LEGISLATIVE, FINANCE AND ADMINISTRATION COMMITTEE

The Legislative, Finance, and Administration Committee meeting was held on January 8, 2007, at 6:12 p.m. with Chairman Salters presiding. Members present were Mr. Hogan, Mr. Slavin, Mrs. Jones, and Mr. Shevock. Members of Council present were Mr. Carey, Mr. McGlumphy, and Mr. McGiffin. Mayor Speed was also present.

AGENDA ADDITIONS/DELETIONS

Mr. Slavin moved for approval of the agenda, seconded by Mr. Shevock and unanimously carried.

Proposed Funding Improvement and Loan Payoff - Robbins Hose Company

Members were advised that the City makes a $60,000 appropriation to the Robbins Hose Company each year for the original mortgage on Fire Station 2. In accordance with the Memorandum of Agreement dated December 27, 2001, a copy of which members were provided, it was agreed that any excess funds created by a decrease in interest rates would be applied to the principle.

Currently, the Robbins Hose Company has approximately $165,000 accumulated in funds set aside in an early payment account due to lower interest rates. The remaining principal payment is $167,000. The Robbins Hose Company requested authorization to spend $31,000 from the accumulated funds in order to replace the flooring in the building and upgrade it with the installation of security doors. The remaining $134,000 would be used for principal repayment, and the final payment will be made in FY 2007/2008.

Mrs. Mitchell, Treasurer/Finance Director, stated that in future budgets, staff is proposing to change over from an annual contribution for loans to budgeting for the actual payments on the apparatus loans. The payments will then be made directly by the City to the applicable financial institution. She provided members with a revised CIP for the City’s Annual Contribution to Robbins Hose Company (page 134) for the major fire apparatus replacement plan and the annual mortgage payment for Station #2. She assured members that this has been discussed with Fire Chief Osika and he concurs with the recommendation.

Staff recommended amending the “Annual Contribution to Robbins Hose Company” CIP as requested and allow Robbins Hose Company to use $31,000 of the $165,000 in excess funds to pay for flooring improvements and installation of security doors, provided that the remaining $134,000 be used to pay down the principal on Fire Station #2.

In response to Mr. Hogan, Mrs. Mitchell explained that making payments directly to the financial institution(s) will alleviate discrepancies. She also stated that, although it is understandable why such an agreement was made, she prefers that any funding be accomplished through the budget process rather than a long-term agreement. By having it included as an annual appropriation, it would be included based on the availability of City funds.

Mr. Hogan moved to recommend the following: 1) approval of the amendment to the Annual Contribution to Robbins Hose Company CIP as requested and allow Robbins Hose Company to use $31,000 of the $165,000 in excess funds to pay for flooring improvements and installation of security doors provided that the remaining $134,000 be used to pay down the principal on Fire Station #2; 2) that in future budgets, staff change over to a system where annual contribution loans are budgeted and made a part of the budget process; 3) that staff be directed to submit a report on the Memorandum of Understanding and its status to determine what was completed; and 4) that staff be directed to submit a report on the completion of paying the $134,000 principal. The motion was seconded by Mr. Slavin and unanimously carried.

Information Technology Emergency Plan Equipment Purchase

Mr. Callan, Information Technology Director, reminded members that, in 2005, a study was conducted for emergency recovery for IT services provided to the City. In June 2006, the first recommendations from the study were presented to and approved by Council. Approval was also required by the Delaware Emergency Management Agency (DEMA). After rejection for reimbursement of the initial I/T Emergency Plan to hire a third party with a comprehensive disaster recovery site, the I/T Department approached DEMA with a modified proposal to purchase its own LAN equipment to begin the establishment of an emergency secondary data center. The I/T Department has received approval for a grant through DEMA to purchase computer equipment to be used to reconstruct the City’s network in the event of a disaster that compromises the City’s existing equipment.

Staff recommended authorization to proceed with the equipment purchase pending DEMA confirmation, as follows:

Mr. Callan explained that since all the equipment specified is under State contract, no competitive bid process is required. Equipment will be purchased from State-approved vendors (Dell Computers and Insight Public Sector). In addition, this project will be funded by a $100,000 State Grant (through DEMA). The I/T Department anticipates additional small purchases as the City establishes a secondary data center and recommended that the I/T Director be authorized to purchase additional equipment as necessary, subject to DEMA pre-approval prior to requisitioning and within the City’s purchasing policy.

Responding to Mr. Slavin, Mr. Callan indicated that no definite location has been selected for the emergency secondary data center. He assured members that he is aware of the issues involved with locating disaster recovery sites close to a potential disaster site, such as railroads.

Mr. Hogan moved to recommend approval of staff’s recommendation to proceed with the equipment purchase pending DEMA confirmation. The motion was seconded by Mr. Shevock and unanimously carried.

Review of Monthly Budget Report - Electric Revenue Fund (Power Supply & Generation Cost)

Mrs. Mitchell advised members that the monthly budget report for the Electric Revenue Fund has been reformatted to highlight the power supply and generation cost per megawatt hour as a comparison to the budgeted cost per megawatt hour. She explained that these changes are being made to assist members of Council in tracking budget variances.

Mrs. Mitchell reviewed the analysis so that members would be able to better understand the monthly budget reports when presented for acceptance. She noted that the exhibit provided is for the power supply and generation costs analysis only.

Mr. McGlumphy requested that staff simplify the report to allow for a better understanding by the public.

Mr. Slavin moved to recommend acceptance of the report as presented, seconded by Mr. Hogan and unanimously carried.

Proposed Budget Amendments - Budget Balances, Encumbrances, and Project Carry-Forwards

Mrs. Mitchell, Treasurer/Finance Director, presented proposed budget amendments. In order to assist members, she also provided details regarding changes in certain line items that were included in the amendments, as well as a summary of the Capital Project and encumbrance carry forward balances from FY 2006. She explained that the budget balances are adjusted to reflect the actual balances based on the audit. The differences between the earlier reported balances are related to adjustments in accrued revenues and expenses.

In reviewing the material, Mrs. Mitchell noted that she discovered that the Library Reserve has not been included in the budget ordinances that were submitted; however, she stated that this will be corrected for the First Reading when presented to Council. She also advised members that the General Fund budget balance, because of accrual adjustments made at year-end in expenses and revenues, actually came up $95,937 higher than originally budgeted. This amount has been put into the Library Reserves, in accordance with the direction provided during the budget meetings, which directed that any excess carry-forward balance in the General Fund be put into Library Reserves.

Mr. Hogan moved to recommend approval of the proposed Budget Revision Ordinances (Attachment #1), as recommended by staff. The motion was seconded by Mr. Slavin and unanimously carried.

Finance Department Re-alignment of Duties

Mrs. Mitchell, Treasurer/Finance Director, submitted a request for department re-alignment and personnel change for the Finance Department. She explained that in order to segregate the duties of the Finance Department into cash management/internal control functions and accounting/reporting functions, it would be necessary to realign the responsibilities within the Finance Department personnel. It was her opinion that the changes would improve the focus on internal controls and efficiency within the department with two (2) top supervisors. She provided a proposed organizational chart depicting the re-alignment. Mrs. Mitchell also alluded to the audit letter submitted by Faw Casson and Company, dated October 2003, which recommended that the Finance Director assess the staffing needs of the accounting department and plan for increased capacity through hiring or reorganizing the current responsibilities.

Mrs. Mitchell explained that the cash management and internal control functions would be handled by the Assistant Finance Director who would be responsible for payroll, accounts payable, investment reporting, banking activities, debt issuance, internal control procedures, preparation of RFP’s, and daily cash transactions. Responsibilities would also include direct contact with financial advisors, bond counsel, and bankers. This position would still be responsible for overseeing the department in the absence of the Director.

Mrs. Mitchell explained that the financial accounting and reporting would be handled by the Financial Reporting and Accounting Manager, who would be responsible for general accounting, fixed assets and project accounting, grant reporting, accounting procedures, monthly budget reporting, and the Comprehensive Annual Financial Report. Responsibilities would also include, but not be limited to, having a direct working relationship with other City managerial staff, actuaries, and auditors.

Mrs. Mitchell assured members that the re-alignment can be accomplished under the current budget with the savings realized through staff retention. The proposal would include promoting the current Senior Accountant to assume the role of Financial Reporting and Accounting Manager. She stated that the present Labor Grade is 121 and by using the PFP system, the revised Labor Grade would be 125 with a starting market rate of $58,600 annually, an increase of $8,703. This increase is supported by the promotion formula of the PFP system which provides this employee partial credit for past experience. They will also assume supervisory responsibilities of the other two (2) accountants.

Referring to the audit letter submitted by Faw Casson and Company, Mr. McGlumphy questioned if all of the recommendations have been implemented. Responding, Mrs. Mitchell stated that most recommendations have been implemented. With regards to the fraud assessment recommendations, she stated that the re-alignment of her department will allow for those recommendations to be implemented. With reference to the recommendation for the establishment of an Audit Committee, she explained that the auditors meet and report on the Comprehensive Annual Finance Report to the Legislative, Finance, and Administration Committee. Mr. McGlumphy suggested that members give serious consideration to the establishment of an Audit Committee and that if Council chooses to form such a committee, he felt it should be independent from the Legislative, Finance, and Administration Committee, whose members would not have a vested interest. Mrs. Mitchell explained that the recommendation regarding the Fixed Asset will be a part of the internal control assessment. She also noted that the recommendation included in the Accounting Team regarding monthly meetings had been implemented; however, she is in the process of changing them to weekly meetings.

Mr. Hogan moved to recommend approval of the proposed department re-alignment and personnel change, as requested by staff, seconded by Mr. Slavin and unanimously carried.

Expansion of Voluntary Curbside Recycling Supported by Dover

In October 2005, the City of Dover began offering voluntary curbside recycling to its citizens through the Delaware Solid Waste Authority (DSWA). Mrs. Tieman, Senior City Administrator, advised members that there has been significant success with this program over the past year. To date, over 575 City residents are enrolled in the program, with over 50% participating weekly. There is an average of 25 pounds per week and a cumulative average of approximately 7,512 pounds of recyclables per week.

As a result of its success, City staff and the DSWA would like to expand this program to other citizens of Dover so that residents of all economic strata would benefit. The DSWA has offered the City a proposal for pickup on an every other week basis since it does not appear that weekly pickups are needed. The DSWA would charge the City $2 per household enrolled per month for this service. This arrangement is similar to what the City of Milford does except that Dover’s program would be structured for citizens who want to voluntarily enroll and not for every citizen to be enrolled automatically. This means Dover only pays for citizens who enroll.

The program would be principally funded from savings which result in diverting recyclables from the landfill. The calculation is based on the City’s October 2006 results as follows:

•Average pounds of recycling from Dover customers annually = 676 (13 lbs./week x 52 weeks)

•Estimated number of customers participating in the supported program = 1,500 (approximately 3 times the current enrollment) x 676 lbs. = 1,014,000 lbs. Per year or 507 tons per year

•507 tons per year x $51.50 per ton ($61.50 per ton minus the DSWA rebate of $10 per ton) = $26,110.50 estimated total annual savings in landfill fees

In addition to these savings, Mrs. Tieman stated that there would be reduced expenses associated with gasoline and maintenance expenses and labor due to the reduction in the number of trips to the landfill (approximately 83). This would also result in less man hours being spent traveling to the landfill (approximately 62.5), which could be redirected and focus put on providing more efficient services within the City. The savings estimated for reduced gasoline expense is $1,236 and the manpower savings is estimated at $1,604. Additionally, no savings from the actual wear and tear on the truck were calculated. This would mean the City would pay $7,049.50 per year for a City supported recycling program. These are conservative estimates since there has never been a program of this type.

Mrs. Tieman also noted that the estimated cost of the program to the City after accounting for savings would be $7,049.50 per year. Currently, the line item for landfill fees shows favorably to date and can support the additional expense.

Staff recommended that the City Manager be authorized to sign a contract with the Delaware Solid Waste Authority (DSWA) to provide the City of Dover supported voluntary curbside recycling at a cost of $24 per year per participating resident for every other week pickup.

Responding to Mr. Hogan, Mrs. Tieman explained that the current program is voluntary with participants paying $4 per month for weekly service. The proposed program would cost the City $2 per month per participant for bi-weekly service. She stated that the more participants there are, the more recycled material, which will result in less land-fill fees.

Mr. Hogan moved to table the matter until the next meeting to allow for further review, seconded by Mrs. Jones and unanimously carried.

Mr. Slavin moved for adjournment, seconded by Mr. Hogan and unanimously carried.

Meeting Adjourned at 7:08 P.M.

                                                                                    Respectfully submitted,

                                                                                    Reuben Salters

                                                                                    Chairman

RS/jg

S:ClerksOfficeAgendas&MinutesCommittee-Minutes20071-08-2007 LF&A.wpd

Attachments to Original Minutes and File Copy

Attachment #1 - Proposed Budget Amendment Ordinances