Informational Meeting

MINUTES Informational Meeting Tuesday, April 7, 2020 at 4:00 PM Carnegie Town Hall, 235 West 10th St., Sioux Falls, SD 57104 1. Call To Order Council Members Present: Janet Brekke (via telecon), Christine M. Erickson (via telecon), Rick Kiley (via telecon), Greg Neitzert, Marshall Selberg, Curt Soehl, Pat Starr, Theresa Stehly Council Members Absent: None Council Chair Selberg called the to order at 4 p.m. Due to a technical issue, the meeting was stopped and re-started at 4:03 p.m. 2. Committee/Commission Reports A. Metro Management Council: March 25, 2020 (Council Members Erickson and Kiley) Council Member Rick Kiley provided an update of the meeting. The council was given a presentation of draft financial statements for the month of December, 2019, and January through February, 2020. The council also accepted the final audited 2019 Financial Financial Report. 3. City Council Open Discussion The council discussed preparing a rotation to ensure three members always phone conference in to the meeting. There was a though that it should be four. It was also indicated that perhaps the chambers could be rearranged to better provide for social distancing by council members at the dais. 4. Presentations A. 2019 Financial Results by Shawn Pritchett, Director of Finance Presentation: Approximately 20 minutes followed by discussion Pritchett explained that the strong economic and financial performance in 2019 allowed the City to end the year in a solid financial position going into 2020. In December 2019, the Sioux Falls unemployment rate was 3%, which closely follows state trends. He also noted that the 1% gap between the state and national trend has now closed. Building permit valuations were just under last year's record number (1.9% decrease) and that valuations have been over $700M for the last four years. Sales Tax collection finished strong at 6.6% for the year. The City previously budgeted 4% for 2019, so the strong finish resulted in $3.2M in revenue over budget projections from this category. Entertainment Tax revenues performed similar to Sales Tax revenues. The 12-month rolling average was up 6.1%--nearly $454k more than budgeted. In terms of the General Fund, revenues came in 103% of budget expectations, or $4.6M more than originally budgeted. The city also ended with lower expenditures than originally projected. The City is in line with its five-year average of performing at 96% of anticipated expenditures. Overall, 2019 ended with a 2.8% increase in revenues. Revenues were $4M over expenses in 2019. In 2017 and 2018, the City ran a $4.1M and $5M surplus, respectively, when compared to 2016 where we had expenditures in excess of revenues. Most revenues for the General Fund are derived from property taxes and sales taxes. Property taxes represented 37% of total revenues and sales taxes represented 40% of total revenues for the General Fund in 2019. About 15% of total revenues was derived from other sources such bank franchise taxes, grants, intergovernmental support, etc. Property taxes are fairly predictable, and the City came in at 100% of budget projections. On the expenditure side, the City came in $5.2M below budget or 97% of budgeted expectations. Overall, this is in line with previous norms. Given the higher revenues and lower expenses, the City did see the overall Available Fund Balance for the General Fund increase to $55.7M. Most of this due to excess revenues over expenses. The City of Sioux Falls has a policy that it will maintain an Available Fund Balance to Budget equal to 25% of the budget. Currently, the Available Fund Balance increased to 32.4% overall (increase of $3.6M in 2019). Pritchett explained there were $113.8M in capital investments in 2019 and he provided an overview of each category. The Sales Tax remaining available balance shows $6.4M at the end of 2019 for new spending, after putting and additional $1.7M in the Sales/Use Capital Fund reserve. This is larger than what has been seen in recent years. This is driven in part by revenues over budget of $5.4M including $3.3M in sales tax and $1.7M in investment revenue. He also provided an overview of 2019 Enterprise Funds. He indicated all funds had positive cash flow in 2019. Total outstanding debt saw a decrease of about $22M from 2018 and about $110M lower than where the City was six years ago in 2012. On a per capita basis, for the third consecutive year, we are presently at the lowest level of debt since 2010. Sioux Falls has the lowest per capita debt when compared to cities with similar size and location. Pritchett continued with a forward outlook. He reiterated that we are currently in a strong position financially and that the ongoing pandemic will likely mean adjustments to our budget. However, we should not necessarily equate our position with other regions of the country because we are going into the situation with strong finances. He explained how the City frames discussions about our larger funds-- three key areas are focused upon: Plan, Balance, and Adapt. The Plan is the original Budget/Plan for 2020; the Balance is recognizing the influence of mitigating factors (both positive and negative); and Adapt is the ability to change in dynamic circumstances. He noted that modeling, recommendations, and decisions will continue to change with circumstances and data. Pritchett challenged the Council Members to contemplate why we have a reserve. He noted that answering this question is important to framing the context of how we  think about the current economic climate and the decisions we make going forward. Great leadership over the years has allowed the City to maintain a solid financial position for the type of circumstances we are experiencing. At the end of 2019, there was an Available Balance of $55.7M, or about 32.4% of the General Fund Budget. He emphasized that all decisions will be disciplined, diligent, and discerning. He indicated that instincts would typically drive one to a defensive position, but given where we are at financially, we have the opportunity to go on the offense in how we make decisions to invest in areas that will create gain, and capitalize on the opportunity to innovate the way government delivers the services it provides. He again reviewed the General Fund and went on to explain how the City intends to manage its strategy going forward. There will be continued modeling for lost revenues--it will be dynamic and the City will adjust as information and data changes. There will be smart spending--the City is already looking at hiring processes, travel, potential impacts to Parks programming, the pass through for the BID/Lodging Tax, and various other department expenditures. In terms of the 2021 budget, the goal is to hold all spending with minimal increases. New priority initiatives would necessitate offset in other spending. For the Sales/Use Tax Capital Fund, the City is more dependent on the Sales/Use Tax (2nd Penny) because it represents 80% of revenue for Capital Projects. However, the City has options to help balance this challenge as time progresses The City will look to proactively set aside specific projects and reassess them throughout the year. It will be important to strategically invest in priority projects. Lastly, Pritchett reviewed the Entertainment Tax Fund, Parking Fund, and Transit Fund. Discussion followed about projects that can be set aside, the operational fund, hiring practices, and grants. B. Election Update by Tom Greco, City Clerk Presentation: Approximately 15 minutes followed by discussion Tom Greco, City Clerk, provided an overview of HB 1298, the enacted State law that postpones the City/School Board Election scheduled for Tuesday, April 14, 2020. The law allows any rescheduled election to occur on any Tuesday in June. Greco recommended the date of June 2, 2020 whereby the election would be held jointly with the Primary Election. This action would require concurrence by Lincoln and Minnehaha Counties as well as cost-sharing agreements. Additionally, the Council will need to set the new date by ordinance. The 1st Reading is scheduled for April 15, with the 2nd Reading on April 21. The agreements are also expected to be presented to the Council on April 21. Discussion followed about the cost sharing, payment by the School District, and an absentee mailer. C. Leadership Election Ordinance by Council Member Rick Kiley Presentation: Approximately 10 minutes followed by discussion Council Member Kiley provided an update on a proposed ordinance that would allow for the adjustment of the election date for the Chair and Vice Chair to the meeting following the Council Installation Ceremony. He explained that the measure is needed due to the postponement of the City Election and start of terms of council members. Discussion followed about the date of the installation ceremony. City  Clerk Tom Greco explained that the proposed election ordinance recommends the third Tuesday in June as the start of terms. 5. Public Comment There was none. 6. Executive Session A. Consulting with legal counsel or reviewing communications from legal counsel about proposed or pending litigation or contractual matters pursuant to SDCL 1-25- 2(3) A motion was made by Council Vice-Chair Neitzert and seconded by Council Member Soehl to enter Executive Session at 5:50 p.m. Voice vote to enter Executive Session. 8 Yes: Brekke, Erickson, Kiley, Neitzert, Selberg, Soehl, Starr, Stehly; 0 No: (None). Motion Passed. A motion was made by Council Member Soehl and seconded by Council Member Kiley to exit Executive Session and adjourn the meeting at 6:35 p.m. Voice vote to exit Executive Session. 8 Yes: Brekke, Erickson, Kiley, Neitzert, Selberg, Soehl, Starr, Stehly; 0 No: (None). Motion Passed. 7. Adjournment Thomas M. Greco, City Clerk