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2019.07.11_FAB_Minutes_Regularow TOWN OF HIGHLAND BEACH FINANCIAL ADVISORY BOARD QUARTERLY MINUTES Town Hall / Commission Chambers Date: July 11, 2019 3614 South Ocean Boulevard Time: 2:00 PM Highland Beach, Florida PRE MEETING PRESENTATION BY FINANCE DIRECTOR LALLA Finance Director Matthew Lalla noted he did not have a formal presentation. He stated the Board received the Comprehensive Annual Financial Report (CAFR) from the Auditors. He encouraged the Board to read the transmittal letter, management discussion and analysis. He noted the CAFR indicated the Town's overall financial condition was very good. He noted Grau and Associates had been doing the Town audits for four years with one year remaining on contract. He noted Racquel McIntosh would present the Auditor's Overview of the Fiscal Year 2018 Audit. 1. CALL TO ORDER Chairperson Alan Polin called the Financial Advisory Board Regular Meeting to order at approximately 2:10 PM. He asked those present to silence cell phones. 2. PRESENT UPON ROLL CALL Member Douglas Hillman Member Neil Eisenband (left the meeting at approximately 4:45 p. m. ) Vice Chairperson David Stern Chairperson Alan Polin ABSENT Member James Karabec Member Edward Kornfeld Member Jeff Hollander 3. PLEDGE OF ALLEGIANCE The Financial Advisory Board led the Pledge of Allegiance. 4. APPROVAL OF THE AGENDA Chairperson Polin asked if there were any additions, deletions or modifications to the Agenda. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 PalZe 2 of 20 Member Hillman added "Discussion on Agenda Protocol" as Item 8G under New Business. Chairperson Polin added "Discussion on May 2019 Monthly Financial Report" as Item 8E under New Business and added "Discussion on Highland Beach Water and Sewer Rate Study Report — Status and Update" as Item 8F under New Business. MOTION: Vice Chairperson Stern moved to accept the Agenda as amended. Member Eisenband seconded the motion, which passed unanimously. 5. PUBLIC COMMENT Chairperson Polin asked the members of the public to raise a hand, wait to be recognized, and then approach the podium. He noted there was a three-minute time limit for speakers and he called for a motion to extend this to five minutes in order to be consistent with the other Highland Beach Boards and Committees. MOTION: Member Hillman moved to extend the speaker time limit to five minutes. Vice Chairperson Stern seconded the motion, which passed unanimously. Chairperson Polin asked members of the public providing testimony to please wait until the specific Agenda Item to speak. He asked if there were any Public Comments on non -Agenda Items. Mr. John Boden stated his address was 3407 S. Ocean Blvd. He asked the Board Members to properly use microphones as he and others present had difficulty hearing. Chairperson Polin asked if anyone else present wished to speak; no one wished to speak. Chairperson Polin stated he wished to diverge from the regular order of business and asked for the CAFR report to be presented, followed by a presentation by the Ronald L. Book Lobbyist Firm. MOTION: Member Hillman moved to adjust the Agenda as described by Chairman Polin. Vice Chairperson Stern seconded the motion, which passed unanimously. FROM THIS POINT FORWARD, THE MINUTES WERE TRANSCRIBED IN THE ORDER OF DISCUSSION. 8. NEW BUSINESS D. Comprehensive Annual Financial Report for Fiscal Year ending September 30, 2018 Presentation - By: Racquel McIntosh of Grau & Associates Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pal4e 3 of 20 Ms. Racquel McIntosh with Grau & Associates reported Grau served as the external auditors for the Town. She noted on page 1 was the Independent Auditor's Report which indicated there was an unmodified, clean Opinion noting Grau believed the Financial Statements fairly presented the financial position of the Town for the Fiscal Year Ended September 30, 2018. She stated on page 11 the balance sheet for governmental activities showed a total fiind balance of approximately $9.9 million dollars, of which $9.2 million dollars was generated through the General Fund, and the remainder through Other Special Revenue Funds. She reported in the General Fund, of the $9.2 million dollars in fund balance, the Town assigned almost $2 million dollars for budget stabilization, $950,000 dollars was assigned for disaster recovery, some was set aside to balance the 2019 Budget, and the unassigned fund balance (available for spending at the Town's discretion) was approximately $5.5 million dollars. She stated page 14 illustrated how the operations changed during the year. She reported the change in the fund balance showed an increase of approximately $429,000 dollars, of which $164,000 dollars was generated through the General Fund and the remaining $264,000 dollars was generated through Special Revenue Funds. She stated page 15 was the Enterprise Activity Funds (Water and Sewer Utility) which ended with a net position of $9.8 million dollars with $7.2 in the Water Utility and the remaining $2.5 million dollars in the Sewer Fund. She stated page 16 showed the change in the Enterprise Activity Fund with a positive net income of approximately $232,000 dollars, the majority of which came from the Water Fund ($168,000 dollars) and the remaining $45,000 dollars from the Sewer Fund. She stated there were no significant changes in the Notes to the Financial Statements. She stated on page 37 the Existing Debt table showed the Town ended with debt through promissory notes and State Revolving Loans of approximately $13.45 million dollars. Chairperson Polin asked what the aggregate age of the existing debt was. Ms. McIntosh responded the final debt service payment would be in 2038. She indicated the shortest loan ended in 2024. Member Hillman asked what the rates were for the loans. Ms. McIntosh responded the loan rates varied; State Revolving Loans were typically between 1.5% to 3.0% (fixed rate), while the promissory note was at 0.67% plus Libor (3.414%) with almost $2.6 million dollars left. Ms. McIntosh stated page 58 reflected the Town's General Fund Budget to Actual Report for the Fiscal Year. She stated page 59 showed the total budgeted appropriations were $12.2 million dollars; there was a budget amendment which brought this number to $12.4 million dollars, and the third column showed what was actually spent: $9.5 million dollars was spent leaving a positive change of $2.4 million dollars. She explained this meant the Town spent $2.4 million dollars less than anticipated. Chairperson Polin asked about the $2.4 million dollars, which were unspent. Ms. McIntosh reported the $2.4 million dollars went into the Fund Balance. She explained the Town collected $11.53 million dollars, but only spent $9.9 million dollars; the difference went into the Fund Balance. She stated on page 88 was the report on the Town's Internal Control over Financial Reporting and Compliance; Grau did not detect any material weakness or significant deficiencies in the internal Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 4 of 20 controls. She stated there was one finding which she would review. Chairperson Polin noted a report of no material weakness or significant deficiencies was a significant achievement; there were many municipalities which had multiple "findings" or "notes" which reflected finances were not booked properly, were not in best practice, or were not in accordance with regulatory scheme. He complimented Staff and the Commission for facilitating this accomplishment. Ms. McIntosh agreed. Ms. McIntosh stated on page 90 was the Single Audit (a Compliance Audit in addition to a Financial Statement Audit). She noted this was required due to the State Revolving Loan for the Water Plant. She stated the Single Audit indicated in Grau's opinion the Town complied in all material respects with the program requirements for the grant. She stated page 92 showed the program which was tested during the Single Audit. She reported just under $1.1 million dollars was spent on the Water Plant from the State Revolving Loan Funds this year. She stated on page 94 was the Summary Results of the Single Audit which revealed there were no findings related to the program tested. She stated page 95 the report on the Town's compliance with Florida Statute 218.415 (the investment statute) showed, in Grau's opinion, the Town was in compliance with all the material requirements, except for the CPE requirement which was a result of a change in Staff. She stated page 97 was the Report to Management which contained two findings. She reported one finding was for the Budget and the other for adjusting journal entries. She stated she had discussions with management who recognized the causes of the findings and had begun to take corrective steps for the issues identified. Chairperson Polin asked how many municipalities Grau audited. Ms. McIntosh responded approximately fifteen municipalities. Chairperson Polin asked what the best practice was in regards to Fund Balance. Ms. McIntosh responded the fund balance threshold varied from municipality to municipality. She noted some municipalities had no fund balance and others had a 25% balance. She stated it depended upon the plans of each municipality; the more projected prof ects, , the more needed to be set aside. She stated the Town Manager and Finance Director would work together to determine best practice for Highland Beach. She noted Highland Beach set aside money for disaster recovery; best practice would be to research and determine if the monies set aside for disaster recovery were sufficient. She stated Highland Beach was on the higher end at 49%, most municipalities were in the 25% range. Chairperson Polin stated he understood best practice was supposed to be six months of budget set aside for emergency purposes. He stated he believed Highland Beach had an extremely healthy fund balance. Ms. McIntosh agreed. Member Eisenband noted the Fund Balance was not all liquid assets; the Fund Balance was the net position of total assets versus total liabilities. He stated the Town had roughly $7 million dollars in liquid assets. Discussion ensued regarding Fund Balance and liquid assets. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pape 5 of 20 Chairperson Polin asked if there was anything Ms. McIntosh believed Highland Beach should be doing which was not being done. Ms. McIntosh responded in the negative; she felt Highland Beach was doing best practice. C. Discussion of Aggressively Going After Grant Money To Aid The Town: Cost vs. Benefit analysis of engaging a State of Florida Lobbyist to belp the Town understand; 1. What Grant Monies the Town can apply for to help pay for FY 2019-20 near term projects on the Commission's radar and 2. How to hop scotch to the front of the line (if you will) on FDOT improvements to AIA to be totally paid for by FDOT (such as A 1 A swale surface water drainage improvements). For example, if the Town needs help with upgrading potable water distribution system (which may or may not need near term fixing), perhaps the State has a pot of money we can draw from. 3. Presentation to be given by Kelly Mallette Associate with Ronald Book Lobbyist Firm (Official Lobbyist for Miami -Dade County) Chairperson Polin explained why he asked the Ronald L. Book Lobbyist Firm to make a presentation. Ms. Kelly Mallette, Senior Director of Government Affairs with Ronald L. Book, P.A., Law Firm (RLB), thanked the Board for allowing her to make a presentation. She stated RLB was a law firm specializing in government relations. She noted RLB represented a wide range of clients from Fortune 500 companies to professional associations, but one of the cornerstones of the practice was local government representation. She reported lobby work was done primarily at the State level; the practice was primarily in Tallahassee. She stated although RLB did not officially lobby in Washington D.C., RLB had great relationships with the Congressional Delegation in Washington D.C. She noted Ronald L. Book was the Founder, President and CEO of RLB Law Firm. She reported she had been with the Firm for 18 years. She stated prior to working at RLB she worked for a Senator in Tallahassee, as Senior Advisor to the Mayor of Miami, and served as an Official in Biscayne Park. She discussed other Staff members at RLB. She noted RLB was established in 1987 and was known as one of the premier firms in the State (rated in the top 5). She stated RLB was a leader in government representation and believed local governments and constituents deserved the same type of competent representation as private sector interests. She noted RLB was a bipartisan firm. She stated RLB prided itself in excellent communication with the local municipalities it represented, as well as with the Members who represented the local municipalities at the State level. Financial Advisory bard Regular Minutes Thursday, July 11, 219 Pap_e 6 of 20 She explaiv,-d RLB held workshops with the local governments it represented to determirt the needs of the municipality and how each government wanted to move forwtrd, all in an effort of preparedness. She reporteA., if retained, RLB would work with the Members who represented Highland each to ensure the Members understood the best times and best methods toke an effective representative, such as explaining when was the best time to mese with the Speaker regarding a specific issue. She reportal RLB was known for its work ethic. She stated there were 60 days in the Legiative Session to get the job done, 60 days to effect results; RLB worked hato ensure the Legislative Session ended successfully in favor of its clients. She repond- over the past three years RLB's average appropriate for clients have been :approximately $200 million dollars annually. She reported in the past two ytars RLB appropriated over $20 million dollars for local water projects. e reported in the past two years RLB appropriated over $2 million dollars forEOCs and transportation. Town Attcmey Torcivia asked for Ms. Mallette to steer the presentation back to an over i�w of lobbying practices in general as this was not supposed to be a solicita m. Chairperson Polin stated he appreciated Town Attorney Torcivia's-roncern; however, he felt it was presumptuous to interrupt as Ms. Mallette fid understood what the goal of today's presentation was. He asked Ms. Malle. to continue. Ms. Mallde reported RLB represented a wide range of clients from big counties tosmaller communities, as well as coastal communities. She stated. Highland Beach had opportunities for road project funding. She reviewed -afew transportation projects RLB appropriated funds for recently. She noted lghland Beach had opportunities in general government space, such as with EKI's, parks, and grants. She noted in addition to grants, there were opportunis for direct line item appropriations from the Legislature, which sometimesIOI outside of the grant process, such as water projects. She noted these types of requests were made through the Legislative process through Member bKlget requests: Highland Beach would ask its State Legislator to file a budget roju.est for the Town of Highland Beach, this would be filed as a bill, and the biwould work its way through the Committee process. She reported the same We of process was used for transportation projects; these were called Member 1N-Yject Processes. She stated under general government there were opportunit s for grants, cultural grants, and EOC opportunities. She stated under enV ,)nment there were opportunities in water projects and parks opportuni&,.s. She stated under healthcare there were opportunities for senior programs md respite programs. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pal4e 7 of 20 She stated RLB had an "it can be done" attitude with which it approached every project. She stated RLB would look at the needs of the town and at the Legislator's priorities to determine where best to direct energies and determine what the best opportunities were at any given time. Member Eisenband asked how many municipalities there were in the State of Florida. Ms. Mallette responded she was unsure; there were 67 counties. Member Eisenband asked what percentages of municipalities were represented by lobbying firms. Ms. Mallette responded she was unsure; anywhere from 50% to 70% in the South Florida area. She stated State-wide maybe 50% were represented by lobbying firms as there were many small cities which were not represented. Chairperson Polin asked for the Finance Director and Town Manager to discuss possible advantages of seeking grant money. He stated he believed the Town could benefit from transportation monies to help fund the crosswalks. He stated the reverse osmosis water plant would need upgrading in the future and Delray Beach processed Highland Beach wastewater currently; he felt maybe there were opportunities for funds in these areas. Town Manager Labadie noted the Town was constantly seeking out grants. He noted there were a handful of projects which were being contemplated now or in the near future. He asked about transportation projects as direct appropriation projects versus grant projects. He noted the Town estimated it would cost approximately $350,000 dollars to construct pedestrian activated crosswalks through the Town; he wondered if it was a possibility for the Legislator to ask ;for direct appropriation money in this regard. He asked what type of priority :Highland Beach would receive with this type of request; would priority be given ?to the larger municipalities like Miami, West Palm Beach and Boca. He asked if the return investment would be worth hiring a lobbyist. Ms. Mallette stated she would want to better understand the crosswalk project; however, with her limited understanding she believed the crosswalk project was something the Town of Highland Beach could ask for direct appropriation. She noted the Legislature did not always give 100%; however, the Legislature was more apt to give 100% if the Town guaranteed a match. She stated RLB advised providing a match with water projects as well. She noted there were funds available for wastewater projects. She stated it was a competitive process as there were dozens of municipalities requesting funds. She noted the larger cities occasionally did not receive funds while the smaller municipalities did receive funds. She noted projects which showed a match were given better weight by the Chairman and a construction ready project had better chances of receiving funds. She stated there were funds available for storm water projects. She noted she encouraged municipalities to file for multiple projects as this would also increase the possibility of a project winning funds. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 8 of 20 Member Hillman asked if the decision making process was demographically based, for example were income levels, needs of the town, budgetary issues, and population considered in the process. He asked how long this process would take. Ms. Mallette responded different Chairmen looked at different things; some Chairmen cared about sending dollars to communities in need, other Chairmen prioritized shovel -ready, innovative projects. She noted there were plenty of municipalities who received funds that were not needs -based. She reported Sunny Isles Beach received funds for a pedestrian bridge and Bal Harbor received funds for a water project. She explained RLB was able to tell a story explaining the needs of the municipality which helped to bolster the chances of being granted funds. Ms. Mallette explained the process: the Legislature met for sixty days annually; in the even years the Session began in January and went until March, in odd years it met from March until May. She stated last week the form for appropriation project requests was released. She noted Committee Meetings began this September, went until December and Session began in January 2020. She reported the decisions regarding funding did not happen until Session; however, RLB filled out the necessary paperwork August and began meeting with Legislators. She explained the bill process. She explained the budget process. She stated she would advise the Town begin working this process soon; results would be realized in March of 2020. Vice Chairperson Stern asked if there was any funding opportunity for beach nourishment/beach erosion. He noted Highland Beach was considered a private beach. Ms. Mallette responded in the affirmative; there was a grant process for beach nourishment. Member Eisenband asked if there was a favorable ratio of fees paid to funds appropriated. Ms. Mallette responded in the affirmative; RLB was accountable to the Town just as the Town was accountable to the taxpayers. She stated RLB wished for the taxpayers to feel a good investment was made in choosing to hire RLB. She noted all RLB fees were publically disclosed online. She indicated State Law prohibited RLB from working on a contingency basis; all work was done on a retainer basis. Member Eisenband asked if there was a specific ratio she could give. Ms. Mallette responded in the negative; however, all of RLB's clients were highly satisfied. Chairperson Polin noted Highland Beach could seek grant money to benefit the elderly in the community. He asked to entertain a motion in a generic conceptual fashion which recommended the Commission research the benefit of having Highland Beach engage a lobbyist to seek funds. Member Hillman reported the Commission looked into the possibility of hiring a lobbyist approximately six months ago and decided against retaining a lobbyist. Chairperson Polin noted the Commission was comprised of different members six months ago. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 9 of 20 Chairperson Polin opened the floor for Public Comments. Commissioner Evalyn David stated her address was 4740 S. Ocean Blvd. She stated the Town recently foolishly spent over $200,000 dollars and spending additional dollars for retaining a lobbyist was not in the best interests of the Town at this time and would probably not be supported by the constituents until Highland Beach "got back on its feet" financially. Mr. John Boden stated his address was 3407 S. Ocean Blvd. He asked, as a relatively affluent Town, how likely was Highland Beach to be granted funds versus the more "needy" municipalities. He asked, if there was funding available, what could be done to appropriate a portion of said funds. Chairperson Polin stated he understood there was approximately a $900,000 dollar shortfall in the budget. He noted an argument could be made that Highland Beach was "needy." He stated this was the purpose of retaining a lobbyist; lobbyists were creative, and persuasive, and could make an argument in favor of the municipality. He stated rather than asking the residents to pay out of pocket in terms of an ad valorem tax increase, he was searching for other sources of revenue; he felt it would be wonderful to procure revenue from Tallahassee for Highland Beach. He discussed the situation in which the Town foolishly spent $200,000 dollars last year. He noted he was not suggesting the Town take on a monetary obligation, he was simply recommending the Commission research the benefits of a lobbyist, especially in light of a $900,000 dollar shortfall. He stated he did not want the shortfall to be met on the backs of the employees or through taxes. He stated he wished the Commission would look for other sources of funding. MOTION: Chairperson Polin moved to recommend the Commission research the benefit of having Highland Beach engage a lobbyist to seek funds. Member Eisenband seconded the motion. Vice Chairperson Stern stated the Commission now had the information which was presented to the FAB; the Commission did watch the Meetings, and if the Commission saw fit to put this Item on the Agenda or to ask the FAB to investigate further, it would do so. He stated he did not believe a motion was necessary. Chairperson Polin stated he was a stickler for formality and his motion was designed to make a recommendation to the Commission which was the purpose of the Financial Advisory Board. Member Hillman stated he believed the $900,000 dollar shortfall was actually only $700,000 dollars. He stated the budget was currently in process; Management and Staff had not completed the budget and he felt this motion was premature and should not be made until the budget was more solidified. He stated it was premature to recommend the Commission investigate investing money for projects which have not even been defined. He indicated he felt it would be better to hold off on this decision until the end of the Session, at which Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 10 of 20 point if the FAB still felt retaining a lobbyist was a good idea then the idea could be revisited. He stated he would first like to at least see the budget presentation, discuss the numbers and get a better understanding of the numbers before considering this possibility. Chairperson Polin agreed this was logical. He stated he would table his motion with the consent of the second. Member Eisenband stated (inaudible, microphone not on). Member Hillman stated he did not have enough information to approve this motion. Chairperson Polin stated he had a conversation with Commissioner Gossett -Seidman who appreciated the value conceptually of retaining a lobbyist and was interested in having a discussion amongst her colleagues. He noted the motion was not binding on the Commission; it was only a recommendation in light of the fact the FAB was in place to help balance the budget and hopefully not raise the millage rate. Vice Chairperson Stern agreed with Member Hillman; however, he noted there would be time to discuss this matter further at a later date. ROLL CALL: Chairperson Polin - Yes Member Eisenband - Yes Member Hillman - No Vice Chairperson Stern- No The motion failed. Member Hillman thanked Ms. Mallette for making her presentation and stated that hopefully the Financial Advisory Board (FAB) would contact her in the future. 6. APPROVAL OF MINUTES A. May 22, 2019, Regular Meeting Chairperson Polin noted there was a grammar discrepancy in Item G "Discussion of Insurance Review," last sentence which read "...Marc Rheingold also worked with Mark, Mark and Waltz and was highly recommended." He stated he did not understand what this meant. Town Clerk Gaskins stated she would review the audio and make any necessary corrections. Chairperson Polin asked if there were any other corrections to the May 22, 2019 Regular Minutes; there were none. MOTION: Vice Chairperson Stern moved to approve the May 22, 2019 Regular Minutes with corrections. Member Hillman seconded the motion, which passed unanimously. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pale 11 of 20 7. UNFINISHED BUSINESS A. None 8. NEW BUSINESS A. Budget Presentation for Upcoming FY 2019-2020 Finance Director Lalla reported this presentation was an overview of the proposed Budget for FY 2019-2020. He stated this Budget had a total increase in the millage rate of 9%, from 3.719 mills to 4.0527 mills. He stated there was a slight increase in the debt service millage which was primarily the result of the debt service budget being approximately $120,000 dollars short of where it needed to be. He stated at the time the millage was being set for the current year, the town was going through an amendment to one of the State Revolving Loans which were in place for the water plant, and it was a little under -budgeted; this adjustment in millage would bring the rate to the proper level to service the debt. Finance Director Lalla reported there was no use of Fund Balance in the recommended budget. He stated it was important that a structurally sound budget be prepared for the Town and using reserves to continue to artificially suppress millage increases was not a sustainable long term strategy. He noted the Town only had a limited amount in reserves; especially considering a large portion of the general fund reserves was the result of a onetime land sale, which would not occur again. Member Hillman noted Member Eisenband had to leave in 10 minutes; therefore, if there were any items which required a motion it was important to review said items prior to his departure. Chairperson Polin noted upon Member Eisenband's departure the Board would no longer meet quorum. He asked the Finance Director how much a $500,000 dollar property would be expected to pay in terms of taxes with the proposed millage increase. Finance Director Lalla asked for a moment to calculate. Chairperson Polin consented. He stated he understood the unassigned fund represented money the tax payers paid in. He noted he believed every tax payer had a pro rata share of the unassigned fund and as such, rather than asking the tax payer to bridge the deficit, he recommended the Town consider taking $250,000 dollars from the $6 million dollars in the unassigned fund to narrow the $900,000 dollar shortfall gap. Finance Director Lalla stated the median property value in Highland Beach was approximately $500,000 dollars; at the current millage rate of 3.719 mills each property owner was paying approximately $1,860 dollars in Town taxes. He reported at the recommended millage rate of 4.0527 mills, property owners would pay approximately $2,026 dollars; this was an increase of about $166 dollars. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pave 12 of 20 Member Hillman asked what the current deficit (or shortfall gap) was in the budget. Finance Director Lalla responded approximately $675,000 dollars. He -explained this was the budget increase over the present year's budget; there was not really a deficit. Chairperson Polin recommended a portion of the unassigned funds be designated to help bridge the gap and lessen the burden on the Town's tax payers. Member Hillman noted there had been growth in the economy over the past few years; however, this growth was slowing. He stated the federal government intended to drop interest rates this month. He read a portion of minutes from a federal government meeting. He discussed real estate trends, which were trending downward. He stated the Town currently had an unassigned (or reserve) fund balance of $5.8 million dollars. He reported in the last two years the Town used $1 million dollars of the reserves to balance the budget. He noted the Town made $3.5 million dollars when the land was sold in Boca Raton; if not for this windfall town reserves would be at approximately $2.3 million dollars which was unacceptable. He stated siphoning from reserves to balance the budget was bad practice. Member Eisenband asked if the millage increase would also increase reserves. Finance Director Lalla responded in the negative. Discussion ensued regarding the millage increase, the $700,000 dollar difference in budgets, the increase in fund balance of about $150,000 dollars in FY ending September 30, 2018, and revenues not keeping pace with expenditures. Member Hillman reported the water sewer rate study would be completed in September. He stated Highland Beach charged much lower rates than its neighboring municipalities and if it raised the water sewer rate 2.5% another $100,000 dollars would be generated in revenue. Chairperson Polin recommended considering transferring the debt service payment for the; water and sewer fund out of the general fund into the water and sewer fund' He asked if Staff agreed. He asked how much the debt service payment was for the water and sewer fund. Finance Director Lalla responded the debt service millage for water and sewer was .62 mills. Discussion ensued regarding the benefits and disadvantages of transferring the debt service payment for the water and sewer fund out of the general fund into the water and sewer fund, the water and sewer rate needing to be raised 70% to cover debt service payments, the possibility of phasing Enterprise Fund debt service payments over to water and sewer rates over a number of years to reduce the impact, taking seven years to phase in the debt service cost at 10% per year, water and sewer rates going up regularly due to cost increase, and waiting until the Rate Study came back before making decisions. Chairperson Polin stated he would entertain a motion to adopt Staff's recommendation to transfer the debt service which presently existed in the General Fund to the Water and Sewer Fund over a sever year period. Finance Director Lalla indicated this was not Staff's recommendation; there were other considerations in the policy change which revolved around Town's resident's ability to use ad valorem taxes as an itemized deduction on Federal Income Tax returns. He Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 13 of 20 explained if debt service was fully converted to Water and Sewer fees, the payment would no longer be eligible for itemized deduction. Member Hillman asked about a motion to significantly increase the water and sewer rates and allow Finance Director Lalla to determine how high the rates should be increased. Discussion ensued regarding waiting for the Water Sewer Rate Study, the Water Sewer Rate Study not being completed until late September and the budget being considered now, focusing on the difference between expenditures and revenues, and how much reserves were necessary to keep on hand. Chairperson Polin made a motion to make a onetime movement out of the $5.8 million dollar unassigned fund, of between $100,000 dollars and $250,000 dollars or more, to help reduce the increase in the millage rate. There was no second. Discussion ensued regarding the motion, needing more information before approving the motion, waiting for the Water Sewer Rate Study, this Study not being available soon enough to apply to the Budget discussion, knowing current rates were low and an increase of 6% not being high enough to make the rates too high, increasing water and sewer rates not affecting debt service, efforts to find new revenue for the Town, and whether or not funds generated by water and sewer rates could bring down millage rates. Finance Director Lalla indicated a rise in water and sewer rates could result in a lowering of the millage rate for debt service purposes. Discussion ensued regarding the importance of the Water and Sewer Rate Study, debt service line items, and moving of the debt service over to the Enterprise Fund (Water Sewer Fund) not changing anything in the aggregate, residents would pay regardless. Town Manager Labadie noted all Board Members were correct. He stated he did not believe there was any single way in which to fix the gap in the budget. He stated he felt the Commission would wish to go into the reserves a little bit, would probably reduce capital and operating expenses, and the water rate would go up. He stated the Town had to get to the point where revenues and expenses balanced; how the Town got to this point would be tricky. He noted the budget workshops would begin soon during which the budget would be reviewed line by line. Member Hillman recommended a 6% increase in water rates (for an extra $150,000 dollars), reduce capital and operating expenses by $200,000 dollars, take the $150,000 dollar carry-over at the end of this fiscal year and roll it into the Budget, raise the mill rate by 0.1 mills (one tenth of one point) and the $700,000 dollar deficit was covered; there would be no need to take money from the reserves. Vice Chairperson Stern stated he agreed with Member Hillman and Town Manager Labadie. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 14 of 20 Town Manager Labadie reported the budget items which Staff was able to control were being controlled and were being lowered; however, the difficulties came with the uncontrollable items, such as debt service and fire safety. He noted the Town was keeping costs down in every way possible, even to the extent of holding department head positions vacant in an effort to keep costs down. Finance Director Lalla continued to review the Budget. He reported the Budget funded all salary and benefit requirements under the Collective Bargaining Agreements, and funded a number of Capital Projects. He stated the source of the recommended millage increase was related to additional debt service (6% of the overall increase of 0.3337 mills), and a need to replace the $700,000 dollars used out of reserves in the Fiscal Year 2019 Budget (84% of the overall increase of 0.3337 mills). Discussion ensued regarding the structural deficit, the difference between expenditures and revenues, actual versus budgeted expenditures leaving $150,000 dollars unspent, and what to recommend to the Commission regarding the Budget. Finance Director Lalla stated the Town's assessed value was moving in the right direction. He reported the most recent numbers from the Property Appraiser indicated a 5.12% increase in taxable value; included within that 5% was approximately $26 million dollars of new construction. He stated the Town tax rate consisted of two components, one of which was the debt service which serviced the debt in the Water Fund (State Revolving Loans). He explained the recommended increase brought the millage rate back to the 2016 millage rate; in 2017, 2018, and 2019 the millage rate was suppressed through the use of reserves. He displayed a slide which illustrated the sources of general fund revenues. He noted the Building Department was moved to a Special Revenue Fund in order to comply with State Law which shifted roughly $700,000 dollars in revenue out of the General Fund and into the Special Revenue Fund. He explained this meant the General Fund was now supported 81 % - through ad valorem taxes, rather than the previous 72% through ad valorem taxes. He noted the other General Fund revenue sources made up a very small portion of the overall pie. He displayed a slide which illustrated General Fund Expenditures at the recommended level. He stated there was a $675,000 dollar increase from the FY 2019 budget to the FY 2020 budget; this was a 5.7% overall increase. He displayed a slide which broke down the 5.7% increase into categories of expenditures. He stated the General Fund transferred into the Special Revenue Fund (building department) costs for the Town Planner position, which by law were not allow to be funded by building permit revenue. Discussion ensued regarding the Town Planner position, salary and benefits. Finance Director Lalla stated another Special Revenue Fund was the Discretionary Sales Surtax Fund which would fund the construction and engineering associated with crosswalks in FY 2020. He displayed the Budget for the Water Enterprise Fund which was funded with other sources non -revenue which included a $1.55 million dollar transfer from the general fund (equal to the debt service amount) and Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pale 15 of 20 $632,000 dollars from reserves within the Water Fund. He stated the Sewer Fund was a status quo budget; the capital was maintenance -related capital. He noted there was also use of approximately $290,000 dollars of reserves from within the Sewer Fund to help keep rates low. Chairperson Polin asked about the possibility of a sinking fund for capital replacement such as a potable water delivery system, piping, and wastewater. Finance Director Lalla stated for the water fund capital projects, the total was around $400,000 dollars. He stated the capital projects could be considered as funded by reserves. He stated the funding source for the water projects, and the sewer projects, was unassigned fund balance (technically called unassigned net position within an Enterprise Fund) within the water and sewer fund. Discussion ensued regarding the health of the water and sewer funds, the need to raise water/sewer rates, and the possibility of a water volume based fee rate. Finance Director Lalla displayed an ERP module for the Building Permit Module which was related to an initiative Staff hoped to put into place in 2020 to replace the Financial Information System presently used, which was around 20 years old. He stated the current Financial Information System did not allow for any direct interface with the building and permitting functions. Member Hillman asked if Staff had considered leasing rather than purchasing a new Financial Information System. Town Manager Labadie indicated there was an annual cost associated with the new Information System. He noted most of the initial cost associated with the new system was data conversion cost, as well as education and training cost. He indicated the budgeted amount was an over -estimation of actual cost. Discussion ensued regarding being able to save money on the purchase of the new Financial Information System compared to the current budgeted amount, the need for a new Financial Information System, the impact an Information System had on Town Management, and a new Information System enabling better work efficiency and functionality throughout the Town. Finance Director Lalla displayed a slide which illustrated a number of capital projects for the General Fund, such as police vehicle replacement, emergency generator building repainting, Town Hall security upgrade, street sign and post replacement, forklift replacement, and truck replacement. Chairperson Polin asked if the Town took advantage of State contracts with regard to vehicle replacement. Finance Director Lalla responded in the affirmative. Chairperson Polin suggested obtaining quotes from local vendors to compare vehicle rates. Town Manager Labadie stated he would check with the procurement expert in the Police Department. He reported the Town made efforts to repurpose vehicles as well. Vice Chairperson Stern asked if the Crosswalk Project, as it would cost approximately $350,000 dollars, would have to go through a referendum. Finance Director Lalla responded he was unsure; he noted research was being conducted in this regard. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 16 of 20 Finance Director Lalla displayed a slide which illustrated the impact of the recommended millage rate. He reported if the Town was to keep the millage at the current rate, with the growth in taxable value, approximately $438,000 dollars was gained in ad valorem taxes. He stated there were a number of things which were not in the Town's control, for example the increase in the Fire Contract consumed approximately one half of the additional property taxes gained from the growth in taxable value. Chairperson Polin asked if Staff felt comfortable recommending salaries only being raised by a cost of living increase. Town Manager Labadie reported the Collective Bargaining Agreements established the rates. He stated moving forward the Town may be able to negotiate a lower rate of increase; contract renegotiations began next summer. He indicated currently there was an up to 5% performance based raise which could be granted to each employee. Discussion ensued regarding employees under the Collective Bargaining Agreement (80% of employees) versus those not under the Collective Bargaining Agreement (20% of employees). Finance Director Lalla suggested keeping the recommended millage rate. He explained it could be lowered towards the end of the budgeting process in September; it was more difficult to raise the millage than lower the millage. Discussion ensued regarding the recommended millage rate being a "not to exceed" number; however, this number could be lowered before final approval of the budget at the September Public Hearing. Town Manager Labadie reported major initiatives included the Crosswalk Project; FDOT was willing to permit the project and he believed the Crosswalk Project would cost close to $350,000 dollars. He stated the Town needed a new Strategic Plan and was working in this direction. He stated the Town was reviewing the sanitary sewage system which would need updating. He stated the ERP (Information System) was antiquated and the Town financial software needed to be updated. He discussed the importance of a new ERP system and a new Strategic Plan. He discussed how a new Strategic Plan might be developed. Discussion ensued regarding the review of the sanitary sewage system's health and condition, the difficulty involved in this review, and accelerating the review process. Chairperson Polin commended the Town Manager for the major initiatives outline, especially the Strategic Plan which he believed was imperative. He stated he had some questions about the Fire Safety Contract with Delray Beach. He asked about the ambulance reimbursements. Town Manager Labadie noted the $28,000 dollars were reimbursements for ambulance transports from Medicare, Medicaid, and private insurance. Chairperson Polin asked about the provision which indicated Delray could charge for Fire Safety Inspections. Town Manager Labadie indicated this was a new Delray practice. Chairperson Polin stated he believed part of the fees collected from Fire Safety Inspections should be returned to the Town of Highland Beach. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pap_e 17 of 20 He discussed his reasoning. Town Manager Labadie stated he could look into this possibility; he would have to speak with the Delray City Manager and Fire Chief in this regard. Discussion ensued regarding this issue and this being a possible revenue source. Town Attorney Torcivia stated Fire Safety Inspections were negotiated into the Fire Safety Contract. Chairperson Polin asked if the possibility of a revenue source in this regard was considered during negotiations; he questioned whether the Town Attorney acted in the best interests of the Town and to the best of his ability during negotiation. Town Attorney Torcivia asserted he definitely acted in the Town's best interest and did an excellent job negotiating this contract. He reported the contract was negotiated at $1.5 million dollars less than any other provider was willing to accept. He noted Palm Beach County would not negotiate for anything less than $6 million dollars, and the contract with Delray was negotiated to $3.6 million dollars; he noted Boynton Beach would not even consider a negotiation. Discussion ensued regarding the negotiation of the Fire Safety Contract, the Fire Safety Inspections, and the written opinion of the Town Attorney regarding this specific clause. Town Attorney Torcivia noted he was aware this was possible revenue potential; however, Delray would not budge in this regard. Discussion continued regarding various points in the Fire Safety Contract with Delray Beach, the performance of the Town Attorney, the actions of Chairperson Polin, and proper Board Meeting behavior. Vice Chairperson Stern recommended keeping records how often the Fire Department used Highland Beach personnel to serve outside of Highland Beach. He stated he felt this might be a possible revenue source. Town Attorney Torcivia stated he met with Delray Fire Rescue regarding the percentage of calls which went outside of Highland Beach (approximately 50%); however, Delray refused to provide a discount for outside calls and at one point threatened to walk away from the contract completely if this point were pushed. He noted Delray was legally required to keep 22 employees to staff the Highland Beach area, and backup vehicles and personnel were provided when needed. He reported the Town discussed opening its own Fire Department; a study was done in this regard and it was determined to be too expensive. He noted this point could always be renegotiated in the future. Vice Chairperson Stern stated if the Town kept track of the statistics in this regard it may help in future negotiations. Town Attorney Torcivia agreed. Chairperson Polin asked why the Fire Safety Contract did not contain a cap on the annual service fee. Town Attorney Torcivia responded Delray would not agree to a cap. He explained Delray could not cap its own costs as it was difficult to know what Fire Safety costs would be. He noted if there was a 5% increase in costs for Delray Beach Fire and Safety, the 5% would be distributed evenly among all residents who paid the tax. He noted Delray was aware no other jurisdiction was close on price. He discussed the negotiations with Palm Beach County which ended up much too expensive at $6 million dollars. He stated Palm Beach County generally charged 3.5 mills in taxes for Fire Service. He reported extensive research went into discovering a better, more affordable option, and none was Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Page 18 of 20 found. Discussion ensued regarding renegotiations in the future, annual true -up vehicle audits, Highland Beach assets being used in Delray Beach, Highland Beach Fire Trucks being included as part of the Delray Regional Fire System, replacement vehicles coming from Delray Beach to Highland Beach when necessary, Highland Beach benefitting from Delray service trucks being sent to Highland Beach, and renegotiating the possibility of reimbursement for Highland Beach service trucks being used in Delray Beach in the future. Chairperson Polin asked if Highland Beach had a "standby contract" with a separate firm for hazardous material calls. Town Manager Labadie responded he was unsure. Discussion ensued regarding the "standby contract." Chairperson Polin stated he wanted to ensure the citizens of Highland Beach received an acceptable health, safety and welfare service. He stated he believed a required 5 minute response time should be included in the contract as this was the basic standard of care according to the insurance companies. Town Manager Labadie explained the ISO rating of the Fire Department would drive the insurance costs for the Fire Department; therefore, the Fire Department made every effort to keep response times low which in turn kept insurance costs low. He stated he believed the average response time for the Delray Fire Department was less than 5 minutes. He noted he would get this information for the FAB. Chairperson Polin encouraged Staff to include this as a negotiation point in the contract. Chairperson Polin asked for the Town Manager's thoughts about the Budget. Town Manager Labadie reported there was a change in meeting dates: the August 13th Meeting would be held on August 20th, 2019 at 12:00 p.m. and the Tuesday, July 23rd Meeting would be held at 11:30 a.m. not 1:30 p.m. He stated Staff would be doing some fine-tuning of the Budget. He noted both he and Finance Director Lalla had a very conservative approach to budgeting and tended to overestimate costs at the outset; therefore, he was certain actual costs would be lower and the Budget amounts would be lowered, as the numbers were fine-tuned. He stated the millage rate ceiling would be set on July 23rd, 2019; however, the millage would most likely be less. He noted some of the debt obligation might be transferred over to the water fund. He stated even though the final copy of the Water and Sewer Rates Study would not be ready prior to July 23rd, 2019 he believed enough information would be available to enable Staff to adjust the rate reasonably. He stated this three component adjustment should bring the Town into line with the Budget. He noted he would take into consideration all the recommendations and points made by the FAB during today's meeting. Chairperson Polin noted as Member Eisenband had to leave the meeting, quorum was no longer met. He called for a Consensus. Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Pate 19 of 20 It was the Consensus of the Financial Advisory Board to support Town Manager Labadie's recommendations regarding the Budget. Vice Chairperson Stern noted the year-to-date Town Investment Earnings this month was listed as $203,000 dollars which was the same as last month. Finance Director Lalla noted he would ensure this was corrected prior to posting. Discussion ensued regarding the sources of the Town Investment Earnings. Chairperson Polin asked about banking service costs. Finance Director Lalla reported the Town was in a multiyear banking arrangement, some of which was offset by balances maintained (earnings credit rate). He noted there were hundreds of types of fees included in banking contracts. He stated the Town's investment policy called for third party custodial arrangements which had not been done and he was looking into correcting this. He stated this would include a fee of roughly 5 basis points of the balance. He stated it was noted at the last FAB Meeting that Fidelity was currently the weakest performing investment. He stated he was looking to make a change to another mutual fund with a similar composition to the Fidelity Fund. Chairperson Polin commended Finance Director Lalla's efforts. He stated he noted the rate of return on investment went up from 2.1 to 2.3. Finance Director Lalla noted this helped; however, per Florida Law this was not the primary objective of a town investment portfolio. He explained State law required objectives be in the order of safety, liquidity, and then yield; yield was an objective only after funds were safeguarded. Chairperson Polin asked if Finance Director Lalla was done with the budget presentation. Finance Director Lalla responded in the affirmative. Chairperson Polin stated given the hour he suggested the remainder of the Agenda be tabled; he would contact Staff regarding a meeting date. It was the Consensus of the Financial Advisory Board to table the remainder of the Agenda. B. Discussion of Attorneys' Fees Line Item of the Budget, to include but not be necessarily limited to: 1. Review of FY 2017-18 Attorney's Fees paid to the Torcivia Law Firm (actual - versus Budgeted number and as a "Percentage" of the Total Expenditure side of the approximately $12 Mil. Budget; 2. Review of FY 2018-19 Attorney's Fees paid to the Torcivia Law Firm (actual) - versus Budgeted number and as a "Percentage" of the Total Expenditure side of the approximately $12 Mil. Budget; Financial Advisory Board Regular Minutes Thursday, July 11, 2019 Paj4e 20 of 20 3. Review complete Attorney's Fees Contract document; 4. Review of Recent RFP for Legal Services materials from the Town of Loxahatchee Groves (in the context of viewing the LG RFP as a structural model only); and 5. Request of Staff to do a small "survey" of similarly situated small municipalities ("SSMs") to see the structural delivery system of how legal services are delivered and the ratio/percentage of the Attorneys' Fees expended compared to the total annual budget of the SSMs — and supply data as "back- up" material for discussion at the FAB meeting. This Item was TABLED, as well as the three New Business Items added to the Agenda: "Discussion on May 2019 Monthly Financial Report" as Item 8E, "Discussion on Highland Beach Water and Sewer Rate Study Report — Status and Update" as Item 8F, and "Discussion on Agenda Protocol" as Item 8G. 9. BOARD MEMBERS REPORT This Item was TABLED. 10. ANNOUNCEMENTS 1. Code Enforcement Board Meeting — July 23, 2019 — 2:00 PM 2. Town Commission Workshop Meeting —July 30, 2019 — 1:30 PM. 11. ADJOURNMENT The Meeting was adjourned at approximately 5:22 p.m. APPROVED at" October"24, 2019 Regular Meeting. ATTEST; i da Gaskins, M Town Clerk David Stern, ice Chairperson Transcribed by: TEI/he f Date