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Minutes 12-13-10 MINUTES OF THE FINANCIAL ADVISORY COMMITTEE MEETING HELD ON MONDAY, DECEMBER 13, 2010 AT 6:00 P.M. AT THE LIBRARY ROOM "A," BOYNTON BEACH, FLORIDA PRESENT Don Scantlan, Chair Michael Madalena, Vice Chair George Feldman David Madigan William Shulman Terry Lonergan, Alternate (arrived 6:07 p.rn.) Kurt Bressner, City Manager Barry Atwood, Finance Director Wayne Segal, Public Affairs Director ABSENT: Glenn Jergensen Merline Pamplona Victoria Castello, Alternate Chair Scantlan called the meeting to Order at 6:02 p.m. The Recording Secretary called the roll. A quorum was present. Motion Vice Chair Madalena moved to approve the agenda as presented. Mr. Shulman seconded the motion that unanimously passed. Mr. Feldman inquired if there would be an Open Forum Item at the end of every meeting and after brief discussion there was consensus it would be added to future agendas. 1. Approval of Minutes - N/A The minutes were not available. 2. Review of Financial Advisory Committee Checklist - Status of Member Research (See attached "FAC Work Area Matrix") The November 13, 2010 matrix was the most recent matrix used. There was one change to it which was the addition of Mr. Jergensen's assignment from the November 9, 2010 list. 1 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 Mr. Shulman had submitted information to the Committee pertaining to a letter going to HOAs for equipment. Mr. Madigan and Mr. Feldman also had information for the Committee. Mr. Feldman had been working with the Golf Course and staff was already trying to develop ways to increase revenues or create initiatives. Mr. Feldman was working on long-term suggestions. Mr. Bressner suggested when there was something significant to report, one paragraph would suffice. Chair Scantlan summarized if there was a finding or a significant milestone, the members should submit it. Mr. Bressner or Mr. Atwood would put it on the agenda. There was discussion when department heads are interviewed, they often want to know what kind of an impact the information they provide would have. Mr. Feldman asked for a rule of thumb in formulating a response. Mr. Bressner explained the members were gathering information and would be providing specific recommendations to the City Manager. If a department head wanted to know what was provided to the Committee, periodic reports would be on the agenda, as would the minutes which are public record. Motion Mr. Feldman made a motion to move Ms. Lonergan to a regular member for the meeting. The motion was duly seconded and unanimously passed. Chair Scantlan received a response regarding utility bills and paper billing and he did not know if the Committee was still pursuing it. He commented 14% signed up for automatic bank drafting and they will target that group to stop sending the paper bill. Chair Scantlan commented he wanted to opt out of receiving the water bills and he goes on line to make his payments. He thought the hang-up with the online service was when he paid his bill online, he did not see the actual usage. There was no way to send out the usage information electronically. Barry Atwood, Finance Director, commented there was a method and he was working on it. The Department can send an e-notification that will have all the components of the water bill, which should include the usage. The information did not look like a water bill. Discussion followed there should be a link on the general website and a printed note on the water bill advising of the e-notification. The City should also allow the consumer to enter their credit card information once, have their information stored and then automatically pay each month with the card. If done, the City would incur a fee, but it was noted the City would incur a fee regardless of either having the consumer enter the information each month or the City auto debiting the account. Electronic wallet technology would store the credit card information, and the easier the site was to use, the more people would use it. After discussion, there was agreement an update on this item would be included on the next agenda. Mr. Madigan discussed Item 32 of the matrix, Selling of City Assets. A sheet identifying the assets was provided, but the members needed a value. Mr. Madigan requested he 2 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 be directed to the correct individual to ascertain the information. Mr. Bressner explained the City does not have a real estate manager. Mr. Atwood agreed to contact the individual. Chair Scantlan suggested removing the items on the list that had City facilities situated on it. Although those properties did not have movable assets and currently did not have value, they could potentially have value. Mr. Bressner noted there were some parks that were vacant pieced of property. The comprehensive plan has an element that contained a recommended percentage of Recreation and Open Space land, which the City followed. This was also State law. Every five years the City has to recertify the plan and the City selects the percentage of land to use. Regarding the City-owned land, Mr. Bressner explained sometimes parcels or portions of them can be used as a joint venture to benefit a developer and the City. A Map from the City Clerk's Office reflected the usable properties. Mr. Bressner would work through a GIS map. Mr. Madigan explained he was looking for the taxable value. Mr. Feldman inquired if the land for beach parking was on the list. Mr. Bressner responded it was and he explained the City owns the land but it has restrictions on it for perpetual use as open space. Whether it was a buildable lot was unknown. It would be subject to Ocean Ridge's Codes. The next step would be to review the list to see if there was any revenue that could be generated from it's sale. Mr. Feldman inquired about the concessionaire at the beach. Mr. Bressner responded the vendor was limited by Ocean Ridge's Code. For years, the vendor was limited to reheated sandwiches. Item 10 was Revenue Sources Other. Mr. Bressner explained the food operation was not a big revenue generator and it was not an enterprise operator. Item 14 Department Head presentations. This item was completed. Vice Chair Madalena inquired if they could obtain a breakdown of what could occur at the beach. Mr. Bressner requested the members exercise caution and communicate with him if any contact would be made with Ocean Ridge. The beach property could not be annexed because the property was not contiguous to the City. Mr. Bressner indicated they could sell solid waste services. They already provided Fire services. Until this year, they were providing Police services to Briny Breezes, but Ocean Ridge outbid them. The City provides building services to Lake Worth. Mr. Bressner responded in order to provide services, they had to ensure there was adequate staff to perform the work in Boynton Beach first. Mr. Shulman inquired about the letter to HOAs and if he would be able to receive assistance with typing the letter. Mr. Bressner responded staff would assist. The proposed letter was very good and he thought the letter was ready to go. The Police Department, Fire Department, Library and Recreation Department were approached about what they needed. Mr. Bressner would circulate the letter to the members and the 3 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 item would be put on the agenda for approval in January. The committee could approve it and get a final packet out based on the draft submitted for the next agenda. Ms. Lonergan had met with Wally Majors and staff regarding the Shopper Hopper and was unsure how to proceed. She noted no one pays anything for the Shopper Hopper and she did not know if there was a set route. Mr. Bressner explained a profile of the program services and how it operates and a short synopsis could be provided. There was an impact analysis in the budget and the ridership data was already completed. Financially speaking, the service did not pay for itself, but from a program services perspective, it was great. The staff expert on the Shopper Hopper was Mr. Majors. Ms. Lonergan would send Mr. Bressner an email and he would set up a meeting with staff. She noted West Palm Beach obtained a grant for their trolley. Delray Beach has a trolley and it was thought the Shopper Hopper could be turned into a trolley. It was questioned if the trolley in downtown West Palm Beach was for the Community Redevelopment Agency area there. Mr. Bressner inquired if it was viable to continue discretionary programs that were not core essential activities in the City and in this economy, if they are continued how they would be funded. Currently, the service is heavily subsidized. It was funded by the Gas Tax, and it was a reduced transfer to the general fund that had an indirect impact on the budget because it reduced the general fund dollars for other activities such as street maintenance. 3. Discuss and finalize questions for Survey Monkey and their distribution and timing - copies of all draft questions included along with report on Survey Monkey included with agenda e-mail. Mr. Bressner explained Wayne Segal, Public Affairs Officer, has been working with other jurisdictions and Survey Monkey. Wayne Segal, Public Affairs Director, explained he was not an expert on surveys. A brief PowerPoint presentation was given. There are open-ended and closed questions and both have their pros and cons which he reviewed and which are contained in the meeting materials. Survey Monkey has a mechanism that would prevent a person from taking the survey 10 times. Chair Scantlan thought the survey should be very focused which would assist the Committee in shaping the deliverables regarding the budget. The survey was another data point to be used to make budget decisions. Mr. Segal explained the multiple choice, Likert Scale and numerical approaches to the closed-ended questions as contained in the meeting materials. The first survey should target what programs or services should or should not be supported in the budget this year. Discussion followed that the members had to consider how long to keep the survey open. He added one group of questions regarding core services that were contained in the Mayor's State of the City report last spring and requested the members consider adding those questions as it would help the Committee gather information about what should be offered. It could identify the public opinion, what they feel the residents and businesses are paying too 4 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 much or too little for and what should be supported in the budget. There was agreement to close the survey towards the end of February. The FAC has to get the questions out there so the FAC would have a quantified data point. Vice Chair Madalena thought the sample survey was excellent. It added a section about demographics and he thought the survey, as presented by Mr. Segal, captured the committee's thoughts. Discussion followed that renters, indirectly, could take the survey. That information could be cross-tabulated and they could see a renter had one view that was very different from that of a business owner. Mr. Segal pointed out any question noted with an asterisk was mandatory to be filled out. Vice Chair Madalena inquired if the survey was too long or if there were too many questions and discussion followed. A test group would determine if the survey covered those issues. The privacy policy is that the City would not sell the information but it is pointed out the information was a matter of public record. The respondents would have to agree to the terms of the privacy policy or they could not take the survey. Discussion turned to public accountability and identifying information. Mr. Feldman thought 40% to 50% of residents in Homeowners Associations did not have a computer. The survey would not ask for the personal information, but would ask how long they were in the community or if they owned or rented, but they would not ask for an address. Mr. Feldman left at 6:59 p.m. The program could lock in an individual's IP address which would prevent them from taking the survey twice. Zip codes would be included but no other personal information. Staff would research Survey Monkey's ability to prevent multiple responses. Mr. Feldman returned at 7:04 p.m. It was suggested a question be added to Question 5 to obtain a response about the school system. It was also suggested adding Recreation and Parks to the same question. This question would be numerically ranked. Chair Scantlan inquired if they should have the same question for business owners for Number 7. This would be what factors affected their decision to move to Boynton Beach, i.e. tax rate, office space, business fees. Mr. Segal agreed to contact the Business Development Board regarding the stock questions they would use. Mr. Segal agreed to look into using a larger font size. A suggestion was made to add tennis and golf to sample question 7 regarding user fees. 5 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 Mr. Shulman suggested Item 1 of sample question 7 should just say franchise fee. Discussion also followed franchise fees cannot be increased more than 10%. There was agreement on sample question 8, Item 2, the second button should be changed to add the word "increase" as follows: "Reduce coverage/increase response time" Item 3, the second button would read, "Not increase the Fire Assessment and see a possible increase decre3so in response time and/or capabilities." Motion Vice Chair Madalena moved the survey in its present form be put out to the sample group. It was suggested the survey be sent to City employees. Mr. Segal advised he was setting up a closed blog and could send the link. It was also suggested the entire Financial Advisory Committee take the survey and Mr. Segal agreed to forward them the link. Mr. Feldman also agreed to get less than 20 people to take the survey. Vote Mr. Madigan seconded the motion that unanimously passed. 4. Review of Revenue Projections for all Funds (See attached Revenue Summary All Funds FY 2008-09 to 2014-2015) Mr. Atwood provided highlights of the totals of all the funds. Page 2 reflected the General Fund under two assumptions; one that the assessed valuation would not decrease; and the second, if the assessed valuation would decrease 8%. The impact on the General Fund with an 8% decrease was reflected and reviewed. There was a deficit of $11.2 million going into the Fund for fiscal year 2011/2012 with no increases or expenditures. Mr. Atwood explained property taxes, in total, were $22.1 million. The total budget for police and fire were twice the property taxes and the deficit, in round numbers, was $11 million. Departmental expenses and revenues were presented. The operating expenses were 11.5 million. If the City increased to 10 mils it would solve the deficit. Vice Chair Madalena revisited the budget and discussion followed as to whether they increased the responsibility of the CRA to pay for the police coverage in their area. He inquired if that was a viable option. Mr. Bressner explained a recent opinion from the Attorney General's Office which may cast doubt on whether CRAs will be able to allocate funding for the services. There had to be a rationale between the services and development. Police services were used for special events. The City Commission was concerned about that with the trolley. Whether police services were integral enough to a redevelopment program was questionable. Lack of public safety can serve as an 6 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13,2010 obstacle to redevelopment but the question was how much of the burden could be borne by the CRA. The impact of the CRA being dissolved was discussed. Mr. Bressner explained any bond or indebtedness incurred by the Community Redevelopment Agency still had to be met. Vice Chair Madalena inquired if the obligation was met whether it would still help the City. Mr. Bressner responded that would have to be analyzed. The other activity that occurs for the CRA funding is supposed to be temporary and good. The model the City used for the CRA when it was created had value to the work they are doing because it is economic development. Now it benefits the programs, services and taxes in the Community Redevelopment Agency. The residents outside the CRA area pay the same taxes as the CRA residents. CRA residents; however, pay taxes based on a 1986 rate for programs and activities and that rate cannot be reset. Everyone on the outside of the district was paying more but there was no way around it statutorily. It would help if police services could be funded to a greater extent by the CRA. Fire services were different and were moderated by the Fire Assessment Fee. The assessment was the equalizer because it was a non ad valorem fee. When the City was legally challenged about the fee and won, the City testified that the Fire Department expenses, including operating and capital construction expenditures during the first seven years, totalled 16%. The City was allowed to expend 55%. That same legislation cannot exist for Police services. Police services must be included in the General Fund. The County has an equivalent of the Fire Services called the Municipal Servicing Taxing Unit, (MSTU). There was discussion about the eligible portions of fire rescue, they could triple the assessment rate. Boca Raton, Boynton beach and West Palm Beach have the assessment. There was discussion about letting residents pick an amount of increment that they want to increase. On a $150,000 house, the resident would be taxed on $100,000 due to exemptions, and the cost would be $333. Boynton Beach was one of the few municipalities that did not raise its millage rate. The rollback rate was 8%, which would have held revenues constant. Public opinion was there was no support for going to the rollback rate even though the tax bill would go down. The City is now funding more personnel costs from the fire assessment. Discussion followed about the budget process. The Financial Advisory Committee would make a recommendation to the City Commission regarding what they see to be the big picture issue and what areas they save money or raise revenues. Mr. Feldman suggested setting a couple of meetings aside for Mr. Bressner to put together the information. Chair Scantlan explained each member had areas of study and the initial deliverable would be in March or April. Chair Scantlan would put together a timeline and recommended the members review what Mr. Bressner put together last year. The 7 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 committee would recommend what areas should be reviewed. The members had to research their assignments Mr. Bressner responded to an earlier question about the Community Redevelopment Agency. If they eliminated the Community Redevelopment Agency, the County increment would also be eliminated which would be about $4 million to $5 million. Vice Chair Madelana thought there was a lot of opportunity to revise the CRA by the size and scope of the property they managed. The redevelopment district was large. There must be some areas that can be reclaimed or the lines redrawn. Mr. Bressner commented there was an analysis done about two years ago to compress the area and the fiscal impact showed there was some monies coming back into the City. Vice Chair Madalena also suggested if there was an area in the Community Redevelopment Agency that initiates a higher percentage of calls for police occurred, Police services should be paid for, and if that study reflected that analysis, it would not be out of line for them to pay for it. Mr. Bressner clarified the question was what is the rationale nexus of providing a level of police services to facilitate the redevelopment. As long as there is a direct relationship between enhanced police services to help the Community Redevelopment Agency fulfill its mission, the expenditure would probably would be acceptable. Chair Scantlan clarified the Community Redevelopment Agency pays for five officers and other services. They would have the same distribution of police coverage. Five officers are dedicated and the redevelopment area does not consume more than two districts. Mr. Shulman suggested changing the fire assessment fee to $87 as opposed to the listed amount of $77 on the survey. Currently the fee was $68. Mr. Shulman inquired about increases reflected from 2011 to 2014 and how the projects were created. Mr. Atwood responded it was based on historical data and the five-year plan. It did not include or reflect any specific increases in fees. 5. Discuss methods of increasing revenues Mr. Shulman inquired if there were any suggestions to increase revenue. Suggestions received were to review the boat slips, Boat Club Park, water management services to Ocean Ridge, and development services to Briny Breezes and Ocean Ridge. Mr. Shulman would send his list to Mr. Bressner who would circulate it to the members. Mr. Shulman advised Boca Raton and Delray Beach had been contacted. 8 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 6. Discuss the "Review of the City's Defined Benefit Retirement Plans" by the Segal Company (Distributed at November 29, 2010 Meeting) - Additional electronic copy included with agenda e-mail Vice Chair Madalena had reviewed the Segal Report and advised there were some items that could be adjusted. Some items could not be adjusted due to contractual obligations. The City's contribution to fund the legacy programs will be too much Other municipalities are making changes to their program now. There are also legislative changes anticipated to occur. In an effort to address pensions in the private sector, Kellogg's did a bond offering for $1 billion and used $500 million to pay for their pension expenses. It was a 10-year bond. Most economists feel the low interest rate environment will not remain that way over the next 10 years and the interest rates will increase greatly over 4%. There is a limited amount of good corporate debt. Vice Chair Madalena inquired if the City could go to the bond market to pay for the unfunded liability. Pembrook Pines tried floating the bonds two or three years ago, but it was not very popular. Vice Chair Madalena explained the fixed-investment environment does not exist at this time. Mr. Atwood explained they would need to conduct an actuarial valuation of the impact of unfunded past service liability. The impact to the current charge to the City and employees compared to the 4.5% bond obligation has not been successful in the past. Mr. Bressner expressed he thought it was already a smoothing on a smoothing. The bond issue could further stabilize it over time. Each plan has their own actuary, which was GRS. Segal is the City's independent actuary. The historical rates have bonds tied to U.S. Treasuries. The 10-year reassure note was less than 3%. Money market rates were less than a quarter of a basis point. He commented investors would line up to obtain 3.5%, tax free over 10 years. Municipalities are not required to pay a high yield. The purpose would be to pay the unfunded liability costs, which as of last year, were $88 million. The $88 million would cost the City about 7%, which the City would try to reduce to 4%. Mr. Atwood explained the City would incur the 7% because of the past obligations to fixed retirees which exceeded the total rate of return and the City's and employees' obligations. Another option was to do an offering for the entire unfunded liability, freeze the traditional pension plan and convert to a defined contribution plan. The City would then try to fund what is owed in the plan and then can move forward on a reduced cost, year by year. The Town of Palm Beach was considering freezing a defined benefit and moving to a lesser cost defined benefit program. Ultimately the service costs and unfunded accrued liability still had to be covered. The bond issue would end that, the plan would then be fully funded, and the City could start funding another program under different auspices. There would be some associated costs 9 Meeting Minutes Financial Advisory Committee Boynton Beach, FL December 13, 2010 7. Other Business Mr. Madigan recalled on August 30th, the City Manager presented 20 items the members would conduct comprehensive reviews on and present their recommendations and options. This item would be put on the next agenda. It was noted the discussion of Item 6 would continue at the next meeting on January 10, 2011. Chair Scantlan advised he attended the Police Pension Board and he suggested each member review their areas of study. He recommended each of the members look at the Advisory Board schedules and attempt to attend a meeting. His thoughts were this would improve the process. 8. Adjournment Mr. Feldman moved to adjourn. Mr. Shulman seconded the motion that unanimously passed. The meeting adjourned at 8:30 p.m. Q~~ Recording Secretary 10