HomeMy WebLinkAboutMinutes - 3/8/2010 - Finance and Personnel Committee FINANCE AND PERSONNEL COMMITTEE MEETING
'`.- Monday,March 8, 2010
Aldermen's Conference Room, 7:30 p.m.
In Attendance:Committee Members: Chairman Alderman Schaefer, Alderman Blake and Alderman
Wimmer. Abselrt: None.
Also in Attendance: City Administrator Maxeiner, Deputy City Administratar Martin, Assistant City
Administrator Hobson, Director of Finance Black, Director Construction and Neighborhood Services
Schwalenberg,Aldertnan Santi,Alderman Peterson and Deputy City Clerk Kunzer.
Chairman Alderman Scha.efer called the meeting to order at 7:30 p.m.
2010/2011 Fiscal Year Budget Discussion
Chairman Alderman Schaefer informed the Committee that the purpose of tonight's meeting is to begin
the budget review process for Fiscal Year 2010/2011.
Finance Director Black stated discussion tonight would cover all funds except the General Fund which
would be discussed at the next Finance and Personnel Committee meeting on Monda.y, Mazch 22, 2010.
Pronrietary Funds
Director Black stated the first azea of the budget to be discussed this evening is the Proprietary Funds.
Public Works Water Division
�, Director Black noted the Public Works Water Division in years past had experienced a deficit. Due to
gradual rate increases by the end of Fiscal Year 2009-10 the fund could actually see a sma11 surplus. By
the end of FY 2010-11 the fund should have recovered from its deficit. He noted the Water
Superintendent has been good about controlling expenses. As a result the fund will maintain a sta.tus quo
budget resulting in $22 million in expenditures and $2.03 million in revenue. Increa,ses in salary due to
the labor contract will be experienced as well as a lazge increase in transfer to the Risk Management Fund
which will be explained when that fund is discussed. Director Black noted capital expenditures include
well rehabilitation, replacement scissor lift and pickup truck replacement. The budget also reflects an
increase in electrical power costs as well as a decrease in supplies of water meters and water meter parts.
City Administrator Maxeiner explained how the proprietary funds work. He noted these funds are cost
driven accounts The expenditures in the proprietary fund accounts should be covered by use fees or
internal fees. Tha Water/Sewer Fund operates most like a business.
As an aside, Director Black stated in a comparison of water sewer rates with 11 comparative communities
in the county, the City of McHenry has the third lowest rates, in spite of recent increases put in place to
make the fund more self-sufficient.
In response to an inquiry from Alderman Peterson, Director Black noted the replacement vehicle in the
Water Division was deferred from the 2009-10 FY budget.
Public Works Wastewater Division
Director Black noted the proposed budget for the Wastewater Division is very similar to last year. As in
the Water Division, there is a noted increase in electrical cost as we; as a significant increase in proposed
� transfers to the Risk Management Fund. He further noted the $6.3 million improvements to the sanitary
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Page 2
sewer system v��ould be covered by the $4.5 million bond issue and $1.85 million in funds previously
collected and set aside in the Capital Development Fund.
Chairman Schacfer inquired if the City would realize any savings once the conveyance line is in place.
Director Black responded there would be minor change noted. City Administrator Maxeiner noted the
larger savings will occur once the Central Plant has been vacated and all functions have been moved to
the South Wastewater Treatment Plan.
City Administrator Maxeiner also pointed out the maintenance of sanitary sewer lines has been shifted
from the Street Division to the Sanitary Sewer Division at no additional cost to the Sewer Division. The
City will likely see a slight savings in the General Fund Street Division due to the change.
Capital Devel�ment Fund
Director Black noted the purpose of the Capital Development Fund is to construct, expand and extend
water and wastewater systems to accommodate new development and growth in the community through
fees assessed on new residential and non-residential development. There has been limited activity in this
fund since FY 2007-08. There is a current fund balance of$600,000. The City transfers money from this
fund to the Utility Improvements Fund for construction of water and sanitary sewer extension or
expansion.
City Administrator Maxeiner clarified the Capital Development Fund is comprised of monies paid when
� new connectors are charged a fee to pay for the expansion caused by growth. These funds can only be
used for expansion and increase of processing capacity.
Marina O�erations Fund
Director Black noted there is a $50,000 budget for the Marina Operations Fund. The fund pays for
approximately $20,000 in annual property tax and estimates $30,000 for maintenance and repair on the
premises. Revenues from the tenant are currently in the$45,000/year range.
In response to an inquiry, City Administrator Maxeiner stated major maintenance repairs are the City's
responsibility.I�tinor day-to-day repairs are the tenant's responsibility.
Utilit,�provements Fund
Director Black �tated the capital projects that improve or expand the capacity of Water and Wastewater
Utilities are paici for from the Utility Improvements Fund. The budget includes funding for construction
of the sanitary sewer conveyance line from the CWWTP to the SWWTP as well as improvements to the
CWWTP.
Risk Mana�ement Fund
Director Black noted the Risk Management Fund is an internal services fund. Expenditures for this fund
are carried across each internal City department. The City participates in McMRMA and is covered for
workers compensation, liability and property casualty. In FY 2009-10 the annual premiums cost
$700,000. It is projected to increase to $894,000 in FY 2010-11. In past years the City had a reserve that
could be drawn from when premiums increased dramatically. However, the reserve has dwindled which
will have a great impact on not only this year's budget but next year's as well. It is anticipated next year's
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Finance and Personnel Committee Meeting
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Page 3
rates will also increase. Consequently, it will be noted across the board a significant increase to the
transfer amount�to the Risk Management Fund from each department.
Information Technology Fund
Director Black stated the Information Technology Fund is also an internal services fund. Each department
is assessed a fee based on the number of desk tops. Specialized software is charged to each department.
The department has closely monitored expenses. The proposed FY budget remains at the status quo with
the exception of�two larger items:
1. Purchase online registration software for Parks and Recreation which will be more convenient for
residents/customers and reduce needed Staff time for the registration process;
2. Replace an obsolete server. It is anticipated the replacement cost will be $28,000. The server
purchas�was not included in the Detail Sheets.
Employee Insurance Fund
Director Black �ioted the Employee Insurance Fund, an internal services fund, is also assessed across the
board to each o�erations department. The quote originally came in from Blue CrossBlue Shield with a
22% increase w�ich was negotiated down to 19%. Staff is proposing to offer the same PPO Plan with an
increase in deductibles for employees and offer another option as well. The previously offered HMO will
still be available.
Chairman Schaefer inquired if the employee's share of premiums will increase. Director Black replied in
� the affirmative.
Director Black stated this fund had a deficit of more than $600,000 in FY 2008-09. By converting from
self-insurance tc� the Blue CrossBlue Shield Plan the City was able to cut the deficit by approximately
$350,000 by the� end of this fiscal year. It is hoped the City can trim an additional $125,000 from the
deficit during FY 2010-ll.
Chairman Schaefer noted last year the union employees could opt to participate in the City's plan or
participate in the union's insurance. He inquired if the employees still have the option to participate in the
City's plan. Director Black responded the Local I50 employees no longer have the option of participating
in the City's plan. By contract they are required to use union insurance.
In response to a request for clarification,Director Black stated the City is able to reduce the deficit in this
fund largely because Blue CrossBlue Shield has a fixed premium. The City continues to spread the cost
of the original premium across the board and thereby saving money and reducing the deficit.
Saecial Revenue Funds
Director Black stated all Special Revenue Funds can be utilized only for restricted purpose.
Band Fund
The purpose of the Band Fund is to finance and account for expenditures incurred in the provision of the
City band concert series. Previously, the City had to tax the residents for monies to be used for the band
concert series. The tax showed up on the tax bills as"Band Fund". The City had a tax cap which had to be
followed when taxing for all funds. Director Black stated now that the City is Home Rule the Band Fund
� will no longer show up as a tax on property tax bills, but will be incorporated in the property tax collected
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Page 4
in the General Fund. Funds will be transferred from the General Fund to the Band Fund to pay for
expenditures ascociated with the City band concerts. It is anticipated the transfer will be between $13,500
and$15,000 for this year's concert series.
City Administrator Maxeiner noted the band consists of union members, who must be paid a union rate of
pay. In addition, the City has to pay for the purchase of music and the rights to use the music during the
concert series.
Civil Defense Fund
Director Black stated a transfer of funds from the General Fund is utilized to fund the purchase and
maintenance of��ity civil defense warning mechanisms.
Audit Fund
The Audit Fund is used to pay for the expenses incurred in the City's annual audit. There is no limit on
the property tax rate used to meet the cost of the required audit. Director Black stated the City is in its
final year of a three-year contract with Eder Casella. The audit includes all funds including an internal
service charge tcr the Water/Sewer Fund and the Police Pension Fund audit fee.
City Administrator Maxeiner noted the cost of the annual audit has risen significantly due to additional
constraints and requirements posted by State statutes.
� Annexation Fund
Director Black stated the purpose of the Annexation Fund is to segregate funds received from negotiated
annexation agreements that are intended to be used for improvements to infrastructure or City facilities.
The fund revemies are determined by a mixture of recurring and one-time, non-recurring sources. The
City annually received approximately$60,000 in this fund from Meyer Material for gravel mining fees.
Director Black stated annexation fee revenue is expected to decrease significantly due to the slowdown in
the housing market that has slowed building activity. He acknowledged a $60,000 transfer to the Debt
Service Fund has been added to fund a portion of the bond payment for the Public Works building.
Motor Fuel Tax Fund
Director Black stated the State receives MFT and distributes a percentage back to the municipalities. The
current rate is $:?6/capita. Due to the results of our recent special census, the City is now receiving MFT
funds on the ba,is of our population, 27,525. MFT Funds are restricted as to their use: road maintenance
expenses, road �alt purchase, debt service for road improvement projects, and additional capital projects
(street repair and improvement).
Director Black rioted the 2008-09 salt purchase cost rose from $40/ton to $138/ton which caused a drain
on this fund. Staff has been advised the City can lock in the purchase price at $63/ton (an increase of 3%
over FY 2009-10 rate) for a total of approximately $157,500. The savings to the City would be
approximately$120,000.
Director Black stated the 2000 MFT Bond was paid off in FY 2009-10. A new bond was issued to cover
street improvements with only an interest payment of about $50,000 due in FY 2010-11. Paying off the
� 2000 bond early caused the City to realize a savings of approximately$100,000 per year.
Finance and Personnel Committee Meeting
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Page 5
Chairman Schaefer requested clarification as to what MFT Funds could be used for. City Administrator
Maxeiner responded funds can be used for street repair and maintenance, salt purchase and street lighting.
Responding to(�hairman Schaefer's inquiry,Director Black stated MFT funds are deposited on a monthly
basis. City Administrator Maxeiner stated there is a disbursement fund which directly deposits the MFT
funds into the ('ity's account. Conversely income tax lags behind as the State is required to approve the
issuance of checks to disburse funds.
Developer ponation Fund
Director Black noted the revenue in the Developer ponation Fund is down significantly as it is based on
collection for new construction. The funds are collected for and distributed to McHenry Elementary
School District 15, McHenry High School District 156, McHenry Township Fire Protection District,
McHenry Libra�y District and the City's Park System.
Tax Increment I�inance Fund
Director Black stated the purpose of the Tax Increment Finance (TIF) District is to finance the
revitalization ef�forts in the City's downtown area through investment both from the private and public
sectors. The taxes generated by development in the TIF District pay for the expenses of the fund. Property
tax revenues are expected to total $554,200 in 2010-1 l, a decrease of$30,800 over the prior year. This is
due to the EAV going down by 2%.
Director Black noted the City purchased land from this fund. Each year the taxes increases are used to pay
�, off that purchase.
Tourism Fund
Director Black stated the City has a 2.5%Hotel/Motel Tax generated by overnight stays in City facilities.
Non Home Rule communities are restricted in the use of these funds. As a Home Rule entity, the City is
now able to use those funds for a more general purpose.
Alderman Wimmer inquired if 2.5% was a standard rate for this tax. Director Black responded for more
typical rate is 5°%.
Alderman Peterson inquired if the tax would apply to a Bed and Breakfast. City Administrator Maxeiner
responded it was the intent of the ordinance to cover Bed and Breakfast establishments as well as hotels
and motels.
Pageant Fund
Director Black stated the purpose of the Pageant Fund is to account for revenues and expenditures used to
conduct the annual Miss McHenry Pageant. The revenues have kept up with expenses on an annual basis.
Capital Proiects Debt Service
Recreation Center Construction Fund
Director Black noted there is a fund balance of approximately $4 million in the Recreation Center
Construction Fund.
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Finance and Personnel Committee Meeting
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�ecial Service Area#lA
Director Black stated Special Service Area#lA was implemented to construct intersection improvements
and traffic signalization at the intersection of Shamrock Lane and Route 31. The project was completed in
2000.
Responding to an inquiry regarding when the SSA expires, or when the bonds will be retired, Director
Black stated he would investigate the matter.
Ca itp al Im rovements Fund
Director Black noted most projects paid for from the Capital Improvements Fund are multi-year and
extend over several budget years. He stated there will be a budget amendment to the FY 2009-10 budget
to reflect the funds utilized for the 2010 Road Improvements project.
�ecial Service Area#4A
Director Black stated Special Service Area #4A was established to provide for sanitary sewer extension
and connection for residents of Lakewood Road Subdivision. The improvements were originally paid for
from the Water/Sewer Fund. Funds recovered due to the implementation of the SSA are transferred to the
Water/Sewer Fund.
Debt Service Fund
The purpose of the Debt Service Fund to provide accounting for bonded indebtedness incurred by the
� City's General Fund, including all bond and interest payments.
Fiduciary Funds
Director Black stated Fiduciary Funds are those monies deposited with the City which they hold for
others. These funds must be segregated from the City's funds.
Employee Flexible S,pending Fund
Director Black stated the purpose of the Employee Flexible Spending Fund is to account for employee
pre-tax medical spending accounts that are offered and paid for by the employees through pre-tax payroll
deduction. The guidelines for this fund have been established by the IRS.
Revolvin Loan Fund
Director Black noted Council had recently approved a$75,000 loan to BuddyZ issued from the Revolving
Loan Fund. The intent of the fund is to provide low interest loans to businesses in the community with a
goal of job creation. Typically, the loans are approved for either new businesses in town or businesses
expanding their operation and thereby increasing the work force in the City.
Chairman Schaefer inquired if as the funds are paid back to the City, those monies would then be
available for loan to another entity. City Administrator Maxeiner replied in the affirmative, pending loan
application information verification and approval.
Police Pension Fund
Director Black stated the purpose of the Police Pension Fund is to provide retirement benefits for retired
police officers and their beneficiaries through employer and employee contributions and investment
� earnings. The City's pension plan is a defined benefit plan meaning that regardless of investment
Finance and Personnel Committee Meeting
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Page 7
performance, tha plan is obligated to pay the defined benefit. The revenue to fund the plan is obtained
through:
1. Employ�e contributions from sworn and non-sworn officers at a rate of 9.1%of their salary;
2. Investment earnings;
3. City contribution which makes up the remainder of funds needed to accommodate the plan.
Director Black stated the amount required to be paid into the fund by the City is determined by State
Statute. The State has determined that all police pension funding in the State must be self-supporting by
the year 2033. Each year there is an actuarial study which determines the status of the fund and what
amount is needed to bring the fund to self-sufficient standing. Due to the large number of pensioners, the
City is making little progress in accomplishing a self-sufficient fund. Assuming a 7.5% investment return,
the City is at a stage where decreasing the deficit in this fund needs to be addressed. This is an obligation
that will always be there. Director Black noted many communities are struggling with this issue.
City Administrator Maxeiner noted the pension fund investments are managed by the Police Pension
Board comprised of current officers, retired officers and members of the community-at-large. The City's
hands are tied. If the pension board makes poor investment decisions, the City is required to make up the
deficit.
Director Black stated the fund at the current time needs to be self-sufficient by 2033, so the increased City
deposits to the fund can be spread over several years.
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City Administrator Maxeiner noted the pension plan is a very rich plan. The City needs to find a solution
to fund the plan.
Alderman Wimmer inquired if increasing the tax levy was a possibility. Director Black replied that could
be an option.
Chairman Schaefer inquired if Staff has some ideas to bring this plan closer to self-sufficiency. Director
Blake replied in the affirmative and noted some ideas would be presented to the committee at the next
meeting on March 22"a
Development Escrow Fund
The purpose of the Development Escrow Fund is to segregate developer funds held by the City to ensure
the completion of specific public improvements, such as sidewalks and traffic signals. The recent
agreement with the developers of Legend Lakes Subdivision which resulted in a$1 million payment to the
City for subdivision public improvements is being held in this fund. Recently, Council authorized the
return of$50,000 to Boon Creek Venture for the money held for a traffic signal anticipated for Glenbrook
Trail and Crystal Lake Road. As that signal was not constructed during the time specified, the money was
returned to the developer.
McHenry Economic Development Fund
Director Black stated there is a small balance in this fund which is used to account for revenues and
expenditures supporting the McHenry Economic Development Commission.
� Retained Personnel Fund
Finance and Personnel Committee Meeting
� March 8, 2010
Page 8
The Retained Pf•rsonnel Fund is used to account for funds collected as reimbursement and expended for
third party serv�ces on behalf of a contractor or developer. Such services would be professional and
technical services used to assist or advise the City in connection with land development. Director Black
noted this is actually a pass-through account.
Chairman Schaefer inquired if there were any further comments or questions regarding the portion of the
budget presented this evening. There were none.
Chairman Schaefer informed the Committee that budget discussions would continue on Monday, March
22, 2010 at 7 p.m. in the Aldermen's Conference Room. The continued discussions would include the
General Fund.
Adiournment
Motion by Wimmer, seconded by Blake,to adjourn the meeting at 8:42 p.m.
Aye: Schaefer,Blake,Wimmer.
Nay: None.
Absent: None.
Motion carried.
Respectfully submitted,
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