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HomeMy WebLinkAboutMinutes 10-17-2008 CITIZENS’ BUDGET COMMITTEE Meeting Date: October 17, 2008 Conference Room 3 Meeting convened at 7:31 a.m. MEMBERS PRESENT: Carl Hensley, Chairman Edward Lounds Craig Mundt Nathaniel “Nate” Wells (7:35) Chris Dzadovsky Patricia “Pat” Ferrick Randy Ezell Richard Pancoast Jeremiah Johnson Jay L. McBee (7:35) Michael McKinnon (7:38) MEMBERS ABSENT: Barry Schrader Bill Casey Steven Messer Thomas Hickey OTHERS PRESENT: Faye Outlaw Lee Ann Lowery Marie Gouin Jennifer Hill Kathryn Hensley Debra Brisson Erick Gill Michelle Franklin Bill Hammer John Ferrick Patty Marston-Duva Shai Francis Ed Fry Rosalie Hawkins CALL TO ORDER Mr. Hensley called the meeting to order. APPROVAL OF MINUTES Citizens’ Budget Committee October 17, 2008 Page 2 th Mr. Dzadovsky made a motion to accept the September 19 minutes. It was seconded by Mr. Lounds and unanimously approved. INVESTMENT REPORT – ED FRY & SHAI FRANCIS Mr. Fry introduced Shai Francis, the Finance Director. He showed a PowerPoint presentation (see attached). Mr. Fry informed the Committee they went to Standard and Poor’s (S&P) for an opinion. St. Lucie County received a Triple A Fund, Credit, Quality rating and a S1 volatility rating for the investment portfolio. The Fund, Credit, Quality rating scale ranges from Triple A, highest level, to Triple C. The volatility ratings go from the lowest, S1, to the highest, S6. The philosophy of the Investment Committee is security and liquidity first and then earnings they are able to get. You could probably do better; but they do not want to take risks. They want the funds to be secure and available. The Board of County Commissioners approved the Investment Policy. Each Commissioner appoints one member of the Investment Advisory Committee. They will meet next week. Mr. Lounds asked about the frozen funds. Mr. Fry explained the State Board of Administration (SBA) manages all the funds for the State. They have a Local Government Investment Pool that is available to local governments. There are about 1400 members. The Local Government Investment Pool has been in place for decades and worked like a money market fund. If you called by 11:00 a.m., you would have your money that afternoon. One of the advantages was that SBA just took out operating costs. They did not try to make a profit. The rates were always at least .1% over any other money market fund. It was a great investment alternative and used by many governmental entities. Unfortunately, they started chasing yield and made some poor choices. Some entities started pulling out their funds. Mr. Fry thought they would weather the storm as they did before. Unfortunately, past history proved to be a poor predictor of future results. They froze the pool, did an analysis of all investments, contracted with Black Rock and split the portfolio. At that time, St. Lucie County had about $145 million in the pool. They froze $20 million. The other $125 million was available. Over time they have been able to liquidate investments. There is now about $6.5 million frozen. We will get that money. But he feels we can weather the storm with $6.5 million, of $318 million, frozen. About $43 million is invested with them at this point. Mr. Hensley asked the difference in the SBA and Government Investment Fund. Mr. Fry explained that SBA is the money market fund managed by the State. The Florida Local Government Investment Trust is a net asset value bond fund created by the Florida Association of Counties (FAC) and Florida Association of Court Clerks. The securities are held in safe keeping by the Bank of New York. There is an audit every year. Commissioner Doug Coward serves on the Board of Trustees. Mr. McBee asked if Mr. Fry opted to go into the Florida Safe Program with the money left in Citizens’ Budget Committee October 17, 2008 Page 3 the SBA. Mr. Fry answered they did not. We decided we wanted a longer track record, like treasuries, US Government agencies, and Triple A money market funds. Mr. McBee asked about current investments. Mr. Fry answered that the overall duration of the total portfolio is about one year. There is a significant amount that is fairly short. The max for most of the treasuries and agencies is five years. Most are shorter than that. There are a number of two-year notes. Mr. McBee asked if he thought about using some longer-term money to purchase our short-term bonds. Mr. Fry answered that to minimize risk our Investment Policy does not allow the purchase of municipal bonds, corporate bonds or stock. Mr. Lounds asked if the restriction is a law or rule. Mr. Fry said it is the policy in place. It is reviewed every year. One of the changes made about nine months ago is to use outside money managers. They decided to get some experts. They recommended to the Board of County Commissioners to change the Investment Policy. His office went through a Request for Proposal (RFP) process. They received a lot of interest and selected three. We have $35 million with each of them. They are the ones investing in the U. S. Treasury and U.S. agencies, and he is looking more at managing the short-term money needed to pay bills. Mr. Dzadovsky asked how often the funds are reviewed. Mr. Fry answered that internally they are constantly looking. They do a report every month. They meet with the advisory committee every quarter. They will have one of the money managers call in for each of the future meetings. Mr. Dzadovsky asked about the normal return for SBA funds. Mr. Fry said it is a money market fund. It is close to what you would get on a money market. It is better because their fees are lower. They are getting 2.43 right now. Mr. Fry confirmed that we did not lose any of the money in the SBA. When Mr. Dzadovsky asked for a prediction of when the rest would be available, Mr. Fry answered that they are hearing sometime over the next 18 months. It depends on the investments. They are hearing that we should get the entire $6.5 million back. The volatility in the market today causes concern. What they are doing is holding the investments until maturity. He explained how the volatility affects current value. Mr. Dzadovsky asked if the frozen money affected the cash flow. Mr. Fry said no. The number one priority is to be sure there is more than enough money to meet all the obligations. There is $86 million in Triple A money market funds. In December and January the tax money comes in. There is money available for any emergency. Mr. Lounds said if the property values decrease as predicted the County will have to draw some of the reserved money. Mr. Fry said they are aware. They stay very liquid. They constantly work with the budget office. Mr. Lounds is concerned about borrowing money without proven income. Mr. Fry said that Citizens’ Budget Committee October 17, 2008 Page 4 is a question for Administration. He manages the money when it comes in. Mr. Lounds asked for Mr. Fry’s best estimate on how long we can go with a 22-25% reduction with the investments we have today. Mr. Fry feels the Commissioners and staff would need to answer that. They have made significant budget cuts. He thinks they have done an excellent job managing in difficult times. It looks like a tough year coming. He thinks Ms. Outlaw will do an excellent job. She has good credentials and is familiar with the County. He has confidence in the County staff. Mr. Lounds asked about how well the bills are paid. Do they take discounts if offered? Mr. Fry answered they take every discount available. Mr. Lounds said the bill paying process was slow in the past. Mr. Fry said Ms. Francis focuses on that area. They accelerate the money getting to the bank and take advantage of every discount available. Mr. Lounds asked if the County departments are processing bills in a reasonable time. Ms. Outlaw answered that there is no delay in paying invoices. State law demands they be paid in 45 days. Ms. Outlaw added that some contracts that have come up for renewal have an escalation clause in them. The Board of County Commissioners has directed them to go to the vendor and negotiate canceling that increase. So far they have 100% participation. If they are not agreeable to waiving the escalation, the County will go back out for a better deal. Mr. Lounds thinks Ms. Gouin, Administration and Mr. Fry should work closely to get discounts. Mr. Fry feels they work well together and are aware of the challenges. Mr. Lounds asked Ms. Outlaw to continue to monitor the way we buy and pay. Mr. Fry admits to sometimes bullying vendors. Mr. Lounds said vendors would come to counties that have the ratings we have. He is concerned about decisions made in Tallahassee. He is more concerned about investments made on the State level than any of the others. Mr. Fry said they have been working down the amounts. The reason some funds are still in the Local Government Invest Pool is to prevent everybody from pulling out all the funds, they started charging a 2% redemption. We are not paying 2% to get the money, but every time they offer additional liquidity, we pull the money out. Mr. Lounds asked if there is a penalty to the County if there is no investment in the State funds. Mr. Fry answered there is not. The history of the Local Government Investment Pool was to provide a safe, secure, liquid investment for local governments. Smaller governmental entities do not have the expertise or staff, so they relied on that pool. Mr. Fry was using a lot of alternatives. When he came to office, 80% of this County’s funds were invested in that Local Government Investment Pool. They have worked that down. It was about 45% in December 2007 and is about 13% now. He will talk to the Investment Advisory Committee. He feels the State has put some policies and procedures in place that give him more comfort. They have a professional firm reviewing the portfolio and there is a lot more transparency. Citizens’ Budget Committee October 17, 2008 Page 5 Mr. Lounds asked Ms. Outlaw if there is no money in the SBA, does the County get dinged on grants and services. Ms. Outlaw answered no. Mr. Fry explained that the SBA is an investment alternative. They lost sight of what they were doing. There are still about 1,100 governments throughout Florida that have money in the SBA. Mr. Ezell added that as a longtime banker he competed with the SBA. They have two advantages. One was that they always paid more. The other was that is was assumed the State would guarantee the funds. It allowed the SBA to grow. They got out of whack because they had a continuous yield improvement. They weren’t willing to let it fall off so they got more speculative. He thinks the lesson is learned. He feels the County is diversified, as it should be. Mr. Mundt thanked Mr. Fry for going to S&P for the analysis and congratulated him for the ratings. He asked about the cost. It was $18,000 per year and includes looking at the current investment portfolio, investigating the three money managers, reviewing an investment report every month, and interviewing Mr. Fry and Ms. Francis during a site visit. If the Investment Policy is changed, it must be sent to them. It is an ongoing examination. They will check every month. There is a three-year agreement. They will yank the rating and broadcast it if there are changes. Ms. Ferrick referred to the June 2008 Investment Report and commented on how he did begin to remove the funds from SBA in December 2007. Mr. Fry added that he did, as the liquidity was available. Ms. Ferrick said that since June it has gone from $61 million to $42 million on the latest report. She feels the report clarifies things for the Committee. She thinks more people should have seen it. Mr. Fry feels the Triple A rating would give comfort to people. Mr. Johnson asked if S&P commented on the ratio. Mr. Fry answered that what they are looking at, is making sure the liquidity that is needed is there. The Investment Policy is the guideline used for the maximum allowable percentage. Mr. Fry said the concern with the banks had an effect on where the money is now. They wanted flexibility to make changes. It will probably be different in February. We are close to the bottom now. The overall cash is low at this time of year. They usually buy one year Certificates of Deposits. Mr. Dzadovsky agreed that it was a good thing to quell the fear with the S&P rating. He asked if the rating helped with opportunities to borrow money in the future. Mr. Fry answered that for bond ratings they consider management of the County. Certainly the Triple A rating on the Investment Portfolio would be a positive. How much is intangible, maybe 10 basis points. .1% is huge on a 30-year bond issue. Mr. Dzadovsky summarized that the benefit is the opportunity to show there is good management. Mr. Fry added that it would make a difference on future bond issuances. He believes the County has an A rating at this point. It could help move to A+. An A rating is solid for a local government. It helps lower borrowing costs. Mr. Fry said the rating agencies look at how the County Citizens’ Budget Committee October 17, 2008 Page 6 handles difficult times. The County management has demonstrated an excellent ability to manage during difficult times. They look at continuity of staff. Ms. Outlaw becoming County Administrator, since she has been here for a period of time, would give a comfort factor that she understands what is going on. Ms. Gouin being here a number of years would help. Has the management team been in place and weathered the storm are questions they would ask. He hopes we get to the A+. Mr. Hensley thanked Mr. Fry. Mr. Fry thanked the Committee. He committed to sending the Investment Report every month to the Committee. The current Investment Policy is on the Clerk’s website. He will advise the Committee if there are changes. TAX WATCH DISCUSSION, FAIRGROUNDS – FAYE OUTLAW Ms. Outlaw introduced Ms. Brisson, Parks and Recreation Director. Ms. Brisson mentioned it was her third month with the group. They reviewed Fairwinds and Tradition earlier. Ms. Brisson showed a PowerPoint presentation (see attached). She explained to the group that Summer Ivy-Platt is now managing the Savannahs Campground and the Fairgrounds. Ms. Brisson explained how the staff was changed from five to seven day workweeks. Mr. McBee left the meeting. Slide 12, Operating Revenues and Expenses FY04-09, (see attached) was distributed to the members. She explained how the personnel expenses would be paid. The Parks Division will maintain the premises and charge it back to the Fairgrounds. Ms. Brisson advised the Committee of the competition. The Okeechobee Agra-Center, The Fenn Center and Port St. Lucie’s new Civic Center will compete for events. They are putting together a work group to assist in an analysis and recommendations to enhance revenues. Mr. Johnson asked about the FEMA trailer revenue. Ms. Brisson answered that it is included in the revenue on the chart. It has been utilized for improvements. It is $29,500 per month. Ms. Brisson was notified last year that they anticipated moving the trailers. They have been on a month-to-month basis for a year. Mr. Johnson asked Ms. Brisson for her interpretation of the contract with the Fair Association. Is there a working relationship? Ms. Brisson told about a meeting with the Fair Association earlier in the week. The contract states if they reach a reserve level of $700,000.00, the excess funds would have to be used to make capital improvements. They have not reached that level; but they continue to make capital improvements. They Citizens’ Budget Committee October 17, 2008 Page 7 recently completed lighting improvements. They have spent $660,000 since they have been there on capital improvements. Mr. Johnson replied that the County is benefiting from the improvements. Ms. Brisson agreed. They helped with lighting and ADA issues. They pay their light bill during the fair. Mr. Johnson asked to clarify that the Fair Association has the grounds reserved for nine weekends. Ms. Brisson explained that there are six for the fair and they can have three other events. She does not think they have ever had three. She thinks they had a rodeo last year. They have the possibility of the fair and three others. Mr. Pancoast found it interesting that they have the Fairgrounds reserved six weeks for the Fair and the Fair is just about 10 days. Ms. Brisson explained that there is a tremendous amount of set-up. He worked with a fair at one time and they would break it down and move it overnight. He thinks six weeks is excessive. Ms. Brisson answered that it is the agreement. Mr. Lounds said the agreement between the Fair Association and the Fairgrounds is an extremely working relationship. If the Fair Association had not poured out machinery, labor, time, effort and personnel, the Fairgrounds would not have opened when it did. The effort to put on the fair is remarkable. The easiest part is the carnival. The hardest part is the volunteers that bring the 4-H, Future Farmers of America (FFA) and other groups. The relationship is misunderstood. He believes they will lose revenue to the Fenn Center. He thinks the Committee should recommend to the Fairgrounds that they get a working, advisory board to help. Part of the board should be the Fair Association, 4-H people, and people who put on other events like radio control airplanes and boats and Motorcross. There are 80 spaces for people to rent for pull behinds and fifth wheels during events. He is concerned that if there is no one on site, it may not be taken care of properly. 250 acres is a large area. Thank goodness for FEMA being there and the income. He asked if all the area is being maintained. Ms. Brisson answered that it was discussed at a meeting the day before. They have done Request for Proposals for mowing so the employees can concentrate on the buildings and area around the buildings. John Fife has been at the Fairgrounds and will move into Public Properties that will be maintaining the area. He will have the same number of individuals to use. Ms. Keaton will also be eyes. They will not be able to maintain the current level. The plan is to keep it at a certain level and attack and prepare it for events. Mr. Lounds asked if the water treatment and sewer facilities are adequate. Ms. Brisson said a storage tank is being added that will store and later move the product during the st Fair. As of December 31, they will have the ability to handle everything. The Wastewater Treatment Plant is under a contract with Walsh to test and maintain the system. Mr. Lounds said there are even more concerns with waste when animal events are scheduled. Ms. Brisson answered that a couple weeks ago they went to an Orange County equestrian center and discussed the issue. It is containerized and hauled away. Citizens’ Budget Committee October 17, 2008 Page 8 Mr. Lounds added that there is a tremendous amount of hair that creates problems for the sewer system. Mr. Lounds asked about the shared office area. Ms. Brisson explained that St. Lucie County is required to supply office space for the Fair Association. Ms. Brisson showed the plans to the Association. They each have the same amount of space for offices and reception areas and share restrooms and a conference room. They expect to have the Certificate of Occupancy on Monday. Mr. Lounds asked how the County solicits business. Ms. Brisson answered that they are trying to target groups visiting other fairgrounds in the State by watching websites and sending letters. They have not had a lot of success because promoters must spend a lot of money to draw people to their event. Ms. Brisson’s staff has limited resources and do the best they can. Mr. Lounds said they should target events that would not be suitable for downtown, like Motorcross, go-carts, and model airplanes or boats. Ms. Brisson added that it is one of the strategies. Ms. Lowery stated that they are hampered by staff level. The ability to have a person actively market the Fairgrounds is not there. Mr. Lounds said the right advisory group could be the advertisement. It is not just animals. If you can’t compete with Palm Beach and Orlando, let’s fly kites out there. Mr. Dzadovsky complemented the staff for the job during the Chili Cook-off. It is a logistics nightmare and Ms. Ivy-Platt did a fabulous job. Mr. Dzadovsky had been asked about privatizing the Fairgrounds. Is it an option? What would be the challenges, pros and cons? Ms. Lowery answered that there was a survey nd done before the August 22 informal board meeting. Associations operate most fairgrounds. Indian River County mothballs their fairgrounds; opening it only for the fair. Lee and Okeechobee Counties are actively involved in their fairground or agriculture center. They did present the idea to the Board of County Commissioners and continue to look at it. It does have its own difficulties. One thing about the Fairgrounds and Fenn Center, is they become major factors in the event of a storm. Ms. Outlaw added that the Board of County Commissioners has discussed privatization, but they are not at a point where they are ready to make that decision. Their strategy is to first see if we can bring the expenses in line. The County is not in a position to subsidize the Fairgrounds with General Fund dollars. They are giving Staff a chance to bring the costs in line. Depending on what happens there, she thinks they will take another look at privatizing. Mr. Dzadovsky asked for clarification on a number on slide six. Mr. Dzadovsky asked about the lower revenue on concessions. Ms. Brisson explained that Citizens’ Budget Committee October 17, 2008 Page 9 there was a large event last year. Mr. Dzadovsky asked about the equipment at Fairwinds being used at the Fairgrounds. Ms. Brisson explained Fairwinds is an enterprise fund so there would have to be a charge back. Mr. Dzadovsky added that if you were talking about contracting out the services, he would try to keep the money in the County. Ms. Brisson answered that Ms. Ivy-Platt was charged to contact Road and Bridge about the possibility of them helping and charges. Ms. Outlaw added that they are looking at what Road and Bridge will be able to maintain. Mr. Dzadovsky asked if the contracts would be focused in St. Lucie County. Ms. Outlaw answered yes, that is the intent and hope. Ms. Brisson answered that we are looking to keep the operating expenses as low as possible. We are hopeful that it will be a local vendor. Mr. Dzadovsky said the number one thing he hears in the public is why money is spent outside the County. Mr. Wells added that it is set up to be all-inclusive. Ms. Outlaw explained to the Committee that the RFQ procedure has been revamped to level the field for local vendors to be able to competitively compete. There will be a workshop on th November 13. She could bring the information to the Committee. There were some major glitches in the former RFQ process. If you were not a large firm, it was almost impossible to get a substantial number of County contracts. She has spent the last 9-12 months going through the system, and they have made refinements. She thinks the new system will allow smaller companies to effectively compete. It is a major concern. Mr. Johnson agrees with Mr. Lounds that a committee would be very useful and add good ideas. People have donated buildings, time and capital. The relationship could ease the burden a lot. Mr. Mundt sees a lot of expensive equipment sitting idle for weeks at a time. Maybe the County could get personnel, from vendors, to operate the County’s equipment. It may keep the cost down from hiring a vendor that has to provide and maintain equipment. Ms. Outlaw said they were suggestions for her to look it. They have to balance cost savings with liabilities. Ms. Ferrick asked if the amounts from the Fair Association show up in the charts Ms. Brisson presented. Ms. Brisson answered that there is no financial assistance from the Fair Association. They make improvements but we do not receive any funds. Ms. Ferrick confirmed that there are no in-kind revenues shown on the charts. Ms. Gouin said you couldn’t put it on the books because it is not actual cash. She explained the line from Adams Ranch is because they are paying the debt service. The Fair Association has spent about $660,000 in improvements. They arranged for and paid for them. Mr. Dzadovsky compared it to a renter making home improvements. Ms. Brisson is not sure if they pay the electric bill directly to FPL or to the County. Ms. Rosalie Hawkins, treasurer of the Fair Association, added that they do have a working relationship with the County and hopes it continues. The Association is a die-hard group Citizens’ Budget Committee October 17, 2008 Page 10 of about 700-1,000 volunteers. They put a lot of money back into it. The land purchase was a little over $1,000,000. Engineering before they moved in was about $50,000. In 2002-2003 they spent $202,000 on various items and rentals. 2003-2004 they put in $86,000. 2004-2005 $33,000 came out of their pockets. 2005-2006 was $61,000. The Fair Association spent $85,000 in 2007-2008. They helped buy the stage, bleachers, and the sewage system. She offered to answer any questions. Mr. Dzadovsky asked if the Fair Association would be interested in privatization down the road and would they be able to accomplish it. She answered that they would not want to; but they could. She thinks an advisory group is a fantastic idea. She thinks some should be taken from the Fair Association, some from FFA, and some from outside. When the original grounds were bought and the master plan was created, the Civic Center was to go out there. When it was taken away, it hurt expected revenue. When the restrooms were not built for the Civic Center they had to come up with money to build them for the Adams Arena. You’ll never make big money there. It is for the citizens to use. It will pay its own way if it is utilized. If you get the stalls, that is where the money is. Mr. Lounds added that there is money brought to the County, such as restaurants and motels, from visitors that can’t be determined. The amount of money volunteers pay out of pocket to make the fair go is phenomenal. If you have not enjoyed the fair, you need to go. If you have not been a volunteer, you need to be. You get to see what a mass volunteer group can do. The Fair Association is a great group to work with. Their focus is the Fair. Mr. Wells thinks the Fairgrounds might be a good place for paintball. The Holiday Bazaar sells out every year at the college. An advisory board might be able to research the possibility of having it at the Fairgrounds. Ms. Brisson said her department is promoter driven. They do not have the staff or budget to put on events. They had been discussing a working committee to assist them. She would welcome that opportunity. Mr. Hensley summarized that it is the recommendation of the Committee. Mr. Hensley asked about November’s agenda. The Airport was discussed. Ms. Outlaw asked if they could have on the agenda: Mr. Anderson’s memo referring to the 2009-2010 budget deficit, plans to address that, Administration transition, ideas, changes and future policies. Mr. Mundt asked for clarification and added that Mr. Furst said the night before that the revenue would be down an additional eight percent, at least. He thinks they need to jump on that right away. Ms. Outlaw said she would like to discuss that plan with the Committee at the next meeting. Ms. Ferrick asked if Ms. Outlaw could get some information to the members before the next meeting so they could look at her suggestions and formulate some answers. Citizens’ Budget Committee October 17, 2008 Page 11 OTHER ISSUES Mr. Lounds asked if a meeting could be scheduled in 2009 to look at the commercial facilities the County has, like the Airport industrial area. He would be interested in revenue and potential revenue. Mr. Mundt asked the Committee to give ideas to Ms. Outlaw before the meeting. Mr. Dzadovsky suggested solar energy on the buildings. There are so many buildings. A 40% power source could save $2,000,000 of the $7,000,000 shortfall of 2010. There would be an upfront cost; but there are grants available. Ms. Outlaw said to feel free to email her directly or give her a call. ADJOURNMENT Mr. Hensley thanked Ms. Brisson for attending and adjourned the meeting at 9:20 a.m. Respectfully submitted by: Brenda Marlin