Finance Advisory Committee

MINUTES FINANCE ADVISORY COMMITTEE CITY OF DEKALB NOVEMBER 10, 2015 The Finance Advisory Committee held a meeting on Tuesday, November 10, 2015 in the Council Chambers of the DeKalb Municipal Building, 200 South Fourth Street, DeKalb, Illinois. Chairman Peddle called the meeting to order at 5:04 p.m. ROLL CALL Committee members present were Mike Peddle, Connie Golden, Lynn Neeley, Ronald Partch and Tom Teresinski. Absent: David Conlin and Mike Verbic. City staff present were City Manager Anne Marie Gaura, Finance Director Cathy Haley, Police Chief Gene Lowery (arrived at 5:23 p.m.), Interim Fire Chief Jeff McMaster, Assistant City Manager Patty Hoppenstedt (arrived at 5:04 p.m.), Interim Public Works Director/City Engineer John Laskowski, Community Development Director Ellen Divita (arrived at 5:11 p.m.) and Account Technician Carri Parker. APPROVAL OF MINUTES Minutes of the October 27, 2015 meeting was reviewed and approved on a motion by Committee Member Neeley, seconded by Committee Member Golden with the understanding the suggested changes would be made. MOODY’S OCTOBER 2015 RATINGS REPORT Finance Director Haley explained that the City has kept their current rating of Aa2, however Moody’s put the negative outlook back on to the final report. The City has had a negative outlook attached prior to 2013, but it was dropped when the city made several budget cuts in 2010 to help improve fund balance reserves. While the City is now in a better financial position with General Fund Reserves the change in methodology from Moody’s has them attaching this negative outlook again to the City’s bond rating. The factor weighing debt and pension liabilities doubled from 10% to 20%. The negative outlook reflects the city's growing pension liabilities and the persistent declines to the property tax base (EAV). Finance Director Haley went on to state that the report does compliment the City on its improved financial position over the last three years, however the declining EAV and the pension liability still raised concern to Moody’s which is why they applied the negative outlook. Outlooks are applied to credits that Moody’s believe may be pressured in the next year or two. Moody’s reviews These minutes were approved by the Finance Advisory Committee on April 5, 2016 all credits in its portfolio every year but credits with an outlook are typically presented to a rating committee for a possible rating change within a year or two of the outlook assignment. Therefore, the City can certainly work to get this negative outlook dropped again. 2015 TAX LEVY Finance Director Haley d i s c u s s e d w h y n e w l e g i s l a t i o n a n d a c t u a r i a l v a l u a t i o n c h a n g e s h a v e m a d e t h i s p r o c e s s d i f f i c u l t t h i s t a x ye a r a n d b r o k e t h e discussion down in to a series of questions meant to spark discussion among the committee. Finance Director Haley reviewed the handout that listed the history of the tax levy allocation for the City. The City’s past practice was not to levy dollars for debt payments. We are not levying for any other items but we could. She added that there is a hierarchy that goes in line with the City’s Financial Polices. The Police and Fire Pensions are currently at the lowest State level since 2011. Committee Chair Peddle clarified that the portion of the levy that is for the Fire/Police Pensions is the employer portion only. He added that the employees do contribute to their pensions and that the tax levy is only the employer portion. Committee Member Teresinski commented that the mortality rate is affecting the change. He stated that he would support a modest increase in the levy. Past practice had been to increase the property tax due to new growth. He stated that finding alternative revenue streams to help increase the fund would be supported. Committee Member Golden questioned options 4, 5 & 6. Finance Director Haley stated that these three options are based on Senate Bill 318. Committee Chair Peddle explained that we need to determine how much of the pension costs the City should cover through the property tax levy. Committee Member Teresinski requested that we do a tax rate analysis before supporting a major tax increase. Finance Director Haley stated that the City will be doing an analysis. The EPI report states that the City needs to broaden the tax base between sales tax and property tax. City Manager Gaura clarified that if there is not an increase we will have to eliminate an expenditure. Committee Chair Peddle commented that he supports the funding methodology from GFOA and Moody’s. He discussed how the pensions are funded and where applied. He suggested that we fully load the personnel costs that is loaned to other entities instead of just getting reimbursed for the hourly wage. He explained that the City needs to cover the higher pension costs and need to find other sources of revenue. During the lengthy discussion, Committee Chair Peddle chose to go through each option and take a vote. He suggested that the Committee go through the remaining options and determine the best option. He proceeded to go through the remaining options and determine the differences. City Manager Gaura suggested to look at Option 5, dollar amount only. These minutes were approved by the Finance Advisory Committee on April 5, 2016 Committee Chair Peddle wanted to take a straw poll of which options to suggest. Option 1 – no recommendation, Option 3 – no recommendation, Option 6 – no recommendation. Committee Member Teresinski stated that his option that he suggested is not listed in the options. Committee Chair Peddle stated he is unable to support it and that the City has to fully fund the pensions. Teresinski added that he can support higher pension funding but operating costs will need to be analyzed. Committee Member Neely added that we need to think about new individuals moving to the area. She would like to keep the Property Taxes low. This will allow attractiveness and help determine where people will want to live. She does support funding the pension obligations, but she does not want to see the entire amount in the property taxes. Committee Chair Peddle communicated the problems with the ideology of the property taxes. It’s not the City tax portion that is increasing it’s the School District that is increasing and is 63% of the property taxes. He is tired of the City being blamed for the increase. City Manager Gaura asked the Committee to look at the last 5 years and see the trends of the increases between the City and the school district. She stated that long-term the pensions will continue to be an issue. Finance Director Haley reviewed and discussed all options with the Finance Committee for the 2015 Tax Levy. She stated that Option 5 is what the staff is recommending. MOTION Committee Member Teresinski motioned an option of $4.4MM to include the growth of new activity plus a CPI increase of 1%; seconded by Committee Member Neeley. VOTE Motion did not pass on a 2-3 roll call vote. Aye: Teresinski, and Neeley. Nay: Peddle, Partch, Golden. Committee Chair Peddle declared motion died. City Manager Gaura added that in the future months, there will be discussions on the expenditures and how the City is having difficulty maintaining the vehicles, ambulances, squad cars, and large equipment. She recommended that the Committee take into consideration when deciding on which option these expenditures that are not being recognized in the current budget. Committee Member Neeley agreed that the information provided in early spring gave a perfect perspective of the situation. Committee Chair requested that the Committee decide on Option 2, 4 and 5. MOTION Committee Member Partch motioned to approve the 2015 Tax Levy Option 5; seconded by Committee Member Neeley. These minutes were approved by the Finance Advisory Committee on April 5, 2016 VOTE Motion passed on a 4-1 roll call vote. Aye: Peddle, Golden, Neeley, and Partch. Nay: Teresinski. Committee Chair Peddle declared motion passed. MOTION Committee Member Partch motioned to approve the 2015 Tax Levy Option 2; seconded by Committee Member Golden. VOTE Motion did not pass on a 1-4 roll call vote. Aye: Partch. Nay: Peddle, Golden, Teresinski and Neeley. Committee Chair Peddle declared motion died. MOTION Committee Member Golden motioned to approve the 2015 Tax Levy Option 4; no seconded. Motion died for lack of a second. The Finance Advisory Committee concluded to proceed with Option 5. BUDGET YEAR-END CHANGE Finance Director Haley purposed a change in the Fiscal Year End from June 30 year end to Dec 31 year end. She added that the department affected the most will the Public Works as it will allow 3 benefits: plan projects earlier, obtain better pricing pre-season instead of post-season, and increase of meeting completion date. Interim Public Works Director John Laskowski added that when projects are let they are in August and typically contractors are filling up their schedules in March or earlier. With our letting of bids that late is causing problems with companies closing for the winter, higher pricing due to short completion date or late project notification. Committee Chair Peddle commented that he believes that we need to change the fiscal year. He stated that the levy discussions would be for that following January and not 6 months later and the timing of the pension due date would be in-line, more information about the large expenses like the large pension bills, and new council members will not be coming on in the middle of the budget cycle. He added that there is more symmetry with changing the fiscal year. Committee Member Teresinski stated he was concerned with the management of the change in fiscal year. Committee Member Golden questioned the auditing and engineering services and how that would be affected. Committee Chair Peddle explained that over-time we would recover the additional expenses. He added that in one project the City could recoup the funds as there will not be additional fees associated with letting earlier in the year. These minutes were approved by the Finance Advisory Committee on April 5, 2016 Committee Member Teresinski requested that the City will be doing a full year analysis for the 6 month budget cycle and a 5 year financial plan and publish that as part of the budget cycle. Finance Director Haley added that the staff has already started the fact checking and developing a document that will show the fee schedule and stated that the 5 year is one of the financial policies. MOTION Committee Member Partch motioned to approve the change in the Fiscal Year from 7/1 to 1/1; seconded by Committee Member Golden. VOTE Motion passed on a 3-2 roll call vote. Aye: Peddle, Golden, and Partch. Nay: Neeley and Teresinski. Committee Chair Peddle declared motion passed. PUBLIC PARTICIPATION Bessie Chronopoulos commented that long range planning is top priority. She added that we need to prove to the public that we are reducing operating costs and lowering expenditures. Ms. Chronopoulos added that the City is not cutting back as much as we should and it is not a good idea to change the fiscal year as it will make it hard to compare. Ms. Chronopoulos and Committee Chair Peddle discussed the EAV and its stabilization. ADJOURNMENT Committee Member Teresinski moved to adjourn the meeting, seconded by Committee Member Neeley. The meeting adjourned at 7:19 p.m. ____________________________________ Carri Parker, Account Technician II These minutes were approved by the Finance Advisory Committee on April 5, 2016