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HomeMy WebLinkAbout2004-02-18 Finance Committee Minutes � Finance Committee � Meeting Minutes � February 18, 2004 @ 5:00 PM � Councilors Attending: Frank Farrington, Gerry Palmer, Geoff Gratwick, David � Neailey, Anne Allen Staff Attending: Deb Cyr, Dave Little, Dave Pellegrino, Keefe Cyr � Others Attending: Roger Lebreux � The meeting convened at 5:00 p.m. i. Consent Agenda , a. Quitclaim Deed — Carson — 14 Third Street b. Quitclaim Deed — Ball — 1217 Stillwater Avenue , The Committee approved the Consent Agenda. � 2. Bids/Purchasing a. Engineering & Design Seroices— WWfP— S.G.C. & D.S. Engineering - � $23,300 b. Cellular Telephone Services— City Wide — U.S. Cellular - $20,000/yr The Committee recommended a policy regarding the use of cellular telephones ' by employees. Cyr noted that she would discuss this with Assistant City Manager Bob Farrar. � The Committee approved items a and b. ' 3. Presentation of FY2003 Results — Runyon, Kersteen, Ouellette Cyr noted that every year the City is required to have an independent audit, and � this year's audit, for the period ending June 30, 2003, was performed by Runyon, Kersteen, Oueliette (RKO). The results are a little bit later this year due to the , implementation of GASB 34. She indicated that RKO works for the Finance Committee and the Council. Cyr introduced Roger Lebreux, a partner with RKO, who reviewed the financial overview of RKO's findings. � � ,� � rLebreux emphasized that RKO had worked independently for the Council for 5-6 weeks, although they did work closely with staff. He noted that the new GASB ' 34 procedures took up a lot of time for the auditors as well as stafF. Lebreux indicated that the graphs in the summary are a representation of the � financial results, and that the Committee should rely on the financial statements for decision making. , The City has received its 6th award for Certificate of Achievement in Financial Reporting. The City has received an unqualified opinion, which means that there � are no deficiencies in the financial statements. Lebreux discussed the report, . noting that taxes receivable remained stable, accounts receivable remained stable, and that cash and investments decreased overall by approximately $1.4 I million. Accounts payable increased by approximately $202,000, probably due to timing. Accrued wages, the most significant liability, increased over last year by about $92,000. Accrued wages represents payroll earned in June of 2003, but ' paid in July of 2003, the bulk of which are unpaid teacher contracts. Deferred revenue represents taxes still unpaid 60 days after the end of the year, August 31�, a slight decrease, meaning the collection rate is remaining stable. Gratwick I asked about the cash balance. Lebreux noted that the general fund increase offset some of the cash decrease. Cyr said that a number of things happened last year that caused cash and investments to decrease, including appropriating � a large sum from the undesignated fund balance to spend, and the fact that we issue bonds and invest the funds until we spend it. The fund equity balance ' decreased by $350,000. The fund equity is made up of four pieces, the reserved of $2.7 million, designated funds of $5.9 million, school funds, a deficit of $194,000, and the undesignated funds at $8.9 million. Cyr noted that the largest � designated fund balance was for self-insurance for Workers Compensation at $2 million. 1 Lebreux discussed the general fund revenues. He said that taxes appear to be over budget mostly due to deferred taxes and excise tax collections being higher than anticipated. Intergovernmental revenues are higher partly due to additional ' general assistance that was needed and additional school state subsidy. Charges for services budget was too high for the school, which offsets the lower intergovernmental budget for the school. Allen wanted to know if the City gets a � breakdown of this part of the budget from the school. Cyr said that the school s departmenYs software is different from the City's. The school has more detailed � information, and the City has a summary version, therefore there are some services that may be placed into the wrong classification. Farrington wanted to know why the school system has a different software program than the Ciry � does. Cyr noted that the schooi system must prepare more detailed reports for the State Department of Education, specifically the EFM 45 report. Allen wanted to know if there was a system that would be compatible for the City and the i � � school. Lebreux said that he is not aware of a program that exists. Cyr said that � the school's total revenues and expenditures match the totais that she has for the City, however a line item might need to be adjusted. Lebreux said that RKO � audits the line items for the school, not just the totais. Lebreux said that the use of surplus is a budget item that is used to draw down the undesignated fund � balance. Under general fund expenditures, health and welfare was over budget, but it is � in relation to the revenue source previously noted. Education is under budget due,to special education students transferring to other schools, and an overall general spending freeze for half of the year due to anticipated shortfalls in state � subsidy. Farrington wanted to know what the speciai education budget was. Lebreux said that he could get it for him. Lebreux noted that schools couid not build up an undesignated fund balance. Schools could have 3% of their budget � in undesignated funds. The tax collection rate is a strong 97% over a ten-year period. Lebreux noted ' that the tax rate had only increased $1.60 in the last ten years, mostly due to the large undesignated fund balance. Gratwick wanted to know what the tax cap would mean to this. Cyr said that the tax cap is limited to 1% of value, or , $10 tax rate, and we are at $23.65. Cyr said that the tax rate for the school department is $12, so we wouldn't be able to pay for schools with the tax cap. � The counry tax is $1, which can not be deducted from the $10. Lebreux said that the fund balance charts shows that the undesignated fund balance has gone up every year since 1994 and is at 12.27%. Nealley wanted to know the Ciry's � current undesignated fund balance percentage. Cyr said that it was now around 9%. Lebreux discussed the enterprise funds chart. He noted that the City has seven , enterprise funds, and that from 1996 to 2001 there is a true comparison depicted on the chart, however due to an accounting change such as GASB 34, the years , 2002 and 2003 are not a true comparison. Lebreux said that the golf course did not really lose $1.2 miilion, that this is unappropriated, which relates to the undesignated for the general fund. Lebreux noted that an enterprise fund that is � heavy in modern fixed asset has a lot of debt, and the way that we now have to account for that leaves a lot less funds in the unappropriated category. So the � Airport looks like it went from $28 million to $16 million and sewer from $17 to $6 million, however this is merely an accounting change. Tax collections are holding their own against other large communities in the state. � Lebreux said that the undesignated fund balance as a percentage of budget is how auditors decide if the City is holding the appropriate amount. He said that � RKO as weli as bonding agencies like to see about 8% of your budget. The City is at 13% on this chart. Debt service should be on the low side, and Bangor is at r � r � 5%. He presented charts with total revenues and expenditures. Lebreux noted that education is currently 53%, which is consistent with other communities. � Lebreux listed significant changes that had occurred due to GASB 34, such as recording fixed assets and accumulation depreciation, eliminating interfund � balance and deferred revenue, and recording long-term debt capital leases and unfunded liabilities. When you see unrestricted it is technically the same as undesignated except that now it is a negative $14 million. What that means is � that the City is heavy in debt compared to the fixed assets. The fixed assets, net of depreciation with building and improvements being the largest at 47%. The � debt per capita chart shows a huge jump from 2001 to 2002, the year that the City bonded $34 million for pensions, � Cyr said that Roger would normally submit a management letter at this time, however, we are still working on it. The types of comments listed are not new. Lebreux said that comments would be one of three levels. Level one is material � weakness, where internal controls are not sufficient enough to prevent problems from happening, of which the City has none, level 2 is a reportable condition, a concern but recognizes that the issue may not be correctable, and �evel 3 are 1 other comments that RKO hopes that you correct. Cyr said that once the Ciry receives the report, we will present staff s position. � 4. Update Police Department Insurance Issue � The Committee voted to table this item to the next Finance Committee Meeting. 5. Executive Session — Hardship Abatement � 6. Open Session — Hardship Abatement Decision , The Committee voted to approve the hardship abatement. The meeting adjourned at 6:08 p.m. ' ' � � � ,