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HomeMy WebLinkAbout2010-11-01 Finance Committee Minutes FINANCE COMMITTEE November 1, 2010 Minutes Councilors: Bronson, Nealley, Weston, Hawes, Blanchette, Wheeler Staff: Cyr, McNeil, Little, Yardley, Farrar 1. Consent Agenda A motion was made by Weston and seconded by Nealley to approve the Consent Agenda items. Blanchette requested that the consent agenda be read for the viewing public. Bronson read the items. a. Quitclaim Deed – 54 Blue Hill West b. Quitclaim Deed – 122 Cedar Falls 2. Ordinance 10-358, Increasing the Maximum Amount of Assistance for a Burial Liner Under the City’s General Assistance Program, Cyr said that in case of an indigent individual there is the ability to pay for burial costs up to a total maximum of $1,340. The request by staff is to increase the maximum amount allowed for a burial liner from the current $345 to $550, which is a reflection of the actual cost. The total allowed burial cost will not increase. Weston asked how often this service for the indigent is needed. Yardley said on average of 8-12 per year. Yardley noted that the liner cost has not been increased in at least 10 years, and he had been approached by the local funeral homes. Responding to Weston, Yardley said the rules put in place by the State and followed by the City are somewhat complicated. The Department of Health and Community Services negotiates with the funeral home to cover costs. The fees charged by the funeral homes are not retail priced. The City Solicitor’s Office is researching cremation or burial in terms of the City’s involvement. The State Statute dictates that the burial must be consistent with the individual’s religious beliefs. Weston clarified that the monies involved are State and local. Yardley noted that his department does research in finding next of kin and spoke about the dignity and respect needed. Yardley has suggested to the Maine Municipal Association and the State welfare directors that this might be something that the State takes over. Blanchette noted that this item will be going to full Council. Palmer had contacted her during the day wanting an opportunity to express his thoughts about this Ordinance change. He couldn’t be in attendance but has suggestions which he would like the City to review. Wheeler asked how many times a specific religious organization is involved in directing a preference specific type of service. Yardley said that the City is only aware of the deceased’s issues when the funeral home doesn’t have another payer. Many of these matters are resolved by relatives and communities, and the funeral home only turns to the City when there is no one available to take responsibility for the deceased. There is a portion of the City’s cemetery reserved for this population. Nealley made a motion to move staff’s recommendation to full Council with the recommendation of the Finance Committee. Weston seconded the motion. 3. Order 10-357, Appropriating Local Share for Purchase of a Transit Bus Earlier in the year, BAT Community Connector was awarded four new transit buses through the American Reinvestment and Recovery Act (ARRA), which required no local match. These buses are desperately needed to replace units which are aging, have high mileage, and are very expensive to operate. During the week of October 11, 2010, the City was notified of an opportunity to procure an additional bus, but it would require a local match. The local match is normally 20% of the total cost (average cost of a bus is $350,000 - $400,000). Due to available ARRA funds, it is anticipated that the local match for an additional bus will be approximately $64,623 or 17%. The final local match may vary slightly from the current quote but should not exceed the normal 20% requirement. Due to the tight deadline to reply, the Council was polled to determine if there was interest in pursuing the acquisition of the additional bus. As the majority of Councilors indicated a desire to proceed with the acquisition of an additional Bus, the City notified Maine DOT of its interest in a fifth bus. McNeil provided back information relating to the rehabilitation of some of the bus units. A motion was made by Nealley to recommend approval of this item which will appropriate the necessary local share from the City’s Bus Equipment Reserve to acquire a fifth bus and any unused funds will be return to the reserve account. Responding to Weston, McNeil said that the buses are full-size diesel vehicles. Weston talked about the need for an Outer Hammond/Odlin Road district route. Public transportation needs to be in districts where it is needed. The estimated cost for a new route is $137,000. Weston then seconded Nealley’s motion. In response to Bronson, McNeil said that three older buses will not pass another year’s inspection. The three will be taken off the roster. The acquisition of the fifth unit will increase the fleet by one. This will take a lot of stress off maintenance. McNeil noted that the new units will be heavy duty transit buses. 4. Review of Near Term Financing Cyr said there have been a number of conversations over the past year about debt and the likelihood of a refunding issue coming forward. She anticipates issuing bonds in January 2011. There are two parts to the issue. The first is an opportunity to refinance. Currently, there are two outstanding debt issues eligible for refinancing. One is the January 2000 general obligation bond in the amount of $1,575,000. Current interest rates are 5.3% to 5.9% for the remainder of its life. There is also an opportunity to refund the February 15, 2001 general obligation bond issue in the amount of $3,055,000. A 1% premium would be required on top of the principal in order to refinance. With that premium, it is well worth doing. The current interest rate for the remaining life of that bond issue is 4.4% to 5%. Cyr anticipates an approximate savings of $700,000 over the next ten years in interest costs alone. She anticipates issuing a 10 year general obligation bond in January 2011 which will fund the remaining life that exists on these existing bonds. She estimates the average interest cost will be 2.5%. This impacts not only the General Fund but the Sewer Fund and the Parking Fund. If the Committee is in agreement, a Bond Order will be prepared for first reading at the next City Council meeting. Weston noted that the savings would fund a Hammond Street/Odlin Road bus route for four years. He suggested that Cyr discuss it with the Interim City Manager. Responding to Wheeler, Cyr noted that the bonds are tax-exempt. Weston made a motion to support staff’s recommendation. It was seconded by Nealley. The item will go to full Council. Cyr then talked about projects to be financed as part of the January 2011. The total estimated project cost for items that have already been authorized is $1,761,000 which includes the local share of BACTS $325,000 for current projects; Fleet Equipment $386,000; Salt Shed dome roof replacement $75,000; $975,000 to replace the HVAC at the Wastewater Treatment Plant. All of these have come or will come before the Finance Committee as the projects come up. All were budgeted capital items. Cyr noted that the Council has previously authorized the bond issuance. She wanted the Committee to be aware that in January 2011 a bond will be issued to not only refund existing debt but adds the current financing needs to it as well. Cyr talked about notes that the City has executed within its own funds. In the past, the City has executed taxable notes between itself and another fund. The majority of notes exist between the general fund and the airport fund. She provided examples. Instead of going into the open market to issue taxable debt, monies are borrowed from an enterprise fund. It is allowed by the FAA regulations but the City is required to pay a market rate of return. These debts are between 7-10 years old with current interest rates of between 6-6.9%. Cyr recommended that the Finance Committee amend these existing notes and readjust the interest rate to reflect the current market taxable interest rate based upon the Airport’s investment portfolio, which is 4.5%. By doing this, a number of savings will be realized. Cyr noted that there was one issue that had a balloon payment due in 2012 and she recommended that it be spread out over the next ten years at the lower interest rate. She estimates about $80,000 in savings over the remaining life of the debt. Some debt has ten years remaining, some 6 years. Bronson said that the City is effectively refinancing itself. Cyr asked the Committee for a recommendation and also had note amendments for the Committee to sign. A motion was made by Weston to follow staff’s recommendation on refinancing all of the notes identified in Cyr’s memo. Nealley seconded the motion. Wheeler clarified that this is money that will not be spent. Cyr agreed. In the long term if this process continues, Wheeler asked if it will have a significant effect on the general fund balance when it comes to budget times and appropriations for various departmental programs and services. Responding to Bronson, Cyr said that the Council approves to annually issue a number of bonds. So while achieving savings by doing so, it is allowing the City to continue to reinvest in the next year’s projects without adversely affecting the interest costs. The debt service is a specific line within the budget itself. Wheeler said that Cyr’s response is very clear. Weston said that debt is a responsible cost of doing business. Debt management matters most. During the past year, the current interest rate environment has been discussed. Cyr talked about larger dollar projects that the City will be dealing with sooner rather than later. She talked about the general fund impact of proposed financing and refinancing. Assuming that the City will refinance its existing general obligation debt, its existing interfund notes, and issue another $1.7M worth of debt to take care of projects, she talked about the City’s current debt service before any of the aforementioned takes place and the estimated debt service in the general fund would be afterwards. Going forward, there isn’t much of a drop off in annual debt service. The projects discussed in general are related to roads: portions of Mt Hope Avenue, Essex Street and a larger portion of Church Road. Estimates range in cost from $270,000 to $1.8M. A total of all three is $3M, if done in the way the projects should be done. Historically through the annual budget project identifies between a half million to one million dollars per year of bond projects, which is minimal to maintain the City’s facilities and equipment. At that level, there will not be a reduction in the annual debt service to be directed to additional projects without potentially impacting the tax rate. Cyr asked if the Committee wanted to recommend to the full Council any amount of bonds for roads which would increase the City’s debt service appropriation going forward. Responding to Weston, Cyr said that if the debt service appropriation is increased, either the expenditures need to be decreased or revenues increased in order to not impact the tax rate. Recognizing the City has three significant road projects, Cyr said the only likely way to undertake the projects is by bond issue. Bonding the projects will increase the City’s debt service above its current level on an annual basis going forward. Cyr needs direction from the Council as to what they would like to do. Nealley spoke about the need to keep up with infrastructure needs and the need to continue to bond moving forward into the future. Nealley expressed support for bonding the three aforementioned projects. Blanchette commended City staff on the recently completed Ohio Street. She also asked Cyr to bring this back to the Committee next year and the BACTS Committee to decide what other roads should be redone. Weston commended the City on the recently completed Union Street sidewalk project. Wheeler spoke about Bangor being a service center and bearing certain costs associated with being so. Bronson talked about roads which have never had an engineered base (Church Road and Outer Essex Street) and wondered if they could be patched for a year or two and find money in the bonding for City Hall improvements; i.e. windows, doors, air conditioning, sprinkler system, damp basement. Blanchette said maybe it is time to look at the usefulness of City Hall and wondered if it would be in Bangor’s best interest to build a new facility. Bronson felt a study would be needed. Wheeler spoke about his thought of moving the Community & Economic Development Department into the EMDC offices. Responding to Bronson, Cyr said she has understood from tonight’s discussion that the Committee would like these discussions to be part of the upcoming budget deliberations and to not include bonding for the streets in the January issue. Adjournment: 6:15 pm