Loading...
HomeMy WebLinkAbout1993 03 17 City Commission Workshop Minutes . WORKSHOP MEETING CITY COMMISSION CITY OF WINTER SPRINGS MARCH 17, 1993 The Workshop Meeting was called to order by Mayor Philip A. Kulbes at 7:00 p. m. Roll Call: Mayor Philip A. Kulbes, present Deputy Mayor John V. Torcaso, present City Manager John Govoruhk, present City Attorney Frank Kruppenbacher, present Commissioners: Don Jonas, present John Langellotti, present Terri Donnelly, absent Cindy Kaehler, present Mayor Kulbes announced that City Attorney Tom Lang is on his way to give a brief summary of a possible refinancing of one of our bond issues. Discussion of Audit Report: Christine Hill and Scott Packert and Suzanne Fradette of Coopers and Lybrand were present to speak to the Commission regarding the Audit Report. Ms. Hill said these are your financial statements. She said they have expressed an opinion as to the fairness of these financial statements, but they reflect the operations of the City of Winter Springs and the disclosures on a historical basis. She said why that is important is because where you have been is often a good indica- tion of where you are headed. So analysis of past history is a very good tool to utilize as elected officials, when Staff comes to you with recommendations and suggestions that you will be able to analyze the potential effect of those items. . Ms. Hill reviewed the Balance Sheet on Page 3 which shows all the various fund types that the City is responsible for and one of the things about governmental financial statements is different from those of businesses is that in a government many of the funds that you are accountable for are restricted and can only be used for certain purposes. Ms. Hill explained the one fund that is basically unrestricted is your General Fund. If you take a look at your General Fund you can see that as of the end of last year there were total assets of approximately $1,700,000, and a fund equity which represents the difference between the assets and liabilities of $1,200,000, of which $1,100,000 was unreserved. Now that represents two and one half or two point seven months worth of average expenditures. She said the Commission needs to keep in mind that you want to keep a balance available to handle the beginning of each fiscal year while awaiting the tax levies to come in. Then Ms. Hill went on to explain the Special Revenue funds which are in the next column; they are the ones that can only be used for certain purposes. In the back of the report there is a schedule that lists each one of those funds and discloses how much is on hand, and each one of those funds has particular restrictions attached to it and can only be used for those purposes. She said one of the challenges from a budgetary standpoint is to determine how to best utilize those funds to subsidize or add to the operations of your General Fund, so you want to keep a close watch on what is in those Special Revenue Funds and make sure that to the extent they can be utilized, they are being utilized. . . . . Workshop Meeting, City Commission, March 17, 1993 Page 2 Because of the outstanding bonds there is debt service which is a requirement of the Bond Resolution. There are two parts to debt service bonds, one is used to make the annual principal and interest payment and one is used for reserve, in essence to protect the bondholders. Then Ms. Hill spoke of the Enterprise Fund and she said during the past year a lot of time has been spent analyzing the water and sewer utility and dealing with the issues of consolidation. That consolidation was very critical in terms of insuring that we would be able to meet the rate covenants and meeting the rate covenants and complying with the bond resolutions is very important because as you go back into the Bond Market one of the key factors that you will be graded on is how well you lived up to the promises you made when you did your last debt issuance. So as part of the audit Ms. Hill said they always take a close look at compliance with any of those bond covenants. Several discussions were held with legal counsel and bond counsel as that consolidation was going on to insure that the end result would be an ability to meet the debt coverage requirement both for the past fiscal year and on an on going basis. The Agency Fund is the Deferred Compensation and those are monies that belong to City employees for retirement. Under IRS regulations you would make the statement that those funds are available for City operation but that is only so the employees do not have to pick it up in their taxable income. From a moral viewpoint that money is not available to be spent. The Enterprise Fund is the only Fund that records its own assets within its columns. All the other capital outlay expenditures the City has made over the years are sitting in that General Fixed Asset Account Group. The general long term debt is the revenue bonds that are not enterprise funds yet; it is the 1989 Bond Issue that is included in that column as well as an accrual that has been made for some potential arbitrage liability that has been calculated as of this point. General long term debt represents future amount that the City will need to generate in order to payoff those liabilities. Ms. Hill said that is an overview of what is on the Balance Sheet. Behind the Balance Sheet is a statement of revenues, expenditures and changes in fund balances, and there is also a comparison of actual to budget for the General and Special Revenue Debt Service and Capital Project Funds. The General Fund Revenues came in at four million six, just slightly under the Budget of four million seven, and the expenditures came in even more under what they were budgeted. and the result was although we had budgeted to spend $500,000 more than we took in, the idea there being we were going to use up some of our beginning fund balance. A small amount like that is not a major problem. Through sound fiscal management and other techniques, the City was able to generate a small surplus of $200,000 to add back to the fund balance. Ms. Hill said it is very common to see the expenditures in the governmental funds come in under budget because most organiza- tions tend to budget very conservatively. In the Special Revenue Funds are some fairly substantial numbers in and out, and that represents certain monies that are pledged with respect to the bonds. There is the Public Service Tax Fund, the Excise Tax Fund and one other that is accumulated in those Special REvenue Funds to comply with the bond covenants and as needed are transferred out into the debt service and any excess then gets transferred to the General Fund. . Workshop Meeting, City Commission, March 17, 1993 Page 3 On Page 6 you can see the Debt Service Fund which is where the bond payments are made and the amounts that are required to make those payments are transferred in on a periodic basis. In the Capital Projects Fund, the one different item in the Fund this year is the Park Grant, the $150,000 item in the revenues in the Capital Projects Fund. Ms. Hill said the remaining outlay you can see a lot of the capital projects funds were actually spent in this past fiscal year to the tune of about $1,700,000. Ms. Hill explained on Page 7 is the Enterprise Fund Income Statement. One of the key differences between the enterprise funds and the governmental funds is that the governmental funds are almost like checkbooks. The enterprise fund records some non- cash items which is depreciation and amortization. The enterprise fund also records its interest expense as it is incurred rather than as it is paid. So there are some differences in the way enterprise funds account for their operation. Governmental funds are focused in on trying to track resources that came in and how they were spent; the enterprise fund trying to track a profit and loss and a cost of service. It is intended to operate as much like a business as possible, that is why it has more of an income statement approach and it also has a statement of cash flow. On Page 8 the Statement of cash flows helps explain some of those non-cash items. The operating income was $1,200,000 but the cash that was available from its operations was $2,300,000, principally because of the depreciation which did not involve any outlay of cash. . Mayor Kulbes asked is that a high amount? Ms. Hill said one of the things about water and sewer utilities is they require an awful lot of capital investment and you have to write that capital investment off over a period of time, and so the depreciation is just a function of the fact that you have some 30 million odd dollars invested in the assets in the water and sewer systems. It is just a method of spreading that cost over a lifetime of a piece of equipment; it is an estimate. She said we do not know how long all that is going to last and we make some assumptions. The assumptions the City is making are reasonable in comparison to what other organizations use to depreciate their assets and they are reviewed as part of the audit. Ms. Hill said the footnotes to the Financial Statements tell you quite a bit about all the different funds the City has and what the accounting principals are. The invest- ments footnote on Pages 18 and 19 describe the kinds of investment the City is authorized to enter. into and it categorizes the investments according to the degree of risk associated with who holds the collateral to those investments. On Page 20 is a breakdown of the property, plant and equipment of the utility system and that gives you a breakdown of those assets and shows you the additions and deletions. Next Page 21, shows what is in the General Fixed Assets and Note 5 gives the informa- tion of the various debt instruments that the City has entered into, about the covenants, the reserves, the changes in those debts. One of the more interesting items of the City on Page 27 is the obligation under the Future's agreement that had to do with the utility operation. Ms. Hill said on the next page is the required disclosure that governments show all the debt that they have outstanding, and how much they have to accumulate each year going forward to amortize that debt to maturity. . Workshop Meeting, City Commission, March 17, 1993 Page 4 . Ms. Hill pointed out because our pension plan is a defined contribution vs. a defined benefit, the disclosure is a lot simpler. The difference being when you have a defined benefit plan you promise a certain benefit based on compensation and a defined contribution, every year a certain amount is put in and based on what has been put in, plus what the plan earned, that is what the employee gets. She said this is a more cost effective way to provide pension benefits and is a more con- trollable number. The last footnote on Page 31 deals with the last refunding issue. One of the things this footnote indicates when this refunding is recorded next year the Enterprise Fund will be showing a fairly significant paper loss as a result of this transaction, and the reason that happens, when you refund debt you remove the old bonds from the books and you put on the new bonds but you also write off the cost associated with that original bond issue, and when you initially recorded that bond issue you took all the costs that were associated with doing it and set it up as an asset and we are writing them off over the life of the bonds. When you take that charge out of the financial statements all at one time it has a fairly substantial effect but it has no cash impact. It is strictly an entry on the balance sheet between those assets and it ends up flowing into retained earnings. With your new bond issue you will be generating savings as you pay the debt service payments on the new bond issue and you will build that number back up. Ms. Hill said they usually call it an extraordinary loss in the period that it occurs to call attention to the fact it is unusual and it only relates to the fact that we did a refinancing. . On Page 32 is a comparison by Departments of Budgets to actual for the General Fund and the reason this is presented is that is the level of control over the Budget. When we get into the Management Letter you will see there was one Department that exceeded the Budget. The General Fund total did not exceed the Budget, but that particular one Department did and that was a function as part of the audit process where certain bills were identified that had come in and were due for payment that had not been recorded on the books as liabilities, and by the time all the liabilities were recorded in that particular department, it caused it to exceed its budget. Ms. Hill said there is a Management Letter as required by the Auditor General and they have indicated areas where the recordkeeping practices of the City could be improved. Ms. Hill said there was only one item from the prior year that had not been completely remedied and that is one dealing with some old escrow deposits. The request has been made to the City Attorney on how to deal with these. Ms. Hill spoke about the Workman's Compensation, unrecorded liabilities and the review of account balances, and fixed asset activity. Ms. Hill explained the thrust of the Management Letter is aimed at trying to improve the City's ability to maintain accurate records throughout the fiscal year so as you are getting your monthly reports and your monthly information you are obtaining the most accurate information. She said part of their mission was to try to do everything they could to try to insure that that type of recordkeeping takes place. . . Workshop Meeting, City Commission, March 17, 1993 Page 5 Attorney Tom Lang said Jim Lentz and Mike Stewart, the City's financial advisors are present this evening. Attorney Lang said any time you see an interest rate movement down and you have outstanding debt there is always the possibility that you can save money by refunding bonds. When you refund there are a couple things that have to be considered. When you refund you have to determine whether or not you have the right to refund. Just because interest rates go down does not necessarily mean you can take someone out of the bonds that they already own because they bought them based on a representation that they can hold those bonds for a given period of time. Attorney Lang explained if you do not have the right to take people out of their bonds you have to do what is called an advance refunding which means that you set aside enough money so that with that money and the interest you can earn on that money when those bonds are eligible to be refunded from the owners to be retired, you have enough money for that retirement. When you do the analysis as to whether or not you ought to refund, and when you are doing an advance refunding, which is what we are going to talk about tonight, you have to look at the dollar savings that you can realize over the life of the bonds to determine whether it is worth it to do an advance re- funding. . Jim Lentz said just like any refinancing, when interest rates decline you have an opportunity to payoff existing debt and issue new debt. He said they have been monitoring the market conditions for the last year and he said we are at a point now where they think it is appropriate for the City to consider advance refunding a portion of its nine million dollar issue that was done in 1989. The 1989 issue was for refunding both the 1979 and 1985 issues, as well as creating four million dollars in new money which $150,000 was used to acquire a fire station and the balance of money was used to acquire Central Winds Park. Mr. Lentz explained under IRS regula- tions you only have a number of times that you can do advance refunding, and unfortunately we are not in a position right now without incurring significant transfer proceeds penalty. We can only refund those bonds which were used for the acquisition of the fire truck and park. Mr. Lentz said our present rate of savings exceeded 7%, or $350,000 for a $4,000,000 outstanding debt. The bonds are secured by the Franchise Fee and Public Service Tax Funds. Mr. Lentz said they are here tonight to get some guidance from the City Commission on how they would like to proceed. Mr. Lentz said 5% is a very conservative rule. Attorney Lang said this would be on the next Agenda and they would come back with a proposal. This was just for informational purposes. Discussion of Mandatory Garbage Problems: Mayor Kulbes explained we have been receiving a number of calls since the City went into the mandatory garbage collection. The mandatory garbage ordinance was advertised and the public hearing held on December 14, 1992. Mr. Martin, Silvercreek Drive, complained that he has a second residence and he takes his trash over there. He said he has not used IWS for over two years. He said he did not feel he should be assessed a monthly charge for something he does not use. . . . . Workshop Meeting, City Commisison, March 17, 1992 Page 6 The Administrative Assistant a letter to the Commission. months of the year and asked for Mr. Harry J. Huerbin, Barrington Circle, presented He said Mr. Huerbin is out of the City at least five to have the garbage service suspended during that time. John Sullivan, South Flamingo Ave., said he does not mind paying his bill and he says he always pays his bill, but how to get IWS to pick up his trash when they miss him is his problem. Janet Spence, East Panama Road, spoke against the mandatory garbage. Gentleman from Barrington Circle also spoke against the mandatory garbage. He also is out of the City at times and does not feel he should have to pay for the service when he does not get any service. Craig Spence, East Panama Circle, said he does his own recycling and spoke against the mandatory garbage service. Mayor Kulbes asked the City Manager to give a report back on what can be done. Meeting was adjourned 9:50 p.m. Respectfully submitted, Mary T. Norton, City Clerk