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03-14-1985 - Special/Workshop .. ... (.) o CITY COUNCIL OF EDGEWATER SPECIAL MEETING & WORKSHOP MARCH 14, 1985 MINUTES Mayor Baugh called the Special Meeting and Workshop to order at 3:32 P.M. in the Community Center. He stated the purpose was to have the FY 1984 audit presentation by Brent Millikan & Co.. ROLL CALL Mayor Earl Baugh Present Councilman James Inman Councilman Louis Rotundo Present City Attorney Jose'Alvarez Councilman Russell Prater Present City Clerk Connie Kinsey Councilman Neil Asting Present Sergeant William Lenz Also present, Brent Millikan and Alex Kish of the auditing firm, Rickelman, Assistant Finance Director. "Mayor Baugh requested a the Special Meeting and go into the Workshop. Councilman Asting Councilman Inman seconded the motion. Motion CARRIED 5-0. Present Excused Present Excused and Mrs. Karen motion to adjourn so moved. Mr. Brent Millikan suggested that Council interrupt at any time they have a question during the presentation. He noted that for 1983 they were awarded the Certificate of Conformance which is the highest award given and the firm feels this year's audit will also obtain this award. He pointed out that one of the governmental entities they audited received an award as one of the top five in the nation. He reviewed some of Mr. Kish's past accomplishments. Mr. Kish stated that the report will be sent to Government Finance Officers Association for review for a Certificate of Conformance. He said the report is broken down into four sections - the introductory section, the financial section, the statistical section, and the report of internal control and management letter and comments. He pointed out that page "v" shows the Certificate of Conformance and the City's personnel worked very hard to get that award and it was unusual for a City to get it on the first try. He noted that pages "vi" through "xii" is the letter from the City Clerk/Administrator and has a lot of information pertaining to the operations of the City in comparison to last year. He read excerpts from page I of the financial section which was the Auditor's Report. He pointed out that there was a change in the way of accounting the sick leave and vacation pay. Mr. Kish stated that the balance sheets on pages 2 and 3 show the City had a tremendous year and is extremely strong financially. He noted that the total assets as of 9/30/84 were $10,671,164., which is $2,065,000. over last year's amount, or a 24% increase in total assets. He pointed out that as of 9/30/84 they had approximately $928,000. in cash in the General Fund in cash and invest- ments. He noted that there's a fund overdraft from the cash pool concept because the money is pooled into a fund and then transferred and this can be netted out. He stated that the General Fund has approximately $1,800,000. in assets. He noted that liabilities increased in total by $391,000. which is a 13% increase. He said equity or ownership investment that the citizens have is an increase of 30% from 5.6 million to 7.3 million. He stated that cash and investments available for projects in General Fund is $928,000. and $738,000. would be left if they'd payoff the liabilities. Mr. Kish said if they set aside the funds reserved for special projects, which is approxi- mately $140,000., they would have $600,000. in surplus cash as of 9/30/84. He noted that special revenue funds has approximately $52,000. that can be appropriated for whatever Council deems is necessary. Mrs. Rickelman pointed out that they budgeted part of the revenue sharing and Mr. Kish noted that these figures were as of 9/30/84. Mr. Millikan asked Mr. Kish if he suggested they hold some funds back for reserve and contingencies and Mr. Kish said they'd have about $600,000. and if they leave $200,OOO.for future contingencies, they'd still have about $400,000. available. Councilman Asting asked if that could be used for City improvements and Mr. Kish replied yes. "'" o o . . Mr. Kish pointed out that this is not like operating a business but is an expendable type fund to provide services and it could go broke and the following year it will pick back up again because of the revenue sources. Mr. Millikan noted that the utility fund has to be retained for water line extensions and capital investments. Mr. Kish stated that as of September 30th the impact fees had $602,000. in the development fees and $66,000. in the renewal and replacement fund, which is restricted, and when debts are paid they'll have $604,000. available for financing water and sewer improvements. Mayor Baugh noted that could be used for expansion of the Water Plant and Mr. Kish agreed it could as an addition to the primary system and subject to the approval of the engineers. Mr. Kish said on pages 6 and 7 the statement summarizes what a good year it was with total revenues of $2,218,200. and good increases in all areas and most cities in the County had record years like this. He noted they spent $77,000. less than last year but they had the large street paving program in 1983. He said they had a net revenue over expenditures of three quarters of a million dollars compared to 1983. He stated that the total surplus in governmental funds was $879,000. and the surplus at the end of the year was equal to 58% of last year's total expenditures. Councilman Asting commented that was good news. Mr. Kish agreed the balance sheet is in very solid condition. Mr. Millikan noted that the assessed value continues to grow and the new people moving in will increase the utility tax. Mr. Kish noted that statement 3 is a recap of the information in the rest of the report. Mr. Kish stated that on page 50 and 51 for refuse and water and sewer, they had revenues in water and sewer of $631,200. and sanitation revenues of $279,000., for a total of $910,000. for operating revenues for enterprise fund activities, or $159,000. over last year. He stated these are from growth and rate changes. He read the non-operating revenues and expenses and said they had good cash management on interest dollars with an increase of $286,000. He said the net income from water and sewer was $194,000. and from refuse fund was $31,000. and most cities don't have a gain with their refuse operations. Mr. Kish noted that amortization of contributed capital increased $277,000. He added that refuse had a great year as did water and sewer, and the utility service tax kept it running. Mr. Millikan stated that the financial statement shows they're selling the water for a cost less than the cost to produce it and are subsidizing it with the utility tax. He added that most cities put the utility service tax in the General Fund which has Police, street paving, etc. Councilman Asting pointed out that in the past the Council has been criticized for putting in utilities and now it's starting to payoff because the growth promotes revenues. Mr. Millikan noted that they have investments in the enterprise activities of over one million dollars. Mr. Kish added that the bulk of that is invested in hard assets. Councilman Asting stated that they have a program underway to expand the water pro- duction ability. Mr. Millikan stated that they're trying to get growth to pay for growth so the new people will pay for these costs and the impact fee will contribute enough to the system to have money for a new plant. Mr. Kish said they're continually spending money for maintenance and repair of the plant and they've collected $538,000. in impact fees, connection and development fees, but at the end of the year they have approximately $604,000. available to spend and they're using that money on a continuing basis. He added that they're experiencing tremendous growth in comparison to prior years. Mr. Kish noted that on the Pension Trust Actuarial fund investments, the interest earnings was $43,000. for the year and the City and State made contributions of about $60,000. for a total of $103,000. and benefit payments of a little over $5,000., administrative costs and charges of $6,600.,which left an operating income of $91,000. -2- Council Special Meeting & Workshop Minutes March 14, 1985 o o , . Mr. Kish stated that page 16 starts a summary of Accounting Policies which should be read when they have time, and he reviewed some of the items in the 22 pages of that section. He said the Exhibits are more detailed and the Statistical Tables on pages 63 and 64 are what happened in the City over the past 10 years. He compared the expenditures and revenues for 1975 to 1984. He read from Table 3 on page 67, noting they collected over 96% of the tax levy. He said Table 4 is the actual size of the City with assessed values and noted that the 1984 assessed taxable value dropped from 1983 because of the extension of the homestead exemption amount. Mr. Millikan pointed out that of the ten largest taxpayers, the assessed valuation was just a little over $200,000. Mr. Kish read from Table 12, page 76, which listed the amounts of the ten principal taxpayers and he pointed out they account for only 6.42% of the levy. Mr. Kish stated that on page 69, Table 5, is the Overlapping Tax Rates showing the General Fund, the School Board levy, the Hospital, Mosquito Control, etc. Mr. Millikan noted that when people pay their property taxes they think it comes to Edgewater and this Table shows them that only 6~ of their tax bill of the total 20~ came to the City and most is going elsewhere. Mr. Kish noted that on Page 71 is the computation of the overlapping debt that is the City's share of the other taxing authorities' debts that they're funding from the tax levy on the citizens. Mr. Kish stated that on page 72, the revenue bond coverage is 4.30 which indicates they had revenues available to pay the outstanding debt by 4.3 times over. Mr. Kish read from the demographic statistics on page 73. He noted that Table 10 is the property value, construction, and bank deposits, and the commercial construction which went from $473,000. in 1975 to 2.6 million dollars in 1984. Mr. Kish said Table 11 is the summary of the ten largest water users and Table 12 is the principal taxpayers. He added that Table 13 is insurance in force. Mr. Kish said the report on Internal Control is reviewed and it's limited in that they only do it to decide what kind of audit system they'll use. He said the firm prepares a separate report and they didn't find any conditions they considered to be material weaknesses. Mr. Kish stated that the Management Letter doesn't show anything major but they tried to include items they want to bring to their attentions and perhaps a way to do it better but it wasn't meant to be critical, just a suggestion. Mr. Kish noted that petty cash is an item that requires disclosure and in two instances the vouchers were out. Mr. Kish noted that the Pension Actuarial information is an item where they had a problem with a prior payroll report that went in and was incorrect but this year's report has been verified for accuracy. He added that this item isn't material but they have to be sure they take care of it. Mr. Kish said the development fee increase created a misunderstanding about the effective date and those people who came in prior to February 1st and filed appplications for service at the old rate didn't come in to pay for them until after the new rates were in effect, but paid the old rate. He said they felt the ordinance was clear that anything paid after that subsequent date should have been at the new rate and management has looked into this and corrective action was taken. -3- Council Special Meeting & Workshop Minutes March 14, 1985 - <4 ~ .. o o , , Mr. Kish stated that discounts aren't a major item but some vendors offer discounts but the bills have to be vouchered on the system, summarized and entered into the computer and then put on a report for Council and there are some dollars lost because of the time involved and perhaps Council would want to take some action on this. City Clerk Kinsey pointed out that they don't know what vendor might offer the discount to get blanket Council authorization in October unless the Council wants to get into once a week payment of bills but that generates a lot of work for the office staff. Mr. Kish said they obtain discounts for various things and when there's a discount listed, they put it in a separate location for payment. Mr. Millikan suggested they inform the vendors of the payment policy and the deadlines and if they want to do business with the City they have to submit it then and if not, they take the discount anyway. City Clerk Kinsey said she'd asked the Accounts Payable Clerk to start immedi- ately to take vendor discounts and try it. Mr. Kish pointed out that the issue of offering discounts is to get it paid and then to get it paid timely. Mr. Kish stated the City was very progressive and had a great year. Councilman Asting noted that they're contemplating buying paving equipment and the City has the money to pay cash and asked if they should pay for it or buy it on a lease purchase with a lesser interest rate and the money they have could be earning interest in an account. Mr. Kish pointed out that there are lower interest rates to governmental entities but the quicker they pay it off, the better it would be. He suggested they might be able to get a deal with a local bank at a low interest rate and let the cash earn interest at a higher rate. City Clerk Kinsey said they can't commit it for an indefinite time. Mr. Millikan noted that they can capitalize on the income tax law because the interest income is non-taxable, and suggested they might want to consider a matching cost concept with the people receiving the benefits of the equipment. Councilman Asting agreed they should keep this in mind when and if they decide to go with. the road paving equipment. Mr. Kish noted that if the City is going to do it, they'll have the cost of the overhead and depreciation of machinery and administrative time involved in the assessment program. Mrs. Rickelman asked if they'd need a plan for assessing the property owners for the cost of the equip- ment and Mr. Kish said they'd have to come up with pro rated life. Mr. Millikan said it would be absorption. Mr. Kish stated that they enjoyed working with the City and hope to continue working with them and asked that Council members call them if they have any questions. Mayor Baugh asked for a motion to adjourn the Workshop and go back into the Special Meeting. Councilman Asting so moved. Councilman Prater seconded the motion. Motion CARRIED 5-0. Councilman Rotundo commended Brent Millikan and Associates on a fine audit report and moved that they accept the report and send them a letter of appreci- ation. Councilman Asting seconded the motion. Motion CARRIED 5-0. Councilman Asting moved that they continue to employ the firm of Brent Millikan & Company, CPA, as the City's auditors. Councilman Inman seconded the motion. Councilman Asting included in his motion for the term ending 9/30/85, for 1984-85. Councilman Inman agreed as the second to the motion. Motion CARRIED 5-0. Councilman Asting moved to adjourn. Councilman Inman seconded the motion. Meeting was adjourned at 4:45 P.M. ATTEST: ~ CITY CLERK _1:- .. APr':: !?fay MAYOR ~ Jp L/p;l r; ~ ~ Minutes submitted by: Lura Sue Koser ,198,)-:- -4- Council Special Meeting & Workshop Minutes March 14, 1985