Loading...
HomeMy WebLinkAbout2019 06-03 CCM Joint Work SessionMINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL/FINANCIAL COMMISSION OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND STATE OF MINNESOTA JOINT WORK SESSION JUNE 3, 2019 CITY HALL — CITY COUNCIL CHAMBERS CALL TO ORDER The Brooklyn Center City Council/Financial Commission Joint Work Session was called to order by Mayor Elliott at 6:30 p.m. ROLL CALL Mayor Mike Elliott and Councilmembers April Graves and Dan Ryan. Councilmember Marquita Butler was absent and excused. Also present were Financial Commissioners Tia Hedenland, Taneshia Kragness, and Dean Van Der Werf. Financial Commissioners Abate Terefe and David Dwapu were absent and excused. Also present were City Manager Curt Boganey, Director of Fiscal & Support Services Nate Reinhardt, and Assistant Director of Fiscal & Support Services Andy Splinter. Also present were MMKR consultants Jim Eichten and Jaclyn Huegel, and Taofeek Ishola, resident. INTRODUCTIONS Mayor Elliott requested that the meeting attendees introduce themselves and say a little bit about themselves. Taneshia Kragness stated she has been on the Financial Commission for ten years. She added she has lived in Brooklyn Center for 16 years, and she loves the community. She noted she is an accountant and mother of three, and her grandmother was Mayor of Brooklyn Center for a time. Tia Hedenland stated she joined the Financial Commission in April 2017. She added she is an at- home mom and has lived in Brooklyn Center for five years. Dean Van Der Werf stated he has lived in Brooklyn Center since 1968. He added he and his wife have three grown children. He noted he has been on the Financial commission since 2011. Councilmember Dan Ryan stated he had lived in Brooklyn Center since 1953 when his parents bought their home. He added he was elected to the City Council in 2006. City Manager Curt Boganey stated he has lived in Minnesota since 1996 and has served as City Manager of Brooklyn Center since 2006. He added he served as City Manager in Brooklyn Park before his appointment as Assistant City Manager in Brooklyn Center in 2002. He noted he enjoys serving the residents and businesses of Brooklyn Center. Councilmember April Graves stated she has been on the City Council for five years and has lived in Brooklyn Center for eight years. She added she has four children. She noted she works for the Minneapolis Health Department in Adolescent Health and Youth Development. Jim Eichten stated he had been a partner with MMKR for 30 years. Jaclyn Huegel stated she has been with MMKR for 15 years. Director of Fiscal & Support Services Nate Reinhardt stated he has worked for the City of Brooklyn Center for 5-1/2 years. He added previously he worked for the City of Waseca. He noted he has two children. Assistant Director of Fiscal & Support Services Andy Splinter stated he has worked for the City of Brooklyn Center for 3-1/2 years. He added before that he worked at the City of Waseca with Mr. Reinhardt as well as for the State of Minnesota, and CPA firm Abdo, Eick & Meyers. Mayor Mike Elliott stated he grew up in Brooklyn Center, and graduated from Brooklyn Center High School, around the time that Myrna Kragness was Mayor. He added he has a daughter named Michelle who is 11 years old. He noted he had been mayor for about six months, and he is happy to be able to attend this joint meeting of the Financial Commission and City Council. He thanked all the meeting attendees for being there. APPROVAL OFAGENDA There was a motion by Councilmember Ryan and seconded by Councilmember Graves to approve the agenda as submitted. The motion passed. PRESENTATION OFAUDIT REPORT AND MANAGEMENT LETTER City Manager Curt Boganey stated the joint budget meeting is the first step in the budget development process. He added this is a chance to review useful and necessary information as the City moves forward with the 2020 budget development. He introduced Jim Eichten with MMKR consulting firm. Mr. Eichten stated the City is required by State law to prepare financial statements as well as being audited by a Certified Public Accountant. He added the auditor reviews the Special Purpose Report and Management Report and issued an opinion to the State Auditor's Office. He noted the City's federal awards must be audited to ensure proper controls over reporting of federal revenue. Mr. Eichten reviewed the Management Report, required for submission to the State Auditor by June 30, 2019. MMKR has issued an unmodified, or clean, opinion. He noted the addition of a new emphasis provided on the federal accounting statement, providing health insurance for retirees. Mr. Eichten stated limitations in the process could be barriers, and internal controls are monitored closely. Policies related to controls over individual cycles are reviewed, for instance, billing or accounts payable. At a federal level, there is a heavy reliance on local auditors to ensure compliance, especially as in the case of Brooklyn Center, which receives federal revenues. 6/9/2019 2 Mr. Eichten stated the Management Report reviews implemented recommendations, how the City is audited, and how challenges and findings are handled. Mr. Eichten stated the audit looks at how the City is doing financially, but MMKR does not give financial opinions. The taxable market value from 2018-19 shows that the City has come back financially from the dramatic decline during the recession years. The audit reviews the average tax rate in the City, which is impacted by tax capacity market value and also annual tax levy, among other things. The City's tax rate is declining as market values increase. Mr. Boganey requested clarification regarding the tax capacity number as opposed to the market value number on page 6. He stated the tax rate and taxes levied are based on tax capacity and not market value. Mr. Eichten agreed, adding the tax rate is a combination of residential and commercial properties, and Brooklyn Center has seen a dramatic increase in terms of commercial properly. Mr. Reinhardt stated the formula for market value exclusion credits works out the same for property owners, but the city's market value credit is a reimbursement from the State. He added the market value was reduced to maintain property taxes, but property taxes had to be raised to get back to the same amount as the market value credit. Mr. Eichten stated analysis of governmental funds shows revenue on a per capita basis by year, and Brooklyn Center's revenue is $1,170 per resident. He added a comparable city of 100,000 residents generates revenue of $960 per resident. The City of Brooklyn Center generates more revenue compared to other cities of its size. He added a lot of that has to do with market values. Mayor Elliott requested clarification regarding the guidelines showing population size categories. He added there is a big jump from population criteria of 20,000 to 200,000. He added that perhaps there are fewer cities around the 100,000 -population mark. Mr. Eichten stated the population data is provided by the Office of the State Auditor. He added it is readily available as a comparable and provides data on a wide range of cities of different sizes. Commissioner Van Der Werf asked how the population is determined. Mr. Reinhardt stated those numbers come from the Metropolitan Council and are estimated based on City data. He added that will be updated after the 2020 Census. Mr. Eichten stated expenditures on a per capita basis are noted on page 8, with capital projects separated from recurring costs. He added debt service is shown separately as it is an important number that shows how well the City is managing its debt load. The City spends about $149 per resident, which shows good debt management. He noted the City of Brooklyn Center spent $73 8 per resident, which is slightly above average. He added public safety is a priority in Brooklyn Center, so that number tends to be above average. Mayor Elliott asked whether does public safety spending includes the Fire Department. Mr. Splinter confirmed this, adding Building and Community Standards inspections all fall under Public Safety as well. 6/9/2019 3 Mr. Eichten stated Page 10 shows the General Fund or regular operations of the City. The fund balance, or equity position, shows the volume of activity within the general fund. He added the City has a policy adopted by the City Council that places a target of 50-52% general fund balance. He noted revenues are received from the County every six months, so without the balance, the cash would run out. Mr. Eichten stated it is anticipated that revenues will come close to meeting projections since there is a $20-21 million budget. He added, in 2018, revenues exceeded projections by approximately $500,000, mostly due to licenses and permits, which is an area that is difficult to project. Mr. Eichten stated the General Fund expenditures were $35,445 over budget, which is exceptional within a $20 million budget. He added this shows extraordinary budgeting and forecasting on the part of City Staff. Mr. Eichten stated the rising cost of public safety had been an issue for Brooklyn Center and many other metro area communities. He added it is a priority for many communities and costs have gone up significantly. Mr. Boganey stated it is important to note that public safety includes Code enforcement and inspections. He added investment in Code Enforcement had been a City Council goal for the past several years. Councilmember Ryan stated law enforcement research showed that physical conditions of neighborhoods were directly related to public safety outcomes. He added the City Council recognized the need for an emphasis on Code enforcement to retain the quality of the City's neighborhoods. Mr. Eichten reviewed the City's utility funds and business funds. He stated the City's water fund shows revenue, expenses and operating income, before and after depreciation. He added some cities to build financing for these types of funds into their rates to cover infrastructure replacement. He added other cities issue assessments. He noted the City of Brooklyn Center's rates covers regular operations as well as capital replacement. Mr. Eichten stated the sanitary sewer fund revenue is doing great financially, with an increase of 7- 7.5% in revenues. He added the liquor fund has also performed well, with a sales increase of 3.8% in 2018, and profit margins increasing overall. He noted the Earle Brown Heritage Center had shown good financial results for the past three years, and 2017 was a high year for sales. Mr. Eichten stated the golf course enterprise fund was transferred to a community asset by the City Council, which has been a positive change for the City. He added it is recorded as a business fund would be inappropriate. Mr. Eichten stated, in conclusion, MMKR has issued an unmodified opinion on the City's financial situation, with no findings to report. He added City Staff are successful at continually assessing value, controls, and methods to improve the City's financial position. He added the golf course fund is one example of that level of attention to success. 6/9/2019 4 Mr. Boganey stated MMKR's report shows that the City has substantially improved its earnings over the past several years, which is difficult to do in a low-interest environment. He added City Staff does a great job generating revenue for the City and gave credit Mr. Reinhardt and Mr. Splinter, as they continue to operate an outstanding financial management system. Mayor Elliott requested clarification regarding the Special Purpose Audit Report, which states that MMKR reviews the City's internal controls over financial reporting to determine appropriate audit procedures, and express an opinion on financial statements, but not the effectiveness of the City's internal controls. He added page 2 states, "Accordingly we do not express an opinion on the effectiveness of the City's internal controls." Mr. Eichten stated MMKR reviews the City's internal controls to ensure systems and procedures are in place. He added an opinion is not given on how effective they are, and whether duties are separated. He noted government standards for reporting are used to verify whether financial reports are in compliance. Commissioner Kragness stated the last paragraph on page 2 indicates that internal controls have limited purpose. She asked whether that is because no recommendations are offered. Mr. Eichten stated that statement is meant to indicate that it is limited to those items that are reviewed as part of the audit. Mr. Reinhardt stated it would be impossible to test every transaction as it occurs, so that statement indicates that it is ultimately the responsibility of City Staff to ensure that controls are being utilized. He added auditors could make recommendations in their report for an improvement or a more thorough document. Mayor Elliott requested clarification regarding Note #3 in the footnotes on page 1, which states "the City does not like to use the 10% rate for indirect cost rate". Mr. Eichten stated the City had received a total of $1.4 million in federal awards, which are required to be summarized in a schedule. He added the Brooklyn Boulevard project was audited, and the City elected not to use the indirect cost rate allowed by the federal government. Mr. Boganey stated advantage of not taking the indirect cost is that that is a cost that is removed from the project total. Mayor Elliott thanked Mr. Eichten for his report. STAFF OVERVIEW OF COMPREHENSIVE ANNUAL FINANCIAL REPORT Director of Fiscal and Support Services Nate Reinhardt gave a presentation reviewing financial results related to Mr. Eichten's management report, including a letter of transmittal, management review, and analysis. Mr. Reinhardt stated the City's capital projects funding policy requires the transfer of anything that exceeds 52% of next year's general fund expenditures into the capital improvements fund. He added there was a one-time transfer of $149,630 following last year's audit, and actual budget expectations 6/9/2019 5 were exceeded by $358,000. He noted there would not be a transfer of reserves in next year's budget. Mr. Boganey stated City Staff are deliberate about keeping projected revenues closer to what is expected and keeping expenditures and spending down. He asked what the largest positive year-end operating budget has been during Mr. Reinhardt's tenure. Mr. Reinhardt stated it was around $1 million for a few years when he first started working for the City of Brooklyn Center. Mayor Elliott requested clarification regarding the losses at Earle Brown Heritage Center. Mr. Reinhardt stated Earle Brown Heritage Center is unique in the amount of depreciation it absorbs and is built into the operating loss. He added a more accurate measure would be to look at income less depreciation, to make sure cash flow is maintained. He noted Earle Brown had maintained a positive cash flow for the past five years, and it is a very well -performing fund. Mr. Boganey stated Earle Brown Heritage Center consistently generates more revenue than it is expending in cash, including reinvestment in capital. Mr. Reinhardt stated 15 -year cash flow projections for larger items like capital outlay, depreciation, and bond sales are reviewed during the budget process. He added it is more accurate to look at the performance of funds from a cash flow projection perspective. Mr. Boganey stated the City does not try to fully fund depreciation, as that would result in generating revenue to cover expenses that are not really expenditures. Mayor Elliott requested clarification regarding the actual cash balance of $2.9 million, which represents a change of $82,000. Mr. Reinhardt stated that total is a combination of the operating fund and capital reserve for Earle Brown Heritage Center, which should be a positive increase in cash. He added an operating loss might not necessarily reflect the whole picture if there is positive cash flow. Mr. Splinter stated Earle Brown Heritage Center did their first $5 million cash flow in 2018 in receipts from customers. Mr. Reinhardt stated there was an increase in cash balances for the City's utility funds. He added bonds were issued to pay for Fire House Park infrastructure improvements and the Water Tower rehab project. He added cash balances swing from year to year based on projects and how the City pays for them. Mr. Reinhardt stated the City made significant investments of $12.3 million on various projects, including Fire House Park, the Community Center, and sanitary sewer station replacement. He added the 2018 investment gain of $701,000 compares to $431,00 0 from the previous year. He noted investments are held to maturity, so they do not translate to an unrealized loss unless the City sells them. Mr. Reinhardt stated the Economic Development Authority (EDA) owned $14 million in assets at the end of 2018. He thanked MMR consultants Jim Eichten and Jaclyn Huegel for their excellent 6/9/2019 6 communication and for moving the process forward. He thanked Mr. Splinter for his hard work on preparing for the audit and providing accurate financial information to ensure the audit gets completed in time. He added the City could be proud of its financial position, including a low amount of budget surplus. Councilmember Ryan stated the State legislature has reduced business property taxes, which could have an impact as certain classes of property appreciate faster than others and drive up property tax numbers. He added a result would be a faster appreciation of home values. Mayor Elliott requested clarification regarding community center use fees. Mr. Reinhardt stated community center revenues had declined steadily over the past few years, as admissions were down, and it is difficult to find the staff to teach swimming lessons. Councilmember Graves stated an argument could be made that the community center serves a similar purpose as the golf course. Mr. Boganey agreed. Mr. Splinter stated the Community Center has always been in the General Fund as it provides a benefit to the City and its residents. Mayor Elliott asked whether it is common for community centers to operate at deficit levels. Mr. Splinter stated it would be difficult to say that the community center loses money, as it is not being charged depreciation like other enterprise funds. He added community center use charges are not intended to cover the full cost of operation. Mr. Reinhardt stated it is difficult to compare other city's community centers due to the wide variety of amenities. Mayor Elliott asked whether community center operations costs would benefit if registrations were up, and swimming lessons were provided. Mr. Boganey agreed to look into it. Commissioner Van Der Werf asked whether there has been a positive financial impact on Brooklyn Center from both the Luther developments and TopGolf. Mr. Boganey stated City Staff could provide the exact numbers. He added the Luther developments fall within TIF District #3, and they contribute substantially to the City's ability to pay off TIF #3 debt. He noted revenue from TopGolf goes into the General Fund. Councilmember Graves asked whether the consultants or City Staff have any experience with participatory budgeting. She added the whole point of auditing is to make sure things are done fairly. She asked whether specific criteria are sought that reflect the social level of ethics in relation to budgeting processes, to provide a more people -centric way of budgeting. Councilmember Ryan stated Councilmember Graves raises an interesting philosophical issue about budgeting practices, and how the City Council as policymakers base their value judgments upon an understanding of the community's needs. 6/9/2019 7 Mr. Boganey stated he had not had experience with the participatory style of budgeting, but he is familiar with virtually every other type of budget process, and they all have their pros and cons. He added he could provide some examples of communities that have done inclusive budgeting involving the community. He noted this is something the City Council should talk about and have a discussion about making the budgeting process more inclusive of the community. Mr. Reinhard stated the budgeting process is very consistent from city to city, specifically in Minnesota. He added some other states employ unique approaches based on various factors. He added Brooklyn Center has more dialogue than most cities and spends time going through the budget as a group. Mr. Elliott stated this is worth looking into as it is a profound question. He added he would like to see more information about other communities who employ this method, and what positive and negatives have been noted. Mr. Boganey stated communities that approach budgeting based on values follow a "budgeting for outcomes" process, to determine outcomes at the highest levels of values and engage the public in determining potential outcomes. MISCELLANEOUS Mr. Boganey stated the Community Development Director requested a City Council Special Work Session to review the draft opportunity site master plan. He added potential dates are: June 17, 18, 19, 20, 25, 26, 27. He requested that the City Councilmembers who were present consider these dates for their availability. Mayor Elliott stated he had expressed his concern about looking at a master plan for the development. He added the master plan should include community input. Councilmember Ryan stated there had been extensive community input. He added it would be helpful to see a master plan and hear about any additional information from the developer as well as the Community Development Director. Mayor Elliott stressed the importance of getting input from the diverse groups within the community, to build something that reflects the uniqueness of Brooklyn Center. Mr. Boganey stated the purpose of the proposed workshop is to review research and information that the developer has come up with up to this point, based on what is happening in the marketplace as well as ideas and approaches. He added no action would be required at these meetings. ADJOURNMENT There was a motion by Councilmember Ryan and seconded by Commissioner Graves to adjourn the meeting. The motion passed. The Brooklyn Center City Council/Financial Commission adjourned at 8:30 p.m. 6/9/2019 8 STATE OF MINNESOTA) COUNTY OF HENNEPIN) ss. Certification of Minutes CITY OF BROOKLYN CENTER) The undersigned, being the duly qualified and appointed City Clerk of the City of Brooklyn Center, Minnesota, certifies: That attached hereto is a full, true, and complete transcript of the minutes of a Joint Session between the City Council of the City of Brooklyn Center and Financial Commission held on June 3, 2019. 2. That said meeting was held pursuant to due call and notice thereof and was duly held at Brooklyn Center City Hall. 3. That the City Council adopted said minutes at its June 24, 2019, Regular Session. Barbara Suciu, City Clerk 9 Mike Elliott, Mayor 6/9/2019 9