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HomeMy WebLinkAboutMinutes - Finance and Bond Committee - 10/30/2006 (3)E TOWN OF ORO VALLEY FINANCE r BOND COMMITTEE REGULAR HOPI '!! r t r 11,000 . r. DRIVE ORO VALLEY, ARIZONA MONDAY, OCTOBER 30,2006 AT OR 600 ROLL CALL PRESENT: Tony Eichorn, Chair Chuck Kill, Vice -Chair Aaron Fisher, Member eter Lamm, Member STAFF PRESENT: Stacey Lemos, Finance Director Wendy Gilden, Management & Budget Analyst Mary Rallis, Accounting Supervisor Danielle Tanner, Senior Office Specialist ALSO PRESENT: Helen Dankwerth, Town Council Member Lyra Done, Parks and Recreation Advisory Board Liaison Dennis Osuch, Partner, Cronstrom & Trbovich and Osuch EXCUSED: Sarah Frost, Member 1. APPROVAL OF MMINUTES FROM THE JULY 31, 2006 REGULAR MEETING MOTION: Member Fisher MOVED to approve the minutes from the July 31, 2006 meeting as amended. Vice -Chair Kill SECONDED the motion. Motion carried, 4-0. ENDED JUNE 30, 2006 Mr. Osuch gave an overview of the audit and discussed the following reports: • They issued an unqualified opinion with non -reportable conditions for the Comprehensive Annual Financial Report (CAFR). There was no management letter. • An unqualified option was issued for the federal programs. • They issued an unqualified opinion for the LTAF II report. • The auditors found no deficiencies with the HURF funds. • They issued an unqualified opinion on the annual expenditure limitation report. FAMINUTES\FINANCE AND BOND\2006\10-30-06.doc MINUTES, FINANCE AND BOND REGULAR MEETING 2 Further discussion followed: • Mr. Osuch stated that the General Fund's total balance at end of year was $14.3M which was an increase over last year. $13.2M is undesignated unreserved fund balance. • Mr. Osuch explained that it is accepted accounting principal for a government to have two different financial statements presented. One statement is on the full accrual basis of accounting and the other statement is on the modified accrual basis of accounting. • Ms. Lemos stated that the Town contingency policy has been adopted by Town resolution to set aside 20% of the adopted expenditures in those funds as the contingency. • Mr. Osuch stated that the most significant item during the year was an issuance of a new revenue bond for $6.2M, 33% of which was reported business type funds and 67% governmental funds. Funds are for the acquisition and construction of the Town facility. • Member Lamm asked why each segregated budget's fund balance is zero. Mr. Osuch explained that a balanced budget is adopted each year. Ms. Lemos added that essentially the end of the year projected fund balance is what Staff plugs in for the contingency. • Member Lamm asked about the non -major government fund. Mr. Osuch explained that they must report the major and non -major funds in one column. Any fund that has total assets, liability_,_ revenues or expenses that are greater than 10% of the governmental funds or 5% of the total government itself is a major fund. Public transportation is the exception because the Town requested to have it presented as a major fund. • Mr. Osuch stated that they do internal control test work at the end of the year and in May/June. This involves pulling large samples of accounts payable info and looking at credit cards, cash receipts, procurement procedures and utilities. They assess some of the major federal programs at that time and test for compliance. Once the year is closed, they confirm the account balances and confirm the amounts in the financial statements. • Member Lamm asked if intergovernmental transfers are among government funds within the Town or if they include transfers between non -Town entities and Oro Valley. Mr. Osuch explained that they are only the Town of Oro Valley with the exception of including Municipal Property Corporation which is a blended component unit. Ms. Lemos highlighted some figures: • In the past year, the Town's fund balance increased by $2.5M primarily due to greater than anticipated sales tax collections primarily in the construction category. • There was an increase in state sales tax collections by about $300K. There was an over budget amount of almost $300K in the interest income line item in the General Fund. • General fund expenditures were below budget by $867K due to staffing vacancies and projects that were carried over into this year. • The Highway Fund's fund balance increased by almost $490K. It includes an incoming revenue source from construction sales tax which was higher than expected. • Public Transportation Fund's fund balance was $53K and it was subsidized because it was an intergovernmental transfer from the General Fund. • The Roadway Development Impact Fees Fund's fund balance decreased by $3.2M due to the completion of several major street widening projects from last year. • Water Utility revenues exceeded budget by $3.2M in water sales, water connection fees and interest income. Water expenses were in line with the budget. FAMINUTESTINANCE AND BOND\2006\10-30-06,doc 2 MINUTES, FINANCE AND BOND REGULAR MEETING 3 MOTION: Vice -Chair Kill MOVED that the Town's financial audit for the fiscal year ended June 30, 2006 be forwarded to the Town Council with a favorable recommendation for Council acceptance. Member Lamm SECONDED the motion. Motion carried, 4-0. 3. COMMITTEE APPOINTMENT TO CAPITAL IMPROVEMENT PROGRAM (CIP) TECHNICAL ADVISORY COMMITTEE Ms. Lemos stated that the Town's annual CIP document is typically a 5-year long-term document that plans the future capital needs of the Town and how to finance them. CIP involves developing a prioritized schedule of short and long-term community capital needs. It provides a means for evaluating and prioritizing projects and looking at the community's ability and willingness to pay for those projects in the most cost-effective way and looking at the Town's resources for the capital projects. Capital projects are defined as projects over $20K which have the expected useful life of two years or more and become or preserve an asset of the Town. Ms. Lemos explained the CIP process schedule: • In November the project request forms will be sent to the Department Heads and the CIPTAC will be established. • In December we will use a more formalized process to seek additional public input. • In January the project request forms are due from Staff. • In January and early February, the CIPTAC will review the requests and set the process. • In February/March the CIPTAC will prioritize the requests and recommend the capital improvement expenditures for next year. • In April the CIP reviewed by P&Z Commission and adopted by Town Council. i MOTION: Member Fisher MOVED to appoint Tony Eichorn to the Capital Improvement Program Technical Advisory Committee as the Finance and Bond Committee's representative and Chuck Kill as the backup representative. Member Lamm SECONDED the motion. Motion carried, 4-0. Ms. Lemos stated that the purpose of this project is to have a model that can forecast financial conditions of the Town related to growth. Economics Research Associates formulated a modeling methodology to project Oro Valley's future operating costs and revenues based on anticipated growth. It is an Excel spreadsheet land use based model that uses changes in land use that drive impacts to the budget. It is an interactive model which includes two main components: 1) The Land Use component of the model is typically updated first and the model has been updated with the General Plan. It figures in different types of zoned areas and calculates a current population estimate based on the existing number of dwelling units and estimated persons per household. Staff can enter incremental growth information on new or changing types of land uses and project additional incremental dwelling units over each budgetary year which would forecast future population estimates. It accounts for current population and a percentage of daytime population based on employees that work in Town businesses. It can project up to 20 years. The model can be used annually to project the budget document or to analyze a scenario such as an annexation. FAMINUTES\FINANCE AND SOND\2006\10-30-06.doc MINUTES, FINANCE AND BOND REGULAR MEETING 4 2) The Economic Vitality Model component of the model includes the budget data (level of service standards, officers per 1,000 ratios, employees per capita standards, assumptions for inflation, cost of benefits increases, merit increase percentages, etc.) Ms. Lemos indicated that the model includes land use data, population data, existing development estimates, project assumptions and pipeline projects. If there were recommended standards to follow, the model could project the cost per standard if we set certain standards. It can show projected revenue based on existing service levels or increased service levels and projected expenditures for those increased service levels and identify that gap. Ms. Lemos discussed the various features of the model. She indicated that some of the advantages of the model are that it can determine the fiscal implication of various development scenarios looking at town wide growth, annexations, major commercial developments, land use change designations, shift in demographics, market impacts in terms of retail performance, and construction value changes. It also contains an element that we can fill in later if the Town were to entertain a property tax election. We could put in our assessed valuation history and project the valuation growth so that we are able to test various amounts and how much those amounts would generate in taxes. The model was $65,000 to develop and the Town owns the model and the development. Ms. Lemos explained that the ERP model will work in conjunction with the Economic Vitality model. The ERP system integrates the financial accounting software and the Human Resources software with budgeting, cost accounting and reporting. The goal is to prepare a program based budget which measures which services and programs can be provided to the citizens. Ms. Lemos stated that each department will be asked break down their budgets into divisions or programs to be able to collect costs by programs so we can compare how we provide programs to how other communities of our size provide programs. The Town will then be able to incorporate performance measures and report on that in the annual budget. Ms. Lemos indicated that the vendor for the ERP system is Tyler Technologies and it is their Munis product. The project will be implemented in two phases. The first phase is expected to go live July 1, 2007 with budgeting, accounts payable, purchasing, general ledger, etc. Phase two is expected to go live in January of 2008 with the payroll and Human Resources module. Chair Eichorn requested a demo of the Economic Vitality model at some point. Ms. Lemos stated that they want to increase the publicity of having this tool. Council Member Dankwerth suggested that it be shared with the Citizen's Planning Institute. Ms. Lemos explained that this is an ongoing agenda item to be added to each meeting. Actual collections for last year were $306,610. The budgeted amount for this year is $200K. Actual collections through 9/30/06 are $205,120. The billed and not yet collected amount which was all from construction industries was for $943,864. If all of the billed amounts are received, the amount would exceed budget by approximately $1M for the first quarter. Staff is labeling these as one time revenues because they are not ongoing revenue from year to year. F:WIINUTEST NANCE AND BONM2006\10-30-06.doc 4 MINUTES, FINANCE AND BOND REGULAR MEETING 5 Vice -Chair Kill asked if the Town has information on the sales tax revenues for stores that have been in existence verses new stores to determine whether the base is growing or shrinking. Ms. Lemos explained that the stores in the Town are reporting on a monthly basis for sales taxes. The sales tax revenues are trending to increase generally and the big box stores are all increasing. Council Member Dankwerth stated that David Welsh, Economic Development Administrator, will be mapping out all of the square footage for businesses in the Town and we will be able to determine income per square foot. Member Fisher requested information regarding the upcoming development projects. Ms. Lemos discussed the 2003 Municipal Property Corporation Senior Lien Water Project Revenue Bonds. The total project budget was $23.8M to fund a variety of potable and reclaimed water system expansions. To date we have spent approximately $20.5M. Some of the projects have gone over budget due to the cost of construction and construction related materials. Ms. Lemos explained that the potable water system expansion related improvement projects relate to the expansion of a new well. This project is currently in design. It is a 500,000 gallon above ground steel reservoir and includes water main extensions. Two of the mains are expected to begin in this fiscal year and four of the projects have been completed. Ms. Lemos reported that the potable water system existing system improvement projects are y growth related capital projects and the bonds are reimbursed by water development impact fees. A portion of these bonds are paid back by water sales revenues. She explained the following: • It consists of drilling 1 replacement well, rehabilitating 2 existing wells and abandoning 3 wells that are no longer in service. The replacement well was completed in September 2005. One well has been rehabilitated. Engineering has begun an additional well. • One of the reservoirs consists of land acquisition and design of a 1.7MG concrete reservoir. The land is acquired but the design has been delayed until this fiscal year. • There has been a redesigning and construction of 2 existing booster stations. One has been completed and the other will begin construction in fiscal year 2006-07. • Five of the water main relocations projects have been completed and the final two are expected to be completed this fiscal year. • A block wall around the Glover reservoir was completed last fiscal year. • Water plant security devises were purchased and installed and 5 vehicles were purchased. Ms. Lemos stated that Phase 1 of the reclaimed water delivery system projects was completed last year. Phase 2 of the project is currently in design. The design which takes both Hilton El Conquistador golf courses off of ground water on both sides of La Canada is expected to begin construction in the spring of 2007. They are using existing funds to pay for the design of that project and then plan to apply to the Water Infrastructure Finance Authority (WIFA) which is a revolving bond fund that is funded at the state level to provide a long term 20 year loan to complete phase 2 of the reclaimed water project. The Water Utility will use its reserves to construct the project and the Town will pay itself back with the funds. FA NUTESONANCE AND BOND\2006\1 0-30-06. doe MINUTES, FINANCE AND BOND REGULAR MEETING 6 Ms. Lemos stated that Excise Tax Revenue Bonds were issued in 2005 to purchase land for the municipal operations center. Remaining funds are $1.3M. We are currently working on programming for the municipal operations center and a conducting a space needs study. MOTION: With regard to the quarterly review of proceeds from long-term debt issuances, Member Fisher MOVED to forward the report to the Town Council with a favorable recommendation for Council acceptance. Member Lamm SECONDED the motion. Motion carried, 4-0. 7. TOWN OF ORO VALLEY FY 2006/07 FIRST QUARTER FINANCIAL STATUS REVIEW Ms. Lemos stated that this summary includes projections of the Town's revenues ending September 30, 2006 based on current actuals. She reviewed the following: • General Fund fiscal year to date revenue collections indicate that revenues overall will be about $114K above budget. Local taxes are projected to meet budget and revenue from residential building permits is projected to be $432K below budget. Single family residential permits are annualizing at 272 perm its�anc permits were _—_ budgeted. State shared revenues are forecasted to exceed budget by $358K. After the Council adopted the budget for state shared revenues, we received information that the State's estimates were going to be a little higher because they give us a preliminary estimate in March and then a final estimate in May/June. Since this information came in after that, the collections that we see are based on the final numbers. • Local sales tax collections data is for only 2 months due to the timing of sales tax reporting by the Arizona Department of Revenue. o Construction sales tax collections are tracking to be above budget by $502K. o Retail sales tax collections are slightly lower compared to last year. Based on this trend, retail collections will fall short of the budget by about $500K. This gap typically closes as we get through the holiday season. o Sales tax collections from hotel/motel accommodations are trending higher than the same period last year by 13%. This revenue is estimated to exceed budget at this point by $773K due to bed tax and retail taxes from hotels. o Revenue generated from sales tax audits has already exceeded budget. Depending on how much revenue is collected and making sure that they pay all of their interest and penalties, the revenue is forecasted for $800K. o The failed adoption of a utility sales tax will contribute to a loss of $1.2M. • State shared revenues are expected to exceed budget by $358K. State income tax is estimated to exceed budget by $170K. Vehicle License Tax revenue is looking to exceed budget by $200K at year end. • Residential building permit revenues are annualizing at about $1.2M. The average fee per permit is higher than the budgeted figure. It is expected that the revenue will be lower than budgeted because of the decreased volume in permits. • Commercial building permits are estimated to be under budget by $135K. • Federal and state grants are estimated to meet budget. • Charges for services are expected to exceed budget by $89K. • Bed Tax collections are projected to meet budget. • Highway Fund revenues are projected to be $251 K above budget due to an increase in the allocation of what we are expected to see from our gas tax collections. FAMMUTES\FINANCE AND BOND\2006\10-30-06.doe 6 • Public Transportation Fund revenues are expected to be around $12K below budget. PAG funds will be received later in the fiscal year for the purchase of a transit van. • Townwide Roadway Development Impact Fees Fund is expected to be under budget by almost $690K due to the decreased number in residential building permits. We expect to receive slightly over $6M in revenues from outside funding sources specifically from PAG for the completion of the I st Avenue Roadway widening project and the Pima County bond funds for the CDO shared use path. • Oro Valley Water Utility is estimated to exceed budget by $13M. Water sales are expected to exceed budget by about $460, connection fees are exceeding budget by $185K and the investment interest is tracking to exceed budget. Member Fisher asked when the Town receives money from State and Federal for seizures. Ms. Lemos stated that it depends on seizure activity. There are separate funds that account for it but they are not significant amounts of money. MOTION: Member Fisher MOVED to recommend Council acceptance of the first quarter financial status report. Member Lamm SECONDED the motion. Motion carried, 4-0. F&WISMIMA-W619m3m al N MOTION: Member Lamm MOVED to ADJOURN the meeting at 8:21 p.m, Member Fisher SECONDED the motion. Motion carried, 4-0. Danielle Tanner Senior Office Specialist F:\WNLJTES\FfNANCE AND BOND\2006\10-30-06.doe