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HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 2/6/2018 City of Glendale 5850 West Glendale Avenue Glendale, AZ 85301 � f Meeting Minutes Tuesday, February 6, 2018 9:00 A.M. Budget Workshop Meeting Council Chambers City Council Mayor Jerry Weiers Vice Mayor Lauren Tolmachoff Councilmember Jamie Aldama } Councilmember Joyce Clark Councilmember lan Hugh Councilmember Ray Malnar Councilmember Bart Turner CALL TO ORDER Mayor Weiers called the meeting to order at 9:00 a.m. ROLL CALL Present: Mayor Jerry Weiers Vice Mayor Lauren Tolmachoff Councilmember Jamie Aldama Councilmember Joyce Clark Councilmember Ian Hugh Councilmember Ray Malnar Councilmember Bart Turner Also Present: Kevin Phelps, City Manager Tom Duensing, Assistant City Manager Jack Friedline,Assistant City Manager Michael Bailey, City Attorney Julie K. Bower, City Clerk WORKSHOP SESSION 1. FY16-17 COMPREHENSIVE ANNUAL FINANCIAL REPORT AND ANNUAL AUDIT UPDATE Presented by: Vicki Rios, Director, Budget and Finance Presented by: Lisette Camacho, Assistant Director, Budget and Finance Guest Presenter: Dennis J. Osuch, CPA, Principal, CliftonLarsonAllen, LLP Ms. Bower read the item by title. Mr. Osuch said the audit process examined and verified management's assertions and provided opinions and recommendations for improvement and efficiencies. Auditors reviewed the high-risk areas and based the audit on a risk assessment. Mr. Osuch said the audit steps performed in the reporting package included the Comprehensive Annual Financial Report, Single Audit Report, Independent Accountants Report, Annual Expenditure Limitation Report, Landfill Assurance Agreed-Upon Procedures and a Management Letter. Three programs were audited for FY16-17: Community Development Block Grant (CDBG), Section 8 Housing, and the Federal Transit Cluster. He said a clean report was issued for all three programs. There was one material weakness and no significant deficiencies and no matters of noncompliance were,found related to a major federal program. Councilmember Clark asked how the scope of work was decided. Mr. Osuch explained that the scope of work included the required statutes and reports. Planning the audit included the material audit areas. Aspects that would be important to investors or other financial statement users would have been considered. Management and Council would have been contacted to ask for concerns. Councilmember Clark asked for an example of"surprise procedures". Mr. Osuch explained that every year it was something different. For this year, samples of the sales tax receipts were collected for the "surprise procedures". The receipts were self-collected by the City and when looked at from a risk perspective, the risk was higher on self-collection City Council Meeting Minutes-February 6,2018 Page 2 of 7 rather than receipts collected by the state. Mr. Osuch said there was a common issue with construction. It was not uncommon to find construction that had been completed but the account showed the construction project was in process. Once the construction had been completed, the project needed to be marked completed. When that did not happen, it created a risk that the valuation of the assets did not get depreciated. Councilmember Clark said now that the State was collecting the City's sales tax, revenue was below what had been projected and asked if that problem had been corrected. Mr. Osuch said, based on the analytics that were completed, the revenue looked comparable. The State was slow at collecting revenue, so there might be a larger accrual of revenues at the end of the year. Ms. Rios said a mid-year review had been completed and the sales tax collection was on target. Councilmember Clark asked Ms. Rios to confirm that the City paid the State $450,000 to collect the sales tax and:how that process affected the Budget and Finance Department. Ms. Rios said that the actual cost had increased for the upcoming year to$580,000. It was a time-consuming process and there was a risk that sales tax payments could be going to the wrong jurisdictions. Staff closely monitored the sales tax revenues. Councilmember Clark asked for information on the one material weakness that was found during the audit. Mr. Osuch explained that adjustments were proposed to recognize revenue within the fund financial statements. There were two basic financial statements. One was a government-wide financial statement(full accrual basis)and the other was the fund level financial statement (modified accrual). The revenue that was proposed needed to be accrued at the fund level. He said corrections were made to the following: pre-pays related to capital assets; some contributions to the Public Safety Retirement System (PSRS); suggestions to deferred in-flows and out-flows of pensions; deferred in-flows and out-flows; and assets that were shown as construction in progress were moved to depreciable assets. 2. FY17-18 MID-YEAR FINANCIAL REPORT Presented by: Vicki Rios, Director, Budget and Finance Presented by: Lisette Camacho, Assistant Director, Budget and Finance Ms. Bower read the item by title. Ms. Camacho said the presentation would provide the mid-year results for the General Fund, Special Revenue Funds and the Enterprise Funds. Overall, the General Fund was on target. She provided a breakdown of each fiscal year and the sales tax revenue. Councilmember Clark asked what was covered under the category of"rentals." Ms. Rios said it included all rentals, both residential and commercial. Councilmember Turner asked if retail sales tax was collected at a lower tax rate. Ms. Rios said the retail sales tax rate was 2.9 percent. Councilmember Turner asked what the sales tax rate was for retail sales that were less than City Council Meeting Minutes-February 6,2018 Page 3 of 7 $5,000, as well as for the categories of restaurants and bars and rentals. Ms. Rios said the sales tax rate was 2.2 percent for retail sales that were less than $5,000, 3.9 percent for restaurants and bars and 2.9 percent for rentals. Councilmember Clark proposed that the sales tax rate of 2.9 percent be reduced in small increments to better align with other communities. Ms. Comacho presented the expenditures which were slightly above target. The Highway User Revenue Fund (HURF) and the Transportation Sales Tax Fund were both slightly above target. Councilmember Clark asked for clarification about the use of the Sales Tax Fund. Ms. Rios said the Sales Tax Fund was a dedicated sales tax, authorized by the voters, dedicated to transportation. Ms. Comacho said the revenues were 5 percent higher than last year for the Police and Fire Special Revenue Funds. The Water and Sewer Enterprise Fund was above target. Vice Mayor Tolmachoff asked if it was normal to be low in Capital Projects in the Water Services Fund. Ms. Rios said it was a trend that had been seen over the last few years. Funding did carry over for the projects. Councilmember Clark asked about the transfers in and out of 155 percent. Ms. Comacho explained that transfers in and out was a "net number". More funds were transferred out than what came into the fund, but the fund did balance out. Ms. Comacho said the combined revenues were slightly below target in the Solid Waste Enterprise Fund. The Landfill Enterprise Fund was below target with the recycling revenues being significantly below target. It was due to the downward trend in the commodities market and a reduction in materials received at the materials recovery facility. Mayor Weiers asked for further information about recyclables. Michelle Woytenko, Field Operations Director, said the City had an intergovernmental agreement (IGA)with Peoria and Wickenburg to accept both cities' recyclables. The City paid both based on the revenues received. The City was not recovering the funds and had notified Peoria and Wickenburg that the IGA would be terminated. The funding reflected a reduction in incoming material and a reduction in expenses. Vice Mayor Tolmachoff asked if the recycling program was losing money. Ms. Rios said the program was losing money and Ms. Woytenko was working on initiatives to reduce the loss. The initiatives would be presented to Council at a later date. Ms. Rios said the revenues indicated consistent financial results and the expenditures were at or below 50 percent. Mr. Phelps explained that the expenditure increase in the Water Services Division was due to the hiring of new staff to assist with capital project delivery. City Council Meeting Minutes-February 6,2018 Page 4 of 7 3. FY18-19 Budget Workshop Presented by: Tom Duensing, Assistant City Manager Presented by: Vicki Rios, Director, Budget and Finance Presented by: Terri Canada, Budget Administrator Ms. Bower read the item by title. Ms. Rios said staff was looking for Council guidance regarding the property tax levy. She presented the budget timeline and deadlines. Councilmember Clark asked that last year's discussion regarding zero-based budgeting be continued. Mr. Duensing said it would be a good topic for the March 6th budget workshop where policies and procedures would be discussed. Vice Mayor Tolmachoff asked for specific amounts for the sales tax, state-shared revenue and the overall total of sales tax. Ms. Rios said the total sales tax revenue in the General Fund was$106.4 million and the state-shared revenue was$63.1 million. Ms. Rios provided a breakdown of the General Fund sales by type. Councilmember Turner asked what items fell under the amusement tax. Ms. Rios said the amusement tax was applied to items such as tickets to events and gaming operations. Mr. Duensing continued the presentation on property taxes. He asked for Council direction on the consideration of a two percent increase to the levy. Councilmember Malnar did not want the policy to allow for increases but wanted the policy to be that it remained at a flat level. Mr. Duensing said the policy was to take advantage of the levy increase. He said the two percent increase would not result in a significant increase in revenue. Council made the final decision on the property tax levy each year. Mayor Weiers said the discussion regarding an increase to the property tax levy occurred every year. He wanted the policy to remain the same and allow for the discussion annually. He did not support an increase. Councilmember Aldama did not support an increase especially since it would not result in significant revenue. Councilmember Turner supported no increase to the property tax levy as well as changing the policy to reflect that the City would not take advantage of the ability to increase the property tax levy. Vice Mayor Tolmachoff supported changing the policy to say that the property tax levy would be evaluated annually. Councilmember Clark supported Councilmember Malnar's proposal to keep the property tax levy flat. City Council Meeting Minutes-February 6,2018 Page 5 of 7 Mayor Weiers supported the current policy that allowed for open discussion and was in favor of evaluating the need annually. Mayor Weiers said the consensus was that the property tax levy would not be raised and that the rate for property tax would remain flat and Council would evaluate it on an annual basis. Mr. Duensing said the policy would be updated and presented to Council for approval. Mr. Duensing provided an example of what a property tax bill would be for an average home in the City. Councilmember Malnar understood that when home values increase, the levy was reduced. He asked what that meant for homeowners. Mr. Duensing said as the value of a home increased, with a flat levy, the variable (rate) decreased. The homeowner would pay the same from one year to the next. Councilmember Malnar asked if staff would be presenting an analysis of a decrease of 1/10th of a percent in sales tax. Mr. Duensing said staff would be presenting an analysis to Council. MOTION AND CALL TO ENTER INTO EXECUTIVE SESSION A motion was made by Councilmember Joyce Clark, seconded by Councilmember Ray Malnar to hold an executive session. AYE: Mayor Jerry Weiers Vice Mayor Lauren Tolmachoff Councilmember Jamie Aldama Councilmember Joyce Clark Councilmember Ian Hugh Councilmember Ray Malnar Councilmember Bart Turner Passed Council entered into executive session at 10:31 a.m. for: Discussion/consultation with the City Attorney for legal advice, regarding the city's position in pending or contemplated litigation, including settlement discussions conducted in order to avoid or resolve litigation. (A.R.S. § 38-431.03(A)(3)(4)); Discussion/consultation with designated representatives of the city in order to consider its position and instruct its representatives regarding negotiations with employee organizations and to receive legal advice regarding the same (A.R.S. §38-431.03 (A)(3)(5)); Discussion/consultation with the City Attorney and City Manager to receive an update, to consider its position, and to provide instruction/direction to the City Attorney and City Manager regarding Glendale's position in connection with contracts, agreements and/or economic development agreements in the area of 55th Avenue and Northern Avenue (A.R.S. §§ 38-431.03 (A)(3)(4)). City Council Meeting Minutes-February 6,2018 Page 6 of 7 EXECUTIVE SESSION A motion was made by Vice Mayor Lauren Tolmachoff, seconded by Councilmember Ian Hugh to adjourn the executive session. AYE: Mayor Jerry Weiers Vice Mayor Lauren Tolmachoff Councilmember Jamie Aldama Councilmember Joyce Clark Councilmember Ian Hugh Councilmember Ray Malnar Councilmember Bart Turner Passed The executive session was adjourned at 12:57 p.m. ADJOURNMENT Mayor Weiers adjourned the meeting at 12:58 p.m. I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the meeting of the Glendale City Council of Glendale, Arizona, held on the 6th day of February, 2018. I further certify that the meeting was duly called and held and that a quorum was present. Dated this 5th day of March, 2018. 9.47 Fe K. Bower, MMC, City Clerk City Council Meeting Minutes-February 6,2018 Page 7 of 7