HomeMy WebLinkAbout1997 03-06 FCA•
AGENDA
BROOKLYN CENTER FINANCIAL COMMISSION
March 6, 1997
City Hall
Conference Room B
1. Tour of Police Station for interested members: 6:30 P.M.
2. Call to Order: 7:00 P.M.
3. Roll call.
4. Approval of Minutes: February 13, 1997.
5. Approval of Agenda
6. Update on Fire & Police building needs planning.
7. Review of proposed Capital Improvements Fund & Reserve Fund Expenditure Policy.
8. Amended Investment Policy.
9. Set Date of Next Meeting.
10. Adjournment: 9:00 P.M.
The Financial Commission asked to receive copies of monthly financial reports submitted to the
City Council. We are behind schedule with producing January 1997 monthly reports due to staff
absences in the Finance Division and so none are included for this meeting. The adopted 1997
Annual Budget is attached for your review.
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• MINUTES OF THE PROCEEDINGS OF THE FINANCIAL COMMISSION
OF THE CITY OF BROOKLYN CENTER
FEBRUARY 13, 1997
CITY HALL, CONFERENCE ROOM B
CALL TO ORDER
Chair Donn Escher called the meeting to order at 7:00 P.M. in Conference Room B.
ROLL CALL
Present at roll call were Chair Donn Escher, Commissioners: Ned Storla, Jay Hruska, Larry
Peterson, Jerry Blamey and Michael Weidner. Also present were Council Liaison Debra
Hilstrom, City Manager Michael McCauley, and Finance Director Charlie Hansen.
Commissioner Ron Christensen was absent and excused.
Approval of Minutes
A motion was made by Commissioner Jay Hruska to approve the minutes of the January 9, 1997
meeting. Commissioner Ned Storla seconded the motion and all members voted in its favor
except for Commissioners Larry Peterson and Michael Weidner who abstained from voting.
Annroval of the Agenda
A motion was made by Commissioner Larry Peterson to approve the agenda for the meeting.
• Commissioner Jay Hruska seconded the motion and all members voted in its favor.'
Fire Police Building and Capital Improvements Fund Expenditure Policv
These items were discussed at the January 9, 1997 meeting and further discussion on them was
deferred to the March 6, 1997 meeting.
Proposed Accounts Receivable Policy
Charlie Hansen presented a draft of this policy. Most of the procedures described are what the
staff is already following with the major exception of granting the City Manager the authority to
write off uncollectible accounts receivable up to amounts defined in the policy. This is a change
from the practice of annually submitting a resolution to the City Council to authorize the write off
of uncollectible accounts receivable. There was discussion, but no consensus regarding the
appropriate amounts the City Manager should have authority to write off. Jay Hruska suggested
that there should be some review by either the Financial Commission or the City Council of the
amounts written off by the City Manager. Debra Hilstrom expressed her desire that the placing
of non-essential items on the City Council agenda be limited.
Proposed NSF Check Policv
Charlie Hansen presented a draft of this policy. This policy is very similar to the accounts
receivable policy in that most of the procedures described are what the staff is already following
with the major exception of granting the City Manager the authority to write off uncollectible NSF
• checks up to amounts defined in the policy. This is a change from the practice of annually
submitting a resolution to the City Council to authorize the write off of uncollectible NSF checks.
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• A motion was made by Commissioner Larry Peterson and seconded by Commissioner Jerry
Blarney to recommend the accounts receivable policy and the NSF check policy as amended to the
City Council. Mike McCauley commented that he may wish to lower the amounts that he would
be authorized to write off before the policies are submitted to the City Council. All members
voted in favor of the motion.
Amended Investment Policv
Charlie Hansen presented the existing investment policy and a proposed draft of a new policy.
The existing policy was approved by the City Council in 1990 and amended in 1994 to exclude
the purchase of derivative securities. The proposed policy is based on a model policy from the
Government Finance Officers Association with various modifications to fit Brooklyn Center's
situation. Extensive discussion followed. It was decided that the paragraph on training be made
a more positive statement by saying the City shall provide training instead of the City should
provide training. The policy was held over to the March meeting to allow more time for the
Commissioners to consider and discuss the issues.
Next Meeting
The next meeting will be Thursday, March 6, 1997 at 7:00 P.M.
ADJOURNMENT
• Commissioner Jay Hruska moved to adjourn the meeting at 8:07 P.M. Commissioner Jerry
Blamey seconded the motion and all members voted in its favor. Interested members proceeded
on a tour of the Fire Stations led by Fire Chief Ron Boman.
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0 CITY OF BROOKLYN CENTER
INVESTMENT POLICY
1. SCOPE
This investment policy applies to all of the investment activities of the City, except for the
Employee Deferred Compensation Agency Fund and the proceeds of refunding bond issues
where the investment of such proceeds is specifically governed by the bond escrow
agreement.
II. OBJECTIVE
1. SAFETY
A,
Safety of principal is the foremost objective of the investment program.
Investments shall be undertaken in a manner that seeks to ensure the preservation
of capital in the overall portfolio. The objective will be to mitigate credit risk and
. interest rate risk.
A. Credit Risk
Credit risk is the risk of loss due to failure of the security issuer or backer. Credit
risk may be mitigated by:
• Limiting investments to the safest types of securities; and
• Pre-qualifying the financial institution, broker/dealer, intermediaries, and
advisors with which an entity will do business; and
• Diversifying the investment portfolio so that potential losses on individual
securities will be minimized.
B. Interest Rate Risk
Interest rate risk in the risk that the market value of securities in the portfolio will
fall due to changes in general interest rate. Interest rate risk may be mitigated by:
• Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell
securities on the open market prior to maturity; and
• • By investing operating funds primarily in shorter-term securities.
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2. LIQUIDITY
The investment portfolio shall remain sufficiently liquid to meet all operating
requirements that may be reasonably anticipated. This is accomplished by
structuring the portfolio so that securities mature concurrent with cash needs to
meet anticipated demands. Furthermore, since all possible cash demands cannot be
anticipated, the portfolio should contain a large component of securities with active
secondary or resale markets.
3. YIELD
The investment portfolio shall be designed with the objective of attaining a market
rate of return throughout budgetary and economic cycles, taking into account the
investment risk constraints and liquidity needs. Return on investment is of least
importance compared to the safety and liquidity objectives described above. The
core of investments are limited to relatively low risk securities in anticipation of
earning a fair return relative to the risk being assumed. Securities shall be held to
maturity with the following exceptions:
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1. Liquidity needs of the portfolio require that the security be sold.
2. A security of declining credit could be sold early to minimize loss of
principal.
4. STABLE EARNINGS
Since investment earnings are included in the budgeted revenues of the City, it is
important that these earnings be stable and predicable through at least the next
budget cycle. This points to the need to purchase securities of various maturities
so that at least half of the portfolio will remain for two or more years with known
interest rates.
III. STANDARDS OF CARE
1. PRUDENCE
The standard of prudence to be used by investment officials shall be the prudent
person standard and shall be applied in the context of managing an overall portfolio.
Investment officials acting in accordance with this policy and exercising due
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diligence shall be relieved of personal responsibility for an individual security's
credit risk or market price changes, provided deviations from expectations are
reported in a timely fashion and the purchase and sale of securities are carried out
in accordance with the terms of this policy.
Investments shall be made with judgment and care, under circumstances then
prevailing, which persons of prudence, discretion and intelligence exercise in the
management of their own affairs, not for speculation, but for investment,
considering the probable safety of their capital as well as the probable income to be
derived.
2. ETHICS AND CONFLICTS OF INTEREST
Officials involved in the investment process shall refrain from personal business
activity that could conflict with the proper execution and management of the
investment program, or that could impair their ability to make impartial decisions.
Officials shall disclose any material interests in financial institutions with which
they conduct business. They shall further disclose any personal financial/
investment positions that could be related to the performance of the investment
portfolio. Officials shall refrain from undertaking personal investment transactions
. with the same individual with who business is conducted on behalf of the City.
3. DELEGATION OF AUTHORITY
Authority to manage the investment program is derived from Minnesota State
Statutes, Chapter 118A and Brooklyn Center City Charter Chapter 6, Section 6.04
and is granted to the City Manager, City Treasurer, and Assistant City Treasurer.
Responsibility for the operation of the investment program is hereby delegated to
the City Treasurer, who shall carry out the program consistent with this policy. No
person may engage in an investment transaction except as provided under the terms
of this policy. The City Treasurer shall be responsible for all transactions
undertaken and shall establish a system of controls to regulate the execution of all
investment transactions.
4. TRAINING
To ensure the competence of its investment officials, the City shoul shall provide
the opportunity for the officials to attend such investment training programs as are
available and suitable.
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• IV. SAFEKEEPING AND CUSTODY
1. AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
A resolution shall be submitted to the City Council at least annually to designate
depositories of city funds. This shall include institutions and dealer/brokers where
accounts are maintained for banking services, purchase and sale of investment
securities, and the custody of securities.
The City Treasurer shall provide to each broker or institution, a written statement
of investment restrictions which shall include a provision that all future investments
are to be made in accordance with Minnesota Statutes governing the investment of
public funds, prior to completing an initial transaction, and annually thereafter.
An annual review of the depositories shall be conducted by the City Treasurer.
Requests for Proposals for banking services and custodian for investment securities
shall be conducted on a periodic basis as defined in the Policy and Procedure on
Requests for Proposals for Financial Professional Services.
2. INTERNAL CONTROLS
•
The City Treasurer is responsible for establishing and maintaining an internal
control structure designed to ensure that the assets of the City are protected from
loss, theft, or misuse. The internal control structure shall be designed to provide
reasonable assurance that these objectives are met. The concept of reasonable
assurance recognizes that the cost of a control should not exceed the benefits likely
to be derived and the valuation of costs and benefits requires estimates and
judgements by management. Internal controls shall include the following:
a. Control of Collusion. Collusion is a situation where two or more employees
are working in conjunction to defraud their employer.
b. Custodial safekeeping,:. Securities purchased from any bank or dealer shall
be placed with an independent third party for custodial safekeeping or held
in an account with the Federal Reserve Bank of Minneapolis.
C. Avoidance of physical deliverv securities. Book entry securities are much
easier to transfer and account for since actual delivery of a document never
takes place. Delivered securities must be properly safeguarded against loss
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• or destruction. The potential for fraud and loss increases with physical
delivered securities.
d. Clear dele atio of authority to subordinate staff members. Officials must
have a clear understanding of their authority and responsibilities to avoid
improper actions. Clear delegation of authority also preserves the internal
control structure.
e. Written confirmatio_ n of telephone transactions for investments and wire
transfers. Due to the potential for errors and improprieties arising from
telephone transactions, all transactions should be supported by written
communications and approved by the appropriate official. Written
communications may be via fax on letterhead. Institutions and broker/
dealers shall be provided with a list of authorized signers.
f. Development of a wire transfer agreement with institutions and broker/
dealers. This agreement should outline the various controls, security
provisions, and delineate responsibilities of each parry making and receiving
wire transfers.
. g. Independent Audit. The City's independent auditors shall conduct a
thorough review of the City's investment portfolio and transactions as part
of their engagement.
3. DELIVERY VERSES PAYMENT
All trades where applicable will be executed by delivery verse payment (DVP).
This ensures that securities are deposited in the eligible financial institution prior
to the release of funds. Securities will be held by a third party custodian.
V. SUITABLE AND AUTHORIZED INVESTMENTS
1. INVESTMENT TYPES
Consistent with Minnesota Statutes Chapter 118A, the following investments will
be permitted by this policy:
a. Securities that are the direct obligations or are guaranteed or insured issues
of the United States, its agencies, its instrumentalities, or organizations
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• created by an act of Congress; including governmental bills, notes, bonds,
and other securities.
b. Commercial paper issued by U.S. corporations or their Canadian subsidiaries
that is rated in the highest quality by at least two nationally recognized rating
agencies and matures in 270 days or less.
C. Time deposits that are fully insured by the Federal Deposit Insurance
Corporation or bankers acceptances of U.S. banks.
d. Repurchase agreements and reverse repurchase agreements may be entered
into with financial institutions identified by Minnesota Statutes Chapter
118A.
e. Securities lending agreements may be entered into with financial institutions
identified by Minnesota Statutes Chapter 118A.
f. Minnesota joint powers investment trusts may be entered into with trusts
identified by Minnesota Statutes Chapter 118A.
i g. Money market mutual funds regulated by the Securities and Exchange
Commission and whose portfolios consist only of short term securities
permitted by Minnesota Statutes Chapter 118A.
h. Bonds of the City of Brooklyn Center issued in prior years, may be
redeemed at current market price, which may include a premium, prior to
maturity using surplus funds of the debt service fund set up for that issue.
Such repurchased bonds shall be canceled and removed from the obligation
of the fund.
2. SECURITIES NOT PURCHASED
Derivative securities which obtain their value by the calculation of some portion of
the value of another security shall not be purchased. Mortgage backed securities,
even if insured by a Federal Agency, shall not be purchased. Securities which
represent the principal or interest payments stripped off from an original issue
security shall not be purchased.
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0 3. COLLATERALIZATION
To the extent that deposits in bank accounts, certificates of deposit, and repurchase
agreements exceed the available federal deposit insurance, collateral shall be
furnished by the financial institution in accordance with Minnesota Statutes Chapter
118A
4. MAXIMUM MATURITIES
When purchasing investments, the Treasurer will attempt to match the maturity to
future cash flow requirements. The city will not invest in securities maturing more
than ten years from the date of purchase. No more than ten percent of the city's
portfolio at any time shall be invested in securities with maturities of more than five
years.
VI. REPORTING
1. The City Treasurer shall prepare a monthly investment report to the City Manager
which shall include a succinct management summary; a list of significant
transactions such as purchases, sales, and maturities of investments; a list of
investments by type, a list of investments by maturity, a calculation of average yield
on the portfolio, and a statement of interest earned. This report will be prepared
in a manner which will allow the City Manager to ascertain whether investment
activities during the month have conformed to the investment policy.
2. A statement of the market value of the portfolio shall be issued at least annually.
This will review the investment portfolio in terms of value and subsequent price
volatility.
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•
Edition 104
~yW~h
February/March 1997
A newsletter for residents of the City of Brooklyn Center
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Police and fire departments address building needs
Since the late 1980's, space
problems have impacted the Police
and Fire departments. Discussions
have gone on over that period
regarding solutions to relieve
overcrowding in the Police
Department and similar space and
building aging problems facing the
Fire Department. Given the age of
the Police/City Hall/Community
Center complex, roof and heating
components are now in need of
attention. The major problems are:
-The Police Department has outgrown
its current space.
-Fire equipment storage needs have
grown and the general age of the 63rd
and Brooklyn Boulevard station,
coupled with new regulations
governing safety and acccessibility,
have rendered the facilities inadequate.
-General aging of the facilities
requires attention to replacement work
and work to make
the facilities /
handicapped-
accessible and in
compliance with
regulations adopted P
POLICE
since the structures RAPE COMMUNITY CENTER ~~pP
were built. '
Police Department POLICE RELOCATED RENEMLOFPICE SPACE PUBt CENTRr
DE IT
When the police °l=
moved in to their
current space in 1971, -
there were 40
employees in the department: Thirty
sworn officers and ten civilian support
personnel. In 1997; the Police
Department has 74 employees: Forty-
four sworn officers and 31 support
personnel (including part-time). The
Police Department is seriously
overcrowded in the following ways:
-Female officers use an old janitor's
closet as a locker
room and have no
other facilities.
-Male officers have
an overcrowded
locker room and
-
minimal shower
facilities.
-Two investigators
are placed in rooms
designed for one
person.
-There is only one
interview room for
investigators that is
also used for storage.
Above: Proposed Police Dept./
Community Center/City Hall complex.
Below: Proposed fire station at 63rd
and Brooklyn Blvd..
Police and fire continued on page ll
-No facilities exist to interview victims
in a neutral environment.
-Sergeants are crammed into a single
row.
-Evidence from closed cases that must
be kept for years is spilling into the
garage area due to a lack of space
in the evidence room.
-Records are kept in several areas and
must be manually rotated each year.
-Meeting with the public is done in
the lobby without adequate space to
take complaints in a private setting.
-Tests for drunk driving are conducted
in the same space as booking and entry
to the jail space.
-If a car is being inventoried after
seizure, prisoners must be taken from
4
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Police and Fire
continued from page
squads outside, rather than in a secure
garage setting.
-There is no separate area for officers
to prepare reports.
Additionally, our jail space does not
meet current standards of separation,
exercise and view as required by the
State of Minnesota.
Fire Department
The fire stations at 63rd and
Brooklyn Boulevard and 65th and
Dupont have several deficiencies in
common:
-Need for a "clean room" to meet
regulations for the cleaning of
resuscitation and breathing apparatus.
-Space to store turn-out gear so that
it can dry between fires. Currently,
the turn-out gear does not have
sufficient space to dry out and may
be wet when put on.
-Inadequate ventilation for exhaust
from equipment.
-Sleeping quarters that lack egress.
-Inadequate rest room facilities.
-Lack of adequate space to
accommodate both female and male
firefighters.
-Code deficiencies in kitchen facilities.
-General age and deterioration that
needs attention.
-Need for additional equipment
storage. City now provides water
rescue as part of the area distribution
of specialized services (i.e.,
Robbinsdale handles ice rescue,
Fridley provides hazardous materials
response).
-Both stations do not have standby
power.
Fire station at 63rd and
Brooklyn Boulevard
Some of the specific problems at
63rd and Brooklyn Boulevard relate
to its age; it was built in 1959. The
City Watch
heating plant is deteriorated and the
piping for the heating system is rusted.
A second means of egress is not
provided from the sleeping area or the
meeting area. There is only one small
bathroom for the entire fire area. The
apparatus doors are narrow and low
for modern fire equipment. There
is no insulation in the building and the
electrical system is inadequate for
current demands with circuit breakers
being overloaded. Equipment must
also back into the station from 63rd,
a moderately busy street, putting
personnel and motorists at risk during
the return of equipment to the station.
Windows are drafty and leak.
Fire station at Dupont and
65th Avenue North
There are similar egress problems
at the Dupont station, as well as a lack
of adequate space for temporary
bunking of firefighters during
inclement weather to insure quick
response to fire and emergency calls.
The apparatus area is not insulated
and the electrical system is inadequate.
Female fire personnel do not have
shower facilities and the facilities are
undersized for both male and female
firefighters.
General building issues:
Police/City Hall/Community
Center
In addition to space limitations on
the Police, the current Police/City
Hall/Community Center buildings do
not meet the accessibility requirements
ofthe Americans With Disabilities Act
due to a lack of access between the
floors of the Community Center and
the absence in any of the buildings of
a restroom meeting current handicap
accessibility standards. Since these
buildings are to serve the entire
community, the lack of accessibility
is an impediment to making all
services and programs reasonably
available to all. Underground oil
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storage tanks are required to be
removed due to their age and State
regulations. These tanks are used to
provide the City with a lower cost of
energy since the City can switch to
backup heat if ordered to by
Minnegasco due to high demand for
natural gas. By being able to switch
to backup heat, Minnegasco charges
a lower rate for gas than if we did not
have the ability to switch to backup
heating. The age of the heating and
ventilation system and roof will also
require attention.
Concept
Over the past year, City staff and
an architect have worked on
developing a framework within which
to address the space needs and
regulatory deficiencies for the Police
and Fire departments. The concept
developed was designed to minimize
cost and utilize existing facilities and
improve them where possible. The
concept for the Fire Department's
needs would remodel the station at
65th and Dupont to provide for the
insulation of the equipment area,
improve the rest room facilities,
provide a clean room for resuscitation
and breathing apparatus cleaning, and
improve the function of the building.
At 63rd and Brooklyn Boulevard, it
turns out that constructing a new
building would actually be less costly
than trying to add on and upgrade the
electrical, heating and ventilation in
the old building. Building new and
consolidating some activities from the
Dupont station, rather than adding
equipment storage space in two
places, would be roughly $400,000
less than trying to rehabilitate both
stations.
The concept for the Police
Department's needs would be to expand
Police and fire continued on page 111
11
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Police and Fire
continued from page 11
the department into both floors of the
current building and remodel the first
floor into complying jail space, provide
adquate locker and rest room facilities
for both female and male officers, and
adequate evidence space. Police
records, administration, investigators
and community service programs
would move into the second floor. This
would provide the Police Department
with roughly twice the space they have
now. This would displace the general
City offices on the second floor. These
would be relocated to a new office space
constructed north of the current offices
and in front of the Community Center.
The new space would allow for a
ground level entrance to City offices
and would connect the Police building
and Community Center to alleviate
some of the current problems in
accessing City offices due to the
confusing layout. This would also
allow us to make the entire area more
accessible by correcting some of the
deficiencies with shared facilities such
as an elevator serving both the
Community Center and the relocated
office space, handicapped accessible
rest rooms and making the whole
complex more citizen-accessible by
having one entrance to both City offices
and the Community Center on the
ground level adjacent to the existing
parking. Other benefits include
continuing shared use of resources
between the Police, general City offices
and the Community Center such as
janitorial, utility backup, large copy
equipment, computer lines, and
telephone system.
Planning Process
There are a number of issues to be
examined and explored before
determining if these concepts will
achieve the goals of meeting our space
needs. One of the unanswered issues
Police and Fire Department Building Needs
Public Information Meetings
Fire Station No.1
(63rd and Brooklyn Boulevard)
Thursday, March 13, from 7:00 - 9:00 P.M.
Saturday, March 22, from 1:00 - 4:00 P.M.
Fire Station No. 2
(65th and Dupont Avenue North)
Thursday, April 10, from 7:00-9:00 P.M.
Saturday, April 19, from 1:00-4:00 P.M.
Please join us for these very important meetings.
is what would happen with the liquor
store at 63rd and Brooklyn Boulevard
and all the issues involved in these
concepts. We are asking you to
become involved in the process of
refining and examining these
concepts. There will be several open
houses to let the public see what the
current problems are and to get more
information on this process of
working to solve the building needs.
As City staff continue to work with
the architect to now further refine
these concepts and develop cost
estimates, your input will be solicited
at these meetings. The meetings
scheduled to date are shown above.
At these meetings we will have
information on the concepts and you
will have the opportunity to tour the
fire station and see videos of the
police areas, ask questions, and
provide your comments and
suggestions.
After the open house/public
information sessions, a proposal will
be submitted to the City Council. We
anticipate having a proposal for the
City Council in late May or early
June. We also anticipate scheduling
a public information session at City
Hall or the Community Center in late
May or early June prior to City
Council action on any plan.
City Watch IN
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City of Brooklyn Center
A great place to start. A great place to stay.
To: Financial Commission
From: Michael J. McCauley'
City Manager
Date: February 27, 1997
Re: Capital Improvements Fund Expenditure Policy
Attached please find an analysis performed by Charlie Hansen on disaster exposure for general
governmental operations and the need for a Reserve Fund. The upper end of the exposure was
$1,000,000 for a public safety dispatch radio system. Generally, the upper end of exposure is
around $500,000 for temporary space, which exposure may be reduced through insurance in the
future.
To provide greater definition of the uses to which funds might be used in a Capital Improvement
Fund, I would propose the following language for discussion to replace the existing language on
use of funds:
USE OF FUNDS:
The Capital Improvement fund may be used, pursuant to this policy, for
expenditures on capital equipment, infrastructure improvements and construction,
and similar projects having an aggregate value in excess of $50,000. The types of
expenditures contemplated by this policy include projects such as::
- building construction, repair, reconstruction, and remodeling, including
component systems for heating, ventilation, and air conditioning
- equipment and furnishings, including furniture, lighting, and communications
cabling
- street repair, replacement, and construction
- park landscaping, shelters, and improvements
- computer, radio, and telephone systems
The expenditures from the Capital Improvement Fund are to be used for general
governmental capital needs and not for enterprise fund capital needs, except as
the general governmental portion of a joint project for both general and enterprise
purposes.
6301 Shingle Creek Pkwy, Brooklyn Center, MN 55430-2199 • City Hall & TDD Number (612) 569-3300
Recreation and Community Center Phone & TDD Number (612) 569-3400 • FAX (612) 569-3494
An Affirmative. Action/ Equal Opportunities Employer
An overview of the differences between the proposed Reserve Fund and a Capital
Improvement Fund are illustrated as follows:
[Planned Expenditures Minimum Balance Annual FundingDisasteri
lReserve Fund No $1 Millhon + Interest Yes
Capital Improvements Yes j No Yes j No
The following table shows the changes in balances for a 6 year period (Note: there are
minor variations in balances and assumptions with other statements. This table was
designed to illustrate in a general fashion.):
Interest Assumption 5.00%
ESTIMATED EXAMPLE
1997 1998 1999 2000 2001
Capital Improvment
Beginning Balance (Cash)
Interest
Transfers In
• Loan repayments
Expenditures/Transfers
Ending Balance
Capital Reserve
Beginning Balance
Interest
Loan repayments
Expenditures
Ending Balance
$3,639,935
$181,997
$154,439
$84,523
($383,753;
$3,677,141
$3,677,141
$183,857
$400,000
$84,523
02,100,000;
$2,245,521
$2,245,521
$112,276
$420,000
$89,511
02,000,000)
$867,308
$867,308
$43,365
$441,000
$80,398
($350,000)
$1,082,072
$1,082,072
$54,104
$463,050
$57,500
($550,000)
$1,106,725
20021
$1,106,725
$55,336
$486,202
$57,500
($600,000)
$1,105,764
$1,000,000 $1,050,000 $1,102,500 $1,157,625 $1,215,506 $1,276,282
$50,000
$52,500
$55,125
$57,881
$60,775
$63,814
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$1,050,000
$1,102,500
$1,157,625
$1,215,506
$1,276,282
$1,340,096
This table is also set forth in a graph attached to this memo. The impact of bonding on
taxes and a $75,000 home are set forth on the attached sheet. These numbers on
construction are preliminary. Much work needs to be done to refine the basic concepts
into more specific plans. There are issues that may also need attention regarding buildings
that may need inclusion with the solution of the Police space needs. Also attached is the
preliminary 1996 year end cash balances prepared by Mr. Hansen.
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Proce s Police Fire Combined
• Parking $715,000
Construction $3,193,700 $2,900,000
Storage $50,000
Contingency $550,000 $490,000
$4,508,700 $3,390,000 $7,898,700
Financing
Capital Fund $3,500,000
Bonds $4,398,700
In ?acts:
Bonds: Principal
Term
$4,000,000
10 Years
$4,000,000
15 Years
75,000 House Principal
Term
' $4,000,000
10 Years
$4,000,000
15 Years
Debt Service Current Levy % Increase
$575,000
$6,442,436
8.93%
$442,512
$6,442,436
6.87%
Tax Increase Current City Tax % Increase
$43.61
$250.38
17.42%
$33.41
$250.38
13.34%
• Bonds: Principal Term
$3,000,000 10 Years
$3,000,000 15 Years
75,000 House Principal Term
$3,000,000 10 Years
$3,000,000 15 Years
Bonds: Principal
Term
$7,000,000
10 Years
$7,000,000
15 Years
75,000 House Principal
Term
$7,000,000
10 Years
$7,000,000
15 Years
•
Debt Service Current Levy % Increase
$429,912
$6,442,436
6.67%
$329,618
$6,442,436
5.12%
Tax Increase Current City Tax % Increase
$32.76
$250.38
13.08%
$25.09
$250.38
10.02%
Debt Service Current Levy % Increase
$1,004,912
$6,442,436
15.60%
$772,130
$6,442,436
11.99%
Tax Increase Current City Tax % Increase
$76.37
$250.38
30.50%
$58.50
$250.38
23.36%
9
•
4
3 -
2
N
O
0 1997
General GO~ernment
Capital Funds*
.
t
~ 2000
i 1999 Year
1998 capital reserve
~ Gapitalln►ptOVement -0- 1
2001
i
2001
• MEMORANDUM
TO: Michael J. McCauley, City Manager
FROM: Charlie Hansen, Finance Director C H
DATE: February 26, 1997
SUBJECT: Report on the Need for a Reserve Fund
In recent meetings with the Financial Commission, we have discussed the possibility of
amending the Capital Improvements Fund Expenditure Policy. You have proposed the
creation of a separate Reserve Fund with a balance which would be dedicated to be held
for catastrophic events not covered by insurance or any other means. The remainder of
the Capital Improvements Fund would then become available to meet current City needs
for buildings or parks. How large the Reserve Fund should be is the main question.
• Steve Sydow and I analyzed all the events we could think of which could cause a
catastrophic loss to the City which wouldn't be reimbursed by insurance. Most of the
events we thought of would be covered by our insurance except for the following:
Environmental clean ut
There are several locations where the City has fuel tanks in the ground for either heating
fuel or gasoline. We could buy insurance for this except that our tanks are older than
allowed by the insurance standards. Fuel tank leaks often aren't detected immediately and
result in costly and extensive cleanups. We didn't develop a cleanup cost estimate due to
the unknown extent of the fuel (if any) which might have leaked from our tanks.
Storm damagg
If a major storm, such as a tornado, came through the City, there could be extensive
damage to buildings and structures owned by the City, and large numbers of downed trees
in parks and on buolevards. Reconstruction of buildings and structures would be mostly,
if not entirely covered by insurance. Tree. removal and other cleanup costs would not.
Even so, Diane Spector doubts that the non covered cleanup costs would exceed $200,000.
0
12
• Du mess interuuti m
If a City building were destroyed by storm, fire, or other cause, insurance would pay to
rebuild and refurnish it. However, our current insurance wouldn't pay the costs of
relocating operations to other sites while rebuilding was taking place. We are in the
process of getting quotes for business interruption insurance for the Liquor Stores, Golf
Course, and Heritage Center. Similar. insurance, called rental value insurance, could be
obtained for City Hall and other buildings as needed. In the absence of such insurance,
the cost of setting up operations in alternate locations would be paid by the City.
The worst case would probably be to relocate City Hall and the Police Department. City
Hall occupies about 15,000 square feet and the Police Station another 8,500 square feet.
It is impossible to say what office space would be available to rent at some unknown point
in the future or exactly what it would cost. Steve Baker believes that if the need were
today, the space is available and would cost about $15.00 per square foot per year. We
would probably need to rent 25,000 square feet for at least a year at a cost of $375,000.
There would be additional costs for the temporary rental of furniture, copiers, a telephone
system, etc. I assume public safety dispatching would be shifted to Hennepin County.
The total uninsured cost could easily reach $500,000. .
•
Equipment failure
The City owns several pieces of equipment which are nearing the ends of their useful lives
and could fail unexpectedly and in a way that would make a complete replacement
necessary. Two examples are the main telephone system and the public safety dispatch
radio. If the failure were caused by a component simply wearing out, as opposed to some
external factor, insurance most probably wouldn't cover the loss. A new telephone system
might cost between $100,000 and $200,000. A new public safety dispatch radio system
could cost between $500,000 and $1,000,000. As I recall the discussion from a couple of
years ago regarding switching to Hennepin County dispatch, replacing our radio with new
equipment of similar technology would cost $500;000. Upgrading to the new 800
megahertz system the state is developing would cost more.
In all of the above examples, the cost estimates are based upon staff estimates, and not on
any extensive research. We felt it was unlikely that more than one of these scenarios was
likely to happen at once. If this analysis is to be the basis for setting the balance in the
Reserve Fund, you could simply . take the most expensive example.
•
13
City of Brooklyn Center
• A great place to start. A great place to stay.
To: Financial Commission
From: Michael J. McCauley
City Manager
Date: November 12, 1996
Re: Capital Improvements Fund Expenditure Policy
At the last meeting of the Financial Commission, discussion began on the issue of changing the
policy to use accumulated fund balance for upcoming projects. The specific project being
targeted for use of funds is the building needs for police and fire. The fund balance requirement
in the current policy is $3 Million plus inflation. Mr. Hansen calculated that balance at
$3,278,000 as of 12/31/95. The policy issue being suggested for review is the benefit of a large
fund balance versus using a major portion of that balance to address major building needs. The
interest on $3 Million could be used for minor projects and the inflationary increase in the fund
balance required by the policy. I would submit that it may be more productive to convert some of
that fund balance into facilities and their renovation, than to have the money accumulate.
• If the policy is revisited, the 4/5ths voting requirement and $200,000 limits should also be
reviewed as to their efficacy. One of the concepts we will be working on for the 1997 budget
process is a 5 year financial plan. That plan may include building fund balance for use in the 2nd
or 3rd year of a cycle. For example, a project may exceed the capability to raise revenues in a
single year and be scheduled for the 2nd year of a budget cycle. This would work by taking
$200,000 from year one of a budget cycle with $200,000 from the second to complete a major
project such as a street project. The 4/5th requirement would potentially delay planned projects
due to an inability to gain an extraordinary majority. $200,000 is also not a large expenditure in
the area of street reconstruction. This has not been an issue where the funding comes from State
Aid or the use of bonds, but the course I am pursuing would have us place monies into a capital
improvement fund to be accumulated and spent in budget cycles. Thus, monies could be put into
the fund for a specific purpose, only to have those fund locked up by the need for an
extraordinary majority.
One of the possible avenues we briefly explored at the last meeting was to create a working
capital fund to receive funds and the release them for projects and a permanent fund for
emergencies or longer range issues. Separating the fund amounts would facilitate an internal
savings plan and the goal of having some amount of capital in reserve.
•
6301 Shingle Creek Pkwy, Brooklyn Center, MN 55430-2199 • City Hall & TDD Number (612) 569-3300
Recreation and Community Center Phone & TDD Number (612) 569-3400 • FAX (612) 569-3494
An Affirmative Action /Equal Opportunities Employer
11
• CITY OF BROOKLYN CENTER
ADEQUATE GENERAL FUND BALANCE POLICY FORMULA
AS ESTABLISHED BY THE CITY COUNCIL ON DECEMBER 22, 1980
(AS SET FORTH IN M&C NO. 80-31)
(AMENDED FEBRUARY 26J 990 AND MAY 22. 1995)
1. Latest Audited Total Fund Balance
Estimated December 31, 1996 $6,574,792
2. Less Items Not Readily Convertible to Cash:
a. Accounts Receivable 152,659
b. Advances to Other Funds 105,074
$257,733
3. Fund Balance Convertible to Cash $6,317,059
•
4. Less Amount Appropriated to the General Fund Current
Year Budget: 1997 $5,748
5. Amount Available Before Deduction for Working Capital $6,311,311
6. Less Amounts to be Reserved for Working Capital:
(40% of Total General Fund Current Year Budget)
40% of: $12,125,987 = $4,850,395
7. Amount Available After Deduction for Working Capital $1,460,916
8. Less Amounts to be Reserved for Other Purposes:
a. Reserve for Overestimation of Revenues:
(5% of General Fund Revenues in, Current Year Budget)
5% of. $12,125,987 = 606,299
•
9. Amount Available per Formula for Other Use
ADQFDBAL.XLS
14
1996
$854,617
2/24/97
CITY OF BROOKLYN CENTER
ADEQUATE GENERAL FUND BALANCE POLICY FORMULA
AS ESTABLISHED BY THE CITY COUNCIL ON DECEMBER 22, 1980
(AS SET FORTH IN M&C NO. 80-31)
(AMENDED FEBRUARY 26_ 1990 AND MAY 22. 19951
1. Latest Audited Total Fund Balance
At December 31, 1995 $5,834,792
2. Less Items Not Readily Convertible to Cash:
a. Accounts Receivable 41,955
b. Advances to Other Funds 1053074
$147,029
3. Fund Balance Convertible to Cash $5,68731763
4. Less Amount Appropriated to the General Fund Current
Year Budget: 1996 $109,750
5. Amount Available Before Deduction for Working Capital $5,578,013
6. Less Amounts to be Reserved for Working Capital:
(40% of Total General Fund Current Year Budget)
40% of $11,632,894 = $4,653,158
7. Amount Available After Deduction for Working Capital $924,855
8. Less Amounts to be Reserved for Other Purposes:
a. Reserve for Overestimation of Revenues:
(5% of General Fund Revenues in Current Year Budget)
5% of. $11,632,894 = 581,645
9. Amount Available per Formula for Other Use $343,211
15
ADQFDBAL.XLS 1995 2/24/97
•
•
Cash gaiance, Dec 31 , 1996
Revenues in 1997
Expenditures in 1997
997
Construction outlays to 1
ash gaiance, Dec 31, 1997
C
►-A
C',
CpKLYN CENTER Special
CITY OF 8R Local Assessment
M.S•A
Capital Construes
Earle Tax is Constructh
F...~
Improve _1 932,091
Economic grown Increment n
Development TIF 1 997 ,225
'
ority 65 r 4,492,699
General Auth istric 131,145 1378,000
1 653,000 ' Eqad 135"21 338,436
EgBd 5177 ,564 281,416
7,584017
1,412,98A 173,753
694,204 260,000 1378'000
12,125.987 1 242,000 528,000
457,989 210,000
12,125987 _ 2,122,225 ,
2,867,040 -152,561 4,445,382
35,77() Debt service
-17 2, 6'778 ds shown on these pageopt. to spend
7,584,0 The City has no ion
ice fun not
of this balance
tely $2,200,000 is use in ebt service
lma !$1,6()()'000 service.
APProx on 211197 SPeciai
1. payments due on anything other thandebt funds to the the utility is will result in the
the remainder fund and These paymen
M S A Construction 1996 worK. os~t'on.
owed by the to close 0u- a positive cash P
Cash is °w Fund 'having awaiting
2. ent Construction fund
investment'Crust fund year.
Asse .j ssessmen ►n the t Construction for the y
Specia A s are cash balance
flQ0 of int on thesbas earnings s are
average
APProximately$1,770'funds
3. distribution to all other
21261979:51 AM
cashbal
•
•
sh Balance, Dec 31,1996
Ca
Revenues in 1997
Expenditures in 1997
on outlays ►n 1g97
construct Dec 31, 1997
Cash Balance,
BROOKLYN CENTER
C1T`t OF Earle
Brown
Refunding
S.A. Bonds
of 1987
u4uor
FEW
Qp- F
9
482
3~
329'835
2 568,100
45,400
321,606
2
826 881
41'800
,
15,458
"
38,741
329 P84
Heritage
nter
RecOing
ce
un
79,666
_334,662
22p p00
2,658,208
22°,°00
2,560,651
98,gg7
+_338,102
7 3,666
Water
Utility
Ew-d
4,46,414
1,393,774
1,027 ,799
A,444,750
3,867 ,639
Sanitary
Sealer
Eod
2 ,50,021
2,430,912
2,p03,529
5g6,250
2,392,160
2261979'.51 'O'M
cashbal
•
•
r-A
00
~ BROOK`YI`l CENTER
CITY O
Central
En►ployee
tirem
Combined
storm
Garage
Re
Ewd
480,337
30
Seger
F-U--gd
1053,319
,
Egad
1,195,831
3,324,799
6p,0p0
923,29$
29,
galance, Dec 3A, A996
Cash
1,237 ,669
1,74,076
00
6p,0
6g3,gg3
,
25
1g87
venues in
479,122
1,784,076
8,p30,247
Re
897
Expenditures in 1
gp7 ,250
26,769,4g5
p5g,319
1
on outlays ►n 1997
structs
128
0471
1
,
3$24,7g9
Con
Dec 31, 1997
$
h ,,lance'
Cas
2j.zr 9:51 AM
cashba%
• fmcommkapolcy7 Draft Feb 97
CITY OF BROOKLYN CENTER
CAPITAL IMPROVEMENTS FUND EXPENDITURE POLICY
POLICY OBJECTIVE:
The City of Brooklyn Center makes unrestricted capital expenditures through one of two funds.
Generally, small capital expenditures are funded through the general fund and planned for as part
of the annual budgeted process for the general fund. Large unrestricted capital expenditures are
funded through the capital improvements fund based on resolution 68-246, which was approved
in 1968. Capital expenditures are also made through other funds such as the M.S.A. construction
fund, the special assessment construction fund, the water fund, the sanitary sewer fund, and the
storm drainage fund. These funds each have restrictions in place to guide their expenditures.
The objective of this policy is to clarify funding for all unrestricted capital expenditures by
specifically defining which capital expenditures are eligible for funding through the capital
improvements fund. Unrestricted capital expenditures not meeting the criteria for the capital
improvements fund must be made from the general fund operating budget.
Specifically excluded from this policy are capital expenditures that are to be reimbursed by
insurance proceeds. These may be accounted for through the capital improvements fund at the
discretion of the Director of Finance.
SOURCE OF FUNDS:
The sources are ad-valorem taxes, issuance of bonds, state and federal grants, transfers of
unrestricted balances from other funds and investment earnings.
USE OF FUNDS:
The-followingtLefift3 9„
ftw
A--.~ ,
budget.
$25,009 are to be mde through the general ftmd operat* Perntanent, Any eapital expendiWre filmt hfts an esti~td useful life of 10 years or
longer. i t_8 to real estate, the aequisition of !mid for eity purposes.
G7-i Fmffitye ,
This definition e:,qtepjude~s q; t of land for development or resale md exeludes
vehieles
19
. The Capital Improvements Fund may be used, pursuant to this policy, for expenditures on capital
equipment, infrastructure improvements and construction, and similar projects having an
aggregate value in excess of $50, 000. The types of expenditures contemplated by this policy
include projects such as:
- building construction, repair, reconstruction, and remodeling, including component
systems for heating, ventilation, and air conditioning
- equipment and furnishings, including furniture, lights, and communications cabling
- street repair, replacement and construction
- park landscaping, shelters, and improvements
- computer, radio, and telephone systems
The expenditures from the Capital Improvements Fund are to be used for general governmental
capital needs and not for enterprise fund capital needs, except as the general governmental
portion of a joint project for both general and enterprise purposes.
Additionally, the capital improvements fund may be used to provide loans to other funds
• maintained by the City. However, loans from the capital improvement fund may only be made
to proprietary funds which have the ability to generate revenue and repay the loan within 10 years
at prevailing interest rates.
AUTHORITY TO SPEND:
Expenditures meeting the above criteria may be funded through the capital improvements fund
based on the following authority limits:
A.) Expenditures from $0 to $25,000: Not eligible for funding from the capital
improvements fund. Funding is required through the general fund operating
budget.
B.) Expenditures from $25,001 to $200,000: The City Council may, through simple
majority, approve these expenditures.
C.) Expenditures over $200,000: Following a public hearing, City Council may,
through a 4/5th's majority, approve expenditures in this category.
•
20
0 SPENDING LIMITATION/FUND BALANCE REOUIREMENT:
The objective as described above and previously defined in Resolution 68-246 requires the capital
improvements fund to be a permanent source of funding for planned major expenditures. As such,
the following criteria is established to comply with that intent:
A.) Planned Expenditures: If the proposed capital expenditure is in excess of
$200,000 it must have been included in the five year capital improvements plan for
at least two years.
Additionally, the five year capital improvements plan must be approved by the City
Council at a public hearing on an annual basis.
B.) Fund Balance Requirements: A minimum fund balance shall be maintained with
a beginning balance of $3,000,000 as of January 1, 1993 and increased by the
Consumer Price Index each year thereafter.
POLICY AMENDMENT:
Amendments to this policy require a 4/5th's majority by City Council vote.
0 ROLE OF THE FINANCE, COMMISSION:
If a review of an expenditure is requested by the City Council from the Finance Commission, the
Finance Commission will respond on the basis of the following questions:
A) Does the expenditure comply with the Capital Improvements Fund Expenditure
Policy?
B.) Is the expenditure appropriate considering the financial condition of the City?
•
21