Special City Commission Meeting

City of Lauderhill City Commission Chambers at City Hall 5581 W. Oakland Park Blvd. Lauderhill, FL, 33313 www.lauderhill-fl.gov Meeting Minutes - Final Monday, March 28, 2022 4:00 PM Attend via phone: Dial 1-312-626-6799 & Meeting ID: 923 2127 8679 Attend via Computer: https://www.colvcm.com Special City Commission Meeting LAUDERHILL CITY COMMISSION Mayor Ken Thurston Vice Mayor Melissa P. Dunn Commissioner Denise D. Grant Commissioner Lawrence Martin Commissioner Sarai Martin Desorae Giles-Smith, City Manager Andrea M. Anderson, City Clerk Earl Hall, City Attorney Special City Commission Meeting Meeting Minutes - Final March 28, 2022 I CALL TO ORDER Vice Mayor Dunn called to order the Special City Commission Meeting at 4:00 PM. Vice Mayor Dunn explained, though Governor DeSantis suspended certain restrictions, the City remained under a state of emergency due to the COVID 19 pandemic. Due to the challenges of the virus, the City of Lauderhill continued to hold hybrid, virtual governmental meetings to allow the public to participate remotely. The City Commission would have a quorum physically present at its meetings at City Hall, along with staff, following the Center for Disease Control (CDC) guidelines for facial coverings, social distancing, and public gatherings. Anyone experiencing issues viewing and/or participating in Commission meetings should contact IT Director Douglas Downs. The City Commission and staff appreciated the public’s patience and cooperation during such difficult and ever-changing times. II ROLL CALL Present: 5- Vice Mayor Melissa P. Dunn,Commissioner Denise D. Grant,Commissioner Lawrence Martin,Commissioner Sarai Martin, and Mayor Ken Thurston Commissioner D. Grant attended the meeting via Communications Media Technology. ALSO PRESENT: Desorae Giles-Smith, City Manager Earl Hall, City Attorney Constance Stanley, Police Chief Andrea M. Anderson, City Clerk III THIS WILL BE A LIMITED AGENDA MEETING. THE ONLY ITEMS TO BE DISCUSSED WILL BE: 1. AUDIT PRESENTATION (REQUESTED BY CITY MANAGER DESORAE GILES-SMITH). Attachments: Item 1 (As Referenced Within Minutes) (City of Lauderhill Fiscal Year 2021 Audit Presentation (1SDA) Deputy City Manager/Finance Director Kennie Hobbs indicated the audit covered the period of October 1, 2020, through September 30, 2021, noting the presentation would be made by Tanya Davis of S. Davis & Associates and Assistant Finance Director Karen Pottinger, who was responsible for maintaining the City’s finances, as well as putting together the City’s Comprehensive Annual Financial Report (CAFR). The numbers in the presentation for fiscal year (FY) 2021 were the final numbers, so regardless of what took place at the present meeting, they were what they were, so the presentation was more about communicating to the City Commission if there were issues or findings related to the audit, and the final numbers as of September 30, 2021. He explained the numbers were reviewed by Ms. Davis and her staff, as well as outside consultants, who reviewed the CAFR. He began his presentation, reviewing the City’s finances up to February 28, 2022, City of Lauderhill Page 1 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 highlighting the following: • The current financial conditions, as mentioned through February 28, 2022, would be the only item discussed as it pertained to the current FY • There was always a 30-day lag between the present month and the reporting month; in the following 30 days, there were usually adjustment periods, etc., which was why staff could not provide accurate numbers to date • The City was at 41 percent complete for FY 2022 • For the General Fund budget of $81.3 million, the City collected 52 percent of General Fund revenue or $42.6 million; there were $33.3 million or 45 percent of budgeted expenditures • The amount related to encumbrances were things for which the City had outstanding purchase orders; they totaled $3.3 million with the $33 million; they were not actual expenditures, but funds the City contracted to expend • The total enterprise funds budget was $46.2 million, of which $16.392 million or 35 percent had been collected as revenues, of which $10.42 million had been utilized for expenditures; unlike the General Fund, which included property taxes that were collected up front and spent as the FY progressed, revenue for the enterprise funds was collected on a monthly basis; at this point, as long as the City’s revenues in the enterprise fund exceeded expenditures, the finances were on par • For year-end projections, staff did not foresee anything out of the ordinary, such as collecting much more or less than anticipated; projections indicated year-end totals were on pace for what was budgeted; if staff observed any fluctuations in either direction, they would being the matter back before the Commission, as it would normally require an amendment to the budget to recognize what transpired; the amendment normally took place in September, when staff fixed all the books • Cash on hand: The City had $70.001 million, and this was broken out between the two funds: $41 million in governmental funds, and $28.9 million in enterprise funds • Government funds made up the General Fund where the budgets for Police, Fire, Parks & Recreation etc. were located • Enterprise funds encompassed the Lauderhill Performing Arts Center (LPAC), fire stations, the fire fund, and water, sewer, and stormwater funds • Regarding the 2021 American Rescue Plan Act (ARPA) grant fund allocations, the City was said to have received $18 million up front which was not the case; the City received some of the grant dollars in FY 2021, and then some more in FY 2022, and more would be forthcoming to be included in FY 2023 • $4.9 million of the ARPA grant affected the FY 2021 audit; $5.8 million was allocated to the current FY 2022 budget, and $7.395 million was allocated to the FY 2023 budget. Tanya Davis, S. Davis & Associates, thanked Finance staff for working with the auditors, as without their participation, it would not be possible to get to the point of making the presentation to the Commission. She continued with a PowerPoint presentation on the City’s annual audit for fiscal year FY 2021, as detailed in the backup, highlighting the following: • The City’s audit would be submitted to the Government Finance Officers’ Association (GFOA) on time, which would enable the City to receive a certificate of achievement again • The City’s annual financial audit was performed in accordance with generally accepted auditing standards, and those standards were related government auditing standards City of Lauderhill Page 2 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 • Auditors performed the financial statement audit in accordance with the provisions of Chapter 105.50 rules of the Auditor General • The pension trust funds were audited by other auditors, but they could be seen in the City’s financial statements • With respect to timing, the auditors spoke to members of the City Commission during the audit planning, prior to the audit commencing; they mentioned the auditors’ and the Finance staff’s goal was to get the financial statements to the City Commission earlier this year than last year; they were submitted to the Commission earlier this year, but the timing of when the Commission received the documents, and was able to review them for the subject presentation was about the same; this was primarily, if not completely due to the pension trust fund audits • The City was reliant on those trust funds to get their audits to the Finance Department, and the City was, somewhat, at their mercy; thus, as with last year, this year it affected the timing at which the Commission received the audit reports and presentation • During the course of the audits, they performed risk assessments and considered internal control over financial reporting; they did not provide an opinion on internal control, but they considered it to determine the nature, time, and extent of the auditor procedures during the course of the audit; this was primarily based on the auditor’s judgment, along with the risk assessments • They performed tests of compliance with laws, regulations, and contracts. • The significant audit results: The City received, again, an unmodified opinion on the financial statements, also known as a clean opinion, the best opinion a municipality could receive; this meant the auditors found there were no numbers in the financial statements presented to them by the City for audit that were materially misstated • Internal control system: There were no significant deficiencies or material weaknesses noted in the internal control; no matters of noncompliance with laws, regulations, or contracts noted that went to the level of having to be reported under government auditing standards • When they reviewed the financial statements, they had to look for indications that a city could be in a state of financial emergency; the City of Lauderhill did not meet any of those conditions. Commissioner L. Martin noted in the audit language, the auditors noted they found no significant deficiencies, asking if this mean they found minor deficiencies that staff addressed. Ms. Davis replied what the auditors found was extremely minor, and had to do with a very, very minor number that was included in the City’s financial statements, and this was with respect to the garage and the inventory observation at the garage, and tires, and the use of camera surveillance. Mr. Hobbs mentioned they did have an inventory software, but it might not be in use, so he would follow up on that, but this was an insignificant number on the City’s financial statements, with very little impact to the City. Additionally, they also suggested there be camera surveillance used, so if anything was taken out of the facility, City staff would catch it. She continued the presentation as follows: • A comparison of the numbers between FY 2020 and FY 2021, and the significant variances, which for the auditors was usually about ten percent • Cash and investments: On September 30, 2020, it was $51.1 million; on City of Lauderhill Page 3 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 September 30, 2021, $51.4 million • Restricted cash: On September 30, 2020, was approximately $2.3 million; this decreased to $1.8 million, primarily due to the decrease in restricted cash in the water and sewer fund • Total cash remained steady; $53.4 million in 2020 versus $53.2 million in 2021 • Total assets went from $283 million in 2020 to $292 million in 2021, primarily due to the amounts considered to be due from other governments, which were the American Rescue Plan Act (ARPA) funds; this also had to do with the decrease in the City’s other post-employment benefits (OPEB) liability • Total liabilities decreased from $224.9 million in 2020 to $192.6 million in 2021, primarily due to the City’s net pension liabilities or OPEB liabilities, and a decrease in debt • Total net position, from a government-wide standpoint was basically the equity the City possessed; $64 million in 2020 versus $81.8 million in 2021, primarily due to the appreciation of pension investments in the current year, coupled with the decrease in net pension liabilities; this year was a good year, for both the City’s and all other outside pension funds • General Fund: Total fund balance as of 2020 was $17.9 million, compared to $17.1 million in 2021; unassigned fund balance dropped from $6.1 million in 2020 to $2.8 million in 2021, primarily related to ARPA-related expenses; the City’s fund balance policy was ten to 15 percent of operating expenditures, and in FY 2021, the City was at $3.42, in large part due to some onetime events • General Fund revenues increased from $64.9 million in 2020 to $68.8 million in 2021, primarily due to the ARPA funds • Expenditures increased from $56.8 million in 2020 to $58.9 million in 2021 • Debt service transfers showed about a $3 million increase from $7.6 million in 2020 to $10.8 million in 2021, in large part due to a transfer to the Community Redevelopment Agency (CRA) in the current year • Change in fund balance last year was $739,000.00 versus a negative change in fund balance of $897,000.00 in 2021; this had to do with much of what was already gone over related to revenues and expenditures, such that the City’s expenditures in FY 2021 were higher than the revenues • Enterprise Funds: Total net position decreased from $86.5 million in 2020 to $80.4 million in 2021 • Unrestricted net position decreased from $37.7 million in 2020 to $30.6 million in 2021, both primarily due to the Lauderhill Housing Authority (LHA) forgiveness in the current year • With respect to the P&O, portion of enterprise funds, operating revenues remained quite steady at $32.2 million in 2020, versus $31.7 million in 2021 • Operating expenses also remained steady at $28.4 million in 2020 versus $28.7 million in 2021 • Interest expense of $808,000.00 in 2020 versus $747,000.00 in 2021 • Net Position, the differences between the revenues and expenses, was $4.9 million in 2020 versus 2021 where expenses were above revenue of $6.1 million; this was primarily due to the LHA balance forgiveness • Entity-wide financial statements were showing a positive trend in both net position and unrestricted net position; from 2019 to 2020, it increased from $61.9 million to $64 million; from 2020 to 2021, it increased to $81.7 million due to increase in pension investments • Unrestricted Net Position: A similar increase was seen for the same reasons; it showed the City had a deficit of $17 million in 2019, a deficit of $10 million in 2020, City of Lauderhill Page 4 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 and a deficit of $5.5 million in 2021, which was moving in a positive direction; the earlier large deficit was primarily due to an accounting adjustment, as it related to pensions, which most cities experienced in terms of a hit to unrestricted net position • General Fund: fund balance remained about the same, $17.2 million in 2019, $17 million in 2021, and it showed a decrease from $7.5 million in 2019, to $2.8 million in 2021, again, primarily due to expense related to ARPA • Net Position in enterprise funds remained the same from $81.5 million, showing an increase in 2020, but back to $80.4 million in 2021 • Unrestricted Net Position: $35.8 million to $37.7 million, to $31 million, or $30.6 million, again, primarily due to water and sewer. Commissioner S. Martin referred to pages 12 and 13; he sought an explanation of the comment made under the auditors’ responsibility that said: No opinion of effectiveness of the procedures that were used; and there were limited procedures that prevented the auditors from verifying the accuracy of the numbers. Ms. Davis explained, when any auditor performed an audit, they looked at internal control, and they did tests of internal control, along with walk through's of internal controls, but they did not opine on internal control. They worked on the internal control to get a feel of whether there could be, potentially, any deficiencies in the system, and based on their judgment, it helped to determine whether the auditors needed to increase their testing in any way. Commissioner S. Martin pointed out on page 13, it said: We do not express an opinion, or provide any assurance on the information, because the limited procedures do not provide us with sufficient evidence to express an opinion. He asked if those limited procedures were from the City’s side or some other side. Ms. Davis believed this was in reference to other supplementary information, stating, again, the auditors looked overall to see if that information indicated something vastly different from the audited financial statements. An audit was not designed to audit those other supplementary schedules. Commissioner S. Martin wished to know what type of numbers were in the supplementary schedules. Ms. Davis responded, as shown on the introductory page of the CAFR, all of the schedules were included, primarily within the statistical section, from page 112 to the end of the document. Commissioner S. Martin observed for pages 85 to 95, and 15 to 25, the auditors expressed an opinion. Ms. Davis replied they expressed an opinion in relation to the information. Commissioner S. Martin recalled in a previous phone conversation with Ms. Davis, she said the auditors did not look at the general obligation (GO) bonds. Ms. Davis said they would not present on them. However, activity related to the bonds were included in the audit, but they were not a matter of detailed presentation City of Lauderhill Page 5 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 for the present meeting, and they, typically, were not, unless there was an issue found. Commissioner S. Martin asked if the City’s bonds were audited. Mr. Hobbs stated the City submitted its CAFR to the bond agencies and bond holder, so they could look at the City’s numbers to ensure the City remained compliant with the requirements set forth in the agreements; this was done on an annual basis. Both the internal reviews and the bond determinants told if there was an issue with the City meeting certain requirements, and in relation to being in compliance, the bond covenants stated the City must have certain operating revenues and expenditures, as done annually by rating agencies and bond holder with the use of the CAFR and other information. City staff monitored these conditions on a monthly basis to make sure the City remained in compliance moving through the budget year, including the budget being reviewed by outside agencies, and this was outside the City’s annual financial statement audit. Ms. Davis clarified the auditors confirmed the bonds, just as they confirmed cash, and other “balance sheet” items; they confirmed the bonds to ensure the numbers seen in the financial statement. Mr. Hobbs continued the presentation with discussion of the one-time events, which impacted the fund balances and retained earnings, as outlined in the PowerPoint, including the LHA balance forgiveness of $13.2 million; this was related to ensuring that the loan for purchase of properties by the CRA was properly assigned. Commissioner L. Martin asked for clarification regarding expenditure of loan dollars. Mr. Hobbs remarked -- the funds from the loan were listed as a liability and an asset; it affected four different accounts, and went on the books as a liability, the cash came in, and it had to be booked as a revenue and expenditure on the other side of the equation; only one side of the equation took place, so the money was used to purchase the properties mentioned. The City was making its loan payments. Commissioner L. Martin clarified his question was if the proper entity was making the loan payments. Mr. Hobbs answered yes, the CRA made the payments, and the CRA always maintained its own debt service, paid their own bills outside of the City, but when the City went to having separate financials from the CRA, a one-time issue was determined and fixed. The LHA had to be taken off the books, and this required Finance staff to look at what took place, as it related to those properties, as the CRA transferred properties to the LHA as well; thus, there were a number of moving parts with the City having to take the $18 million off the City’s books, with the need to go back to the original entries to figure out how it got on the City’s book, and that was when the determination was made it was not recorded correctly on the front end. He continued his presentation as follows: • The third item was related to the ARPA funds, which impacted the City’s budget; the COVID 19 pandemic affected the City’s books, as it had all governments and City of Lauderhill Page 6 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 peoples around the world; it was a onetime event that resulted in shortfalls; despite the ARPA dollars being disbursed to the City more quickly than funds coming from FEMA, in some cases, much of the impacts of the shortfalls already happened • The backup information detailed how the various funds in the budget were impacted, and how ARPA dollars were used to mitigate those effects • Staff felt comfortable with the reduction shown in fund balance, as the City’s revenues exceeded its expenditures • Because of the three items being a part of the FY 2023 budget, a plan would be presented by the City Manager and staff to show how the fund balance would get above the ten percent over the next three fiscal years. Commissioner L. Martin asked if Mr. Hobbs and his staff ever made recommendations to the Commission, as it related to the current fund balance policy, on where those numbers needed to be, whether the policy should be revisited. Over the past two years, the country experienced the effects of the pandemic, and still continued to do so to a lesser extent, and though he thought the City dealt with the challenges well, with the help of an influx of federal dollars that contributed to City’s moving towards being whole. He was curious if the ten to 15 percent was still a good number based on those experiences, and if more could be done with the City’s tax dollars, he would be in favor of such exploration. Mr. Hobbs said staff could revisit the fund balance policy, but in both the Finance staff and his professional opinions, they thought the present number was sufficient. Pandemic-type effects were very difficult to anticipate, considering this was the first time in 100 years the country dealt with a pandemic, making it hard to plan for such an eventuality. He thought it would be a disservice to the Lauderhill taxpayers if the City increased the percentage. Commissioner L. Martin clarified he meant the possibility of decreasing the percentage. Mr. Hobbs reiterated Finance’s comfort with ten percent; this was the unassigned portion, as fund balance was made of both assigned and unassigned funds; funds were set aside in the event the market dropped for the pensions funds. The unassigned funds were for us in the case of an unexpected event, or extreme weather event. Mr. Hall suggested the Commission recess the workshop, to begin the CRA meeting, which could be shortened, after which the workshop could be reconvened. The meeting went into recess at 5:00 PM and reconvened at 5:06 PM. Mr. Hobbs continued his presentation as follows: • The fire protection fund: The Commission had a discuss in relation to the deficit balance when the fire activities were accounted for in the General Fund; some years ago, the Commission decided to break those expenses out of the General Fund, and create a separate fund, and for the fire fund to be funded 100 percent with a fire fee; in doing so, it moved all the related deficit from the General Fund into the fire fund; as part of the City’s annual meetings with Moody’s and S&P, it was pointed out the City needed to have that fund begin to move in the right direction, City of Lauderhill Page 7 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 that is, towards positive, which staff accomplished over the past years; in the present fiscal year, the fund went in the opposite direction by $2 million, and this was related to a timing issue with the Fire Department, as some of the funds to complete the fire station came from ARPA dollars, and $2 million was not received by September 30, 2021; though it would be in the current fiscal year, it created a negative in the FY 2021 fire fund, and in the next year’s audit, there would be a reduction in that statement • The City’s pension liability, between FY 2020 and FY 2021, the postretirement benefits, the OPEB, increased from $21.9 million to $23.6 million; this spoke to benefit provided, and the cost of insurance, etc. for employees when they retired, and this was directly related to the increase in health insurance costs, with an effect to the tune of $1.7 million • Net pension liability decreased from $44.5 million to $17.8 million; this was the City’s obligation to make pension whole; there was a $17 million gap between the assets on hand, and the City’s pledge to pay those benefits; this was solely due to how well the investment returns did; as a cautionary note, when such positive returns took place, there were usually requests for new benefits, but the problem of issuing new benefits at such times was when reversals took place in the investment market, the pension liabilities increased vastly; Moody’s and S&P pointed out to the City some ten years prior, and a rule established while under the previous city manager and still in practice by the current City Manager today, was staff made tweaks or changes to pension benefits, so pension plans were sustainable; City staff had no wish to run afoul of the advice given by Moody’s and S&P, and so not reverse what was accomplished over the last ten years • All the City’s pension funds were doing well, as it related to the funding ratio • A study was put out by the Government Finance Officers Association (GFOA) to look at funding levels and assign grades, with anything from 90 to 100 considered an A, 80 to 90 a B; the City earned Bs and As • Staff would return before the Commission in the next month or so, after they completed the land bill, to discuss the refinancing of the pension bonds; an additional study was being done as it related to the pension bond. Commissioner L. Martin noted the fact that the City recently completed negotiations with both the fire and police unions for the next three years, it was now just a matter of watching the market and making the right investments. Mr. Hobbs concurred. Staff felt by the City doing the refinancing spoken about previously, it would have a positive impact, as currently the City was paying between seven and seven and a half percent, where in the market the City could be getting three and four percent. It depended on the portion of liability to be refinanced, and from a recent conference Mr. Henderson and he attended, the advice given was to refinance the portion that was unlikely to change, which was that involving the current retirees. He continued his presentation: • The City’s financial condition assessments spoke to the City’s financial health • The City went from a favorable position to an inconclusive position; this had everything to do with all the aforementioned events: reduction in fund balance, reduction in spending cash in relation to capital projects, etc. • The City had ten favorable from 11 the previous year; the four unfavorable last year went up to seven; and the 11 inconclusives went down to nine. City of Lauderhill Page 8 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 Commissioner S. Martin wished to know who provided the report on the city’s financial condition assessments. Mr. Hobbs replied Finance staff compiled the report and provided it to the auditors; the State had criteria the City had to follow, and it spoke to trend and benchmark information. When the question arose about how the City compared to others, that referred to this information; the Sate had formulas the City had to follow, and other steps to make such a determination, and the information gathered was turned over to the auditors for review to ensure the City was reporting information in accordance with the criteria set by the State. Commissioner S. Martin questioned if City staff was entering the information into a State database system. Mr. Hobbs answered yes. Commissioner S. Martin asked if the information generated a report from the State. Mr. Hobbs said it did not; the State provided templates, and City staff entered information from financial statements into the templates that then created the financial assessment before the Commission. Commissioner L. Martin remarked, to the naked eye, it seemed a matter of concern that the City went from favorable to inconclusive, understanding the explanation of events previously discussed that were mainly due to the pandemic, but the various financials continued to be strong, including pension funds. The ARPA and other federal funds, along with those still uncollected from FEMA and other government agencies to address the effects of the pandemic went toward making the City financially whole. He asked what would be the two or three main issues that brought the City to its current financial position. Mr. Hobbs responded the write offs for the LHA and CRA. Vice Mayor Dunn sought additional information regarding the unfavorable ratings, as an explanation for the public’s benefit would be helpful. Mr. Hobbs mentioned the four critical indicators as follows: • The only indicators reflected in the slide presentation were the critical ones • The first critical indicator was related to the change in net position; this was a favorable position wholly related to the appreciation of pension assets; that is, the pensions did well, so there was a favorable overall rating • The second critical indicator was related unassigned and assigned fund balance, plus restricted net position; this was related to CIP being spent down; the City issued a $45 million GO bond, so when the money was issued to the City, it went to the fund balance as retained earnings; the assigned portion was considered capital projects, so the amount held in fund balanced reduced each year as the funds were spent on projects; one of the formulas the State used was if the number in year one is higher than the number in year five, from a trend analysis perspective, it was considered an unfavorable trend, but from the City’s position, the reduction could be explained as being due to the reduction in fund balance City of Lauderhill Page 9 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 • The third indicator related to the General Fund and the assigned and unassigned fud balance over total expenditures; this was related to the one-time write offs for the LHA and CRA that led to a significant reduction that impacted the City’s savings; it was considered inconclusive, because it occurred quickly with no real trend to illustrate if matters were moving in the right or wrong direction, and the State deemed it must happen over a certain period of time in order for the trend to be considered unfavorable; it was rated inconclusive, as it was unknown what would happen in the next year; from the City’s position staff felt comfortable, as it took place last year, and would not take place in the present fiscal year, so the trend line would turn back positive, and begin moving in the positive direction; G referred to governmental wide, looking at the entire entity’s unassigned over assigned fund balance versus total expenditures; this was related to the write offs previously mentioned • The fourth financial indicator spoke to cash and investments over current liabilities; there were debt payments made regarding the CRA, as previously mentioned; the others were related to the LHA and onetime payments; this was where the CRA changes impacted the City’s books; “P” referred to proprietary funds, the onetime reclass for the debt issued for the land purchase held by the City; this portion of that same transaction reflected here based on impacts from the CRA and the LHA transactions • The fifth financial indicator referred to cash and investments over total expenditures; this was related to the spend down of capital projects, as well as debt payments; as the City spent cash, it impacted cash holdings, creating a negative trend; the five G trend was the same as in indicator four, but the five P went up with the CRA being a proprietary fund, and it was doing well, so it showed a positive trend, despite it impacting the City negatively • The sixth financial indicator looked at current liabilities over total revenues; revenues increased, while debt decreased; this was the direct reflection of the impact on fund balance; revenues were increasing at faster pace than expenses, so this, overall, put the City in a positive position; the liabilities referred to money the City owed, versus revenues, and the City owed less, while revenues increased, so net liability decreased, and this was a favorable position; for six P, the revenues in the proprietary funds were doing well, and expenditures and debt were not increasing at the same pace, so it had a positive impact on the City’s financial position • The seventh financial indicator referred to long-term debt versus population; as the City paid its debt down, and the population was not increasing at the same rate, the City was in a better position and debt per capita was less, as the City continued to pay its debt off; it showed a negative trend, which was a positive outcome • The eighth financial indicator looked at excess revenue over expenditures versus total revenues; the City took its revenues and subtracted expenditures; as long as the positive number continued as such, the trend would be positive • The ninth financial indicator spoke to operating income or losses over total operating income revenue; this was related to depreciating assets. City Attorney Hall mentioned Vice Mayor Dunn asked Mr. Hobbs to adjust his presentation to clarify the unfavorable and inconclusive financial indicators, to allow time for the CRA audit presentation. Mr. Hobbs proceeded as follows: City of Lauderhill Page 10 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 • Financial indicator ten G looked at intergovernmental revenues over total revenues; this had an unfavorable rating, due to there being a higher reliance upon grants, and such funding sources, at the end of those grants, etc., some of the costs maintained; this had a negative impact on the City’s financials; thus, an important aspect of acquiring grants was what would take place after they ended, and there were continuing expenses related to whatever they funded; from a policy standpoint, it was not a good approach to bring on permanent costs for an action funded by temporary revenues • Financial indicator 11 referred to the unfavorable trend related to unassigned and assigned fund balance was strictly related to the write offs mentioned previously, and the impacts were in various places in relation to the City’s financial position; 11G and 11P were related to the write offs, both being unfavorable • Financial indicator 15P, another unfavorable trend, referred to accumulated depreciation over capital assets; this spoke to depreciated assets with a useful life, such as a city car or piece of equipment; if an asset’s depreciation stopped, such as a car after five years, and no new assets were acquired, this would impact the City’s financial position; in the subject instance, the City’s depreciation was increasing at a faster rate than the acquisition of assets, thus, having a negative impact from an indicator standpoint; for the City it made good policy not to acquire assets, from an administrative position, continuously turning over to assets to avoid getting an unfavorable rating • As part of the upcoming FY 2023 budget process, staff would provide the Commission with a plan on how the City would get back above the ten percent in the next three budget years. Commissioner L. Martin observed, based on staff’s comments, it was possible that, by the beginning of the next fiscal year, much of the issues would correct themselves. Mr. Hobbs answered yes, by the end of the current fiscal year they would begin trending in the right direction, as it was not a one-year fix. 2. COMMUNITY REDEVELOPMENT AGENCY FINANCIAL STATEMENT (REQUESTED BY CITY MANAGER DESORAE GILES-SMITH). Attachments: Item 2 (As Referenced Within Minutes) (CRA Fiscal Year 2021 Audit Presentation (2SDA)) Executive Director Sean Henderson presented a financial update on the Lauderhill CRAs, as detailed in the backup, highlighting the following: • The snapshot of the current financial position as of February 28, 2022, was for both the Central CRA and State Road 7 CRA • Budgeted revenue and expenses of $1.1 million; to date, the CRA received $966,000.00 in revenues; expenditures were at $366,000.00 • Year-end revenue/expense were all on pace to meet projected year-end goals • Cash on hand was at about $815,000.00 • A sizeable receivable was expected in the next week or two from Broward County for reimbursement for the PRP grant; the City’s CRA paid $1 million up front, so staff submitted all the paperwork to the County for reimbursement of the $667,000.00; once reimbursed, it would be added to the CRA’s cash dollars City of Lauderhill Page 11 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 Ms. Davis gave a PowerPoint presentation on the CRA’s annual audit for fiscal year 2021, as detailed in the backup, highlighting the following: • The scope of the examination was done in accordance with generally accepted auditing standards, government auditing standards, and the rules of the Auditor General • Auditors performed risk assessments, considered internal controls over financial reporting specifically related to the CRA, despite the information being already included in the City’s financial statements • They performed tests of compliance with laws, regulations, and contracts that became important as State statutes changed and required a separate CRA audit • The CRA audit received a clean opinion or unmodified opinion on the financial statements; there were no significant deficiencies or material weaknesses noted in the internal control system, and no weaknesses fell below significant deficiencies that came to the auditors’ attention • No matters of noncompliance with laws, regulations, or contracts were noted • A review of balances was compared between fiscal year ending September 30, 2020, to that of fiscal year ending September 30, 2021 • Cash and investments on September 30, 2020, was $825,000.00, compared to $346,000.00 for 2021; cash often fluctuated based on timing; total assets were $3.3 million in 2020 compared $6.5 million in 2021; the increase in total assets was primarily due to the Project Renaissance Housing Program improvements, and the receivable coming from Broward County for the NW 38th Avenue project. Commissioner Grant asked why the amount was added prior to the CRA receiving the funds from the County. Ms. Davis explained it was added as a receivable for FY 2021 that would be paid in FY 2022. Mr. Henderson added the $1 million given to the CRA by the City was held in escrow for the line of credit used to build the homes, so they were considered assets. Ms. Davis resumed the presentation: • Total liabilities decreased from $4.5 million to $2.7 million; the difference between the CRA’s total assets and liabilities led to a total net position deficit of $1.2 million in 2020 versus $3.9 million in 2021; this shift was due to the increase in total assets and the decrease in total liabilities, as well as the transfer from the City to the CRA • The eastern CRA financials showed a fund balance in a better position due to the transfer of funds, and the influx of asset items; there was about a $200,000.00 deficit in total fund balance in 2020 versus a $593,000.00 positive fund balance in 2021; a deficit in unassigned fund balance of approximately $250,000.00 in 2020 compared to a $401,000.00 positive unassigned fund balance in 2021 • Revenues went from $86,000.00 in 2020 to $1.5 million in 2021, primarily due to the County receivable • Transfers in: $534,000.00 in 2020 versus $497,000.00 in 2021 • Expenditures saw a significant increase from $591,000.00 in 2020 to $1.2 million in 2021, primarily due to the improvements on NW 38th Avenue • Change in fund balance of $131,000.00 deficit in 2020 versus $793,000.00 positive City of Lauderhill Page 12 Special City Commission Meeting Meeting Minutes - Final March 28, 2022 fund balance in 2021; this was due to revenues, transfers in, and expenditures and transfers out • The Central CRA financials showed a deficit total fund balance of approximately $1 million in 2020 versus a $2.2 million positive total fund balance for 2021; an unassigned fund balance deficit of $3.4 million in 2020 decreased and moved to a positive trend of $216,000.00 in 2021 • Revenues increased from $68,000.00 in 2020 to $512,000.00 in 2021 • Transfers in: $259,000.00 in 2020 to $3 million in 2021; this was a write off of those notes • Expenditures decreased from $1.2 million in 2020 to $62,000.00; transfers out remained steady • Change in fund balance: Revenues and transfers in versus expenditures and transfers out showed a deficit of $1.1 million in 2020 to a positive change in fund balance of $3.2 million in 2021 • For the CRA entity-wide and the Central CRA fund, the trend showed a bettering of net position; that is, unrestricted net position, fund balance, and unassigned fund balances were all related to the transfer of funds from the City to the CRA and the write off of notes. Mr. Henderson commented regarding the CRA debt associated with the Mission Lake Plaza, explaining that once staff put the process in place for the designs for those properties and getting them on board, the CRA could look at leveraging the assets to move forward. Commissioner L. Martin asked if it was safe to say the Lauderhill CRA was in a very strong position, particularly the Eastern CRA, once there was buy in from businesses on the vision for the area, possibly sourcing funding to help businesses in that area. Mr. Henderson clarified if by strong was meant from a credit-worthy standpoint, but CRA revenues were what they were. For example, the transfers to the Central CRA might be $500,000.00, but $250,000.00 went toward paying debt, and the remaining funds would be piecemealed for different projects, interest expense for houses, etc. He did not request funding from the City beyond what was needed to operate the CRA, and there was no accumulation of extra cash that could be used toward anything, as those funds needed to stay with the City for other projects. Ms. Davis understood the read through of the audit presentation went quickly, but her staff and she remained available to answer any questions after the meeting. IV ADJOURNMENT - 5:37 PM City of Lauderhill Page 13