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HomeMy WebLinkAboutMinutes - Minutes - City Council - Meeting Date: 5/1/2018 City of Glendale 5850 West Glendale Avenue Glendale, AZ 85301 itt GLENDIP Meeting Minutes Tuesday, May 1, 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 Ian Hugh Councilmember Ray Malnar Councilmember Bart Turner CALL TO ORDER Mayor Weiers called the meeting to order at 9:01 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. PRESENTATION ON THE CITY'S INVESTMENT PORTFOLIO AND INVESTMENT POLICY Presented by: Vicki Rios, Director, Budget and Finance Presented by: Lisette Camacho,Assistant Director, Budget and Finance Guest Presenter: Shiela Duffy, Public Trust Advisors Guest Presenter: Chris DeBow, Public Trust Advisors Ms. Bower read the item by title. Ms. Rios said an overview of the updated investment portfolio and the strategy for investment would be presented and staff would be seeking direction from Council regarding proposed updates to the investment policy. Ms. Duffy provided the current status and the duration of the portfolio as of March 31, 2018 and explained the investment strategy by the City. She proposed updating the strategy to include dividing funds into two portfolios- Liquidity and Core. Ms. Camacho said the purposed language changes/additions to the investment policy were: •All cash and reserve balances from all funds except for cash in excluded funds, restricted, and special accounts shall be pooled into two investment accounts depending upon liquidity needs. The two accounts will be labeled Liquidity and Core Portfolio •Core Portfolio—This is the longer-term, actively managed portfolio with a longer duration but within the maximum maturity of 5 years or shorter depending on security type per this policy. This portfolio will be managed on a discretionary basis with quarterly updates and authorization. •Liquidity Portfolio—This portfolio is managed to maintain sufficient liquidity to fund normal operations of the City over a normal business cycle. Funds in this portfolio will mature within the normal business cycle (or one year)and will be managed on a non-discretionary basis. •On an annual basis, the Finance Director shall report on investment strategy and performance to City Council. This report will include an update on performance of the portfolio over the prior year and proposed strategy for the coming year. The annual report shall be present to City Council during the first quarter of the fiscal year. City Council Meeting Minutes-May 1,2018 Page 2 of 9 Councilmember Clark asked for a definition of"excluded funds, restricted and special accounts." Ms. Camacho explained an example of an excluded fund would be a cemetery perpetual fund. The fund would be pooled but segregated per the investment policy. Councilmember Clark asked the definition of"restricted and special accounts." Ms. Camacho said the RICO Funds were considered restricted accounts. Councilmember Clark asked for the definition of"special accounts." Ms. Rios said a special account could pertain to a bond fund. Bonds usually had a specific duration and were part of the portfolio as a special account for tracking. Councilmember Clark asked for an estimate of how much of the City's funds were in restricted accounts versus the liquidity and core portfolios. Ms. Camacho saidthe liquidity was used to pay debt service and operational charges. The total portfolio of the City was about$200 million and the core portfolio would contain between $125 to $150 million. Councilmember Clark asked for an estimate of how much was available in the three accounts. Ms. Camacho did not have the information available but would send it to Council later. Councilmember Aldama asked what prompted the changes to come forward now. Ms. Rios explained the City's policy did not allow Public Trust Advisors to manage funds on a discretionary basis. The change was suggested by several investment companies when the RFP was in process. Staff looked at other cities which were following similar methods of fund management. It was a best practice and would bring a better return on investment. Staff was seeking Council approval to use the method. Councilmember Aldama asked if the City lost funding in investments by not making the change sooner. Ms. Rios said some of the market adjustments were not taken advantage of that could have provided better opportunities. Councilmember Aldama asked if the trade approvals were done by staff or would it come to Council. Ms. Rios said as the policy stood, it gave the Finance department the right to approve the trades, administratively. In the interest of time, it allowed the City to take advantage of the market and not miss out on an opportunity. Councilmember Clark wanted to confirm the current portfolio was not divided and it matured at the end of every year. Ms. Rios said funds were in one portfolio but there were multiple investments within the portfolio. Councilmember Clark asked if the portfolio was divided, would there be a gain with dividing the portfolios but at a higher interest rate. City Council Meeting Minutes-May 1,2018 Page 3 of 9 Ms. Duffy said the liquidity focused on cash or immediate transactions. The core portfolio could be invested more actively to increase the yield. The difference was funds could be carved out from funds that were not needed and earn more interest. Councilmember Turner said his understanding was that one-third would be kept and two-thirds would be invested to earn interest. Ms. Duffy said his figures were about correct. Councilmember Turner asked what funds were included in the core portfolio. Ms. Rios said every fund within the City had a reserve policy. The untouched funds would be used in the core portfolio and could be used if necessary. Councilmember Turner asked if any of the Transportation funds were included in the reserves going into the core portfolio. Ms. Rios said they did not look in each fund to determine how much reserve would go into the portfolio. They looked at the reserve funds to identify how much funds were untouched, so they would not need to"dip" into the portfolio often. She said there were Transportation funds in there but the reserve funds in the portfolio were entered as a total amount, not specific to each department. Councilmember Clark gave a hypothetical situation. She asked, within the core portfolio, if there were 50% reserve funds and the other 50% reserve funds from enterprise funds, how would the interest accrued be allocated. Ms. Camacho said distribution was proportionate to the total interest based on the percentage of cash balances within the funds. Councilmember Clark wanted to confirm there was an allocation to the various funds. Ms. Camacho confirmed there was. Councilmember Malnar was in favor of moving forward with the request. He asked if there were any penalties for dipping into the core portfolio. Ms. Duffy said there was not a penalty but there was a market risk. If the market moved, interest rates went up and the value of the bond went down while accessing it, there would not be a full return. Ms. Rios added if they had to access core funds, staff would work with Public Trust Advisors to find which of the funds could be accessed with minimal loss. Councilmember Aldama asked for justification from going to less reporting rather than more reporting. Ms. Camacho said staff thought it would be more prudent and transparent to report to Council the return and performance of the investment. Vice Mayor Tolmachoff asked whether the quarterly reports would continue. Ms. Camacho said that was correct. Vice Mayor Tolmachoff asked in the event of a major change, would an item be placed on the City Council Meeting Minutes-May 1,2018 Page 4 of 9 agenda for discussion to let the Council know there was an issue and to possibly come up with a different strategy. Ms. Rios said if there were issues with the City's portfolio at any time, they would bring it to Council for an update. She added there was not a requirement to report to the Council quarterly. They would like to do an annual report to the Council but make the quarterly investment reports available to everyone. Vice Mayor Tolmachoff asked if the data would also be available on the portal to constituents. Ms. Rios said staff had not discussed that option but would look into it. Councilmember Clark asked if there was a market downturn, how would a situation like that be handled to protect investments. Ms. Duffy said staff watched the market at all times and would monitor through any downturns. She explained during the last downturn, interest rates dropped and the value of portfolios rose. A fixed income portfolio would react differently during a downturn. Councilwoman Clark expressed her support for the policy changes. There was Council consensus to proceed. 2. FY17-18 THIRD QUARTER 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. Rios introduced the FY17-18 third quarter financial report update for the City which touched on the topics of the General Fund, Special Revenue Funds and Enterprise Funds. Ms. Rios explained trends of incoming sales tax had remained steady and displayed where the tax revenue originated from. Vice Mayor Tolmachoff asked if the figures provided showed the first quarter of the water rate increase. Ms. Camacho saidit did reflect the first quarter. Vice Mayor Tolmachoff wanted to confirm the rate adjustment accounted for$575,000 of the total estimated targeted water revenue for the first quarter. Ms. Camacho explained the first quarter of the calendar year had lower water sales in cooler monthsand higher water sales through the warmer months. Ms. Rios provided a summary of the third quarter financial report. She said revenues were consistent, expenditures were at or below the 75% mark and staff would continue to monitor the performance of each fund. Councilmember Turner asked why the Police and Fire Special Revenue Fund showed an increase of 5% but the City's sales tax revenue remained constant without an increase in rates. Ms. Rios said there were differences in the performance of the special revenue funds compared to the General Fund. It was mainly attributed to the Police and Fire untaxed items, such as food. City Council Meeting_Minutes-May 1,2018 Page 5 of 9 The General Fund had a reduction in the level of sales tax for items over$5,000 where the 0.7% did not apply to those items. Councilmember Turner asked if the 12%for rentals reflected the amount of sales tax collected. Ms. Rios confirmed it consisted of residential and commercial rentals. Councilmember Clark asked whether the project investigating if there was a deficit in the rental revenue fund had begun. Ms. Rios said the project had not started. It was decided to conduct the investigation internally. A staff member had been identified and they were in the process of back-filling the employee's duties to others in the department. 3. FY18-19 BUDGET WORKSHOP Presented by:Vicki Rios, Director, Budget and Finance Presented by: Tom Duensing, Assistant City Manager Presented by:Amy Lindsay, Interim Budget Administrator Ms. Bower read the item by title. Ms. Rios would review budget priorities and challenges, the draft FY19-28 Capital Improvement Plan (CIP), total budget requests and the Budget Calendar. Vice Mayor Tolmachoff said there was more work to do with the Downtown Merchants Association before funds were allocated to improve the amphitheater. Mr. Phelps said a preliminary look had been done at the amphitheater and this was the next level of planning in order to base a budget for future years. If Council was not in favor of the timing, the discussion could be delayed. Vice Mayor Tolmachoff was worried an expectation would be set for further investments to downtown. Mr. Phelps said there was an expectation with special events and the current investment to the downtown area. If there was a general understanding of the concept of the amphitheater as an economic development strategy to revitalize the downtown, it was a good time to start planning. He had received positive feedback from the downtown group that the amphitheater was a good investment strategy, but it was ultimately Council's decision. Vice Mayor Tolmachoff said without having a conversation, she did not want to set higher expectations for the downtown merchants. She also wanted to discuss a "vision"of how the amphitheater would run if it was rebuilt. Mayor Weiers said without understanding the total cost and the effect on downtown, they could continue to hit a downward trend with special events. Beginning the planning phase would help gain most of the information needed to make a good decision on whether to continue with the amphitheater. He wanted to include all of Glendale, not just the downtown merchants, for the improvements. Councilmember Clark supported moving forward with the amphitheater design. Designing the amphitheater would take time, would provide focus on downtown and future strategies for events. Councilmember Aldama agreed with Mayor Weiers and Councilmember Clark. He agreed with the strategy of the first design phase at the 30% build out and asked what the cost would be. City Council Meeting Minutes-May 1,2018 Page 6 of 9 Mr. Phelps said a formula was used to calculate an estimate. It was projected the amphitheater would be about$3 to $4 million and the design portion would cost about$202,000. Councilmember Hugh agreed with moving forward with the planning phase of the amphitheater. He agreed with Vice Mayor Tolmachoff that it could help with a better return on special events. Councilmember Turner asked where the money was coming from to design and build the amphitheater. Funding had not been identified. Mr. Phelps said it would be a Council policy if it went forward. He recommended not taking funds from existing CIP projects but instead identifying a one-time sale of assets within the downtown area and reinvesting the funds into the amphitheater. Councilmember Aldama agreed with Mr. Phelps and said it would be best to use the revenue from the properties on something that could bring revenue in and serve the City. Vice Mayor Tolmachoff said there were no funds allocated for several of the GO projects for a couple years. She wanted to discuss items which were already established as a priority but did not have an allocation for design. Councilmember Malnar had concerns but supported the design phase of the amphitheater. Mr. Phelps said through meetings with merchants, food and drink was what drove entertainment districts. He said it was important to attract new businesses to the downtown area to see the full investment potential. Councilmember Clark wanted to change the process model by seeing departments and Council submit projects and be able to weigh in on prioritizing projects before the end of the process for GO-funded Projects. Councilmember Turner had requested the same item as Councilmember Clark. He also wanted to see the departments' budget requests that were not included in the City Manager's recommended budget. Vice Mayor Tolmachoff asked for clarification on the alignment of items for Parks on the handout. Ms. Rios explained as the 10-year plan progressed, they would firm up what it included year by year. Items not addressed to be part of the 10-year plan would be part of the next year's CIP budget discussions. Vice Mayor clarified that at next year's CIP discussions the items for Parks would be part of the requested budget allocations. Ms. Rios said that was correct. Councilmember Clark asked when the enhanced bond authorization categories would be reviewed. Ms. Rios said due to election timing, the categories would need to be reviewed by next year. Councilmember Clark asked for an explanation of the General Fund's$2 million in contingency and the $46 million ending fund balance. Ms. Rios explained the ending fund balance was set aside in case of emergency. The City Council Meeting Minutes-May 1,2018 Page 7 of 9 contingency was an amount of unanticipated expenses in a particular fund. Councilmember Turner asked how the$4 million shortfall to the committed $50 million ending fund balance would be paid by next year. Mr. Duensing said the $121,000 was a budgeted surplus and was required to be below legal budget expenditures. He anticipated the budgeted surplus would exceed the amount based on savings, as well as revenue estimates in time for the June 30, 2020 deadline. Councilmember Turner asked if he anticipated unspent money plus revenue above projections, would get the City to the$50 million goal. Mr. Duensing said in past years, the City had been able to add about$2 million to the ending fund balance each year through aggressive budgeting. Vice Mayor Tolmachoff wanted to confirm a transfer payment from the"interfund loan"would return $1.2 million back to the Enterprise Fund. Ms. Rios said that was correct. Vice Mayor Tolmachoff asked what was included under Debt Service. Ms. Rios explained it was for General Fund-supported projects. Councilmember Turner asked if the line item for a zoning ordinance rewrite was still included in the budget request. Ms. Rios said it was included. Councilmember Turner asked if the item could be removed from the budget request until it was presented to Council. He also wanted to reconsider eliminating the Council Assistant position from the budget. Mr. Phelps recommended to keep the zoning ordinance in the budget and conduct a workshop after summer break resumed to be sure the funds were available. If Council wished to postpone the rewrite it could do so at that time. Councilmember Malnar was in favor of moving forward with the review of the entire code. Councilmember Clark was prepared to adopt the budget as presented. There was Council consensus to proceed. ADJOURNMENT Mayor Weiers adjourned the meeting at 11:03 a.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 1st day of May, 2018. I further certify that the meeting was duly called and held and that a quorum was present. Dated this 25th day of June, 2018. City Council Meeting Minutes-May 1,2018 Page 8 of 9 • 49/ —Mirk Bower, MMC, City Clerk City Council Meeting Minutes-May 1,2018 Page 9 of 9