Finance Committee

CITY OF HENDERSONVILLE FINANCE COMMITTEE September 26th, 2023, at 6:00 p.m. 101 Maple Drive North, Hendersonville, TN 37075 I. Call to Order by the Chairman II. Acceptance of agenda III. Minutes A. Approval of September 26th, 2023, meeting minutes 2-4 IV. Ordinances and Resolutions Clary, 1. Reading of Ordinance 2023-20, an ordinance requesting citizens to 5-11 Roberson, determine by election whether to adequately fund public safety, Garza, Waters, infrastructure, parks, and paving in the City of Hendersonville by a small Goodwin, and increase in sales tax of ½ penny per dollar for only 10 years Collins Clary 2. Reading of Ordinance 2023-23, an ordinance amending Ordinance 2023-11 12-16 to reflect final-year adjustments to the City’s 2024 Fiscal Year Budget Dixon 3. Reading of Resolution 2023-35, a resolution to revise and update the Fund 17-34 Balance and Reserve Policy for the City of Hendersonville V. Other Agenda Items 4. Sales Tax Analysis Report (to be provided under separate cover) 5. Hotel-Motel Tax Report (to be provided under separate cover) 6. Investment Earnings Analysis (to be provided under separate cover) 7. Stormwater Report (to be provided under separate cover) 8. Other Business VI. Adjournment Anyone needing accommodations due to disabilities, please contact the ADA Coordinator at 615-822-1016 at least 24 hours prior to the meeting. 1  FINANCE COMMITTEE MEETING MINUTES JULY 25, 2023 CONFERENCE ROOM 2 @ 6:00 pm Present: Karen Dixon, Mark Burgdorf, Jeffrey Sasse Absent: Others Present: Mayor Jamie Clary, Jesse Eckenroth, Tamara Ingersoll, Andy Gilley, Scott Ryan, Janna Garton, Terri Goodwin, Mike Cook, David Brigance, Scott Ryan Called to order at 6:00 pm Motion to Accept the July 25, 2023, Finance Committee Agenda Motion: Mark Burgdorf Second: Jeffrey Sasse Vote: Unanimous Approval 3-0 Motion to Approve the April 25, 2023, May 16, 2023, and May 30, 2023, Finance Committee Meeting Minutes Motion: Jeffrey Sasse Second: Mark Burgdorf Vote: Unanimous Approval 3-0 Citizens’ Comments None Ordinances Reading of Ordinance 2023-16, an ordinance appropriating a Violent Crime Intervention Fund (VCIF) Collaborative Grant for the Sumner County Region to be administered by the Hendersonville Police Department Discussion: Scott Ryan with the Hendersonville Police Department presented and explained the benefits of Ordinance 2023-16, to the Finance Committee. Motion to recommend Ordinance to BOMA: Jeffrey Sasse Second: Mark Burgdorf Vote: Unanimous Approval 3-0 2 Resolutions Reading of Resolution 2023-21, a resolution to adopt the 2023 Purchasing Policy Discussion: Policy to replace our former purchasing policy that was last updated in 1998. The new policy is comprehensive and allows the City to transition from paper forms and processes to electronic processes resulting in more efficient processes. Tamara Ingersoll asked the committee to recommend that this policy be approved to move to the Board of Mayor and Alderman with the following updates: • Incorporate changes recommended by MTAS • Increase the bid limit to $25,000 • Increase the requirement for a contract to $25,000 • Change from a resolution to an ordinance as required to implement the Competitive Sealed Proposal process outlined in the policy Motion to recommend resolution to BOMA with the above changes: Jeffrey Sasse Second: Mark Burgdorf Vote: Unanimous Approval 3-0 Reading of Resolution 2023-22, a resolution to adopt guidelines for budget amendments Discussion: Jesse Eckenroth shared that five items were identified that would be appropriate to bring to BOMA outside of the budget adoption process. Those items include natural disaster or emergency, significant donated funds or unexpected revenues, projects and grants that are time sensitive, the city’s mid-year budget amendment process and any other significant event that justifies the need for a budget amendment. Motion: Karen Dixon Second: None Vote: Karen Dixon Aye; Jeffrey Sasse & Mark Burgdorf No Other Business Hotel-Motel Tax Analysis Hotel Motel Tax Analysis – Tax collections for the month of June 2023 totaled $40, 864.64 This represents a $ 1,156.07 increase compared to June 2022, and a $42,866.95 increase compared to this point in FY 2022. Sales Tax Analysis State Sales Tax Analysis – Sales tax for the month of June 2023 totaled $646,967. This represents a 3 $10,809 increase compared to June 2022, and a $498,138 increase compared to this point in FY2022. Local Sales Tax Analysis – Sales tax for the month of June 2023 totaled $1,712,314. This represents a $15,026 increase compared to June 2022, and a $1,252,436 increase compared to this point in FY 2022. Investment Activity Discussion: The City of Hendersonville’s interest earnings for the month of June 2023 was $155,795. The total investment earnings for FY23 was $353,881. Motion to Adjourn Motion: Jeffrey Sasse Second: Mark Burgdorf Vote: Unanimous Adjourned 6:40 pm ______________________________ Karen Dixon, Chairwoman 4  ORDINANCE 2023-20 REFERRED TO AS “THE HENDERSONVILLE INVESTMENT IN THE FUTURE ACT” Sponsors: Clary, Roberson, Garza, Waters, Dixon, Goodwin, and Collins AN ORDINANCE REQUESTING CITIZENS TO DETERMINE BY ELECTION WHETHER TO ADEQUATELY FUND PUBLIC SAFETY, INFRASTRUCTURE, PARKS, AND PAVING IN THE CITY OF HENDERSONVILLE BY A SMALL INCREASE IN SALES TAX OF ½ PENNY PER DOLLAR FOR ONLY 10 YEARS WHEREAS, inflation pressures have strained cities’ ability to fund essential services such as public safety and infrastructure needs of its citizens; WHEREAS, the City of Hendersonville (the “City”) has recently experienced large cost increases in providing essential services such as paving cost increases of 35%, garbage collection services cost increases anticipated to be 100% over the next year, and the costs to purchase and maintain fire trucks increases of over 30%, as well of almost every other service provided; WHEREAS, the City of Hendersonville has taken steps to cut government costs including a hiring freeze on new employees, postponing the funding of replacement safety vehicles for fire and police, cutting garbage service from twice a week to once a week, delaying new infrastructure projects and cutting the paving of roads; WHEREAS, the City needs new investments in road paving to repair neighborhood streets, traffic projects that will help with reduced congestion, replacement of First Responders equipment such as police vehicles and emergency fire apparatus, and upgrades in our Parks for our youth; WHEREAS, cities in the State of Tennessee generally have two methods to fund municipal operations by either a sales tax or by property tax; WHEREAS, property tax is a non-discretionary expense that places 100% of the burden of covering the cost of local government exclusively on city property owners and may make it difficult for some residents to maintain their homes; WHEREAS, sales tax on items purchased is more broadly supported by both residents and non- residents and generally covers discretionary spending that can be controlled, in many cases, by the purchaser; WHEREAS, according to University of Tennessee Municipal Technical Advisory Service (“MTAS”), in Tennessee 57% of the 95 counties and 69% of the cities have implemented increased sales tax to fund local government essential services; WHEREAS, several counties around Sumner County and the City of White House have implemented an increase in the local sales tax option to fund critical services for their citizens; 5  O23-20 Page 2 WHEREAS, Tennessee Code Annotated, § 67-6-708 allows increases in the local sale tax option to be sunset, or terminated, at a specific period of time, if approved by voters; WHEREAS, a sunset provision on the local sale tax option helps ensure accountability that the increase will not be permitted in perpetuity and that it is being used as intended for essential services; WHEREAS, at present, the local option sales tax rate in the City and County is 2.25%; WHEREAS, pursuant to Tennessee Code Annotated, § 67-6-701 et seq., the Local Option Revenue Act, municipalities may upon approval of a majority of its citizens voting on the issue, levy a local option sale tax of up to 2.75%, or an additional ½ penny per dollar spent amounting to, for example, an additional 25 cents for a $50 meal at a Hendersonville restaurant; WHEREAS, the City desires that the voters of the City of Hendersonville decide on the issue of any subsequent increase to the local option sales tax, as required by State law pursuant to Tennessee Code Annotated, § 67-6-701 et seq.; and WHEREAS, under current State law, municipalities and local governments are not allowed to exempt food and food ingredients (“groceries”) from any increase to the local option sale tax rate, and as such the City desires to make a request to the State legislature for the authority to exempt these items: NOW, THEREFORE, BE IT ORDAINED BY THE BOARD OF MAYOR AND ALDERMEN OF THE CITY OF HENDERSONVILLE, TENNESSEE as follows: Section 1. Under the authority of Tennessee Code Annotated, § 67-6-701 et seq., subject to the referendum required by the Local Option Revenue Act, the local sales tax of the City is increased from 2.25% to 2.75%, except where different sales tax rates for particular goods and services are set by statute and are not subject to variation by ordinance. Section 2. to ensure accountability, any increase to the local sales tax approved in a referendum shall not be in perpetuity but rather shall terminate (“Sunset”) on the tenth (10th ) year anniversary of the date such sales tax increase begins collection as allowed pursuant to Tennessee Code Annotated, § 67-6-708, unless citizens renew its application in an election. Section 3. In order to ensure transparency, each year the mayor will summarize in his/her proposed budget for the next fiscal year to the Board of Mayor and Alderman how the approved increased sales tax may be appropriated for city public safety, infrastructure, parks, and paving; Section 4. As required by Tennessee Code Annotated, § 67-6-710(d)(2), the City designates the Mayor as the municipal officer designated to receive any notice of a payment made under protest, and shall be the official against whom suit, if any, may be brought for recovery of any tax, penalty, and interest which the Tennessee Department of Revenue has collected and which is alleged by the taxpayer to be illegal or improper. 6  O23-20 Page 3 Section 5. If a majority of those voting in said referendum vote for the local option sales tax rate imposed by this ordinance, collection of the increased tax levied by this ordinance shall begin on the first day of the month occurring thirty (30) days after the Election Commission makes its official canvass of the election returns. Section 6. The Tennessee Department of Revenue shall collect the additional tax imposed by this ordinance, concurrent with the collection of the state and local tax now being collected for the City, in accordance with the rules and regulations which may be amended, added, or rescinded by the Department. Section 7. A certified copy of this ordinance shall be transmitted to the Tennessee Department of Revenue and the Sumner County Election Commission. The County Election Commission is requested that a special election be held at the earliest date possible and practicable; and in which the following question be placed: Shall Ordinance No. _________, which increases the City’s sales tax from 2.25% to 2.75% for ten years for the purpose of funding city public safety, infrastructure, parks, and paving, except where the sales tax is limited or modified by state statute, be approved? For the Ordinance ____________________ Against the Ordinance ____________________ Section 8. This Ordinance shall be forwarded to the State delegates for the City to request passage by the Tennessee General Assembly the authority for the City to exempt food and food ingredients as defined under Tennessee Code Annotated, §67-6-228 from any increase to the local option sale tax rate. Section 9. This ordinance shall take effect upon final passage and as otherwise required by law. First Reading: _____________________________ Second Reading: ___________________________ APPROVED: __________________________ ATTEST: JAMIE CLARY, Mayor __________________________________ TAMARA INGERSOLL, City Recorder APPROVED AS TO FORM AND LEGALITY: _____________________________________ LANCE A. WRAY, Interim City Attorney 7  O23-20 Page 4 LEGISLATIVE HISTORY Ordinance 2023-20 Sponsors: Clary, Roberson, Garza, Waters, Dixon, Goodwin, and Collins Committee: General Date of Committee Meeting: September 7th, 2023 Committee Recommendation: Yes Committee: Finance Date of Committee Meeting: September 26th, 2023 Committee Recommendation: First BOMA Reading: September 26th, 2023 8 DATE: September 26, 2023 ORDINANCE/RESOLUTION # Ordinance 2023-20 BOMA is being asked to hold a referendum. The SPECIFIC REQUEST/ RECOMMENDATION: referendum would ask voters if the city’s sales tax should be increased by .5 percent (half penny per dollar). STAFF REPORT REPORT PREPARED BY: Jamie Clary BACKGROUND: 1 For most items that are sold in Hendersonville, buyers pay a total of 9.25 percent sales tax. The state charges 7 percent. The County charges 1.125 percent. The City charges 1.125. The City can increase the portion it charges by .5 percent. The total would then be 9.75 percent on most items purchased in Hendersonville. That increase can be allowed only by referendum. This ordinance is similar to the ordinance that BOMA passed two years ago, allowing residents to a vote on term limits. Similarly, BOMA did not impose term limits; BOMA approved wording for the referendum regarding term limits. Passing this ordinance will approve wording for a referendum allowing residents to vote on increasing the local sales tax; the ordinance does not increase the local sales tax. DISCUSSION: 2 The vast majority of items sold in Hendersonville are subject to the sales tax formula noted above (7 + 1.125 + 1.125). However, to provide comprehensive information on this, it needs to be mentioned that gas is not subject to sales tax, items above $3,200 are charged different rates of sales tax, and some other items are exempt from sales tax. Most clothing, groceries, restaurant meals, hardware, candy, and electronics are charged 9.25 percent sales tax in Hendersonville. Many communities in Middle Tennessee have the highest legal sales tax rate, 9.75. In some cases, the additional revenue is split between city and county. (More on that below.) Those communities with the higher rate are competing against Hendersonville in many ways--tourism events, business recruitment, new investment, and personnel. Additionally, the Hendersonville mayor and aldermen frequently hear comparisons that other communities have community centers, turf athletic fields, better roads, higher paid police officers, better ISO ratings, etc. All of those items depend on revenue. If the City of Hendersonville had more money, it could provide better services. The City has two primary streams of revenue—property tax and sales tax. The simplest method to raise revenue is to increase the city’s property tax rate. However, that imposes additional costs only on some of the people who benefit from city services. By contrast, the local sales tax imposes costs on people who live here as well as those who don’t live here but benefit from the city’s roads, parks, public safety, and many other services. To raise revenue by $9 million would require an approximate property tax increase of 39 percent. 9  2 Tennessee Code Annotated (67-6-702(a)) states, “…any incorporated city or town, by ordinance of its governing body, is authorized to levy a tax on the same privileges subject to this chapter as the chapter may be amended, that are exercised within such county, city or town, to be levied and collected in the same manner and on all such privileges, but not to exceed two and three-fourths percent (2.75%); provided, that the tax levied shall apply only to the first one thousand six hundred dollars ($1,600) on the sale or use of any single article of personal property.” That legal verbiage allows local governments to have a maximum sales tax of 2.75 percent. The total local share in Hendersonville (city plus county) currently is 2.25 percent. In many places the city and county split the revenue generated from the half-penny bump. In some places the city takes the full bump. Our referendum would allow the City of Hendersonville to take the full bump, all the additional money generated from the additional half-penny increase. The City does have to give the county commission an opportunity to share the additional revenue. The county commission would have an opportunity to act before the referendum takes place and after the referendum passes. In both cases the county’s action would be to schedule a referendum of all county voters. If county voters approve a countywide increase in local sales tax, all Sumner cities would have the higher tax rate but would split the additional revenue with the county. If the referendum fails (or the county commission fails to hold a referendum) the city would be entitled to all the revenue generated from the increased sales tax rate. Of all Tennessee cities, 69 percent of them have the higher sales tax rate. Notably Hendersonville’s referendum would differ from other cities’ referenda in three manners. First it would expire after 10 years. Second, the revenue would be set in a separate fund to track how it is used. Third, the revenue will be used for expenses related only to public safety, Infrastructure, paving, and parks (PIPP). FISCAL IMPACT: 3 A vital disclaimer to any fiscal note is the possibility that the county commission could host a countywide referendum to increase sales tax throughout the county. If that happens and the referendum passes, the revenue that Hendersonville would realize would be cut in half. This fiscal impact assumes that no countywide referendum passes. Another disclaimer would be the nuances of the sales tax related to items with price tags above $3,200. During recent fiscal years the City collected: • Fiscal Year 2021, $16.489 million in local sales at the 1.125 rate; • Fiscal Year 2022, collected $18.765 million in local sales tax 1.125 rate; • Fiscal Year 2023, likely collected $20 million in local sales tax 1.125 rate. 10  3 If the City had collected the higher rate of 1.675, the following additional funds would have been realized. • Fiscal Year 2021, $7.328 million • Fiscal Year 2022, $8.340 million • Fiscal Year 2023, $8.889 million A half-penny sales tax increase for Fiscal Year 2024 would produce an estimated $9,000,000 of additional revenue, to be split amongst public safety, infrastructure, parks and paving (PIPP). ADDITIONAL INFORMATION / PHOTOS: 4 The process to offer the referendum came to us from MTAS 1. BOMA approves an ordinance first reading by simple majority. 2. Tennessee Department of Revenue approves the ordinance. 3. BOMA approves second reading of the ordinance by simple majority. 4. City staff notify election commission of the referendum and request a special election. 5. County window opens (see below). 6. City referendum is held. 7. County can hold its own referendum later. County window 1. County passes a resolution to hold a referendum. 2. City’s referendum would be postponed. 3. County holds its referendum. If the county referendum is approved, the city referendum is cancelled. If the county referendum fails, the city referendum is scheduled. 11  ORDINANCE 2023-23 Sponsor: Clary AN ORDINANCE AMENDING BUDGET ORDINANCE 2023-11 TO REFLECT FINAL- YEAR ADJUSTMENTS TO THE CITY’S 2024 FISCAL YEAR BUDGET WHEREAS, on June 27, 2023, the City’s governing body passed Ordinance 2023-11 (the “Budget Ordinance”) adopting the City’s operating budget for Fiscal Year 2024; WHEREAS, the Budget Ordinance was based on projected revenues and anticipated expenditures for Fiscal Year 2023; and WHEREAS, now that Fiscal Year 2023 is closed out, the Budget for Fiscal Year 2024 requires adjustments to incorporate the actual revenues and expenditures for Fiscal Year 2023; and the City therefore desires to amend the Budget Ordinance to reflect these adjustments: NOW, THEREFORE, BE IT ORDAINED BY THE BOARD OF MAYOR AND ALDERMEN OF THE CITY OF HENDERSONVILLE, TENNESSEE, that the City’s Fiscal Year 2024 Budget Ordinance, Ordinance 2023-11, is hereby amended in accordance with the final- year budget adjustments set forth in the attached Exhibit A. This ordinance shall take effect on the earliest date allowed by law. First Reading: ______________________ Second Reading: APPROVED: JAMIE CLARY, Mayor ATTEST: ___________________________________ TAMARA INGERSOLL, City Recorder APPROVED AS TO FORM: ____________________________________ LANCE A. WRAY, Interim City Attorney 12  LEGISLATIVE HISTORY Ordinance 2023-23 Sponsor: Clary Committee: Finance Date of Committee Meeting: September 26th, 2023 Committee Recommendation: 13  EXHIBIT A BUDGET AMENDMENT WORKSHEET Requested Requested Expenditure Revenue Use of Fund Account Code Account Name Current Budget Amendment Amendment Balance Adjusted Budget Justification 110-000-41920-0033-0000-526800-33005 Drake's Creek Stop 30 Widening $ 2,124,502.00 $ 10,913.00 $ 2,135,415.00 True-Up of Project Rebudgeted from FY23 110-000-00000-0000-0000-433160-33005 Drake's Creek Stop 30 Widening - Revenue $ 1,730,505.00 $ 5,764.00 $ 1,736,269.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-526900-33023 Sanders Ferry Walking Trail $ 4,057,571.00 $ (783,255.00) $ 3,274,316.00 True-Up of Project Rebudgeted from FY23 110-000-00000-0000-0000-433160-33023 Sanders Ferry Walking Trail - Revenue $ 3,242,530.00 $ (623,077.00) $ 2,619,453.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0043-0000-592200-43001 Fire Hall #7 Construction $ 3,061,387.00 $ (847,276.00) $ 2,214,111.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-526800-33008 Saudersville LIC - Exit 8 $ 4,893,829.00 $ (21,937.00) $ 4,871,892.00 True-Up of Project Rebudgeted from FY23 110-000-00000-0000-0000-433430-33008 Saudersville LIC - Exit 8 - Revenue $ 1,700,000.00 $ (10,968.00) $ 1,689,032.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-526400-33017 Signal Timing Optimization Equipment $ 2,268,007.00 $ (3,167.00) $ 2,264,840.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-534300-33002 TMSI Light Synchronization $ 1,805,600.00 $ (360,510.00) $ 1,445,090.00 True-Up of Project Rebudgeted from FY23 110-000-00000-0000-0000-433160-33002 TMSI Light Synchronization - Revenue $ 1,432,398.00 $ (278,952.00) $ 1,153,446.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0015-0000-593700-15017 LPFR Grant - Drakes Creek Park & Rugby $ 1,200,000.00 $ (107.00) $ 1,199,893.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0015-0000-593700-15022 Pickleball Construction $ 571,475.50 $ (4,344.00) $ 567,131.50 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-526800-33013 Drakes Creek Road Roundabout $ 561,406.00 $ (21,256.00) $ 540,150.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-592200-15049 Gold Cart Barn Removal and Rebuild $ 136,445.00 $ (44,385.00) $ 92,060.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-526800-33015 Saundersville & Avondale Intersection $ 250,000.00 $ (1,256.00) $ 248,744.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0015-0000-550100-15050 2023 Wind Damages $ 129,378.84 $ (39,131.00) $ 90,247.84 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-526700-33032 ADA Improvements $ 289,821.13 $ (48,398.00) $ 241,423.13 True-Up of Project Rebudgeted from FY23 110-000-41920-0042-0000-530300-42007 HPD Gun Range $ 10,000.00 $ 60,052.00 $ 70,052.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0015-0000-593700-15020 Volunteer Park Consessions $ 26,090.00 $ (11,090.00) $ 15,000.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0015-0000-593700-15021 Parks Security Cameras $ 13,178.00 $ (2,265.00) $ 10,913.00 True-Up of Project Rebudgeted from FY23 110-000-41930-0022-0000-526600-22CDG Senior Center $ 1,000.00 $ 89,485.00 $ 90,485.00 True-Up of Project Rebudgeted from FY23 110-000-41920-TBD-0000-xTBDx-OTHER New Grant Funded Items $ - $ 250,000.00 $ 250,000.00 Budget for Potential Grants 416-000-41920-0033-0000-526900-33023 Sanders Ferry Greenway Stormwater $ 106,414.00 $ (31,446.00) $ 74,968.00 True-Up of Project Rebudgeted from FY23 416-000-41920-0033-0000-534300-33002 TMSI Light Synchronization $ 61,100.00 $ (61,100.00) $ - True-Up of Project Rebudgeted from FY23 416-000-41920-0033-0000-526800-33013 Drakes Creek Road Roundabout $ 189,377.00 $ (1,960.00) $ 187,417.00 True-Up of Project Rebudgeted from FY23 110-000-41920-0033-0000-526920-PB001 PERF BOND - FY13 FRANKLIN FARM $ - $ 5,000.00 $ 5,000.00 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB002 PERF BOND - FY13 SHOLODGE $ - $ 10,000.00 $ 10,000.00 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB003 PERF BOND - FY13 IRIS COVE $ - $ 7,596.00 $ 7,596.00 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB004 PERF BOND - FY13 SAVANNAH PHAS $ - $ 32,604.56 $ 32,604.56 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB005 PERF BOND - FY13 IND LAKE PH4 $ - $ 10,777.00 $ 10,777.00 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB006 PERF BOND - FY13 IND LAKE PH5 $ - $ 18,989.00 $ 18,989.00 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB007 PERF BOND - FY13 OTTER POINTE $ - $ 48,646.00 $ 48,646.00 Budget for Performance Bond 14  EXHIBIT A BUDGET AMENDMENT WORKSHEET Requested Requested Expenditure Revenue Use of Fund Account Code Account Name Current Budget Amendment Amendment Balance Adjusted Budget Justification 110-000-41920-0033-0000-526920-PB009 PERF BOND - FY13 HEND MARKET P $ - $ 51,400.00 $ 51,400.00 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB011 PERF BOND - SAUNDERSVILLE RD N $ - $ 54,000.00 $ 54,000.00 Budget for Performance Bond 110-000-41920-0033-0000-526920-PB012 PERF BOND - SHUTES LANE PH 9 $ - $ 54,000.00 $ 54,000.00 Budget for Performance Bond 110-000-41920-0033-0000-526800-PB013 PERF BOND - ANDERSON PARK@ILM $ - $ 288,000.00 $ 288,000.00 Budget for Performance Bond 110-000-41920-0033-0000-548200-PB014 PERF BOND - SANDALWOOD HILLS $ - $ 41,000.00 $ 41,000.00 Budget for Performance Bond 110-000-41920-0033-0000-526910-PB015 PERF BOND - GROVES @ WATERFORD $ - $ 14,375.00 $ 14,375.00 Budget for Performance Bond 110-000-41920-0033-0000-526800-PB016 PERF BOND - WATERFORD CR PH1 $ - $ 12,834.00 $ 12,834.00 Budget for Performance Bond 110-000-00000-0000-0000-326240-PBOND RESTRICTED FUND BALANCE - PERF BOND $ 649,221.56 $ (649,221.56) $ - Use of Reserve for Performance Bonds 110-001-42200-0043-0000-531000- Office Supplies - Learn Not to Burn $ 2,000.00 $ 3,500.00 $ 5,500.00 Additional Budget for Learn Not to Burn 110-001-00000-0000-0000-326412- Restricted Fund Balance - Learn not to Burn $ 7,397.29 $ (5,500.00) $ 1,897.29 Use of Reserve for Learn not to Burn 110-000-41920-0033-0000-534300-33029 Traffic Signal Drakes Creek Rd at Long Hollow $ - $ 325,000.00 $ 325,000.00 Budget for Project 110-000-00000-0000-0000-326240-DURHM Restricted For Durham Farms $ 570,916.68 $ (325,000.00) $ 245,916.68 Use of Durham Farms Reserve for Project $ - 110-000-41690-0016-0000-553300- Machinery and Equipment Rental $ 20,000.00 $ (20,000.00) $ - Computers will be purchased, not leased 110-000-41690-0016-0000-580000- Non-Capital Assets $ 19,600.00 $ 60,000.00 $ 79,600.00 Computers will be purchased, not leased $ - $ - $ - $ - $ - $ - $ - $ - $ 31,131,150.00 $ (854,711.44) $ (907,233.00) $ (979,721.56) $ 28,389,484.00 15 DATE: September 26, 2023 ORDINANCE/RESOLUTION # Ordinance 2023-23 That the Board of Mayor and Alderman consider SPECIFIC REQUEST/ RECOMMENDATION: Ordinance 2023-23, amending the FY24 Budget for the City of Hendersonville. STAFF REPORT REPORT PREPARED BY: Tamara Ingersoll, Finance Director BACKGROUND: 1 On an annual basis the city appropriates funds to facilitate the orderly operations of local government services. The city’s budget year, or fiscal year, begins July 1st and ends June 30th. As part of the budget process staff is recommending that the budgeted amounts for projects be trued-up based on actual expenditures after the prior fiscal year is closed. This budget amendment serves as a time to review and revise the project budgets based on prior year actual expenditures. DISCUSSION: 2 When the FY24 budget was prepared, the continuing projects were budgeted based on anticipated expenditures at the end of FY23. Now that FY23 is closed, actual expenditures for projects have been reviewed and determined. FY24 projections were conservative and most budgets will be reduced to reflect the actual vs. estimated funds spent in the prior year. This budget amendment also includes amounts from reserves to budget for performance bonds and Learn Not to Burn supplies. Additionally, the city received a request to install the traffic signal at Drakes Creek Road and Long Hollow Pike due to the project nearing the completion of the final phase. The traffic signal is 100% funded using fees collected from the developer and will have no impact on the General Fund operating budget. The original FY24 Budget included $20,000 for leasing of computers for city staff. It has been determined that it is more effective and approximately $10,000 less expensive to outright purchase the computers instead of leasing and paying over a 4-year period. Amending this line items requires two actions, 1. moving the amount from a rental account to the non-capital asset line and, 2. add an additional $40,000 for the outright purchase. FISCAL IMPACT: 3 This budget amendment has a $40,000 impact on the General Fund unassigned fund balance. ATTACHMENTS: 4 Exhibit A is attached to Ordinance 2023-23 and itemizes every proposed budget amendment. 16  RESOLUTION 2023-35 Sponsor: Dixon A RESOLUTION TO REVISE AND UPDATE THE FUND BALANCE AND RESERVE POLICY FOR THE CITY OF HENDERSONVILLE WHEREAS, the City adopted a fund balance and reserve policy for the City pursuant to Resolution 2021-10, in order to ensure that certain reserves are maintained by the City sufficient for unanticipated expenditures or revenue shortfalls; WHEREAS, the City wishes to update and revise the current fund balance and reserve policy in order to make it more enhanced, more comprehensive, more financially beneficial, and satisfies requirements of the State of Tennessee; and WHEREAS, this Resolution will provide the City with an improved and expanded framework of ensuring that sufficient reserves are available for additional contingencies and funds are better maintained for unexpected expenditures or shortfalls: NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF MAYOR AND ALDERMAN OF THE CITY OF HENDERSONVILLE, TENNESSEE, that the City’s fund balance and reserve policy, established by Resolution 2021-10, is hereby amended by adopting as its full replacement the attached hereto. This policy shall be effective upon passage of this resolution. Adopted this ________day of ___________, 2023. APPROVED: __________________________ JAMIE CLARY, Mayor ATTEST: __________________________________ TAMARA INGERSOLL, City Recorder APPROVED AS TO FORM AND LEGALITY: _____________________________________ LANCE A. WRAY, Interim City Attorney 17  LEGISLATIVE HISTORY Resolution 2023-35 Sponsor: Dixon Committee: Finance Date of Committee Meeting: September 26th, 2023 Committee Recommendation: 18 DATE: September 26, 2023 ORDINANCE/RESOLUTION # Resolution 2023-35 That the Board of Mayor and Alderman consider SPECIFIC REQUEST/ Resolution 2023-35, superseding Resolution 2021-10, for RECOMMENDATION: a Fund Balance and Reserve Policy for the City of STAFF Hendersonville. Tamara Ingersoll, Finance Director REPORT REPORT PREPARED BY: Jesse Eckenroth, COO BACKGROUND: 1 The Governmental Accounting Standards Board (GASB) establishes accounting and financial reporting standards for U.S. state and local governments. GASB standards are recognized as authoritative by state and local governments, the state Boards of Accountancy, and the American Institute of CPAs. The primary goal of GASB is to promote financial reporting that provides useful information to taxpayers through a transparent and inclusive process. GASB establishes policy updates through the issuance of new statements. One such statement, Statement 54, has been issued to enhance the usefulness of fund balance information. GASB Statement 54 is not specific to the City of Hendersonville, government agencies across the country have, and are, establishing fund balance policies to comply with Statement 54. The state Comptroller’s Office has encouraged the City to adopt said policy and maintain a prescribed amount of unassigned fund balance. The city adopted a fund balance policy, Resolution 2021-10 in May of 2021. Incorporated within the fund balance policy was the establishment of two General Fund Reserves, 1) Prudent Reserve and, 2) Infrastructure Reserve. DISCUSSION: 2 At the time Resolution 2021-10 was adopted the city did not meet the Comptroller’s recommendation for the minimum unassigned “cash-on-hand” and no reserves existed to deal with unexpected revenue shortfalls or expenditure increases. Resolution 2021-10 created a policy to prioritize unassigned cash-on- hand and developed a rudimentary reserve policy. Since the policy was adopted, the city has satisfied the Comptroller’s recommendation for minimum unassigned cash-on-hand. Today’s resolution will expand the existing reserve policy to incorporate a new reserve, Public Safety Reserve. The update will also change the name of the Prudent Reserve to the Rainy-Day Reserve and establish a financial goal for all three reserves. The three reserves and the financial goal for each reserve are: 19  2 DESCRIPTION GOAL Public Safety Reserve - provide uninterrupted services for fire and police 20% of the annual HFD and HPD operations. budget (approx. $6,000,000) 20% of the General Fund annual Rainy-Day Reserve - mitigate an economic recession, or natural disaster; operating budget (approx. ensure a consistent level of service. $12,000,000) Infrastructure Reserve - Capital Projects (Walton Ferry Realignment, Exit $15,000,000 for one-time projects 8, etc.). FISCAL IMPACT: 3 There is no impact to the budget for the adoption or implementation of the Fund Balance and Reserve Policy. Reserves amounts will be funded through budget surplus during the fiscal year-end close process. ATTACHMENTS: 4 1. Resolution 2021-10 2. Existing redlined Fund Balance Policy 3. Proposed Fund Balance and Reserve Policy 20  RESOLUTION 2021-10 SPONSOR: Cunningham, Dixon, and Collins A RESOLUTION TO ADOPT A FUND BALANCE POLICY FOR THE CITY OF HENDERSONVILLE WHEREAS, Resolution 2017-27 promoted the maintenance of an appropriate balance for the City's general fund; and WHEREAS, the purpose of a fund balance policy is to establish a set of parameters to ensure that sufficient reserves are maintained by the City of Hendersonville for unanticipated expenditures or revenue shortfalls using a disciplined and defined approach to financing needs; and WHEREAS, adopting a fund balance policy shall satisfy requirements of the State of Tennessee while providing a framework for structurally balance budgets in the future: NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF MAYOR AND ALDERMEN OF THE CITY OF HENDERSONVILLE, TENNESSEE, that a fund balance policy is hereby adopted and attached herein to establish a set of parameters for structurally balance budgeting for the City of Hendersonville. This policy shall be effective July 1st of 2021. Adopted this 25th day of _ _~ May..___ _, 2021. ATTEST: R Q?~CicyR- APPROVED AS TO FORM AND LEGALITY: 21 Resolution 2021-10 Page2 of2 LEGISLATIVE HISTORY Resolution 2021-10 Sponsor:Cunningham Committee: Finance Date of Committee Meeting: February 23, 2021 Committee Recommendation: Yes, with the caveat that the sentence "This policy shall be effective July 1st of 2021" be added. BOMA Reading: March 9, 2021 - Withdrawn by Sponsor Committee: Finance Date of Committee Meeting: March 23, 2021 Committee Recommendation: Yes BOMA Reading: April 13, 2021 - Withdrawn by Sponsor BOMA Reading: April 27, 2021 - Withdrawn by Sponsor BOMA Reading: May 25, 2021 Vote: Aye: Brown, Campbell, Collins, Cunningham, Dixon, Edwards, Hayes, Peterson, Petrelli, Roberson, Skidmore, Waters, and Clary. Nay: None. Motion carried 22  City of Hendersonville IO 1 Maple Drive North :•<~2 Hendersonville, TN 37075 www.tivllle\n,org • Fa>1. (61 !!>) 264-$327 Telephone (615) 822-1000 STAFF SUMMARY REPORT TO: Board of Mayor and Alderman DATE: May 25 , 2021 FROM: Jesse Eckenroth, Chief of Operations Robert Manning, Finance Director SUBJECT: Fund Balance Policy- Resolution 2021-10 SPECIFIC REQUEST OR RECOMMENDATION That the Board of Mayor and Alderman consider Resolution 2021-10 adopting a Fund Balance Policy for the City of Hendersonville. JUSTIFICATION OR INFORMATION BACKGROUND: The Governmental Accounting Standards Board, GASB, establishes accounting and financial reporting standards for U.S. state and local governments. GASB standards are recognized as authoritative by state and local governments, the state Boards of Accountancy, and the American Institute of CPAs. The primary goal of GASB is to promote financial reporting that provides useful information to taxpayers through a transparent and inclusive process. DISCUSSION: GASB establishes policy updates through the issuance of new statements. One such statement, Statement 54, has been issued to enhance the usefulness of fund balance information. GASB Statement 54 is not specific to the City of Hendersonville, government agencies across the country have, and are, establishing fund balance policies to comply with Statement 54. The state Comptroller's Office has encouraged the City to adopt said policy and maintain a prescribed amount of unassigned fund balance. The proposed policy defines: • Fund balance classifications • Order of fund use - most restrictive to least restrictive • Authority level for establishing fund designation • Minimum level of unassigned fund balance 23 DATE: May 25, 2021 Page 2 of 2 Fund Balance Policy - Resolution 2021-10 JUSTIFICATION OR INFORMATION CONTINUED: The proposed policy also establishes a long-term strategy to stabilize the city's financial operations. The long-term strategy is two-fold, 1) increase the city's unassigned fund balance, and 2) build a prudent "rainy day" reserve and an infrastructure reserve. Increasing the city's unassigned fund balance (available cash) would be accomplished by continually setting aside two percent (2%) of the city's local sales tax revenue through the budget process and, whenever the unassigned surplus is below the minimum level, also using any available year-end surplus. Funds would only be assigned to reserves when a year-end surplus exists and only after the minimum unassigned fund balance is satisfied. If the minimum unassigned fund balance percentage is satisfied, the year-end surplus would then be split 50% to the Prudent Reserve and 50% to the Infrastructure Reserve. FISCAL IMPACT: There is no cost associated with adopting the Fund Balance Policy; city staff have developed the policy with no outsourcing of professional services. 24  Page ll ADMINISTRATIVE POLICY FINANCE NO. 7 CITY OF HENDERSONVILLE Fund Balance Policy The Fund Balance Policy is intended to provide guidelines during the preparation and execution of the annual budget to ensure that sufficient reserves are maintained for unanticipated expenditures or revenue shortfalls. It also is intended to preserve flexibility throughout the fiscal year to make adjustments in funding for programs approved in connection with the annual budget. The Fund Balance Policy shall be in accordance with the Governmental Accounting and Financial Standards Board (GASB) Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions. Fund Balance represents the difference between assets and fund liabilities in the governmental funds balance sheet and is commonly referred to as fund equity. This Policy shall only apply to the City's General Fund and all governmental funds. The fund balance policy addresses the following components: (1) clearly defined classifications as to the nature and extent of the constraints placed on the various fund balances; (2) the City's order of spending regarding restricted and unrestricted fund balance and the order of spending for committed, assigned and unassigned fund balance; (3) authority to commit and assign funds; and (4) minimum level of unassigned fund balance. Fund Balance Classifications Nonspendable Fund Balance consists of funds that cannot be spent due to their form (e.g. inventories and prepaids) or funds that legally or contractually must be maintained intact. Restricted Fund Balance consists of funds that are mandated for a specific purpose by external parties, constitutional provisions or enabling legislation. Committed Fund Balance consists of funds that are set aside for a specific purpose by the city's highest level of decision-making authority (council/board). Formal action must be taken prior to the end of the fiscal year. The same formal action must be taken to remove or change the limitations placed on the funds. Assigned Fund Balance consists of funds that are set aside with the intent to be used for a specific purpose by the city's highest level of decision-making authority or a body or official that has been given the authority to assign funds. Assigned funds cannot cause a deficit in unassigned fund balance. 25  Page J 2 Unassigned Fund Balance consists of excess funds that have not been classified in the previous four categories. All funds in this category are considered spendable resources. This category also provides the resources necessary to meet unexpected expenditures and revenue shortfalls. Order of Use of Restricted and Unrestricted Funds When both restricted and unrestricted funds are available for expenditure, it shall be the policy of the City to use the restricted amounts first as permitted under the law. When committed, assigned and unassigned funds are available for expenditure, committed funds should be spent first, assigned funds second, and unassigned funds last. Authority to Commit Funds The City's governing body has the authority to set aside funds for a specific purpose. Any funds set aside as Committed Fund Balance requires the passage of a resolution by a simple majority vote. The passage of a resolution must take place prior to June 30th of the applicable fiscal year. If the actual amount of the commitment is not available by June 30th, the resolution must state the process or formula necessary to calculate the actual amount as soon as information is available. Authority to Assign Funds Upon passage of the Fund Balance Policy, authority is given to the City's Finance Director to assign funds for specific purposes as a part of the fiscal year end close. Any funds set aside as Assigned Fund Balance must be reported to the City's governing body and/or Finance Committee at their next regular meeting, which has the authority to remove or change the assignment of the funds with a simple majority vote. Minimum Level of Unassigned Fund Balance The City will strive to build and maintain an unassigned fund balance of not less than sixteen and sixty-seven hundredths' percent (16.67%) of annual operating expenses for each fund. Such fund balance shall serve cash flow needs, protect against unforeseen emergencies, and enhance the credit worthiness of the City. Compliance with the provisions of this policy shall be reviewed as part of the closing of the financial books at year-end (June 30) and the amounts of restricted, committed, assigned and non-spendable fund balance will be determined. Any residual general fund balance amounts will be classified as unassigned. 26  Page 13 Budgetarv Commitment of Funds Local Sales Tax Through the budget process, the City shall account for funds being set-aside to increase the unassigned fund balance of the General Fund. The City shall set-aside two percent (2%) of the Local Sales Tax collection for the purpose of unassigned fund balance growth. The two percent (2%) set-aside shall only be used for the purpose of increasing the unassigned fund balance of the General Fund. Budget Surplus After the end of the fiscal year the Finance Director will calculate whether the General Fund budget ended in a surplus or deficit position. If the City ended in a surplus position, the City will: 1) use the surplus funds to satisfy the minimum unassigned fund balance of 16.67%, as stipulated in this policy, and then, 2) build a Prudent Reserve and an Infrastructure Reserve. After the unassigned fund balance meets the minimum 16.67%, as stipulated above, the surplus funds will be assigned 50% to a Prudent Reserve and 50% to an Infrastructure Reserve. The surplus funds will revert to satisfying the minimum 16.67% of unassigned fund balance if such balance drops below 16.67%. All year-end General Fund surplus will be calculated by the Finance Director, but generally meaning current year revenues in excess of current year expenses. 27 28 29 30 31  Page |1 ADMINISTRATIVE POLICY FINANCE NO. 7 CITY OF HENDERSONVILLE Fund Balance Policy The Fund Balance Policy is intended to provide guidelines during the preparation and execution of the annual budget to ensure that sufficient reserves are maintained for unanticipated expenditures or revenue shortfalls. It also is intended to preserve flexibility throughout the fiscal year to make adjustments in funding for programs approved in connection with the annual budget. The Fund Balance Policy shall be in accordance with the Governmental Accounting and Financial Standards Board (GASB) Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions. Fund Balance represents the difference between assets and fund liabilities in the governmental funds balance sheet and is commonly referred to as fund equity. This Policy shall only apply to the City’s General Fund and all governmental funds. The fund balance policy addresses the following components: (1) clearly defined classifications as to the nature and extent of the constraints placed on the various fund balances; (2) the City’s order of spending regarding restricted and unrestricted fund balance and the order of spending for committed, assigned and unassigned fund balance; (3) authority to commit and assign funds; and (4) minimum level of unassigned fund balance. Fund Balance Classifications Nonspendable Fund Balance consists of funds that cannot be spent due to their form (e.g. inventories and prepaids) or funds that legally or contractually must be maintained intact. Restricted Fund Balance consists of funds that are mandated for a specific purpose by external parties, constitutional provisions or enabling legislation. Committed Fund Balance consists of funds that are set aside for a specific purpose by the city’s highest level of decision-making authority (council/board). Formal action must be taken prior to the end of the fiscal year. The same formal action must be taken to remove or change the limitations placed on the funds. Assigned Fund Balance consists of funds that are set aside with the intent to be used for a specific purpose by the city’s highest level of decision-making authority or a body or official that has been given the authority to assign funds. Assigned funds cannot cause a deficit in unassigned fund balance. 32  Page |2 Unassigned Fund Balance consists of excess funds that have not been classified in the previous four categories. All funds in this category are considered spendable resources. This category also provides the resources necessary to meet unexpected expenditures and revenue shortfalls. Order of Use of Restricted and Unrestricted Funds When both restricted and unrestricted funds are available for expenditure, it shall be the policy of the City to use the restricted amounts first as permitted under the law. When committed, assigned and unassigned funds are available for expenditure, committed funds should be spent first, assigned funds second, and unassigned funds last. Authority to Commit Funds The City’s governing body has the authority to set aside funds for a specific purpose. Any funds set aside as Committed Fund Balance requires the passage of a resolution by a simple majority vote. The passage of a resolution must take place prior to June 30th of the applicable fiscal year. If the actual amount of the commitment is not available by June 30th, the resolution must state the process or formula necessary to calculate the actual amount as soon as information is available. Authority to Assign Funds Upon passage of the Fund Balance Policy, authority is given to the City’s Finance Director to assign funds for specific purposes as a part of the fiscal year end close process. Any funds set aside as Assigned Fund Balance must be reported to the City’s governing body and/or Finance Committee at their next regular meeting, which has the authority to remove or change the assignment of the funds with a simple majority vote. Minimum Level of Unassigned Fund Balance The City will strive to maintain an unassigned fund balance of not less than sixteen and sixty- seven hundredths’ percent (16.67%) of annual operating expenses for each fund. Such fund balance shall serve cash flow needs, protect against unforeseen emergencies, and enhance the credit worthiness of the City. Compliance with the provisions of this policy shall be reviewed as part of the closing of the financial books at year-end (June 30) and the amounts of restricted, committed, assigned and non-spendable fund balance will be determined. Any residual general fund balance amounts will be classified as unassigned. Determination of fund balance amounts and classifications will be performed in conjunction with the year-end close and annual audit. 33  Page |3 Assigned Reserves 1, Public Safety Reserve 2. Rainy Day Reserve 3. Infrastructure Reserve Budget Surplus After the end of the fiscal year the Finance Director will calculate whether the General Fund budget ended in a surplus or deficit position. If the City ended in a surplus position, the City will: 1) use the surplus funds to, at a minimum, satisfy the unassigned fund balance of 16.67%, as stipulated in this policy, and then, 2) allocate the remaining funds amongst the Public Safety Reserve, Rainy-Day Reserve, and Infrastructure Reserve. Reserve balances for each assignment shall be as follows: DESCRIPTION GOAL 20% of the annual HPD Public Safety Reserve - provide uninterrupted services for police and fire and HFD budget (approx. operations. $6,000,000) 20% of the General Fund Rainy-Day Reserve - mitigate an economic recession, or natural disaster; annual operating budget ensure a consistent level of service. (approx. $12,000,000) Infrastructure Reserve - Capital Projects (Walton Ferry Realignment, Exit 8, $15,000,000 for one-time etc.). projects Allocation of funds, from year-end surplus, will be distributed to the reserve assignments according to the following percentages: • Public Safety Reserve – 25% • Rainy-Day Reserve – 25% • Infrastructure Reserve – 50% Once a reserve assignment is meeting the financial goal of this policy, funds shall no longer be allocated to that reserve and instead shall be distributed equally to other reserves that have not met the reserve goal. Reserve funds will revert to satisfying the minimum 16.67% of unassigned fund balance if such balance drops below 16.67%. All year-end General Fund surplus will be calculated by the Finance Director, but generally meaning current year revenues in excess of current year expenses. 34