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HomeMy WebLinkAboutMinutes - 08/07/2017 - Finance and Personnel CommitteeFINANCE AND PERSONNEL COMMITTEE Monday, August 7, 2017 Municipal Center Classroom, 5:30 PM 1. Call to Order: The meeting was called to order at 5:30 pm. 2. Roll Call: Chairman Alderman Curry, Alderman Schaefer, and Alderman Mihevc. Also in Attendance: Director of Finance Lynch, Director of Economic Development Martin, Human Resources Manager Campanella, and City Clerk Lynzi Nevitt. 3. Public Comment: None. 4. Motion to approve the March 6, 2017 Revolving Loan Committee meeting report. Motion made by Mihevc, second by Schaefer, to approve the March 6, 2017 Revolving Loan Committee Meeting Report as presented. Chairman Curry asked the Clerk to call the roll: Voting Aye: Mihevc, Schaefer, Curry Motion carried. 5. Motion to approve the July 17, 2017 Revolving Loan Committee meeting report. Motion made by Mihevc, second by Schaefer, to approve the July 17, 2017 Revolving Loan Committee Meeting Report. Alderman Schaefer requested that future meeting minutes when other Alderman not on the respective Committee are at the meeting, it should be noted in the minutes. Chairman Curry asked the Clerk to call the roll: Voting Aye: Mihevc, Schaefer, Curry Motion carried. 6. Motion made by Mihevc, second by Schaefer, to approve the July 13, 2017 Finance and Personnel Committee meeting report. Chairman Curry stated there is a concern as to how the recommendation actually went forward regarding the Revolving Loan request for Smith's Central Garage. The Clerk was asked to replay the recording. Upon review of the recording, Alderman Schaefer said it seems like two points recommending the $50,000 and sending it to Council for full approval and the second part of it is the interest rate portion of it. Chairman Curry said he thinks the question is the report states simply forward and the Council documents for tonight's meeting says recommended. The question was did the Committee actually say it was a recommendation or did the Committee say they were just forwarding it on for the City Council to consider. Chairman Curry added that he actually heard himself say on the recording that it was a recommendation and he now entertains a Finance and Personnel Committee Page 2 August 7, 2017 motion to amend the previous motion to amend the minutes to indicate that is was a recommendation. Alderman Schaefer made the motion to amend the July 17, 2017 Revolving Loan Committee minutes to reflect that it was for recommendation not consideration. Seconded by Alderman Mihevc. Chairman Curry asked the Clerk to call the roll: Voting Aye: Schaefer, Mihevc, Curry Motion carried. Chairman Curry now asked for a motion to approve the July 13, 2017 Finance and Personnel Committee meeting minutes. Alderman Schaefer made a motion to approve the July 13, 2017 Finance and Personnel Committee meeting minutes and to include that Alderman Glab was in attendance. Seconded by Alderman Mihevc. Chairman Curry asked the Clerk to call the roll: Voting Aye: Schaefer, Mihevc, Curry Motion carried. 7. Discussion regarding City of McHenry Business Loan Program and possible Committee recommendation to amend the Business Loan Program procedures. Chairman Curry stated the topic is actually the Revolving Loan Program and informed the Committee that he asked for this item to be place on this agenda, and although it will be discussed, he realizes that the Committee may not get to a recommendation at this time. Director Martin provided information on past loans and the former Business Retention Loan Program criteria from 2003. Chairman Curry said the Committee should also have secondarily received an email with the actual application that was used recently for the Revolving Loan Program. Chairman Curry opened the floor for discussion. Alderman Mihevc asked if the question at hand is to go back to the original objectives of the 2003 loan program and reassess them to see what the program should be going forward. Chairman Curry stated from his standpoint, the objectives from 2003 are actually a different program. It was kind of a subset back then because there was construction on Route 120 and there were concerns about businesses so it was called a Business Retention Loan. There was never really criteria for the Revolving Loan Program itself. After speaking with Director Lynch, some of the inherit issues that staff has seen recently indicates there is no established criteria or process for the Revolving Loan. No documentation could be found about when the Revolving Loan Committee was established. Director Martin stated there are a couple of things that need to be established; a process, and review criteria. He researched other programs in the County Finance and Personnel Committee Page 3 August 7, 2017 and selected the best aspects in his opinion from each one. Director Martin distributed information to the Committee about those programs. City of Marengo: This program is simple and succinct and establishes the goals, eligibility, criteria, and terms. McHenry County: This program is similar to Marengo. Director Martin is of the opinion that the leveraging of investment should be a criterion used by McHenry. He further stated the McHenry County Economic Development Business Incentive Program loosely modeled after the city's Underutilized Property Tax Abatement Program, includes a scoring system that adds objectivity to the process. Director Martin said there should be some incentives to apply for a loan i.e., is the building vacant, is it underutilized, is the property blighted, is it on Main Street or West Route 120; all this should be considered. City of Crystal Lake: Crystal Lake has a few program and they are called Investment Brand/Job Creation Programs. There is a program for manufacturing and retail. Director Martin thinks these programs incentivize and give more if the applicant does more. In other words, you get more money for each new full time employee. Director Martin told the Committee that Alderman Santi had recently stated to him that he thought approval of the Revolving Loan Program was based on the number of jobs involved with the business; there is only a simple statement on the application that refers to jobs. Some type of incentive might be beneficial for instance, you would get a larger loan if you hire more people. Director Martin also suggested eligibility if you are occupying a vacant building. More discussion ensued on the types of eligibility and processes to enhance the city's loan program. Chairman Curry stated the Crystal Lake program is actually a grant and not a loan and Director Martin agreed, but he thought the concept of it was worth reviewing. Director Martin said another consideration would be to develop a program whereby the city asks banks in town to participate and use the underwriting criteria from the participating bank. He also suggested creating an application checklist and loan agreement with a fee structure. Discussion ensued on the lack of interest in the city's Fagade Grant Program. Alderman Schaefer said that going back in history it was nice to have the retention program and thinks what is being considered today is very different. The Retention Loan Program was helping businesses due to construction on Route 120. There are some good points to that program that can possibly be included in a new program. Unless the city increases the current program the funds are limited. Alderman Schaefer added he is in favor of keeping the program somewhat simple and make it an incentive to apply for the loan and offer funding for specific uses. Past loans were approved for various uses. Finance and Personnel Committee Page 4 August 7, 2017 Director Martin stated the program could be limited to sales tax generating uses. Alderman Schaefer agreed and added that perhaps a business that generates tax revenue would be scored higher than a business that does not. Alderman Mihevc told the Committee that he agrees with what has been said and that because there are limited funds, the city needs to be smart about how they are allocated. The city should encourage new and existing businesses to invest in the town so whether it is a new business coming in or an existing business that wants to stay should be fine. However, maybe the eligibility criteria should require the demonstration of job creation or some sort of building rehabilitation or investment. Alderman Mihevc noted there are good points listed in the criteria presented from other entities that could be used to establish our criteria. In Crystal Lake, to make sure that the new retailer is complying, the applicants are required to submit a letter to the Illinois Department of Revenue to release their sales tax information to verify what they said in the application is true. Mayor Jett asked if the city was able to determine if a business was paying its taxes and Director Lynch answered yes. Alderman Mihevc asked should an applicant need to demonstrate some special circumstance that caused them not to be able to get the money from a financial institution. Chairman Curry said especially now as there is no appreciable interest difference. This program is not really to get a low interest loan but more about availability. Chairman Curry added in the future if there is a 5% spread in the interest rate then this would become a consideration but he does not think it is in today's economy. The city is merely providing access to funds. Alderman Schaefer said he would caution the city considering an applicant's personal versus business finances. We should not guess if the applicant could personally afford to finance their business. The city should also take into account any previous investment the applicant has made in the business up to the time of the application. A discussion ensued on past applicants and their ability to obtain conventional loans. Chairman Curry noted that job creation and generation of tax revenue are the two primary criteria in the city's past programs. Director Martin agreed and asked the Committee to consider other economic development goals such as business retention and job creation, which will make the community strong long term and sustainable. Alderman Schaefer asked does the city want applicants that do not qualify through another institution or are determined to be a risk through the city's underwriter. Chairman Curry said in his opinion, if a business qualifies for a private loan then they should do that because there is no advantage going through the city and they would just tie up money that might be available to a business that cannot get private financing. On the other hand, a business may be so much of a credit risk there is no possibility of being paid. We need to find an applicant that falls somewhere in the middle who may not qualify for a private loan but there is a decent opportunity for the city to be paid and help a new or existing business. This is what the city has done and it has worked out in most Finance and Personnel Committee Page 5 August 7, 2017 cases. Further discussion ensued on qualifications of applicants and existing investment in the community. Alderman Schaefer stated he feels that a business already invested in the community would be what the city should look at. Mayor Jett agreed that investment in the community is important and as this program is used more and more, he would like to see the program increase to include an expanded fagade program. He and Director Martin speak to many business owners who cannot afford to make fagade improvements. Chairman Curry asked if the Mayor is thinking of a Revolving Loan Program for facades. Mayor Jett said he is just contemplating increasing the size of the grant. Director Martin noted that most businesses that would apply for a facade grant own older buildings, which are more expensive to improve. Alderman Schaefer stated that a fagade improvement could fall under the Revolving Loan Program, as it is a renovation to an existing building. Mayor Jett agreed stating we look at the Revolving Loan Fund as a vehicle for new business and also should consider it for an existing business that wants to upgrade their building. Alderman Schaefer said that a business owner might not own the building where the business is located, which may be a problem. Director Martin said it would be a good idea to speak with existing business owners and ask them what would make them want to take advantage of a program, what are the obstacles, and why don't you use it. Alderman Schaefer asked if the Committee is considering rewriting the Revolving Loan Program using some of the criteria reviewed today. Chairman Curry said the reason he thought this was important to discuss is that it seems like this program has been nebulous in terms of why applicants qualify or do not qualify for a loan and on what basis the decision is made. Although there will always be an exception to the rule, in general the city should have criteria such as a scoring system to determine the risk. Chairman Curry concluded the discussion by recommending that the Committee determine the primary goal of the program such as job creation or expansion of sales tax. In addition, the Committee should work with staff to determine the criteria used in reviewing an application as a point system or other method. Alderman Schaefer suggested the Committee provide Chairman Curry with suggestions on criteria and Chairman Curry said that is a great idea however he would suggest the ideas are provided directly to Director Martin and Director Lynch. Chairman Curry asked Director Lynch to work with the bank to make certain the criteria suggested make sense from a financial standpoint. 8. Staff Reports. Human Resources: Human Resources Manager Campanella informed the Committee that as of the last pay period, the city had 239 pays of which 153 are full and permanent part time employees. Finance and Personnel Committee Page 6 August 7, 2017 The city received proposals for the Classification and Compensation Study from GovHR of Northbrook, IL for $19,200 and The Mercer Group of North Caroline for $29,950. Staff is reviewing the proposals and will bring a recommendation forward to the City Council soon. Alderman Schaefer asked if the RFP process was now closed and Manager Campanella answered yes, they were due by 11:00 AM last Friday. Six proposals were emailed to vendors. There is not much movement on the IPBC (new Health Insurance Consortium) other than obtaining broker data for the city's one on one implementation. The city is in the midst of configuring the new time and attendance software. Implementation should begin by October. Finance Department Director Lynch distributed to the Committee a copy of the Quarterly Financial Report that will be provided to the full Council at its next meeting. The city to date has received four months of state income taxes, which is a bit higher than expected. Impact and permit fees are at 25% of budget most likely due to the summer season. Reimbursements are a bit low due to the Dispatch Center, as our partners do not pay until the end of the fiscal year. Responding to Alderman Schaefer's question, Director Lynch stated gaming revenue is included in licenses and permits and is running at approximately 22%. Alderman Schaefer asked what is included in "Other," and Director Lynch answered transfers to the Internal Service Funds, employee contributions to police pension, and other employee contributions, which have an expense attached to them. In Expenditures, benefits are running a bit high. This includes police pension and contributions, which match property tax receipts. Approximately half of the property tax receipts were received through June. Supplies are running low as fuel costs are low at about 15%. Debt Service will always be low in the early month of the fiscal year as our principle payments are not made until December. All other funds are running close to 25% as expected. Chairman Curry asked why Revenues in the TIF are at 59%. Director Lynch said TIF is mostly property taxes and we have received June payments. The Fund Balance was added to the report to see where the city stands as of the first quarter. Director Lynch noted this is not a true and accurate number because Expenses and Revenues occur at different times, but this report does provide a snapshot of the fund. She asked the Committee to keep in mind that these are not yet audit numbers and they will change. Finance and Personnel Committee Page 7 August 7, 2017 9. Any Other Business Director Martin provided a brief summary of the current PACE Voucher Program. Chairman Curry suggested Director Martin put together a financial overview of the program for the Committee to discuss at its next meeting. 10. Motion to adjourn the meeting. There being no further business to discuss, Chairman Curry called for a motion to adjourn. Alderman Schaefer made a motion, second by Alderman Mihevc, to adjourn the meeting. Chairman Curry asked the Clerk to call the roll: Voting Aye: Schaefer, Mihevc, Curry Motion carried. The meeting adjourned at 6:45 PM. Respectfully submitted by, Marci Geraghty, Executive Assistant/Deputy City Clerk Reviewed and approved this day of fR'uA2✓ 2018.