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HomeMy WebLinkAbout1984-02-15 Finance Committee MinutesFinance Committee February 15, 1984 @ 4:00 p.m. Present: Councilors Cox, Jordan, Tilley, McCarthy,.- Willey, John Flynn, Ted Jellison, Ron Wentworth 1. Computer Proposal Cox: I guess we all know why we're here.. Someone want to open discussion?.. - Tilley: Yes. I. think the computer is a capital item. Ted and I sat down yesterday and went through the list of capital jobs that are in process and there are some underruns which leaves a little bit of money available and there is one item in there of the Central Fire Station consolidation. From what I have talked with everybody this is ore or lessof a dead issue but money has been set aside in this account for it. We felt ifwe couldtake and transfer this money from this account plus take some of the overruns and simply transfer it into a computer account then that would solve the problem. In addition to finding a way to fund the computer it would save probably $25,000 in r budget for next year as far as leasing expenses and maybe $38,000 each year for the next five or six years. We felt that was the quickest and cleanest and best way to do it. Cox: Do you have any comments, John? Flynn: The only thing, it depends on what the Council wants to useit for, I would think,. obviously, it would take full Council action to terminate the project (consolidation) and I would assume you would ant some discussion as to where we are to date on it, etc. Other than that it would simply be Council action - you would do away with that project and transfer the monies back into the General Reserve and than an appropriation from the General Reserve to purchase the equipment. Cox: What is the name of the fund, Arthur? Tilley: Central Fire Station Consolidation. Cox: I'd like to know something more about that fund. Fly n: I'm not prepared today to sit down and... Jellison: It's a project - not a fund. Flynn: We had a project in mind of consolidating the police and fire, of building a new. police station next to the fire station, adjacent to it. We put moneyy in the budget to hire an engineer with the idea in: mind that we would hire an architectural firm to do some preliminary work on it as wellas put some money in there for the purchase of additional land that we thought would be necessary to do it. We entered into an architectural agreement for a preliminary phase only and have not gone any further than that and presently are looking at the figures they have given us on hat it would coat to put the police station there and whether or not there would be any kind -p - of savingsecould derive in order to help pay that debt service payment o new building. This particular fund here is only for architectural services n the purchase of land. We haven't gone any further than that and didn't intend to unless it becomes feasible. Cox: I thought you were talking of the combination, that's not just a new fire station, but a combination of both. Flynn: Just new police station. Cox: Did you review the architectural with, did the Finance Committee? Jordan:. This was put inthe capitalbudget acouple of years ago - we selected the architect - it's been there a year and a half or so and the progress to date is that we met that same group that does the engineering stuff, proposals from four or five architectural firms and the one selected was from Lewiston. They came back with some preliminary staff on it but I think at the time we wanted more data on .the relative costs between heating and all those things. Flynn: They were to come up with some preliminary designs, preliminary cost estimates and also try to give us some consolidation numbers on energy. Jordan; The bulk of the money in that proposal was originally, - set up to purchase the land which is basically where the Goselin Bakery building is now owned by the Diocese, St.. Mary's Church. We had some discussions with them and at one point an offer had been made and we never could reach agreement and at that point the project was put on holdbasically because the Council had some reservations if it would pursue it further without getting more information from the architects. No decision has been made at this point about that particular fund whether or not it should be pursued further or not be pursued further. Flynn: One of the other concerns... Jordan: I'll be blunt about it - I have voted consistently against it,the consolidation, since day one but I don't, I guess my point is that I would not disagree with Arthur's proposal conceptually that that may be a way todo it. The question is when, where and how. Before we were to make a decision to commit this money to the computer I think we ought to have the benefit of seeing what the staff is looking for in terms of capital budget for this coming year and try to make a determination of whether it would be better to use the money for the computer based on the figures we have or better to apply that to some other capital project if we want to take it out. 'I spoke with Ted briefly about it today, called him to see what the thinking was and he mentioned Arthur's proposal and I think in the course of our conversation it occurred to me that maybe the way to handle this would be to go forward with the proposal as presently submitted, do what Ted has suggested in transferring from Reserve and carrying forward with that with the idea we would have an opportunity to review Arthur's proposal about the Central Fire. Station fund and if we decided to use it for this then we could use that money at that point to transfer, the transfer could be accomplished and the money could be paid back. If we decided not to at least we'd have this in place and we could go to. Ma the regular appropriation process and pay it back on the annual basis. To me that makes a lot of sense. Gets the process started, funding mechanism in place and we can always make that decision which is not an illogical one. I'd be more than happy to see the Fire Station con- solidation die a slow and natural death anytime. As far as what to use the money for, I think it's .something we have to think about whether we want to use it for this or maybe something else. Tilley:. You see, Ren, technically this is a capital item and if we take it out. of Reserve and charging it off for a year that is expensing a capital asset and actually regardless of how we do it it should really go through capital asset account. Jellison: That's no problem. That's just the mechanics of taking the money from one fund and putting it in another fund. Tilley: Yes. Another point is this money isn't going to be required until October. Jellison: Well, hopefully. Tilley: Regardless of what happens, if we do have other capital items we want to put in here into the budget, and we decide to take this out, it's a'question of which item doesthisgo towards - towards the computer or towards another piece of equipment or something like that. One .could say one way and one towards the other. Jordan: The problem I have and a point I made the other night is I don't think we canenter into an agreement to buy a computer unless we decide where the money will.. come from. I suggested if we e going to do this than let's, I don't think .this Finance Committee should make that decision today. The full Council would have to make a decision to terminate that project. I'm not so sure that we would be in a position to make that decision on Friday.. I know there are several people,: I know you and John have not had the benefit of reviewing that project. My suggestion is we go ahead and vote on the proposal as originally submitted and than go forward and discuss the termination of the fire station consolidation project and if so then apply it. 'Iwant to see thecontract signed.- Iwant to see the computer going. I don't know whether we can do it the way you've proposed and get it done in time to be sure we can get the benefit of the agreement that Ron has reached with these people. Tilley: .There is anotheralternative - a couple. In other words the Charter does provide that the City Manager, with the :permission of the Council, can take any savingsfromone account and put it -into another. We do know we have some savings building in the current year budget for the changes in the Health and Code Enforcement Dept. - $20,000 - $40,000. Flynn: Well, it's an annualized figure, Cox: Insurance also? Jellison: There would be some butyou're talking about five months. Tilley: Also will be gathering in $23,000 worth of money from surplus land that wasn't budgeted. There are a lot of possibilities -4 - to fund this. The only thing I don't like, I don't think it's right to dip into a Reserve that is set up for a specific purpose and say I'm going to take it out and pay the money back. You could do it. Jellison: It's a lot better than the old method. used. Tilley: As far as the bookkeeping thing is concerned we can say right now we, if we can't do this, we'll fund it in next year's budget because that's when the money will actually be requited. Jellison:. Suppose we don't vote to fund.it in next year's budget. John can't sign a contract without funding. I certainly ouldn'twant him to and youwouldn't want to if you were in his position. I. just don't understand why, what your concern is about this Reserve Fund transfer. Tilley: You just don't do things that way, Ken. in other words, that Reserve isset up for the busses. If. we're going to analyze that Reserve and itgoesto she Council and the Council says we don't need that money in Reserve, we're going to wipe it off and that becomes surplus money and we're going to use $200,.000 of that to fund a computer and the other to fund something else, fine. But let's analyze Reserve and if we don't need it let's wipe it off the books. We should really look into it and know what we're doing before we make a decision like that. Willey: Myrason, I don't usually like. tot a to these meetings to interfere and I'm not, two reasons I came over today because this is an extremely disturbing matter to me. I wanted to let the Council know that the Capital Construction budget is completed as of today and we are going to be holding a workshop on that very item. I got wind of the idea of transferring funds from some other Construction Accounts today and I would ask that nothing be done until the full Council meets and makes a determination. I don't think this Committee has authority to do anything other than that. We are going. to be setting up a Workshop. John and I have talked about it within the next few days on the Capital Construction Budget which we will put a lot of time into this year. 'Second thingthatconcerns me and 'I personally consider it matter of clear policy, others disagree with me on it, but I think it's clear policy when we are taking money from a designated account, a reserve,. and transferring it for a non -reserve use and saying we're going to pay it back - that borrowed reserve. What bothers me is not so much the economics of it but that if the moneycan be borrowed from that account that means implicitly it doesn't need to be used and therefore because it was there to be used we wouldn't be able to barrow it. From a policy standpoint it concerns me that there are times when do transfer money between accounts and I personally. find what we are doing essentially is taxing the public into an a ount that e don't need - again, because if we needed it we wouldn't be able to borrow from it - we're. having these surplus accounts and then when the need arises we'll just go there, don't need to raise taxes because money is there... taxes have already been raised. I object to that. I heard Ted's explanation the other night. I'm just not satisfied with it. That's his administrative explanation. I'm saying as a matter of policy I don't like the ideaof transferring funds and I told you yesterday. However, if the Bus Reserve Account YOU are talking about is really no longer needed. I suggest, so we don't hold this up and I'm willing to call a special meeting on Friday morning, and -5 - this Committee can discuss today, if that's the case fine. Make the transfer but, I was glad to hear Arthur say this, close that account out. If we .don't need it let's not have it. Transfer the money, get the computer, we all think we need it. 'Let'a not have these surplus accounts floating around that we don't need. If you or someone on your staff can explain to me why that is fiscally responsible you tell me. Because I don't think it is and it concerns me. That is a deep philosophical problem I've bad for a long time with these surplus accounts where year in and out we put things in and then when it comes time to getting a piece of equipment it just comes out on the books, the transfer is made and we don't really analyze it becausethe money is there. Jellison: I don't quite follow the last statement but I want to go back on a point. Councilor. Willey has indicated that if we don't need the reserve then let's get rid of it. It seems to me the way we postured the whole arrangement indicates wedo need that reserve account. If we didn't need it I would never have suggested we pay it back. Willey: Then why borrow from it? Jellison: Because it i available, we will not spend $500,000 on busses in any single year, $hopefully, in the near future. Willey: -You're .telling me you've overbudgeted that account that has been raised with taxpayer's dollars? Flynn: No, we're not talking about a budget.- it's a reserve account. Willey: But it has been raised through budgets, se my point? Flynn: That's right. Jellison: Let me go back and explain what I tried to explain the other night. The bulk of which resulted from the fact that we were in the school bus businesses and bad -a fleet of approximately 30 busses and several years ago the School Dept. we can get it cheaper privately so they went ahead and did that andfound out they couldn't - that's just a little aside - so we were left with 30 school busses,.w . had accumulated considerable reserve moniesfor their replacement. The sale of those busses went in to increase that same fund but during that same period of .time we were getting hot and heavyinto the transit businesses which is a whole different story. We went out and bought the first to Mercedes busses using $60,000, $56,000 worth of that reserve money to start creating a modern .transit fleet. We now have 10 1978 Mercedes we are in the process of trying to replace. They are all approaching 200,000 miles andit appears we .are going to be fortunate in that the federal government is going to be there with their big checkbook, give us 80% of what it costs to replace those. I thinkvery soon.we are going to see the federal checkbook close up and when it comes time to replace the three Orion's we, just bought which we $110,000 a piece, if we replace those and we have to do it, that's the fund that would be used to replace those vehicles. Willey: Fortunately if the federal funds dry: up the program dries up because you're not going to, if I'm here, at into....I think time and time again we get these programs going and you talk about the matching -6 - and then the program.dries up and the city is expected.to take it over. I won't vote for that, no way. Flynn: That's a policy matter, Larry, that we don't have any control over. Willey: At 20% funding per bus, what would that cost us? Jellison: On replacement of 10 Mercedes, those are estimated to cost $50,000 each to replace. 201 would $100,000 - wouldbe our local share. The 3 Orions we .just bought the local share was funded out of the Bus Reserve. It's not that we're not asing it. We use it e when necessary. We just haven't had to go out and buy five or ten busses on our own. But that's .coming. Willey: My concern, Ted, isand Citjreally gets down to philosophy, do we have too much money in some of thesefunds, more than you need, do you build in to your budget that. you give to the Council a excess, cushion if you will, what have you got in there? $300 $400,,000? Jellison: $500,000. Willey: You don't needtha:.much money in there. Jellison: .Not in a given here, that's right. Willey: .You just said 10 busses is $100,000. You're not going to buy all of those in one year. Flynn: Yes. Willey: You'regoingto. sell the other busses and get money on those. Jellison: That's the net. Willey:. They get that as trade-in? Flynn: That's right. Willey: I think thereis too much money in that account. Jellison: What if three or four years from now the 3 Oriens have to be replaced and there .is no federal money? Willey: I know what my answer would be. Flynn: That's the problem'- whether you plan for the short time... Willey: You're raising tax dollars onma future expectation and I don'¢ think you can do that. The Council ought to be told when you present your budget what the basis is for.... Flynn: It is. Willey: I've never heard that before. Flynn: Every year. Absolutely. Every single year. Willey: I've never heard it before and I've been here for two years. -7 - Flynn: When weget the Motor Pool budget, we explain how all. the credits work in that budget. Jellison: Absolutely. Willey: I don't tape record the conversations.. Tilley: If you look at it the money in this account really doesn't belong in the bus system as such. -.it belongs back to the old school busses. Jellison: The old school busses are a part of thebussystem. Tilley: If we eliminate this account and four years from now e face a situation where the federal governmentisout of it than at that point we say the bus system is going torun on a pay as you go basis - we go out and buy the busses the same way everybody else buys their car. Finance It. Make the system pay as you go and when they're gone you do the same thing.. Flynn: Would be an awful expensive system. Tilley: Maybe if it's too expensive we shouldn't have it. Willey: That's what we're-. talking about here. Jellison: That's a much bigger question then we trying to face now. Willey: It's a policy issue raised by this very point, Ted, and that is what some were trying to raise the other evening. Flynn: It's your funds. Willey: It's very important. Jellison: Do what you wish. Tilley: Really what we're talking about here is how do we say there is $200,000 inthe city someplace to finance this? We can sign an agreement with Sperry for. this and say when you deliver it next fall there will be 5200,000. Flynn: Iwouldn't sign it that way. I think we have to have a specific fund citation. Jellison: We never r buy anythingwithouta fund authorization. No way we would sign it that way. McCarthy; Was this $500,000 raised solely through the sale of the original busses? Jellison: No. It's accumulated. - In fact part of she $500,000 technically belongs to the other communities that participate in the system. They participate every year in the replacement cost of the vehicle used on their run. Willey: Those are Bangor's busses that we contribute to the system. MIN Jellison: They pay the local share on the busses used on their run, minus what's been accumlated in the reserve account for them that they have paid for. Cox: Who owns the busses technically? Flynn: We do. Jellison: The three new :ones areowned by the State. Tilley: They don't belong to us at all?. Flynn: We lease them. Our local share goes to than. Willey: I can't stay. Can I ask one question - how much money is in that reserve account that's related to the old busses? Jellison: Four hundred something... Willey: Could I make the suggestion - would it be possible to get a specific breakdownthat way - perhapstheold bus account which is sally blendedinto the .new .system --it's consistent but different - maybe the old one could be closed out and we'd have an accurate _ reflection of the bus system vs. the old one and then you could utilize that money for things like this. What's left over goes into the general fund and reduce taxes. Tilley: We should leave $100,000 in .the Reserve. Willey: He's got it. There's $500,000 and there is about $400,000 for the yellow. busses. Jellison: $400 plus. Tilley: We can't clean the account out now because we're going to buy 10 busses and we're going to need some funds to pay our 20% which Ted .says $100,000 - if we left $100-$150,000 and transferred the rest into General Fund then w would: be starting out with 10 new Mercedes busses plus 3 new Oriense At that point if we decide this is the method of accounting for us then we start depreciating on an actual -like basis instead of 20% basis as now and start charging that into the account. Willey: Somewhere a prior: Council as a matter of policy said to you folks you carry over that Reserve Flynn: Absolutely. Willey: Well, I think this Council should be given a chance to look at that. Maybe they'llagree and maybe they won't. Flynn: No problem. McCarthy: How was the original money raised to buy the busses? Yellow busses? Flynn: That was one of the first revenue sharing payments. $535,000 in that range. _q. Tilley: If we're going to do it and there isn't a real logical support to keep the $500,000 in there. Jellison; There is if we are going to be in the transit. business. Tilley: No .there isn't, Ted. Right now we .have 16 busses and we know we will end up with 13 busses new and it's going to cost us less than $150,000. The difference between $150,000 and what's in the budget really isn't needed. Just the same way this $185,000 here. The taxpayers have paid this and itis sitting in account drawing interest and it really shouldn't be.. Jellison: Then the .Council that approved. that, shouldn't have approved it. Willey: It was a four to four vote, I think.. Flynn: But by doingthatif you get rid of that portion of that, buy new busses and then turnaround and fully depreciate them through the budget process, then in fact you are going to turn around and regenerate that money all over again and increase the budget, the tax rate. Willeyi You're going to do that anyway when you buy those new busses. Flynn: You're only depreciating the 205. Willey:- Is there a reason you chose this particular Reserve account overany other? .. Jellison: Totally arbitrary. Could yea have gone to the Motor Pool Reserve there is a million dollars sitting there. Could take $200,000 with no problem. Willey: If you can borrow from these Reserve accounts, then you've got too much money in there, Ted.. Tom a Reserve is there for needs s they exist. You're raising tax dollars for future expectations. Good planning to a point. Flynn: But you could be depreciating it greater for $120,000 and not have to buy one for: 15 years but yet that money isaccumulating n that fund to buy that grader so that at the end of the 15th year (tape turned over) Tilley:.......... I. have to agree with Larry. The bus account reserve, I 'think we have to look at everyone of these reserves. The bus is much easier to analyze because it'sso simple. -A couple of items- the 'Mercedes and Orions antwo or three old busses. We know we've got 3 new busses; fox anoeher ess than $150,000 we are going to have 10 more which makes 13 total - with a. total of 16. If you were starting a new business and had to start out with new equipment, we're starting the businesses with roughly 13 new busses and 3 old ones. At that point you have no need for depreciation or replacement reserve. It is at that .time you start charging expense into the bus system every year and so forth. Flynn: So you wipe it out, start all over again and start putting money back into the depreciation fund for new busses? -10 - Willey: You do that anyway. Jellison: Only on the 20%. The reason to leave the rest of it there is when the federal checkbook closes up you've got... Willeye I don't buy that - federal checkbook .closes up the doors close up. Jellison: I don't think that's our decision. Willey: No, it's a Council decision. Jordan: Two things I want to say. Dae is obviously the policy decision that arises out of this is a significant :one. I have some serious disagreements with what you are saying but you can spend a Lot of time arguing aboutit needlessly. The fact is the immediate problem at hand which is the computer and regardless of what we do with that reserve fund we have got to establish a funding mechanism at this point so they can enter .into a contract and buy this computer. I go back to my original suggestion which is let's make the transfer an the basis that it will be repaid out of our budget unless we come up with some other solution which would either be to terminate the reserve account and not repay it, wipe it out. Or come up with another source within the capital budget. But let's get this thing done now. As far as wiping out the Reserve account the only thing I can say is that everything I've heard here today looks to me like a short term budget relief solution which could have some long-term adverse reprocusions on the City. I'm not sure we should do that without giving it some veryhard thought. But needless to say, let's, I move we recommend through the Council by a specialmeetingon Friday that the $200,000 be transferred from the Bus Reserve Fund and repaid at B% interest over a 7 year period as suggested by the Finance Director. McCarthy: Ken's suggestionmakes some sense but I think there is a much more significant policyieaue has been raised in terms of how we reserve and. particularly if we are reserving against changes in federal policy. I would tend to agree with Ken and should do something to get this thing on its way but we should take specific steps to review this policy so we know what reserve accounts exists and which ones are reserved for unusual reasons like possible and of federal program. It maybe a good reason to reserve but we certainly should study it and know about it.. Willey: Can I just - John, you mentioned something about a temporary transfer and that if the Council at a workshop next week in going over the capital construction accounts that... Flynn: You can transfer money back in or out of this anytime. Willey: But we give them the relief? Flynn: I don't care where the money comes from. All I want is some fund citation approved by the City Council before I sign the contract. Willey: No one is disagreeing with that. It's just so we are not pinned in. Flynn:. You can reimburse that, you can permanently transfer it out. Jordan: It would have to be a budgetitem to repay that.fund. If we chose not to repay it we simply don't authorize the expenditure. Flynn: Ken's Order would say if you did absolutely nothing that you would end up repaying that fund. If you do something else, if you close out those capital accounts and reappropriate the capital account for this, do whatever you want... Jellison: I think we are looking for immediate relief. Flynn: All I'm. looking for is just an immediate fund citation. Tilley: We should take $200,000 and transfer it from Bus Reserve into the General Fund, we're okF Jellison: Take the repaymentepgovision off. Tilley: Take it right off and transfer $200,000 into the Capital Fund for the.computer.. If we do that we're doing it right. Borrowing between accounts isn't right. Cox: What do you .say, Ted? Jellison: It's up to you folks. Willey: The 8% bothers me. - Jordan: My feeling is doingit the other way would bethe right way because if you don't you're in essence making a policy decision at this point that you're not going to repay. that account. I think the account has value, the reserve fund has value, and should be replenished. I would rather see it go from the other direction and we would have to take a positive step not to appropriate money to replenishit rather than doing it the other way and decide to replenish it. Willey: He was talking about the 8% retainment Jordan: I say leave it in and take it out later if we want. Don't take it out now and have to go through a step to put it back in. Tilley:. We shouldn't at our pleasure as we sit say okay we need some money and take $150,000 from here and charge it and pay it back later. Let's take it out and make it clean. Take it out and transfer it to the general fund. The purchase of it should go through the capitalif this is a capital item. $200,000. If we get it the ay we're talking about we'd be expensing it in the budget each month, each year and charging it. That's not right. It's a capital asset and it shouldbe on record as going through the capital account. Whether you get the money from the bus account or reserve account, doesn't make any difference. But let's do the bookkeeping right. -12 - Jellison: We borrow just, we don't borrow willy-nilly. We borrow from one fund to another fund. The Council has also been the body that made that decision. We've never done 1t on our o Have always gone to the Council with an order to transfer money to be repaid at the current rate of interest. The whole Trans -ease settlement at the airport hinged on borrowing a. halfmillion dollars from the capital fiord. It's not something new. F1yn It's nothing we can do administratively. Always done through Order. Tilley:- There is another point we might bear in mind. Ted did look into lease purchase agreement and he did get fourpp sibilities and one of them was very good ... over a five year period...charge in excess of 8% of $1,800 a year on a.$200,000 investment which isn't bad. There are a. lot of things we should be thinking of and I feel that we may thick definitely ofgetting out of reserving and buying on a lease basis, pay as you go basis. You're paying lease instead of charging depreciation. Willey: John, you and I talked about the meeting that would be a £ollowup to this re: capital budget primarily and to go over the reserves. Flynn: That's two separate meetings. - Willey: Any dates in mind? Flynn: You mentioned next week. Willey: We'll hold a special meeting on Friday at 9:15 a.m. Flynn: What should the order say - transfer $200,000 Jordan: Leave it like it is and if Flynn: If you restate what it is so we are absolutely sure. Jordan: Exactly as it. is. Flynn -The Order with the first two paragraphs was passed the other night. What happened in the 3rd paragraph? Jellison: Require a separate order? - Willey: No. Flynn: Re: the fire station, one thing you should think about is if you think 'there will ever be, not just nextyear, a police station built at that facility. Is the land cheaper now? Willey: That's policy. - Jordan: There is some feeling that a portion of that land might be required for parking. That money was specifically for land acquisition. Tilley: Here again we've got $200,000 worth of taxpayers money just sitting and the city indrawing interest on it. -13 - Jordan: You've got to .remember Arthur when that thing was voted on,. and I voted against it believe me, there was every intention by the Council to acquire that land that year. It wasn't because St. Mary's Church burned down and the Diocese decided they wanted to sell the whole thing for $1 million. .Also we started stalling because we hadn't gotten anything back from the architect. To say we appropriated it and let it sit it erroneous because it was appropriated for a specific purpose. Tilley:. I realize that.. Jordan: It's sitting there now because in the last year we have not had an occasion to deal with it. It's been waiting for this capital budget. Tilley: Jahn, could we also have a complete list of all the jobs. Should clean up.overruns which do exist. Find out exactly where we stand. Any excess moneyfrom underruns and cancelled jobs could be. applied. Flynn: We do that every year. Ted gets together with John Frawley. Any completed projects get taken off the books and money put into the reserve and used for other capital work. Jordan: I only have one other thing to say we have always had an explanation of reserve accounts.. I don't think anyone should leave here feeling it's something that hasn't been supplied us by the administration. There's neverbeen a question about what we were doing. Tilley: That's easy to say on an overall: basis, Ken. Jordan: What do you mean an overall basis? Tilley: Funding and depreciating assets and accumulating reserves is a normal thing but does the Council every year analyze that based on each piece of equipment to find out we are still depreciating equipment that the initial price has been fully depreciated? I'm not so sure we know that. In talking with Ted, the depreciation is set up on a basis of per hour. use and I don't believe there's Any cutoff and in affect.a vehiclemight have a three year life and now we are using it for seven years. That's not right. Ican understandguarding against future price increases but I don't think it's right. Jordan: You don't think it's right to fund depreciation in a manner which will guard against future price increases? You don't think that's sound management?.` Tilley: In business if something costa you $1,000 and you're allowed to depreciate it for up to $1,000 and no further. Jordan: For tax purposes, yes. But not for funded depreciation. Tilley: You can do anything anyway you want to, Ken, and in my opinion we are taking too many liberties in some of our accounting. Jordan: That's obviously your opinion. Tilley: That's right. -14 - Jordan: I'm not suggesting it is anything other than that. I'm saying my opinion is no - we are not taking liberties. Tilley: .Fine. That's your opinion and I have my opinion. Jordan: Move we adjourn. Adjourned at 4:50 p.m.