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04/14/2020 - MinutesRole of the Finance Committee The finance committee provides oversight of city budgeting, financial planning, and financial reporting. The committee recommends long-range financial goals along with funding strategies for the operating and capital budgets. Human resource issues requiring policy direction are brought before the committee. The committee serves as the advisory forum for transportation and street maintenance funding, and funding relating to the transportation benefit district. City of Port Orchard Council Finance Committee A meeting of the Council Finance Committee was held remotely with all participants using Zoom on April 14, 2020 at 5:30 p.m. PRESENT: Council members John Clauson, Beck Ashby, Shawn Cucciardi Mayor Rob Putaansuu, Director of Finance Noah Crocker, Public Works Director Mark Dorsey The meeting was audio recorded. Finance Report The Finance Director discussed the Sales Tax and REET Revenue report The sales tax revenue collected thru March 2020 is at 10.60% over its 2020 budget and 4.0% over the 2019 actual sales tax revenue collected. Real Estate Excise Tax collected thru March 2020 is at $197,352. This represents approximately 89% of the biennial budget and approximately 28% of what was budgeted for collections for 2020. The committee reviewed a fund balances and had no questions or concerns. The Finance Director discussed the Quarterly Report, which was sent to council on April 9, 2020. The City did not find an impact to the revenues from the Shelter in Place issued by the Governor due to COVID-19 in Q1. This is primarily due to the timing of sales tax revenue collections received from the State. The City does anticipate seeing the impact in late 2nd quarter to early 3rd quarter of 2020. In anticipation of the revenue impact the department directors have been asked to slow their spending and only purchase essentials items to maintain operations for the next 30-90 days. The Finance Department will continue to closely monitor and provide monthly updates. Operating Scenario’s-Revenue Forecast The Finance Department conducted Revenue Scenario analysis as a result of the Shelter in Place order issued by the Governor due to COVID-19. The initial step was to develop a range of revenue risk scenarios to the City’s operating funds. This involved immediately suspending/delaying projects in order to continue to provide the core services of the city. Additionally, we reduced/eliminated carryover expenditure authority in order to bolster the cash balances. This is an important point as the Role of the Finance Committee The finance committee provides oversight of city budgeting, financial planning, and financial reporting. The committee recommends long-range financial goals along with funding strategies for the operating and capital budgets. Human resource issues requiring policy direction are brought before the committee. The committee serves as the advisory forum for transportation and street maintenance funding, and funding relating to the transportation benefit district. management team will realize a reduction in expenditure authority, delaying projects, and committing to working within the allocated 2020 budget expenditure authority. Each month the finance department will continue to review this approach to ensure the core services of the city can be performed. Overtime, we anticipate the risk incorporated will diminish and we can re-evaluate the approach described above. The following provides a summary of the scenarios and identifies the assumptions used in evaluating the impact to the operating funds of the City: Fund 001: General Fund Summary: The General Fund scenarios illustrate a loss of revenue range from $1.5 million (19%) to $4.0 million (50%) of the remaining revenue to be collected for the year. This level of loss would drastically reduce our cash balance and impact future budgets for 2021-2022 but the City could function within its 2020 allocated budget. The City would end the year within its cashflow policy level but significantly below working capital targets identified. Key Results: 001 General Fund: 2020 Projected Ending Fund Balance $555,000 - $3.055 mil Ending Fund Balance is projected to be above the cash flow policy target for 2020 Benchmark and Indicators • 001 Cash Flow Policy Target: $527,000 • 001 Working Capital Targets: o 45 days of operating expenses: $1.362 million o 60 days of operating expenses: $1.817 million o 90 days of operating expenses: $2.725 million Baseline assumptions: • All saving realized in 2019 is reflected in Beginning Fund Balance • All Beginning Fund Balance is being utilized under the scenarios • All surplus expenditure authority from 2019 is suspended • ~$1.4 million of selected projects have been delayed/suspended • All allocated budgeted 2020 expenses will be spent • Revenue reduced for the next 3 quarters by 19%-50% of 2020 budget o Revenue Reduction (19-50%): $1.5 million -$4.0 million Role of the Finance Committee The finance committee provides oversight of city budgeting, financial planning, and financial reporting. The committee recommends long-range financial goals along with funding strategies for the operating and capital budgets. Human resource issues requiring policy direction are brought before the committee. The committee serves as the advisory forum for transportation and street maintenance funding, and funding relating to the transportation benefit district. Fund 002: Street Fund Summary: The Street Fund scenarios illustrate a loss of revenue range from $390,000 (27%) to $415,000 (29%) of the remaining revenue to be collected for the year. Note: This range of revenue loss includes ~ $190k budgeted to come from TBD which will be a 100% realized loss due to the repeal of TBD money. This level of loss would drastically reduce our cash balance and impact future budgets for 2021-2022 but the City could function within its 2020 allocated budget. The City would end the year within its cashflow policy level but significantly below working capital targets identified. Key Results: 002 Street Fund: 2020 Projected Ending Fund Balance $370,000-$345,000 Ending Fund Balance is projected to be above the working capital targets for 2020 Benchmark and Indicators • 002 Cash Flow Policy Target: $81,700 • 002 Working Capital Targets: o 45 days of operating expenses: $207,000 o 60 days of operating expenses: $276,000 o 90 days of operating expenses: $415,000 Baseline assumptions: • All saving realized in 2019 is reflected in Beginning Fund Balance • All Beginning Fund Balance is being utilized under the scenarios • All surplus expenditure authority from 2019 is suspended • ~$270,000 of selected projects have been delayed/suspended • All allocated budgeted 2020 expenses will be spent • Revenue reduced for the next 3 quarters by 27%-29% of 2020 budget o Revenue Reduction (27-29%): $390,000 -$415,000 Fund 411: Water Fund Summary: The Water Fund scenarios illustrate a loss of revenue range from $636,000 (25%) to $890,000 (35%) of the remaining revenue to be collected for the year. This level of loss would drastically reduce our cash balance and impact future budgets for 2021-2022 but the City could function within its 2020 allocated budget. The City would end the year within the working capital targets identified below. Key Results: 411 Water Fund: 2020 Projected Ending Fund Balance $2.138-$1.884 million Ending Fund Balance is projected to be above the working capital targets for 2020 Role of the Finance Committee The finance committee provides oversight of city budgeting, financial planning, and financial reporting. The committee recommends long-range financial goals along with funding strategies for the operating and capital budgets. Human resource issues requiring policy direction are brought before the committee. The committee serves as the advisory forum for transportation and street maintenance funding, and funding relating to the transportation benefit district. Benchmark and Indicators • 411 Working Capital Targets: o 45 days of operating expenses: $343,000 o 60 days of operating expenses: $458,000 o 90 days of operating expenses: $687,000 Baseline assumptions: • All saving realized in 2019 is reflected in Beginning Fund Balance • All Beginning Fund Balance is being utilized under the scenarios • All surplus expenditure authority from 2019 is suspended • ~$80,000 of selected projects have been delayed for 30-60 days • All allocated budgeted 2020 expenses will be spent • Revenue reduced for the next 3 quarters by 25%-35% of 2020 budget o Revenue Reduction (25-35%): $636,000 -$890,000 Fund 421: Storm Drainage Fund Summary: The Storm Drainage Fund scenarios illustrate a loss of revenue range from $290,000 (25%) to $406,000 (35%) of the remaining revenue to be collected for the year. This level of loss would drastically reduce our cash balance and impact future budgets for 2021-2022 but the City could function within its 2020 allocated budget. The City would end the year within the working capital targets identified below. Key Results: 421 Storm Drainage Fund: 2020 Projected Ending Fund Balance $1.477-$1.361 million Ending Fund Balance is projected to be above the working capital targets for 2020 Benchmark and Indicators • 421 Working Capital Targets: o 45 days of operating expenses: $175,000 o 60 days of operating expenses: $233,000 o 90 days of operating expenses: $350,000 Baseline assumptions: • All saving realized in 2019 is reflected in Beginning Fund Balance • All Beginning Fund Balance is being utilized under the scenarios • All surplus expenditure authority from 2019 is suspended • ~$110,000 of selected projects have been delayed for 30-60 days • All allocated budgeted 2020 expenses will be spent • Revenue reduced for the next 3 quarters by 25%-35% of 2020 budget o Revenue Reduction (25-35%): $290,000 -$406,000 Role of the Finance Committee The finance committee provides oversight of city budgeting, financial planning, and financial reporting. The committee recommends long-range financial goals along with funding strategies for the operating and capital budgets. Human resource issues requiring policy direction are brought before the committee. The committee serves as the advisory forum for transportation and street maintenance funding, and funding relating to the transportation benefit district. Fund 431: Sewer Fund Summary: The Sewer Fund scenarios illustrate a loss of revenue range from $1,026,000 (25%) to $1,436,000 (35%) of the remaining revenue to be collected for the year. This level of loss would drastically reduce our cash balance and impact future budgets for 2021-2022 but the City could function within its 2020 allocated budget. The City would end the year within the working capital targets identified below. Key Results: 431 Sewer Fund: 2020 Projected Ending Fund Balance $2.179-$1.769 million Ending Fund Balance is projected to be above the working capital targets for 2020 Benchmark and Indicators • 431 Working Capital Targets: o 45 days of operating expenses: $571,000 o 60 days of operating expenses: $761,000 o 90 days of operating expenses: $1,140,000 Baseline assumptions: • All saving realized in 2019 is reflected in Beginning Fund Balance • All Beginning Fund Balance is being utilized under the scenarios • All surplus expenditure authority from 2019 is suspended • ~$100,000 of selected projects have been delayed for 30-60 days • All allocated budgeted 2020 expenses will be spent • Revenue reduced for the next 3 quarters by 25%-35% of 2020 budget o Revenue Reduction (25-35%): $1,026,000 -$1,436,000 Good of the Order • Mayor discussed other funding needs • Mayor discussed Guild Grievance • Finance director discussed draft language to waive Utility Penalties for COVI19 The meeting adjourned at 6:25 pm.