2007-07-17 Audit Finance Committee Minutes I MINUTES
2 AUDIT/FINANCE COMMITTEE
3 July 17,2007
4
5 After determining that a quorum was present, the Audit/Finance Committee of the City of
6 Denton, Texas convened in a regular meeting, Tuesday, July 17, 2007, at 1:30 p.m. in the City
7 Council Work Session room, at City Hall, 215 E. McKinney Street, Denton, Texas at which the
8 following items were considered:
9
10
11 OPEN MEETING:
12
13 PRESENT: Mayor Perry R. McNeill and Council Member Joe Mulroy
14
15 Audit and management staff present included liaison Susan Croff and Internal Auditor Steve
16 Shepherd. Ex officio members present included City Manager George Campbell, and Assistant
17 City Managers Howard Martin and Jon Fortune.
18
19 1. Consider approval of the Audit/Finance Committee minutes of:
20 A. May 15,2007
21
22 McNeill moved approval of the minutes,with a second by Mulroy. Minutes approved
23 (2-0). _
24
25 2. Management Report:
26 A. Audit/Finance Committee Action Item Matrix
27
28 Mulroy stated that the matrix appeared to be current and in good order and was approved(2-0).
29
30 B. Municipal Court SofhAare
31
32 Mulroy stated that the information provided in the Municipal Court.Software Memo and the
33 information provided to the Council Appointees Performance Review (CAPR) Committee did
34 not concur, but stated the discussion would be deferred. This item is to remain open on the
35 matrix for presentation at the next Audit/Finance Committee meeting.
36
37 3. Receive a report, hold discussion and give staff direction regarding the park property
38 inventory and the value of park property.
39
40 Due to the size of the following budget presentation, this topic was deferred to the end of the
41 meeting.
42
43 4. Receive a report, hold a discussion and give staff direction on the 2007-08 budget and five-
44 year financial forecast.*
45
46 No closed meeting was necessary.
47
48
I *Note that the Committee does not anticipate the need to go into a Closed Meeting regarding the
2 matters stated in 4. hereinabove. However, in the event that a Public Power Competitive Matter
3 issue arises, in connection with Denton Municipal Electric portion of the budget only, where it is
4 necessary to convene a Closed Meeting of the Audit Committee; then the following notice shall
5 be applicable.
6
7 CLOSED MEETING:
8
9 ["Before the Audit Committee may discuss, deliberate, vote, or take final action on this
10 agenda item posted as an "electric competitive matter" under the provisions of Texas
11 Government Code §551.086(c) relating to "Public Power Utility" items, the Chair must first
12 announce the time, and then the Committee must then go into a Closed Meeting, and must
13 make a good faith determination; by a majority vote of the members of the Committee, that
14 this agenda item that is an "electrical competitive matter," that satisfies the requirements of
15 Texas Government Code §551.086(b)(3). A vote must be taken. The vote shall be taken
16 during the Closed Meeting and shall be included in the certified agenda or the tape recording
17 of the Closed Meeting. If the Committee fails to determine by a majority vote of its
18 members that this particular agenda item satisfies the requirements of §551.086(b)(3), then
19 the Committee may not discuss, deliberate or take any further action on that agenda item in
20 its Closed Meeting.]
21
22
23 A. DELIBERATIONS REGARDING CERTAIN PUBLIC POWER UTILITIES;
24 COMPETITIVE MATTERS --- Under Texas Government Code §551.086
25
26 Receive competitive public power and financial information regarding
27 proposed financial issues and plans regarding Denton Municipal Electric;
28 and discuss, deliberate, and provide staff' with direction regarding such
29 matters.
30
31 ANY FINAL ACTION, DECISION, OR VOTE ON A MATTER DELIBERATED IN A
32 CLOSED MEETING WILL ONLY BETAKEN IN AN OPEN MEETING THAT IS HELD IN
33 COMPLIANCE WITH THE TEXAS GOVERNMENT CODE, CHAPTER 551, EXCEPT TO
34 THE EXTENT SUCH FINAL ACTION, DECISION, OR VOTE IS TAKEN IN THE CLOSED
35 MEETING IN ACCORDANCE WITH THE PROVISIONS OF §551.086 OF THE TEXAS
36 GOVERNMENT CODE (THE "PUBLIC POWER EXCEPTION") REGARDING A
37 COMPETITIVE ELECTRIC MATTER. THE COMMITTEE RESERVES THE RIGHT TO
38 ADJOURN INTO A CLOSED MEETING AS AUTHORIZED BY TEXAS GOVERNMENT
39 CODE, §§551.001, ET SEQ. (THE "TEXAS OPEN MEETINGS ACT") ON ANY ITEM ON
40 ITS OPEN MEETING AGENDA OR TO RECONVENE IN A CONTINUATION OF THE
41 CLOSED MEETING ON THE CLOSED MEETING ITEMS NOTED ABOVE, IN
42 ACCORDANCE WITH THE TEXAS OPEN MEETINGS ACT, INCLUDING, WITHOUT
43 LIMITATION, §§551.071-551.088 OF THE TEXAS GOVERNMENT CODE.
44
45 Campbell stated that the preliminary007-013 burl et and forecast being presented reflects
46 City Council and Community requests and introduced Fortune to detail the item.
47
I Fortune stated that the numbers presented are conservative assumptions based on historical
;? information and current data. The numbers will be adjusted when the Final Certified
3 Appraised Values are received around July 25"' from the Denton County Appraisal District.
4 Final budget recommendations may change pending the certified values.
5
6 Fortune stated that the 2006-07 Year End Estimate is conservative, but proposes the City fund
7 balance will come in above the projected amount. Sales tax is currently lower than anticipated
8 but is projected to be on budget by close of the fiscal year.
9
10 Major Assumptions include a 4 cent12r9l!c!U tax increase. Three cents of this 4 cent increase
I 1 is dedicated to debt and was approved in the 2005 bond election. An additional 1 cent has been
12 added and will be dedicated for drainage. This debt calculation includes bonds being presented
13 to Council tonight. Sales tax is shown to increase from 2% to 5% and is based on the proposed
14 Rayzor Ranch Development.
15
16 The 5-Year Financial Forecast proposes reaching the goal of a 15% fund balance as requested by
17 the Audit/Finance Committee during the last year's budget discussions. Mulroy requested
18 research on other like cities determinations of fund balance, whether the reserve is number of
19 days of operations or a percentage of budgeted expenditures, and asked that a memo be provided
20 to the Audit/Finance Committee with the results. McNeill questioned if the 15% fund balance is
21 of the total budgeted expenditures, which Fortune confirmed.
22
23 ACTION ITEM: Research and provide a memo to the Audit/Finance Committee on how other
4 cities determine fund balance, whether the reserve is number of days of operations or a
25 percentage of budgeted expenditures.
2
27 Additional Major AssuMptions were the 4% Compensation for Non-Civil Service Employees
28 and Meet and Confer Agreements with Civil Service employees, Self Insurance, Vehicle
29 Replacements, Service Enhancements, New Positions and Operating Expenses Adjusted for
30 Inflation.
31
32 The self-insurance program includes a 6% increase from 2008-2012. Fortune stated that there
33 could be some savings involved with the sell`-insurance opting, depending on amounts paid out
34 by the City, and the conservative estimates will be re-evaluated at the beginning of each fiscal
5 year.
36
37 Vehicle rolacements will be funded through bonds.
38
39 Mulroy questioned if Finance was comfortable with a 2% mm:gin for the fund balance. Fortune
40 stated that with the conservative estimates provided that the 2% margin is acceptable. Mulroy
41 requested to keep the 2% window in future 5-Year Forecasts.
42
43 On the General Fund Reserve Level Fortune stated that the City receives weekly updates from
44 the Appraisal District on the values, however, closer to the date the certified values generally
45 decrease due to adjustments. Based on the most recent update the percentage of total
46 expenditures is 16%, well above the conservative estimate of 11%.
47
I Detailing the 4 cent tax increase, .03158 cents of the bond program has not been issued to date.
2 As discussed earlier, 3 cents of that increase would be for debt services and the remaining 1 cent
3 would be for drainage. This would allow for approximately $5-6 million in bonds to fund
4 drainage vroiects. Mulroy questioned Jim Coulter, Director of Water and Wastewater, if
5 Certificate of Obligation (CO) bonds were obtained, how quickly could progress begin on the
6 drainage issues. Coulter stated that since the flood of April 24`f', staff has analyzed flood prone
7 areas over most of the City, with the largest projects being outlined in the presentation. Several
8 studies would need to be completed on these projects and work could begin in about 6 to 9
9 months.
10
11 The four largest drainaM_pro a is include: Pecan Creek Main Branch (Near Sycamore up to
12 behind City Hall), Cooper Creek Basin (Craig Street area), Pecan Creek "Tributary 4 (By
13 Morrison Milling), and various neighborhood improvements.
14
15 McNeill questioned what the resolve would be for the CooUer Creels Basin,where 20-25 homes
16 flooded. Coulter stated that the City is working on an additional study with the possibility of
17 boring through the railroad easement. McNeill also questioned the unfinished drainage located
18 behind the Quiktrip on Eagle Drive. Coulter responded that the funds have already been
19 allocated to complete that project and that it is underway.
20
21 Mulroy requested a detailed list of the neighborhood drainage improvements, with time line of
22 expected completion,be forwarded to Council.
23
24 ACTION ITEM: forward a detailed list of the nchborhd drainage imnrovcrncnts, with
25 time line of expected completion,to Council.
26
27 Martin stated that there is a potential for a retention pond for Cooper Croch on the Hasler
28 property. McNeill stated there is a need for these projects to be run simultaneously and contracts
29 with engineers should include a clause for a bonus for early project completion and a penalty for
30 projects over deadline.
31
32 The 2005 Bond Program will be completed in 2009, with the next proposed bond election that
33 same year. Mulroy requested staff to evaluate the possibility of starting the new projects during
34 the current bond series. Mulroy questioned if funding could be provided to complete the
35 planning and engineering phase prior to the 2009 bond election, so that construction can begin
36 immediately upon approval.
37
38 ACTION ITEM: Evaluate the possibility of completing the planning and engineering phase
39 during the current bond election so that the projects can begin construction immediately after the
40 2009 bond election.
41
42 Fortune stated that the pay Alan evaluation was not completed at this time. McNeill stated that
43 it appeared to be on target with the Audit/Finance Committee and Council directives and
44 expressed appreciation for working on the evaluation.
45
46 Fortune highlighted other areas of Service I n iancem, nts requested, including: Building
47 Inspections, Code Enforcement, Planning, Streets, Traffic, Airport, Police, Fire Operations,
48 Parks Maintenance, Downtown Development, Community Development Block Grants (CDBG),
I Internal Audit, and the City Manager's Office, Code Enforcement is requesting officers to
2 address issues beyond nuisances and enforce ordinances. Planning is requesting additional
3 support staff and an urban forester as recommended by the Citizen Tree Advisory Committee.
4 Airport is requesting funds for grant matching and support staff for the Airport Manager,
5
6 McNeill questioned if Fire Operations invoiced responsible party for hazard inaterials clean up.
7 Fortune stated in most corporate cases the City does reclaim that money, however, for fuel spills
8 and individual occurrences it is sometimes difficult to locate the offender.
9
10 Vorel stated that the Park Maintenance request also includes mowing for the airport.
11
12 Mulroy questioned the current interest in the Downtown Incentive Reimbursement program.
13 Linda Ratliff, Director of Economic Development, stated that four applications have been
14 distributed to date; but applicants have been told that they will not be processed until October l".
15 Mulroy stated depending on level and quality of projects, Economic Development could come
16 back to Council and request money to fund more than one project, or more funding for a
17 particular project.
18
19 McNeill questioned if the budogcts for offices that report to the 9C tXCouncil are under
20 separate cover. Fortune stated the budgets are separate business units included in General Fund,
21 McNeill requested that those departments present their budget for review and approval.
22
23 fortune reviewed Packages that A411 be presented in the 2008-09 budget and packages that were
24 unable to be funded in the upcoming budget year. Mulroy stated appreciation for prioritizing the
25 packages for this fiscal year.
26
27 Mulroy reiterated the need for the 4 cent ad velorum tax increase, and was seconded by McNeill
28 to support this recommendation to Council.
29
30 The meeting paused for a break at 3:02 PM and reconvened at 3:12 PM where agenda Item #3
31 above was considered.
32
33 Mulroy stated that this is good information to demonstrate the actual value of the City versus the
34 book value based on original costs. McNeill questioned 40 acres of land owned by the City
35 donated by the Rayzor family on Airport Road, if the land was unimproved and the City held the
36 mineral rights. Emerson Vorel, Director of Parks and Recreation stated that the land is in its
37 natural state and the City owns gas pooling and mineral rights on the property. Tony Puente,
38 Budget Coordinator,confirmed gas revenues go into the Non-Airport Gas Well Fund. McNeill
39 also questioned open space on Windsor Drive. Vorel stated that a plan has not yet been
40 determined for this area,but it would likely be part of the trails along with shared use for
41 drainage.
42
43 5. New Business—This item provides an opportunity for the Committee members to suggest items for
44 future agendas or to request information for future meetings.
45
46 6. Subsequent Meeting Schedule—Discuss subsequent meeting needs and schedules—
47
I No future meetings scheduled.
2
3 Meeting adjourned at 3:22 PM.
4
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