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 Thursday, March 16, 2023 4:00 PM City Commission Chambers Special City Commission Meeting LAUDERHILL CITY COMMISSION Mayor Ken Thurston Vice Mayor Sarai Martin Commissioner Melissa P. Dunn Commissioner Denise D. Grant Commissioner Lawrence Martin Desorae Giles-Smith, City Manager Andrea M. Anderson, City Clerk Angel Petti Rosenberg, City Attorney Special City Commission Meeting Meeting Minutes - Final March 16, 2023 I CALL TO ORDER Mayor Thurston called to order the Special City Commission Meeting at 4:00 PM. II ROLL CALL Present: 5- Commissioner Melissa P. Dunn,Commissioner Denise D. Grant,Commissioner Lawrence Martin,Vice Mayor Sarai Martin, and Mayor Ken Thurston ALSO PRESENT: Desorae Giles-Smith, City Manager Zachary Davis-Walker, Assistant City Attorney Constance Stanley, Police Chief Andrea M. Anderson, City Clerk HOUSEKEEPING A motion was made by Vice Mayor S. Martin, seconded by Commissioner L. Martin, to ACCEPT the Revised Version of the Special City Commission Meeting Agenda for March 16, 2023. The motion carried by the following vote: Yes: 5- Commissioner M. Dunn, Commissioner D. Grant, Commissioner L. Martin, Vice Mayor S. Martin, and Mayor K. Thurston Abstain: 0 III THIS WILL BE A LIMITED AGENDA MEETING. THE ONLY ITEM TO BE DISCUSSED WILL BE: 1. RESOLUTION NO. 23R-03-79: A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF LAUDERHILL ACCEPTING, APPROVING AND ADOPTING THE CITY OF LAUDERHILL’S COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR FISCAL YEAR ENDING SEPTEMBER 30, 2022; PROVIDING FOR AN EFFECTIVE DATE (REQUESTED BY CITY MANAGER, DESORAE GILES-SMITH). Attachments: RES 23R-03-79 Approve CAFR FY 2022 AR 23R-03-79 Deputy City Manager/Finance Director Kennie Hobbs remarked the CAFR was put together with the hard work of Assistant Finance Director Karen Pottinger and her staff. He would first give an overview of the City’s current financial position as of February 28, 2023; then the auditor would present the CAFR, and a review of the City’s financial statements, for FY 2022 ending September 30, 2022; he would continue the presentation to discuss the City’s financial indicators. He went on to present an overview of the City’s current financial position for FY 2023, as detailed in the backup, noting the following: • Year to date, the City collected 54.96 percent of budgeted revenues or $46 million City of Lauderhill Page 1 Special City Commission Meeting Meeting Minutes - Final March 16, 2023 of the $83.8 million approved by the Commission, and $35.6 million or 46.57 percent had been expended • In addition to those expenditures, the City had $3.3 million encumbered; this was money set aside for which the City had contracts, and/or purchase orders on which those dollars had yet to be spent; this brought the amount the City expended to roughly $39 million • Traditionally, the City collected funds earlier in the year, then spent it down as the fiscal year progressed; collected revenue included ad valorem tax dollars, revenue sharing of tax revenue from the State, etc. • The enterprise funds encompassed water and sewer, stormwater, and the Lauderhill Performing Arts Center (LPAC); the General Fund represented all other City funds, with the exception of the fire services fund • The General Fund was where the City accounted for police, fire, code enforcement, general administration, the Commission, parks and recreation, etc. • The General Fund had an approved budget of $55.2 million; year-to-date, the City collected revenue of $14.77 million, or 26.74 percent, and spent $11.7 million, or roughly 21 percent of those funds • The percentage of revenues and expenditures might appear low relative to where the City was in its current fiscal year; included in that were some grant dollars the City had yet to receive, along with capital projects that had yet to start • Staff expected all revenues and expenditures to be within budget for the current fiscal year ending September 30, 2023 • Finance staff monitored on a daily basis that the revenues owed to the City were being collected, and bills to be paid were being paid; no variances were anticipated in terms of the FY 2023 budget approved by the Commission • Grant dollars could have impacts on the City’s revenues and expenditures; as such dollars came in, staff would bring the matter before the Commission for supplemental appropriation, as adjustments to the budget were needed to account for those dollars • Cash on hand was $88.6 million, which accounted for all the City’s cash; this includes cash to pay the City’s day-to-day bills, and remaining American Rescue Plan Act (ARPA) dollars of $10.7 million. Commissioner L. Martin asked, based on the current general fund budget position, the had collected approximately 54% of the anticipated revenue, and only spent 45-50%, if it was accurate that they were ahead of the game on collection and about where expected on spending. Mr. Hobbs affirmed the City was a little bit ahead on revenue collection, which usually was around 42 percent year to date; March was the six-month budget period for FY 2023. Vice Mayor S. Martin questioned if staff projected to completely expend remaining ARPA dollars by the end of FY 2023. Mr. Hobbs answered no. Staff would give a presentation in April 2023, as they kicked off the FY 2024 budget year; at that time, the Commission would be provided with additional explanation, as staff would have a more detailed plan for the ARPA dollars. Under the current FY 2023 budget, a portion of the ARPA dollars was slated to be part of the FY 2024 budget, and beyond; the Commission requested staff project the spending over a three to five-year period, so staff continued to work City of Lauderhill Page 2 Special City Commission Meeting Meeting Minutes - Final March 16, 2023 on doing so. Vice Mayor S. Martin wished to know if use of ARPA dollars in FY 2024 prevented the City from lowering its taxes. Mr. Hobbs confirmed it would for any fiscal year in which ARPA dollars were used. Roderick Harvey of Harvey, Covington & Thomas (HCT), LLC, the chartered public accountants (CPA) of record hired to conduct the City’s annual audit, and produce a CAFR, presented the financial results of their annual audit for FY ending 2022, further detailed in the backup, highlighting the following: • The audit was conducted according to General Auditing Standards (GAS) • The auditors considered the provisions of the Auditor General (AG), Chapter 10.55; they performed testing on internal controls, and compliance with major federal programs • The auditors reported an unmodified or clean opinion, as it related to the City’s financial statements, and compliance with major federal programs; no significant deficiencies were noted based on their internal controls audit, and no matters of noncompliance were found, pursuant to federal uniform guidelines • The numbers as of September 30, 2022 were reviewed as illustrated in the backup, including an overall showing of: cash and investments at $68 million, restricted cash $1.8 million, total cash of a little over $70 million, total assets of $303 million, total liabilities of $226 million, and a net position of $86 million. Vice Mayor S. Martin referred to HOME Grant funds, and the fire fund that showed a negative position of $9 million. Commission Dunn indicated she, too, had similar questions. Mr. Hobbs stated he would touch on a number of elements mentioned by Mr. Harvey, resuming the presentation to focus on the City’s financial condition assessment from the ratio analysis put forward by the AG, as set forth in the backup. He highlighted the following: • The City had a fund balance policy of ten to 15 percent; in the current fiscal year, that balance was 4.2 percent; when the subject presentation was made for the previous fiscal year, staff pointed out to the Commission there was some debt the City forgave, and it was related to Lauderhill Housing Authority (LHA); it was a onetime event that had a onetime impact on the City’s financials; prior to that event, the City’s fund balance was about 12 percent, and after the onetime debt forgiveness, it took the City’s fund balance down to one or two percent • Within the fund balance policy was stated the City had a three-year window to return its fund balance to at least ten percent; the current figures showed the City was moving in the right direction with regard increasing its fund balance back to policy levels; the figure mentioned by Mr. Harvey indicated the City earned $380,000.00 more than it spent, which had a positive impact on fund balance. Vice Mayor S. Martin sought clarification as to if the fund balance policy of ten percent should be cash. City of Lauderhill Page 3 Special City Commission Meeting Meeting Minutes - Final March 16, 2023 Mr. Hobbs replied fund balance included some cash, as cash was a part of the City’s assets; fund balance was the difference between the City’s assets and liabilities. In the subject instance, the City had an asset on its books, meaning an entity owed the City a certain amount, and when the City forgave that debt, it reduced its assets, but the liability did not disappear, thus reducing the City’s equity or fund balance. He said the unassigned fund balance was made up of a portion of equity that was not assigned to something; for example, the City had dollars set aside to deal with natural disasters, and those monies were a part of fund balance, but it was not a part of unassigned fund balance, with the latter being funds that were not assigned or restricted for any particular purpose. The City’s policy stated unassigned fund balance should be at least ten percent of the prior fiscal year’s expenditures. Vice Mayor S. Martin asked if unassigned fund balance was cash. Mr. Hobbs answered no, not solely; unassigned fund balance was the net difference between the City’s assets and liabilities, including cash. Regarding the debt the City forgave, an agreement was put in place that required the entity to pay the City a certain amount, and this was having a positive impact on the City’s revenues. He noted when the City agreed to waive the rest of the debt, it not only reduced potential revenue coming in, but reduced City assets. Commissioner Dunn thanked Mr. Hobbs for his clarifying explanation, asking for more details on the fire protection fund. Mr. Hobbs responded, several years ago, the City broke out the fire side of the Fire Department, so there was now fire and EMS; EMS was still considered part of the City’s General Fund, but the fire portion was now 100 percent funded with fire fee dollars; before the change, they were both in the General Fund. When the City made the change, there was negative equity; that is, the fund began with a negative position, and this was due to previous commissions giving discounts; so if the cost to provide City residents and businesses with fire services was $10 million, the City did not bill them $10 million, rather, they were being billed for $8 million, so each year the fire fund accrued a negative equity, and that had a negative impact on the General Fund. After discussions with the City’s auditors at that time, the decision was made to move fire services out of the General Fund into its own fund. Mr. Hobbs explained, at the same time this change occurred, the Commission made a policy change, whereby, fire services would be funded 100 percent by the fire fee. Henceforth, in the City’s billing for fire services, when there were objections to waiving fees, and reducing fees, etc., this was due to there being an independent company, GSG, that did a study of the City’s actual cost to provide fire services, and from that they devised a fee schedule on how much should be paid by residents, industrial businesses, institutional businesses, and commercial businesses; everyone one was billed based on that scale. He reiterated the City was billing at 100 percent to run the fire department, so any discount awarded created a budget deficit for the City, noting there were only two ways to fund fire services, either 100 percent sourced from the fire fee, or by the City subsidizing fire services to reduce the 100 percent with monies from the General Fund, which meant property taxes could increase. Mr. Hobbs pointed out, by funding fire services 100 percent with fire fees, this meant everyone paid the fee, while supplementing it from the General Fund, there were property owners who paid no City of Lauderhill Page 4 Special City Commission Meeting Meeting Minutes - Final March 16, 2023 ad valorem taxes, so they paid nothing towards the fire services fund, thereby, burdening persons paying taxes with having to make up those amounts. Commissioner Dunn asked how 100 percent funding from the fire fee affected the Fire Department’s ability to get all they needed to protect the City’s residents; she questioned if there was a plan in place to supplement any shortfalls in the collection of the fire fee without having to further tax people. Mr. Hobbs said potential revenue shortfalls in the collection of fire fee would not impact fire services, as the Commission continued to fund fire services at 100 percent with monies from the fire fees collected. There was a plan to cover any shortfall that was already implemented some years prior, as one of the issues brought to the City’s attention by its credit rating agencies, such as Moody’s, was the need for staff to figure out how to bring it to a positive; there was a ten-year plan to move it to a positive position, and in each of the last two years, it could be seen that the negative position had been reducing, and this was accomplished by being prudent, maintaining expenditures, and collecting more than was being spent. With the support of the City Commission and City Manager, staff would continue to ensure that goal was met. Commissioner L. Martin referred to the ten-percent fund balance policy, asking for confirmation that the City’s numbers, to date, continued to move in the right direction, as it did at the end of FY 2022 with the aforementioned $380,000.00. Mr. Hobbs mentioned in the slide showing the City’s current financial position illustrating revenue over expenditure to date, the net number was the indicator, and though it now showed $6 million, it was likely to decrease as the fiscal year progressed to September 30, 2023; staff’s goal was to make sure FY 2023 ended in the positive, as was done the previous year, moving the City toward achieving ten percent fund balance. He continued, focusing on financial indicators: • The City was required to provide financial indicators to the State of Florida AG on an annual basis • Financial indicators assessed the City’s financial position as of September 30, 2022 • The information shown in the backup included historical data • There were three categories into which financial indicators could fall: favorable, unfavorable, or inconclusive, and each indicator would fit one of the three categories • For 2022, the City’s indicators were: ten favorable, six unfavorable, and ten inconclusive, with an overall rating of inconclusive • The FY 2022 annual financial audit had one less unfavorable indicator than the previous fiscal year • The inconclusive indicators were not necessarily bad; they just meant it was not possible to know what direction the trend was going at the time, as it might be too soon • The packet Mr. Harvey presented contained all the indicators; the presentation would highlight the critical indicators; which if issues were found, the AG would consider the City to be in a bad position • The first critical indicator was financial indicator two: unassigned and assigned fund balance over unrestricted net position; in the subject CAFR, this was deemed City of Lauderhill Page 5 Special City Commission Meeting Meeting Minutes - Final March 16, 2023 a favorable indicator based on the matrix provided by the AG; it was related to the City’s net financial position discussed earlier • The second critical indicator was financial indicator four: This was for the General Fund, cash and investments over current liabilities; this showed the City’s ability to pay its bills over the 12-month period; the City’s CAFR showed the second critical indicator as inconclusive, and this was due to it being a representation of cash; the City’s cash position decreased over time, but this was planned; when the City receive revenue from bonds, grants, etc., eventually the City’s cash position decreased as the fiscal year progressed; there was no reason to be alarmed, as an indicator being inconclusive was due to the inability to make a decision based on data if the City’s finances were going in the positive or negative direction • The third critical indicator was financial indicator 4G: This was the governmental funds, which included the General Fund and other funds; from a broader perspective, which was the governmental fund, this was favorable, but from a narrower perspective, for the General Fund, it was inconclusive • The last critical indicator was financial indicator 4P, in which the area looked at was cash and investments over current liabilities in the City’s enterprise funds; this indicator received an overall rating of favorable. Commissioner Dunn asked, when looking at the trend, benchmark, and overall rating, on which should the Commission focus. Mr. Hobbs replied the Commission should pay attention to the overall rating. Commissioner Dunn sought clarification the benchmark was how the City stacked up against other cities. Mr. Hobbs answered correct. He continued his presentation: • Thus, three of the four critical indicators were rated favorable, with one rated inconclusive • The City’s net cash position from FY 2021 to FY 2022 increased by $1.76 million, from over $5.9 million to $6.66 million; this was in the General Fund. Commissioner Dunn questioned, in looking at the CAFR document provided in the backup, how did she know the topic or name under which the financial indicators, etc. could be found. Mr. Hobbs said they were noted on the left side of the relevant page, adding that his staff and he could sit with each member of the Commission to clarify or discuss any matters. Mayor Thurston reminded the Commission, for a parliamentary procedure, the CRA meeting held at which the CRA’s CAFR was to be presented was moved to a time certain of 4:45 p.m., so the present special Commission meeting would be recessed for a short period, and reconvene after the CRA meeting concluded. A motion was made by Commissioner L. Martin, seconded by Commissioner D. Grant, to temporarily adjourn the meeting at 4:45 PM. The motion carried by the following vote: City of Lauderhill Page 6 Special City Commission Meeting Meeting Minutes - Final March 16, 2023 Commissioner Dunn Yes Commissioner Grant Yes Commissioner L. Martin Yes Vice Mayor S. Martin Yes Mayor Thurston Yes The meeting recessed at 4:45 PM, and reconvened at 5:00 PM. Mayor Thurston remarked, when looking at the indicators, there were some listed as unfavorable, asking staff what was the plan to change the rating from unfavorable to at least inconclusive or favorable for the future. Mr. Hobbs responded, in essence, it came down to increased costs associated with the increase in services. In looking at the City’s financials, it was evident that expenditures increased over time, as the City was providing many more services to Lauderhill residents, so staff had to figure out a way to provide those services more efficiently, whether through the introduction of technology, or offering certain programs to City employees, etc. He would be meeting with the City Manager in the coming weeks to discuss these matters further, and his staff and he were already looking at financial aspects over the last several months to put together the City’s Five-Year Plan to ensure all the financial indicators moved in the right direction. Mayor Thurston wondered, as the City was half way through its fiscal year, if it would be reasonable to ask staff to come back in a few months before the Commission to articulate what plan staff came up with. Mr. Hobbs answered absolutely. Commissioner L. Martin noticed in the CAFR, there were four areas shaded in yellow that had no indicators, asking if there were some things the City’s finances were not measured for, or was it an omission. Mr. Harvey remarked, for those indicators in yellow, these baselines did not apply to the City, so there were no metrics or numbers to input; they had no effect on the City’s CAFR. He noted not all measures applied to every city, and in Lauderhill’s case, there were four indicators that did not apply to the audit of the City’s finances, and this was not an unusual occurrence. Commissioner L. Martin commented the Commission knew no city went through a financial audit without the need to address some areas, asking if such issues were found, the auditors gave City staff the opportunity to rectify matters where possible, then the auditors proceeded. Also, he questioned if the auditors found issues where it was just processes that needed to be addressed, but the salient information was already available. Mr. Harvey replied Ms. Giles-Smith and Mr. Hobbs, and the Finance staff ran a very efficient organization for the City of Lauderhill, and in any audit, there were matters that were discussed when brought forward; there was nothing the auditors found that rose to the level of needing to be in a written format; the auditors did spend time with staff, going over some practices they could do better, or matters his staff City of Lauderhill Page 7 Special City Commission Meeting Meeting Minutes - Final March 16, 2023 needed to gain a better understanding of how the City conducted its finances, for which his staff were then satisfied once provided with the explanation by staff. The auditors felt very good about the Finance Department and the end product, and they could stand by their having no findings to report on internal controls, and financial reporting. Commissioner L. Martin thought it was important to get this on the record from a third party who were professional auditors, showing that the City’s Financial staff were doing a very good job taking care of the City’s finances. Commissioner Dunn wished Mr. Harvey to state in plain, layman’s terms the findings stated in City’s FY 2022 CAFR; that is, was it a good report, was the City in a healthy financial position, etc. Mr. Harvey answered yes; based on their audits, which cut across various levels, the auditors ended up giving a clean opinion, which meant there was nothing they saw that would cause them to modify their reporting, not only to the City Commission, but to any independent third party, such as the City’s banking and insurance institutions, and members of the public. As it related to the City’s financial health, the City’s cash balance was robust; the City’s proprietary funds continued to do well with maintaining a positive balance; the General Fund continued to remain healthy. He stressed that City was doing great things, and continued to do great things, and these were evidenced in the CAFR; it was a good report, and the City Commission and staff continued to do a great job. A motion was made by Commissioner D. Grant, seconded by Commissioner L. Martin, that this Resolution be approved. The motion carried by the following vote: Yes: 5- Commissioner M. Dunn, Commissioner D. Grant, Commissioner L. Martin, Vice Mayor S. Martin, and Mayor K. Thurston Abstain: 0 Commissioner Dunn congratulated City Manager Giles-Smith and her staff for organizing a very successful Youth Excel STEM Summit, which took place earlier in the day; the City’s Parks & Recreation Department did an outstanding job, in collaboration with the Fire and Police Departments. The students absolutely enjoyed the experience, and Becon TV was present and reporting on the event. IV ADJOURNMENT - 5:07 PM City of Lauderhill Page 8