HomeMy WebLinkAbout2003 01-28 Pre
Meridian City Pre-Council Meetina
Januarv 28, 2003
The Pre-Council Meeting of the Meridian City Council was called to order at 4:30
P.M. on Tuesday, January 28,2003, by Mayor Robert Corrie.
Members Present: Mayor Robert Corrie, Bill Nary, Tammy de Weerd, and
Cherie McCandless
Members Absent: Keith Bird
Others Present: Kenny Bowers, Stacy Kilchenmann, Bill Nichols, Sharon Smith,
Reta Cunningham, Mike Worley and Will Berg.
Item 1.
Roll-call Attendance:
x
X
Tammy de Weerd X
Cherie McCandless 0
X Mayor Robert Corrie
Bill Nary
Keith Bird
Corrie: At this time I will open the Meridian City Council Pre-Council Meeting on
Tuesday, January 28, 2003 at 4:40. First what I would like to do is if we have the
presentation the audit report first then we'll go right into the options of Lemley
and Associates if that would be alright. We're about 10 to 15 minute and
(inaudible). Clerk if you'll give roll please.
Roll Call: Nary, aye; de Weerd, aye; McCandless, aye; Bird, absent.
Item 2.
Adoption of the Agenda:
Corrie: We have - first on the agenda is the adoption of the agenda. Council is
there any changes to the agenda at this time.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: I would move to approve the agenda as presented.
De Weerd: Second.
Corrie: Okay motion made and second to present the agenda as stated any
further discussion? Hearing none, all those in favor of the motion say aye.
MOTION CARRIED: THREE AYES, ONE ABSENT
Item 3.
Presentation of Audit Report by Balukoff & Lindstrom:
Corrie: With that, let's have the presentation of the audit. Stacy.
Meridian City Pre-Council Meeting
January 28, 2003
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Kilchenmann: The presentation tonight (inaudible) Kevin Anderson (inaudible).
Anderson: Mr. Mayor and Members of the Council my names Kevin Anderson of
the audit firm Balukoff Lindstrom and Company in Boise. Our firm did the audit of
the financial statements for the year-end September 30, 2002. You should have
gotten a copy of that as well as another packet that had the management letter,
what we call the management letter in it and another letter that had some
required communications that we have to tell you based on audit standards or
whatever. On Page 1 of the financial statements I will start with that first, is our
opinion on the audit of the financial statements. It's an unqualified opinion
meaning that the financial statements present fairly that the numbers or the
amounts therein are fairly presented in all material respects with regard to the
financial statements, the cities operations, and balance sheet. Also, in the audit
and financial statement on Page 33 is our report on compliance and internal
control over financial reporting based on our audit. We don't do an actual
internal control review separate and apart we do it as part of our audit to
determine the amount of auditing procedures that we perform. During our audit,
we did note a couple of things that we felt necessary to bring to the Council's
attention and that begins on Page 35 schedule of financial statement findings. I
wanted to spend a little bit of time on that and then I can kind of go back to the
Financial Commission of the company. On Pages 35 and 36, I guess is what I
would consider to be things that need to be improved for next year. A couple of
things of material weaknesses and one of what we call a reportable condition.
Those consist of bank statement reconciliation's. There was a bank account that
had not been reconciled to the general ledger and we feel like this needs to be
done on a monthly basis. We've talked with finance and Stacy and she's agreed
and will incorporate that step into the monthly procedures. Then the Utility Billing
Department we feel like there's some segregation of duties, issues that need to
be addressed. Basically, all Utility Billing Personnel have the authority and
access to receive cash, post the receipts and post adjustments. From an internal
control standpoint that probably needs to be addressed and looked at because, if
I'm receiving cash I then could slip that in my pocket. Theoretically post an
adjustment to the customers account and you know all of a sudden the cities
assets have been misappropriated. We think that ought to be taken a look at in
the coming couple of months to see if that could be - if there are some ways that
that could be changed. There is a response on that by the Finance Department
to see what the internal controls - how we can approve those but I would just
bring that to the attention of the Council as an area that needs to be improved
upon. Another is contract. The Accounting Department just - we don't seem to
get all of the contracts to them for proper recording. I'm not sure I think this has
been something that's been reported on in the past. I think it's better this year
but it still probably needs to be improved upon so I will just bring that to the
attention of the Council that that needs to be improved upon there. With that, as
far as other items that need to be noted everything is going well in the cities
Accounting Department. The financial statements if you turn to Page 2, I'll give
you a quick overview of that. Page 2 of the financial statements is the balance
sheet of the city oh Page 3, my mistake. Page 3 is the balance sheet of the city.
Page 3 has the assets and Page 4 has the liabilities and equity. As of
September 30th, the general fund had an 11.9 million dollar fund balance equity
Meridian City Pre-Council Meeting
January 28, 2003
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basically. Now there's 3.6 million dollars that's got to be used of that to payoff
the debt on the - or the lease I guess if you will on the police station so you can
net that off of there. Basically is there's 8.6 million dollars of equity. You won't
see that number anywhere so I'm just going to point that out. This will actually -
there's the new statement Gasby Statement 34 that we'll implement next year
that will show this a little bit better. Basically, there's 8.6 million dollars of fund
balance that's available for spending and some of that has been reserved for
things like the overpass construction, 1.8 million park improvements 1,085,000
and those other things that are listed there. There's roughly about four million
dollars of fund balance that's available for spending in the future of that.
DeWeerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: Kevin so the 7.153 are unreserved?
Anderson: Right.
De Weerd: Is that the required set aside that our city needs to have?
Anderson: Well, I don't know required set aside you know there is no
requirement as far as what you maintain as your fund balance but as you're well
aware there's many cities and the Ada County Highway District that are going
through some pretty tight budget times. I think you've got adequate budget
depending on - or adequate fund balance depending on how you spend your
funds this next year. I would take that 7.1 million and back off the police building
of 3.6 and say you've got about 3.5 million that's available for spending. I don't
know did that answer your question or there is really no set aside from an actual
legal standpoint. Prudent management would say that you need some. It's
personally we don't run our personal checking accounts down to zero or at least
that's probably not prudent. Some of us may but it would be better if we had a
little extra in there or whatever. We obviously don't want to get that too high
either and then too much because then the citizenry might say hey, you're not
spending our money why should our taxes be so high. There's really kind of a
fine line in terms of where that ought to be. Yours is probably in my opinion not-
you've got adequate. You've got adequate fund balance. It's not too low. In
what some of the projects that I've mentioned that I've heard talked about I think,
it's prudent to where it is right now or whatever.
De Weerd: And that takes into consideration as you mentioned the debt of the
police station.
Anderson: Yes. Yes that's netted off of there which again is from perspective is
a good way of looking at that from you know what's available to spend. I know
we've got several years to pay on that police station but it's still a good way of
looking at that or whatever. On Page 5, is what we call the income statement.
It's a statement of revenues, expenditures, and changes in fund balance. Down
there at the very bottom of the page on the general fund column. Two numbers
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January 28, 2003
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or the third number from the bottom it shows a one and a half million dollar
negative number. That's how much we spent more than revenues that we took
in this last year. We can't do that too many years. Obviously if you take three
and a half million you would be able to do that two more years and then you
would be kind of looking at some possible financial difficulties. Historically we've
been really quite good in that but we had a large year of capital outlay
expenditures this year. That's what really drives that number is capital outlay so
depending on what you do this year in capital outlay will drive that number.
Those are probably the things in the financial statements that I think are most
critical for the Council to be brought before the Council. I would want to talk
about one other thing and that's a discussion of materiality. I guess that comes
from all what's in the paper based upon your counter part down the road here a
little bit on things that are happening at Boise City and how come a special audit
or forensic audit is required. I kind of want to address that a little bit from my
perspective. Materiality when we audit the financial statements our materiality is
higher than probably what - if I can call (inaudible) taxpayer would think it is or
whatever. Our materiality is higher than what the average taxpayer believes that
we should be looking at. Part of that is defined by professional accounting
standards and you know how we look at materiality. Part of that is to do - I mean
obviously if you've seen the paper, the quotes to do a forensic audit of you know
57,000 going to 70,000 going to who knows how much. If we audited to the level
that that is happening at Boise City in the forensic audit the fees would just be
astronomical. It's kind of a strike a balance between where you know we find the
material things, things that would really affect the financial statements versus you
know how much we would have to find those low - those things that maybe a
taxpayer would be - get really upset, irritated, excited I guess is the word that I'm
looking at. That's where internal controls comes in and that's where the Finance
Department and the Accounting Department comes in is to help find those kinds
of things. Our audit is to kind of oversight of that function so there might be
things that are small or that go through that might get somebody excited about
but from a again cost benefit perspective we audit to a higher level or whatever.
Is there any questions related to that because like I say I know that's got a lot of
press lately or whatever and I thought it would be wise to bring that up so that the
Council understood kind of the role that we have. I think and we go do
presentations now boy do we get a lot more attention as far as (inaudible) what's
being said. Now you guys have always been good when I come out here and
done the presentation but we do get some more - I think people have (inaudible)
a lot more than they have in the past or whatever from the other entities that we
audit (inaudible).
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: I guess I figure we already have our forensic audit through the two
gals sitting over there. They scrutinize if anyone's put anything through our
process. They scrutinize our purchases and all of that very well.
Anderson: They should.
Meridian City Pre-Council Meeting
January 28, 2003
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De Weerd: And that's why I was almost disappointed when I saw your audit and
hardly any comments. It was like what am I going to ask him.
Anderson: Yes well and that goes to just the accounting staff that you do have
and the attention that they have to that or whatever.
De Weerd: We're very fortunate.
Anderson: Yes.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: I did have one question though Mr. Anderson. On Page 35 you had this
discussion about segregation of duties and utility billing and I think that's
probably what this cash receipt policy is related to is that right? That's on tonight.
Kilchenmann: Councilman Nary this Cash Receipt Policy (inaudible).
Nary: Oh, okay.
Kilchenmann: It addresses some of the issues that's (inaudible).
Nary: Okay. I guess my question is that this doesn't appear to be a new practice
that you had made comment on as to change so I wandered had you raised that
before and if you had how often has that been raised? If you haven't was there a
reason that it wasn't raised previously to this year?
Anderson: The answer to that is I don't believe it's been raised in previous
audits. I don't think the practice has changed any. It's something that's come to
light you know kind of as we looked as some specific things this year. We came
in and looked at some specific procedures in the Utility Billing Department, things
that you know what we call an agreed upon procedures engagement. I think
that's what brought it to light to us even more so than it was in the past. I don't
think it's really changed related to that. Do you have anything to -
K. Smith: A couple of years ago we actually -a couple of years ago we had
actually made a comment - probably not as strong as this one related - we could
probably put it as another condition. Related to some cash handling and some
segregation of duties in the Utility Billing process and then this year when we
came out and did those agreed upon procedures I think it became a little more
apparent to us that it was a little more serious than what we had anticipated
before.
Nary: Okay, thank you.
De Weerd: Mr. Mayor.
Meridian City Pre-Council MeeUng
January 28, 2003
Page 6 of 32
Corrie: Mrs. de Weerd.
De Weerd: As you go through the audits for this year do you go back and look at
your comments from last year and note the improvement and what was then a
concern?
Anderson: We do. I can go over those if you wanted to spend a little bit and
we'll see if I can - last year some of the things that we had mentioned was - the
first thing was currently there's no information technology staff that was being
outsourced or whatever. There was an IT Coordinator hired on November 4th of
this year. We felt like that was a good move. We think that that will pay
dividends in the long run for the city and resolved in more costs hopefully than
outsourcing would because of the IT function has grown so much as the city's
grown. Contracts we had talked about contracts last year that's the same. Last
year we had talked about small grants and miscellaneous revenues are recording
as a reduction of expenditures when received and recorded as expenditures
when expended. We felt like that needed to be recorded as revenue and as
expenditures and they had - the changes were made this year. The evaluations
of water assessment agreements are computed in a manner that allows for error
inaccuracy. We felt like there ought to be a standardized format for those to be
done especially using Microsoft Excel and there is a standardized format
completed. Those were the comments that we had last year the status of those.
There has been progress in those things that we had noted.
De Weerd: Thank you.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: One thing Mr. Anderson since you brought it up about Boise, and I hadn't
heard the term materiality so I appreciate you informing us. One of the things the
Council in Boise seem to have a lot of discussion with the forensic auditors was
the base of the level of scrutiny of where that audit is. I'm assuming that's what
materiality is.
Anderson: Yes, in a lot of ways that's right.
Nary: And they were talking over there about how low amount an expenditure
were they going to evaluate. Obviously the more scrutiny you would place on it
the more expensive and time consuming that could be.
Anderson: Exactly.
Nary: Now it's probably in here and I didn't notice it but I didn't see what that
level of scrutiny is under the general practice that you were (inaudible).
Anderson: Actually it's not in here as far as the level of scrutiny or whatever
that's - you know what we do is we take a - we determine materiality based
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January 28, 2003
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upon just our what we feel like we're comfortable with. For the general fund what
we call tolerable misstatement which basically if it's anything more than that we
then get really excited about it I guess or you know but it's 60,000 dollars. It's a
fairly high number as far as that goes and each fund type we go through that
level or whatever.
Nary: Now - oh, okay I'm sorry.
Anderson: That's all right.
Nary: I was going to just that do you base that also based upon your overall
assessment of how the financial staff feels about the (inaudible).
Anderson: That has an impact on it yes. Yes, it does have an impact on it if we
have noted errors, significant errors in the past or as we reviewed the monthly
financial, the interim financial statements we see errors we will drop that number
down so -
Nary: (Inaudible) correlation but obviously the higher comfort level you have on
the policies and how those are carried out by the financial staff you're
comfortable with that level of scrutiny is adequate to make sure you can use a
fair audit is that fair?
Anderson: Yes there are probably two things that go into that. Part of that's the
size of the transactions that are flowing through it has an impact. Probably a
direct impact on that as well as the, what we call internal control which is
basically your people, your procedures and processes. I do want to make one
other comment in relation to Boise. I know there's a bill going before the senate I
think it's going to come through out of the State and Local Government
Committee that I believe Senator Hal Bunderson is proposing in relation to City
Councils. I think he believes you know in the Boise City situation but the City
Council fell down in regards to their duties as well. He's clarifying that law and
basically I've had some discussions with Senator Bunderson in terms of that and
he felt like the City Council should be reviewing those we'll call them high profile
expense reports or whatever. The Mayor, the Chief of Staff maybe the
Department Heads or whatever and he's writing a bill to clarify that so just kind of
an FYI for this Council. As you look at this discharging your - there's a number
of ways to discharge your responsibilities as you're reviewing expenditures or
whatever you don't have to review the dollar 98's you know kind of a thing. If
you've got some high profile things or whatever that's probably, what you know
needs to be focused on in terms of if, you're interested in looking at anything or
whatever on that.
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
Meridian City Pre-Councll Meeting
January 28, 2003
Page 8 of 32
De Weerd: He's also working on clarifying that Councils don't have to look at
each expenditure before they're made because that is what the state law is
(inaudible).
Anderson: Yes and I think that's right. He's working on that and I know he's
looking for input too from - I know he had sent a letter to the Association of Idaho
Cities seeking member input so if you have some certainly get a hold of him.
Corrie: Any other questions? It looks very good Kevin nice job.
Anderson: Well thank you for the opportunity. It's been a pleasure to work with
the people here and the staff people or whatever.
K. Smith: I just wanted to point out one thing in the statement that going forward
you guys may be aware that there's a new statement out a new government
statement that's called Gatsby 34 and you may have heard that. I'll just be real
brief but if you look at Page 3, basically what it's going to do next year when you
look at your financial statements this whole page is going to be combined into
two columns. There will be government al type activities and business type
activities. All of this is going to be condensed in two columns. In order to do that
it takes a fairly large reconciliation as you can see because all of this is going to
be condensed down. It's going to take some additional time from the staff and
from us. We've found it to be quite cumbersome actually, you know to do that.
Basically, what's going to happen is your general (inaudible) group, your general
long-term data account group is going to go away, and they will be combined and
reconciled into your governmental type. Your isn't going to be quite as bad
because you don't have a lot of infrastructures as far as roads and streets and
things like that we have been in the process of implementing over at ACHD and
that one is very large. I've spent a lot of time this past year - they spent a lot of
time measuring roads, sidewalks, curbs, and those types of things, which
fortunately you don't have. You'll basically see the capital projects from the
general fund, the general fixed asset and the general long-term debt will all be
combined into one column and be called governmental fund type. Then the
proprietary fund or enterprise fundwill be called business type enterprise and so
you're going to see a significant change in how your financial statement looks.
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: I think you've been trying to integrate some of that over this last year
haven't you those practices?
Anderson: I think we've tried to prepare for but it's really not integrated yet. I
mean we're trying to figure out the issues and make sure that we're on top of all
of those before hand but when you get right into the nuts and bolts of the details
it does take - it will take some time even this year to do that. I will say next year
for the fiscal year ended September 30, 2003 that you know we've always tried to
operate under having the financial statements done by the end of December.
Meridian City Pre-Council Meeting
January 28, 2003
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That will be a challenge given the implementation of this new standard or
whatever. I mean we'll work with Finance and Accounting to do it as quickly and
as efficiently as we can but that December 31st date we may have to push just a
little bit next year. I'll just kind of throw that out in front and make sure that you're
aware of it but we'll try to get it done as quickly as we can. I think it's as much -
it will take staff more time to get the financial statements put together is what the
critical issue will be here or whatever so we'll have to go through some
reconciliation's that we'll help them with. I don't know Stacy have you thought
about a date that we might throw out or you don't want to commit.
Kilchenmann: I think I don't want to commit.
Anderson: Idealistically, I think that we should be able to have it done by the end
of January no later than you know as far as - so we may have to push it a month
or whatever. I know Councilman Bird is usually the big advocate of trying to get
that done by then or whatever so we might have to hopefully he can read the
minutes <inaudible) have to talk to him about that. I just wanted to throw that out
and make sure you're aware of that.
Corrie: Thanks.
Anderson: Thank you very much.
Corrie: Any other questions? Okay thank you.
Anderson: Thanks.
Corrie: I guess (inaudible) questions that we need to accept the audit by
adoption.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: I move we accept the audit as presented by Balukoff and Lindstrom for
Fiscal Year I guess 02'.
McCandless: Second.
Corrie: Okay motion been made and second is there any further discussion?
Hearing none now roll call vote please?
Roll Call: Nary, aye; de Weerd, aye; McCandless, aye; Bird, absent.
MOTION CARRIED: THREE AYES, ONE ABSENT
Item 6.
Discussion of Building Options with Lemley & Associates,
Inc.:
Meridian City Pre-Councll Meeting
January 28, 2003
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Corrie: I would like to skip down to six if we can and then Stacy we can come
back to you. If we want to have Chris then you can make your presentation to
us.
Wendrowski: Mayor Corrie, Members of the Council my name is Chris
Wendrowski. Myself as well as my colleague here Steve Ehninger we are with
the joint venture of Lemley and Associates 3D international. We are a joint
venture with international, national, as well as local experience in the delivery
management acquisition of capital programs. We understand that the City of
Meridian is about to embark on a community redevelopment program which
includes the acquisition of a new parking structure in city hall as well as other
elements in the downtown area. We are pleased to be here today to share with
you and have a conversation with you on some of our experiences in the area of
capital redevelopment and systematic approaches to construction and methods.
With that, I would like to turn it over to Steve who's going to run you through a
little presentation we've prepared for you. Thank you.
Ehninger: Okay let's see if this will work. Construction delivery options. As
you're getting ready to embark on this we're going to try and give you some basic
tools so you can understand what to do and what's needed. What we're going to
discuss today - first of all, we're going to talk about what really matters. This will
probably be the most important thing we talk about. We're going to discuss
construction project timelines so you'll understand how construction projects run.
We're going to talk about the structure of a project the roles and relationships.
That's something that people don't understand completely and you want to make
sure you understand that. Then we're going to talk to you about three delivery
options. About ways you can get a building built there's three basic options.
Okay what matters most. Cost, quality, and time pick any two. It's an old adage
it's a dilemma if you think about it for a minute. If you want something cheap you
usually have to sacrifice quality or time and so these are important issues that
are often times overlooked and just sort of assumed to be in the background of a
project but you need to decide amongst yourself which is more important. Lets
look at quality and cost for a minute. Some people call that value. How do you
get a great value? Well first of all you got to know what you want. You got to
know what matters most to you. Then you got to develop a plan. That's
probably the most important part of the whole thing is you got to have a plan of
how you are going to move ahead and schedule a timeframe. How do you
develop a plan? We call it project definition. A study was done in Texas recently
that showed projects that were poorly defined were a cost as much as 37 percent
- I guess the building that was well defined. This early thing you do which we
call project definition is much more important then you would think. Because it
sets the ground rules for what's to come. A well-defined project you could save
as much as 30 percent - 37 percent on your building. Time is money. The cost
of change - this is real important. The written word can be changed for pennies,
you know what we talk about and discuss, not to expensive. Artists' drawings
and architects sketches, worth maybe a dime or a nickel. Once the architect
starts doing complex drawings we are getting into the dollar range. Once
construction starts it jumps to ten bucks. Now we are expensive. You can see if
Meridian City Pre-Council Meeting
January 28, 2003
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you want to have an impact the best place to do, it is during the discussion part
the first part or maybe the sketch. You don't want to get into the construction
part and if you let it slip to occupancy we are looking at a Ben Franklin kind of
deal. Very expensive so time is money. Make your changes early that's why it's
important to know what you want to have. What relationships don't want to come
out there? This is another thing. This is interesting. A lot of people don't realize
what are involved in a project of course there's you and your architect and you
might have a project manager. Then you've got all your people that you've got to
deal with tons of people on your side. The contractor he's got a bunch of people
too some more people on your side. You've got a lot of sub-contractors. Those
sub-contractors have a lot of suppliers. Those suppliers have a lot of distributors
and those distributors have tons of manufacturers so construction projects area
complex bunch of people. The relationships you build are real critical to make a
successful project. In the background, there are all sorts of other things going
on. The media, EPA, you've got a bank, you've got a lead certification maybe
and there's always a polar bear. There's always some unknown waiting to get
you, you know so when you look at project relationships are real important and
very complex. It's more than just you and contractor. Okay we're going to talk a
little bit about a project time on this it's just a typical construction project. We
looked at your project and we're talking about from right now, till when you move
in. We're saying it's about six months and the dark, the light gray are six-month
increments. The first thing you've got to do is define your project. You've got to
decide what it is you want and that usually takes about four months. That's
where you sit down and list all the attributes you want, the better and the more
detailed it is the better project you're going to have. You're going to list a facility
program, that's a list of all the particulars you want in the building. You're going
to want to talk about deliver options there are three or four ways to deliver the
building. You're going to want to talk about cost and schedule. The next phase
is a tough one for you guys. You've got to decide which way you want to go so
you're going to have about a two month period there where you can evaluate the
different kinds of options there are basically three and make a decision and go.
You got to select the best delivery option, develop a project schedule, create an
RFP, and advertise for someone whichever system you go with. Then there's
the advertising and the selection process. It usually takes about a month. You
can see on our time thing we've slipped seven months just like that. Select the
best team for the project, contract negotiation, and then the architect begins his
design. Now design on a project like yours usually takes about nine months.
What we're showing you is nothing hurried up or accelerated just traditional how
it's done. During that process of the architects, design there is three phases of
design where you can look at the documents and approve them. There's one at
the very beginning, in the middle and at the very end basically. There's another
option that's a value of engineering or value management which is a peer review
where you have a completely different team come in and look at it that's pretty
good to do you do that right up front just to see if everybody's on tract. Then the
next thing you do is bid the document you send it out to bidders and that usually
takes two months. Now we're at 18 months from today. After the bids are in
you've got to review them with the contractor or whoever, negotiate a contract,
you award it, and then construction begins. We think this projects about a 16-
month construction period. Some people want that a year but we're just saying
Meridian City Pre-Council Meeting
January 28, 2003
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generally. That puts us at month 34 then there's move in. Move in is a thing we
sometimes forget about. What happens during move in? Well, one of the things
is the building gets commissioned all the fans, and all the systems get checked
out and made to run and your people get taught how to run them. There's a
punch list with the architect that goes around and talks about all the problems
that need to be fixed. Then of course there's your physical move in. That's sort
of a typical project 36 months. Let's talk a little bit about structure of a project the
relationship between you, the architect, and the contractor. This is the
construction table. There's the owner. Here's the architect with a set of
drawings usually sits by the owner. The general contractor is usually on the
other side of the table because he's bidding the project and the bidding and
parturient laws don't allow him to sit with you so that it can be a fair bid so he's
on the other side of the table with all of his sub-contractors. Sometimes the
owner will have a project manager or an in house person who's in charge of the
project too assisting them. That's your typical project right there. That's the
relationships and that's how it's been for hundreds of years. Okay I'm going to
talk a little bit about project delivery systems. There are basically three of them.
Here's our schedule again. We've already talked about this so we've made our
decision at six months we'll call that a milestone. The first one we're going to talk
about is the old tried and true design bid build. These terms might be new to you
but they are standard things in the industry. This is traditional design it, bid it,
and build it. The architect is selected at the seventh month. He does his design
work like we showed you before at about nine months and has his reviews. At
that point, right there you have an important point, a milestone for you. That's
sort of a check to see if you're on task. You do that after that value engineering
session where you have a peer review or after that first review of his schematic
drawings, we call them. Then at the very end of his documents, you have one
more chance to have a formal look at things. Once they go out the door their bid
two-month period to bid them and award them. Here we are again at 18 months
and that's where you decide to go or no go. It either hits your budget or it
doesn't. Contractually you can have a contract with the architect that says if it
doesn't' meet our budget you've got to fix it for free but that's contractual. You
still have a to make a decision go or no go. That's 18 months into the project.
Then construction follows 16 month duration and the contractor has a milestone
to hit he has to hit a delivery day and then you move in. There you go 36
months. Now what's really interesting to do over the top of this schedule let's
look at the owners' risks. When I say the owners' risks, that means when do you
have time for input and say and when do you have risks to do that. When do you
not - when is your input and say gone? In otherwards, you just have to go with
what's out there. Remember our bid date we set the bid price. Over the top of
this, I'm going to show you how your risk jumps up and jumps down. Now the
reason it drops down at bid day is after bid day you don't have much to say about
anything because its bid. At bid day you set it out on the street, they bid it and
the contractor's going to build it like it's been drawn. If you have changes, it will
cost you more money. There are the owner's risks and I'll do this on each one of
these three - the similar thing on each one of these three delivery systems.
That's the traditional tried and blue way that most projects are developed
delivered in the country. Now, here's the relationships this is the project structure
and this is just like we saw before the owner, the architect, the general
Meridian City Pre-Councll Meeting
January 28, 2003
Page 13 of 32
contractor, his sub-constructers and the construction manager / project manager.
That's the scheme of things and so there, you can see the whole thing the
timeline, the schedule and everything. Now you may have heard the term design
build kicked around. Sometimes people call it CM at risk or design build so
what's the deal. Well, let's look at our timeline here. What happens is the
architect he gets out of the gate in a hurry. He has one more quick design
development we call it see and we're in month 11. Then he starts building, they
start bidding and building as the drawings are done a bit of a risk but you can
pick up six months. There's a place where they call guaranteed maximum price.
At that point, the contractor design team will say to you we guarantee you this
building for 10 million dollars and you go okay let's go then off you go. You see a
certain amount of work has to be done in order to reach that number. Based on
the old tried and true you can see it go all the way to the finish for them to get a
really good number. Right now he's kind of guessing a little bit so he's going to
build a little cushion there, a little contingency which he will not sure because
that's his contingency because he's guessing on your behalf. If you decide to go,
you build the project now you see it's six months shorter than our other one. You
can even have your move in happen at the same time, as they're finishing
construction so you can pick up six months pretty easily using design build. Let's
look at the owner's risks. The owner's risks are just like they were on the other
project except now you're out of the picture sooner. Remember we were at
about 18 months in that other one now we're at about 12, 14 months. At 14
months, you've pretty much got to make a commitment one way or another so
you have less input. It puts the onus on that first green box. You've got to have
a well defined project so you don't get down the road and run into trouble
especially on design build -
***End Of Side One***
Ehninger: -- you also have possibilities to change orders. The people will tell
you in design build there is no such thing as change order but there are always
change orders. Something will change in your city that you will have to have
change in your design. Project structure now this is interesting the same group
of people except now the architect works for this guy he doesn't work for you
anymore. That's a significant change. That's a relationship change a lot of
owners don't understand. When the architects not working for you his interests
are with the contractor so just remember that about design build.
Wendrowski: I think one of the key things there (inaudible) or what you keep
saying is that when this process changes and that ownership documents -
Corrie: Chris could you take the mike just so we can - thank you.
Wendrowski: The key thing about this is when that relationship changes and
now the architect is associated with the contractor. The importance here is this
relationship up here and the skills that are associated with this group here have
to be of equal and on par with this group that you're dealing with here to insure a
successful completion of the project. As Steve had mentioned earlier we need to
spend our money up front and do our homework up front get the definition locked
Meridian City Pre-Council Meeting
January 28, 2003
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down so that there are no questions as you go throughout the project and what it
is that this team is going to build for you.
Ehninger: Okay now here's something that can happen. The design build that
we just showed you is really the one we would like to see happen but that's not
what usually happens. What usually happens is this. That guaranteed maximum
price moves back to the day you select them. The day you select the design
build team which might be the contractor and the architect. They will set a price
but it's a bit of a risk for them so they're going to build an even more cush.
You're risks are like that. Now if you can talk the design build team into letting
you have some input during those other design phases you can kind of control
the design a little bit but you're pretty much after about - what is it that about six
or seven months, eight months out. At eight months out you're out of the picture.
If you haven't decided what you want and defined it well it's going to cost you a
lot to change it. Design build moves fast, you get the project six months quicker,
it would probably cost you a little list but you've got to have your mind made up
sooner. All right now, let's talk about developer. The developers an interesting
process but in reality it's not much different than anything else we've showed you
as far as - except you do get the project earlier. He's going to do the design
build thing. You still have some review points but he's going to have to
guarantee you a price right after he's awarded the project. Your risks are just like
they were quick and - you have to be quick and get out of it. Now one
advantage of the developer process is he might be able to come up with the
money. He can act as the bank. He can front the money for this thing. You can
probably strike a deal with him where you have some input during design so you
can kind of control changes to a minimum. As soon as he starts bidding, it you
know as soon as that contractor wedge starts it's going to become very
expensive to change. You can see what's happening is your input time is moving
back in time as you streamline these projects. Now, let's just look at the
structure of - what happens here is of course your architects going to work over
here with the construction team. The contractor moves away from the table and
the developer moves in. The relationships' even differ one more notch than what
you had before and the architects on their team it's not on your team. That's an
important thing to know. Let's just review these options all together now.
There's design bid build, design build and developer lease. You can see they all
line up and you can see that the blue piece moves back on both of them so you
get to building six months earlier that's pretty good. Let's look at some attributes.
Delivery time, cost, quality, management, claims control. Does everybody
understand what claims are? Claims are things like change orders. Let's look at
delivery time and the comparison of the three. Well the standard true blue loses
because the design bid build rule is six months longer. Design build and
developer lease is pretty good. You've got good deliver time and time is money
so you're probably going to save some money. Cost control it's really hard to
control the design bid build team. Probably your best place to control cost is with
a design build team. The developer he's not going to be too interested in
controlling cost especially after he gets the bid. Quality control you probably
have more quality control in the old standard delivery system of design bid build
because see you have more time for input. You see where the spike is. The
spike is further down the line 18 months and you know control really starts to
Meridian City Pre-Council Meeting
January 28, 2003
Page 15 of 32
vanish quickly. When you finally do the design, the developer lease thing your
control situation changes dramatically to where you have what we think is no
control. That puts the onus on the upfront (inaudible). Management similar kind
of thing when we talked about management control that's your ability to be part of
the team not just the spectator to manage the work of the general contractor and
the architect and the developer. It's pretty impossible to manage the developer
because he's just going to build this for you. It's a turn key thing he doesn't want
a lot of help, he's going to give you a price and get it built for you. Claims control
probably the best claims controls are going to be in your design build world.
There really shouldn't be any claims with the developer lease thing. In a nutshell,
that's the whole thing. We really don't have a recommendation for you because
it depends on a lot of things. You would want to go with the developer lease if
you don't have money if you have money problems. I think the message we're
trying to tell you is this first six months, this next six months or the first six months
of your endeavor are so critical for any of these especially the last two. You
really have to define clearly and precisely what it is you want otherwise they don't
know what you want and they give you what they think you want and it might not
hit the mark. I'm open for questions.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: Have you made this presentation to the MDC the Meridian Development
Corporation?
Ehninger: No.
Nary: You said yes and you said no.
Wendrowski: No we have not.
Ehninger: No we have not.
Nary: And were you planning on doing that?
Ehninger: No but if we're asked to we would love to. This is just right off the
press.
Wendrowski: I think one of the key things that we're trying to demonstrate here
is that money is better spent up front and in capturing the need and definition of
what you're trying to accomplish. Each of these methodologies is a lot of new
(inaudible) that can vary in different ways. The types of agreements and what's
in the agreement will make adjustments and increase or limit your ability to
interact with the different parties. Each methodology is unique and suitable to
different projects. We have a vast experience of knowledge in all of these
delivery systems and the new (inaudible) that are within each and every one of
them. Each has a capability of succeeding. It depends on the team that you put
together the members of the team from both your side as well as the other team
Meridian City Pre-Council Meeting
January 28, 2003
Page 16 of 32
members of the contract or architect in otherwise. That is something that is part
of this early development phase that we're talking about in putting the right
people you know into the arena to deliver your project.
Ehninger: It's a lot like building a building if you don't get the foundation right
you're not going to get a good building. If you're going to go design, bid build you
can probably have that design team do your program and your facility
assessment and that stuff and move right in to design. That's fine. I think if
you're looking at the other two options, which would give you probably a lower
cost and a quicker delivery you really need to define what it is you want.
Smith: Mr. Mayor.
Corrie: Yes Gary.
Smith: I would like to ask a question. In these three scenarios where does the
construction management fall?
Ehninger: Construction management is a lot like design build it's very similar.
The only thing that will happen in construction management is during the design
phase they'll break it out into little pieces and bid it. It's more of a step thing and
the design if the CM is at risk there'll here this term at risk the CM. What that
means is he's going to guarantee the price. When he says I guarantee this price,
we'll be 10 million dollars he is now at risk for that. It's just like design build if he
guarantees it early in the thing he's going to charge you a contingency and it's
going to be his to use. If you go down the road, with him a ways, you have more
chances for input but he doesn't have as much risk. He finally becomes at risk at
the last bid package.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: And at the risk, I sounded like the densest person here because Mr. Bird is
unfortunately not here and he is really good at knowing these things. You
couldn't just be here to tell us that there are three ways of building this building.
You must be here to tell us more of how we get down the road on one of things
aren't you isn't that why you are you?
Nary: Okay.
Ehninger: I think we're here to show you the three options and if you have
questions, we can certainly - but we don't pretend to know what you need.
Ehninger: I would think you know from - Chris has a lot of experience in -
Nary: Well my perspective on building a 10 million dollar build in
government is step one find someone with 10 million dollars beca
have that. For us to get further down the road on doing these
Mertdlan City Pre-Council Meeting
January 28, 2003
Page 17 of 32
what you're talking about we're not to step one yet because we don't have that
kind of money. That's why I asked if you had made this presentation to the
Meridian Development Corporation because that was at least my belief is how
we attend at some point in the near future to be able to finance something is to
work through them to get this done. That was I guess the reason for my question
because I think the information you've given us is very good information but
we're not really there so I didn't know if you were -
Ehninger: No we're just trying to help you get started. You don't see any
marketing stuff here. We definitely have an opinion about how it could be but
that's something that we have to - somebody like us would have to work with you
to do to come up with.
Wendrowski: We have a - again we have a lot of experience in program
development which is the as you said phase that step one. How do we finance,
how do we put the money together we do that too. We've actually a lot of
experience in the developer lease (inaudible) type of arrangements with other
governmental agencies as well as working with in terms of bond development
and bond sets and that type of thing in program (inaudible). We are certainly
capable of working with agencies to help develop that and to create these
funding sources.
Nary: Mr. Mayor if I could just ask one more. I heard you just say you have
experience in doing that in the developer lease. Was that locally or elsewhere?
Wendrowski: My experience is outside of the Boise area with the likes of the
County of Los Angeles and other cities. We are working with some state
agencies now on some bond projects down in downtown Boise.
Ehninger: I'm currently working with the GSA in Salt Lake building a laboratory
and it's a developer lease. They'll never own it they just lease it. They're happy
to lease it and that's how they got it financed. I think the purpose of the
discussion today is to lurch you to that first - to take that first step. You need to
do some careful definition and decide how you want to do it. I know it's hard to
but I think you have about six or seven months from when you get going to make
that decision then stick with it and go. If we can be of some help, we would love
to help you.
Wendrowski: I think the thing is early planning with regards even in the stages
when you've got a concept of a plan or an idea to do something to think of these
things as you're putting together even the financing options. They will have an
impact as to what the overall cost is going to be.
Ehninger: Mr. Mayor we can make this presentation available to you as a CD if
you would like.
Corrie: Okay that will - I think that might be a good idea too.
(Inaudible discussion amongst Council Members)
Meridian City Pre-Council Meeting
January 28, 2003
Page 18 of 32
Ehninger: Should I send it to you?
Corrie: The City Clerk.
Ehninger: Okay I'll make a CD of it. It's a PowerPoint presentation, make a CD
out of it, and give it to you.
Corrie: Okay. This would sure help me a lot. Like I say, Mr. Bird's not here, he
knows construction inside and out but I didn't. Where do we need to start, do it
right, and save some money at the same time?
Ehninger: You'll here a lot of confusing terms like CM at risk, CM, bridging it's
one of these three things basically.
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: I guess we have a combination of the design bid build and design
build with our police station. It wasn't one true form or the other but we certainly
did better than those timeframes. In particular, it's because of our construction
manager.
Ehninger: Yes the timeframes I'm showing you are just for discussion. We don't
know enough about your project and (inaudible). It's just for discussion.
De Weerd: I was hoping we were going to hear funding options.
Wendrowski: There are a lot of different you know types of funding options that
can be utilized. It really depends on your physical position and what your charter
says in terms of what you can and can't do. Again, like I said we've got
experience in that area of helping municipalities and state as well as other
agencies develop those plans. One of the items we've talked about there was
working with the developer as an interim methodology to acquire that initial
capitalization then developing a lease, lease back program which allows you to
make in essence debt payments utilizing their money. That's another
methodology. Again, it depends on what your charter says and what your
counselor would say that you can and can't do. We can go into more detail with
that in an opportunity if we have to sit down with you.
Ehninger: That's a good delivery way to deliver a project you just have to really
tell them what you want. You can't just have like a couple of paragraphs you've
got to really tell them with some detail and then you get what you want.
De Weerd: And we have. We have started with our space study it's very
outdated and needs to be updated. Some of those preliminary steps have been
done. They do need updating but I think at this point funding and how to finance
it and looking at the developer build well actually lease to buy option.
Merldian City Pre-Council MeeUng
January 28, 2003
Page 19 of 32
Ehninger: So lease purchase?
De Weerd: Yes.
Wendrowski: That would be our recommendation by the way. We always
recommend to our clients that you want to retain the capital asset at the end. A
lot of developers will come in and try to convince you no I'll retain the ownership
of the structure, building or whatever it may be. That's not a good way to go.
Corrie: That's a good piece of advice. We've had that given to us as a possibility
as well.
Wendrowski: Well you're going to be spending your money you should show
something for it at the end.
Corrie: You're absolutely right.
Wendrowski: My grandfather told me that a long time ago.
Corrie: You're absolutely right okay. Anything other questions Council. Thank
you Chris, Steve thank you very much and appreciate you coming this evening.
<Inaudible discussion amongst Council Members)
Item 4.
Presentation of Finance Report by Finance Department:
Corrie: Stacy Finance Report.
Kilchenmann: Mayor and Members of Council the first thing I would just like to
clarify when we talked about the financial statements and Kevin was talking
about Page 5 the changes and fund balance. We had a negative change in fund
balance of 1.5 million dollars. That includes all the projects that we carry forward
so sometimes that can be a little misleading. That's because we had the
overpass in there, the police station, the big parks project, and so forth. Some of
the - it's not that we had a 1.5 million dollar loss in cash or we spent more than
we budgeted. I just wanted to clarify that. Briefly, on the financial statements,
themselves for the month of December just note a couple of things in the general
fund. The only things note really are both the fire and the police have had higher
than budgeted overtime. In the fire, we also probably are looking in a potential
amendment because three of the firefighters were increased to firefighters II out
of schedule or sooner than anticipated. You noticed in your packet we've started
our potential amendment list again so that item is on there. The police have
several vacant positions so they have enough salary savings that their overtime
at this point doesn't look like it's going to be any kind of an issue or a problem.
On the enterprised fund side, you might notice in your packet that I added a
monthly utility sales graph and it just goes by month. It compares what we got in
revenue to the current year just as a point of interest because we did change the
fee structure. That's a new report that you'll find in there. On the amendments
Meridian City Pre-Council Meeting
January 28, 2003
Page 20 of 32
for the enterprise fund, we are going to ask for approximately 430,000 dollars for
the South Slough and the White Drain Sewer Trunk lines because both those
projects did come in higher than anticipated when they originally budgeted. The
budget it has been a long-term project. During the times since those amounts
initially arrived at of course the enterprise fund has been continuing to build their
fund balance so approving those additional amounts is no financial problem for
them. Brad did want to make you aware of it because he is ready to have you
approve the contract for that. Then there will also be a 150,000-dollar increase
cost for the <inaudible) Project. If you have any questions about those I'll let Gary
and Brad answer those. Then we had also - Brad and I have been talking about
Carol Subdivision that Brad's been discussing with you annexing into the city.
We would like to offer those citizens a chance to do a 12 month or a 24 month
contract to kind of let them pay for the fee rather than have to pay it up front. We
thought the 12-month could be maybe three and a half percent interest and the
24-month could be at four and a half percent interest. We already did have an
agreement format that Bill did for us that we've used with a few individuals on a
one-time deal where they haven't been able to pay the fee up front. Does
anybody have any feedback on that how you feel if that's a problem?
Nichols: Mr. Mayor.
Corrie: Mr. Nichols.
Nichols: Stacy on - when you say give them time to pay are you talking about
the connection fees or are we talking about annexing and paying the annexation
fees? I'm not sure what you -
Kilchenmann: Connection fees.
Nichols: Just the connection fees?
Kilchenmann: Yes.
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: After seeing the interest that we've been, receiving lately it might not
be a bad idea.
Kilchenmann: Those interest rates would definitely be comparable to what we're
earning on our Investments. I think and maybe Gary could speak about this but
they're trying to get a whole rather than just a person here and there get this
large group of people to connect. Some of the homeowners have you know say
yes we want to do it but we can't pay it all at once.
De Weerd: Mr. Mayor.
Corrie: Yes Mrs. de Weerd.
Meridian City Pre-Council Meeting
January 28, 2003
Page 21 of 32
De Weerd: I guess that opens up a whole new conversation with the Carol Sub
people. I think we should consider financial help but then that would raise the
issue of annexation. If they're willing to come to the city together as a
subdivision so we don't create an enclave and they want that kind of assistance, I
think that's something that would make it attractive to us to come to the table on
that. If they're not willing to annex into the city why would the city even consider
financing that? That's my own personal opinion.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: I guess on top of that too I guess I want to avoid the city becoming a bank
for - we've had other folks come here for the same purpose. We've had the lady
on Ustick a few months ago who was in dire need of having to hook up to the city
and we said no we're not a bank that's not what we do. Go to the bank and go
borrow the money from the bank. Now I recognize there is some benefit to our
citizenry to do that but I guess we really need to have a little bit of time to digest
that. I would agree with Council Member de Weerd. Certainly, we would want
them to annex into the city. We don't want to have to fight that battle at some
point in the future and we would also certainly want them to be secured by their
property. That way we aren't chasing them for that money when we've hooked
up that sewer we want their property annexed into the city and we want to make
sure that well if we have to collect it we're going to collect it on the sale of that
property and not trying to chase these people into bankruptcy for it. I mean those
are the things I guess I would think about but I'm just concerned if we're going to
do that we'd have to look at us a city wide policy because we have had many
people that would probably have liked to do that if we .could have afforded to
extend them that type of note or such. I guess we just need to talk about that a
little more.
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: I guess we're only talking hook-up fees. I think that other situation
was also running the system, the sewer line, and water line to the house as well.
Nary: That's true.
Corrie: Gary.
Smith: Mr. Mayor, Council Members one other thing that we're trying to
accomplish here is to provide a link annexation route for property to the east side
of Eagle Road. If the residences to Carol Subdivision can ban together and
annex as a group and provide that link then we can move forward farther to the
east. We've had some discussion Brad Watson and I have had a discussion or
two with property owners to the east side of Eagle that are interested in
Meridian City Pre-Council Meeting
January 28, 2003
Page 22 of 32
annexation and further extension of the South Slough Sewer. I think that would
be a benefit to the city also to assist the residents in making a connection and in
turn like Tammy said agreeing to the annexation and build to. I agree with that.
Nichols: Mr. Mayor.
Corrie: Mr. Nichols.
Nichols: Perhaps those folks that would like to be contiguous would like to loan
the money to the Carol Sub people to think they can actually (inaudible). One of
the things that -
Nary: -- (inaudible) water over there.
Nichols: So far unless the Legislature changes the current law, once someone is
receiving city water or sewer services they are deemed to have consented into
annexation. I think one of the things we've done in all of the providing water and
sewer hookups we've included consent to annexation in it so it becomes a
contractual matter, its recorded and it becomes a matter of record as to the
property so that helps us in the long run. I think you're probably along the lines
of what Councilwoman de Weerd said in terms of it has to make sense to the city
as a whole to extend this kind of credit. I would say you would almost have to set
it up there would be some additional fees you would want a (inaudible) report so
that you had verification that the person that is obligating the property has the
right to do so. You would also want kind of to know who's ahead of you and
perhaps even get some sort of subordination agreement from their lender that
yes an exchange for this you're ahead of us so that if there was a bankruptcy or
that sort of thing we could prepare some foreign type agreements which you
could use under those circumstances. Somebody would just have to bird dog it
and make sure everything got done. I am also not so sure that there - not be
close to a going rate for interest just simply what you're getting on your
investments now. If they can borrow money at seven and a half percent on a
home equity line or less why shouldn't they pay close to that to the city for
carrying that? Just some things for you to think about.
Kilchenmann: Okay thank you I'll pass that on to Brad. He'll be coming back to
you with other issues on that so that can be another one of those issues. I didn't
have anything else on the financial statements the regular monthly financial
statements. I also included in your packet three additional type reports. Those
are reports that we can use to, as we're just believe it or not ready to start the
budget process again. One of them is a first quarter revenue projection a kind of
an update know what we did about this time last year. It's this one. The one
that's - it should be on your computer probably it's titled first quarter general
revenue fund projection. What that is is looking at actual revenue for specific
categories for the general fund. Looking at the budget number that we had and
then doing a revision based on what we know now. This was done
approximately a year ago. It just details - there are notes at the bottom it goes
through each revenue category, time vision update on what things look like now.
The most significant thing about this report is that the electricity, gas and cable
Meridian City Pre-Council MeeUng
January 28, 2003
Page 23 of 32
franchises for 2002 came in significantly higher than we anticipated which is a
good thing. We revise our projection for 2003 upward somewhat for those
amounts. We also did better in interest income than we projected. We think this
is a result of - we keep very little money in our regular checking account. We
keep moving it to our investment advisor so I think that's helped us in spite of low
interest rates keep our revenue up more than it has been in the past. Our
revenue projection right now it looks like good news, which is hard to believe in
this economy, but I think we're in good shape there. Then you also have one
that's entitled property tax and property tax levy rates. That's just something
similar to what we saw in the revenue manual only we've added - since we know
the actual for 2002 it's just a projection of where the levy rate will go based on
historical market values and increase in annexation and so forth. As we've
talked about it, it shows our levy rates that will be decreasing. It also has all
other revenue sources aligned for those and that kind of draws on the previous
report that I just talked about. It kind of lets us know what we're looking at as far
as total general fund revenue. Then the last one, the one that Sharon gave you
that has the colors on it. I had given her another one that was - has like a billion
gazillion numbers on it so it's hard to read. This is just - I won't go through all
this but it's just projections. It looks at how much have we traditionally increased
in personnel expense. How much have our benefits - the cost of our benefits
increased? How much have we increased our operating expenses? Then in the
middle of the report we looked at what we traditionally - what our Blue Cross
rates have been increasing at. This last year they went up 39 percent so we can
almost guarantee that they're going to go up another big chunk. We said what if
we froze everything and we increased either health insurance 20 percent, 25
percent or 30 percent. What would it look like if nothing else changed except for
insurance? That's the number in the middle that you see that says remaining un-
appropriated. However, the scenario that we didn't increase personnel it has a
minor increase of three percent in personnel that would be some of the
contractual increases we've had with the Fire Department and the Police STEP
Program. We say well what if we do - what if we increase like we have
historically and that's what's on the bottom of the page, the very bottom two
columns that are probably the most important. If health insurance increased, 25
percent wages increase 10 percent, which is actually, less than they have been
increasing historically. How much in operating, increase the 20 percent that it's
historically been increasing. How much would we have left? You can see if we
had a 10 percent wage increase we would only have 275,000 dollars left for
capital and if we had 15 percent wage increase we would have a negative 72,000
dollars left. What this report is just saying is if we keep going in the same
direction we're going how much money would we have left? One other thing I did
want to point out is that even though the base part of our property tax doesn't
increase more than a few percent we actually have been increasing like 12 to 16
percent and that's because we get to add in the new construction (inaudible).
Those are just some numbers to start looking at and I've passed them out to the
staff as we start to move forward into the budget process. Are there any
questions?
De Weerd: Mr. Mayor.
Meridian CIty Pre-Council Meeting
January 28, 2003
Page 24 of 32
Corrie: Mrs. de Weerd.
De Weerd: I think Stacy, this will be very helpful as the Revenue Analysis Task
Force comes together in trying to analyze the narrowing gap and if we do indeed
need to pursue other funding or revenue streams or increasing what we have. I
appreciate this this is going to be very helpful for them and get them off on a
good foot.
Nichols: Mr. Mayor.
Corrie: Mr. Nichols.
Nichols: Stacy just wanted clarification when you say wages increase 10 percent
you don't mean a 10 percent increase in salary --
Kilchenmann: No.
Nichols: -- for employees you mean - you've added new people.
Kilchenmann: Correct I should have clarified. That's just - yes the total increase
with new people. I thought I could slip that by you but somebody had to notice.
Item 5.
Cash Receipt Policy:
Kilchenmann: The final thing I have to talk about is the Cash Receipts Policy.
This is basically to define what cash is and what basic internal controls need to
be followed by everyone in the city who handles cash. It has some basic
guidelines or basic rules that it starts with that everybody needs to do or that it
just kind of (inaudible) of cash handling the golden rules of cash handling. Then
it goes through each major department that handles cash. We started out with
the first one as the Utility Billing Department they're the biggest they handle the
most cash. Then it kind of goes through the Building Department, the City Clerk
and the Park's and Recreation because they all take cash over the counter and
they all have slightly different procedures to follow. When Kevin talked about the
noting the segregation of duties with the Utility Billing, I think as he explained that
really came to their attention when we asked them to do some special
procedures this summer. This does address some of the problems but it doesn't
really get to the heart of the problem. The heart - one of the problems is the
software they're using and the other problem is the basic way they do the billing
and that they have all the work comes in in just a few days of the month rather
than being spread out evenly. They feel that they can't segregate duties
because they have certain times of the month when everybody needs to be able
to do everything. Therefore they have open access to their computers and they
have some problems with the system they're on apparently won't let them lock
out in certain modules. Terry I have the explanation - the computer explanation I
didn't bring it. From my view point I think it's my responsibility to point out I think
it's a big area of exposure because you just - it's just kind of an accounting
golden rule you know that you segregate duties and you have those computers
secure - those computer security procedure. Both Rick and Leslie are aware of
Meridian City Pre-Council Meeting
January 28, 2003
Page 25 of 32
it and they have some ideas for changing it. I think - I don't know if they've
discussed them with you or not but some ways maybe to even to workload out
throughout the month and so forth.
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: I guess I thought when this first kind of came to everyone's attention
that certain measures were taken in play. Certain measures were built into our
system that these issues were taken care of.
Kilchenmann: Several of the issues have been taken care of. They radically
change the way they handle cash, who enters it, who opens the mail and logs the
receipts and so forth. They have made significant changes but there are - there
still is that issue with the computer system. It's not an easy fix.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: Stacy on this policy that you're proposing has this been looked at by the
other departments that collect cash that are listed in here?
Kilchenmann: Yes we have - everybody has seen it and everybody made
suggestions and has been forced to read it five or six times. They have all been
cooperative in giving their changes, looked it over and so forth.
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: So, these are all practical and they can be easily implemented by the
departments that do handle the cash?
Kilchenmann: Yes in fact I think almost all of them already are being done now
we just need to get it in writing. Then we have a training tool and everybody's on
the same sheet of music. There are very few, just a couple of things like having
the signs that say be sure to ask for a receipt and so forth that we're not doing
now.
Nichols: Mr. Mayor.
Corrie: Mr. Nichols.
Nichols: Stacy on Page 9, under reconciliation under the second part it refers to
an accountant.
Meridian City Pre-Council MeeUng
January 28, 2003
Page 26 of 32
Kilchenmann: That probably should be clarified. That's just a job title in the
Accounting Department. That's actually Reta's job title.
Nichols: Okay.
Kilchenmann: We only have one. I guess the next step if it's okay would be to
give it to Bill to turn it into a -
Nary: Resolution.
Kilchenmann: -- resolution.
Nichols: Mr. Mayor.
Corrie: Mr. Nichols.
Nichols: Mayor, Members of the Council I think probably the best way to do this
one and we would prepare a resolution so that there's a trail in the resolution
book with a regard to a policy. That would be to attach this as an addendum or
an exhibit to that so that you know if this is the format that you wanted in for your
internal policies or accounting policies then maybe that's something you need to
discuss is to have all of the policies in some kind of uniform format. You have
one for each department - because I know the Police Department has policies
and Human Resources has policies. We want to keep them somewhat uniform
so that if somebody picks one up they know what it is. I think the resolution
would be pretty easy to put together so it wouldn't take us long to do it. You just
tell us which meeting you want it at and we'll have it.
Nary: A couple of weeks.
Corrie: Probably two weeks maybe would that be enough?
Kilchenmann: Sure because I'll just give it to Bill. I think that's alii had are there
any other questions?
De Weerd: No, it looks good.
Corrie: Thank you I went through it pretty fine toothed combed on this what our
neighbor has been doing and it's a very good job. Very good job I wouldn't
expect anything different.
Item 7.
Discussion with Revenue Analysis Task Force:
Corrie: Okay I guess discussion of Revenue Analysis Task Force I assume that
is the mill levy name or a possibility of name there.
De Weerd: I don't know who came up with it at the last meeting but it was coined
at that time. Today we just needed to verify the committee, define the scope and
a suggested timeframe. I would open it up for comment. I can tell you we have
Meridian City Pre-Council Meeting
January 28, 2003
Page 27 of 32
Christine Donnell, Lori Jones, Ryan Riley, Shaun Wardle, Rich Greene, and Joe
Bongiorno - I like that name. It's just fun to say. Robert Chandler, Blue Cross is
going to get back to me in the next day or two with their name. Gene Strate, AI
John, David Fulkerson, Jim Keller, Brad Gilmore, Sheila Bresnaham, Darrell
McRoberts, Irma Atkinson and Fred Helm.
Corrie: Who's AI John?
De Weerd: AI John is the representative from the Meridian Senior Center.
Corrie: Okay I heard the name but I couldn't place it.
McCandless: You were thinking of Dan John from the (inaudible).
Corrie: Yes that's -
(Inaudible discussion amongst Council Members)
Corrie: (Inaudible) the toolbox.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: I guess one timeframe we probably need to look at is I know we were not
prime to pre-supposing outcome of any sort but I do want to at least leave the
task force the ability to go forward with a levy proposal if that's what they decide
that they need. I guess I would have to look to Mr. Berg. If we were going to
have a levy - if we were going to have a vote on a levy proposal the furthest one
- the furthest date this year would be the November election date again I
assume. What would be the drop-dead date to have that proposal to be able to
put it on the ballet in November? Then we work backwards on whether or not
that's -
Berg: Mr. Mayor, Members of the Council and Councilman Nary I believe - I'm
trying to refresh my memory - 45 days I think is the announcement of an election
so what we have to do prior to that - but that's the time that we - I think 45 days
prior to the election date.
Nary: So I guess time period wise then we would want I mean no less than 60
days before the November election. I don't mean that has to be the cut off date
but that would be the latest we would want something so how much further back
from that date do we think would be a reasonable amount of time because that's
what the committee (inaudible) maybe something totally different but-
...End Of Side Two...
Nary: -- as much as it takes us to kick it around to decide what we're going to do
next that's probably not at bad - we've also got budget in July so we really want
Meridian City Pre-Council Meeting
January 26, 2003
Page 28 of 32
to - we really probably want to have some closure from this task force by the end
of June at the latest.
De Weerd: End of June.
Nary: Because that would give us the budget time to deal with if there's
budgetary issues that we need to consider by whatever this task force comes up
with that would give us the flexibility to do that and then give them about four
months -
De Weerd: Four to five months.
Nary: Four to four and a half months probably to get together to come up with
something. That's probably enough time and if they need more then I guess they
can tell us they need more. They just may lose some dates or they may lose
some options this year to do things. That way at least we have some better idea
of what to do but at least that would be at least an initial target I would say is the
end of June.
Corrie: June 30th is on a Monday.
(Inaudible discussion amongst Council Members)
De Weerd: Mr. Mayor.
Corrie: Mrs. de Weerd.
De Weerd: Is there - do you have suggestions on the scope? I mean we do
realize that it will be to evaluate the revenue streams, look at cost of doing
business and kind of the narrowing gap between revenues brought in and on
going operational expenses. Do we want to further define that or have them
define it? I think we need to provide on parameters.
Nary: Mr. Mayor.
Corrie: Mr. Nary.
Nary: I mean I think this yellow and white sheet is a very good jumping off point
that Stacy and her staff have provided to give us some idea of what the future
could bring. I think that's really what we're asking this task force to do is based
on what we think the future might be that may limit our options on doing things.
What can we do to either address that without any change or what other changes
and proposals they think we can do to not end up with this negative balance so I
guess a potential (inaudible) in FY04, which isn't very far away. Those I think at
least that's a starting point. Yes, I agree with what you're saying it's just I think
we have to give them some idea of what they're doing otherwise they're going to
spend a month just defining why they're there and waste a month discussion it.
I'm not sure how much more besides these particular information as well as
probably having someone from Stacy's staff or Stacy working with this group.
Meridian City Pre-Council MeeUng
January 28, 2003
Page 29 of 32
Not necessarily, a member of the task force but providing that level of input so
they have some idea of you know what the framework the city has to live with.
What do we currently have in relation to our mill levy projected revenues - where
our revenue sources are currently? I don't remember if we had that discussion
about having the finance staff working with this group but I think it's pretty critical
for them to know where do we get our money from, how do we get it, and where
our limitations are currently so they have some idea of where to start.
De Weerd: That is how we've kind of set it out that kind of gave them a heads up
to staff that they would be a resource to this but it's very imperative that the
involvement is just on a resource basis so that they can stay as unbiased as they
can just so we can keep those lines clear.
Nary: Right what I don't' think we want and I don't think Stacy would have a
concern about this. We don't want Stacy or her folks saying well we can't do that
well don't do that (inaudible) we never can do those things. We want to really
leave that plate open to these folks to give us whatever recommendations they
think. I think the Governors' Task Force at least is somewhat of a model of what
we're talking about. They came up with lots of suggestions. Some which weren't
very practical but yet it was still allowed to make suggestions I mean you still had
to look at the whole picture. They obviously weren't limited by people saying oh
well you can't do that anyway so don't even bother making that suggestion. I
don't think Stacy would disagree with that we want to just give them the
information, let those folks make those recommendations not us and not really try
to steer that one way or another or try to sway one avenue or a different one. I
think the committee needs to figure those things out. They may want to ask
those questions, can we legally do that or is there a means to do that currently
and get the answer to that but we don't really want to drive the outcome. We
really wan the outcome to be whatever these folks come up with.
Corrie: In other wards you're not going to box them in?
Nary: Right exactly.
De Weerd: Right no just provide them the resources and this indeed, Stacy is a
great starting point for them to go with. As well, I know our general (inaudible)
departments have really developed their Capital Improvement Plans and so that
will help in the evaluation. Stacy, maybe you can pull together a packet of
information that we could get to this committee. We could review that, make
suggestions on other pieces that we might feel are needed and start working to
set a date on getting this Council Budget Committee together to first meet.
Maybe we should really target the second week in February to kick it off and then
from that date, they can basically set their own schedules and that sort of thing.
Let our staff know that they need them there as a resource or not.
Kilchenmann: And I think we have the revenue - Gary turned me off. We have
the revenue develop manual that we have with the budget and that kind of - that
gives narrative on each source so I think that would be useful. I think we almost
have everything we would need to give them to get started.
Meridian City Pre-Councll Meeting
January 28, 2003
Page 30 of 32
De Weerd: We probably want to mail that out in advance of their first meeting
too so they have an opportunity to go through it, have questions and that sort of
thing.
Kilchenmann: Yes I was thinking maybe one meeting with the staff to explain
everything and then let them meet on their own and just brainstorm like the
Governors' Task Force did.
Corrie: You could possibly have all that the first meeting and then whatever is
needed by then as they go -
Kilchenmann: Yes I think we already have -
Corrie: -- let them have their go and then they can pre-rein and do what they
need to get to us (inaudible). Any suggestions on the timing in February 11th, or
4th?
Kilchenmann: Maybe the 11th.
Corrie: The 11th okay Tuesday, the 11th.
Kilchenmann: I think we have everything we need. I think we already have it
together.
Corrie: You want (inaudible). We meet on the 11th.
De Weerd: No, the Mayor is asking Stacy if she can have the materials.
Corrie: Oh, if she can have that on the 11th by then for that committee.
De Weerd: Do you think it would take that long Stacy? I would like to see them
start meeting mid February if they're going to make the end of June they -
Kilchenmann: Well if I use the materials I have now I could probably get it
together tomorrow. I think we have enough to get them started.
Corrie: Okay we'll give it the 4th then.
Nary: Just for us to look at and for a comment and then hopefully then can get a
meeting set up the week of the 10th.
Kilchenmann: I'll put it in your box. I was going to say I would email it but it gets
really long so I'll stick it in your boxes to look at.
De Weerd: And Will if you could look at the city calendar and see when we have
availability at city hall to set a time.
Meridian City Pre-Council Meeting
January 28, 2003
Page 31 of 32
Berg: Mr. Mayor just to - you're looking for a recommendation from this
committee correct? This is a task force that is from the Mayor and City Council
so they'll have to have published their date for their meeting, open it to the public
and take minutes themselves so they can respond back just like any other body.
Corrie: Do you have the list and their addresses?
De Weerd: No, I have their names I don't have their addresses.
Corrie: Okay well we need to get that - put the two together then. If you can
give me that entire whole list, I'll have put the names and the addresses together
for us. If you can get that to me this week or as quick as possible I'll have Anita
take care of that.
De Weerd: Okay.
Corrie: Anything else.
(Inaudible discussion amongst Council Members)
Nary: You just said anything else, you didn't say (inaudible).
De Weerd: Mr. Mayor.
Corrie: Yes.
De Weerd: If we have an opportunity to discuss or go into Executive Session we
might want to take five minutes and do so under which code here?
Nary: 67-2345(f) (inaudible).
De Weerd: Yes so I would make a motion that we move and go into Executive
Session under State Code 67-2345(f).
Nary: Second.
Corrie: Okay motion been made and second to go into Executive Session. Any
further discussion. Roll call vote please Mr. Clerk.
Roll Call: Nary, aye; de Weerd, aye; McCandless, aye; Bird, absent.
Corrie: Okay we should all adjourn to the office across the hall.
(Return from Executive Session)
De Weerd: Mr. Mayor I move we come out of Executive Session.
Nary: Second.
Meridian City Pre-Council MeeUng
January 28, 2003
Page 32 of 32
Corrie: Okay motion made and second to come out of Executive Session. All
those in favor say aye. All ayes motion carried. Let the record show that no
basic decisions were made in the Executive Session.
MOTION CARRIED: THREE AYES, ONE ABSENT
Corrie: At this time, I will entertain a motion to close the Pre-Council Meeting and
come back at 7:00.
De Weerd: So moved.
McCandless: Second.
Corrie: Okay all in favor say aye. All ayes, motion carried at 7:00 we'll be back.
MOTION CARRIED: THREE AYES, ONE ABSENT
MEETING ADJOURNED AT 6:38 P.M.
(TAPE ON FILE OF THESE PROCEEDINGS)
APPROVED:
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