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HomeMy WebLinkAbout12/20/1999 BAKERSFIELD ~~ Patricia J. DeMond, Chair Alan Tandy, Cit~/IV~aY~ger Mike Maggard Staff: Darnell Haynes Mark Salvaggio AGENDA SUMMARY REPORT SPECIAL MEETING BUDGET AND FINANCE COMMITTEE Monday, December 20, 1999 12:00 p.m. City Manager's Conference Room 1. ROLL CALL Call to Order at 12:05 p.m. Present: Councilmembers: Patricia J. DeMond, Chair; and Mark Salvaggio Mike Maggard arrived at 12:10 p.m. 2. ADOPT OCTOBER 13, 1999 AGENDA SUMMARY REPORT Adopted as submitted with one typographical correction. Stdke the words "City Attorney Alan Tandy" and replace with "City Manager Alan Tandy.' 3. PUBLIC STATEMENTS None 4. DEFERRED BUSINESS A. UPDATE AND POSSIBLE COMMITTEE RECOMMENDATION ON AGREEMENT AND SECOND DEED OF TRUST WITH THE BAKERSFIELD MUSEUM OF ART Approximately a year ago a request was received from the Museum to review the agreement that had been entered into between them and the City. They were interested in a major expansion at a cost of approximately $2 million. The reverter clause in the agreement was preventing them from securing financing. City staff work with Museum staff and reached an acceptable alternative to include language involving a second trust deed with the City having the first right of refusal. With ADOPTED AS SUBKI:TTED ON FEBRUARY 7, 2000 FILE COPY AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Monday, December 20, 1999 Page -2- that came the issue of an appraisal should the City decide to exercise its option. Initially it was proposed there would be three appraisals done, one at the cost of the City (Beneficiary), and two at the cost of the Museum (Trustor), but the option of which appraisal would be used was left open. Museum representatives expressed concern if you have three appraisers and they cannot agree, whose appraisal would be used. Through Mr. Werdel it was proposed if the three appraisers cannot agree that we would use the middle appraisal and the high and Iow appraisals would be discarded. Before the Committee could meet on this issue, Mr. Werdel sent the City a letter dated December 15th with another alternative. This second alternative incorporated language in the event the Beneficiary and Trustor are unable to agree on the selection of an appraiser. The City Attorney's Office reviewed both proposals and indicated either one is acceptable. In further explanation, the second alternative includes language that as long as the difference in the two appraisals does not exceed 5%, the purchase price shall be an average of the two. If the difference exceeds 5% of the lower of the two appraisals, the two appraisers shall select a third appraiser and that appraisal shall be the purchase price. After discussing the proposals from the Museum, the Committee unanimously recommended accepting the second alternative and forwarding it to the Council for approval Committee Chair DeMond thanked everyone for all the hard work that staff, the Museum and the Committee contributed to resolving this issue. 5. NEW BUSINESS A. DISCUSSION REGARDING THE CITY OF BAKERSFIELD INVESTMENT POLICY The City modified its Investment Policy some time ago which placed lower caps on the percentages invested, as well as restricting the type of investment. These restrictions currently hamper the City Treasurer from maximizing interest earning rates. Staff is requesting the following changes: 1. Current - Obl~lations issued bi/the United States Government A~lencie,~: "At the time of purchase no more than 10% of the portfolio may be invested in any single agency name." Recommendation - 10% be increased to 20%. 2. Current - Repurchase A.~lreements (Commonly Called Repos)' "The maturity of Repos shall not exceed 30 days." Recommendation - 30 days be increased to 90 days. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Monday, December 20, 1999 Page -3- ' 3. Current - Local A.qency Investment Fund (State Local Investment Pool): "Investment may be up to the maximum permitted by State Law or 30% of the portfolio whichever is less." Recommendation - 30% of the portfolio whichever is less be changed to 40%. 4. Current- Time Certificates of Deposit ('rCD's): "No more than 30% of the portfolio may be invested in this category." Recommendation - No more than 30% of the portfolio may be invested in this category be changed to 40%. 5. Current - Mutual Funds: "No more than 15% of the portfolio may be invested in this category." Recommendation- No more than 15% of the portfolio may be invested in this category be changed to 20%. 6. Current- Fireman's Disability Retirement Fund: "Up to 25% of the retirement fund may be invested in securities of a single agency of the four triple A rated United States Government agencies authorized inthis policY." Recommendation - Up to 25% of the retirement fund be changed to 40%. In many instances, the requested percentage changes are still more restrictive than what is currently allowed in the State Government Code. In response to a question regarding our cash investments and if the City has any protection, Bill Descary responded that we are protected in terms of the rating. All four federal agencies listed in the Policy used by the City have a triple A rating. For large CD's we revert to collateralization, which is required by the State Government Code. After discussion about the concentration of risk and protection, the Committee unanimously approved staff's requested changes be forwarded to the Council for adoption. B. DISCUSSION AND POSSIBLE RECOMMENDATION REGARDING THE CITY OF BAKERSFIELD SELECTING A SINGLE INVESTMENT FIRM FOR CUSTODY OF CITY INVESTMENTS This item was referred to the Committee at the request of Council member Couch concerning why the City does not use one custody agent, as does the County. Mr. Klimko explained the City's Investment pool is $100,000,000 versus the County's pool of approximately $1 billion, allowing them to absorbs wire transfer and other administrative costs with minimal impact. The three banks with whom the City has custody agreements provide their service free of charge. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Monday, December 20, 1999 Page -4- Due to a change in the State Government Code, it was necessary for the City to secure a separate custody agreement to handle other securities that are not dealt with through our existing agreements. To channel all of our transactions through one institution would require an increased internal workload, as well as additional administrative costs. As part of this issue, Committee Chair DeMond stated there also was concern in not placing our business with local banking institutions. Bill Descary responded that while two of the three banks, Bank of Amedcan and Union Bank of California have a local presence, all of their corporate trust departments are located in a major city, e.g., Los Angeles and San Francisco. Even by utilizing one institution, the actual trust work would still be handled outside of Bakersfield. The Committee directed staff to reflect in the minutes how the concerns were addressed. C. DISCUSSION AND POSSIBLE RECOMMENDATION REGARDING PROPOSAL RECEIVED FROM DAVID TURCH AND ASSOCIATES, WASHINGTON D.C. LOBBYIST Alan Tandy stated that at the Council goal setting session; strong emphasis was placed on street work and the need for more funding. In 1999 grants and internal fund transfers were utilized to address part of that need. VVhile the Council has seldom retained a lobbyist, staff suggested utilizing a single-purpose lobbyist. In the current budget $50,000 has been set aside for this purpose. Raul Rojas said the next STP Federal money cycle is in 2002. In order to get the City's projects in line, the groundwork needs to be started soon. Generally Federal dollars are allocated to the State and redirected. The idea is to get a project attached to funding at the.Federal level. Staff has researched and recommends a lobbyist the City could obtain for a $30,000 annual fee. Committee member Salvaggio indicated he was not in favor of hiring a lobbyist. As non-partisan local government, we should be able to access both Congressman Dooley and Thomas for assistance in connection with such matters. Council and staff could redouble efforts in this regard. Mr. Salvaggio also requested that meetings be scheduled on a regular basis with our district representatives. Committee Chair DeMond had additional concerns. Staff needs to check the manner in which any lobbyist conducts business. We have had fairly good results from working with our State representatives and should be working on the same type of relationship with our elected officials on the national level. Due to the Committee's concerns, and as he is undecided, Committee member Maggard requested staff to explore whether a lobbyist could be hired on a contingency basis. The matter was deferred to another meeting. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Monday, December 20, 1999 Page -5- D. DISCUSSION AND POSSIBLE RECOMMENDATION REGARDING EXCESS FUNDS FROM WILSON PARK PLAYGROUND EQUIPMENT PROJECT (This item heard first to accommodate attendees) Approximately $114,500 of Community Development Block Grant (CDBG) funds from project savings were reallocated to be used for Wilson Park improvements and playground equipment. There will be funds remaining after the completion of that project in February 2000. Committee member Salvaggio requested that such funds anticipated to be $25,000 to $30,000 be used for related purposes in Planz Park. The estimate for Planz Park will require additional funds which will be addressed during the FY 2000 -01 budget proceedings. The Committee directed staff to start the amendment process (Council member Maggard was absent for this item). E. DISCUSSION OF FINANCIAL REPORTS: CITY OF BAKERSFIELD COMPREHENSIVE ANNUAL FINANCIAL REPORT CONTENT/ACCOUNTING POLICY PROCEDURES AND BAKERSFIELD CENTENNIAL GARDEN AND CONVENTION CENTER FINANCIAL STATEMENTS AND AUDITOR LETTERS The City uses governmental accounting standards for its audit and Ogden Entertainment uses private sector accounting standards for their audit. Private sector standards adjust revenues to the time frame in which the service is provided. The City's accounting methodology treats them on a cash basis, which puts revenues into the time frame corresponding to when the money is received, as opposed to when the service is provided. There is agreement on cash balances, the amount of Ogden's incentive, and the interpretation as it relates to the incentive. Staff proposed exchanging a letter of understanding with Ogden acknowledging the differences and stating both parties use the appropriate accounting standards and agree on the contract issues. Committee - member Maggard reiterated he does not think it is of any consequence that they do not match and there is no reason to reconcile the two financial statements. Gregory Klimko stated that his concern had to do with the public's perception. This in not a one- time occurrence as there's going to be a difference in the timing of revenue recognition every year. Mr. Paulden on behalf off Ogden believes the issue has been addressed, been disclosed and and is understandable. The only way to eliminate the difference is for the City to change it's accounting method. There are pros and cons on reporting this as a government fund or on a proprietary (enterprise)basis. Committee member Maggard said he wanted to discuss the issue of handling this as an enterprise fund. It may be that municipalities will be required to report all of their operations by taking into account matching the debt service and depreciation that goes along with an activity. These are two of the main components that affect whether this is governmental fund accounting or enterprise fund accounting. His current concern is that in reviewing our financial statements, the public will believe we operate the Garden at about a $300,000 loss. He feels it should be made clear there is approximately $2 million in annual debt payments (principal and interest), which will be shown in the Transportation Occupancy Tax (TOT) fund until the debt is retired. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Monday, December 20, 1999 Page -6- The original facility, the Convention' Center, was built with general obligation bonds. The operations of the facility were accounted for in the General Fund. This practice could have been continued, but in this current year a TOT fund was established where revenues and expenses of Centennial Garden are recorded in addition to TOT revenue and related expenses. There was some discussion regarding the accounting/reporting for the operations of Centennial Garden. It is known that such facilities provide a community service but do not generate sufficient income for debt service and depreciation. Staff suggested an enterprise fund would be appropriate if the Council chooses to set aside monies to cover the annual depreciation from general revenues. Committee Chair DeMond stated that during the public/council budget review, it is evident a good portion of the total annual debt is effectively serviced by Redevelopment monies. She questioned that if an enterprise fund is set up but monies are not allocated to cover depreciation, it could also be construed as being misleading. The Committee will continue to discuss accounting standards and the City's depreciation reserve policy and deferred the matter to another meeting. Gregory Klimko stated that related to the Comprehensive Annual Financial Report (CAFR), this is the last year of a five-year contract.with the current auditing firm. In.the past staff have sent cards to all the CPA's in town asking for a response if they were interested, and sent them out a packet. Then staff would review the proposals, conduct interviews, and make a recommendation to the Council for their approval. The Committee recommended.staff to go forward with the .audit firm search. The Committee requested future CAFR's (Comprehensive Annual Financial Report) be reviewed by Budget and Finance Committee pdor to being forwarded to the Council for approval. Sufficient time should be allowed to meet state mailing requirements. The Committee recommended the CAFR be forwarded to the Council for acceptance. 6. ADJOURNMENT The meeting was adjourned at 1:33 p.m. Staff present: City Manager Alan Tandy; Assistant City Manager Alan Christensen; City Attorney Bart Thiltgen; City Treasurer Bill Descary; Assistant to the City Manager Darnell Haynes; Public Works Director Raul Rojas; Community Development Coordinator George Gonzales; Finance Director Gregory Klimko; Recreation and Parks Director of Operations Greg Cronk; Recreation and Parks Business Manager Jane Gardner; Public Works Fleet Superintendent Emie Medina; and Public Works Operations Manager Joe Lozano; Others present: Jim Foss, Executive Director, Centennial Garden; Steve Womack, Director of Finance, Centennial Garden; Andy Paulden, Brown Armstrong; Charles Meyer, Bakersfield Museum of Art; Attorney Terrence Werdel, Bakersfield Museum of Art; and Gene Tackett, Bakersfield Museum of Art. AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Monday, December 20, 1999 Page -7- cc: Honorable Mayor and City Council DV~"I:jp S:/Darnell/BF99dec20summary.wpd