Finance Advisory Committee

MINUTES CITY OF DEKALB COMMITTEE OF THE WHOLE JOINT CITY COUNCIL AND FINANCE ADVISORY COMMITTEE MEETING SEPTEMBER 28, 2015 The City Council of DeKalb, Illinois held a Committee of the Whole Joint City Council and Finance Advisory Committee Meeting on Monday, September 28, 2015 in the City Council Chambers of the DeKalb Municipal Building, 200 South Fourth Street, DeKalb, Illinois. Mayor Rey called the meeting to order at 5:02 p.m. A. ROLL CALL City Clerk Jennifer Jeep Johnson called the roll, with the following members of the City Council present: Alderman Bill Finucane, Alderman Michael Marquardt, Alderman Bob Snow, Alderman Kate Noreiko, and Mayor John Rey. Alderman Monica O’Leary was absent. City Clerk Jennifer Jeep Johnson called the roll, and the following members of the Finance Advisory Committee were present: Mike Peddle, Connie Golden, Tom Teresinski, Mike Verbic, and Lynn Neely. Committee Member Thom Gearhart was absent. Alderman Dave Jacobson arrived at 5:10 p.m. Committee Member Dave Conlin arrived at 5:13 p.m. Alderman Dave Baker arrived at 5:19 p.m. Also present were: Acting City Manager Patty Hoppenstedt, City Attorney Dean Frieders, Finance Director Cathy Haley, Police Chief Gene Lowery, Fire Chief Eric Hicks, Community Development Director Ellen Divita, Utilities Superintendent Bryan Faivre, Management Analyst Lauren Stott, and City Clerk Jennifer Jeep Johnson. B. ITEMS ALSO ON THE REGULAR AGENDA C. CONSIDERATIONS 1. Water Rate Finance Director Haley provided background information on the issue at hand. She stated that three meetings had been held, and provided some of the questions that had been addressed in the meetings. She explained some of the considerations made by Burns McDonnell in forming their recommendations. She also provided some data on the Water Fund. She stated that staff is looking for a recommendation to move forward from City Council to keep in line with their January deadline. The City Council approved these minutes on October 12, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015. Committee of the Whole Joint City Council and Finance Advisory Committee Meeting September 28, 2015 Page 2 of 4 Mayor Rey stated that the goal was for Council to receive a consensus from the Finance Advisory Committee, as to which of the three proposed scenarios is recommended. Mike Peddle stated there is agreement that something needs to be done, but less agreement on the various options themselves. He favors option 1A, but general consensus seemed to be around option 1. Mr. Peddle explained he had received many questions from citizens within the community regarding how the numbers included in the explanations of the three options came to be. He explained how the comparisons read on the charts, and why there might be some confusion. He stated that City staff has recommended option 1, and that a low user (of water) would still pay into the flat rate increase (as a portion) to support the infrastructure that needs to be in place, regardless of individual consumption. Tom Teresinski wanted to remind everyone about the debt policy, and pointed out some specific instances where we are slightly over the debt burden percentages. He laid out some comparisons between DeKalb and other cities within our same class, stating that he is not in favor of going into debt for the project, or our debt structure overall. He offered support for option 2. Finance Director Haley stated that the debt ratios will not be affected by this loan. Mike Peddle iterated that a revolving loan fund does not require issuing any bonds, though it does mean we will owe money. Dave Conlin expressed that he agreed with Mr. Teresinski. Lynn Neely stated that she had not yet made up her mind on which option was best. Mike Verbic echoed that he favored a no debt, pay-as-we go approach. He expressed concern for our future obligations, and support for scenario 2. Connie Golden expressed support for scenario 1. She stated option 1A seems to penalize low usage more, but would support that option as well. Mike Peddle clarified that the maximum increase for a low usage resident from option 1A over 1 would be around $3.33 maximum, per quarter, based on the way the numbers work. Mike Peddle asked for a straw poll from the Finance Advisory Committee, in order to get a feel for where the members were leaning. The City Council approved these minutes on October 12, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015.  Committee of the Whole Joint City Council and Finance Advisory Committee Meeting September 28, 2015 Page 3 of 4 Dean Frieders reiterated that the polling was informal, and a temperature taking measure only. Brief discussion ensued, while the members of the Finance Advisory Committee offered their support of the various options. Option 1 was the only option to have support from four members, though no clear guidance was offered. Discussion ensued as to the level of comfort amongst the Finance Advisory Committee with issuing debt for this project, versus a pay-as-you-go approach. There seemed to be a consensus among the committee that pay-as-you-go was preferable. Mr. Peddle offered that a line of credit could be used to help improve cash flow, and at the low interest rate, he felt this was a good use of the fund. Ms. Golden inquired as to where the money would come from over the next 10 years, if it wasn’t available (under the pay-as-you-go approach). Finance Director Haley responded that in that case, either proposed infrastructure would be left unfinished, or that we’d need accept interest rates (for a loan) where they are at the time we need to borrow. Tom Teresinski suggested that we take 3% each of the years’ water receipts and apply them toward a fund, which would prevent any money from drifting into operations. Mr. Peddle stated it should be noted that Mr. Teresinki’s approach is conservative, and ensures that of the increase, all you’re putting aside is a portion of the rate increase. This approach would ensure that no money would be applied toward the general fund. He added that it would send a message to citizens that we are serious about using these funds for the purposes of maintenance and improvement of the water systems. Connie Golden offered that an increase was part of a whole plan, as was the additional debt, so even with taking 3% of the receipts out would leave a shortage of finances that would require taking on additional debt. Mr. Peddle stated there wasn’t significant opposition to taking out a revolving fund to smooth out cash flow, so the advice to use a line of credit seemed to pass muster, as long as it wasn’t a way of increasing the total toward the project. He clarified that what Mr. Teresinski intended to convey to the citizens was that the money we used for this project, would stay with this project. The policy would be that the rate The City Council approved these minutes on October 12, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015. Committee of the Whole Joint City Council and Finance Advisory Committee Meeting September 28, 2015 Page 4 of 4 increase is for capital, and in the event of emergency, an affirmative decision would have to be made regarding where the money would come from. Finance Director Haley pointed everyone in the direction of the 10 year plan, which was intended to keep the City on track of projects for the next 10 years. Further discussion ensued as to the report in the 10 year plan that apportioned certain dollars. A brief discussion ensued wherein the Finance Advisory Committee members offered their respective opinions on Mr. Teresinski’s proposal. Finance Director Haley expressed that she had enough to move forward. Mayor Rey noted that there will be two other issues to decide: 1) the intergovernmental agreement with sanitary district; and 2) changing the three month billing cycle to two months. Alderman Snow offered his opinion that infrastructure is key, and that water is an essential service. He offered that the revolving fund would offer some flexibility for the construction projects needed, because this is a long term project. He also offered preference for 1A. Alderman Noreiko offered that using the revolving fund to even out cash flow issues makes sense, and offered her opinion that unforeseen circumstances can affect revenue issues. D. PUBLIC PARTICIPATION None. E. RECESS FOR EXECUTIVE SESSION OF THE CITY COUNCIL F. ADJOURNMENT MOTION Alderman Noreiko motioned to adjourn; seconded by Committee Member Neely. VOTE All in favor via voice vote. Mayor Rey declared the meeting adjourned at 5:56 p.m. __________________________________________ JENNIFER JEEP JOHNSON, City Clerk The City Council approved these minutes on October 12, 2015. The Finance Advisory Committee approved these minutes on October 27, 2015.