LEGISLATIVE, FINANCE, AND ADMINISTRATION COMMITTEE
The Legislative, Finance, and Administration Committee Meeting was held on April 26, 2004, at 5:42 p.m., with Chairman Speed presiding. Members present were Mr. Ritter, Mr. Truitt, and Mr. Shelton. Mr. Gorman was absent. Other members of Council present were Council President McGlumphy, Mr. Carey, Mr. Pitts, Mrs. Williams, Mr. Salters, Mr. Ruane, and Mayor Hutchison.
AGENDA ADDITIONS/DELETIONS
Mr. Shelton moved for approval of the agenda, seconded by Mr. Truitt and unanimously carried. (City Clerk’s Office Note: Due to time constraints, items #3, 5, 6, and 7 were not considered; in addition, item #2 was considered prior to #1).
Proposed Amendment to the City of Dover Electric Service Handbook - Electric Bill Payment Refund (Division II, Section 3, Paragraph 2-108)
As a result of the committee meeting held on April 12, 2004, staff presented members with a proposed amendment to the Electric Service Handbook (Division II, Section 3, Paragraph 2-108) to reduce the interest rate paid by the City for electric deposit refunds, as follows:
1.Customer Deposit. Customers with a good credit standing may request a refund of their deposit after two years.
2.Customer Deposit Refunds. Interest paid on deposits during the upcoming fiscal year shall be calculated using the prevailing Federal Reserve Discount Rate as published in the Wall Street Journal on the last business day of the current fiscal year.
3.System Update. The Administrative Services Director will update the City’s customer service system annually.
Responding to Mr. Ritter, Mrs. Tieman, Administrative Services Director, stated that although attempts are made to provide for the refunds automatically, since it requires a manual process, it is not always given a priority. She also advised members that the refunds of deposits for commercial customers are held for four (4) years.
Members suggested that sub-paragraph A be amended by adding “for residential customers and four (4) years for commercial customers”.
Mr. Shelton moved to recommend approval of staff’s recommendation to amend Division II, Section 3, Paragraph 2-108, with the amendment to sub-paragraphs A as suggested. The motion was seconded by Mr. Ritter and unanimously carried.
Revisions to the Financial Policy (Reserve, Rate Stabilization, Operating Transfers)
During their meeting of April 12, 2004, members considered revisions to the Financial Policy. As a result of questions raised regarding percentages, Mrs. Mitchell, Finance Director/Treasurer, presented alternatives (Attachment #1) to assist members in developing certain percentages for the various funds. She suggested that the approval of the policy be accomplished in two (2) steps, first to develop the percentages; then staff will incorporate the percentages into the wording of the policy and bring it back to the committee for their review and recommendation to Council.
Referring to the Alternatives for the General Fund Budget Balance and Contingency, Mrs. Mitchell stated that alternative 3, setting a minimum of 8%, no greater than 12%, for the budget balance and 4% for contingency can be accomplished.
Mr. Ruane relayed his opinion that there is a weakness in the City’s policies as they relate to emergency services. It was his feeling that the purpose of a contingency account is not to cover budget short-falls and suggested that the language of the policy be amended. Responding, Mr. Speed stated that at this time, the committee is reviewing the percentages to include in the policy. Once this is accomplished the committee will review the actual language of the policy.
Responding to Mr. McGlumphy, Mrs. Mitchell stated that more than $600,000 is earmarked for the post retirement benefit. She explained that there is no separate reserve for the benefit since it is a line item for an appropriation from each of the funds to the Post Retirement Benefit Fund.
Mr. Ritter moved to recommend setting the budget balance for the General Fund at a minimum of 8% and no greater than 12% and that the Contingency be set at 4%. The motion was seconded by Mr. Truitt and unanimously carried.
Mrs. Mitchell reviewed the Kent County Wastewater Fee trends and provided the history, which substantiates the need to have a budget balance to cover concerns of inflow/infiltration issues without impacting the City’s financial results and bond ratings. Referring to the Water/Wastewater Fund Alternatives, Mrs. Mitchell indicated that the City’s policy currently provides for a minimum of 17% carry-forward balance and 4% contingency. In order to obtain these minimums, an additional $304,000 per year would be required to be budgeted. Due to the volatility with inflow/infiltration, brown water issues, commercial reductions, etc., she recommended that the budget balance be increased to 17%, which would provide for two (2) months of expenses.
Responding to Mr. Ruane, Mrs. Mitchell explained that the Impact Fees are not a part of the budget balance or contingency, they are a part of the capital budget, not the operating budget.
Mr. Ritter moved to recommend setting the budget balance for the Water/Wastewater Fund at a minimum of 17% and that the Contingency be set at 4%. The motion was seconded by Mr. Shelton and unanimously carried.
Mrs. Mitchell stated that the current depreciation for the Capital Asset Reserve for the Improvement and Extension Fund Accounts in the Water/Wastewater Funds is approximately $1M annually. An appropriation is currently made annually in the amount of $200,000. She provided alternatives in the amount of $500,000 and $1,000,000.
Responding to Mrs. Williams, Mrs. Mitchell explained that if a Capital Asset Reserve was established for the purpose of replacing future assets, she would recommend an annual appropriation of $1M. Unfortunately, at this time, she does not feel that it can be accomplished with this fund; therefore, Mrs. Mitchell recommended a $200,000 annual appropriation to create a Capital Asset Reserve for the Water/Wastewater Fund and work towards a higher annual appropriation in future years.
Mr. Truitt moved to recommend setting a $200,000 annual appropriation for the Capital Asset Reserve for the Water/Wastewater Fund. The motion was seconded by Mr. Shelton and unanimously carried.
With regards to the Electric Revenue Fund, Mrs. Mitchell stated that the current policy recommends a 5% minimum for the budget balance and 1% for contingency. It was her opinion that a minimum of 45 days of operating expenses should be provided for; therefore, staff recommended increasing the budget balance to a 12% minimum and 2% for contingency.
Mr. Shelton moved to recommend setting the budget balance for the Electric Revenue Fund at a minimum of 12% and that the Contingency be set at 2%. The motion was seconded by Mr. Ritter and unanimously carried.
Mrs. Mitchell advised members that the Insurance Deductible Reserve is currently funded at $733,919. She explained that after reviewing the deductibles on the insurance policies and given the fact that Duke insures the Power Plant, it was her opinion that $250,000 is sufficient for the Insurance Deductible Reserve. She recommended that the Insurance Deductible Reserve be reduced to $250,000 and that the remaining funds be transferred to the budget balance.
Mr. Shelton moved to recommend reducing the Insurance Deductible Reserve to $250,000, seconded by Mr. Ritter and unanimously carried.
Referring to the Rate Stabilization, Mrs. Mitchell stated that the policy recommends establishing a new reserve to maintain 10% of the purchased power costs, which would be $3,736,114. She advised members that there currently is $1,402,746 in this account and that in order to achieve the 10%, an amount of $777,789 would be necessary over a three (3) year period.
Mr. Ritter moved to recommend that the Rate Stabilization Fund not exceed 10% of the purchased power cost. The motion was seconded by Mr. Shelton and unanimously carried.
Mrs. Mitchell advised members that the Depreciation Reserve currently has a balance of $15,008,455 and the Future Capacity Reserve currently has a balance of $8,113,132. Based on the current cost of the 230kv Tie and on a 10% future capacity increase, it was recommended that a minimum balance of $10M be maintained in each to provide financing for emergency substation repairs, other equipment failures, transformers, or to partially or completely finance major projects.
Mr. Shelton moved to recommend a minimum of $10M for the Depreciation Reserve and the Future Capacity Reserve, seconded by Mr. Ritter.
Mr. Ruane noted that the policy includes the following statement: “The City shall maintain a balance equivalent to the value of 10% growth in capacity at any given time, or no less than $10M (equivalent to an estimated current cost of a LM6000 turbine plus labor and materials).” Although the current value of 10% growth in capacity is $10M, he suggested that there be a distinction on maintaining a balance equivalent to the value of 10% growth which will change.
Mr. Speed reiterated that the committee’s review at this time is to simply set the amounts by establishing certain dollars and/or percentages. The Financial Policy will be drafted according to these recommendations and will be brought back to the committee for final review.
Mr. Shelton moved to recommend that the City maintain a balance equivalent to the value of 10% growth in capacity at any given time, or no less than $10,000,000 for Future Capacity Reserve and the City will maintain a minimum balance of $10,000,000 for the Future Capacity. The motion was seconded by Mr. Ritter and unanimously carried.
2004 CDBG ACTION PLAN AND PROPOSED RESOLUTION
Mr. Galvin, Director of Planning and Inspections, provided members with the proposed 2004 Community Development Block Grant Action Plan (as on file in the Office of the City Clerk) and Resolution. The Action Plan, which is a required HUD document that establishes a one year strategy for the CDBG program, includes the City’s request for a $326,000 CDBG Entitlement and use of $82,043 in program income for eligible activities.
Mrs. Harvey, Community Development Director, advised members that the Community Block Grant Advisory Committee reviewed proposals for funding and recommended the following activities for fiscal year 2004:
City Building Accessibility Improvements - $35,000
CDBG Program Administration - $65,200
Fair Housing Counseling - $600
Homeowner Rehabilitation Assistance Program - $75,000
Microenterprise Assistance Program (Main Street Dover, Inc.) - $25,000
Demolition Revolving Loan Fund - $20,000
Dover Police Department Community Policing Program - $20,500
Community Revitalization Infrastructure - $131,743
Dover First Start Assistance Program - $35,000
TOTAL - $408,043
Mr. Salters stated that Council has had previous discussions and determined that use of CDBG funds could be utilized for improvements to streets and other infrastructure in the target area, which is included in the Community Revitalization Infrastructure project. He suggested that this goal be increased to a minimum of $135,000 which could be accomplished by reducing the amounts in the other recommended activities.
Responding to Mr. Ritter, Mrs. Harvey stated that the Homeowner Rehabilitation Assistance Program would provide funding assistance for those that may need to make home repairs. She explained that this program was not funded last year, it was a carry forward program from 2002, which amounted to $45,000. This provided the ability to accommodate three (3) houses last year. For this year, the limit has been increased to $75,000 in hopes of providing funding for at least five (5) houses. It was Mr. Ritter’s feeling that it is more important to help those that may be “down on their luck” and need assistance in this manner. He suggested that additional funds be allocated to this project.
After much discussion, Mr. Speed suggested the committee forward the 2004 CDBG Action Plan and proposed Resolution to Council as presented and that individual members may present specific recommendations to Council for further consideration.
Mr. Shelton requested that staff provide information regarding the CDBG Action Plan that was approved last year.
Mr. Truitt moved to recommend approval of the 2004 CDBG Action Plan and adoption of the proposed Resolution (Attachment #2) as presented, seconded by Mr. Shelton and unanimously carried.
Mr. Ritter moved for adjournment, seconded by Mr. Shelton and unanimously carried.
Meeting Adjourned at 7:28 P.M.
Respectfully submitted,
Stephen R. Speed
Chairman
SRS/jg
S:ClerksOfficeAgendas&MinutesCommittee-Minutes20044-26-2004-LF&A.wpd
Attachments
Attachment #1 - Financial Policy Alternatives
Attachment #2 - Proposed Resolution