Finance Committee, February 2018

March 3rd, 2018  |  Published in Observer Reports

Finance Committee
Feb. 20, 2018

Members Present: Council members Sean Malone (chair), Nancy Moore, Earl Williams and Robert Zimmerman; citizen members Thomas Cicarella, Martin Kolb, Linda Lalley and Anthony Moore
Others present: Mayor Earl Leiken, Chief Administrative Officer Jeri Chaikin, Chief of Fire Patrick Sweeney, Director of Economic Development Tania Menesse, Director of Finance Robert Baker, Principal Planner Ann Klavora, Housing Commissioner William Hanson and Council Member Julianna Senturia

The meeting was called to order by Mr. Malone at 7:30 a.m.

 Agenda—Committee actions:

  1. Mr. Malone opened the meeting with introductions around the room for the benefit of new citizen members Tom Cicarella and Anthony Moore. He also shared with them the role of the Finance Committee within the city government.
  2. Mr. Malone presented the minutes of the Dec.11, 2017, Finance Committee meeting for approval. The minutes were approved.
  3. Chief Sweeney presented his request for committee approval to apply for the Fire Prevention and Safety Grant through the Federal Emergency Management Agency (FEMA) and the U.S. Department of Homeland Security (DHS) for fiscal year 2017. The department is requesting grant funding in the amount of $25,000 to fund the purchase of smoke detectors to be installed in the homes of Shaker Heights residents in need. Chief Sweeney apologized that due to short notice he had been unable to present this item to the Safety & Public Works Committee. Mr. Williams stated the FEMA grant originated before the last Congress and asked when the city might apply again with a longer lead time. Chief Sweeney replied the grant would normally have come up in May last year. Ms. Moore asked about the technology, specifically photoelectric smoke detectors. Chief Sweeney shared that the older ion detectors were not as reliable as photoelectric detectors and that many homeowners would remove a battery after a low battery alarm. The new detectors have 10-year batteries that are not accessible, so that the unit would be replaced by the fire department after 10 years. Mr. Malone asked how many people in Shaker had the new photoelectric detectors and Chief Sweeney estimated about 25 percent. Mr. Zimmerman asked how the department determined need. Chief Sweeney replied that the department does not usually challenge a homeowner who claims a financial need, but there is a waiting list for the units. Ms. Lalley commented that this is a micro grant; were there other grants with more dollars available? Chief Sweeney answered that smoke detection was a high priority for the fire department and that they had applied unsuccessfully for other FEMA grants. He also reminded the committee that a home safety survey was a requirement during the installation of the smoke detectors. Mr. Kolb commented he moved to Shaker in 1983 and the fire department installed their smoke detectors; his father was a fireman and impressed by the professionalism of the Shaker Fire department. The motion was approved.
    4. Chief Sweeney presented his request for approval to apply for the Assistance to Firefighters Grant (AFG) through the Federal Emergency Management Agency (FEMA) and the U.S. Department of Homeland Security (DHS) for fiscal year 2017. The department is requesting grant funding in the amount of $13,300 to fund the purchase of two training simulators. Chief Sweeney summarized the request for the committee. This request was presented and approved by the Safety & Public Works Committee on Feb. 2, 2018. Mr. Malone asked how much money was required for other materials when using the training simulators. Chief Sweeney answered that the simulators were designed to help firefighters minimize damage to a homeowner’s property when responding to alarms, so the damage was usually a door or window, not the frame or surrounding structure. The motion was approved.
    5. Ms. Menesse presented her request for approval of a Vision Fund Forgivable Loan of $100,000 to The Mannik & Smith Group, Inc., to build out 8,154 square feet in Tower East over a 10-year lease term. E2G Properties has signed a 10-year lease with The Mannik and Smith Group for 8,154 square feet on the fifth floor of Tower East; the firm has first right of refusal on all contiguous space on the floor to accommodate its growth plans. The lease is contingent upon approval of a $100,000 Vision Fund Forgivable Loan from the city. She summarized the request, emphasizing this lease would bring Tower East occupancy above 80 percent. The forgivable loan was reviewed by the Neighborhood Revitalization and Development Committee and recommended for approval. Mr. Williams asked how competitive the city of Beachwood was in attracting this tenant. Ms. Menesse stated Beachwood is usually very competitive and Highland Hills has also become very competitive, but that the attraction of walking to lunch at the new Van Aken District was a decision factor. Ms. Lalley asked if the Van Aken District had lease openings; Ms. Menesse replied that about 20 percent of Val Aken was still available to lease. Mr. Malone asked if the city had performance clauses in the loan contract; Ms. Menesse answered there are agreements regarding employee numbers and income tax projections. She added that only a couple of these loans had not met projections in the past and the city was compensated. Mr. Malone continued: were these loans comparable to the ABA Insurance Services loan? Ms. Menesse replied that the ABA loan was larger and required upfront payments–it is the largest forgivable loan to date. Mr. Cicarella asked who checked the information provided by the applicant regarding other bank loans, insurance, salaries, etc. Ms. Menesse stated that RITA records were checked each year to verify loan reports, and that the city was subordinate to any bank loans. Mr. Kolb stated he felt the program was fantastic but asked if any prior loans had been written off. Ms. Menesse answered that only one had been nonperforming. Mr. Kolb recounted the Vision Fund had made nine loans totaling $262,000, yielding $555,000 in tax revenue and wanted to know if all that went back to the fund. Ms. Menesse clarified that the original $262,000 went back to the fund but the remainder of the $555,000 went to the city’s General Fund. Mr. Kolb clarified that these were mostly small loans and Ms. Menesse stated most were around $25,000. Mr. Zimmerman asked that a performance spreadsheet of past Vision Fund loans be sent to the committee; Ms. Menesse agreed. Mayor Leiken then provided some background regarding Tower East for the new citizen members of the committee—how the building had been allowed to deteriorate under prior out-of-state owners and the city had stepped in to convince E2G, a local company and Tower East resident, to purchase the property. The loan was approved.
    6. Principal Planner Ann Klavora presented her recommendation to enter into a professional services contract for construction inspection and administration of the Farnsleigh Streetscape Improvements project with Greenman-Pedersen Inc. (GPI) for $117,207. The services include construction inspection and administration for streetscape improvements along Farnsleigh Road, between Warrensville Center and Van Aken in the Van Aken District. The selected consultant will act as the city’s onsite construction manager for the duration of the project and satisfy Ohio Department of Transportation (ODOT) requirements when federal funding is involved in a project. The tight schedule for the project prevented the presentation of this proposal to the Safety & Public Works Committee prior to the Finance Committee meeting. Mr. Williams asked if this referred to the south side of Farnsleigh Road, Ms. Klavora stated it was for both sides of Farnsleigh Road. Mr. Williams asked if the future plans for the city parking lot on the north side were considered and Ms. Klavora confirmed these plans had been considered. Ms. Moore inquired about the RFQ (Request for Quotation) process involved. Ms. Klavora stated the RFQ was mandated to follow ODOT format without variance due to the federal funding requested; all the bidders are familiar with the requirements. Ms. Moore continued to ask if the budget was negotiated and Ms. Klavora replied there are variations among bidders about the administration process and task hours but she expected the actual costs to come under the bid. Mr. Kolb wished to know what improvements will be made and Ms. Klavora answered the project includes sidewalks, landscapes and artwork per the Van Aken District plan. Mr. Zimmerman requested that a copy of the ODOT process be included for City Council members. Mr. Cicarella asked hypothetically what would happen if two bids were close—can other factors such as “local” be considered? Ms. Klavora stated the ODOT process does not allow local preference. Mr. Malone returned to the city parking lot plans and Ms. Klavora said they were allowing for a building on that property. Mr. Kolb moved to enter into an agreement with GPI and the motion was approved.
    7. Mr. Hanson presented his request for Finance Committee approval to sell the condominium at 19101 Van Aken Blvd. #529 and the associated garage space to the Shaker Club Condominium  Home Owners Association (HOA) for $1. The goal of this transaction is to restore this long-standing vacant unit back to productive use through renovation and re-sale to an owner-occupant. The city has not spent any funds to acquire the property but no taxes are being paid while the city owns the property. This request was unanimously approved by the Neighborhood Revitalization & Development Committee on Feb. 14, 2018. Ms. Moore wanted to know the housing office picture on condos in Shaker Heights. Mr. Hanson shared that there is weakness in the market for condos in buildings originally intended as apartments built in the 1940s and converted to condos in the 1980s. Recently purpose-built condos are doing well with the amenities new buyers desire. There are 1,124 condos in Shaker with 11 percent vacant. Mr. Cicarella asked if the city knew the Shaker HOA was interested in buying before foreclosure. Mr. Hanson replied the city knew the HOA was interested, otherwise the city would not have taken the property from the county. Mr. Cicarella asked if this was an ongoing plan for the city. Mr. Hanson said that it was not a plan, only tactical in this one case; there was no personnel support for this going forward. Mr. Williams wanted to know if it was the practice to allow properties to progress to foreclosure. Mr. Hanson clarified that the city has little ability to affect a foreclosure even when the city knows it is imminent. The city does have ongoing efforts in place to reduce single family home foreclosures, which is a priority. Mr. Malone asked why local rehab companies did not bid on the property. Mr. Hanson replied that there is little a rehabber can do to add value to a condo in comparison to options for adding rooms and other amenities to single homes. Ms. Lalley wanted to know what criterion is used to accept a condo. Mr. Hanson reiterated this was an exception case and there is no desire to repeat unless an HOA asks for help. Mr. Malone asked if the city wanted to do more and Mr. Hanson replied “not really.” The motion was approved.
    8. Baker presented the list of “Then and Now” approval requests and explained for the new committee members the need for and use of “Then and Now” certificates in order to pay invoices prior to goods or services being delivered. He then requested that the Finance Committee recommend to City Council that the “Then and Now” certificate presented for transactions on Exhibit A and related payments be approved. Mr. Williams asked if this process deterred vendors. Mr. Baker is not aware that the process is any deterrent; the suppliers are normally smaller businesses and local to Shaker, so they are better able to adjust their billing dates and avoid the process. Mr. Cicarella wanted to know when the goods or services are actually delivered, an example being oil or gas delivery. Mr. Baker said delivery could be before or after invoice date. Sometimes, particularly for larger companies, the invoice is sent immediately after the contract is signed. It is not usually tied to the actual delivery. Mr. Cicarella asked if there is some penalty levied by the vendors. Mr. Baker did not know of an example in his experience. Mr. Malone wanted to know if other cities followed the same practice. Mr. Baker shared that this is standard practice in Ohio and all cities follow it. Auditors require it. The transactions and payments were approved.
    9. Baker presented the unaudited 2017 financial results for the city and the 2018 budget. Revenues were above the budget and 2016 revenue, and operating expenses were less than 2017 and more than 2016, so that the city’s General Fund stood at 32.33 percent reserve. Mr. Williams asked what defines the General Fund. Director Baker replied the General Fund is supported by city operating revenues, separate from the Recreation and Economic Development funds, which have different revenue sources. Mr. Williams asked if the General Fund supported city employee pensions. Mr. Baker clarified that all city employees are either Ohio Public Employee pensioners or Ohio Fire and Police pension members. There are state mandates for contributions to these pension funds based on a percentage of employee salaries. These funds are separate from the General Fund and cities have no pension obligations after these contributions are made to the pension funds. The pension funds can change the contribution and benefit rates without any city approval. Mayor Leiken made a comment for the benefit of the new committee members about the General Fund’s 32.33 percent reserve funding level. Shaker Heights is one of only nine municipalities in northeast Ohio with a AAA rating, because of this reserve level. The reserve is higher than ever; expenses have gone down while revenue has increased since 2007.

Mr. Malone adjourned the meeting at 8:58 a.m.
Frank Goforth

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