Finance Committee, April 2018

April 29th, 2018  |  Published in Observer Reports

Finance Committee
April 16, 2018

Members Present: Committee members Sean Malone (chair), Earl Williams, and Robert Zimmerman; citizen members Thomas Cicarella, Martin Kolb, Linda Lalley, and Anthony Moore
Others present: Mayor David Weiss, Chief Administrative Officer Jeri Chaikin, Director of Finance Robert Baker, Director of Public Works Patricia Speese, Director of Planning Joyce Braverman, Human Resources Manager Sandra Middleton, and Council Member Julianna Senturia

The meeting was called to order by Mr. Malone at 7:31 a.m.

Agenda—Committee actions:

  1. The minutes of the March 19, 2018, meeting were approved.
  2. Ms. Chaikin presented a request from Ms. Middleton asking that the Finance Committee recommend City Council authorize an appropriation of employee Flexible Spending Account forfeiture money in the amount of $5,027 in the Human Resources Department operating budget for the purpose of employee Lunch and Learn and Employee Recognition programs. The Flexible Spending Account (FSA) is a benefit provided by the city that lets employees set aside a certain amount of their paycheck into an account before paying income taxes. The employee has the entire benefit year plus an additional 2½ months to use the funds toward qualified expenses. After that time, any remaining FSA contributions are forfeited. The request was approved.
  3. Ms. Speese presented her request to accept a proposal and authorize a contract for construction inspection services to GPD Group for the 2018 Street Resurfacing project at a cost of $34,200. The 2018 Street Resurfacing program is funded in the amount of $2 million and involves the resurfacing and inspection of 12 streets with the option for additional streets as funding permits. On March 23, the city three proposals for construction inspection services related to the 2018 Street Resurfacing project. The Request for Proposals (RFP) was sent to six firms and posted on the city’s website.

Ms. Lalley inquired about the long-term capital needs for street repairs. There had not been a separate and complete discussion of the city’s infrastructure plan and how that plan was to be financed. Ms. Chaikin replied that the 10-year capital fund set aside $2 million per year for street maintenance, $2 million per year for sewer, and $3 million per year for rolling stock and buildings. Mr. Baker interjected that beginning in 2010, when interest rates became exceptionally low, the city began using short-term notes to fund maintenance on streets. The city has had no debt service for these repairs since 2006. That will change in the future as interest rates rise. Bonds cannot be used for street maintenance as streets do not have a sufficiently long life. Mr. Malone added that a special Finance Committee meeting would be scheduled to review the infrastructure plan and how it is funded. The request was then approved.

  1. Ms.  Speese presented her request to authorize an appropriation of money in the Street Maintenance Fund to cover the county share of maintenance for several projects. In May 2013 City Council passed legislation authorizing the city to participate in the Countywide Preventative Maintenance Program through the Cuyahoga County Department of Public Works (CCPDW). As a result, Shaker is eligible for the two additional options now being offered by CCDPW under this program. The first is a road maintenance grant; the County will reimburse the city for materials for repairs of catch basins, crack sealing, manhole replacements and other miscellaneous maintenance items. The materials to rebuild catch basins on Warrensville Center, Coventry, and Lee roads as well as on Fairmount Boulevard qualify for this grant ($55,707). The second is the pavement maintenance grant, which is a 50/50 split between the county and city for an approved project in its entirety. The Fairhill Road resurfacing project ($249,040) qualifies for this grant.

Mr. Malone asked if this was the first year these grants were available to the city. Ms. Speese replied that this was the first year for the 50/50 grant. Mr. Kolb asked if the city’s portion of these projects was part of the $2 million-per-year street maintenance budget discussed in item 3. Ms. Speese confirmed they were, and that $500,000 had been set aside for Fairhill Road, so that $250,000 was now available for other street repair projects. Mr. Zimmerman wished to know the condition of Fairhill Road and whether was it critical to repair it this year. Ms. Speese confirmed Fairhill Road needed repair this year and was budgeted. Mr. Kolb was surprised Fairhill Road was a county road. Ms. Speese confirmed that it is. Mr. Malone asked to confirm we could repair additional streets with the budgeted funds and Ms. Speese confirmed so. Mr. Cicarella inquired if Fairhill Road would have been repaired by the county anyway. Director Speese replied that yes, the county would normally share costs 80/20, but the county was out of funds this year and Fairhill Road was probably seven-eight years later in their priority. Mr. Kolb wanted clarification that Fairhill Road would have been done by the city this year. Ms. Speese replied that yes, the Fairhill Road condition would not tolerate a wait of eight years. A motion was made and approved.

  1. Ms. Speese presented her request to accept a proposal and authorize a contract with Quality Control Inspection (QCI) for construction observation services for work within right-of-way. Historically, Public Works has spent an excessive amount of time responding to residents, following up with the utilities contractor on restoration, and ensuring maintenance of traffic plans are adhered to. Payment for construction observation would be at the expense of the utility company working in a right of way.

Mr. Malone wished to confirm the utility would pay the fee. Ms. Speese confirmed this. Mr. Cicarella asked if this was normal procedure. Ms. Speese remarked that too often utility contractor’s “clean-up” left many residents’ property poorly restored and many of them complained to the city. Mr. Malone asked what specifically had gone wrong on the Lee Road repaving project. Ms. Speese said that the contractor had closed Lee Road without informing the city so that traffic could be rerouted, had worked during quiet hours, and ruined lawns throughout the area. These inspectors, paid by the utility, would coordinate with city services, be the city’s “eyes and ears,” and protect city and residents’ assets. Mr. Malone continued to ask if Lee Road would be repaved this year to repair the poor paving done last year. Ms. Speese replied that further repair was necessary at Green Lake before repaving. Ms. Lalley wished to confirm how and who pays the inspector. Ms. Speese explained that the utility places a deposit with the city and the inspectors draw from this account. A motion was made and approved.

  1. Mr. Baker presented his request to authorize an appropriation of $850,000 from the Economic Development and Housing Reserve Fund for the ABA Insurance Services and McGlinchey Stafford “Vision Fund” loans. City Council approved Vision Fund loans for ABA Insurance ($500,000) and McGlinchey Stafford ($350,000) on July 25, 2016, and April 6, 2017, respectively. Funds were not appropriated for either loan, as they would not be expended until 2018 and beyond. These loans are for the Van Aken District and have two parts: upfront to prepare office spaces and yearly thereafter through the 10-year life of loan. The office build outs for both firms in the Van Aken District have commenced and upfront funds are expected to be requested for reimbursement between May and August 2018 ($250,000 for ABA and $200,000 for McGlinchey Stafford). This will leave $5 million in the Economic Development Fund.

Mr. Malone asked if these loans were approved in prior years. Mr. Baker confirmed they were approved. Mr. Moore asked if any prior loans had been written off. Director Baker answered that one prior Economic Development loan had been written off when the company’s office had moved to California. Mr. Moore asked the value of the lost loan. Mr. Baker replied that the loan was for $19,000 and $8,000 was written off. Mr. Moore inquired if a qualifier should be added to loan terms. Mr. Baker answered that a guarantee would likely cause these companies to choose other cities for their location; these loans are structured to attract new business and still have a low risk. Mr. Moore asked if that was the reason the loan is structured to pay back in two years. Mr. Baker confirmed that reason and added that these loans are usually paid back 2-for-1 over the loan lifetime. Ms. Lalley wanted to understand what happened to any profit from these loans. Mr. Baker explained any excess went back into the Economic Development Fund. Mr. Cicarella stated he has not seen this result with industrial tax abatement and asked if there was data to support this past loan experience. Mr. Baker said he will separately report the details to the committee. Mr. Malone stated he would also wish to see the data, as these two loans were larger than past loans. Mayor Weiss asked if the delayed loan payments were new. Mr. Baker replied, yes, prior smaller loans were paid out upfront. Mr. Kolb also expressed his concern that he would like to see more detailed and regular tracking for these larger loans. Mr. Zimmerman asked to see data for all these incentives. Ms. Lalley agreed with the desire for better tracking but applauded the creative use of these funds. A motion was made and approved.

  1. Mr. Baker presented his request to authorize the issuance and sale of $1.8 million of notes, in anticipation of the issuance of bonds, for the purpose of paying costs of improving streets as designated in the plans approved or to be approved by Council. The 2018 Streets Notes are consistent with past the city practice of financing street improvements. The notes are rolled over each year, and at maturity 10 percent of the original principal amount will be retired, so the entire issue will be retired in 10 years. The interest rate that will apply each year will be a one-year interest rate determined at the time of the rollover. Since streets are not a long-lived asset, notes are more appropriate financing than longer-term bonds. The entire note issue can be repaid on any maturity date, as was done for the 2010 road notes repaid in 2016.

Mr. Cicarella asked about any added fees for notes. Mr. Baker said there are fees paid by the city to the financial advisor while other fees are paid by the purchaser of the note. The request was approved.

  1. Mr. Baker presented his request to authorize “Then and Now” payment for the transactions on Exhibit A, a payment to Rea & Associates. Rea & Associates has a “letter of arrangement” to supply auditor services and last year the letter was mailed to Mr. Baker during his vacation, so he missed the payment.

Mr. Williams asked if this was a contract. Mr. Baker replied that Rea & Associates do not contract separately for each service but bills for services as needed by the city according to this letter. The request was approved.

  1. Ms. Chaikin introduced a new item requested at the April 9, 2018, City Council work session. There are two capital projects at City Hall to be addressed. The first project is an addition to the existing elevator upgrade in process. The second is a new project to repair and upgrade the basement, garage area and second floor of the area in city hall vacated by the Fire Station move. Ms. Braverman continued: The elevator addition is $70,000 to extend the elevator into the second floor space vacated by the Fire Department so that it may be repurposed in the future for city administration and/or public use. The second project would first require a $75k study of three options for the available basement, garage and second floor space considering the entire City Hall needs. The actual implementation cost for any chosen upgrade would be a separate future project.

Mr. Moore asked if the elevator to the second floor is needed if the space is not used by the public. Director Braverrman replied it would be necessary for access for employees as well as the public. Mr. Weiss stated that operating money must be spent to study options and capital for actual upgrades. Mr. Moore added that ADA compliance would be necessary for all uses. Ms. Chaikin warned the actual implementation cost may be triple the study costs. Mr. Malone wanted to know what other costs are expected. Ms. Chaikin answered the $70,000 is added only for the elevator. Mr. Williams asked what extent might this trigger for other ADA changes. Ms. Braverman replied that six or seven years ago there was an ADA complaint and City Hall was made compliant, but not the Fire Hall section of the building. Mr. Kolb remarked that the city could thus be facing significant costs for other changes. Ms. Speese said that the elevator addition would require four to six weeks to implement. Ms. Lalley said that she understood the combined Building & Housing office would move into the City Hall basement, according to the original restoration project. Ms. Braverman replied that Building & Housing would move to upgraded second floor space and an employee lunch room would be in the basement. Mr. Kolb wanted to know if there was room at “The Dealership” for Building & Housing. Ms. Chaikin replied there was no space left at The Dealership. Mr. Zimmerman remarked the proposal is for improvements and not rebuilding. Mr. Moore remarked it was sensible to request a full design for building usage rather than piecemeal. Mr. Malone summarized that the committee did not need to vote as this was not a formal agenda item but he would draft a memo to council members that the Finance Committee discussed the new item and there was support to recommend this to the council, but there was no formal Finance Committee vote.

Mr. Malone adjourned the meeting at 8:47 a.m.
Frank Goforth

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