The URL can be used to link to this page

Home My WebLink AboutPackets - Council Packets (1238) AGENDA ORO VALLEY TOWN COUNCIL SPECIAL SESSION November 20, 2019 ORO VALLEY COUNCIL CHAMBERS 11000 N. LA CAÑADA DRIVE Executive Sessions - Upon a vote of the majority of the Town Council, the Council may enter into Executive Sessions pursuant to Arizona Revised Statutes 38-431.03 (A)(3) to obtain legal advice on matters listed on the Agenda. SPECIAL SESSION AT OR AFTER 6:00 PM CALL TO ORDER ROLL CALL SPECIAL SESSION AGENDA 1.PRESENTATION AND POSSIBLE DISCUSSION OF THE TOWN'S FISCAL YEAR 2019/20 FINANCIAL UPDATE THROUGH SEPTEMBER 2019 2.PRESENTATION, DISCUSSION AND POSSIBLE DIRECTION TO STAFF REGARDING IMPLEMENTATION OF THE TOWN COUNCIL'S OCTOBER 2, 2019, DECISION REGARDING THE TOWN'S COMMUNITY CENTER AND GOLF OPERATIONS (Continued from November 6, 2019 Regular Town Council Meeting) 3.DISCUSSION REGARDING THE SUMMARY RESULTS OF ONLINE SURVEY AND FOCUS GROUP REGARDING THE POLICE CHIEF RECRUITMENT PROCESS EXECUTIVE SESSION - Pursuant to A.R.S. §38-431.03(A)(3), (A)(4) for legal advice with the Town attorneys, discussion, and consultation with those attorneys and designated Town representatives, and possible instruction to those attorneys and designated representatives about proposals or agreements related to the Town owned golf courses, HSL and/or Home Owners’ Associations proximate to those courses RESUME SPECIAL SESSION ADJOURNMENT The Mayor and Council may, at the discretion of the meeting chairperson, discuss any Agenda item. POSTED: 11/13/19 at 5:00 p.m. by pp When possible, a packet of agenda materials as listed above is available for public inspection at least 24 hours prior to the Council meeting in the office of the Town Clerk between the hours of 8:00 a.m. – 5:00 p.m. The Town of Oro Valley complies with the Americans with Disabilities Act (ADA). If any person with a disability needs any type of accommodation, please notify the Town Clerk’s Office at least five days prior to the Council meeting at 229-4700. INSTRUCTIONS TO SPEAKERS Members of the public have the right to speak during any posted public hearing. However, those items not listed as a public hearing are for consideration and action by the Town Council during the course of their business meeting. Members of the public may be allowed to speak on these topics at the discretion of the Chair. If you wish to address the Town Council on any item(s) on this agenda, please complete a speaker card located on the Agenda table at the back of the room and give it to the Town Clerk. Please indicate on the speaker card which item number and topic you wish to speak on, or if you wish to speak during “Call to Audience”, please specify what you wish to discuss when completing the blue speaker card. Please step forward to the podium when the Mayor announces the item(s) on the agenda which you are interested in addressing. 1. For the record, please state your name and whether or not you are a Town resident. 2. Speak only on the issue currently being discussed by Council. Please organize your speech, you will only be allowed to address the Council once regarding the topic being discussed. 3. Please limit your comments to 3 minutes. 4. During “Call to Audience” you may address the Council on any issue you wish. 5. Any member of the public speaking must speak in a courteous and respectful manner to those present. Thank you for your cooperation. Town Council Special Session 1. Meeting Date:11/20/2019 Requested by: Wendy Gomez Submitted By:Wendy Gomez, Finance Department:Finance SUBJECT: PRESENTATION AND POSSIBLE DISCUSSION OF THE TOWN'S FISCAL YEAR 2019/20 FINANCIAL UPDATE THROUGH SEPTEMBER 2019 RECOMMENDATION: This item is for information only. EXECUTIVE SUMMARY: In the General Fund (see Attachment A), revenues collected through September totaled $10.2 million or 25.9% of the budget amount of $39.4 million. Year-to-date expenditures through September totaled $9.5 million or 22.7% of the budget amount of $42.0 million. In the Highway Fund (see Attachment B), revenues collected through September totaled $1.1 million or 29.7% of the budget amount of $3.8 million. Year-to-date expenditures through September totaled $392,472 or 9.5% of the budget amount of $4.1 million. In the Community Center Fund (see Attachments C-1, C-2 and C-3), revenues collected through September totaled $1.4 million or 21.1% of the budget amount of $6.7 million. Year-to-date expenditures through September totaled $1.6 million or 25.5% of the budget amount of $6.5 million. BACKGROUND OR DETAILED INFORMATION: GENERAL FUND Attachment A shows General Fund revenues and expenditures through September, as well as year-end estimates for each category. The estimated year-end projections in the General Fund are as follows: Revenues $40,441,768 Less: Expenditures ($41,723,356) Estimated Decrease in Fund Balance ($1,281,589) General Fund Revenues Local sales tax collections in the General Fund total $5.4 million or 28.0% of the budget amount of $19.3 million. These revenues are estimated to exceed budget by about $410,000 or 2.1%, due to better than expected construction sales tax revenue. Please see Attachment E for a monthly tracking of General Fund local sales tax collections, including construction, utility and bed tax collections. State shared revenues total $3.0 million or 24.1% of the budget amount of $12.5 million. Charges for services revenues total $659,354 or 25.8% of the budget amount of $2.6 million. License and permit revenues total $631,626 or 31.8% of the budget amount of $2.0 million. These revenues are estimated to exceed budget by about $213,000 or 10.7%, due primarily to residential and commercial building and grading permits. Interest income revenues total $135,234 or 90.2% of the budget amount of $150,000. These revenues are estimated to exceed budget by roughly $440,000, due to better than anticipated interest earnings on investments. Federal grant revenues are estimated to exceed budget by $20,000 due to a pass-through grant awarded by the State Historic Preservation Office for Steam Pump Ranch. In total, General Fund revenues are estimated to exceed budget by roughly $1,085,000 or 2.8%. General Fund Expenditures General Fund expenditures are estimated to come in under budget by nearly $220,000 or 0.5%, due to estimated personnel savings. HIGHWAY FUND Highway Fund Revenues State shared highway user funds total $1,089,133 or 30.2% of the budget amount of $3.6 million. These revenues are estimated to exceed budget by nearly $200,000 or 5.5%, due to a one-time allocation approved in this year’s final state budget for all cities and towns. Highway Fund Expenditures Highway Fund expenditures are estimated to come in on budget at this time. COMMUNITY CENTER FUND Attachment C-1 shows the consolidated financial status of the Community Center Fund with all revenues and expenditures from Troon and Town-managed operations. Attachment C-2 shows the monthly line item detail for the Troon-managed operations, specifically revenues and expenditures associated with the golf, food and beverage operations. The totals in the revenue and expenditure categories in Attachment C-2 tie to the contracted operating revenues and expenditures in Attachment C-1. Attachment C-3 shows the revenues and expenditures for the Troon-managed food and beverage operations only. Community Center Fund Revenues Revenues in the Community Center Fund total $1.4 million or 21.1% of the budget amount of $6.7 million. Contracted operating revenues from Troon total $593,186 and Town operating revenues total $275,008. Local sales tax revenues from the dedicated half-cent sales tax total $556,520 or 22.5% of the budget amount of $2.5 million. Local sales tax revenues and Town operating revenues are estimated to come in on budget at this time. Contracted operating revenues from Troon are estimated to exceed budget by about $108,000 or 3.4%, due primarily to non-member golf revenues. Community Center Expenditures Expenditures in the Community Center Fund total $1,646,718 or 25.5% of the budget amount of $6.5 million, and are estimated to come in under budget by about $57,000 or 0.9%, due to contracted operating expenditures. All revenue and expenditure estimates are subject to change. Please see Attachments A and B for additional details on the General Fund and Highway Fund. See Attachments C-1, C-2 and C-3 for additional details on the Community Center Fund. See Attachment D for a fiscal year-to-date consolidated summary of all Town Funds. See Attachment E for a breakdown of monthly local sales tax collections for the General Fund. FISCAL IMPACT: N/A SUGGESTED MOTION: This item is for information only. Attachments Attachment A - General Fund Attachment B - Highway Fund Attachment C-1 Community Center Fund Attachment C-2 Troon Cash Flow Attachment C-3 Troon F&B Attachment D - Summary All Funds Attachment E - Gen Fund Local Sales Tax ATTACHMENT A September YTD Financial Status General Fund % Budget Completion through September --- 25.0% % Actuals YE % Variance to Budget to Budget REVENUES: LOCAL SALES TAX 5,406,806 19,311,206 28.0% 19,722,006 2.1% LICENSES & PERMITS 631,626 1,984,118 31.8% 2,197,391 10.7% FEDERAL GRANTS 53,032 549,543 9.7% 569,543 3.6% STATE GRANTS 14,296 75,000 19.1% 75,000 0.0% STATE/COUNTY SHARED 3,016,886 12,530,715 24.1% 12,530,715 0.0% OTHER INTERGOVERNMENTAL 246,244 1,675,000 14.7% 1,675,000 0.0% CHARGES FOR SERVICES 659,354 2,552,639 25.8% 2,552,639 0.0% FINES 34,594 120,000 28.8% 120,000 0.0% INTEREST INCOME 135,234 150,000 90.2% 591,474 294.3% MISCELLANEOUS 8,591 288,000 3.0% 288,000 0.0% TRANSFERS IN - 120,000 0.0%120,000 0.0% TOTAL REVENUES 10,206,663 39,356,221 25.9% 40,441,768 2.8% % Actuals YE % Variance to Budget to Budget EXPENDITURES: ADMINISTRATIVE SERVICES 1,156,159 4,648,370 24.9% 4,648,370 0.0% CLERK 74,301 366,336 20.3% 366,336 0.0% COMMUNITY & ECON. DEV. 615,443 3,039,421 20.2% 2,977,253 -2.0% COUNCIL 94,865 206,001 46.1% 206,001 0.0% GENERAL ADMINISTRATION 959,551 2,590,400 37.0% 2,590,400 0.0% LEGAL 180,525 874,057 20.7% 874,057 0.0% MAGISTRATE COURT 190,227 923,561 20.6% 923,561 0.0% MANAGER 260,735 1,314,145 19.8% 1,314,145 0.0% PARKS & RECREATION 811,754 3,808,366 21.3% 3,801,895 -0.2% POLICE 3,437,043 17,448,615 19.7% 17,344,646 -0.6% PUBLIC WORKS 936,475 4,826,507 19.4% 4,781,256 -0.9% TRANSFERS OUT 795,436 1,895,436 42.0%1,895,436 0.0% TOTAL EXPENDITURES 9,512,514 41,941,215 22.7% 41,723,356 -0.5% SURPLUS / (DEFICIT) 694,149 (2,584,994) (1,281,589) BEGINNING FUND BALANCE **19,571,664 Plus: Surplus / (Deficit)(1,281,589) ENDING FUND BALANCE **18,290,076 * Year-end estimates are subject to further revision ** Beginning and ending fund balance amounts are estimates and are subject to further revision FY 2019/2020 Year End Estimate * Budget Year End Estimate * Actuals thru 9/2019 Actuals thru 9/2019 Budget F:\BUDGET ANALYST\Financial Reports 2019-2020\1Q\Sep\Sep FY 20 Monthly Report 11/10/2019 ATTACHMENT B September YTD Financial Status FY 2019/2020 % Budget Completion through September --- 25.0% Actuals thru 9/2019 Budget % Actuals to Budget Year End Estimate * YE % Variance to BudgetREVENUES: STATE GRANTS 46,065 180,000 25.6% 180,000 0.0% STATE/COUNTY SHARED 1,089,133 3,604,407 30.2% 3,802,209 5.5% INTEREST INCOME (14,410) - 0.0% 31,169 0.0% MISCELLANEOUS 4,065 1,500 271.0%4,729 215.3% TOTAL REVENUES 1,124,853 3,785,907 29.7% 4,018,107 6.1% Actuals thru 9/2019 Budget % Actuals to Budget Year End Estimate * YE % Variance to Budget EXPENDITURES: TRANSPORTATION ENGINEERING 318,969 3,821,428 8.3% 3,821,428 0.0% STREET MAINTENANCE 73,504 301,720 24.4%301,720 0.0% TOTAL EXPENDITURES 392,472 4,123,148 9.5% 4,123,148 0.0% SURPLUS / (DEFICIT) 732,381 (337,241) (105,041) BEGINNING FUND BALANCE **866,907 Plus: Surplus / (Deficit)(105,041) ENDING FUND BALANCE **761,866 * Year-end estimates are subject to further revision ** Beginning and ending fund balance amounts are estimates and are subject to further revision Highway Fund F:\BUDGET ANALYST\Financial Reports 2019-2020\1Q\Sep\Sep FY 20 Monthly Report 11/10/2019 ATTACHMENT C-1 September YTD Financial Status % Budget Completion through September --- 25.0% % Actuals YE % Variance to Budget to Budget REVENUES: CONTRACTED OPERATING REVENUES Golf Revenues 168,451 1,302,860 12.9% 1,391,321 6.8% Golf Member Dues, Trail and Cart Fees 256,150 1,012,349 25.3% 1,031,542 1.9% Food & Beverage 137,266 665,849 20.6% 675,793 1.5% Merchandise & Other 31,319 223,213 14.0%213,769 -4.2% 593,186 3,204,271 18.5% 3,312,425 3.4% TOWN OPERATING REVENUES Daily Drop-Ins 6,816 35,000 19.5% 35,000 0.0% Member Dues 212,792 757,000 28.1% 757,000 0.0% Recreation Programs 40,501 170,000 23.8% 170,000 0.0% Swim Team/Swim Lessons - 16,000 0.0% 16,000 0.0% Facility Rental Income 14,875 68,280 21.8% 68,280 0.0% Concession Sales 24 - 0.0%75 0.0% 275,008 1,046,280 26.3% 1,046,355 0.0% OTHER REVENUES Local Sales Tax 556,520 2,478,552 22.5% 2,478,552 0.0% Real Property Rental Income - 19,502 0.0% 19,502 0.0% Interest Income (982) - 0.0%16,238 0.0% 555,538 2,498,054 22.2% 2,514,292 0.7% TOTAL REVENUES 1,423,732 6,748,605 21.1% 6,873,072 1.8% % Actuals YE % Variance to Budget to Budget EXPENDITURES: CONTRACTED OPERATING EXPENDITURES Personnel 483,619 2,174,907 22.2% 2,135,642 -1.8% Operations & Maintenance 646,220 2,407,818 26.8% 2,389,804 -0.7% Equipment Leases 96,952 438,468 22.1%438,468 0.0% 1,226,791 5,021,193 24.4% 4,963,914 -1.1% TOWN OPERATING EXPENDITURES Personnel 227,903 850,734 26.8% 850,734 0.0% Operations & Maintenance 38,179 203,960 18.7%203,960 0.0% 266,082 1,054,694 25.2% 1,054,694 0.0% CAPITAL OUTLAY 5,035 106,500 4.7% 106,500 0.0% TRANSFERS OUT 148,810 268,810 55.4% 268,810 0.0% TOTAL EXPENDITURES 1,646,718 6,451,197 25.5% 6,393,918 -0.9% SURPLUS / (DEFICIT) (222,986) 297,408 479,154 BEGINNING FUND BALANCE **495,932 Plus: Surplus / (Deficit)479,154 ENDING FUND BALANCE **975,086 * Year-end estimates are subject to further revision ** Beginning and ending fund balance amounts are estimates and are subject to further revision FY 2019/2020 Actuals thru 9/2019 Budget Year End Estimate * Community Center Fund Actuals thru 9/2019 Budget Year End Estimate * F:\BUDGET ANALYST\Financial Reports 2019-2020\1Q\Sep\Sep FY 20 Monthly Report 11/10/2019 ATTACHMENT C-2 TROON El Conquistador Cash Flow Statement Actual Actual Actual Actual Original Budget Forecast Jul-19 Aug-19 Sep-19 TOTAL TOTAL TOTAL Revenues: Golf Fees, net of discounts 45,761 48,979 60,160 154,900 1,231,063 1,325,692 Trail Fees & Member Cart Fees 17,200 16,200 15,875 49,275 212,428 214,454 Golf - Group Services - 486 254 740 2,300 2,121 Range, Rentals, Other Golf related 3,292 3,449 4,981 11,722 58,505 54,947 Golf Lessons 315 450 70 835 4,987 4,412 Income - Golf Schools 254 - - 254 6,005 4,149 Total Member Dues 68,260 68,452 70,163 206,875 799,921 817,088 Other Member Income 90 112 176 378 1,026 1,262 Income - Other (non - golf)- 1,509 6,598 8,107 9,873 8,480 Merchandise, net of discounts 7,141 7,915 7,778 22,834 212,314 204,027 Food and Beverage, net of discounts 36,943 46,834 53,489 137,266 665,849 675,793 Total Revenues 179,256 194,386 219,544 593,186 3,204,271 3,312,425 Cost of Sales: COS - Group Services Golf - 496 244 740 2,300 2,121 COS - Golf Lessons 211 382 56 649 3,990 3,511 COS - Golf Schools 112 343 - 455 4,804 3,571 COS - Merchandise, net of discounts 7,998 7,245 6,165 21,408 134,282 136,332 COS - Food & Beverage 14,468 20,183 17,284 51,935 193,741 207,508 Total Cost of Sales 22,789 28,649 23,749 75,187 339,117 353,043 Gross Profit 156,467 165,737 195,795 517,999 2,865,154 2,959,382 Operating Expenses: Payroll 127,833 123,465 134,120 385,418 1,750,373 1,714,942 Employee Benefits 30,539 30,300 29,813 90,652 390,886 387,086 Employee Related 2,120 2,678 2,751 7,549 33,648 33,614 Advertising & Marketing 6,249 6,998 6,566 19,813 116,291 108,581 Repair & Maintenance 19,549 29,499 69,436 118,484 399,892 375,852 Operating Expenses 12,941 17,347 16,035 46,323 240,755 232,889 Total Operating Expenses 199,231 210,287 258,721 668,239 2,931,844 2,852,964 Operating Profit (42,764) (44,550) (62,926) (150,240) (66,690) 106,418 Leases - Carts 13,041 13,041 13,041 39,122 186,900 186,900 Leases - Equipment 19,277 19,277 19,277 57,830 251,568 251,568 Utilities 126,018 124,119 106,247 356,384 1,188,556 1,197,622 Fixed Operating Expenses 158,335 156,436 138,564 453,336 1,627,024 1,636,090 Gross Operating Profit (201,099) (200,986) (201,490) (603,576) (1,693,714) (1,529,672) Insurance 101 101 101 303 1,183 1,191 Fees, Permits & Licenses 674 (31) (35) 608 525 608 Base Management Fees 10,000 10,000 10,000 30,000 120,000 120,000 Bad Debt - (882) - (882) 1,500 18 Total Other Expenses 10,775 9,188 10,066 30,029 123,208 121,817 Net Operating Income (Loss)(211,874) (210,174) (211,556) (633,605) (1,816,922) (1,651,489) 11/10/2019 ATTACHMENT C-3 ACTUAL BUDGET ACTUAL BUDGET MONTH MONTH Y-T-D Y-T-D FOOD & BEVERAGE REVENUE 53,489 57,054 137,266 127,322 TOTAL REVENUES 53,489 57,054 137,266 127,322 COST OF SALES 17,284 15,085 51,935 38,169 PAYROLL & BENEFITS 37,875 39,339 107,179 114,870 OPERATING EXPENSES 3,555 5,832 13,858 18,057 NET INCOME (LOSS) (5,225) (3,202) (35,706) (43,774) EL CONQUISTADOR INCOME STATEMENT CONSOLIDATED - RESTAURANT/GRILLE - SEP 2019 11/10/2019 ATTACHMENT DConsolidated Year-to-Date Financial Report through September, 2019FY 2019/2020FY 19/20 Capital Leases/Left in AccountsBegin Bal. Transfer OutThru Sep 2019General Fund 19,571,664 10,206,663 10,206,663 795,436 5,860,269 2,842,431 14,378 9,512,514 20,265,813 Highway Fund 866,907 1,124,853 1,124,853 281,722 110,051 699 392,472 1,599,288 Seizure & Forfeiture - Justice/State 229,363 2,253 2,253 2,379 16,513 18,892 212,723 Community Center Fund 495,932 1,423,732 1,423,732 245,762 227,903 1,168,018 5,035 1,646,718 272,946 Municipal Debt Service Fund 182,187 26,442 1,046,718 1,073,160 2,550 1,046,307 1,048,857 206,491 Oracle Road Debt Service Fund 9,922 88 88 - 10,010 Alt Water Rscs Dev Impact Fee Fund 9,019,943 377,039 377,039 4,467 127,975 132,441 9,264,540 Potable Water System Dev Impact Fee Fund 5,808,880 151,001 151,001 4,467 266,613 271,080 5,688,801 Townwide Roadway Dev Impact Fee Fund 3,257,944 104,865 104,865 4,467 11,098 15,565 3,347,244 Parks & Recreation Impact Fee Fund 531,324 58,830 58,830 4,467 4,467 585,687 Police Impact Fee Fund 108,573 24,473 24,473 100,000 4,467 104,467 28,579 Capital Fund 3,515,884 544,131 544,131 882,468 882,468 3,177,547 PAG/RTA Fund 566,136 1,816,300 1,816,300 1,809,275 1,809,275 573,162 Water Utility10,725,309 5,014,438 29,820 5,044,258 2,472 698,355 1,718,658 543,028 4,709,485 7,671,998 8,097,569 Stormwater Utility728,173 360,872 360,872 167,962 66,347 35,090 269,399 819,646 Benefit Self Insurance Fund 1,032,951 880,577 880,577 737,831 737,831 1,175,697 Recreation In-Lieu Fee Fund 15,718 173 173 - 15,891 Total 56,666,810 22,116,730 1,076,538 23,193,268 1,143,670 7,236,211 6,670,597 3,445,560 - 6,022,405 24,518,443 55,341,634 Fund RevenueOther Fin Sources/TfrsTotal InDebt Service Total OutPersonnel O&M Capital ContingencyF:\BUDGET ANALYST\Financial Reports 2019-2020\1Q\Sep\Attachment D - Summary All Funds11/10/2019 ATTACHMENT EGeneral Fund Local Sales Tax Collections FY 2019/20CATEGORYJULYAUGSEPOCTNOVDECJANFEBMARAPRMAYJUNETOTALConstruction Sales Tax 517,637 462,244 615,858 1,595,739 Utility Sales Tax 234,537 311,362 320,239 866,138 Retail Sales Tax 555,057 542,964 524,735 1,622,756 Bed Tax 54,830 91,322 99,278 245,431 All Other Local Sales Tax *189,195 198,846 220,579 608,620 TOTAL 1,551,256$ 1,606,738$ 1,780,689$ 4,938,684$ FY 2018/19CATEGORYJULYAUGSEPOCTNOVDECJANFEBMARAPRMAYJUNETOTALConstruction Sales Tax 432,755 355,783 480,092 457,613 380,468 341,104 698,951 390,588 412,233 437,627 513,242 1,084,876 5,985,332 Utility Sales Tax 284,416 315,680 310,763 300,228 246,348 206,155 226,228 269,639 237,684 206,253 193,245 206,049 3,002,688 Retail Sales Tax 521,613 511,157 528,681 526,398 543,458 656,373 786,532 547,247 509,518 636,067 598,384 577,250 6,942,678 Bed Tax 79,334 80,404 80,545 69,997 101,224 158,327 86,952 131,451 200,165 219,171 167,742 169,856 1,545,168 All Other Local Sales Tax *198,583 200,462 187,826 206,134 234,808 245,773 221,263 273,974 299,266 326,011 282,214 266,937 2,943,252 TOTAL 1,516,701$ 1,463,486$ 1,587,907$ 1,560,370$ 1,506,306$ 1,607,732$ 2,019,926$ 1,612,899$ 1,658,866$ 1,825,129$ 1,754,827$ 2,304,968$ 20,419,118$ * Note: Does not include cable franchise fees or sales tax audit revenuesF:\BUDGET ANALYST\Financial Reports 2019-2020\1Q\Sep\Attachment E - Gen Fund Local Sales Tax11/10/2019 Town Council Special Session 2. Meeting Date:11/20/2019 Submitted By:Kevin Artz, Finance Department:Finance SUBJECT: PRESENTATION, DISCUSSION AND POSSIBLE DIRECTION TO STAFF REGARDING IMPLEMENTATION OF THE TOWN COUNCIL'S OCTOBER 2, 2019, DECISION REGARDING THE TOWN'S COMMUNITY CENTER AND GOLF OPERATIONS (Continued from November 6, 2019 Regular Town Council Meeting) RECOMMENDATION: Staff’s recommendation to finance necessary capital improvements for the golf course and community center is to blend the options that have been presented within the background section of this Council Communication. The recommendation incurs the lowest capital and operating costs and allows the improvements to be constructed in a timely manner. Staff recommends the following plan: Intra-fund loan for $1.9M this fiscal year to fund irrigation and other improvements for 18-holes on the Conquistador golf course. Construction would be planned to occur from May-October 2020. General Fund would be paid back over three fiscal years from Community Center Fund surplus, which will minimize escalation of construction costs, maximize water savings and eliminate the need to issue bonds for the golf course improvements. 1. Tax-exempt bond financing of up to $3.2M (includes 6% escalation cost on contract) in early FY 2020/21 for the community center improvements. Design could begin this fiscal year with construction planned for Fiscal Year 2020/21, which will minimize escalation of construction costs. Financing the community center exclusively will qualify for tax-exempt bonds with lower costs. Total financing costs on $3.2M for 10 years totals $360,000. 2. PAYG financing from the Community Center Fund for $2.1M (includes 9% escalation cost on contract) to fund irrigation and other improvements for the second 18-hole course (Cañada course). Construction would occur from May-October 2021 (FY 21/22), which will minimize escalation of construction costs, maximize water savings and eliminate the need to issue bonds for the golf course. 3. Establish a minimum fund balance policy for the Community Center Fund in the amount of $500,000, which will provide capacity for the Town to make other improvements starting FY 2022/23, such as resurfacing and reconfiguring the parking lot, and also preserve funds for unforeseen financial issues. 4. If the performance of the Community Center Fund does not meet forecast sufficient to fund the plan, the above financing recommendation could be adjusted as follows, depending on the extent to which the forecast is not met: The repayment of the intra-fund loan could be extended to 10 years or $190,000 annually.1. The bond repayment would be fixed at $356,000 per year.2. The PAYG improvements for the second 18-holes could be deferred one year (or until funds in the Community Center Fund are available). 3. 5. EXECUTIVE SUMMARY: This report serves as a response to the October 2, 2019 action by Council for staff to review and provide an analysis and recommendation on financing options for the capital investments needed for the Town’s community center and 36 holes of golf. In addition to the financing option information contained in this communication, at the November 4 meeting, staff will present Council with a general implementation schedule of the Council’s decision regarding the continuation of the 36 holes of golf and related issues, specifically identifying key decision points that will need to be made in order the 36 holes of golf and related issues, specifically identifying key decision points that will need to be made in order to progress in a timely manner. A follow-up special meeting and discussion has been scheduled for Wednesday, November 20 at 6:00 p.m. in the Town Council Chambers for a continuation of the discussion, to include obtaining the Town Council’s input on the Request for Proposal procurement vehicle that will be required to solicit proposals for the operation of the 36 holes, one of the conditions included in the October 2 Council-approved motion. BACKGROUND OR DETAILED INFORMATION: On October 2, 2019, the Town Council directed staff to bring options and recommendations to finance the necessary capital improvements for the Town to implement the Council’s decision of continuing 36 holes of golf and making improvements to the community center building. Staff has analyzed several options that include: pay-as-you-go financing, intra-fund loans, Municipal bonds, and a combination of the options. Assumptions In order to provide a comparable cost analysis and recommendation, staff has used a set of assumptions when comparing the different options. The assumptions used are not intended to create strict parameters for the scoping of the project. For example, a total project budget of $6.8M has been used in the assumptions for the financing options; however, in the future, a detailed project scope will be required to determine an appropriate project construction budget and will likely differ from the $6.8M used for these assumptions. Final project costs will require future Council action. The following assumptions have been used for this analysis: Project budget of $6.8M, which comprises $3.8M for the golf course improvements and $2.6M (adjusted to $3.0M for inflation attributed to vertical construction) for the community center improvements. The $2.6 million represents the prior Council’s conclusion to improve the building as recommended by staff ($2.25M), with the addition of an estimated $350,000 to also address the reconstruction of the front entry way to eliminate stairs to the ground level, eliminate the portico, and expand parking availability. The estimates for the community center improvements are 18 months old; therefore, staff adjusted the cost estimates by 12% and used a $3.0M budget for this analysis. Staff spoke with a construction estimator for a large contractor in the Tucson area, and they have experienced an annual 6% increase in construction cost over the past several years. They are also anticipating the trend to continue in the near-term. Therefore, staff utilized a construction cost price index increase of 6% for the current year, 6% for fiscal year 20/21 and then 3% annually thereafter. Taxable bond terms – staff structured the financing as taxable bonds with a 10-year callable term and a 2.67% interest rate. Taxable bonds were utilized in the analysis, which increases the financing costs by 70 basis points (.7%) because additional analysis needs to be performed to determine if tax-exempt financing for the golf course would meet the requirements of private-use tests. If tax-exempt financing is an option, the interest rate would drop to 1.97% (in today’s market). Fund balance projections – the community center fund balance projections were estimated utilizing the 10-year pro formas, including additional revenue from the day-play policy change and the HOA contributions. Water savings – staff has previously estimated that improvements to the 30+ year-old irrigation system would result in approximately 15%, or $105,000 of savings in water costs. Cash flow projections for the investment options were modified to reflect the realization of those savings following the capital investments. Options Pay-as-you-go Pay-as-you-go (PAYG) is the practice of funding new projects with cash saved from current or prior appropriations, with the expectation to utilize those savings to pay for the capital project. Staff has evaluated the Community Center Fund and forecasted contracted revenues, dedicated sales tax revenues and contracted expenditures to determine a projected timeline for accumulating sufficient funds. The accumulated savings would then be utilized to construct the golf course and community center improvements. The attached table (Attachment A) provides those projections. As indicated in Attachment A, staff forecasts that the Community Center Fund could accumulate $6.7M of fund balance (savings) by the end of Fiscal Year 2023/24. If the entire costs of the improvements are funded with PAYG, the capital improvements could start in three years ($2.9M in FY 22/23) and the balance in five years ($3.9M in FY 2024/25). This also assumes that there would be no other capital expenditures that are paid from the fund balance during this period (i.e., tennis court repairs, building repairs, etc.). It is likely that a portion of the final improvements will need to be included in year six (FY 2025/26). As staff indicated in the assumptions, construction costs have increased by 6% in each of the past two years and are expected to continue that trend in the near future. If construction costs escalate at 6% the first year, and 3% per year for FY 21/22 to FY 24/25, the estimated project budget of $6.8M is forecasted to increase to $7.76M (assuming $2.9 contract in FY 22/23 and $3.9 contract in FY 24/25), or an increase of $960,000, during that period. In addition, staff and the Town's management company, Troon, have previously estimated that the leaking irrigation system is causing an estimated 15% increase in water usage for the golf courses. The increase in water usage translates into approximately $105,000 of additional cost per year from the pro formas presented during the option evaluation process. If the irrigation system improvements for the golf courses are funded PAYG in FY 24/25, the fund would incur an additional $525,000 of water costs. Staff also projects if the irrigation improvements are funded PAYG, Variation B of the 10-year forecast, which Council approved October 2, 2019, would need to be adjusted to increase the utility budget until the capital improvements are completed. PAYG financing for the golf courses and community center is projected to increase costs by $1.5M due to escalating construction costs and increased water costs. PAYG would delay the start of the improvements for three to five years. Intra-Fund Loans An intra-fund loan is an internal borrowing from a fund that has excess fund balance available, in this case, the General Fund. The internal borrowing could be established with or without an interest component. At June 30, 2019, the General Fund is estimated to have a fund balance of $19.7M, with an unassigned fund balance of approximately $6.5M (total fund balance less 25% contingency reserve and fund balance allocated in the FY 19/20 budget). A portion of the General Fund unassigned fund balance could be loaned to the Community Center Fund for golf course or community center improvements. The General Fund does not have adequate capacity to fund the entire $6.8M of estimated improvements. If an intra-fund loan is utilized, there may be other necessary capital improvements (i.e., park or street projects) that are delayed or postponed until the loan can be repaid, although with a remaining $4M+ unassigned fund balance, there is still strong capacity to fund expected capital projects for next fiscal year. However, golf course and community center needs could potentially be prioritized over other Town capital needs. The benefits of the intra-fund loan are that the projects can begin sooner, thereby, reducing a significant portion of the inflationary and water costs from PAYG financing. An intra-fund loan would also reduce or eliminate the financing and closing cost of municipal bonds. Municipal Bonds A municipal bond is a debt instrument issued by a city or town to finance capital improvements. A bond is similar to an individual’s mortgage, in that there is an interest rate, and a repayment schedule with principal and interest. Municipal bonds can be tax-exempt or taxable. Tax-exempt bonds afford the Town a lower borrowing cost or interest rate than taxable bonds. In order to qualify for tax-exempt bonds, the projects financed by the bonds have to serve a governmental purpose. If the projects financed benefit a private individual or corporation, or if the payment of the obligation is received from a private firm that benefits from the project, the bonds are generally taxable and have a higher borrowing cost to the Town. Staff has not discussed the potential structure of the bonds (specifically bonds for improvements of the golf course) with the Town’s bond attorney to determine if they will qualify for tax-exempt status, given the use of a commercial operator for the golf course. Bonds for community center improvements do qualify for tax-exempt status. Therefore, staff is presenting interest rates for both tax-exempt and taxable bonds for this analysis. Tax-exempt Bonds $6.8M Principal Amortization Assumed rate Avg. annual debt service Total debt service 5-year 2.00%$1,443,000 $7,215,000 10-year 1.97%$756,000 $7,560,000 15-year 2.00%$529,000 $7,935,000 Taxable Bonds $6.8M Principal Amortization Assumed rate Avg. annual debt service Total debt service 5-year 2.67%$1,471,000 $7,335,000 10-year 2.67%$784,000 $7,840,000 15-year 2.74%$559,000 $8,385,000 A key consideration when issuing debt is ongoing revenue capacity to pay the annual debt service. The Community Center Fund is projected to have a surplus of approximately $1.2M (contracted revenues and dedicated sales tax less contracted expenditures, capital outlay, transfers out and debt service) in FY 20/21. Per the table above, the Community Center Fund is not projected to have surplus capacity to issue bonds with a 5-year term (while maintaining a minimum fund balance). The fund does have capacity to issue 10-year or 15-year bonds. If the Town were to issue 10-year term taxable bonds, the financing cost would total $1,040,000. The bonds could be issued with a pre-pay feature, which would allow the Town to pay off the bonds early to reduce the financing costs, should there be additional surpluses allowing to pay additional payments. In addition, bond issuance costs are estimated to be $70,000 for a total cost to finance of approximately $1,110,000. The benefit of issuing bonds is the projects can begin sooner, reducing a significant portion of the inflationary and water costs from PAYG financing. Bonds do incur financing cost which are higher than PAYG or intra-fund loans. Summary In summary, each of the options has benefits and challenges, and below is a recap of each option. PAYG Escalation of construction cost over 3-5 years $960,000 Water Costs $525,000 Project construction starts 3-5 years Environmental impacts of leaking irrigation Intra-fund Loans Inadequate capacity to fund entire $6.8M project Other needs in the Town may have to be delayed (opportunity costs) Lowest potential financial cost of options Project construction begins sooner Municipal Bonds Financing costs (Tax exempt-Taxable) $760,000-$1,040,000 Closing costs $70,000 Project construction begins sooner Recommendation Staff’s recommendation to finance necessary capital improvements for the golf course and community center is to blend the options that have been presented. The recommendation incurs the lowest capital and operating costs and allows the improvements to be constructed in a timely manner. Staff recommends the following plan: Intra-fund loan for $1.9M this fiscal year to fund irrigation and other improvements for 18-holes on the Conquistador golf course. Construction would be planned to occur from May-October 2020. General Fund would be paid back over three fiscal years from Community Center Fund surplus, which will minimize escalation of construction costs, maximize water savings and eliminate the need to issue bonds for the golf course improvements. 1. Tax-exempt bond financing of $3.2M (includes 6% escalation cost on contract) in early FY 2020/21 for the community center improvements. Design could begin this fiscal year with construction planned for Fiscal Year 2020/21, which will minimize escalation of construction costs. Financing the community center exclusively will qualify for tax-exempt bonds with lower costs. Total financing costs on $3.2M for 10 years totals $360,000. 2. PAYG financing from the Community Center Fund for $2.1M (includes 9% escalation cost on contract) to fund irrigation and other improvements for the second 18-hole course (Cañada course). Construction would occur from May-October 2021 (FY 21/22), which will minimize escalation of construction costs, maximize water savings and eliminate the need to issue bonds for the golf course. 3. Establish a minimum fund balance policy for the Community Center Fund in the amount of $500,000, which will provide capacity for the Town to make other improvements starting FY 2022/23, such as resurfacing and reconfiguring the parking lot, and also preserve funds for unforeseen financial issues. 4. If the performance of the Community Center Fund does not meet forecast sufficient to fund the plan, the above financing recommendation could be adjusted as follows, depending on the extent to which the forecast is not met: The repayment of the intra-fund loan could be extended to 10 years or $190,000 annually.a. The bond repayment would be fixed at $356,000 per year.b. The PAYG improvements for the second 18-holes could be deferred one year (or until funds in the Community Center Fund are available). c. 5. The following table displays the financing costs for $3.2M of tax-exempt bonds for the community center: Amortization Assumed rate Avg. annual debt Total debt service 5-year 2.00%$679,000 $3,395,000 10-year 1.97%$356,000 $3,560,000 15-year 2.00%$249,000 $3,735,000 The impacts of staff’s recommendation (general fund loan repayment, PAYG financing and annual debt service) to the community center fund are presented in Attachment B of this communication. FISCAL IMPACT: The potential fiscal impacts are detailed within the background or detailed information section of this Council Communication. SUGGESTED MOTION: I MOVE to... Attachments Attachment A - CC fund balance Attachment B - fund balance FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24 PY Actuals CY projected Forecasted Forecasted Forecasted Forecasted Contracted revenues 3,232,077$ 3,204,271$ 2,913,184$ 3,043,918$ 3,207,773$ 3,331,393$ Local Sales Tax 2,463,034$ 2,478,552$ 2,528,123$ 2,578,686$ 2,630,259$ 2,682,864$ Total Revenue 5,695,111$ 5,682,823$ 5,441,307$ 5,622,604$ 5,838,032$ 6,014,257$ Contracted Expenditures 4,906,264$ 5,021,193$ 3,813,471$ 3,833,921$ 3,903,630$ 3,981,703$ Capital Outlay 125,987$ 106,500$ 106,500$ 106,500$ 106,500$ 106,500$ Transfer Out 253,999$ 268,810$ 268,810$ 268,810$ 268,810$ 268,810$ Debt Service - Com. Ctr. -$ -$ Total Expenditures 5,286,250$ 5,396,503$ 4,188,781$ 4,209,231$ 4,278,940$ 4,357,013$ Surplus/(deficit)490,000$ 286,320$ 1,252,526$ 1,413,373$ 1,559,092$ 1,657,244$ Ending Fund Balance 490,000$ 776,320$ 2,028,846$ 3,442,219$ 5,001,311$ 6,658,555$ FY 18/19 FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24 PY Actuals CY projected Forecasted Forecasted Forecasted Forecasted Contracted revenues 3,232,077$ 3,204,271$ 2,913,184$ 3,043,918$ 3,207,773$ 3,331,393$ Local Sales Tax 2,463,034$ 2,478,552$ 2,528,123$ 2,578,686$ 2,630,259$ 2,682,864$ Total Revenue 5,695,111$ 5,682,823$ 5,441,307$ 5,622,604$ 5,838,032$ 6,014,257$ Contracted Expenditures 4,906,264$ 5,021,193$ 3,813,471$ 3,833,921$ 3,903,630$ 3,981,703$ Capital Outlay 125,987$ 106,500$ 106,500$ 106,500$ 106,500$ 106,500$ Transfer Out 253,999$ 268,810$ 268,810$ 268,810$ 268,810$ 268,810$ GF Loan Repayment 18-holes -$ -$ -$ 300,000$ 600,000$ 1,000,000$ PAYG 18-holes -$ -$ -$ 2,100,000$ -$ -$ Debt Service - Com. Ctr. -$ -$ 178,500$ 356,000$ 356,000$ 356,000$ Total Expenditures 5,286,250$ 5,396,503$ 4,367,281$ 6,965,231$ 5,234,940$ 5,713,013$ Surplus/(deficit)490,000$ 286,320$ 1,074,026$ (1,342,627)$ 603,092$ 301,244$ Ending Fund Balance 490,000$ 776,320$ 1,850,346$ 507,719$ 1,110,811$ 1,412,055$ Town Council Special Session 3. Meeting Date:11/20/2019 Requested by: Councilmember Pina & Councilmember Rodman Submitted By:Mike Standish, Town Clerk's Office Department:Town Clerk's Office SUBJECT: DISCUSSION REGARDING THE SUMMARY RESULTS OF ONLINE SURVEY AND FOCUS GROUP REGARDING THE POLICE CHIEF RECRUITMENT PROCESS RECOMMENDATION: N/A EXECUTIVE SUMMARY: Councilmembers Piña and Rodman requested this agenda item be placed on the agenda. BACKGROUND OR DETAILED INFORMATION: N/A FISCAL IMPACT: N/A SUGGESTED MOTION: N/A Attachments No file(s) attached.