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HomeMy WebLinkAboutMinutes - 8/19/1997 - Finance and Personnel Committee (2) FINANCE COMMITTEE MINUTES � August 19, 1997 Members Present: Chairman Murgatroyd, Bill Baird Alderman McClatchey arrived 8:50 P.M. Others Present: City Administrator Lobaito, City Clerk Althoff, Alderman Glab, Director of Public Works Batt, City Auditor John Eder. Finance Chairman Alderman Murgatroyd opened the meeting at 7:02 P.M. stating the purpose of this evening's meeting was to review the 1996-97 audit and management letter as well as to preliminarily discuss the possibility of increased capital development fees and water/sewer rates. 1996-97 AUDIT REVIEW AND MANAGEMENT LETTER City Auditor John Eder of Eder, Riedel and Company was in attendance. Mr. Eder reported the City of McHenry was in good fiscal position entering into the new budget year, May 1 , 1997-April 30, 1998. He also stated the results of his �„ audit disclosed no instances of noncompliance under Government Auditing Standards. Mr. Eder then briefly reviewed the audit noting council could, at its leisure, study more throughly pages 1 1-34 which provide more specific information about each fund. He also informed council the footnoted information, with reference to the Police Pension Fund and the Illinois Municipal Retirement Fund were provided his firm by the Police Actuarial Firm of Watson, Wyatt and the Illinois Municipal Retirement Association, respectively. Mr. Eder then drew the committee's attention to the federal grant audit pages noting federal compliance regulations had been amended and the City of McHenry will no longer be required to provide independent audits of federal grant monies unless the total funds received exceed $300,000. Current regulation requires independent audits of all federal grants in excess of 5100,000. MANAGEMENT LETTER City Auditor John Eder explained the management letter is a review of the City of McHenry's accounting procedures, financial records and system of internal control. Three specific issues were addressed: 1 . Deposits/Investments held by the City exceeded the amount of coverage provided by the FDIC and collateral pledged by the McHenry Savings Bank. \.. Finance Committee Meeting `, August 19, 1997 Page Two 2. The Employee Insurance Internal Service Fund used to account for the financing of services provided by one department to other departments within the City of McHenry need to be monitored more closely and operate on a break-even basis. 3. The City has no formal documented accounting policy and procedures manual. Mr. Eder noted with regard to Item 1 the situation had been noted and corrected by staff and Items 2 and 3 were currently being addressed. Further discussion followed regarding additional services provided by the accounting firm of Eder, Riedel & Company including reviews of the police pension fund, bond compliance, insurance fund and an audit of the 1993 FEMA funds as per Federal requirement. The committee directed Mr. Eder to submit a proposal for these services for full council review. Mr. Eder left the meeting at 7:33 p.m. `.. CAPITAL DEVELOPMENT FEES City Administrator Lobaito informed the committee that the capital development fees had not been increased since 1990/91 . The capital development fees are collected at the time of building permit and are used soley for the improvement of water/sewer facilities. Currently council has authorized the expenditure of $2,000,000 from the capital development fund for the South Wastewater Treatment Plant expansion. Director of Public Works Batt explained how the capital development rates were determined noting the cost figures of the South Wastewater Treatment Plant were used as a formula. City Administrator Lobaito suggested the cost of the South Wastewater Treatment Plant expansion be used to determine new rates. After some discussion it was the consensus of the committee to include any engineering costs as well as the construction costs in the formula. Further discussion included the feasibility of charging a flat fee rather than the incremental fees currently in place based on bedroom numbers. `.. Finance Committee Minutes � August 19, 1997 Page Three Motion by Baird, seconded by Murgatroyd, to make a formal recommendation to the full council authorizing staff's review of the current capital development fees based on the construction costs of the South Wastewater Treatment Plant including any associated costs including engineering. Voting Aye: Baird, Murgatoryd Voting Nay: None Absent: McClatchey The Committee also directed staff to explore the feasibility of establishing a yearly CPI increase. WATER/SEWER RATES City Administrator Lobaito stated the water/sewer fund was an enterprise fund. Enterprise funds are established when it is the intent of the municipality that the costs of providing a service to the general public on a continuing basis be financed � primarily through user fees. All operational and maintenance costs of the water and sewer departments should be financed by the water and sewer rates. City Administrator Lobaito referenced the previously provided background information including surrounding municipal cost comparisons of water/sewer rates. A review of the water and sewer revenue analysis provided by the 1996-97 audit as well as staff's projections of 1997-98 water and sewer expenses was conducted. Discussion followed with regard to possible 1997-98 capital projects and their associated estimated cost. Director of Public Works Batt noted the following maintenance projects: Water Plant One repair and upgrade Update of the Water and Sewer Master Plans Elevated Water Tower Maintenance including painting Acquisition of property Old main replacements City Administrator Lobaito noted all building maintenance costs were expensed through this fund. These costs had not been included in the 1997-98 expense projections. A lengthy discussion followed. Finance Chairman Alderman Murgatroyd directed staff to develop a list of `, anticipated major projects expensed from these funds in order of priority, with associated estimated costs and projected time frames for discussion at the next scheduled committee meeting. Finance Committee Meeting August 19, 1997 �.. Page Four Some discussion followed regarding the current water/sewer rates and the projected increase in water/sewer expenses over the next year. Alderman Baird noted an increase appeared necessary just to meet these expenses. Further discussion occurred regarding whether an increase in the water/sewer rates was needed as well as how much of an increase and over what period of time. Director Batt noted the average water usage was 96,000 gallons per year. He also reminded the committee that the federal grant obtained by the City of McHenry to build the South Wastewater Treatment Plant required the disclosure on all bills of the debt service, whether by percentage or flat monthly rate. Alderman McClatchey arrived at 8:50 P.M. The discussion regarding debt service and the feasibility of increasing water/sewer rates continued. The committee directed staff to present for discussion and review at the next regularly scheduled finance committee meeting two rate increase scenerios; one with an equal rate increase over three years and one with a substantial increase the � first year with subsequent smaller single digit increases over the next two years. Motion by Baird, seconded by Murgatroyd to adjourn at 9:20 P.M. , - _ .��'f��� __ �"', � , , ( , , ��. Steven Murgatroyd, inance Chairman �