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FINANCE COMMITTEE 2016/11/14 Minutes The City of Lake Forest FINANCE COMMITTEE Proceedings of the November 14, 2016 Meeting 5:00 p. m. – Municipal Services Training Room I. Call to Order and Roll Call The meeting was called to order at 5:11 p.m. Present: Chairman Pandaleon, Mayor Schoenheider, Aldermen Waldeck, Beidler, Newman, Reisenberg, Tack, Adelman and Moreno. Absent: None. Quorum present. There were approximately 24 present in the audience. Staff present: Robert Kiely, Jr., City Manager; Elizabeth Holleb, Finance Director; Diane Hall, Assistant Finance Director; Michael Thomas, Director of Public Works; Sally Swarthout, Director of Parks and Recreation; Karl Walldorf, Police Chief and Cathy Czerniak, Director of Community Development. Others present: There were seventeen people in the audience. II. Consideration of Minutes from the Finance Committee Meeting Held on October 17, 2016 Alderman Reisenberg made a motion to approve the minutes from the Finance Committee meeting held on October 17, 2016. The motion was seconded by Alderman Newman. The motion carried unanimously by voice vote. III. Five Year Financial Forecasts Ms. Elizabeth Holleb, Finance Director stated the focus of the five year forecasts would be on the capital related funds only. Ms. Holleb presented the five year forecasts for the Capital Fund, .5% Sales Tax Fund, Water Capital Fund, Motor Fuel Tax Fund and Park and Public Land Fund. She explained the negative fund balance in the Public Land Fund would be funded by impact fees from the sale of the Laurel Ave. property that has not been recorded as of this time. The Committee discussed the revenues and expenses for each fund. The Committee requested an analysis be completed to determine the breakeven point of issuing the Water Plant Expansion Project debt early to offset potential increases in interest rates. Issuing the debt early would create an additional year of debt interest payments to be funded. IV. 5 Year Capital Improvement Program Program overview – Mr. Robert Kiely, City Manager explained no final decisions on capital would be decided during the meeting and all projects presented are funded through available revenues. He explained the City survey results to be presented at the City Council meeting would show residents concern with maintaining the City’s infrastructure. He explained the process for determining the projects was changed for FY2018 to incorporate targets by category to maintain all infrastructures. Priority 1 NF – Mr. Kiely explained the projects categorized as 1 NF scored as a priority 1, but funding was not available to proceed with the projects. He stated possible additional funding could be generated through the tax levy, Laurel Avenue impact fees or the Lake Forest Hospital permit fees. Additional Funding: Hospital/MS Redevelopment Permit Fees – Ms. Holleb explained the Laurel Avenue permits fees had been negotiated and allocation of the fees is still in progress. She stated the impact fees are allocated based on City code and it is important to show a correlation between the impact fee revenue and any capital expenses completed with the revenue. She Finance Committee Meeting Minutes – November 14, 2016 stated the water capital and permit fees were calculated at 100% and the impact fees were then adjusted by percentage. Ms. Holleb stated the City received permit fees from the hospital project, which have been recorded separately. She stated all expenses related to the project have been tracked separately to be covered by the additional revenue. She stated $454,000 in water investment fees would be transferred to the Water Capital Fund. Mr. Kiely reviewed a schedule depicting projects without current funding that could be financed through one time revenues. He reviewed each project and the coordinating revenue to fund the project. He explained the Golf Fund loan would come from the General Fund and the remaining impact fees of $385,604 would be transferred to the Public Land Fund. Annual Street Overlay Program and IMS Study – Bob Ells, Public Works Superintendent reviewed the 2016 pavement condition study completed by IMS. He stated the overall average street condition is 77.9, which is above the established level of 77. He reviewed the streets proposed for resurfacing that were within the budget and additional streets if funding becomes available. The Committee discussed the streets proposed for resurfacing. They discussed the method used to identify streets for the project and if a calculation could be added to incorporate average street usage. The identified streets will be discussed further at Public Works Committee. The Committee requested the rating of each street proposed for resurfacing. South Beach Access Road – Mr. Michael Thomas, Public Works Director stated in 1987 a portion of the South Beach Access road was repaired and back fill was used along the road. He reviewed the area that has been tested for movement of the bluff. He stated the estimated cost to repair the area is $1.7 million with a recommended solution of soldier pile and lagging walls. He explained staff is recommending a workgroup comprised of City staff, aldermen, residents and engineers to review the entire road to ensure other areas are not in need of repair and to make a recommendation at the March 2017 budget meeting. The Committee discussed the need to ensure the entire road is looked at and the project is completed correctly. They discussed the workgroup needs to look at the project from all perspectives of financial, construction and impact on the boaters. They discussed the importance of the engineering and construction and not focusing on the environmental look. Discussion included contacting North Shore Reclamation District because of their use of the road with heavy equipment. North Western Avenue Streetscape – Chuck Myers, Superintendent of Parks reviewed the original scope of the project with an estimated cost of $788,000. He stated the City applied for grants to assist with the project, but were not successful. He reviewed four alternate options developed by staff for the project. He explained staff’s recommendation to complete the portion of the project near the businesses without including the storm sewer. He stated the storm sewer could be completed at a later date, as the sewer would be under the road. The Committee discussed using a portion of the Laurel Avenue impact fees to complete the project as a way to enhance the businesses in that area. Discussion regarding ways to enlist assistance from the property owners to contribute to the project because of the value added to their properties. A request to write a letter to the property owners was made by the Committee to enlist contributions to the project. Finance Committee Meeting Minutes – November 14, 2016 Golf Course Improvements – Mr. Kiely discussed the initial improvements for the golf course was estimated at $3,000,000 with a suggested public/private partnership to fund the improvements. City staff identified expenses within $1 million to focus on return in investments. Alderman Newman reviewed City identified projects consisting of fairway drainage, continuous cart paths and patio expansion/kitchen upgrades. He discussed a prioritized list of options would be developed to be funded by private donations. The Committee discussed contacting Conway Golf Course to view their new drainage system and the proposed improvements. Public Safety Building Renovations – Mr. Kiely stated a majority of the renovation is the front counter area with additional ADA improvements. Gaslights – The Committee discussed the report provided to the Public Works Committee, highlighting sample lights are in Triangle Park. V. Fee Schedule Proposed Changes in Fee Schedule - Ms. Holleb reviewed the proposed additions and changes to the fee schedule. She stated first reading of the ordinances would be on Monday November 21st with final reading on December 5th. The Committee discussed the proposed increase to the fire transport charges. The Committee requested the total cost to transport a patient to the hospital. Public Safety Pension Fee – Mr. Kiely reviewed three options for the proposed Public Safety Fee. He stated if the required additional pension funding was placed on the tax levy, this would be subject to a possible tax levy freeze. He reviewed the third option that distinguishes between a single residence and other locations realizing additional costs are associated with a greater number of people at a location. The Committee discussed additional resources are needed when responding to a commercial call versus a single family residence justifying option 3. Mr. Kiely stated himself and the Mayor has met with other communities and agencies regarding the pension crisis and will be coordinating a meeting after the first of the year to discuss options. The Committee supported option 3, which allocates a fixed cost of $10 for residence and $35 for all others per quarter on the water bill. Water Rates – Ms. Holleb reviewed the history of changes to the water rate structure, highlighting the need to review the fixed and variable allocation. She reviewed a water plant improvement financing schedule showing the current debt and the new debt with interest only until the current debt is retired. The interest payments over six years equates to $1.2 million. She reviewed an option utilizing Laurel Avenue Redevelopment fees, Lake Forest Hospital permit fees and Water Capital Fund Reserves to absorb the incremental debt service of the new bonds eliminating the necessity of adjusting water rates to cover the associated expense of the water plant improvement project. The Committee supported this option and requested staff to communicate publically this new alternative. Ms. Holleb reviewed the City’s expenditures are mostly fixed, while the revenue is 80% variable. She stated May 2014 water rates were restructured to increase the fixed revenue. She reviewed data showing meter size is an appropriate method to calculate fixed customer charges. She Finance Committee Meeting Minutes – November 14, 2016 reviewed proposed changes to the water rate structure, which included increasing the fixed charged for small and medium meters, adding a new tier by reducing the rate for residential customer usage up to 10k per quarter, increasing the rate for over 10k to 60k and increasing the rate over 60k. She stated the reduced rate for usage under 10k would offset the increase in customer charge. Other categories of rates would also increase. She stated the overall increase in revenue is calculated at 2.5%. The Committee discussed the proposed rates and supported the recommended changes. VI. 2016 Property Tax Levy and Bond Abatement Ordinances Ms. Holleb reviewed the information received from the County to calculate the changes in the EAV and new growth used in the calculation of the tax levy. She reviewed the proposed levy, which included the moving of the redeemed 2008 bond issue debt to the Capital Improvements line and the assumption of the require increase in police and fire pension amounts would be funded through the Public Safety Pension fee. She stated this would result in a 1.45% increase over last year and would be within the tax cap. She stated if the pension increase was moved to the tax levy, $254,000 would need to be added. This would require a super majority of the City Council to approve and would need to meet one of the required exceptions in the City ordinance. The Committee discussed the City’s IMRF pension is currently not fully covered by the tax levy and would like to see what the additional amount would be. The Committee requested a summary of all fees and taxes charged to an average household for the past 5 years and how does this compare to other communities. Ms. Holleb reviewed the tax levy abatements for the current year. She stated 2017 will be the first bond payment for the TIF district. The City has not started receiving tax increments and will need to fund the bond payment and will be reimbursed once funding begins. VII. Other Business: Mr. Thomas provided an update on the water plant improvement designs and schedule. He stated a small pilot program is running to test the improvements. He reviewed the bid schedule with an anticipated start date of October 2017. He stated the project is tracking under budget. VIII. Opportunity for the Public to Address the Finance Committee: None IX. Adjournment There being no further business, Alderman Moreno moved, seconded by Alderman Reisemberg, to adjourn the meeting at 9:07 p.m. The motion carried unanimously by voice vote. Respectfully Submitted, Diane Hall Assistant Finance Director