1995.04.03_FAB_Minutes_Regular• TOWN OF HIGHLAND BEACH
FINANCIAL ADVISORY BOARD
REGULAR MEETING
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Monday April 3, 1995 9:30 A.M.
Chairman Thomas J. Reid called the Regular Meeting to order in
Commission Chambers at 9:30 A.M.
Deputy Town Clerk Gretchen Dayton called the roll. Present were
the Chairman and Vice Chairman Victor P. Hadeed and Members S.
Myron Browner, John DeMarco and Werner Wm. Rothenberg.
Town Manager Mary Ann Mariano and Finance Director Michael Seaman
were also present. Mr. Felix Goldenson was present as a member of
the general public.
APPROVAL OF MINUTES
Mr. Browner stated that several points of discussion
up at this meeting which were not included in
Suggested changes were made and upon MOTION by MR.
ROTHENBERG, the amended Minutes of the March 17,
Meeting were approved.
OLD BUSINESS/CORRESPONDENCE
Review of Town's Reserve Policy
were brought
the minutes.
BROWNER/MR.
1995 Regular
Chairman Reid read into the minutes a statement defining reserves.
A copy of which is attached hereto.
The Board discussed putting the definition of reserves at the
beginning of the report. The philosophy second; and to include in
the report the glossary found on page 36 and 37 of the "An Elected
Official's Guide to Fund Balance" booklet.
Chairman Reid stated that the present reserve policy of Highland
Beach to be the retention of department revenues in excess of
expenditures for future contingent needs. All funds are
accumulated in a single bank account or investment account with
definition, identification or allocation of specific monies to
specific funds. He suggested that a survey be conducted to
determine the finite items within each fund for which a reserve
should be established. This survey would consider the nature and
purpose of each reserve; the amount to be reserved; and the source
of funds being set aside for each reserve.
• FAB Reg. Min. 4/3/95 Pg 2
Mr. Browner made the point that if this is done by fund, there may
be too many restrictions. He stated that presently money can be
transferred between funds, whereas if it is made finite, the
general fund remains a designated specific amount.
Mr. Rothenberg suggested to make the policy with flexibility and
include a transfer clause.
The Board discussed the transfer of money from one fund to another
as needed. Transfers being permitted in case of necessity and
under extraordinary situations.
GENERAL FUND
Mr. Hadeed said the general fund should not be depreciated,
therefore a reserve for depreciation is not needed. Further he
stated that there is a need to determine if the reserve for
unappropriated funds is to be stated as a fixed dollar amount, a
percentage of the budget, or a percentage of assets. He also
mentioned the Town has a "twelve percent of budget" reserve whereas
the range of the policy standards seem to be between eight to
twenty percent.
Ms. Mariano referred to the "Financial Highlights" brochure which
shows the Town having fifty days operating costs versus the average
city with one hundred forty nine days of operating costs. She also
suggested starting from zero to allocate funds whenever necessary
over a certain number of years and build up to the suggested amount
needed in the reserve fund by adding a line item to the budget.
Mr. Goldenson spoke with the auditors and asked for a suggested
amount for reserve funds. Their response was three to four months
of operating costs. Other considerations are the factors in
determining what reserve funds should be in the general fund; what
does the insurance cover; how much cash flow and what is the
current monthly operating cost.
After further discussion, for the purpose of unanticipated
operating costs, the unappropriated reserve fund should be
approximately 25% of the annual budget or three consecutive months
of operating costs, whichever is lower with the source of money
being general revenue. This reserve should be a line item in the
budget and should be reviewed as to amount annually.
WATER FUND
The recommendation was made that a reserve for depreciation be
established and shown separately in the fund equity section of the
balance sheet. The amount to be decided by using federal tables
for depreciation. The source of the money will come from user
• fees. The items to be reserved are the water plant assets and the
purpose is for replacement.
• FAD Reg. Min. 4/3/95 Pg 3
The recommendation was made for an unappropriated reserve fund in
the amount of $225,000 be established in the equity section of the
balance sheet for the purpose of expansion and upgrading for water
facilities and quality.
SEWER FUND
The Board recommends a funded reserve for depreciation be
established in the fund equity section of the balance sheet based
upon future deprecation charges (not retroactive). Further, the
Board recommends that an unappropriated or undesignated reserve in
the amount of $100,000 be established in the equity section of the
balance sheet for the purpose of expansion and upgrading of the
sewer plant and facilities.
Due to a malfunction with Delray Beach's water meter the Town was
over charged approximately $100,000. When the Town receives the
• rebate, it will be put into this reserve fund.
Chairman Reid read a draft memo to be sent to the Town Commission
notifying them of the Financial Advisory Board's intentions to
draft a recommended reserve policy. A copy of which is attached
hereto.
NEW BUSINESS
None.
It was agreed the next meeting will be held on Tuesday, May 9 at
9:30 A.M. Subsequent consideration placed the meeting date for May
23 at 9:30 A.M.
There being no further business to come before the Board at this
time, the meeting was adjourned upon MOTION by MR. HADEED/MR.
ROTHENBERG at 11:50 A.M.
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FAB Reg. Min. 4/3/95 Pg 4
APPROVE:
Thomas J. Reid, Chairman
Victor P. Hadeed, Vice Chairman
S. Myron/Browner
)hn R. DeMarco
Werner Wm. Rothenbe
ATTEST:
DATE:
MEMO
TO: TOWN COMMISSION
FROM: THOMAS J. REID CHAIRMAN, FINANCIAL ADVISORY BOARD
DATE. APRIL 13, 1995
SUBJECT: RESERVE FUNDS
THE F.A.B. HAS INITIATED IT'S STUDY OF THE QUESTION OF ESTABLISHING
RESERVES, THEIR PURPOSES, AMOUNTS AND SOURCES OF FUNDING, AND SHALL BE
IN POSITION TO ISSUE PRELIMINARY REPORT BYAPPROXIMA TEL YJUNE 15, 1995
AND A FINAL REPORT BY SEPTEMBER 30, 1995.
TENTATIVELY OUR REPORT WILL DISCUSS THE THEORETICAL AND PRACTICAL
ASPECTS OF ESTABLISHING AND MAINTAINING RESERVES, AND PRESENT, BY FUND,
THOSE ITEMS WHICH ARE CONSIDERED APPROPRIATE TO BE FUNDED, THIS IN A
WRITING CLEARLY STATED IN LAYMEN'S LANGUAGE.
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