Committee Minutes
FINANCE DEVELOPMENT STANDBY COMMITTEE
Wednesday, March 4, 2009 - - 4:00 p.m.
City Hall - - Room A101
Present:
Christensen, Glassheim (via phone), McNamara, Gershman.
1. Report from Finance re. Alerus Center financial situation.
Jerath distributed revised year end financial statements to the Committee. She stated that the auditors had met with Alerus Center staff and informed them of the need to combine the operating account, events center and concert fund into one financial statement. The revised statements include a balance sheet with the $872,00 due to the City listed and report a net loss from operations of $484,919. Jerath stated that she had also suggested that they prepare a cash flow statement monthly and for year end. McNamara asked whether now that the current financials have been consolidated and restated whether it is appropriate to restate the prior years as well. The Committee also requested clarification for some items like unearned suites, unearned advertising and advertising contracts, so that they could better understand the statements.
The group discussed that the Alerus Center owes the City $872,000 and in addition, the Concert Fund has a current balance of $1,000, and was intended to have a balance of $250,000. The concert fund was initially established using funds from 2163. There has not been a request from the Alerus Center at this time for additional funds to replenish the concert fund.
The group discussed the process for transfers between funds and in particular entities such as the Alerus Center, Library and Airport, all of which have a separate governing board. Jerath noted that no transfers to the Library or Airport have been made. The group discussed that the transfers have always been properly reported in the City’s Comprehensive Annual Financial Report, but no other notice was given to Council regarding the transfers. The Committee discussed that seemed appropriate to develop a policy for transfers and that seemed requiring a Budget Amendment with Council approval would be reasonable.
The Committee inquired what expenses were funded with the transfers and would like to see a listing. Stjern commented that some requests had described for payroll in slower months of summer. McNamara requested that a list be provided showing the uses of funds for all the transfers. Christensen asked whether there were any capital or maintenance items that were covered through operating expense that could possibly be covered with debt service funds. Jerath stated that we are already reviewing expenses from debt service when they qualify but will continue to review some expenses for the past couple of years and if any qualifying expenses are found will reimburse from debt service fund.
Glassheim inquired whether to recoup some of the funds, could the City just not pay the “Due from City” shown in the statements. Jerath explained that is reporting revenue, such as sales tax collections from last year that were not received until 2009, so must remit those to the Alerus Center.
The group discussed the intended use of the concert fund whether it was intended to be a risk fund or more an advance fund where anticipation was to always recoup what was spent. Discussion also included the Fleetwood Mac Concert and amount of loss that was split with promoter and how decision was made with promoter and whether that was indeed best decision that should have been made in that situation. Christensen stated that this calls into question the current structure of the commission and now have new manager in place and may need to look at whether we should be in the concert business or just focus on convention business. Concern was that Council Members are replaceable every four years by public, but not so for commission and feel that holds them to a different standard.
The group consensus was that need to look at things carefully, in particular, the proposed upgrades and whether appropriate to do at this point or hold off until get operations more stable and would like input from the commission as well. McNamara stated that he could see potentially the commission going away and have a standing committee made up of council members and community members that report to the Council. Gershman stated that there is a task force of council and commission that are meeting to review all aspects and nothing should be off the table at this time, but look at best way to operate going forward.
The committee requested that Jerath present the revised financial statements at the Committee of the Whole meeting on Monday along with other recommendations from today’s meeting. McNamara stated that he would also like to see the profit and loss statement for each concert as a way to understand how things work.
Gershman stated that he believes that need to keep some concerts in the mix if you are going to keep your suiteholders. Christensen stated that may be, but need to make some changes as can’t keep going the way we are. Glassheim commented that good to discuss and that some loss may be acceptable, but need to determine what the appropriate level is. Christensen noted that there is a limited revenue stream available to cover increasing expenses and need to also keep that in mind.
2. Report from Daryl Hovland re. projected wage and benefit increases.
Hovland distributed a handout with information related to the 2010 salary plan budget request. He reviewed the salary plan policy that was adopted in 2002 and thanked the Committee and Council for their commitment to funding the plan the last years. He continued that this years request for salaries is for $50,000 to go towards those at less than 80% of the midpoint, which is a policy set by Council; $511,650 for market increase, which based on survey data of cities comes in at 3.36%; and $73,015 for benefits associated with salary increases; for a total request of $634,665 for the general fund. Hovland stated that there is a proposed 16% health insurance premium increase estimated at $257,421 for all funds, pending legislative approval. Hovland stated that Human Resources will now move into the next phase of the salary plan, which involves gathering data on benchmarked positions.
Glassheim commented that not sure whether there will be that level of funding available and not sure if inflation going forward is going to remain at that rate. Hovland explained that a list of surveyed cities is attached and the requested 3.36% is an average of all the results obtained, which ranged from 1.8% in Moorhead to 6% in Devils Lake. He noted that Fargo is at 3%, Bismarck is at 5%, and East Grand Forks is at 3%. He added that information from IPMA is supporting similar increases. Gershman wondered how many of these may have had to lay off to sustain their level of funding or going to 4 day week, etc. and maybe some of them can do that due to cuts. Hovland stated that our region has been insulated and not seeing what other areas are seeing. Hovland stated that the average salary increase since 2003 has been 3.2%, which is in line with this years request.
Christensen commented that have heard that valuation increase is down this year, with an estimate of $234,000 for general fund, there is potential for decreased sales tax collections, both from economy shift and due to potential legislation that is currently being discussed. He continued that we do have reserves and would not be opposed to dipping into those in order to keep this commitment this year, but have to watch all these factors very carefully to stay secure for future. Storstad commented that are already spending down $249,000 in reserves planned in the 2009 budget.
Gershman commented that economists are saying that our region is entering the economic downturn late and may be able to come out of it sooner than some areas of the country, so may be alright to use reserves if needed this year, but maybe have to consider if still appropriate to do if same conditions next year. Christensen stated that would like to see us at least be able to cover inflation for employees, as they need that to at least keep pace with the increases in insurance and also need to pay our pensions and don’t want to see us fall behind, but want to make sure employees aren’t hurt by inflation, at least staying in place. Gershman were so far behind when we started this plan and now starting to plateau and don’t want to fall back. McNamara commented that agrees but also not enough revenue to meet all the needs unless some want to look at increasing taxes and don’t think that is appropriate at this time either and need to keep pension up just when got that fixed and on track and can’t fall back there either. The group discussed that might have to take a look at policy and if need funds for wages, maybe have to look at holding on some capital items so that have enough funding available.
3. Report from Finance re. special assessments against cemeteries.
Christensen inquired as to the potential shortfall if the cemeteries do not pay specials for flood protection project. Emily Fossen, Accountant, distributed a spreadsheet to the Committee detailing the assessments that have been done to date for the cemetery property. She noted that in addition to the flood project there is also a pump station that was assessed to the south cemetery property. She added that the remainder to be assessed for the flood protection project is anticipated to be four and a half cents per square foot, which is less than what the previous assessments were.
The Committee also reviewed information on how other ND cities handle assessments when cemetery property is involved. It was noted that Minot does not assess, as cemetery is City owned; Fargo does assess, but gives a break on area; Dickinson and Valley City do not assess, but also do not have within the city limits.
Christensen stated that this issue is one the Council needs to discuss and make some changes on prior to the next assessment in 2010. Fossen stated that staff is working on cost numbers and there is a possibility that the assessment could be ready this fall and not wait until 2010 to assess it. Christensen stated that the Council needs to be kept up to date so action could be taken prior to the assessment being done.
Christensen asked Glassheim if there is any time to get a legislative change made during this session. Glassheim stated that he did not believe that there would be time and would be too controversial to tack onto an existing bill, as some will want some discussion on the matter. He added that perhaps may be able to get a study resolution passed and then look at for next session.
4. Other matters brought forward by committee members.
There were none.
Meeting adjourned 5:30 p.m.
Respectfully submitted,
Sherie Lundmark
Admin Spec Sr.