I. Call to Order
II. Roll Call
III. Approval of Minutes
IV. Presentation of the FY08 Annual Financial Reports
Enclosed with the packet are the City and Borough of Juneau’s FY08 general governmental financial reports. These reports are produced as part of the annual audit process. These reports were prepared by staff and our auditors, Elgee Rehfeld Mertz, LLC. Reports include the following –
• Letter to the Assembly (which includes comments on internal controls and operations)
• Comprehensive Annual Financial Reports (CAFR) Note: Copies of the CAFR were not available at the time packets were distributed, these reports will distributed during the meeting.
• State Financial Assistance Report
• Expenditures of Federal Awards Report
The Letter to the Assembly was prepared by our Auditors. The Comprehensive Annual Finance Report was prepared by the Finance Department staff. The State Financial Assistance and the Expenditures of Federal Awards Report were prepared as a joint effort. Staff prepared the single audit financial data and the Auditors prepared the opinions and findings information.
These reports contain a significant amount of detailed financial information about the CBJ’s operations. The following is a brief overview of each report-
• The Letter to the Assembly is information provided by the auditor directly to the governing body. The Letter discloses the responsibilities of the auditor, what assurances the audit provides, any disagreements with management, any auditor adjustments, any poor judgment used in financial management and an analysis on operational items coming to the attention of the Auditors during the audit. Some of this information was previously reported in an Internal Control and Operating Comments Report. The Internal Control and Operating Comments Report is no longer provided. The Letter also references issues that are opportunities for strengthening internal controls and/or operating efficiencies. There were five comments contained in this year’s report.
Close School District Projects and Use District-wide Major Maintenance Capital Improvement Fund (Staff have been working with the District on this issue for some time.)
Popular Reports for Year-end Results (Staff are reviewing options, this will be an increase in workloads.)
Enhance Investment Policies for Investment Rating Downgrades (Staff are working on an investment policy addition.)
Grant Monitoring and Compliance (Finance takes on the responsibilities for grant accounting and financial reporting, but Finance does not manage the grant projects. Finance will work on providing additional training to grant administrators to help insure they understand their grant compliance responsibilities.)
Docks and Harbors Cruise Ship Billing Procedures (The Finance Treasury Division will be providing additional support and training to Harbor Office staff and monitor Dock’s and Harbor’s financial transactions more closely.)
• The Comprehensive Annual Financial Report (CAFR) reports the results of our operations and financial balances. The Auditors’ issued a “clean opinion” regarding the CBJ’s general-purpose financial statements.
• The State Financial Assistance Report, commonly referred to as the state single audit, reports the CBJ’s compliance with the terms and conditions of grants received from the State. This report includes a listing of all State supported projects, the status of the grant funds and comments on compliance. There were no current year comments or questioned costs noted in the report.
• The Expenditure of Federal Awards Report, commonly referred to as the federal single audit, reports the CBJ’s compliance with the terms and conditions of the grants received from the federal government. This report includes a listing of all federally supported projects, the status of the grant funds and comments on compliance. There were no current year comments or questioned costs noted in the report.
Mr. Max Mertz, of Elgee Rehfeld and Mertz, the audit firm conducting the City and Borough’s annual audit will present the Comprehensive Annual Financial Report (CAFR) and accompanying reports, will provide an overview of the process and answer questions.
The firm of Elgee Rehfeld and Mertz also prepare a separate set of financial reports for the School District. These reports have been submitted to the School Board.
V. Proposed Funding for the Dimond Park Swimming Pools Ground Source Heat Pumps
Energy studies and life cycle cost analysis performed during the preliminary design phases of the Dimond Park Swimming Pool project demonstrated that significant operational savings could be generated by using a ground source heat pump system rather than conventional oil or electric heating systems. During the December 19 Assembly meeting, it was noted that the Pool project was approximately $2 million short in having the funds to pay for the heat pump system. The Assembly directed that the City Manager, working with the chairs of Finance and PW&F Committees, identify options to fund the heat pump system.
The City Manager, after reviewing funding options and discussing these options with the chairs of the Finance and PW&F Committees, is recommending we fund the $2 million for the heat pump system with a combination of sales tax revenues. These revenues would be provided in the form of a loan from the Sustainability Fund. The savings from installing the ground source heat pump system is estimated at approximately $200,000 per year. The operational savings from the ground source heat pump system will be used to repay the loan over a 10-year period.
The Sustainability Fund currently has no funding available to fund projects. The proposed $2 million in funding would come from the following sales tax funding sources:
• First, would be to reduce a short-term sales tax advance previously made to the Airport by $1 million. During the FY09 budget process, the Assembly approved an advance of $2 million in sales tax funding to the Airport. The $2 million came from the remaining balance of the 1% temporary sales tax levy that expired on January 1, 2006. The $2 million advance is to be repaid in 2013 from the 1% temporary sales tax levy that includes the Airport Terminal Expansion Project (levy date October 1, 2008 through September 30, 2013). The $1 million dollars being de-appropriated would be replaced through a $1 million Central Treasury Loan increase. The Assembly previously approved an $8.183 million Central Treasury Loan to the Airport, Ordinance 2008-35, for the terminal expansion project. The $1 million in funding would then be provided to the Sustainability Fund.
• Second, would be to take $1 million in funding remaining from the 1% temporary sales tax that expired on October 1, 2008. Approximately $2.8 million in funding is remaining from that 1% temporary 33 month sales tax levy. This $1 million would be combined with the $1 million noted above and provided to the Sustainability Fund.
VI. Utility Capital Improvement Project Support
On December 15, 2008, staff requested a motion of support from the Public Works and Facilities Committee for FY09 and FY10 utility rate increases. It was indicated that the increases would support a capital replacement program involving the replacement of sewer systems, and the updating of treatment plant infrastructure. The amount of funds needed to support the current projects is $1.4 million with $1.25 million funding Wastewater projects and $150,000 funding Water projects.
After further research and discussions, I am recommending a portion of the remaining balance of the 1% temporary sales tax (the 33 month levy expiring on October 1, 2008) be used to fund the Public Works Utilities CIP’s. This support would eliminate the need to increase waste water utility rates by 8% (4% in FY09 and 4% in FY10) and water utility rates by 3% (1.5% in FY09 and 1.5% in FY10) to fund the needed capital improvements.
VII. Sales Tax Exemption for Food
It has been requested that staff review the issues associated with exempting food from sales taxation. Two major issues need to be evaluated when considering the exemption of food. First, is the impact to CBJ revenues. The Sales Tax Administrator has reviewed and estimated the revenue impact of a food exemption at approximately $5 million or 12% to 13% of the total sales tax revenues collected. Obtaining a very precise estimate is not possible as merchants are allowed to combine all sales into a single reported number. The Sales Tax Administrator has contacted each merchant and requested they estimate the amount of food sales being reported on their sales tax returns. In addition, the actual financial impact would also depend upon the specific food items being exempted.
Revenue reductions from exemptions are split between operations and capital funding. The revenue impact of a food exemption, using an FY09 estimate, would be as follows-
Operations $3 million
1% for Roads, Streets, Sidewalks CIPs $1 million
1% for PW, Airport Term, AW Sewer, Harbors $1 million
The second issue would be to determine which food items should be exempted. The large variety of food items can make this process difficult. It can also be difficult for both merchants and staff to administer. There are literally thousands of both food and non-food items setting on the shelves of the average grocery store. Any exemption will need to be drafted clearly enough to be administered by both staff and the merchant.
Enclosed in the packet is additional information from the CBJ Sales Tax Administrator, Joan Roomsburg and a copy of the 2005 Report of Recommendations by the Assembly Tax Policy Subcommittee. The Tax Policy Subcommittee reviewed and made recommendations on a number of CBJ’s sales tax exemptions. Staff will present and discuss the issues and concerns of a sales tax exemption on food with the Finance Committee. Note the information supporting the revenue inpact is not included in the packet. This information is considered confidential and restricted by code.
VIII. Information Items
A. Mayor’s Salary
On November 19, 2008, a question of reviewing the Mayor’s compensation was presented to the Finance Committee. It was noted that the position of Mayor in Juneau is intended to be a half-time position and the position has been compensated at $30,000 per year since 1995. To faithfully carryout the duties and representations of the Mayor’s Office requires a significant time commitment. The current compensation level requires the Mayor to either be financially independent or balance mayoral duties with a regular job.
The Finance Committee requested that staff prepare comparative information regarding mayoral salaries for communities similar to Juneau. The requested information has been compiled and is presented in the packet.
B. FY10 Budget Calendar
Staff have been working on preparing the FY10 budget. This is the second year of the FY09-FY10 Biennial Budget presented to the Assembly and Finance Committee last spring. The FY10 budget preparation schedule is as follows-
November 2008, preparation of the internal charge structures
December 2008, preparation of the staffing information and budget preparation package
January (late)/February (early) 2009, submission of the departmental budget requests
February 2009, reviews of the departmental budget requests by the accounting, budget and the City Manager’s Office.
February (late)/March (early) 2009, review and updating of the major revenue projections
March 2009, preparation of budget summary information and determination of our budget position. Final budget balancing determinations.
March 2009 (late), preparation of the FY10 budget document and printing
April 5, 2009 (or before), submission of the budget document to the Assembly.
April 5, 2009 to June 15, 2009, Assembly review of the City Manager’s proposed budget.
It has been requested that staff accelerate the FY10 budget process, to the extent possible, in light of the City Manager’s decision to separate service on April 30. Staff will be working with the City Manager to accelerate the FY10 budget process where possible.