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2015.08.20_FAB_Minutes_RegularTOWN OF HIGHLAND BEACH MINUTES OF THE FINANCIAL ADVISORY BOARD REGULAR MEETING Thursday, August 20,_2015 9:00 A.M. Members Present: Board Member Dragos Alexe, Board Member David Buchsbaum, Board Member Stephen Golding, Board Member Edward Komfeld and Board Member Lori Wolin. Absent: Board Member Bruce Giacoma Also Attending: Finance Director Cale Curtis, Town Clerk Valerie Oakes, Deputy Town Clerk Patrice Robinson, Commissioner Louis Stern, Commissioner Rhoda Zelniker, Town Manager Beverly Brown, and members of the public. CALL TO ORDER: Member Buchsbaum called the Regular Meeting to order at 9:00 A.M. in the Town Commission Chambers. Roll call was taken by Deputy Town Clerk Robinson followed by the Pledge of Allegiance. ADDITIONS, DELETIONS OR ACCEPTANCE OF AGENDA: Member Buchsbaum suggested that due to the Chairman's resignation, item B (appointment of Board Chair) should be heard first, followed by item A (discussion of 2015-2016 proposed budget) under new business. MOTION: Member Alexe moved to approve the reorganization of the agenda. Member Wolin seconded the motion, which passed unanimously. PUBLIC COMMENTS AND REQUESTS: There were no public comments. PRESENTATIONS: There were none. APPROVAL OF MINUTES: ® July 22, 2015 — Regular Meeting Member Buchsbaum called for a motion to approve the July 22, 2015 Regular Meeting minutes, as presented. Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 2 of 13 MOTION: Member Kornfeld moved to approve the minutes of the July 22, 2015 Regular Meeting as presented. Member Alexe seconded the motion, which passed unanimously. OLD BUSINESS: No old business. NEW BUSINESS: B. Appointment of Board Chair Member Buchsbaum announced that Gerald Gitner recently resigned from the board. He thanked Mr: Gitner for his contributions to the Board, and suggested that the Board collectively send a card or letter expressing thanks for his service. Additionally, the public is encouraged to consider joining the Board. Member Buchsbaum called for a motion to defer the appointment of Board Chair, in the absence of the Vice Chair, to the next meeting. MOTION: Member Alexe moved to defer the appointment of Board Chair to the next meeting. Member Wolin seconded the motion, which passed unanimously. A. Discussion of 2015-2016 Proposed Budget Finance Director Curtis formerly thanked former Chair Gerald Gitner for his service as he was a good resource. He discussed the updates to the proposed 2015-2016 budget based on the changes from the Town Commission's Budget Workshop that was held on August 4th. On the revenue side, the Commission came to a general consensus to lower the ad valorem tax rate from 3.95 to the computed roll -back rate of 3.7073. The roll -back rate is essentially defined as the no new taxes millage rate. This rate will bring in the same amount of taxes as levied in the prior year when applied to the current year's tax base. Any new construction, property that has been added or deleted from the base is excluded from this calculation. It brings in prior years tax revenues when applied to a new tax base. That change to our millage rate has resulted in a $488,000 revenue reduction from the proposed budget. On the expense side, there has been a number of changes that have been put into the budget. The first is the elimination of a systems analyst position in the Town Manager's department. He provided background on the elimination of the position. The library formerly had a full-time IT position in their department. Over the course of the last few months, that employee resigned and that position was then transferred to the Town Manager's department and what we're going to do moving forward is fill that position with a contractual computer services company, hopefully saving the town some money and probably improving our IT services. We've added back a full-time position (Library Assistant) with less responsibilities, with a $67,000 package as opposed to a $128,000 package. The Finance Department has a new auditing contract, so that budget's been reduced by $7,000. The Commission came to a consensus that they did not want to hire a Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 3 of 13 consultant to provide a feasibility analysis design for a streetscape project that would improve the Highland Beach walk path and entryways. So we've taken $75,000 out of the public works budget, however the walk path is in need of improvements and repairs, so we put back in $100,000, so it's actually one budget that has been increased by $25,000 due to that effect. The Commission had a consensus to eliminate the $68,000 that was budgeted for the license plate recognition camera systems. The Commission had a consensus to eliminate the $150,,000 for enclosing the library terraces. When we tally up these changes in the revenues and expenditures, we've got a reduction to the reserve for contingency, which is the general fund's budget surplus; it's a reduction of just under $228,000. There still is a budget surplus in the general fund of approximately $464,000. We still have at least three more meetings of the Town Commission where they can make changes with exception to increasing the tax rate of 3.95. Who would like to go first with their review of their assigned budget section selections? General Fund Revenues & Debt Services <B> Member Buchsbaum — I was charged with general fund revenues and debt services. Is the roll -back rate to last year or to 2007? Finance Director Curtis — The roll -back rate is to last year. Member Buchsbaum — With this roll -back of $488,000, we still have a budget surplus of $464,000, which commissioners can take under consideration as they set the new millage rate. We're in a very healthy position. When I began on this advisory board we had a deficit of close to $1 million dollars. In addition to the millage rate, the town's values have improved, we sold a piece of property for $3.5 million, and we've had the roll off of debt service on the library, which are positive events which have positively impacted the financial position of the town. If we go back to 2007, how are we reserved right now relative to that time period in terms of overall reserves? Finance Director Curtis — At the period of 2007, we were able to increase our reserves very significantly. Those were boom times prior to 2007. We were having a pretty significant budget surplus that we were able to increase our reserves. The years thereafter as property values quickly declined, the Commission was reluctant to adjust the tax rate rather they would reduce it and then take money from those reserves which led us to 2011 as you're speaking of when the Financial Advisory Board made a recommendation to stop taking money from the reserves to balance the operating budget, increase the tax rate proportionately to close that gap and start using the reserves balances for your one time capital improvements, for disaster preparedness and so forth. I think over the last three years, the Town Commission has done that, they have kept their tax rate steady at 3.95 and as the tax values, tax base increases and our general fund expenditures almost stays the same with exception to capital improvements, we were able to replenish those reserves over the last few years. And we are still at that point and the current proposed budget where we have a surplus, if that surplus doesn't get spent then it will go into the reserve funds. Member Buchsbaum — I guess what we need to drive at is a general sense of what an appropriate level of reserves is in terms of discussing the budget, what our goals are and what the Commission's goals are going to be. It would appear that we have a lot of reserves, more than is necessary relative to our immediate needs. There's an opportunity to reset the millage rate every year. In terms of our current position of unassigned reserves and total reserves where are we currently? In terms of looking back what would you like to compare that to? How do you feel about our overall reserve position? Finance Director Curtis — The makeup of our fund balances, we've got Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 4 of 13 two sections that are assigned for specific purposes, one is assigned for disaster recovery, that amount is designed to grow by $100,000 each year until it reaches a maximum of 1/ 12 of the then in effect general fund budget. I believe the current balance of that is about $500,000, 1/12 would equal between $850,000 and $950,000. We fund it by $100,000 each year on October 1St with a transfer from our unassigned reserves. The second assignment of fund balance which is the Best Practices given out by the Government Finance Office Association is an assignment that's called budget stabilization and they recommend that you have 2/12 of the then in effect general fund budget set aside. It's used for periods of revenue shortfalls due to the timing of tax payments that come in to help stabilize your monthly general fund operations. That reserve fund is fully funded and this year it is at $1.9 million. Outside of those two reserve balances, we have what is called the unassigned fund balance and that is what everybody commonly refers to as the rainy day fund. It is the Town Commission's surplus revenues that have been collected over the years and built up so that they can use at their discretion for items such as one time capital improvements, for periods of economic distress where they need to drastically lower tax rates and plug those funds in on a short term basis. They can use it at their discretion, it's also used in periods of crisis or disaster and that fund amounts to about $3.6 million. Member Buchsbaum — There is also two more unassigned reserve funds for the water plant, how much is that? Finance Director Curtis — In the water system, the unassigned fund balance is around $4 million and $3.5 million of that is directly associated with last year's land sale of the former water plant property. Member Buchsbaum — There is one other large amount. Finance Director Curtis — Which is about $1.5 million in the sewer fund. Member Buchsbaum — In total, it's $11.6 million. That's a lot of reserves. Would you agree? Finance Director Curtis — I would agree. Member Buchsbaum — Does everyone agree with what I'm saying? Member Kornfeld — We have $11 million in reserves, some earmarked, some not, history has proven that they come in handy only if it is used wisely or if there is a catastrophe. We have 5% on our hurricane coverage. What does that 5% amount to if we have a hurricane? What are the values? Finance Director Curtis — I think it's around $2 million. Member Kornfeld — So $2 million of the reserves can be used in that case. So I am for where it is. I think we have to watch it closely every year. Should we utilize it for landscape projects? Member Buchsbaum — Let's hold off on the utilization question. Fortunately we have a lot of cash available for our immediate needs. In terms of debt, could you briefly address the significant debt that the town currently has to the extent there is any and whether or not it's encumbered? Finance Director Curtis — All of the debt is currently assigned in the water fund and it's associated with the distribution plant and the distribution lines. Annually, we have about $1.4 million in principal and interest payments and all of that debt is secured by ad valorem tax dollars. Our voters and the Town Commission has taken a policy decision to pay off the water fund debt with ad valorem taxes as opposed to user rates. This provides a number of different benefits to the Town as well as the residents that are paying the taxes on the debt. We are looking at adding new debt for our $ 5 million water infrastructure improvement project that's budgeted in the current year budget. We're looking at funding that project with a very low interest loan from the State Revolving Fund (SRF) Program that's administered by Florida's Department of Environmental Protection. That has been voted to be funded by ad valorem tax dollars. There was a discussion probably almost a year ago with regard to how we are going to fund this $ 5 million water Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 5 of 13 infrastructure improvement project. The topic was bought up and discussed by the Financial Advisory Board because there was the understanding that we would have $3.5 million coming in from the land sale and the question was should we use those funds to offset some of this new debt associated with the capital improvement projects or should we fully fund it with SRF funds? The Financial Advisory Board's recommendation to the Town Commission was to fund it with the low interest loan offered by the state of Florida because it's very cheap money. Looking at the future, we may have additional capital improvements that will not be eligible for this low interest funding that we could use the unassigned fund balance to cover it. That topic was bought up at the August workshop meeting of the Town Commission and I think I was able to express the Financial Advisory Board's opinion on that and their recommendation on it. I don't know if anybody would like to further comment on that just to reinforce the recommendation. Member Buchsbaum — I'll try to frame the issue as I did listen to the transcript of the budget meeting that the Commission held and basically there were two issues raised. Why don't we use the $3.5 million to pay for the water infrastructure improvement project and this advisory board made a recommendation that we utilize the state available funds which are currently about 1.85% interest. That was the consensus of this Board at that time. Some Commissioners are thinking why should we pay 1.85% when we are only receiving a low percentage of interest with respect to our cash reserves that are in the bank currently. We always have the option of if we have the funding available at 1.85% and we have the opportunity to take advantage of it, that availability is not always available at that rate if we do avail ourselves of it. We're paying it in inflation affected dollars that are in my view a 0% interest loan because adjusted for inflation we're going to be paying for in less expensive dollars. You have then $3.5 million that the town has which it can use for other capital or emergency expenditures or give it back to the taxpayers in the form of a lower millage rate. The recommendation made by this Board was very thoughtful and I would encourage the Commission to take that position. Member Alexe — I concur. That's what we agreed on. I thought it was a wise decision. My suggestion to the Town Commission is also to take this loan right now and just use the reserves that we obtained from the sale of the land for future capital projects. Member Buchsbaum — I would add though with respect to the millage rate discussion and water infrastructure improvement project which we are going to hold towards the end, that the $3.5 million be held back until the financing is finalized allowing us to pay for it with those funds if we need to do so. Any discussion of perhaps giving back those funds to the public is best held until next year's budget and setting the millage rate for the following year after that financing is in place, which just seems to be a common sense way to approach it. With respect to capital expenditures, other than the water infrastructure project and looking at the 5 -year projections, it does not seem to me that we have any significant needs that really need to be addressed in a macro way. Most of them are smaller requests. Personnel /Payroll Benefits <B> Member Kornfeld — I reviewed the Highland Beach personnel payroll benefits, several key policies, support documentation and their associated budgeted expenses. I did not review in detail all plans and procedures. I did do cursory reviews on the key ones and I consulted with the Finance Director on the others. My specific attention was directed to the annual Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 6 of 13 remuneration of our employees and associated benefits. I reviewed pay scale policies and grades based on the recommended pay plan developed by consultants several years ago. I did a cursory reading of the Town of Highland Beach Personnel Rules & Regulations manual dated December 31, 2013. I reviewed the budget totals of gross payrolls and benefits provided to the town's 50 employees, which consists of 38 full-time, 7 part-time and 5 elected officials. The budget for 2015-2016 payroll and benefits are as follows. The gross payroll is approximately $3 million. Health insurance costs for employees and dependents is approximately $800,000 with the employees contributing to that cost ranging from zero to 15% with an average 11%. Employees contribute 3% to retirement pension plans costs for the Florida Retirement System (FRS) and our cost is approximately $475,000. We have what is called IRS 457 deferred compensation plan that several employees take advantage of based on specific situations and it costs about $40,000 a year. Life insurance costs is about $10,000 a year. Dental plans cost about $16,000. Vision plans are approximately $3,000. Short term disability insurance is approximately $10,000. Long term disability insurance is approximately $11,000. Tuition reimbursement plans cost about $1,000 a year. We provide the employees 14 days of sick leave and at the end of the year we pay them for unused days which is approximately $40,000. We provide holiday and birthday gifts which costs approximately $6,000 per year. The proposed budget had several changes. Longevity bonuses were reinstated based on years of employment with a cost of about $17,000. The 5% merit increase was replaced with a 2% cost of living increase on October 1 st and a 2% on April 1St and the net savings on that is about $7,000. The elimination of the education incentive plan for non-union personnel would save about $24,000. To summarize our budget of gross payroll is approximately $3 million. The total net cost of all budgeted benefits is approximately $1.5 million, therefore the total cost of payroll and benefits for all employees is $4,450,000. The above noted payroll and benefit plans have been put in place with good intentions to keep Highland Beach competitive in hiring and retaining our worthy employees. My review indicates that the town's plans are well structured and overseen appropriately. I do recommend that the Town Manager and the Finance Director undertake a complete review with the assistance of an outside consultant with proficiency in these areas of each component of our payroll and benefit structure to ascertain if we are competitive in the remuneration of benefits and the amount that is contributed by employees for those benefits. This evaluation should compare our programs against municipalities in other areas of Florida. This review should consider the best business practices of Florida industry. Payroll and benefits are not fixed expenses, they increase and compound annually. They need to be addressed and reviewed annually on how to continue to provide competitive pay and benefits in these business and economic environments with an eye on cost containment. I'd also recommend that the proposed budget changes I noted earlier, not to be put into effect until the review is complete as other adjustments could be warranted. In summary we have very good employees. They seem to be paid in pay and benefits extremely well and it comes down to looking at the relationship to the environment we live in because if it's in line with Boca, Delray and Broward County, then we must keep it that way so as to not lose talent to other towns. On the other hand, if it's above, then we should try to adjust accordingly. Member Buchsbaum — You're suggesting that an outside consultant come in and review the current pay structure? And what was the final part? Member Kornfeld — To put the Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 7 of 13 recommended changes on hold. A whole plan should be put into place. We'd be better off doing a complete review when approaching benefits and salaries. Member Buchsbaum — My understanding of what the Commissioners are considering currently is that the merit pay structure that was in place previously has been repealed in favor of a Cost of Living Adjustment (COLA) increase plus seniority pay increase and that there are essentially 28 employees involved here that are not under union contracts. He asked the Town Manager to briefly address this topic. Do you have an opinion with respect to whether you like a pay structure that gives you more autonomy in terms of how to pay people or the one that is currently proposed? Town Manager Brown — Prior to preparing the budget, I met with all the Commissioners on a one on one basis. All of them were in the opinion of somethings needed to be changed, they were tired of giving 5% merit raises to everyone. When you have only 28 full-time employees, when you do an evaluation, it's difficult to give someone a 3% and someone else a 5% raise. The recommendation was if someone does something superlative like going out to get a grant or something. We do not qualify for many grants because of our property values and we do not do many large projects. My recommendation was to give a COLA, when you give a COLA that adjusts the maximum pay of every employee in the system. So to give a 2% COLA at the beginning of October and then 6 months later another 2% step increase, that would change everyone's salary to just over 3.2%, this is eliminating the 5% and meeting the demands of the Commission. But since we made this proposal, they have had different opinions about it, so I'm not certain how they are going to do it. If we had a consultant come in like it was recommended, they would understand the different systems we have within this area. I know the Mayor has contacted some of the other communities in the area but it's hard when you contact a town where the property value is a maximum of $30 million compared to ours at $1.2 billion, you can't say you're going to give your employees 2% when your property values are only $30 million and then come back to say we're only going to give you 2% when our property values are $1.2 billion. We have employees that work outside of their job description because we do everything. Member Buchsbaum — I appreciate that you certainly want to take into consideration how the Commission feels on this issue, but to the extent that you are in charge of hiring, firing, changing compensation, and I don't know that in the past we've ever lowered somebody's salary by 10 percent. Town Manager Brown — This last pay classification was adopted January 1, 2014 and was done in 2013 and everyone's, I think 95% of the people's range of salary changed a little bit, there was only two people that were at the maximum of what they should be paid. And it had not been done since 19959 so it was a long period of time between these two evaluations. Member Buchsbaum — But from your perspective in terms of making the decisions that you need to make as Town Manager and giving people the proper incentives when they do a great job being able to reward them or if they do poorly being able to handle that situation appropriately. Are you comfortable with where you are presently? To what extent do you approve of these changes that are being proposed? Town Manager Brown — Right now, everyone's evaluation is being done by their supervisor, so I have to accept what their supervisor's recommend. Member Buchsbaum — May I ask why that is? Town Manager Brown — That's the way our evaluation form is done, the last page of the evaluation says what do you recommend as a salary increase. Member Buchsbaum — Is it fair to say that Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 8 of 13 the town has adopted a weak town manager position? Town Manager Brown — When it comes to salary increases, yes. Member Alexe — I think we have great employees in this Town. As you said, they don't have specific job functions, they do everything in town. So the fact that we are taking away the incentive program, especially when it was offered to them before, it's going to cause a morale issue and a productivity problem in the town. I have no idea of what we are trying to accomplish by taking their incentives away. Are we looking to reduce the taxes because their raises are only pennies? I would pay two cents more a year to give them the raises. I don't understand what we are trying to accomplish. We are a Town with good financial reserves, unless you think that this needs to be revamped or we're doing something morally wrong by incenting these people, I understand that everybody's up in arms about a 5% salary increase but that's right along with the industry standards, so what we are doing is transforming a good people issue into a bad management issue. If the employees perform, they should be rewarded. We are right here on the ocean. We have a hurricane season that's not over for this year and next year. If something hits, do you want the town employees to perform or just think well I'm not going to make any more money, why should I put myself in harm's way to fix the water system? It's unclear to me at all what we are trying to accomplish by taking these incentives away. Town Manager Brown — I believe the thought was that once the salaries go up every year so does the retirement costs, the insurance costs, and the social security costs. I believe they are trying to reduce the taxes in an overall position and part of it is reducing the benefits to employees. Member Buchsbaum — I concur with that. The view seems to me to be that we have good employees and they are well compensated. It seems like what we've done is basically kept the status quo in terms of this policy. I'm sure that it's adequate for employees to the extent that they are reasonably compensated. But from a management point of view, it would seem to me that you would benefit from having an active discussion with the Commission with respect to what's going to allow you to do your job more effectively and it seems to me that this system doesn't allow you a lot of autonomy. Is that fair to say? Town Manager Brown That's correct. Member Buchsbaum called for a motion regarding hiring a consultant. MOTION: Member Kornfeld moved to bring in a consultant to assist the Town to review payroll, benefits, practices and costs. Member Wolin seconded the motion, which passed unanimously. Member Golding — I met with the Finance Director and I was very impressed with him. I approached this task as I would a client of mine. I found the procedures that the Town has to be excellent. There's an enormous amount of checks and balances. I spoke with the Finance Director about what happens at the end of the year if the budgets have not been reached and if the department heads try to force money in order to reach the budget. He said both he and the Town Manager look out for that so that there's no padding at the end of the year. A budget is a best guestimate. I think increases and things like that should go to department heads who save the town money instead of looking to equal what was done Financial Advisory Board Regular Meeting Minutes Thursday, AuLyust 20, 2015 Page 9 of 13 last year. I think we should be looking to save the town money. At one time we used to use ADP for payroll, which happens the most expensive payroll service. They don't use that anymore. They went to another payroll service. I also asked him about town contractors, specifically the Building Official and why do we use an outside contractor versus our own personnel. He said development in this town is on the downside, if we have a full-time person when there's no work we are going to be paying them. If it's outside service, we are going to pay for what we use and I was impressed with that answer. I was really impressed with how the town employees handle the operating expenses. I think some incentive should be given to those department heads who have the ability to save the town money. Water & Sewer <B> Member Wolin — I reviewed the water and sewer budgets. I noticed that the line item for water connections, the revenue is budgeted for zero next year, and the reason why it is budgeted at zero if I'm correct is because you don't expect as many connections as prior, but my question is do you expect any connections? Finance Director Curtis — Yes, we probably could expect three or four and what she is referring to is our impact fees that are associated with new construction on a vacant lot, and somebody comes in and applies for a permit to build a home on a vacant lot and connect that home to the town's water system we charge them a one-time impact fee of $3,000. It kind of stands out in the current year's budget, there is $60,000 in there and that is due to the 20 units that have gone up at 3200 S. Ocean Blvd. We certainly don't expect a 20 -unit condo to go up in the next couple of years. We're virtually built out. There are only a few vacant lots left. We average one to three impact fees. We could adjust that budget and put $6,000 - $9,000 in there. Member Wolin — So it's min * m al. We have the revenue numbers for water and sewer, what are the unit numbers and the price per unit and my question regarding that is the budget schedules and increase of $50,000 in water for the coming year, sewer being the same, that $50,000 increase is that due to an increase in price per unit or number of units? Finance Director Curtis — Based on the current year's actual numbers, we have actually seen an increase in the water consumption. So within the revenue item, there is not only a flat rate, there is a usage component to it. The flat rate stays the same based on the number of units we have and depending on where I see usage trends going, we fluctuate it a little bit, up or down. Member Wolin — So rates are staying the same for both sewer and water, just a higher water usage is anticipated. Finance Director Curtis — Budget wise, yes. I'd just like to add to that that we are currently working with a consultant on a rate study. Their study should be done within the next sixty days and then they will make presentations to the Town Commission which could result in rate adjustments sometime after the first of the year. Member Wolin — We have a fairly large capital outlay request for the water department. Let's take the two line items, the water main replacement project and the lime and slurry carbon dioxide system, are those numbers based on bids that we have already received or are they just a best guess? Finance Director Curtis — They're a best guess. Member Wolin — When do those bids go out or the request for proposals? Finance Director Curtis — We just approved a ranking for hiring an engineer to prepare a complete design and ultimately bid packages to go out. We have a meeting with them today to finalize and negotiate a contract. Once those negotiations are done, assuming we can come to an agreement, we'll bring that back to the Town Commission for their approval. At that point the consultant will then come in. Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 10 of 13 I am hoping before the first of the calendar year and then shortly thereafter those bid packages would go out. Hopefully we'll get a good response in this heavy construction climate. Member Wolin — Where are these requests for proposals advertised or posted? Finance Director Curtis — The requests for proposals (RFP) of this magnitude, they go in a number of different places, they go on the town's website, an ad in the Palm Beach Post, and we also utilize a website called Demand Star, there are hundreds of thousands of different vendors, contractors, consultants, engineers that sign up to receive notifications when RFPs like this go out. I'll upload that RFP, all of that information and select the commodity code for construction contractors of this nature and it will send a blast email out to all of them. They can then download the RFP, see if it is something that fits their service and if it's something they want to bid on and then they can respond to the RFP. We reach a lot of different vendors, granted they are all over the country, but there a lot here in Florida. Member Wolin — These numbers can and probably will vary based on what we receive back in terms of bids? Finance Director Curtis — Yes they will. Based on our Public Works Director, he formulated the estimates on it, he has said over and over again that he estimated on the high end. Member Alexe — Public safety is a great concern of the Town. We outsource the fire department and the first aid services to the City of Delray, which I'm not sure how we can save any money there for the town, I think they are doing a pretty good job. The only issue is the fire truck. Should we lease a fire truck from the town of Delray, which we are doing right now? I think the consensus was that we will continue to lease the fire truck. The security cameras were taken out of the budget as there is an issue with FDOT. The Commission is for that and I am personally for that too, it's just a matter of when the State of Florida will actually allow us to go ahead. They own the right-of-way next to the streets and that's an issue that will be tabled for now. I looked over everything and I don't really see how we can reduce the budget at all. I recommend that we stick to those figures that are in there and not change anything. At this time, Member Buchsbaum with respect to public safety budget, requested that the Board be included in communications regarding the police union contracts so that they can offer input. Member Alexe — My personal opinion about the tax rate is that we should not roll anything back right now. There can be other emergencies and Public Works mentioned some issues that are not included in the future capital plan. Other Towns break the mill rate into general fund and they have a special break down for capital improvements. This way the taxpayers know what the general fund is for the regular operations of the town and what the capital improvement mill rate will be. Once you lower that it's going to be a very difficult, both political and financial decision to raise it back again and you have to obviously explain to the people of the town what's going on every time. If we do the breakdown and we have the capital improvement portion of that separate then they would understand that capital improvements are needed and that particular portion can go up and down. With the mill rate we are right in between what other towns around us are. The savings is only $464,000, which is just peanuts if you have to divide that by every taxpayer. I'm not sure if it's worth Financial Advisory Board Regular Meeting Minutes Thursdav, Auzust 20, 2015 Paye 11 of 13 it. My advice to the Commission is to see what's going on and to just leave it as it is at least until we secure the loan. Member Buchsbaum — Respectfully, I am going to take an opposing view. I was a part of the advisory board when we ran a deficit of $1 million and absent going to the roll -back rate what would our surplus be this year if we kept the tax rate the same? Finance Director Curtis — $692,000 at the 3.95 rate. Member Buchsbaum — We've gone from a deficit of $1 million to a surplus of almost $700,000, plus we've got the roll -off of the library for $400,000 a year, plus we have the $3.5 million from the land sale and our reserves at this juncture are probably as high as they have ever been. I don't know why we would continue to go ahead and add to the unassigned reserves. I would suggest that the millage rate should at least go back to the roll -back rate or to a neutral rate. We are over reserved in my view point. Discussion ensued between Member Buchsbaum and Member Alexe regarding the overall level of reserves, what the taxpayer will receive, breaking down the millage rate, and the roll -back rate. Member Buchsbaum — Respectfully, the rate has gone from 3.4 to 3.95 so the idea that it's likely to go higher in anywhere over the relative near term is not in the cards. Member Alexe — If the property values continue to go up, obviously the tax base is much larger so you can actually lower it even more. There was discussion regarding the rate of returns on investments. Member Buchsbaum — How much is our total unreserved funds in all accounts? Finance Director Curtis — We have about $6 million in the general fund, $4 million in the water system and about $1.5 million in the sewer system, $11 million in cash reserves between all three funds. Member Buchsbaum — Can we give back $400,000? Member Alexe — Yes. I mean it's a Commission decision, obviously we can only advise them. Why are we taking the state loan if we have $11 million that is not allocated? Member Buchsbaum — Essentially you're faced with two roads. You can avail yourselves of the financing available with the state and considering lowering taxes to taxpayers in the Town or you can go ahead and pay down debt as you incur it and decline to avail yourself to state financing and maintain a higher tax rate. My opinion among the two is that you can always raise rates later. We are adequately reserved and I think that the financing makes sense. I think that puts the Commission in the enviable position of being able to lower taxes and I do recommend availing themselves to the financing. We have made a recommendation as a Board that the financing should be pursued. Member Alexe — Let's go ahead and give the $464,000. Member Buchsbaum — We are in general agreement that they should avail themselves of the financing and that they are in the enviable position of being able to lower rates. I would be happy to vote for a roll -back rate. Member Kornfeld — When you roll- back rates everybody cheers, when you raise rates, they forgot that you lowered the rates and everybody is unhappy. What I am hearing from Member Alexe is that it's a few dollars. The roll -back for me is maybe $300, that's what my taxes get affected by. If I had an increase of $300, I'd want to know why. What were our reserves in 2009? Finance Director Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Paize 12 of 13 Curtis — With all three funds combined, it was probably in the range of $6-7 million. Member Kornfeld — Was it going south at that time? Finance Director Curtis — Going south. A large portion of that $11 million, well $3.5 million of that $11 million in reserves just came in this last year in the water fund and I think what Member Alexe is trying to explain is that the $11 million is allotted, $6 million is associated with the general fund, $4 million in the water fund, which $3.5 million of it just came in, that's been a troubled fund, it's been operating at just barely covering its costs, not accounting for capital, hence the rate study. The sewer fund is again another fund its rates are just covering its costs, over that last couple of years we've just started to use their reserve funds to balance the budget. When we get to a point of do we want to use a reserve funds to pay for this $5 million project, yes we certainly can, but we'd bring our reserves down to zero in the water fund, they've got $4 million, we'd have to bring them down to zero, we'd have to borrow $1 million from the general fund or borrow it from the state, we certainly can do that, but we'd forgo the efforts that we've gone in the past to bring those reserves up. I hear the Board's recommendation is to continue on with the low interest loans from the state of Florida and reserve those unassigned funds of $4 million for future projects, with the possibility that once the financing goes through that we can then take a look at making adjustments to tax rates or user rates, offsetting our future capital needs. Member Kornfeld — We are still going to net increase our reserves with these adjustments for the year. If we bring our rate down, we are still going to be increasing the fund by $464,000. I'll vote for the adjustment, I have no problem with that. MOTION: Member Buchsbaum moved to make a recommendation to the Commission utilizing the roll -back rate as presented today. Member Kornfeld seconded the motion, which passed unanimously. Member Kornfeld — Why are we cancelling the consultant for the walk path project if we have $11 million in reserves? This is something that I think the town would like to do. What was the purpose of taking it out? Town Manager Brown — It was just an opinion of some of the Commissioners, they'd rather not spend $75,000 which was just for a consultant to come in to make a recommendation on the streetscape. The streetscape is going to cost us about $1.5 million and even once we have the consultant come in we'd have to go to referendum because the total cost would be over $350,000. They felt a black paved streetscape walking path did not harm the town. Runners that run on it prefer to run on pavement rather than brick pavers. Member Kornfeld — We don't know what the consultant would suggest. There are a lot of different ways to approach it. There has to be more than two ways to address it. Member Buchsbaum — We are in a good cash position and the Commission is in a position to consider capital expenditures. We have a priority for public safety. The next budget meeting will be on August 25th. On September 10th, they will have to adopt a tentative budget. On September 24th is when the millage rate is set. Is there any need for this Board to meet in the near term? Finance Director Curtis — I would advise meeting sometime in the middle of October to reconvene to go over how the budget was finally received and formally adopted. As a recap, I've got three formal motions that the Board made that I will Financial Advisory Board Regular Meeting Minutes Thursday, August 20, 2015 Page 13 of 13 advance to the Town Commission: (1) to reaffirm the Financial Advisory Board's ^`' recommendation to use the State Revolving Loan Fund for the water infrastructure improvement project; (2) to hire a consultant to provide a comprehensive review of the salary and benefit packages for all employees; and (3) to reaffirm the Town Commission's position to adopt a tax rate to the roll back rate. ADJOURNMENT: There being no further business to come before the Board, the meeting was adjourned at 10:26 a.m. APPROVED: Dragos A e, Board Member TOWN SEAL Patrice Robinson, CMC Deputy Town Clerk Date: David Buchsbaum, Board Member A Bruce Giacoma, Bo*lajm �r Stephen Golding�ard IVxember Edv rd. . K6 .feed, Board Member Lori Wolin, Board Member 0 4