City Council

Minutes from the Petersburg City Council Budget Work Session meeting held on: March 27, 2017 -1– ______________________________________________________________________________ The work session of the Petersburg City Council was held on Monday, March 27, 2017, at the General District Court. Mayor Parham called the budget work session meeting to order at 6:30p.m. 1. ROLL CALL: Present: Council Member Charles H. Cuthbert, Jr Council Member Darrin Hill Council Member W. Howard Myers Council Member Annette Smith-Lee Council Member Treska Wilson-Smith Vice Mayor John A. Hart, Sr. Mayor Samuel Parham Absent: None Present from City Administration: Interim City Manager Tom Tyrrell Interim Finance Director Nelsie Birch Clerk of Council Nykesha D. Jackson, CMC 2. PURPOSE: a. Interim City Manager presents FY18 Budget Mr. Tyrrell stated that they have a lot of work to do. He stated that he wanted to start by reading a statement. He stated that before anything else he wanted to acknowledge the directors and employees for the work that they do every day but for the work that they did on the budget and that it was simply amazing. He stated that he deeply appreciates their efforts and that they did start from the bottom and work their way up. He stated that they defended their budgets as well after they created it. He stated that he is very proud of this effort. He stated that he would like to also thank Jack Berry for his work with the Capital Improvements Program. He stated that it is nothing short of phenomenal. He stated that he will brief them on this information on Wednesday. He stated that when they walked into finance there were two part-time people and every one else was gone. He stated that they had old systems, compromised data, and no policy and procedure. He stated that they have been working on documents for the last few months that they believe is strong. He stated that the long nights that she stayed up working on the documents. He stated that he particularly wants to thank Nelsie and the entire team for the work that was put in the book this evening. He stated that the works represents a collaborative zero based bottom up budget that responsibility provides the City with the critical services the citizens rely on every day. He stated that it is a fact of life in public service that when you get it right hardly anyone notices and when you get it wrong it is a headline. He stated that they have done everything they could to get it right and empower the City team to do their job so well every day. He stated that the book also represents a fresh start for the City of Petersburg. He stated that the City at the crossroads of fiscal stability and the uncharted territory of an insolvent municipality. He asked do we choose to move the City’s administration forward on a path of fiscal stability or do we slip onto a path of bankruptcy, receivership or reversion. He stated that clearly the council has chosen fiscal stability. He stated that they received the message and that it was what the hard choices on the budget represent. He stated that they should not forget where they are. He stated that the City has been living with a structurally imbalanced budget since 2009. He stated that they had a 2015 audited deficit of $5.9 million, a 2016 unaudited deficit over $9 million and that they are trying to recover in FY 2017. He stated that they have been able to stabilize the finances but that they continue to carry deficits from the past. He stated that without new revenue the bills do not get paid until they can. He stated that this is the position that Mr. Bobb speaks about regarding the cashflow of the budget. He stated that over the years the City could manage the imbalance *Audio available  Minutes from the Petersburg City Council Budget Work Session meeting held on: March 27, 2017 -2– ______________________________________________________________________________ and “kick the can down the road” by drawing down cash reserves, grabbing cash from special accounts to fund general operations and the issuance of revenue anticipation notes (RAN). He stated that in early 2016 the City ran out of road when the City was unable to obtain RAN for financing. He stated that the City took drastic measures to cover an $18 million-dollar shortfall, but by late October the City was on the brink of fiscal collapse and scrambling just to meet payroll. He stated that the City hired the Bobb Group as intern leadership for City administration and working together with the Governor’s office, VRA, and the financial and legal advisors at Davenport and Sands Anderson. He stated that with the full support of City Council the City was able to obtain aa $6.5 million-dollar RAN $1.3 million dollars of capitalized interest that provided enough cash and bought enough time for them to manage through the immediate financial crisis and create a path for financial stability. He stated that now that this is behind them there are some fundamental imperatives. He stated that first they have to adopt and adhere to an underlying budgetary and financial policies which will allow them to build the stable and sustainable financial posture they need to regain access to the credit markets and make this a critical tool available to the City again. He stated that they must also adopt a rigorous reconciliation process that examines both revenue and expenses in detail from beginning to end. He stated that when the administration or Council makes a decision that will cost money, determine where the money is before they make a decision. He stated that they avoid creating unfunded mandates and any initiative from either council or the administration that is not already funded in the budget that can only be adopted if the funding is also identified. He stated that they are to adopt policies, procedures and practices that manage our fiscal process by providing a framework that holds everyone accountable for fulfilling their fiduciary responsibility to council and to the citizens. He stated that the next thing is that they need to build a fund balance. He stated that they must have cash available to deal with all the variances and opportunities that occur throughout the year without resorting to RAN. He stated that the issue of the last note because of the financial posture has an overall cost of $1.3 million to issue a note for $6.5 million. He stated that this is not where the market is. He stated that the City is penalized because their financial situation and that they are trying to avoid this in the future. He stated that the first step in the budget is the assumption of a $6 million liquidity event for 2018. He stated that building a fund balance is one of the surest signs of a healthy financial footing. He stated that the third imperative is to make the strategic decisions to invest our infrastructures. He stated that we have to make it a priority to plan for and fund the ongoing capital improvements programs and avoid the consequences of major failures due to years of neglect. He stated that the current utility crisis is but one example. He stated that the outdated police and fire equipment is another. He stated that dilapidated facilities is another and the inability in supporting the schools in remodeling and replacement programs is another. He stated that the three imperatives: 1) a structurally balanced budget, 2) a positive fund balance and 3) making strategic investments in infrastructure are critical first steps that must be taken to build a stable financial picture for Petersburg. Mr. Tyrrell stated that he would like to talk about the budget process next. He stated that after tonight’s presentation there will be a work session on revenue. He stated that per the prior approval of the budget process and calendar there are a total of six work sessions, plus meeting, public comments periods, etc. that culminate in a vote to adopt the FY2018 budget at a special city council meeting on June 6th. He stated that they are just introducing the budget to City Council tonight. He stated that they must first realize that both the FY16 and FY17 are somewhat misleading as comparable budget years. He stated that they have a structural balanced budget to finish the year on a good comparison for revenue. He stated to keep in mind that FY18 is not a growth budget. He stated that the budget includes a onetime liquidity of $6 million dollars that will go directly into a fund to establish a fund balance. He stated that if they are unable to establish a liquidity event, it does not impact the operating budget. He stated that they will not be able to start a fund balance as soon as they like. He stated that $77.7 million is the revenue projection for FY18 and that it includes the $6 million. He stated that the actual revenue for operating the City is $71.7 million which is a 5% increase over the amended FY17 budget and 4% lower than the audited FY15 budget. Mr. Tyrrell stated that lastly this is City Council decision. He stated that they propose and council disposes. He stated that they have been honored as a team that City Council has entrusted them to assist the City through a very difficult financial period and that they work hard to fulfill their expectations. He stated that *Audio available  Minutes from the Petersburg City Council Budget Work Session meeting held on: March 27, 2017 -3– ______________________________________________________________________________ they are ever mindful that however strongly they believe in a recommendation the authority and the responsibility to make the tough decisions needed to move the City toward financial health rests with the City Council. He stated to City Council that the decisions are theirs and theirs alone. He stated there will be some spirited conversations in the coming weeks and even this evening. He stated that he wants them to know that they completely respect and understand the difficulty of their work and the gravity of the financial situation. He stated that they can rest assure that whatever decisions that City Council makes will be supported and implemented with fidelity and energy. He stated that they will now go through the PowerPoint presentations. There was discussion among City Council and staff regarding the proposed budget. Richie McKeithen, City Assessor, stated that in regards to information on revenue he will be speaking on abatements in the rehab program and property tax exemption. He stated that these two items provide an indirect revenue stream via assessments. He stated that by this he means that property is either taxable or exempt. He stated that taxable is easy. He stated that exempt is revenue that is not collected. He stated that churches and schools are properties that the City is not collecting revenue on. He stated that he has breached them on several venues to give them some information. He stated that that rehab program is for individuals that fix up their property to not have the market value by which they fix up the property taxed for five or ten years. He stated that the part that they have fixed up with not be taxed for five to ten years. He stated that exempt property is schools or churches that do not get taxed at all. Mr. McKeithen presented a short PowerPoint presentation. There was discussion among City Council and Mr. McKeithen. Council Member Cuthbert asked Mr. McKeithen to put on his calendar and that he will put it on his calendar as well to get an interim report from him in February 2018. Mr. McKeithen stated that he will bring the report back at the requested time by Council Member Cuthbert. Council Member Wilson-Smith asked if economic development, planning and code enforcement being added to the budget calendar. She stated that she would like some update information from them in April. Ms. Birch stated that she can add them to the April 26th meeting. She stated that they will have another work session on planning, economic development and code. Council Member Wilson-Smith asked a question in regards apartment projects. She asked Mr. McKeithen if he has an information or records that show how many apartments and tenants are in the City. She stated she would like some type of data to help them see whether the City needs new apartments in the City. Mr. McKeithen stated that he will only have what is coded in an apartment. He stated that he does not have occupancy for all of them because all of them don’t always comply when he sends out the request of information. Mr. McKeithen stated that the partial count of residential or small families is about 11,000. He stated that they have about 1,200 to 1,500 in commercial property. He stated that everything else is exempt. Pamela Hairston, Commissioner of Revenue, gave a briefing on some of the information that they send out that is returned to their office. She stated that she is looking at hiring a part-time person or temp employ to help with the return mail in the office. She stated that they receive DMV downloads weekly to update their information. She stated that people do not always update their information with DMV. She stated that the tax authority does a good job of finding people in the system. She stated that she would like an outside vendor to *Audio available  Minutes from the Petersburg City Council Budget Work Session meeting held on: March 27, 2017 -4– ______________________________________________________________________________ him them in doing this information in the future. Council Member Cuthbert asked Mrs. Hairston does she have ample staff to update information in her office promptly. Mrs. Hairston stated that with the DMV download information she does. She stated that with the return mail she does not. She stated that it does not get done quickly but that she is looking at hiring someone to only do the return mail once or twice a year. She stated that they previously advised to bill twice a year. She stated she would like to suggest to Council that they start supplemental billing and the twice a year billing. There was discussion among City Council and Mrs. Hairston on personal property taxes, billing and the business license process. Council Member Cuthbert asked how soon will the implementation of checking vendors begin. Mrs. Hairston stated that this would be after they finish business licenses. She stated that right now they are doing the process of getting the business license information over to the treasurer’s office. She stated that this would probably be the first week in April. Council Member Cuthbert asked how long would it take to complete this testing. Mrs. Hairston stated that it would take some time. She stated that she has no idea how long it would be. She stated that you have several stores in Petersburg that sell cigarettes. Council Member Cuthbert stated that he is sure of that. He stated that from the conversation with Mrs. Hairston there are somewhere between 80 and 100 vendors. He asked Mrs. Hairston would the first meeting in October give her enough time to implement this program and have information that she could bring back to City Council to report at that time. Mrs. Hairston responded yes. Council Member Cuthbert stated that he would put this information on his calendar and that he would ask Ms. Jackson to put it on City Council’s calendar to have this report brought back. He stated that he would like to know the stores that they visit and the results of the testing. He stated that it may reveal that everyone is playing by the books. There was discussion between Council Member Cuthbert and Mrs. Hairston on desk audits and taxes. Council Member Cuthbert asked Mrs. Hairston whether she have the manpower to do the things that she needs to do in her office. Mrs. Hairston stated if she could get a part-time person to work then she will be able to achieve her duties. Council Member Cuthbert asked that maybe the first meeting in May Mrs. Hairston can come back to City Council and give her recommendation on where the balance should be struck on additional manpower and additional revenue on the other. He stated that in the meantime she could talk to other localities and see what they do in their field audits. Council Member Smith-Lee stated that she thinks that Mrs. Hairston needs more manpower in her office. *Audio available  Minutes from the Petersburg City Council Budget Work Session meeting held on: March 27, 2017 -5– ______________________________________________________________________________ Kevin Brown, City Treasurer, asked Council Member Hill if he can share the information that has been shared with him. Council Member Hill stated that he received calls from constituents saying that they put their check in the drop box but it had not cleared yet. He stated that if he dropped off money tonight in the dropbox how soon does it go into the bank or if he pays today how soon does it go to the bank. Mr. Brown stated that the process is that they pick up the dropbox outside of City Hall and then they go to the post office and pick up mail. He stated that it depends on how much mail they get will detail the process. He stated that the situation that happened in the last cycle is that they never had two weeks of lines before and after the due date. He stated that they just could not handle it. He stated that his goal was to help the people standing in line. He stated that because this they could not process the mail. He stated that going forward they will start testing the Lockbox. He stated that the customers will mail their payment to the Lockbox. He stated that it will not come to Petersburg Lockbox but that it will be going to SunTrust Lockbox. He stated that there are three separate Lockbox specifically for whatever bill that they are trying to pay. He stated all this information is done automatically. He stated that every day they will get a deposit total and that it will be deposited in the bank. He stated that this is March madness for them. He stated that there are so many that come in and what to know information about their taxes. Council Member Hill asked Mr. Brown when will the City start their new system. Mr. Brown stated that they will have it in place no later than May. Council Member Cuthbert stated that his notes indicate that the June 30, 2015 CAFR showed that there was $3.8 million dollars in accrued taxes. He stated that Mr. Brown appeared before them on January 10th of this year giving documentation that there were real estate taxes alone that were past due and that the amount was $7.5 million. He stated that this is more than twice the number from June 30, 2014. He asked what is the explanation for that increase. Mr. Brown stated that this was a water billing issue and that they did not have enough staff to answer their phones and so people begin calling their offices. He stated that if they cannot get in touch with people in water billing then they contact people in his office. He stated that his people are trying to assist water and this keeps them from trying to contact people in regards to collecting taxes. Council Member Cuthbert asked Mr. Brown that it was not the fault of his office but that fault of the utility office. Mr. Brown stated that they did not have the process correct. He stated that the utility office was not set up correctly to go where they wanted to go. He stated that when they started talking about billing they told administration that there was no way that they would be able to catch up. He stated that they decided to go forward. Council Member Cuthbert asked what was the game plan in reducing the $7.5 million dollars. Mr. Brown stated that the game plan is to work with TACS and Sands Anderson to increase the numbers of opportunities that they must close on those properties for the City of Petersburg. Council Member Cuthbert asked Mr. Brown does he see any opportunity to increase the RPM or the sales projects. *Audio available  Minutes from the Petersburg City Council Budget Work Session meeting held on: March 27, 2017 -6– ______________________________________________________________________________ Mr. Brown responded yes. Council Member Cuthbert asked why this has not already been done already. Mr. Brown stated that this is because of going through the process of everything. He stated that the biggest thing is to find out how to reduce things if possible. He stated that his first goals were to get with TACS and then with Propel and then Sands Anderson. He stated that Sands Anderson is at the point the 660 properties that were given in 2011 has almost run out and that now they need some more properties. He stated that he has promised them to give them more properties. Council Member Cuthbert asked Mr. Brown that he has not given them any properties since 2011. Mr. Brown stated no. Council Member Cuthbert asked Mr. Brown that he has not given Sands Anderson one parcel since 2011. Mr. Brown stated no. He stated that Sands Anderson were still were on the parcels that they previously gave them. Council Member Cuthbert stated that he is dumb founded. He stated that he did not expect to hear anything like that. Mr. Brown stated thank you. Ms. Birch stated that this concludes the work session. She stated that they will be back on Wednesday at 6:30pm. She stated that they have modified the schedule a little bit. She stated that they still have the same dates but that they have added a few things. She stated that Wednesday night they are going to add the utilities. She stated that the capital budget is focused largely on the utilities and that they decided to add this for Wednesday. 3. ADJOURNMENT: City Council adjourned at 8:26 p.m. _________________________ Clerk of City Council APPROVED: _________________________ Mayor *Audio available