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2012.06.07_FAB_Minutes_Regular1.4 • TOWN OF HIGHLAND BEACH F:t MINUTES OF THE �'y •'•• • '' * = FINANCIAL ADVISORY BOARD ��w Fl OA10� •- REGULAR MEETING Thursday June 7.2012 9.00 AM Members Present: Chair Gerald Gitner, Board Member Ronald Brooks, Board Member David Buchsbaum and Board Member Bruce Giacoma. Member Absent: Board Member William Gross. Also Attending: Town Manager Kathleen Weiser, Vice Mayor Ron Brown, Commissioner Dennis Sheridan, Commissioner Louis Stern, Acting Finance Director Cale Curtis, Deputy Town Clerk Valerie Oakes and members of the public. CALL TO ORDER: Chair Gitner called the Regular Meeting to order at 9:00 a.m. in the Town Hall Conference Room followed by a roll call taken by the Deputy Town Clerk. ADDITIONS, DELETIONS OR ACCEPTANCE OF AGENDA: Chair Gitner called for any additions, deletions to the agenda, hearing none, the agenda was accepted as presented. PUBLIC COMMENTS AND REQUESTS: No public comments and requests. PRESENTATIONS: No presentations. APPROVAL OF MINUTES: • April 13, 2012 — Regular Chair Gitner requested to amend the minutes on page 7, under New Business, second paragraph. Change "gap" to "GAAP (Generally Accepted Accounting Principles)". Member Buchsbaum requested to amend the minutes on page 7, second paragraph from the top. Change: Member Buchsbaum — felt that political decisions "have" to "should". Financial Advisory Board Thursday, June 7.2012 Paze 2 of 7 MOTION: Member Giacoma moved to approve the minutes of April 13, 2012, Regular Meeting as amended. Member Buchsbaum seconded the motion, which passed unanimously. OLD BUSINESS: A) General Discussion of Financial Topics Follow -Up: • Investment Options/Policy (Memo Tonic #1) Director Curtis — The Financial Advisory Board's recommendations for updating the Investment Policy were heard by the Town Commission on April 241h and voted upon on May I". The Commission approved the policy in general. The Town Commission did make the following changes: 1) chose not to take the short-term (overnight) liquidity threshold down to 35% of the portfolio; the threshold will remain at 50%, and 2) the policy will state that all investments must have the capability of being liquefied upon request of the Investment Officer and/or Town Manager. Member Giacoma — By eliminating the ability to extend the maturity by a nominal amount it is going to make getting a return on our investment almost impossible. Chair Gitner — I believe there was a misinterpretation of the concept of "safety", which has nothing to do with extension. The Board will revisit this issue at the next meeting, in the meantime, Director Curtis was asked to speak with three investors (bankers, brokers) to get indications of current market offerings. Chair Gitner requested a catalogue of board members who have volunteered for specific projects. Member Brooks — How do we communicate our recommendations to the Town Commission? Deputy Town Clerk — The Board would pass a motion, which upon being passed, the recommendation(s) would be distributed to the Town Commission via memorandum and presentation by the Finance Director. During the summer, the Finance Director will meet with possible investors. • Sale of Surplus Property (Memo Tonic #2) Director Curtis — At the Town Commission's Regular meeting of April 24, 2012, the Commission discussed prioritizing items in the Strategic Plan. The Commission concluded that the sale of the surplus property is a low priority and approved moving forward with retaining the services of a commercial realtor; however, without a motivated desire to sell the property. Financial Advisory Board Thursday, June 7, 2012 Page 3 of 7 Chair Gitner — How much did we generate in interest in the last 12 months on the portfolio? Director Curtis — An estimated $24,000. Chair Gitner — How much does it cost to maintain the surplus property including mowing? Director Curtis — It is not much. Member Giacoma — This property is considered a "low priority item", and I would like to know why. Member Buchsbaum — I would presume that the implication is that the value of the property may appreciate over time. Town Manager Weiser — This is a low priority item on the Strategic Plan, however, it is not a low priority item to the Town. The fact that this item is included in the Strategic Plan means that it is a priority for the Town within the next three years. The Town Commission gathered all of the goals, then categorized them by priority. Chair Gitner — This is a project that a vendor can manage. Do any other projects generate cash? This is the only one that generates cash and takes less time. I got the impression that you even want to put of talking to a broker to generate a contract. Town Manager Weiser — The number one priority is the renovation because we have facilities that are crumbling. Director Curtis — I agree we will move forward. • Monthly Financial Report (Memo Tonic #3) Director Curtis — The first issue (March 2012) of the "reformatted" financial report was distributed to the Town Commission, staff, and the Financial Advisory Board. Those that received the report were pleased with the changes. Chair Gitner — This is a major step forward. • Capital Improvement Plan (Memo Topic #4) Director Curtis — The policy and guidelines are slowly coming together. The CIP form was given out at the first department budget meeting on May 14th and is being used on a trial basis. Member Buchsbaum — If you have similar projects, one for a repair versus a replacement option, would staff fill out two forms? Director Curtis — For a repair, no; however, a replacement, yes. • FY 2013 Budget (Memo Topic #5) Director Curtis — A department head meeting was held on May 14th to discuss the budget process. The departments received their budget request forms for operating and capital. The deadline to turn in the requests is June I". Between June 1 St and June 22nd the Town Manager and I will review the requests and prepare our recommended budget document for distribution the first week of July. The Town Commission is scheduled to hold a special meeting on July 17th to tentatively set the millage rate that will be posted on the Financial Advisory Board Thursday, June 7, 2012 Page 4 of 7 preliminary tax notices. At this meeting, the Commission will also be given their first presentation on the budget. After this meeting, I anticipate that the FAB will be given direction (other than the already requested options on balancing the budget) as to where the Commission will want input. Chair Gitner — It would be a good idea to include an article in the Highlander to explain the taxes and the break down of the tax bill: with emphasis upon the small proportion of the total tax levy represented by the Town. Member Giacoma — Are there any leanings from the Commission throughout regarding increasing the tax rate? Director Curtis — I have heard various things as to how to approach the tax rate. I suggest that the Board review the video of the Commission meeting. Member Brooks — If we look at major source of funds, where do we go as far as taxes, reserves or sell property. Somebody needs to start talking about where we are going to get money or are we satisfied dipping into the reserve. Director Curtis — We cannot continue to dip into the reserve. Chair Gitner — I think we are of the consensus that if the money in the reserve is to be used, it should be used to fund capital projects that will have the potential impact of reducing future operating expenses as opposed to dipping into the reserve to offset otherwise mandatory tax increases. We are all residents and volunteers. Personally, I would rather be on a pay-as-you-go basis as opposed to being hit two years from now with a high tax rate and no unassigned reserve. By consensus, the Board agreed with Chair Gitner. Member Brooks — Suggest that we send a memorandum to the Town Commission with the FAB's recommendation. MOTION: Member Giacoma moved to make a recommendation to the Town Commission to endorse column three on the "Taxing Equivalents to Consider for Preserving the Fund Balance" chart to fully close the budget gap at a millage rate of 0.5734 as we think it is prudent and appropriate for that measure to be installed. Member Buchsbaum seconded, which passed unanimously by a voice vote. B) Fund Balance: Develop Strategies to Identify the Proper Amount and to Preserve it. Director Curtis — At the Town Commission Regular meeting of April 24, 2012 and during discussions on the strategic plan goal: "address use of reserves to balance budget", the Town Commission requested that the FAB research and provide the Commission with options (other than using unassigned fund balance) to balance the budget. The Town has been using the unassigned fund balance to fill the budget gap for Financial Advisory Board Thursday, June 7, 2012 Page 5 of 7 the past three years; this year's gap was approximately $710,000. Next year's gap may top $1,000,000. At the May 29`h Town Commission Workshop Meeting, the Commission was given a PowerPoint presentation demonstrating the Town's current and projected Fund Balance totals; and the tax rate and levy equivalents of closing the budget gap at various funding levels. Below are options to consider: • Raising taxes will close the gap immediately, but doing so may not be politically popular. • Identify capital expenditures that provide immediate and future reductions in operating expenses. Such expenditures likely have significant upfront cash costs that will further reduce fund balance. Operating expense reductions are only assumed and estimated; not guaranteed. The amount of reasonably achievable operating expense reductions are highly likely to be far less than what is needed to close the anticipated gap of $1,000,000 in the FY 2013 budget. It is simply not possible to plan, approve and implement capital expenditures in a manner to have an impact upon next fiscal year's results. Utilizing a combination of tax increases and operating expense reductions while reducing capital expenditures. • One aspect of operating expense reductions, service reductions, may be highly unpopular with the residents. E.g. reducing library hours, reducing police force, furlough days for staff, salary reductions, and layoffs. Chair Gitner — At our prior meeting, we discussed and agreed that the budget be prudent and should be fully funded. Member Giacoma — Are there increases in the budget for the departments? Director Curtis — Yes, there are increases in capital requests and operating expenditures. This year's gap was around $700,000, and this upcoming fiscal year is close to $1 million. Chair Gitner — Is this normal? Director Curtis — Yes. The department heads submit their wish lists, which are reviewed and approved/denied by the Town Manager and Finance Director. Chair Gitner — Can we have an update on the walkway? Director Curtis — The Town Commission directed staff to budget funds to repair the needed areas of the walkway, which will be approximately $70,000. Chair Gitner — Assuming that the walkway is repaired, how much time will there be before further deterioration? Manager Weiser — It will be functional for at least a decade. Financial Advisory Board Thursday, June 7, 2012 Paae 6 of 7 NEW BUSINESS: Chair Gitner asked for any New Business items. Member Buchsbaum — In terms of creating a policy and/or alternatives to close the gap, where do these policy options emanate from? Chair Gitner — Someone needs to start somewhere; for example, trying to obtain the property at 3200 S. Ocean Blvd. Manager Weiser — Vice Mayor Brown has approached the owners of 3200 S. Ocean Blvd., who are close to having a contract. As for the budget, the recommended budget along with the wish list is presented to the Town Commission, which decides. The Town Commission may request that the Financial Advisory Board do research on the chosen wish list items. Chair Gitner — The walk path is dangerous. The repairs will not fix the walkway because the issue is the basic structure. Member Brooks — This needs to be understood that it is a temporary fix. Manager Weiser — There is a difference in the cost with repair versus replacing the walkway. The Town Commission has a decision to make with a $1 million shortfall of which 65% is personnel. Chair Gitner — The more education and explanation to the residents regarding the budget, the better off we are. The next scheduled meeting will be Monday, August 20, 2012, at 9:30 a.m. in the Town Hall Conference Room. ADJOURNMENT: There being no further business, Chair Gitner called for a motion to adjourn the meeting at 9:50 AM. MOTION: Member Giacoma moved to adjourn the meeting at 9:50 AM. Member Buchsbaum seconded the motion, which passed unanimously. Financial Advisory Board Thursday, June 7, 2012 Paze 7 of 7 APPROVED: Gerald Gitner, Chair onald Brooks, Board Member 06WjG. 05'4'�� David Buchsbaum, Board Member Bruce Giacoma, oard Member Absent William Gross, Board Member TOWN SEAL ATTESTED: a&2-� Valerie Oakes, CMC Deputy Town Clerk Date: Auzust 20, 2012