that if the City left everything as is, it wouldn’t be able to implement the program. 13. Recommended Revenue Adjustments: He explained that if the City made changes based on the study, it would have adequate funding to perform all of the suggested maintenance. 14. Typical Bill Competitiveness Proposed Rates: Among other Illinois Communities, DeKalb’s proposed FY16 water rates maintain competitive position. 15. Impact of Proposed Rates on Typical Bills: The review of proposed scenarios can be referenced in the Village Spreadsheet. Finance Director Cathy Haley explained how she came to the projected rates, imagining three different scenarios from the Water Rate Study Analysis. Mr. Peddle noted that the calculations were per one unit of water toward the top of the spreadsheet, whereas down below takes into consideration more common usage, which Finance Director Haley acknowledged. Mr. Peddle offered some calculations he made to help explain the projected figures, highlighting which of the options is the cheapest initially, and which options cost more at the end of the projection, in year 2024. Mayor Rey asked Finance Director Haley whether or not the City fund balance reserves are within the range of the City’s fund balance policy, to which she replied, “yes.” Mr. Teresinski asked how to ensure funding stays for this purpose. Finance Director Haley explained that the rate is not broken up between maintenance and operating costs. The costs are something that is monitored through the budgeting process every year. Mr. Teresinski followed up asking whether it would be up to Council to make sure the fees are properly collected to drive the proposed plan forward, to which Finance Director Haley replied, “yes.” Mr. Peddle pointed out that the water fund is an enterprise fund, emphasizing the point that the money should be diligently watched by Council and staff to make sure revenues aren’t bled outside of the water fund, or from capital to operations. Alderman Baker asked whether the concerns expressed by Mr. Peddle could be addressed in the creation of a law, to avoid the fund being used for other causes, The City Council approved these minutes on September 28, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015. Committee of the Whole Meeting September 14, 2015 Page 4 of 5 stating that it has happened repeatedly in the past. He expressed that such a problem is why he is hesitant to build up specific funds. Mike Peddle responded by adding that anything Council decides could be undone by a future Council. He added that the financial policies are included as part of the budget, so perhaps including something about the dedication of the monies could be added there. Alderman Baker asked whether the problem could be solved by making the money unusable for other purposes, unless passed by public referendum. Mr. Patchett advised that things happen in communities where a set-aside doesn’t cover what needs to be done. He explained they aren’t trying to grow a fund, but rather trying to set up a program that will help us sustain the water system long term. He offered that status quo leads to the inability to maintain the system without outside rate generation, so the money needs to be set aside, but that there also needs to be flexibility, knowing that things happen, and you need to be able to manage what you’ve got. Mr. Teresinski offered that from an overall perspective, the City is highly rated in terms of being able to maintain the system. He stated support for a modest increase for capital, rather than bonds, or going into debt for the project. He asked whether, from the standpoint of cost reduction, a return on investment via efficacy, is typically seen. Mr. Patchett responded that while it is typically seen, DeKalb’s system is approximately 60 years old, and the City is actually falling further behind each year, which is not uncommon for Illinois. Systems are nearing the end of useful life about every 50 to 100 years. So, yes, if you are proactive to avoid the potential situation that requires attention beyond yearly maintenance. Alderman Finucane inquired as to how the different scenarios play out over time, and further discussion ensued as to the different scenarios, how they play out over time, and the pros and potential cons of them compared to one another. Examples of different strategies as tried in other communities were offered to help illustrate the issues at hand. Mayor Rey inquired as to the proposed timeline, with Finance Director Haley responding that they are looking for a recommendation from Council to help meet the January 1, 2016 goal. City Manager Gaura added that staff is looking for guidance as to how to proceed, so that if a decision wasn’t made, they’d be looking to how to move forward. D. PUBLIC PARTICIPATION The City Council approved these minutes on September 28, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015.  Committee of the Whole Meeting September 14, 2015 Page 5 of 5 Lynn Fazekas offered that she appreciated the discussion regarding the water rates. She recounted after the recession hit, the budget was scrutinized more closely, revealing that when a water tower needed to be painted, the City needed to borrow money to complete the maintenance. She recalled that at the same time, money was transferred into the general fund to cover salaries. She added that if rates were to increase, she would want to be sure the money was used for its intended purpose, rather than to plug budget holes. She stated her support for adding in language to the policy to that affect. A brief discussion ensued wherein it was determined that Council was not ready to take action on the rates, and that more discussion was required. City Manager Gaura stated that the Committee of the Whole for the next meeting would be listed as another joint session to continue the discussion. E. RECESS FOR EXECUTIVE SESSION OF THE CITY COUNCIL 1. Approval to Hold an Executive Session to Discuss Pending or Imminent Litigation as Provided for in 5 ILCS 120/2 (c)(11). MOTION Alderman Noreiko motioned to move into Executive Session; seconded by Alderman O’Leary. Motion carried on an 8-0 roll call vote. Aye: Jacobson, Finucane, Marquardt, Snow, Noreiko, Baker, O’Leary, Rey. Mayor Rey declared the motion passed. Mayor Rey closed the meeting to the public at 6:02 p.m. Mayor Rey opened the meeting to the public at 6:37 p.m. F. ADJOURNMENT Alderman Jacobson moved to adjourn the meeting; seconded by Alderman O’Leary. Motion carried on an 8-0 voice vote. Mayor Rey declared the meeting adjourned at 6:39 p.m. ____________________________________ JENNIFER JEEP JOHNSON, City Clerk The City Council approved these minutes on September 28, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015.