City Council Finance Committee Meeting

FINANCE COMMITTEE MINUTES April 12, 2018 The City Council Finance Committee of the City of Norman, Cleveland County, State of Oklahoma, met at 8:30 am in the Municipal Building Executive Conference Room on the 12th day of April, 2018, and notice and agenda of the meeting were posted in the Municipal Building at 201 West Gray and the Norman Public Library at 225 North Webster 24 hours prior to the beginning of the meeting. PRESENT: Chair Castleberry, Members Allison and Wilson ABSENT: Member Bierman OTHERS PRESENT: Mayor Lynne Miller Anthony Francisco, Director of Finance Suzanne Krohmer, Budget Manager Gala Hicks, Director of Human Resources Ken Komiske, Director of Utilities Evan Dunn, citizen Item 1, being: SUBMISSION OF THE REVENUE/EXPENDITURE REPORTS Anthony Francisco gave the report. He stated that the negative sales tax collection trend continues, with the General Fund being overall two percent (2%) below projections. The City Manager is taking steps to help this issue, but the trends are not positive. Chair Castleberry asked if the sales tax collection was up from this time last year. Francisco stated that it was. Castleberry stated that we are also quite a bit under in expenditures. Francisco stated that the City Manager has taken steps to reduce expenditures which has saved us from having to use the two percent (2%) Emergency Reserve Fund. Castleberry asked where we think we will be net at the end of the year. Francisco stated that if you factor out the transfer from the TIF Fund for the over-apportionment, we expect to be about $1.3 million short in revenues over expenditures. Castleberry then asked where we think we will be at the end of the year as far as expenses. Francisco stated that if it were not for the over-apportionment money from the TIF Fund, we would already be recommending drawing on the Rainy Day Fund. Francisco stated that the Average Annualized Growth Rate Adjustment is also being factored in, which helps the General Fund. If overall City Sales Tax growth is < 4.5%, then the apportionment to the TIF Fund is less than 60%. This year we only apportioned 50%, which meant more funds are going into the General Fund and the Capital Fund. Finance Committee Minutes April 12, 2018 Page 2 Francisco stated that we do have the money in the bank right now to pay off the TIF #2 debt, but the payoff will be extended if you add projects. Member Wilson asked if we are obligated to collect the full $54 million. Francisco stated that it is an authorization not an obligation. Mayor Miller stated that we have a project agreement with the other taxing jurisdictions Member Allison stated that the Norman Public School system would need about a year notice due to the impact on the schools if we ended the TIF #2 early. Francisco stated that we have 36 months until the TIF will end by itself. Member Wilson asked if we could end the apportionment to the TIF if we did not want to do anymore of the projects. Francisco stated that was one thing you could do, although the statutory approval process would have to be followed. Member Wilson asked if the money already collected would then go back to the General Fund. Francisco stated that it would not because it has to stay in the TIF Fund for the obligated projects. The funds would sit in the TIF Fund until they were spent. Chair Castleberry asked what the projections are for when the Public Safety Sales Tax (PSST) Fund would fully accumulate. Francisco stated that once the reconstruction of Fire Station No. 5 is complete, that would be the last of the Capital projects. This could be as soon as 4 years or as long as 6 years based on current projections. Member Allison asked what is the delay on the Emergency Operations Center (EOC). Francisco stated that he does not know; we would have to ask the project manager. He also stated that once the debt is paid off, the PSST funds will go into the General Fund. This will actually hurt the General Fund. Member Allison asked how much the extra expenses from this Fund would run. Francisco stated this will cause the General Fund to be short about $2 million per year. Mayor Miller stated that we need a simple, stark explanation for the City Council. Chair Castleberry asked if this was information we could have by the next meeting. Francisco stated that the Committee would have the fiscal year 2018-2019 budget letter by Tuesday. Francisco stated that the letter will address 7 “mega trends”. This includes the declining Sales Tax, the increasing Use Tax, the General Fund losing money every year, the PSST funds going into the General Fund, and the TIF revenue. Member Allison asked if the 86% decrease in the Sewer Maintenance Fund was due to timing of projects. Francisco stated this was correct. Chair Castleberry asked about connection fees. Ken Komiske stated that we raised the connection fees by $1,000, but the volume has gone down. Chair Castleberry asked if we can legally exempt schools from utility bills. Francisco stated that we legally can, but it would not be prudent. Castleberry asked how the City can help the schools. Mayor Miller stated that we are helping the schools with the TIF already. Member Wilson stated that the TIF as a tool is hurting smaller school districts. Castleberry asked if we could help the schools through utility relief. Francisco stated that we can. Castleberry asked if we could take this money from the utility funds. Francisco stated that this would be contrary to Finance Committee Minutes April 12, 2018 Page 3 our goal to operate the utilities similarly to for-profit businesses; another method may be to pay school utility bills from the General Fund. Castleberry stated that every business gives customers discounts. He understands that this is contrary to business profits but he is looking at the bigger picture. He thinks that a delay of utility payments for the schools would help. Mayor Miller stated that we help the schools through a number of other programs and partnerships. Chair Castleberry asked if we give a discount to low-income customers. Francisco stated that we do as part of the rate structure that the citizens approved. Castleberry asked about helping the schools pay their utility bills and if this would require us to take the money from another source. Francisco stated that it would require taking the money from another source. Mayor Miller stated that the City has a responsibility to every single citizen and we are a support system for every business, school, hospital, etc. Castleberry stated that he wanted to know what we “legally” could do, but it may not be a good policy decision. Chair Castleberry stated that years ago we talked about having a fuel tax to specifically go to road maintenance. We need to do some more long term planning. Member Allison stated that we need to send the comparative sales tax graphic of surrounding cities to all the Committee members. Chair Castleberry stated that he is concerned about the trend of Norman going down. Francisco stated that he has been in Finance for 30+ years and he has no idea what is going on with this trend. Chair Castleberry asked how we know if the Oklahoma Tax Commission is remitting us the correct amount of sales tax money. Francisco stated we receive reports from them on what the businesses remit to the Oklahoma Tax Commission. Castleberry stated that one of the State Legislators told him that if the Tax Commission is having money flow issues, they don’t always give the cities their money. Francisco stated that we have to take their word for it. We could do spot checks on the individual businesses to make sure the amounts reported are correct. Mayor Miller stated that according to the survey information, it looks like the increased competition from the surrounding cities, as well as the millennial population moving to Oklahoma City, has made a large impact on our sales tax information. Our retail is strong, but we have a lot of competition. If we rely on sales tax collection, what is the answer? Member Wilson stated that instead of trying to compete, we need to be different. Chair Castleberry stated that there is the entertainment district proposal. Francisco stated that the OKC citizens voted on a MAPS project entertainment district. We need to ask the citizens if they are willing to pay for it. Member Allison stated that we need to invest in all parts of the City, not just downtown. Parts of Norman make it closer to get to other cities than amenities in downtown Norman. Chair Castleberry asked where we were on the Request for Proposal for the auditors. Francisco stated we have gotten responses and he, Clint Mercer, and the City Manager are ranking the responses. We are hoping for a contract by the second City Council meeting in May. Items submitted for the record: Finance Committee Minutes April 12, 2018 Page 4 1. Summary of Major Fund Revenue Sources vs. Budget FYE 2018 as of March 31, 2018 2. Summary of Major Fund Expenditures vs. Budget FYE 2018 as of March 31, 2018 3. Appropriations from Fund Balance FY18 4. General Fund Transfers over $50,000 between Expenditure Categories FYE 18 March 2018 ****** Item 2, being: SUBMISSION OF THE REPORT ON OPEN POSITIONS Gala Hicks stated that we hired 12 Police Officers, but we lost 1 on the first day. We put that hire in the Communication Officer position that we had open, so we are down to 11 Officers in the Academy. That leaves us with 5 vacancies for Police Officers right now. Chair Castleberry asked if we could have an update on the health insurance costs at the next meeting. Francisco stated that we have been drawing down the health insurance fund balance primarily because of a few beneficiaries who are going out of network. The consultant has recommended that we increase our premiums by 5% but we budgeted fiscal year 2019 for an increase of 2.5%. Our out of pocket maximum is very low, which costs the City a lot more. Member Wilson asked if we can change the out of pocket maximum. Hicks stated that we did this year, but we are still working on a contract with the Fraternal Order of Police Union. It will make a big difference. We try to encourage in-house or in-network, but we can’t make them change. We have not had a premium increase in 4-5 years, but we do have to fight the Unions for these benefits. Member Allison asked about talk of an on-site clinic. Hicks stated that the Unions bulked at the idea of an on-site clinic. Mayor Miller stated that we should re-visit the idea soon with the opportunities for a wellness center at the County. We could have a clinic near our new facilities, such as the Senior Citizens Center or the Aquatics Center. Member Allison asked where an on-site clinic would be built. Hicks stated that it could have been near City Hall on the original plan. Member Allison asked if we offer tele-medicine. Hicks stated that we offer Teledoc. Chair Castleberry asked about the state of the worker’s comp fund. Francisco stated that we almost break-even but the trend has been negative because of the change to the state laws. The worker’s comp statutes have been more lenient, so our costs are increasing now. Items submitted for the record: 1. City of Norman Position Vacancy Report dated 4/3/18 ****** Finance Committee Minutes April 12, 2018 Page 5 Item 3, being: MISCELLANEOUS COMMENTS None ****** The meeting adjourned at 9:30 am. ATTEST: City Clerk Mayor