Finance Committee

TOWN OF MOUNT PLEASANT, SOUTH CAROLINA FINANCE COMMITTEE Tuesday, September 5, 2017 Municipal Complex, Committee Meeting Room, 3rd Floor 100 Ann Edwards Lane Mount Pleasant, SC 29464 Minutes PRESENT: Elton Carrier, Chair; Paul Gawrych, Gary Santos and Mark Smith STAFF PRESENT: Eric DeMoura, Town Administrator; Marcy Cotov, Chief Financial Officer Mr. Carrier called the meeting to order at 8:45 a.m. 1. Approval of Minutes from the July 31, 2017 meeting Mr. Smith moved for approval; seconded by Mr. Santos. All present voted in favor. 2. Public Comments [None] 3. Employee years of service recognition Mr. DeMoura recognized Lauren Sims for five years of service to the Town and most notably that she ran the Town Hall project. 4. Employee recognition Mr. DeMoura recognized Brad Walbeck, Benefits Manager. He stated that the Town has been battling healthcare costs for years and that it is the single largest item in the Town’s budget. He stated that Mr. Walbeck’s work, especially with retirees, has been extraordinary. He stated that Mr. Walbeck has been able to provide retirees with a great plan and saved the Town almost $400,000.  Finance Committee September 5, 2017 Page 2 of 18 5. Establishment of millage rate and sales tax credit factor Mr. Carrier stated that it is his understanding that the Town received the numbers late from Charleston County on Friday; therefore, this will be presented at the Town Council meeting. Ms. Cotov stated that staff reviewed the appraisals and assessments and they look in line with the budget. She stated that they did not receive the information on their LOST liability, which they need in order to calculate the numbers. She stated that staff will bring it straight to Council. 6. Workers’ Compensation Update Ms. Cotov stated that staff wanted to update the Committee on Workers’ Compensation. She stated that in February, 2017, an analysis was performed that indicated that the Town would benefit by going self- insured. She stated that the budget was adopted, including the anticipation of going self-insured. She stated that they just received the results from a recently completed risk assessment and are working through this assessment. She stated that this looks at how the Town can contain costs and improve risk management. She stated that staff began the self-insured process, which requires approval from the State, which requires the Town to secure excess insurance at $500,000 per claim. She stated that the Town will pay self-insurance tax, hire a third party administrator, and if this does not include attorney services, which is a key component, this would also need to be procured. She said that this means the Town would have to pay their claims up to $500,000. She stated that currently the Town pays up to $50,000. She stated that as staff began looking at all the components, they felt that this was a large increase. She stated that what staff would like to recommend is transitioning into self-insured, which means it would be phased in. She stated that the Town will begin increasing their deductible until they reached the $500,000 and set up, similar to health insurance, an internal services fund so that during the good years, the Town can begin to build up the fund balance that will allow, for that first bad year, not to impact the general fund. She stated that staff has procured a broker that will be  Finance Committee September 5, 2017 Page 3 of 18 going to nine different commercial firms and also the municipal self- insured pool. She said that if the Town changes, they will bring this to Bids & Purchases. She stated that they are looking to go slowly from $50,000 to $100,000 and continuing up. She stated that this provides them with the opportunity to take this assessment on the Town’s risk and to hire the risk manager and have them begin implementing the assessment in order to start containing costs. She stated that their plan is similar; however, instead of jumping from $50,000 to $500,000 they would prefer to slowly phase it in and continue to look at the market to see who the best coverage carrier is. Mr. Carrier asked about the history of claims as he understands there was a serious claim this year, but that claims have been relatively low. Ms. Cotov stated that when the assessment was completed in February, they reviewed five years’ worth of claims, which is one of the reasons why it was a benefit for the Town to go self-insured. Mr. Carrier asked if most of the claims are generated by Public Services. Ms. Cotov stated that annually, they meet with Public Safety; Fire & Police and Public Services. She said that they recently met with them and looked at all their claims and how they could possibly start mitigating some of these. She stated that the Risk Manager, with the assessment they just received, will help the Town tremendously in implementing these, in order to put the Town in a better position to go fully self- insured. Mr. Smith stated that a much more conservative fiscal approach on this is a prudent decision. He stated that he does not wish to violate any of the HIPAA laws, but sees that as becoming a growing trend for municipalities. Ms. Cotov agreed. Mr. Smith asked if any of the Town’s departments heavily weighted towards claims versus others that are not within normal range of other municipalities.  Finance Committee September 5, 2017 Page 4 of 18 Mr. DeMoura stated that it is getting close. He stated that the Town goes by a modifier, which is 1.0. He stated that this is the median point where everyone should be and the Town runs approximately .89 or .91 and staff monitors and reviews the claims quarterly. Mr. Smith stated that he would like to highlight the Town’s health and wellness program and staff being proactive, and asked if there are areas of opportunities where this could be improved. Mr. DeMoura responded in the affirmative. He stated that the Town can improve on training when it refers to safety. He stated that the Town requires one hour of physical activity for firefighters to stay in shape for the job. He stated that there are times when they are out on the job and twist an ankle or hurt their knee and they are out for several weeks and worker’s compensation begins. He stated that the Town is better off in the long run having more fit employees that are able to respond and accept the extra risk. He stated that there are some things that the Town is going to continue with because it makes sense for the response perspective. Mr. Carrier asked when this will be implemented and how. Ms. Cotov stated that if the Town is going to leave the Municipal Association of South Carolina, they must notify them in November and it will take effect in January, 2018. She stated that if the Town accepts one of the nine commercial firms, they will bring it to Bids & Purchases Committee and if the Town remains with the Municipal Association when it is time to renew, it will be renewed at the $100,000 level. 7. Discussion on funding total estimated repair cost for Old Village Watershed Basins 1 and 2 Ms. Cotov stated that during discussions, Mr. Carrier asked that if the Town approves the design, would the Town be able to fund the construction. She stated that they have provided Committee members with the final document that pulls together all the numbers from Thomas & Hutton, not just doing existing; however, proposing the design to the 2043 build out. She stated that it also includes alternative  Finance Committee September 5, 2017 Page 5 of 18 improvements that provide storm drain connections to some of the closed basins. She attempted to capture all the costs in their report. She stated that the total is approximately $8.1 million. She stated that she also wanted to provide other data. She stated that stormwater fees generate approximately $2.7 million. She stated that every $10 increase generates approximately $450,000 and it is currently at $60.00. She also looked into a revenue bond if the Town were to use stormwater fees. She added that if the Town were to borrow $6 million dollars over ten years, the payback would be at $700,000. She stated that possible sources of funding for this, using $9 million (taking into consideration contingency and right of way acquisitions), the Town could utilize the fund balance of stormwater, the stormwater infrastructure fund balance, and borrow $6 million. She stated that this is only one plan, but would utilize some of the Town’s fund balance and borrow some funds. She said to pay back the $6 million, it would be a $15 increase in the stormwater fee. She stated that staff would like to take this as a project through the CIP process, have it ranked and bring back the final recommendations at the January Council retreat, with all the other CIP projects. Mr. Carrier stated that with this being such a large CIP project, he would like to ask staff to explain this once again, as Town Council will see a number of changes at the November elections, and this is a large monetary item that should be addressed by the new Town Council at the January retreat. Ms. Cotov stated that the typical process is that in October, the Town solicits for all Capital Projects and takes those and all existing Capital Projects and puts them together, looking at all the revenue sources. She stated that based on priority, staff will begin funding the projects. She added that this would be included, prioritize it, and bring it with all the Town’s capital projects to the retreat, showing staff’s final recommendation on the funding sources prioritized. Mr. DeMoura stated that staff is hoping around this time, to have clear numbers from the consultant who is doing the design. He stated that  Finance Committee September 5, 2017 Page 6 of 18 with design, are cost estimates along the way, as they begin to perfect the design. He stated that it will take time to design this project and stated that bringing this to the retreat makes perfect sense. Mr. Carrier asked if the first $800,000 has a funding source. Mr. DeMoura stated that there is a funding plan for this design and they also will bring this to Bids & Purchases Committee. Mr. Smith asked if the funding is still $800,000 to $1,000.000 for the design. Mr. DeMoura responded in the affirmative and said that the design amount was received and will be addressed in the Bids & Purchases Committee, which is $791,515.00 Mr. Smith stated that this amount was not in the budget last year and asked if funding has been reallocated. Mr. DeMoura responded in the affirmative. Mr. Smith asked where the funding came from. Mr. DeMoura stated that it will be addressed in item #8. Mr. Smith stated that he understands that we are focusing in on the first two basins; Edward and Royall Avenue basins and up to 86% - 87% of these roads are SCDOT owned roads. Mr. DeMoura responded in the affirmative. Mr. Smith asked if this same percentage are applicable to these two basins. Mr. DeMoura stated that the percentage would apply to both these basins (Edwards and Royall), and not only the roads, but the stormwater lines as well, are owned by SCDOT. Mr. Smith stated that he asked at a previous Town Council meeting if there had been any communications with the State regarding their own assets and how they are planning to take care of this expense, or partner with the Town. He mentioned that he was told that there was a casual conversation held with Congressman Mark Sanford’s office. He asked if  Finance Committee September 5, 2017 Page 7 of 18 there has been any communication or meetings or the findings of this report presented to any State elected official to ask how they are going to pay for 87% of this project or at least partner with the Town in any way. He asked if the Town is going to assume sole responsibility for this project. Mr. DeMoura stated that this question is one for the elected body as to direct communications. He stated that at the staff level, they have not had any direct communication with a representative from the State in reference to the funding. Mr. Smith asked the Chairman of the Finance Committee if they are able to lead the charge on this effort as it is critical to ask the State to pay for their own bill prior to the Town paying for this project. Mr. Carrier asked Mayor Page if there has been any communication. Mayor Page stated that she has these conversations regularly with them; however, nothing formally has been done. She stated that she would be happy to lead the charge and ask them to participate. She stated that she has not received any encouragement in any of the conversations that there is any funding for this type of infrastructure. She stated that a big issue is the right-of-way which is nonexistent for the Town. She stated that one of the items that the Town must work with the state on is right of way. Mr. Santos stated that in the past SCDOT has been happy to have the Town fix their roads as long as the Town takes over the maintenance of the roads. He asked if this was a possibility. Mr. DeMoura stated that there was a push in Columbia to turn the roads and infrastructure back over to the communities. He stated that there was discussion of funding attached to it; however, sometimes that funding withers over time. He stated that the Town should never accept any SCDOT infrastructure, unless they provide a funding source that the Town controls. Mr. Santos asked if this should be obtained in writing prior to moving forward with any repairs to the drainage.  Finance Committee September 5, 2017 Page 8 of 18 Mr. DeMoura stated that the Town will know early on in the design, because SCDOT will need to be brought in. He stated that as the owners of the infrastructure, SCDOT will need to see what the Town is proposing. He stated that the Town will be asking that question early on as to what SCDOT will require prior to the Town doing work on their infrastructure going forward. He stated that it will be addressed during the design process. He stated that they will ensure early on in the process to ensure that this is resolved. Mr. Gawrych asked Mr. DeMoura if he was aware of anything on Johnnie Dodds Boulevard or US 17 North where the Town built something and had to pay the State to use their right-of-way for utilities. Mr. DeMoura responded in the negative. Mr. Gawrych stated that on the half cent sales tax for Johnnie Dodds, the State was involved to oversee the project; however, it is still their road. Mr. DeMoura stated that they have responsibility over it. He said that it is a federal roadway. Mr. Gawrych stated that it was the same thing with US 17 North. He said that the Town did the road improvements, but it is still SCDOT’s road. He stated that the Town is going to begin the Coleman Boulevard improvements, which will repair approximately 50 years’ worth of stormwater for the state with TIF funding, not the State’s money, but when complete, will still belong to SCDOT. Mr. DeMoura responded in the affirmative. Mr. Carrier asked if the Committee agreed that this project be laid out in its entirety up to the $25 million dollars and then discuss how it will be resolved and if they are willing to help. Mr. Smith stated that he would ask Mayor Page for her consideration to call a special meeting with the entire delegation from both the House and Senate and present to them what has been presented. He stated that it is unfair that the Town has information that they do not have. He suggested providing them with the information. He stated that he believes good communication may possibly lead to a different result.  Finance Committee September 5, 2017 Page 9 of 18 Mr. Gawrych stated that he agrees, however, there is protocol established. He stated that Mr. Morrison has had years of interaction with the State. He stated that the only thing the Town did not do was ask for assistance. He stated that the protocol is there for the shared information. Mr. Smith asked if this would impede the timeline that was discussed earlier if this meeting were held with State and House officials in order to better educate them and bring awareness to what is happening here in the Town, as well as not to bind the future Town Council. Mr. Carrier stated that the legislature does not go back into session until January; therefore there are two months to make the schedule and prepare a presentation. Mr. DeMoura stated that what he is hearing is that Committee would like to see a meeting held here at Town Hall. He stated that they would first mail the report that was done with an executive summary so they have it ahead of time and follow it up with a scheduled meeting and power point presentation and feed them if necessary. He stated that this should be accomplished within the next 60 days. Mr. Santos stated that it should be held here at Town Hall so that the citizens may attend and participate. Mr. DeMoura stated that this will be put on Town Council’s agenda under Finance and then move forward. 8. Consideration of a Budget Transfer to Fund the Design of Old Village Watershed Basins 1 and 2 Ms. Cotov stated that according to the Town’s budget policy, the Finance Committee does have the ability within a fund to transfer appropriations. She stated that staff has brought three sources of funding that could be transferred to fund the design at almost $800,000. She stated that the first is the pipe repair at Rivertowne Wando, which came in under budget, and Mr. Peele said that the excess funding in the amount of $290,000 would be available. She stated that there is also an expenditure reserve that is built into the budget. She stated that this  Finance Committee September 5, 2017 Page 10 of 18 utilizes anticipated funds which will come in from the Stormwater Infrastructure Fund Balance policy. She said that the last item is on the current budget for pipe repair and rehabilitation. She stated that there is $1.475 million and $400,000 of those dollars would be reallocated to come up with the funding for this design. She stated that Committee members have been provided with a sheet that provides the amounts that make up the $791,515.00. Mr. Carrier asked if this was an extra $100,000 over and above the $3 million expenditure reserve split for this year. Ms. Cotov responded in the affirmative. Mr. Santos made a motion to approve the $791,515.00 for the Old Village Design and Engineering as described by staff; seconded by Mr. Smith. Mr. Carrier asked Mr. Weis if anything will be negatively impacted under the pipe rehabilitation if the $400,000 is reallocated. Mr. Weis stated that it will have an impact. He stated that when they did the budget this year, they broke it out into three phases. Phase I is what is currently planned and budgeted for and some currently being done. He stated that they left a 30% contingency, as something always comes in over budget or find a new issue. He said whatever is not spent in Phase I will go to the rest of the pipe repair for that fiscal year. He stated that reallocating the $400,000 will prevent them from moving on to Phase II of their projects for this fiscal year unless the funding is reimbursed at mid-year. He said that the other potential impact is what they consider Phase III, where they would begin cleaning the pipes now so that when the new fiscal year rolls in, they would be able to roll into repair. He stated that reallocating the $400,000 will have a potential impact on what they will be able to execute this year and plan for next year. Mr. Carrier asked if these were named projects. Mr. Weis stated that Phase I is a named project already. He stated for Phase II, they have locations where they would repair pipes at this point.  Finance Committee September 5, 2017 Page 11 of 18 He stated that they are also still awaiting reimbursement for some FEMA projects for Matthew; however, these funds have been pushed to Harvey. Mr. Carrier asked Ms. Cotov if there is any budget access that is not yet known that may be forthcoming. Ms. Cotov stated that they do anticipate additional money that they bring to Council at mid-year to allocate. She said any existing projects they were anticipating could be deferred and this money used to replenish, if this is the desire of Council. Mr. Carrier asked if Mr. Santos would be willing to amend his motion to state that any budget excesses at mid-year would go to replenish the $400,000 item. Mr. Santos amended his motion; Mr. Smith amended his 2nd. All present voted in favor. 9. Mount Pleasant Waterworks SRF series ordinance authorizing a water and sewer system parity bond evidencing a loan from the Water Quality Revolving Fund Authority to the Town for sewer improvements Mr. Paul Trouche stated that before Committee is an ordinance authorizing a revenue parity bond under the 1992 Master Bond ordinance. He stated that the bond itself will be in the form of a promissory note and a loan agreement the State Water Quality Revolving Fund Authority not to exceed $3.9 million amortized over twenty years, with an interest rate of 1.9%. He stated that the funds would go towards sewer improvements, pump station rehabilitation and conversion and stated that Mr. Niesse would be able to provide greater detail. He stated that all bond issues for Water and Sewer must go through the Town of Mount Pleasant. He stated that the bond will be paid solely through the revenues of the water and sewer system. Mr. Carrier asked how the $3.9 million will be utilized. Mr. Niesse stated that it will be used for pump station conversations. He stated that there are 13 pump stations, five of which will be from above  Finance Committee September 5, 2017 Page 12 of 18 ground stations to below ground stations, with buildings going away. He stated that there are another six pump stations with piping underground and the piping will be moved above ground. He stated that there will be rehabilitation of wet wells at Oakhaven, Old Village, Mallard Lakes, Shem Creek, East Ridge, Long Point, Brickyard, Pleasant Pines, Hobcaw, Remley’s Point, Hindman, Connector East and Hidden Cove. Mr. Carrier asked if any of this work will overlap with what the Town is anticipating doing in the Old Village. Mr. Niesse stated that their work is all site specific. Mr. Gawrych made a motion to recommend to full Council to move forward with this bond; seconded by Mr. Smith. All present voted in favor. 10. Freedom of Information Act (FOIA) Fee Schedule Update Ms. Cotov stated that staff brought to Council Ordinance 17038, which was approved at first reading. She stated that it was deferred last month, because while working through the process, staff realized that there were fees that they currently charge that were not identified on the schedule. She stated that they also recognized that their good intent with the $10 for research had unintended consequences. She stated that staff is bringing a proposed change fee schedule and hopes that second reading will be amended to incorporate these changes. She stated that the differences will be to remove the minimum charge of $10 for all requests and that the Town specify some of the other fees that are currently charged. She stated that for example: USB drives when a resident requests electronic information. She stated that the Town is unable to accept outside USB drives and put into the system as it goes behind the Town’s firewalls. She stated that the Town has USB drives and will charge a fee for this. She stated that the Town also specifies costs for different mediums that they may want their electronic items in. She stated that they included other fees. Mr. Smith made a motion to make the changes to the FOIA fee schedule as presented; seconded by Mr. Santos. All present voted in favor.  Finance Committee September 5, 2017 Page 13 of 18 11. Capital Planning Model – (presentation) Ms. Cotov stated that this model looks at long range financial planning on the Town’s capital projects. She stated that it was developed with First Tryon and they are still working through some of the projections. She stated that the model is designed to take in certain inputs, all the projects, when the Town would like to begin those project, the funding sources, current debt, and puts all the information in and begins receiving outputs. She stated that with the inputs, the Town lists all the projects and may turn them on or off, depending on funding, the date of the project and what type of funding will be utilized. She added that it may even be customized if the Town is going to incur debt or going level principal or level payment and if the project generates any revenues. She stated that it takes all of this data.  Finance Committee September 5, 2017 Page 14 of 18 She stated that in the next slide which is very detailed, all the projections are put in.  Finance Committee September 5, 2017 Page 15 of 18 She stated that as an example, are Impact Fees, which are volatile, a viable source of funding. She stated that First Tryon is developing for each of those impact fees, as well as all other revenue sources. She stated that then they receive the outputs. She stated that if the Town is considering using millage, it would monitor the millage and any coverage ratios the Town may have. She stated that it will look at the Town’s internal policies to ensure that the Town is in compliance when utilizing the revenues to fund these projects. She stated that it is even by revenue source, that it will track the fund balance for all of the revenues. She stated that this will also project the Town’s income statements so it will show the expenditures, revenues and all the components and will forecast it out for the years.  Finance Committee September 5, 2017 Page 16 of 18 She stated that it will also project tax impact over time, debt service ratios, debt per capita, and even compare the Town to others. She stated that it will look at what the Town establishes as our region to determine how the Town’s fund balance of the general fund is in comparison to a percentage of the Town’s revenue.  Finance Committee September 5, 2017 Page 17 of 18 She stated that this is where it ties in exactly to the timing of the Town’s capital improvement process. She stated that the Town will be taking all of the new projects and existing projects, ranking them and putting them into this program, identifying sources of revenues to utilize and tracking to determine whether the Town is able to afford those projects. She stated the program takes the debt off first and any operating expenditures that may be supported by those revenues and flows through to allow the Town to do true long range capital planning. She stated that the next slide are staff from First Tryon who are developing this program with the Town. Mr. Carrier asked when implementation takes place. Ms. Cotov stated that First Tryon has not only been working with Finance and Administration, but also with Planning. She stated that implementation will be ready in October when the Town begins reviewing the CIP. She stated that staff will be utilizing the program and present everything at the January Council Retreat, with all the other capital items. Mr. Smith asked how the Town selected First Tryon to partner with.  Finance Committee September 5, 2017 Page 18 of 18 Ms. Cotov stated that the Town utilized First Tryon for the last bond issuance and when working and meeting with them, they indicated what they were able to do and when the impact fees changed, Mr. DeMoura asked staff to review it and she selected working with First Tryon. Mr. Gawrych asked if First Tryon is under contract. Ms. Cotov stated that she believes it is a five year contract and may utilize them by work order the way the contract is established with them. She said that this was an additional work order and the first one was with the bond. She stated that the procurement policy allows some flexibility with financial items. She stated that First Tryon is only one component of the Town’s financial planning. She stated that they also have bond counsel and utilize others for cash flow. Mr. Gawrych asked if this contract piggybacks on an existing contract or is this a new contract. Ms. Cotov stated that it is a new work order under the existing contract. Mr. Gawrych asked for the amount. Ms. Cotov stated that it is $30,000. 12. Adjourn There being no further business, meeting adjourned at 9:32 a.m. Respectfully submitted, Barbara Ashe September 5, 2017