City Finance Committee, March 2019

March 29th, 2019  |  Published in Observer Reports

March 18, 2019

Members Present: Committee members Sean Malone (chair), Nancy Moore, Earl Williams, Rob Zimmerman; citizen members Thomas Cicarella
Others present: Mayor David Weiss, Chief Administrative Officer Jeri Chaikin, Director of Public Works Patricia Speese, Assistant Fire Chief James Heath, Senior Economic Development Specialist Katharyne Starinsky, Sustainability Coordinator Michael Peters

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

Agenda—Committee actions:

  1. The minutes of the February meeting were approved without further discussion.
  2. Assistant Fire Chief James Heath presented a request for approval to apply for the 2019-2020 State Board of Emergency Medical, Fire, and Transportation Services Grant. Additionally, the Fire Department is requesting approval to accept any funds that would be awarded by this grant application. The grant is administered by the Ohio Department of Public Safety, Division of Emergency Medical Services, and is to improve and enhance EMS and trauma patient care in Ohio through the provision of grant funding for equipment, training, and research. The amount of the grant would be $3,000, Chief Heath said.
  3. Ms. Speese presented a summary of the Cuyahoga County Solid Waste District (CCSWD) 2019 Solid Waste Management Plan Update. The CCSWD serves the community through programs designed to promote and increase recycling, thereby reducing solid waste sent to landfills. The newest plan update includes three new initiatives: the district would evaluate whether there is interest in establishing a municipal yard-waste contracting consortium to help communities manage leaves and brush, and obtain longer contracts and stable pricing; the district will develop a Multi-Family Housing Recycling Guide that offers instructions, best practices, and case studies for multi-family housing recycling programs; and the district will conduct a study to assess the need for a scrap tire transfer station to provide local drop-off options for scrap tires. Ms. Speese recommended that the plan update be ratified by the city.

Mr. Zimmerman said he had read in the New York Times that China is no longer accepting plastic and paper for recycling and wondered if this was related to our recent changes in what we could accept for recycling. Ms. Speese said it was. Representatives from Los Angeles had told her at a conference that they had previously earned $3 million a year for their recycled material but were now spending $20 million a year to get someone else to accept it. She heard similar stories from Portland, Ore., and other large cities. Paper and cardboard are still money-makers, she said. The cost of screening plastic and glass for contamination is prohibitive, as over 35 percent is not cleaned properly. Shaker employees screen as they collect the recycling buckets, which is why the buckets are small. Ms. Moore said Philadelphia incinerates waste and the air pollution is awful. Ms. Speese added that using landfill is much cheaper than other options. Mr. Malone asked if anyone from Shaker attends the county’s sustainability committee meetings. Ms. Speese answered that we do. Mr. Malone said he was encouraged by the multifamily residence initiative. The recommendation was approved.

  • Ms. Speese next presented a request for approval to enter into a contract with Solar Testing Laboratories, Inc., for 2019 Construction Inspection Services at an estimated cost of $73,625, or $50 per hour, with the option to renew in 2020 and 2021. Shaker Heights sent Request for Proposals (RFPs) to six consulting firms for construction inspection services on Jan. 7, 2019. The general scope of work included providing full-time construction inspection for road resurfacing, waterline replacement, sewer improvements, and other projects as requested by the city. Public Works received three proposals and Solar Testing Laboratories was the low bid. Public Works interviewed the team from Solar Testing Laboratories on Feb. 21, 2019, and found them to be qualified.

Mr. Malone wished to know if the city always used a construction inspector. Ms. Speese replied that the city had used several different companies for inspection of work but that this was a first contract for Solar Testing Labs. Mr. Williams asked if QCI was doing the inspection work for the Dominion gas line construction and Ms. Speese confirmed this. The request was approved.

  • Senior Economic Development Specialist Katharyne Starinsky presented a request that the Finance and Administration Committee approve a Vision Fund incentive in the amount of up to $80,000 to Align Capital Partners, who intend to lease 4,500 square feet in the Van Aken District for 10 years. Align is a growth-oriented private equity firm making investments in business-to-business specialty manufacturing, distribution, and business services companies. The Economic Development plan, adopted by City Council in November 2010, called for the implementation of tenant incentives to make it financially feasible for businesses to expand their operations and locate new offices in Shaker Heights. This incentive requires that businesses meet agreed-upon payroll and income tax targets within a set time frame to ensure that the city realizes a return on its investment. The Vision Fund has since made 10 loans, totaling $362,000; the loans have stabilized office buildings in Shaker Heights and yielded $653,000 thru 2018, representing a return of 2:1 on the city’s funds. Funds for this incentive are available in the 2019 Economic Development Department budget.

Mr. Zimmerman asked if Align had approached the city for assistance. Ms. Starinsky confirmed that they had. Mr. Zimmerman recommended that the city emphasize that Align is a unique professional business for Shaker and we should publicize this win. Mayor Weiss added that the city should also publicize that one of the firm’s principals and another employee are Shaker residents, and that the Van Aken District office space is now 100 percent rented. The caveat is that this business is very young, but the city’s assistance is “pay as you go” rather than all up front. The mayor asked rhetorically if Shaker could have landed this business without a loan: the answer was probably, but now the city has the tenant and the payback for Vision Loans is good. Mr. Zimmerman remarked that Beachwood also provides incentives for new businesses. Mr. Malone asked how much money is still available in the Vision Fund and can we “claw back” payments if milestones are not met. Mayor Weiss replied that there is not a “claw back” clause in this contract because the city is making the loan in stages rather than all up front. Mr. Malone asked if we had clawed back loans before. Ms. Chaikin replied that the city had successfully recovered funds from companies that had left Shaker before the loan terms had been met. Mr. Zimmerman confirmed there are risks with the loans, then he asked Ms. Starinsky to prepare a summary of past loans for Council. Mr. Malone asked if we had success with Vision Loans other that at Van Aken District. Ms. Starinsky replied that we had successful loans at other Shaker locations. Mayor Weiss added that the city is saving funding for Vision Fund use at the new tower planned for the Van Aken District. Mr. Cicarella praised the creativity of applying 5-6 year “pay as you go” funding for Vision Loans. The request was approved.

  • Ms. Chaikin presented a request to recommend to Council the approval of a grant application to the Northeast Ohio Public Energy Council in the amount of $55,958 toward the $150,000 generator replacement and electrical service upgrade project at City Hall. NOPEC’s Energized Community Grant Program provides funds to help member communities implement energy savings or energy infrastructure measures. In 2018 the city received $60,445 in grant funds, which were applied to the $95,000 replacement of the original boiler in the Police/Court Building at 3355 Lee Road. For 2019, $55,958 is available but Council approval is required for the application.

Mr. Williams wanted to confirm that one generator was replacing two generators. Ms. Chaikin replied that yes, one larger generator was replacing two older ones. Mr. Malone commented that the money being freed up by this grant would also help fund the hiring of the new sustainability coordinator, Michael Peters, for next year. The request was approved.

  • Mr. Peters presented a request for the Finance and Administration Committee to approve the submission of an application to the U.S. Green Building Council (USGBC) for an “LEED for Cities” grant (Leadership in Energy and Environmental Design). This grant will award 14 U.S. cities funding and resources to achieve LEED for Cities certification. Estimated total value is approximately $25,000. LEED certification is recognized as a progressive sustainability initiative.

Mr. Malone said that the sustainability committee had discussed applying for LEED certification in 2015 when only larger cities were considered and then again last week when they learned USGBC would consider smaller cities for these grants. Ms. Moore wanted to learn the connection between this grant and the new housing being built. Mr. Peters said the specifics would be announced April 1. If we are chosen to receive one of the 14 grants, we can choose one area from the many options to qualify—renovated housing is one of those options. Ms. Moore asked if storm-water management would also apply. Mr. Peters replied that it would also. Mr. Williams asked Mr. Peters to explain LEED and Mr. Peters gave a short review of the history. Mr. Williams then asked if there were any LEED certified buildings in the area. Mr. Peters replied he could not recollect any at the moment but he guessed the Key Tower might be. [Note: Key Tower is not certified, but several Cleveland City School District school buildings are certified, as is the new and renovated Cleveland Heights High School.] Mr. Zimmerman asked Mayor Weiss if this would attract business to Shaker. Mr. Weiss replied that qualifying was not easy and commercial builders are not attracted to this; however, it does provide a competitive advantage if the building is certified and data is available on the savings. Mr. Zimmerman shared that LEED certification came up when Mitchell’s was pursuing the Oakwood Commons site in South Euclid. Mr. Weiss added that there are multiple advantages from EPA and from some businesses, but it does cost to pursue on one’s own. Mr. Peters added that Shaker would be the first city in Ohio to qualify for this grant and we should work with the schools to get support. Mr. Cicarella asked if Shaker is required to go forward for certification if our grant application is approved, and what the costs to the city are. Mr. Peters replied we would learn the answer on April 1, but it would mostly be staff time rather than dollars. Mr. Cicarella said he did not want to start down a path and then be committed to fund specific projects. Mr. Malone stated his understanding this would be a means to set goals rather than to fund specific projects. Mr. Cicarella asked if there were bad consequences of not winning the grant. Mr. Peters answered that the goal is to reach LEED certification within one year of the grant and that if USGBC does not believe we can be successful, it will not consider Shaker for the grant. Mr. Weiss remarked that the longer term benefit is public relations to attract environmentally minded residents and businesses to Shaker. The request was approved.

  • Ms. Chaikin presented the unaudited 2018 Year End Results and offered some highlights:
    • 2018 Revenues were $18,589 less than the 2018 budget and only $3,578 more than 2017 actual.
      • Income taxes were $516,143 less than in 2017, down 4 percent. Some suburbs were up and others down, but none down as much as Shaker.
      • Investment earnings went up by $393,848 as a result increased interest rate and using brokered CDs and Treasuries for investments.
      • This is the first year since 2013 that revenue has not grown by at least $500,000.
    • 2018 Operating Expenses were $1,848,191 less than the 2018 budget and $204,059 more than 2017 actual.
      • Almost all departments spent less than they were budgeted in 2018.
      • Transfers Out of the General Fund were $11,972,621 which exceeded the 2018 budget by $1,090,994 and permitted funding for recreation, the economic development fund, and sewer construction.
    • 2018 General Fund Results: Revenues exceeded expenditures and transfers by $1,264,405.
      • The year-end unencumbered General Fund balance is 36.18 percent of 2018 expenditures and transfers.
      • Given the uncertainty of whether Shaker income tax revenues will recover in 2019 and by how much, and that all of the collective bargaining agreements for Shaker unionized employees have expired, the unencumbered cash balance of the General Fund may be needed in 2019 to meet the city’s obligations.

Ms. Chaikin added she expected new bargaining requests from the unions this coming week and that these will be a major topic of the March 25 City Council meeting. Mayor Weiss added that $500,000 extra was budgeted in 2018 for labor, but cost cutting yielded $1,400,000, which was very good work by the departments, and now it is needed. Nancy Moore remarked it was good news the 2018 actual expenditures came out with a surplus, but we may still be surprised when the actual tax revenue is learned after April 15. Mr. Cicarella worried this hoped for revenue may not come to pass.

Mr. Malone adjourned the meeting at 8:39 a.m.

Frank Goforth

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