Finance Committee, June 17, 2019

July 15th, 2019  |  Published in Observer Reports

Members Present: Council members Sean Malone (chair), Nancy Moore, Earl Williams, Robert Zimmerman; citizen members Thomas Cicarella, Linda Lalley, Martin Kolb, Anthony Moore

Others present: Mayor David Weiss, Chief Administrative Officer Jeri Chaikin, Director of Finance Robert Baker, Commander of Support Services John Cole, Assistant Finance Director Cheryl Arslanian

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

Agenda—Committee actions:

  1. Mr. Malone presented the minutes of the May 20, 2019 Finance Committee meeting for approval. The minutes were approved without further discussion.
  2. Mr. Cole presented a recommendation to approve the proposed ordinance for sale of police dogs owned by the city. Upon retirement of a city-owned K-9, past practice has been to allow the retired dog to live with its handler until the dog dies. The handler has, generally, assumed all liabilities for the dog until its death. However, there has been no official paperwork that transfers the ownership of the dog to its handler. To fully address these issues, the police department is proposing that the city enact an ordinance formalizing the transfer of ownership. Nancy Moore recommended that we “tidy up this loose end.” Mr. Kolb recommended this be done at the next City Council meeting. The recommendation was approved.
  3. Mr. Baker proposed a resolution amending fiscal policy statements of the city relating to the desired level of certain city fund balances. The policy statements are not binding, but serve as guides for the city. The 2003 resolution provided that the city, as a goal, should endeavor to carry forward at the beginning of each year a General Operating Fund balance of not less than 20 percent of the budgeted operating fund expenditures. Any amount in excess of 20 percent shall be available for transfer to the General Capital Fund. The 2003 resolution also stated that the city, as a goal, should begin the year with a General Capital Fund balance that, at a minimum, is equal to the current year’s general capital debt funding requirement plus the total of all estate tax revenue received by the city and credited to the General Capital Fund in the prior year. The proposed new resolution would increase the General Operating Fund reserve to 25 percent and that any excess above 25 percent can be transferred to the General Capital Fund, the Sewer Capital Fund, or any other fund authorized by Council. The proposed new resolution recognizes the loss of estate tax revenue and states the General Capital Fund test should be that the year-end balance (plus grants receivable) equal prior unspent capital appropriations plus current year capital appropriations.

Nancy Moore counseled the committee to review the history of how the 2008 recession impacted the city, note the impact of the 2012 city income tax increase, and consider how the 2018 federal tax law changes were affecting 2018 and 2019 city revenue. She agreed this was a good policy, but will depend on Council not “spending down” to the limit. City Council has been maintaining a reserve around 30 percent rather than the 20 percent goal, which proved critical during the recession. Mr. Cicarella asked that Mr. Baker enlighten him on the difference between a policy and an ordinance. Mr. Baker replied that ordinances would require specific “rainy day” funds be set aside and specific limits be defined for their use beforehand, requiring actions to be taken that would need to be reversed after the fiscal emergency subsides. Mr. Zimmerman remarked that Council considers this policy frequently as situations arise, but is not forced into legislative action to sequester funds and modify ordinances. Nancy Moore added that recently proposals had been made to “spend down” the Operating Fund reserve in response to revenue shortfalls, which would bring the city closer to required action should we adopt ordinances. She reminded the committee that fiscal responsibility was a function of political will. Ms. Lalley agreed that policies were preferable to ordinances; she added that she was not a fan of large reserves because they constrain Council’s options. Nancy Moore asked what would be an appropriate reserve in order to maintain the city’s high bond rating and low borrowing cost; the rating agencies publish a reserve guideline nationally and for Ohio. Mr. Malone agreed with Ms. Lalley’s opinion on reserves; his recollection is that 20 percent was the minimum for an AAA bond rating and that the city did not have the revenue to achieve 35-40 percent reserves. Mr. Kolb said that it was incumbent on Council to change the policy rather than enact an ordinance; loss of funding would be traumatic if the city adopted an ordinance. Mayor Weiss outlined three issues: we must update the policy to recognize the loss of the estate tax; a policy is preferable to an ordinance; and the percentage target should provide a cushion for external stresses such as the federal tax law changes last year. He is concerned that the city will need the reserves in the future and raising the target to 25 percent sends a responsible message. Mr. Williams commented that until the city attracts more commercial capital investment, we should maintain a healthy reserve. Anthony Moore questioned how we could maintain accountability with a reserve policy when the underlying goal was to preserve our credit rating. He requested that a phrase be added to the policy specifically setting a bond rating target; be more direct. Mr. Cicarella remarked that the discussion had been helpful for him. He agreed that a policy was preferable, allowing Council to respond more easily. He added that the target chosen should be related to our recent experience and that experience indicated we should raise the target. He then asked that the policy be revisited annually rather than as a reaction to financial events. Nancy Moore concurred that an annual review during the budgeting process would be preferable. Mr. Zimmerman agreed that this policy comes up during many budget discussions. Ms. Lalley asked if we needed to add language to reflect the purpose of the reserve. Mr. Malone suggested the committee approve the resolution for raising the target with the addition of a reference to a bond rating target in the policy. The resolution was approved.

Mr. Malone adjourned the meeting at 8:19 a.m.

Frank Goforth, observer

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