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01/26/2018 - 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 in the Council Chamber Meeting Room at City Hall on January 26, 2018 at 7:30 a.m. PRESENT: Chairman John Clauson, members Beck Ashby and Shawn Cucciardi, Mayor Putaansuu, Finance Director Noah Crocker, Public Works Director Mark Dorsey, Assistant Finance Director Rebecca Nichols The meeting was audio recorded. Finance Report Finance Director Crocker presented the sales tax collection report that reflects sales tax revenue collected for 2017 being 4.6% over its 2017 projection. For the year, sales tax collected grew by 4.2% with an increase of $189,628 more than 2016. Real Estate Excise Tax has remained strong throughout the year with total annual collections at $968,367. REET revenues were large than 2016 REET by approximately $261,000. The committee reviewed cash reports and identified that the city has healthy fund balances at this time. Tremont Widening Project Finance Director Crocker provided members the Tremont Widening Project Construction Finance Plan. The committee walked through the expenditure plan and compared year-to-date budget to year-to-date actuals. Thus far the project has spent approximately $4 million and remains on track. The plan will be updated monthly and as the project progresses, expenditure trends will become more apparent. Finance Director informed the finance committee of some recent issues discovered with the project. The city staff in its effort to conduct internal auditing discovered there was a lapse in contract renewals in 2008. The lapse was under a different administration and public works staff. The lapse in contract renewals could result in some of the projects A&E expenses becoming ineligible for Federal funds. The error could result approximately $750,000 in funding becoming ineligible for federal dollars. WSDOT Local programs is reviewing the issue and will get back to the City with their final opinion. Once WSDOT informs the city of their determination the City will plan to address the results and report back to the finance committee. 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. Software Review: Finance, HR, and IT Departments have conducted a review of the functionality, usability, cost, and long-term plan for its software needs and have determined the current software system is inadequate for the City’s current and future business needs and puts the City at risk. Finance acknowledge the growth of the cities needs and the current system capabilities are outdated and is ready to move to a completely integrated platform. Finance and public works also discussed the desire to have an integrated software system to improve efficiencies and compatibilities. Finance recommends seeking a new software provider that can meet the cities growing needs. A new software provider will provide high level of customer support, solutions, and a dynamic system for the future. Finance proposes moving forward immediately as procurement and implementation can be a lengthy process. Finance has done some preliminary researched and found that the change could be cost neutral. The finance committee directed the finance department to go forward with the procurement of a new software vendor in an expedited yet responsible manner. Finance acknowledge the process could take up to a year to procure, implement, train before going live. Additionally, there would be due diligence in its vendors selection and implementation plan. Finance will move forward with the procurement process and report back. GAAP VS Cash: Mr. Crocker provided the committee information regarding the differences in GAAP vs Cash reporting. Finance is recommending the City move to Cash Basis reporting. Finance identified some of the following benefits of the move: Cash basis reporting will simplify the annual reporting process, thereby significantly reducing the staff time required for preparation of the annual financial report, resulting in a positive budgetary impact. Cash basis could save on auditing costs. Cash basis reporting will allow for more efficient use of staff time. Cash basis reporting will provide more useful and timely information in the budgeting process. Cash basis reporting will allow for a larger breadth of accounting expertise and cross training in the Finance Department. The public will have a better understanding of the state of the City. The Mayor and Finance committee were supportive of the move and requested a discussion be brought forth to the February study session. The finance department acknowledge the sooner the change the better as their will be thoughtful transition 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. period. The plan would be to report in GAAP for 2017 and transition in 2018 to report on a Cash-basis for 2018. Finance will bring a presentation to February study session. Union Negotiations: The City is still in negotiations with the Teamsters and do not have a final agreement at this time. Staff will report back once more information is available. CWSRF Loan (Marina Pump Station): The City recently received a proposed funding offer for the State for the Clean Water State Revolving Fund Loan program. The proposed offered is for a 20-year loan at a 2% interest rate to fund the Marina Pump Station project. The proposal still needs to go through the legislative process and is anticipated to be finalized by June 26, 2018. While the offer is not final yet, the State commented that the project scored highly and is likely to be finalized. The Finance Department will be working on a comprehensive Sewer Capital funding plan to ensure the City has a plan and the resources to move forward with their Sewer projects. The staff will report back once the draft plan is prepared. Public Works Shop Connection Costs: The Public Works Shop is experiencing internet connectivity issues. The Public Works shop is not on Fiber optic cables like the rest of the City. The PW shop is currently provided internet through Wave cable with outdated equipment that is no longer supported. Wave Cable has been unresponsive to the cities internet needs as the equipment has been failing over recent months. The internet service reliability and performance are critically important for the response and management of the City’s SCADA System. Poor connection and/or failure which could result in delayed information in an emergency could result in damaging critical pumps and equipment. For example, if a lift station pump fails the City has a limited time to respond and adjust the controls. Currently, staff are contacted through the phone lines if there are any alarms or issues. At which they remote access the system through the Wave cable internet. Failing and unreliable internet service can put the cities pump stations and equipment at risk. IT and Public Works would like to move towards activating and connecting to the fiber cables available and moving away from Wave Cable. There would be an initial cost of $2000 to connect then ongoing of roughly $800 per month. The committee discussed and agreed the risks of failure and risk exposure to our lift pump stations is unacceptable. The committee directed the Mayor and staff to move 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. forward with the project as long as they conduct due diligence in finding the best alternative internet provider. Public Works Project List: The Mayor discussed the current project list. The Mayor and the public works director made the case that additional staffing support is needed in order to carry out the current work load and prepare for future projects. There was significant discussion regarding staffing needs as well as the direction of these projects. The committee provided the Mayor with direction to move forward with adding an engineering technician to help provide relief to the public works department and these projects. The committee stated they also would like to work on the council and mayor’s vision for the city and a longer-term staffing needs discussion. Good of the Order: The finance committee were made aware that do to the increase in the minimum wage the monthly council compensation no longer qualifies members to receive PERS service credits. The next time the council can adjust the compensation is on the next election cycle in 2 years. Finance Committee requested for more information at the next meeting. The meeting adjourned at 8:35 am. Next meeting February 23, 2018 at 7:30 a.m.