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HomeMy WebLinkAboutMinutes - Finance and Bond Committee - 7/31/2006MINUTES TOWN OF ORO VALLEY FINANCE • 1 BOND COMMITTEE REGULAR MEETING HOPI ROOM 11,000 N. LA CASADA DRIVE R MONDAY, JULY 31,2006 AT O, AFTER 6:00P ,�� 1� III IC�Z�I:� 1�a'?�1��► � I:�' •ei I PRESENT: Tony Eichorn, Vice -Chair Aaron Fisher, Member Chuck Kill, Member Peter 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 Albert Holler, Albert Holler & Associates Bob McClure, Albert Holler & Associates EXCUSED: Sarah Frost, Member CALL TO AUDIENCE Bill Adler, 10720 N. Eagle Eye Place, suggested that more detail be provided for the public explaining why recommendations are supported by the Committee. He requested that a detailed explanation be provided for the public regarding the utility sales tax agenda item. Council Member Dankwerth reported that the Council will receive detailed information from each department on the additional positions requested, why they were requested, and how providing those positions would benefit the public. These reports will be reviewed by the Council on August 2nd. There will be two public hearings on the utility sales tax to be held on September 6th and September 20th. If adopted, the utility sales tax would go into effect January 1, 2007. Council Member Dankwerth requested the presence of the Finance and Bond Committee members at these meetings. CADocuments and Settings\lhersha\Local Settings\Temporary Internet Files\OLK8\7-31-06 Minutes.doc MINUTES, FINANCE AND BOND REGULAR MEETING 2 Lyra Done explained, that she is a member of the Oro Valley Parks and Recreation Advisory Board and will serve as the liaison to the Finance and Bond Committee. Each of the Committee Members introduced themselves and shared their backgrounds. • • 1, ., � . MOTION: Member Fisher MOVED to elect Tony Eichorn as Chair of the Finance and Bond Committee. Member Kill SECONDED the motion. Motion carried, 4-0. MOTION: Member Fisher MOVED to elect Chuck Kill as Vice -Chair of the Finance and Bond Committee. Chair Eichorn SECONDED the motion. Motion carried, 4-0. ,...• • .,• Iw,, MOTION: Vice -Chair Kill MOVED to approve the minutes from the May 25, 2006 meeting. Member Fisher SECONDED the motion. Motion carried, 4-0. The Town entered into a contract with Albert Holler and Associates during FY 05/06 to conduct local sales tax audits on the Town's behalf. This contract has been renewed for FY 06/07. Mr. Holler explained his background as the Chief Auditor of Revenue with the Arizona Department of Revenue and his work with the City of Mesa. Albert Holler and Associates was established in 1993 and operates strictly for municipalities. They currently work for 13 municipalities. He discussed some statistics: • Since 1993 they have assessed over $18M in delinquent sales taxes. • They have collected approximately $13M on behalf of the 13 cities. • They have conducted 1,721 audits for the 13 cities. • An average assessment is approximately $10,500 but each collection is around $7,500, • The return on their fee based on assessments for an average of all of the cities is 6.3 to 1 and on collections it is 4.1 to 1. The yearly fee for Oro Valley is 13.4 to 1. • The municipalities have control over the penalties and Albert Holler and Associates usually imposes them and informs the municipality of the status. Albert Holler and Associates compares public records with historical reports to search for any discrepancies. They initiate a letter which is mailed out by the Town and the Town collects the money. Their commitment was 15 audits per year for Oro Valley and they have conducted 17 audits for the Town in the past 13 months. Mr. Holler explained that they look at spec buildings, contracting and retail. They subscribe to a service which issues monthly listings of the property sales in the county. They compare the sales listing to the building permits and identify potential spec buildings. They then review the records for the general contractor to see if they are paying taxes on it. Once they identify the potentials, they submit a request to the tracking system for Arizona which verifies that they are CADocuments and Settings\lhersha\Local Settings\Temporary Internet Files\OLK8\7-31-06 Minutes.doc 2 MINUTES, FINANCE AND BOND REGULAR MEETING 3 not already being audited and once approval is issued, they send out a letter of intent. They contact the taxpayer in 2-3 weeks and fax them an explanation and copy of the tax code. They schedule an audit time and proceed with the audit. Once the audit is complete, they submit the worksheet to the taxpayer for agreement of the data. Albert Holler and Associates mails a final assessment to the taxpayer and they have 45 days to pay, appeal, or contact them. The actual amount through the audits for Oro Valley for the first 13 months is $547K for assessments and $483K for collections. The Town pays $36K per year for the service. Mr. McClure explained that a normal audit goes back four years. Once into the audit, if they have underpaid the taxes by 25% or more, then it can go back six years. If they have never paid taxes, it can go back to the start of the business. Ms. Lemos stated that there is a line item included in next year's budget to account for sales tax audit recovery. The budgeted amount for 06/07 is approximately $200K. Albert Holler and Associates reviews monthly reports from ADOT and Pima County listing all of the projects that they are funding and they verify that taxes are paid on those projects. They will also work on franchise agreements. 9. FISCAL YEAR ENDED JUNE 30,2006 BUDGET ! ACTUAL REVIEW OF ! REVENUES 1EXPENDITURES/EXPENSES Ms. Lemos reported that the Town is closing the fourth quarter of FY 05/06 and is running the reports for June 30th. Some year-end accruals need to be included but there are preliminary pre - audit figures on revenues and expenditures. She reviewed the financial status report: • General Fund revenue collections are $22AM through June 30, 2006. This is $600K above budget. As further accruals are recorded, this variance may increase. • Local sales taxes have exceeded the budget by $1 M without the year-end accruals. There are above budget scenarios in construction sales tax. Retail sales tax collections are $2.9M which is slightly below budget but there will be one additional month worth of accruals to post for July's collections which should bring it above budget. The revenue collected from the sales tax audit program was $306K. The Town received approximately $187K shortly after the year-end close which will be posted in 06/07. • State shared revenues are at budget. • Residential building permits came in at 388 permits which are below the budgeted amount of 440. Although the number of permits was low, the value assigned to those permits was higher than projected. This resulted in a $44K positive impact. • Commercial building permits were $473K below the budgeted figure of $1 M due to construction timing issues. • Federal/State grants are $92K higher than budget due to a higher than expected revenue from COPS Universal, MANTIS and Safe School grants. • Charges for services have exceeded budget by $191 K. Court costs exceeded budget by $74K, Parks and Recreation user fees were above budget by $69K and zoning and subdivision fees exceeded budget by $35K. • The Highway Fund revenue is $174K below budget for FY 05/06. There was a large reimbursement from PAG tied to a safety intersection construction project at Calle CADocuments and Settings\lhersha\Local Settings\Temporary Internet Files\OLK8\7-31-06 Minutes.doe 3 MINUTES, FINANCE AND BOND REGULAR MEETING 4 Concordia which was delayed until FY 06/07. Construction sales tax collections have exceeded budget by $420K. Public Transportation Fund revenues were $27K below budget. This resulted from a grant funding not received in the current fiscal year for reimbursement for a transit van which was not purchased. That purchase will be made in the current fiscal year. Townwide Roadway Development Impact Fees Fund collections are $186K below budget due to a shortfall in residential building permits. There is also a delay in the First Avenue widening project which should be complete in the current fiscal year and reimbursement from PAG for this project should be received this fiscal year. The Oro Valley Water Utility Fund revenues exceeded budget by $2.2M due to higher than expected water sales. Water sales exceeded budget by $667K due to higher than expected sales from residential, commercial, irrigation, construction, and turf related water sales. The water connection fees exceeded budget by $871K. Interest from income exceeded budget by $509K due to cash reserves being invested in the LGIP (Local Government Investment Pool). MOTION: Vice -Chair Kill MOVED to recommend Council acceptance of the fourth quarter financial status report. Member Fisher SECONDED the motion. Motion carried, 4-0. a) 2003 MPC Senior Lien Water Revenue Bond — Ms. Lemos reported that revenue bonds for $23.8M were issued to finance phase 1 of the reclaimed water delivery system, three years of - existing water system capital improvements and three years of water system expansion capital improvements. The expansion related improvement projects on the potable water system had a budget of approximately $5.4M. Actual paid to date through June 30, 2006 was $2.3M and slightly over $3M remains. Four projects are complete on the extension of the water main and two are expected to begin in FY 06/07. The potable water system existing improvement project had a budget of approximately $7M. The actuals paid to date are about $6.7M and approximately $311K remains on this bond issue. The costs remaining on this project are for the design of the reservoir that has been delayed until 06/07 and the design and construction of the Sheraton booster station which will begin in FY 06/07. There are two final water main extensions and new locations which are expected to be constructed in FY 06/07. The reclaimed water delivery project Phase 1 is basically complete and all bond funds have been spent. This project was to provide reclaimed water to the turf areas located north of Tangerine Road. This project ended up overrunning its budget in the Water Utility Fund by $2.2M due to construction cost increases but there are sufficient funds in the Water Enterprise Fund to cover all of the overages without borrowing money from the General Fund. b) 2005 Excise Tax Revenue Obligation — There were $6.2M in bonds issued in September 2005 to fund land acquisition and development of a municipal operations center. To date the land has been acquired and remaining is approximately $1.3M for municipal operations center design. CADocuments and Settings\ihersha\Local SettingsUemporary Internet Files\OLK8\7-31-06 Minutes.doc 4 MINUTES, FINANCE AND BOND REGULAR MEETING 5 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. Vice -Chair Kill SECONDED the motion. Motion carried, 4-0. 7. STATUS UPDATE ON COUNCIL CONSIDERATION OF THE UTILITIES SALES TAX Ms. Lemos stated that at the upcoming Town Council meeting on August 2, 2006, the Council will be renewing the discussion of implementing a 4% local sales tax on utility services. The utility services would include electricity, water and natural gas. This topic arose at the culmination of the FY 06/07 budget approval process when the Town Council adopted the tentative budget for $105.9M to include placeholders for 18.5 new positions to be contingent upon the adoption of a utility sales tax before September 30, 2006 or identification of other recurring revenue that could be used. There were 35 new positions requested townwide during the budget process. Those positions were cut at the Manager's review level in order to provide budget capacity to fund salary adjustments, market adjustments and COLAs for existing staff. The amount of CIP items requested was reduced and funded out of carryforward cash reserves from the General Fund. On May 25, 2006, the Finance and Bond Committee held a special meeting to re -recommend the utility sales tax to the Council as a means for funding the personnel and capital improvement projects. Also discussed was a recommendation to revisit the utility sales tax ordinance every two years as the new commercial centers are developed and retail sales taxes are generated. Also, since there were no recurring funds available in the General Fund to dedicate to CIP projects for FY 06/07, the CIP Technical Advisory Committee repeated their recommendation from last fiscal year that the Mayor and Council pursue additional CIP funding sources, and that CIP funds should not continue to be taken out of cash reserves, as was done this year. Last year, the utility sales tax was estimated to generate approximately $1.9M. Finance staff has revisited and reconfirmed these estimates and it may be slightly higher due to growth. It is estimated that the cost impact per household would be approximately $7.48 based on an average electric/gas bill of $150 per month and an average water bill of $37 per month. If the Council decides to move forward on this item on August 2nd, they will have the opportunity to set two public hearing dates, tentatively recommended for September 6th and September 20"'. If a utility sales tax ordinance is approved on September 201h, the tax would be effective January 1, 2007. Staff worked to prepare justification for the 18.5 requested new positions including the public benefit from additional staffing. That memorandum is prepared and is in review. Member Fisher indicated that Oro Valley is the only municipality in the area that does not already have a 4-4.5% utility sales tax. CADocuments and Settings\lhersha\Local Settings\Temporary Internet Files\OLK8\7-31-06 Minutes.doc Ms. Leos explained that the Town is statutorily prohibited from excluding water in the utility sales tax due to the municipal tax code. The utility sales tax must apply to all utilities. Telecommunications is not included because it is under a separate tax code. Vice -Chair Kill asked about future relief from the increasing tax rates. Council Member Dankwerth stated that with an increase in population, there is an increase in the need to provide infrastructure, personnel such as Police Officers, and build and maintain roads. Chair Eichorn explained that the quarterly meetings are the Committee's regularly scheduled meetings and all other monthly meetings are tentative. MOTION: Member Fisher MOVED to maintain the existing schedule and time of Finance and Bond Committee meeting dates for FY 2006/07. Vice -Chair Kill SECONDED the motion. Motion carried, 4-0. ADJOURNMENT — 8:04 P.M. There being no further business before the Committee, Chair Eichorn adjourned the meeting at 8:04 p.m. Danielle Tanner Senior Office Specialist CADocuments and Settings\lhersha\Local Settings\Temporary Internet Fi1cs\0LK8\7-3 1-06 Mil]LlteS.doc 6