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HomeMy WebLinkAbout2006 02-07 PreMeridian City Pre-Council Meeting February 7, 2006. The regular Pre-Council meeting of the Meridian City Council was called to order at 6:30 p.m., Tuesday, February 7, 2006, by Council President Shaun Wardle. Members Present: Mayor Tammy de Weerd, Shaun Wardle, Keith Bird, Charlie Rountree and Joe Borton. Others Present: Ted Baird, Will Berg, Stacy Kilchenmann, Len Grady, and Dean Willis. Item 1: Roll-call Attendance: Roll call. X Shaun Wardle X _ Joe Borton X__ Charlie Rountree X Keith Bird _X_ Mayor Tammy de Weerd Wardle: All right. I would like to welcome everyone to our Pre-council Meeting for Tuesday, February 7th, 2006. I'll begin with roll call attendance. Mr. Clerk. Item 2. Adoption of the Agenda: Wardle: Item No. 2 is adoption of the agenda. Rountree: Mr. President? Wardle: Mr. Rountree. Rountree: I move that we adopt the agenda for our Pre-council Meeting. Borton: Second. Wardle: It's been moved and seconded to adopt the agenda. All in favor? MOTION CARRIED: THREE AYES. ONE ABSENT. Item 3: Audit Presentation for Fiscal Year 04-05 by Eide Bailly, LLP: Wardle: Item No. 3, the audit presentation for fiscal year 2004-2005 by Eide Bailly and I will introduce this. Kevin Smith will be presenting the audit to us. I will mention that this year we have an audit committee, which I believe I was the chairman of, and so -- De Weerd: You believe? Rountree: That's a scary start. Meridian Pre-Council Meeting February 7, 2006 Page 2 of 9 Wardle: That's right. They let me know that I was the chairman of the audit committee and Stacy and I participated on that, so we will have that presentation. Kevin. Smith: Appreciate the opportunity to be here tonight and to go over the financial statements of the City of Meridian for the fiscal year ended September 30th, 2005. And we were engaged to audit financial statements for that year ended and the objective of an audit is -- to remind you, is to provide reasonable assurance that the financial statements are fairly stated in all material respects. So, keep in mind it's not absolute. And also to consider the city's internal controls, so we can develop our procedures based on those controls that we assess. The results of the audit, if you would like to turn with me in the financial statement to page one -- page one -- page two is the auditor's opinion. And in the financial statements for the year ended September 30th, 2005, we issued an unqualified opinion or a clean opinion, as we refer to it. And there are several other types of opinions that could be rendered and unqualified being a clean opinion. Also new to this year in the very back of the financial statement there is -- we had to do some specific procedures related to what we call single audit. It is regulated by the federal government when you receive federal funds over 500,000 dollars you're required to have a specific audit on those funds and how they were expended and auditing some specific and some general requirements on those funds to make sure they were accounted for properly. And so that's new this year. The City of Meridian, since we have been auditing, has not had that type of audit, because they have not received federal funds exceeding 500,000 dollars. So, you will see in the very back there is some additional procedures that were done and some additional opinion letters back there related to internal controls and the federal financial assistance. And we found no -- we had no findings related to the federal money and the way that they were expended. De Weerd: Excuse me. Mr. Chairman? Wardle: Madam Mayor. De Weerd: I mean Mr. President. I'm sorry. I just did want to clarify the reason we exceeded that was primarily because of two grants. One a community block grant for one of our businesses here, as well a pass-through grant for our senior center. So, I just wanted to provide some clarity for that. Smith: Thank you. And it's actually -- you know, it's most common to have a single audit, you know, in government and most cities do expend, you know, quite a large amount of federal funds and so, you know -- and so something that, you know, may continue in the future. Also in the report -- and this has been ongoing for a couple of years now. I think this is, actually, the third year that we actually have -- maybe the second year that we actually have the management discussion and analysis that's in the front of the financial statement and that's written by management and as it's just -- we look at it to make sure that it's consistent with the financial statements. We don't render opinion on that information and provide some explanation to the financial statements, some changes, some differences, comparison to the prior year, provide Meridian Pre-Council Meeting February 7, 2006 Page 3 of 9 some graphs and some charts that kind of help explain some of the changes that are going on in the city and some of the plans for the future. And it also separates still between government activities and enterprise activities, proprietary funds with the utility billings. A couple of highlights in the financial statements that I noted. You know, one -- again, as has been in the past, that expenditures were less than the budgeted amount, which is good. That means that, you know, management's doing a good job and, you know, Council is doing a good job, you know, watching the expenditures of the city and being fiscally responsible for those. In the enterprise fund I also noted that net income was about 21 million dollars. However, that's a little bit misleading, because a lot of that is -- or most of it is actually contributed to donated water lines and also connection assessment fees. So, operating net income is, really, only about 90,000. So, you know, very close, you know, operations, what's coming in for utility billing and what's going out is very close. As far as internal controls, we issued a management letter. We have gone over that with the audit committee. We have always gone over it with management. They responded to the -- to some of the notes and findings that we had, suggestions that we had, and we are satisfied with those -- with those remarks. And so I won't go into that in detail, unless anyone has any questions -- any questions on the financial statements or the management letter I would be happy to answer those. Rountree: No questions. Smith: Once, again, I think it was a great year and we appreciate the opportunity to work with the City of Meridian and also with management. The accounting department does a great job and it makes our job much easier and it also makes us more efficient, so we can come in and, hopefully, not be too disruptive. We know we are somewhat disruptive to day-to-day activities. De Weerd: You're disruptive. Smith: Yeah. We are. And if we can keep those disruptions to a minimum, then, you know, we are happy and management is happy, accounting department is happy and everybody gets their pay check on time. That's what we don't want to get in the way of, so -- but thank you again. Wardle: Thank you. Questions of Mr. Smith? I will say -- clarify my earlier statement as being the chairman of this committee. The auditors presented the audit in a very concise way and I believe that our staff did just a wonderful job. Obviously runs a very -- very clean set of books and made the process very smooth. So, from my perspective it was -- it was very easy to see that all things were in order in our city. So, I'd like to thank your staff, Kevin, for doing a wonderful job. I know that Mr. Bird was going to comment on the timeliness of the reporting and some of the city ordinances that we have Bobby and I discussed, there are some additional federal reporting requirements in addition to the Christmas holiday, which may warrant a look at moving that ordinance and so it's a discussion that I think we have had with Mr. Bird in the past and -- do we have a specific opinion on a date that might work, Kevin, or -- Meridian Pre-Council Meeting February 7, 2006 Page 4 of 9 Smith: Yeah. I don't know that we have come up with a specific date, but we are looking, you know, maybe two to three weeks. You know, if we could push it out just a little bit it would be helpful. Wardle: Okay. De Weerd: Mr. President? Wardle: Madam Mayor. De Weerd: I would agree that we need to ask our legal staff to look at that and bring back with the finances recommendations -- a new date for that. Indeed, because of some of the new reporting and some of our activities and being a little bit more proactive with seeking out grant opportunities and that sort of thing, I would imagine that this is just an indicator of future audits and so that would give us some more breathing room. I also would like to note that the addition of audit, because of the grant monies, it was also an additional time either for our staff and we would like to recognize our city clerk and our finance department and the extra effort that they did in working with Sage in getting the money passed through to the entities that were working with those grants and appreciate the timeliness of that. I think it was a learning experience, some of the legal requirements, the necessary ordinances that our legal staff quickly responded to and so it was a good experience and appreciate all the extra effort that went through to make sure that we passed with a clean audit. Appreciate the auditor's time. They did try to stay out of the way as much as possible and I think every year it just seems to go a little bit more smooth and, again, I think our city does a fine job in keeping its financial matters in order. I would like to request that, you know, I have always been part of that summary in the past and would like to continue to be. I know we started the new team with the Council president's involvement, but as management I would like to also participate as well. Wardle: Great. De Weerd: And Mr. -- I'm sorry. Wardle: Madam Mayor. De Weerd: Finally, because I just got back in town last night I didn't read the audit. It's still sitting on the pile that I was welcomed home with. So, I apologize I don't have any stumping questions. I really wanted to throw one out there for you, Kevin, but we will do it next year. Wardle: Stacy, any additional comments on the audit? I will say, obviously, there is a management letter attached to the audit. If you have specific questions on that, you can certainly address them to me or to Stacy and we can, then, get any clarification that you may need from either the audit committee or the auditors themselves. So, Mr. Baird, Meridian Pre-Council Meeting February 7, 2006 Page 5 of 9 procedural question. Is it now the City Council's duty to accept the audit and release it for publication or do we do that during our regular agenda? Baird: Mr. Chairman, you are in a duly noted public meeting of Council. You can certainly take action at this time if it's your desire. Wardle: Okay. Council, I would entertain a motion to accept the financial audit for the fiscal year 2004-2005 by Eide Bailly. Rountree: So moved. Borton: Second. Wardle: It's been moved and seconded to accept the audit for fiscal year 2004-2005. Mr. Clerk, roll call vote. Roll-Call: Bird, absent; Rountree, yea; Wardle, yea; Borton, yea. MOTION CARRIED: THREE AYES. ONE ABSENT. Wardle: Thank you again. De Weerd: Mr. President? Wardle: Madam Mayor. De Weerd: One final comment. I appreciate the flexibility that Kevin had in making sure we could use English this year. That was appreciated as well. Item 4: Quarterly Financial Report by Stacy Kilchenmann: Wardle: Thank you. Item No. 4 is quarterly financial report by Stacy Kilchenmann. Kilchenmann: The first quarter of the year not very much happens financially. We are just laboring to finish the audit and close the year. So, we are going to do a little different kind of presentation this time. First, I just -- Kevin mentioned to you the management discussion analysis, so I have a couple slides to highlight some of that. The first one is on governmental activities and those are all the activities of the general government, including the planning department, the building department, and so forth. And as you can see in the comparative analysis in 2004 our net assets increased 5.5 million and in 2005 they increased 8.6 million. And there is really two basic components of that. One are the assets which are highlighted in the yellow and you can see our assets went up about two million dollars. And, then, the other is the cash that flows into the fund balances. You can see the break out of those percentages of how much of that total net asset belongs to fixed assets and which part is the fund balance. So, a pretty good year for the governmental activities. This is the enterprise fund, which are referred Meridian Pre-Council Meeting February 7, 2006 Page 6 of 9 to that MDNA and in the audit schedules as business type activities and, again, if we look down at -- and try to analyze that change or the change in net assets, a big part of that are the contributed capital assets and so I put those with the bottom, they were nine million for 2005, with 17 million in assets that we purchased or projects that we finished. And they still had a healthy increase in their net asset position of 20 million dollars. Then, just to move onto 2006, to kind of give a refresher and remind you where we are, our current budget for this year for the -- city wide is 89 million and that break out kind of gives you an idea of where that money is budgeted and you can see a big portion of it -- almost a third of it is in enterprise capital outlay and that gray is new budget capital outlay, with the carry forward of 24 percent being projects that we have budgeted in years prior to 2006, but have not been completed. So, that almost is half of the city wide budget. This is what we call by class, meaning is it personnel, operating, or capital outlay. And, again, anything that in carry forward amount is capital outlay. So, you can see the majority of our budget is in capital assets. And most of it is in the enterprise fund. To return again to the general fund, our revenue that we budget is 16.6 million and for 2006 62 percent of that is in property tax. And because property tax is such a hot issue right now, in looking -- kind of looking at Meridian's position, these are some slides that we prepared when we went before the interim tax -- legislative tax committee. The first slide shows our building permit sales and, as we all know, 2000- 2004 they skyrocketed. The bottom slide below shows what happens to our levy rate during a period of growth and I'm not going to go in and explain the mechanics of how the levy rate works, but it's kind of an interesting comparison. Another big topic or consideration going around right now is taking away new construction and new construction is absolutely vital to the City of Meridian, because it allows us to increase our base to keep up with growth. The year 2005 to 2006, or the year that we just had, our growth was double -- our new construction dollars were double what they were the prior year. The top slide, the yellow line is our actual property tax, including what we get to add for the construction base and the annexation and the bottom line is taking out just the base property tax or what our property tax would be if we couldn't add new construction and annexation. And, then, the slide below, the green line is new construction dollars only and the pink one is annexation only. And typically -- Borton: Mr. President? Wardle: Mr. Borton. Borton: Could I ask a question on that? Kilchenmann: Yes. Borton: As described, these two graphs confuse me, Stacy, when I look at the top one, the difference added with new construction looks to be about four million. Is that -- is that right? Property tax -- actual property tax? Kilchenmann: Yeah. The actual property tax is the amount that we actually levy. Meridian Pre-Council Meeting February 7, 2006 Page 7 of 9 Borton: Right. Kilchenmann: And it increases -- go ahead. Borton: When you pull out the purple, without new construction, that difference is about four million? Kilchenmann: Yeah. And it also includes annexation is in that yellow -- or that green line on top. So, it's not -- it's not just new construction, it's all -- Borton: Construction and annexation? Kilchenmann: Yes. Borton: And, then, on the bottom how is that -- Kilchenmann: That's just new construction and just annexation. Borton: This is probably a simple answer. I'm confusing myself. Why wouldn't the figures on the bottom graph equal the gap that are referenced in the top graph? I mean if the bottom is new construction and annexation -- Kilchenmann: They should. Borton: See what I mean? Kilchenmann: Yeah. I think -- they are graphed with the same numbers, so -- Borton: It looks like it's 400,000 on the bottom and it's got a gap of a million on the top. Kilchenmann: Yeah. Those are the dollars that it just adds for the current year and, then, the base -- I see what you're saying. Borton: The actual property tax without new construction on the top is about four million dollars and, then, on the bottom not anywhere close. Kilchenmann: I will have to look at it. I can't see that far away, but -- Borton: It might just be a zero on the bottom graph. If those hundreds of thousands were millions, it might -- well -- Kilchenmann: I think it's right, because I just looked at it today, but I don't have the -- the table that I made the numbers with, but I can e-mail them to you. Borton: Okay. Thanks. I stumped myself. Meridian Pre-Council Meeting February 7, 2006 Page 8 of 9 Kilchenmann: Yeah. I think -- I see what you're saying. Okay. This graph, which is really tiny, too, is just taking a projection and looking at how much has -- how much have we grown in our base budget and the base budget is just personnel and operating. So, in the past six years our growth rate has been -- can't even see that far -- about 12 percent. So, if we were to continued to grow the base at that percentage, this graph just shows where we would cross -- where the revenue would fall below the base. And the one below is shortening the historical growth period to nine -- or to four years, where we have grown 19 percent. And, then, comparing our historical revenue growth of 12.5 percent. This is just another way to look at -- this looks at actual personnel -- number of general fund personnel compared to the population and the personnel and operating budget compared to the population. This is another way we looked at it. We did it by per capita. We said how much are we spending in each of those departments per capita, so -- and, then, this is looking at how much of our budget we spend on safety services, which almost half of our budget is police. And, then, a third of it's Ron. And you have to remember in admin we have the overpass money, which kind of throws it off. And I just want to talk really briefly about a fund that is sometimes misunderstood. We used to call it special services, we call it development services, and community planning, and it's really, technically, it is part of the general fund, which I think is sometimes not understood and it was set at a point in time -- the Council made the decision that certain departments would be in that fund and they were the Planning and Zoning Department and the building department and so those two departments were pulled in a separate fund, separate checking account, and a separate accounting system was opened for them and the money -- any money that would be like left over after expenditures, the difference between revenue and expenditures, the Council said will go into the capital improvement fund, which will be spent for any kind of capital improvements. City Hall. Could be used for parks. Could be used for fire stations. So, the top shows what the budget looks like currently for that fund and that big pink section for the capital improvement fund, that's the City Hall. This is the first time we have really budgeted any significant amount of money. And, then, because that's kind of distorting, I pulled it out in the graph below and you just have the building department and planning and zoning. We also have added economic development, code enforcement, and street lights to this fund. So, this is what their revenue looks like. Eighty-seven percent of their revenue comes through the building department from the sale of building permit fees. And, then, to kind of understand how important the building permit fees -- that top graph shows the base budget for the building department, which they have a few employees and, then, the rest of that cost is in paying the building -- contract the building inspectors and the green line shows you the revenue from the building department. You can see that right now the building department is a good -- doing good. The bottom one is the planning department revenue, which is the red line, and, then, they -- compared to their base budget. So, you see they are not a self-supporting entity, they are pretty much supported by the building department. And, then, finally, the enterprise fund. They have -- their budget is 59 million. As we talked about, a lot of that is in carry forward through our capital projects, with the next biggest chunk of that being the wastewater treatment plant. And their revenue -- they are using quite a bit of fund balance now, because they are budgeting those big major wastewater projects and they are also -- the sewer-water connections or assessments or hook-up fees or whatever you want to call them, are Meridian Pre-Council Meeting February 7, 2006 Page 9 of 9 also -- because we are growing they are adding a significant portion of the pie. That's just another way to look at their budget. And this -- if you look at their base budget compared to their revenue, you can see that as far as their operations they are fine, they have plenty of margin. You can see where we have budgeted kind of a leap in those one-time projects. That's the yellow line. And that's the end. Wardle: Thank you, Stacy. Council, questions? Rountree: I have none. Another good report, Stacy. Kilchenmann: I'll get you that. I'll get you the tables. Borton: Okay. Wardle: Thank you very much, Stacy. Excellent report. Council, that brings us to the end of our agenda for the Pre-council meeting. I would entertain a motion to adjourn. Borton: Move we adjourn. Rountree: Second. Wardle: Been moved and seconded to adjourn. All in favor? MOTION CARRIED: THREE AYES. ONE ABSENT. MEETING ADJOURNED AT 7:00 P.M. (TAPE ON FILE OF THESE PROCEEDINGS) __________________________________ ______/______/______ COUNCIL PRESIDENT SHAUN WARDLE DATE APPROVED ATTEST: _____________________________________ WILLIAM G. BERG, JR, CITY CLERK