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HomeMy WebLinkAbout05/28/2020 FC MinutesFINANCE COMMISSION MEETING MINUTES Thursday, May 28, 2020 Online — GoToMeeting Portal I. Call to Order Meeting called to order at 7:02 p.m. Commission members present: Kenneth Arndt, Pam Bazan, Yulia Bjekic (Signed on at 7:31 p.m.), Trisha Chokshi, Vince Grochocinski, Don Ocwieja, and Tom Pekras. Staff present: Director of Finance Amit Thakkar, Assistant to the Director of Finance Jennifer Fitzgerald and Assistant to the Village Manager Alexander Bertolucci. II. Approval of Minutes a. Commissioner Pekras, seconded by Commissioner Grochocinski moved to approve the revised minutes of the Finance Commission regular meeting of February 27, 2020. Chairman Chokshi called a voice vote. Commissioner Arndt abstained. Motion Carries. III. Welcome — New Finance Commission Member — Kenneth Arndt Director of Finance Amit Thakkar introduced Commissioner Arndt to the Finance Commission. Commissioner Arndt provided a brief personal background. IV. Citizens to be Heard No comments were submitted and no members of the public called into the meeting. V. Old Business None. VI. New Business Director of Finance Amit Thakkar presented the first quarter 2020 review. Staff made the same presentation to the Village Board at the May 12 Committee of the Whole meeting. a. Q1 — 2020 Review i. Financial Review Mr. Thakkar reviewed FY 2019 unaudited financials. All operating, debt service and CIP funds spending are within the established budget limits. The General Fund spending is 98.3 percent of the approved budget. Mr. Thakkar provided a fund balance analysis and explained the differences between the accounting and spendable fund balances. The General Fund shows an ending fund balance (unaudited) of $23,062,502 (36.60 percent of budget) and an ending spendable fund balance of $16,178,607 (25.68 percent of budget). Mr. Thakkar gave an update on the Police and Fire Pension funds, which experienced several policy changes in 2019. This includes changes in the amortiziation of unfunded liability, inclusion of spouse data for the first time, mortality table updates and Tier II benefit changes due to pension consolidation. Mr. Thakkar reviewed Q1-2020 revenues and expenditures. During Q1-2020, the Village collected 19.86 percent of the annual revenues, while the Village collected Finance Commission Page 1 of 5 05/28/2020 18.10 percent of annual revenues in Q1-2019. Employee compensation and benefits are on track compared to the budgeted amount and overtime payments are $93,215 less than Q1-2019. He noted the major capital improvement related payouts in Q1-2020 for the Police and Fire Headquarters as well as the Maple Street Parking Deck. In addition, Other Expenditures in FY 2020 include a property acquisition in the Prospect and Main TIF for $1.3 million. ii. Revenue Loss due to COVID-19 and Contingency Plan Commissioner Bjekic joined the meeting at 7:31 p.m. Mr. Thakkar reviewed COVID-19's impact on Village revenue categories with an estimated total loss of $5.6 million of which $3.8 million is from General Fund. The budget has a multi -step contingency plan that can be implemented in events that significantly affect local government revenues. Staff has utilized the plan to reduce operating expenses by $3.6 million and capital spending by $3.4 million. The total proposed reduction is $7.0 million, which provides a cushion of $1.4 million in case revenue losses are greater. He reviewed operating expenditures reductions and capital projects deferrals to achieve the $7.0 million reduction. Mr. Thakkar gave a pension fund update based on investment reports which show a 10.91% lost value of assets for the Fire Pension Fund and a 14.17% lost value of assets for the Police Pension Fund. Staff provided the following in response to comments from the Finance Commission: • Internal service funds dedicates department funds for specific uses like certain capital expenditures (e.g. computers, vehicles) and employee health insurance. • Suspend computer and vehicle lease payments for 2020 with the goal of extending life of assets at least 9 months or more. iii. Collateralization of Village Funds Mr. Thakkar stated all village funds are kept at an FDIC insured bank. He explained that village funds at JP Morgan are collateralized using the US Treasury and while this form of collateralization is highly secure, it is costly. This costs $50,000 or more annually in banking fees and lost interest revenue. The Letter of Credit from Federal Home Loan Bank is rated at Aaa/AA+, which is the same rating as the US Treasury. The Village is already using a letter of credit from the Federal Home Loan Bank for securing the Funds at PMA Investments. Staff recommends approval to collateralize the security using the Letter of Credit from Federal Home Loan Bank instead of US Treasury. Staff provided the following in response to comments from the Finance Commission: • The proposed change was in the work plan before COVID-19 pandemic started. • The U.S. government backs the US Treasury and Federal Home Loan Bank is one of their agencies. Finance Commission Page 2 of 5 05/28/2020 Motion by Commissioner Bjekic, second by Commissioner Grochocinski to recommend and support the change from US Treasury to Federal Home Loan Bank Letter of Credit Ayes: Don Ocwieja, Vince Grochocinski, Pam Bazan, Tom Pekras, Kenneth Arndt, Yulia Bjekic and Trisha Chokshi. Nays: None Motion Carries. iv. Changes with PMA Investments Mr. Thakkar explained the changes with PMA Investments, the Village's approved investment and bond advisors. Their platform allows the Village to invest in liquid and non -liquid funds including CDs, Treasuries, CDARS, and many other authorized investments in compliance with the Village's investment policy. The liquid cash balance is kept at Citi Bank. PMA is moving liquid funds to a new fund called I -Prime. The current Money Market rates (Citi Bank) have dropped to 10 basis points (0.10°/x), while the I -Prime rate is 89 basis points (0.89%). Staff provided the following in response to comments from the Finance Commission: • There is potential for $280,000 in interest income. • The liquid funds are invested in Citi Bank Accounts (money market account). I -Prime is a fund, but does not have any collateralization. Not dedicated securities to our balances. • PMA has a good market basis, billions of dollars from public agencies provides volume advantage. • It is a liquid fund divided between Chase Bank, Illinois funds and PMA. v. Fund Balance Policy Revision Mr. Thakkar introduced fund balance policy revisions. Staff is proposing a fund balance from the current 20 percent to 30 percent range to 25 percent to 40 percent range. The aim would change from 25 percent to 33 percent. A 33 percent fund balance will ensure village operations for four months and will provide enough cash and liquid funds for approximately 25 percent of the annual budget. Staff is also proposing, if the fund balance at the end of the year is more than 40 percent, than an automatic transfer to a Rainy Day Fund/Stabilization Fund would occur. The Stabilization Fund spending will require approval from the Village Board and use of funds would be limited to the following: a) 34 percent— Property Tax Levy Smoothing for Pension Funds and Debt Service b) 33 percent— Maintaining The Core Services and Staffing Levels in time of Distress c) 33 percent — Major/Non Major Capital Projects Funding Staff provided the following in response to comments from the Finance Commission: Finance Commission Page 3 of 5 05/28/2020 VII. VIII. 10 • The proposed is a more manageable property tax smoothing mechanism. • If fund balance were 25%, then spendable fund balance would be 16%, which equals to two months of cash on hand, and if state delays payment, there would be a liquidity issue. Illinois has a Prompt Payment Act. The current liquidity level is good. • The Fund Balance Policy needs to comply with GASB, which requires accounting fund balance and not spendable fund balance. • It is not likely the Village would reach 40% fund balance anytime soon. • 40% fund balance would be 30% cash balance. • The timing of some payments, like the debt service payment in June, is when liquidity is significantly reduced. • Modified accrual accounting: book twelve months, by only collect nine months of actual revenue for the current year. • The Commission's feedback helps develop a policy. The Village needs a mechanism for property tax smoothing on a more regular basis. Finance Commission Comments: • There was discussion on a 40% fund balance level. • Revisit fund balance policy in six months. • Discussed separating the fund balance percentage change and stabilization fund proposal. • There was discussion on how a stabilization fund would be help in an economic downturn. • Reviewed how the Village's fund balance percentages changed over time. Motion by Commissioner Bjekic, second by Commissioner Ocwieja to recommend an amended fund balance policy to 25 percent to 35 percent range with periodic review of the fund balance policy every three years, and to revisit the Stabilization Fund concept in six months. Ayes: Don Ocwieja, Pam Bazan, Tom Pekras, Kenneth Arndt, Yulia Bjekic and Trisha Chokshi. Nays: Vince Grochocinski Motion Carries. vi. Updates on the Work Plan — March Items Mr. Thakkar reviewed the 2020 work plan items for March and April. Two outstanding discussion items were Fund Balance Policy, discussed tonight, and a Strategic Planning Update. Staff presented top and high policy agenda and management agenda actions for 2020. Any Other Business None. Finance Director's Report None. Next Meeting: Thursday, June 25, 2020, 7:00 p.m., Venue — To Be Determined Finance Commission Page 4 of 5 05/28/2020 X. Adjournment: Motion by Commissioner Bazan, seconded by Commissioner Pekras to adjourn the meeting. Chair Chokshi called a voice vote. Motion Carries. The meeting adjourned at 9:25 pm. Alexander Bertolucci Assistant to the Village Manager Finance Commission Page 5 of 5 05/28/2020