# Budget and Finance and Economic Development Committee - October 27, 2015 > Auto-transcribed civic record · October 27, 2015 - **Permalink**: https://meetings.lexingtonky.news/meeting/3807 - **Source video**: https://lfucg.granicus.com/player/clip/3807?view_id=14&redirect=true - **Date**: 2015-10-27 - **Last revised**: July 15, 2026 - **Length**: 15,590 words > ⚠️ **Auto-generated content.** Audio from the official Granicus video was auto-transcribed with OpenAI's open-source Whisper large-v3-turbo model, run locally by The Lexington Times. Structured facts were extracted with GPT-4o; the narrative summary was written by Anthropic Claude. Verbatim wording may contain errors. See [methodology](https://meetings.lexingtonky.news/about/methodology) or [report a correction](mailto:editor@lexingtonky.news). --- ## Meeting Overview The Budget, Finance & Economic Development Committee met on October 27, 2015, at 1:00 p.m., with Stinnett presiding. The committee addressed six agenda items, including approval of the previous meeting's summary, review of financial reports, and consideration of fund balance matters. During the meeting, the committee took 11 votes and heard 5 public comments. The committee approved the September 22, 2015 Committee Summary and the FY 15 Fund Balance item. Two financial presentations were provided on an informational basis: the September Financials General Fund and the Monthly Budget Report Other Funds. The Contingency Fund item was deferred to a later date. The committee also approved Items Referred for consideration. ## Attendance The following individuals were present at the meeting on October 27, 2015: * Stinnett * Moloney * Kay * Lamb * Farmer * Scutchfield * Brown * Mossotti * Bledsoe * Hensley No absences or late arrivals were recorded. ## Votes and Decisions The meeting included eleven votes, all conducted by voice vote except where individual votes were recorded. **Motions Passed by Voice Vote:** - Motion to approve the August 25, 2015 Budget, Finance & Economic Development Committee Summary, moved by Farmer and seconded by Bledsoe [timestamp: 0:14:05] - Motion to bring a proposal forward for alternative options for the Economic Contingency Funds, moved by Kay and seconded by Mossotti [timestamp: 0:02:30] - Motion to remove Activity Based Costing/Financial Efficiency from Committee, moved by F. Brown and seconded by Mossotti [timestamp: 0:03:00] - Motion to accept all yellow boxes as reported and recommended by the administration for the FY15 fund balance, moved by Brown and seconded by Bledsoe [timestamp: 1:32:17] - Motion to report out the fund balance portion of the meeting today during work session, moved by Farmer and seconded by Bledsoe [timestamp: 1:42:01] - Motion to remove the solid waste user fee structure through the Waste Management Task Force, moved by Farmer and seconded by Bledsoe [timestamp: 1:43:37] - Motion to remove Quarterly Development Reports from Committee, moved by Farmer and seconded by Bledsoe [timestamp: 1:44:16] - Motion to remove World Trade Center from Committee, moved by Farmer and seconded by Bledsoe [timestamp: 1:46:34] - Motion to adjourn, moved by Bledsoe and seconded by Mossotti [timestamp: 0:03:00] **Recorded Votes:** - Amendment to delete the $4.6 million recommendation to bring the Economic Contingency Fund to 10% of prior year's revenue, moved by Brown and seconded by Bledsoe: Failed 5-4 [timestamp: 1:26:54] - Voted for: Farmer, Lamb, Scutchfield, Hensley, Bledsoe - Voted against: Kay, Brown, Mossotti, Moloney - Amendment to reduce the $4.6 million recommendation to $2.3 million, moved by Lamb and seconded by Farmer: Passed 5-4 [timestamp: 1:32:47] - Voted for: Farmer, Lamb, Scutchfield, Hensley, Bledsoe - Voted against: Kay, Brown, Mossotti, Moloney ## Budget and Financial Actions The meeting addressed several amendments to the Economic Contingency Fund and recommendations for establishing financial reserves. **Economic Contingency Fund Amendments** The body considered multiple adjustments to the Economic Contingency Fund: * An additional contribution of $4,600,000 to reach 10% of prior year's revenue * A reduced contribution of $2,300,000 to the Economic Contingency Fund * An additional $1,052,000 to the Economic Contingency Fund based on 25% of the change in fund balance **Reserve Recommendations** Three reserves were recommended for establishment: * A litigation reserve of $11,500,000 * An insurance reserve of $3,000,000 * A prior project assignment reserve of $13,500,000 These financial actions totaled $48,952,000 across all proposed amendments and reserves. ## Public Comment Several council members addressed fiscal policy and budget allocation priorities during the meeting. **Contingency Fund and Reserve Policy** Council Member Hensley spoke at [timestamp: 1:33:25] regarding contingency fund size and policy. Hensley supported limiting the contingency fund to 10% of the budget, noting that the state's contingency fund comprises only half a percent of total budget. Hensley argued that perpetual growth of the fund prevents access to funds when needed. Council Member Farmer also addressed contingency fund policy at [timestamp: 1:33:25], advocating for a policy change to allow access through council approval with a replenishment plan, rather than the current calculation test requirement. Farmer argued that the existing system is too restrictive and prevents access during emergencies. **Infrastructure and Fund Allocation Priorities** Council Member Brown expressed concerns about paving needs and infrastructure funding at [timestamp: 1:36:11]. Brown raised grave concerns about the city's infrastructure, particularly paving needs in the 8th District, and argued against increasing fund balance reserves. Brown advocated instead for allocating funds to paving, public safety, and parks. Vice Mayor Kay spoke at [timestamp: 1:33:25] on fiscal responsibility and fund allocation. Kay agreed with Council Member Brown that saving money in a fund earning little return while infrastructure needs accelerate is not fiscally responsible. Kay supported a cap on the contingency fund. **Litigation Reserve** Council Member Bledsoe raised a question at [timestamp: 1:21:28] regarding the litigation reserve and risk analysis. Bledsoe asked whether the litigation reserve is based on a risk analysis. The response indicated that the reserve is based on current pending litigation matters, though full details require a closed session. ## Contested Items The October 27, 2015 meeting included two significant areas of disagreement among committee members. **Funding Allocation Between Contingency Fund and Infrastructure Needs** The committee was divided on how to allocate $4.6 million in available funds. One faction, including Council Member Brown, argued that the funds should be directed toward paving, public safety, and parks rather than added to the Economic Contingency Fund. The opposing view supported allocating the $4.6 million to the contingency fund to reach the target of 10% of the budget. This disagreement resulted in a split vote, indicating the committee could not reach consensus on the proper use of these funds. **Policy Change for Contingency Fund Access** A heated discussion emerged regarding how the contingency fund should be accessed in the future. The debate centered on whether to change the fund's access requirement from a calculation test to requiring council approval. Committee members held differing views on the fund's intended purpose and the degree of flexibility needed to respond to emergencies. Some members advocated for the calculation test method, while others supported moving to a council approval process, reflecting broader disagreement about balancing fiscal controls with operational responsiveness. ## September 22, 2015 Committee Summary [timestamp: 00:14:05] The committee reviewed the summary from the previous meeting held on September 22, 2015. Stinnett presented the summary for the committee's consideration. The committee approved the summary without requesting any changes or additions. No concerns or issues were raised during the review process. **Outcome:** The September 22, 2015 Committee Summary was approved as presented. ## September Financials General Fund Commissioner O'Mara presented the September financials for the General Fund [timestamp: 00:15:41], highlighting strong economic indicators and revenue performance. **Presentation and Discussion** The presentation focused on the General Fund's financial status for September, with emphasis placed on positive economic trends and revenue collection results. **Questions and Concerns Raised** During the discussion, several commissioners raised questions about specific financial matters: - Lien collections were a topic of inquiry among the board members - Questions were raised regarding fund balance usage and how reserves were being allocated **Key Participants** The following commissioners and officials participated in the discussion: - O'Mara - Cooke - Kay - Brown - Moloney - Lamb **Outcome** This agenda item was presented for informational purposes. No formal action or decision was required on the September General Fund financials at this meeting. ## Monthly Budget Report Other Funds [timestamp: 00:24:32] Melissa presented the monthly budget report for other funds to the committee. The presentation was received as informational, with no questions or concerns raised by committee members regarding the report contents or findings. The committee accepted the report without further discussion or debate. ## Contingency Fund Tyler Scott presented findings on the Economic Contingency Fund to the committee [timestamp: 0:25:04]. Scott's presentation included three primary recommendations: maintaining the fund's 10% goal, changing access requirements to require council approval, and establishing a replenishment plan. The committee engaged in discussion regarding the fund's structure, accessibility, and policy implications. Key participants in the discussion included Farmer, Brown, Kay, Bledsoe, Hensley, and Moloney, alongside Scott. The outcome of this agenda item was deferred, meaning the committee did not reach a final decision and postponed further action on the contingency fund recommendations to a future meeting. ## FY 15 Fund Balance [timestamp: 1:04:11] Commissioner O'Mara presented a preliminary fund balance analysis for fiscal year 2015, which included recommendations for specific reserve allocations and unassigned fund balance amounts. The committee discussed the rationale behind each of O'Mara's recommendations during the presentation. Participants in the discussion included Commissioners Brown, Bledsoe, Lamb, Hensley, and Kay, along with O'Mara. The committee voted to approve the proposed allocations as presented. ## Items Referred [timestamp: 00:03:00] The committee discussed and voted on removing several items from the committee's jurisdiction. The speakers involved in this discussion included Farmer, Bledsoe, Brown, and Kay. The items under consideration for removal were: * Activity Based Costing/Financial Efficiency * Quarterly Development Reports * The World Trade Center The motion to remove these items from the committee's jurisdiction was approved. Following this action, the committee also passed a motion to adjourn. --- ## Decisions - **Motion** — passed: Motion to approve the August 25, 2015 Budget, Finance & Economic Development Committee Summary - **Motion** — passed: Motion to bring a proposal forward for alternative options for the Economic Contingency Funds - **Motion** — passed: Motion to remove Activity Based Costing/Financial Efficiency from Committee - **Motion** — passed: Motion to adjourn - **Motion** — passed: Motion to accept all yellow boxes as reported and recommended by the administration for the FY15 fund balance - **Motion** — failed (5-4): Amendment to delete the $4.6 million recommendation to bring the Economic Contingency Fund to 10% of prior year's revenue - **Motion** — passed (5-4): Amendment to reduce the $4.6 million recommendation to $2.3 million - **Motion** — passed: Motion to report out the fund balance portion of the meeting today during work session - **Motion** — passed: Motion to remove the solid waste user fee structure through the Waste Management Task Force - **Motion** — passed: Motion to remove Quarterly Development Reports from Committee - **Motion** — passed: Motion to remove World Trade Center from Committee --- ## Full transcript Do a little dance, make a little love, get down tonight, get down tonight. Do a little dance, make a little love, get down tonight, get down tonight, baby. Get down, get down, get down, get down tonight, baby Get down, get down, get down, get down tonight, baby Get down, get down, get down, get down, get down tonight, baby Get down, get down, get down, get down, get down tonight baby Stir and see and shout Get down, get down, get down, get down, get down tonight baby Get down, get down, get down, get down tonight baby I felt the rush of the Rio Grande into Yellowstone And I've seen firsthand Niagara Falls And the lights of Vegas Crisscross down to keep his game And shot town via bang or me Think I've seen it all And all I can say is How about them cowgirls Boys ain't they something Sure are some crowd girls And you can't tell them nothing And I tell you right now, girls May just be seven wonders of this big Old, round world But how about them cowgirls? She's riding coals in Steamboat Springs Bailing hay outside Abilene She's trying hard To fit in in some city But her home is neat That big blue sky And the northern plains And those other wide Open spaces Our days there ain't as many But how about them cowgirls Boys ain't they something Sure are some proud girls And you can't tell them nothing I tell you right now girls They'd just be seven wonders of this big hole around the world But how about them cowgirls? Boy, she don't need you and she don't need me She can do just fine on her own two feet But she wants a man who wants her to be herself And she'll never change Don't know how to hide Her stubborn will or her fighting side But you treat her right And she'll love you like No one else Yeah, how about them cowgirls Boys, ain't they something Sure are some proud girls But you can't beat the loving And I tell you right now, girls They just be seven wonders Of this big, bold, round world But how about them cowgirls? How about them, boys? The king of broken hearts doesn't ask much from his friends And he has quite a few of them They know he will understand That's just the way it goes The king of broken hearts doesn't know he's a king He's trying to forget other things Like some old chivalry sings He's walking through the lawn He talks to angels And the stars start to spin He thinks of troubles That he's got for him He recalls how his heart got broken And how it's still that way The king of broken hearts is so sad and wise He can smile while he's crying inside We know he'll be brave tonight Cause he's the king of broken hearts guitar solo Cause how his heart got broken And how it's still that way The king of broken hearts thinks that he's an old fool He's a little bit like me and you So what's a king like that supposed to do With all that blue time We know he'll be brave tonight Cause he's the king of broken hearts He's the king of broken hearts I've got the world on a string Sitting on a rainbow Got the string around my finger What a world, what a life, I'm in love. I got a song that I sing, I can make the rain go. Anytime I move my finger, lucky me, can't you see I'm in love? Life is a beautiful thing, as long as I hold the string. I'd be a silly so-and-so If I should ever let it go I got the world on a string Sitting on a rainbow Got the string around my finger What a world, what a life I'm in love Thank you. ¶¶ Thank you. ¶¶ ¶¶ ¶¶ ¶¶ ¶¶ ¶¶ Okay, we'll go ahead and call the meeting in order. This is the Budget and Finance and Economic Development Committee meeting on October 27th. It's 1 p.m. First item on our agenda today. And welcome, everyone in the audience. First item on our agenda today is the committee summary from the September 22nd meeting. Do I have a motion to approve? So moved. A motion in a second. Are there any changes, additions, or deletions in the summary? Hearing none, all in favor say aye. Aye. Any opposed? All right, that passes. Next up, we have our usual monthly update on September financials of our general fund. Commissioner, welcome. Thank you, Chair. We're going to follow the regular procedure with going over a financial update, and this is through the first three months of the fiscal year, the end of September. and we track the unemployment, which is really good news for Lexington and surrounding areas. I'm not sure that the August results which are on there will stand. They're preliminary, but August unemployment for Fayette County was 3.5 percent. So we haven't seen that in a long, long time. That's compared to the MSA slightly above that and then Kentucky at the 5%. And then the economic updates all have thumbs up. We have increases in Fayette County permits issued year over year for September. We have business license higher year over year for September. We have home sales up year over year for September. And then finally, we have foreclosures significantly down over the same time last year and last month. So we have any questions on economic indicators? And I'll turn that over to Rusty Cook to go over the top four revenue streams. Good afternoon, everyone. Thanks, Chair. Top four against the budget for the month of September, we were down $734,000. Let's move and take a look at the quarterly so we can kind of see where we are through the first quarter, which makes a lot more sense. We're up $1.9 million in the first quarter over budget. Employee withholding was strong, which is indicative of the low unemployment rate. It's at $1.4 million right now. Net profit's up $760,000. We had a pretty good, strong September, which is our first extension period. Insurance is up $260,000. Franchise fees is down $560,000. We increased our budget quite a bit this year based on some historical data, and it's just not playing out. We are seeing increases in the ones who had rate increases, such as the electric utility. Comparing the prior year, we're up $4.4 million, which is 7.3%. It makes a lot of sense. We increased our budget this year as well. Employee withholding is at 3.1. And again, the unemployment rate being low was a big indication there. Net profit's up 570,000. Insurance, 458, which is still strong, and it's in the marine type again. And fire insurance. And then franchise fees is up 180,000, which is up 3.3% versus last year. And this one is included for information purpose, the lien collections through the first quarter. Any questions on top four? Yes, we have Vice Mayor Kay. Thank you, Chair. Thank you, Rusty. I had asked the question last month about the drop, significant drop from last year's collections. Yes. You sent me an email back saying it's not finance, it's handled elsewhere. But I notice a remarkable increase. Correct. From August to September. um do you have any information about that or should we be talking to code enforcement i will and no the information i got on that from them was what i said about how they handle it it's unplanned when it comes in it just comes in as it comes in but i'll ask them if they got a large check or something big in those categories in the month of september and get that back to you as well okay i guess i just have a concern about what the procedure is sure and whether that's been changed or not I don't know if it's appropriate for this committee or general gov I don't know just okay numbers that really cry out for some kind of an explanation so I'll talk to the Commissioner on that and then we'll go from there on that and get you some information back on that so let me just ask the chair is it appropriate to ask code enforcement to be here next month Yeah, I think since the chart's in our packet each month, they can come and address those differences. And if there's a policy question or a general management question, we can put in General Gove for further changes. Great. That sounds fine. Thank you. Absolute chair. There may be a perfectly good explanation. We just don't know yet. Sure. Anyone else on this? Okay. Thank you, Rusty. Thanks a lot. Melissa, and I'll take over for the other revenues and expenses. Good afternoon. um resties talked about the top four so we'll move into the other revenues we are pretty much right up budget on the other licenses and permits the ad valorem is up two hundred thousand dollars that's related to the motor vehicle tax is up for the first three months services is up 317 000 that's primarily due to the detention center fees out there and then if you go down we've got another increase in that investment income is just adjustment to the cost to market. So that's just an accounting entry. We know that varies from month to month. And then if you notice, the other income is up $444,000, which is quite large there. That is due to a payment from FEMA that we received from the 2009 ice storm. So that's in our miscellaneous revenue there. So that's the big difference in that category. Hold on one second before you go. We have a question. Councilor Massati. Thank you, Chair. Melissa, on the franchise fees, we've got a variance of negative 564.079. Can you give me a little bit of a heads up on that, please? I'm going to let Rusty talk about that one since he's got that information. Thank you. Yeah, we increased our budget year over year for that one because, if you recall, the last fiscal year we were significantly above budget. We went a little bit too far on the budget because there was a rate increase in, I think it was January of 2014. that skewed the large increase. So we went above and beyond, as well as anticipating an electric utility increase that started this year. We are seeing benefit from the electric utility rate increase. It's just not to where we had thought it would be. And the other utilities are running about flat. Excuse me, so still with the franchise rate increase, we're still not meeting the goal? Oh, we are. We had a more aggressive plan for 2015. I think okay thank you councilmember but so real quick I saw the difference in property sale just looks larger to me I'm just curious what happened there um this is typically one where we don't know it's not just properties it's other it's other types of properties it's not just land so this is if we do any kind of surplus sales any kind of equipment and so it's hard to budget what we're gonna sell because we never know so that's why there's a variance there but makes sense we don't know what it was i can get um i can get some detail on that curious i believe it's just general miscellaneous properties like vehicles and things like that smaller properties but i'll get the detail for you thank you chair anyone else okay melissa continue please finish writing my note there i'll take your time okay so on the expense side i'd like to point out that the personnel for the three months into the fiscal year is within 1% so it looks I don't want to toot the horn too soon but it seems that our new way that we budgeted personnel this year it's working out well for us for the first three months now it's just three months so I'm not gonna get too excited but we're within 1% on the operating side we're spending faster than what we had had in our budget spread some of the accounts that we're head-on for the The first three months are professional services, rent and lease, and repairs and maintenance accounts. So those are some that we had spread them out more throughout the fiscal year, but people are spending sooner on those. The large variance in partner agencies, that's just the timing of a payment. So it's not anything that's not a large variance there. And then the operating capital expenditures, that's very similar to the operating expenses. People are just spending sooner than what we had the budget spread out to be. So if you take the variance in operating and the variance in revenues, for the first three months, we have a net change in position of $3.6 million. And then the next two slides are for reference. They're just comparing the prior September to this September in the revenue and then the operating. So are there any questions? Say none. Thank you. All right. Next on our agenda is the monthly budget report of other funds. This is for information only unless anyone has a question in reviewing those other funds and the urban service funds. Anyone? If there's no questions on that, then we'll start our contingency fund presentation and follow up from last meeting. Tyler, Scott, welcome. and we understand you're going to be leaving us here soon at LFECG, and this will be your last time appearing before us. Unfortunately, that is true. Well, we wish you the best of luck, and thank you for everything you've done for us. Thank you very much, and thank you once again for this last opportunity to continue to talk about what we've spent a lot of time on over the summer. You asked us last time to come back with the findings of our research. I'd like to take a quick moment to thank our interns who worked on this over the summer, Lauren Kesselring, who's still with us. We had Brittany Sims, who's now in the MBA program at UofL, and we also had Jennifer Henry, who's in the law school program at UK. And they produced a large amount of information that I think will continue to benefit us well into the future. So we'll go over some of the basic components of how we went about our research, kind of how we condensed down the major components of contingency funds across the board, what we found to be the best recommendations moving forward and any questions from there. We started looking internally, of course, at how we had our own contingency fund structured and tried to thoroughly lay out all components thereof and how we can go about improving that moving forward. In the benchmark cities, I covered most of this last month. We looked at university cities, a lot of regional comparisons, and then we focused on some distressed cities just to see how they either responded or utilized their own contingency funds whenever they faced some kind of either economic or natural disaster. We gathered all that information and we looked at their CAFERS, emails, phone calls, on and on and on to try to get as accurate and up-to-date information as possible. There's a list of the cities that we focused on for this study. uh what we found across the board at least there is not a standard comprehensive best practice or template uh that is utilized uh every municipality looks at uh their own uh funding structures they look at their own own way they generate revenues and uh and the things they may they identify as being the greatest need for uh for for using this as a funder funding source and they they structure their plans accordingly. I'd say three considerations for good practice. One, that the fund itself is good for good governance. It allows you to be flexible and adaptive moving forward. It is one of many components that bond rating agencies consider when they give us our ratings. And having a good fund that is usable is just as important as any of these others. So we condensed everything we found as far as considering this fund down to three primary categories. We looked at funding contributions, we looked at the accessibility and uses of this fund, and then how to replenish the fund and what a plan should look like moving forward if the fund is tapped into. The first one is the funding contributions internally. As we talked about last time, we have an internal goal of 10% of the prior fiscal year's revenue as our target. As of last fiscal year, for 2014, we were at 8.3% or 83% of the way towards our 10% target. And we get there by depositing a general fund transfer each year of $600,000 plus 25% of the change in the general fund fund balance at the end of the fiscal year. And all that interest earned in that account is maintained within that fund. Just to add some color to what that gets us right now, it would essentially cover the fund size right now would cover just slightly over one month of operating and personnel expenses citywide. Now we look at benchmark cities. Like I mentioned, there are no significant trends that we that we've really picked up on. But most most have some kind of goal based on their own number of days that they like to target to cover for operating and personal expenses or some kind of percentage structure to cover the revenues coming in or expenses from their prior year. No cities put an actual dollar cap on their funds. Most of them, if they identify any kind of target, they're using a percentage, as we do. They've also established many other smaller funds within these funds, such as emergency funds, capital reserve funds, other kinds of assistance funds in those categories. Most cities also do not list their contingency funds separately within their CAFR. It's included in their total unassigned fund balance. This is not an apples-to-apples comparison, but this is just to kind of illustrate that last point I just made. If you look at Lexington right there at 8.3%, as I mentioned, by comparison to others, we're the only one who's focused solely on our contingency fund as the way we break it down within our CAFRs. These numbers are showing total unassigned for these other cities. And just to show you what the average looks like, for a AA-1 city like Lexington, our goal is 10%, average is 9%. AAA cities on average were considerably higher. We looked at the second component now, which is accessibility and uses. Within our ordinance, we identified two defined uses. One was an unexpected revenue shortfall, which required the calculation. In fiscal year 2010, we went through this exercise to utilize the calculation. And going through the process, what it resulted in was we were only allowed to access about 50 percent of the total funding we needed to cover that gap. The second defined use would be under an emergency declaration, which is kind of vague. the language in quotations is directly from the ordinance saying it's to provide sufficient working capital and an ability to address emergencies without borrowing or an accounting-wide declared emergency. Looking at how other cities do it, most have some sort of requirement for an analysis from the administration that goes to counsel for consideration on this proposal. They most would have a pretty significant outline of what the uses were for, how much it was for, and then also some kind of timeline for replenishment of that fund. In all funds, just like in ours, it's important to note that any kind of revenue shortfall or an emergency declaration is not an automatic trigger for the fund. It does require you to go through the reasonable adjustment within your own current budget first, and that would be one other thing we found that's important to make sure you've shown that that's a step you've taken before you go to ask the deliberative body for access to those funds. Now the third component was the replenishment of the funds. We don't have that clearly outlined in our ordinance right now. It went straight to the recommendations coming from benchmark cities. I think it needs to be a clear but flexible and affordable policy recommendation. It needs to include the amounts of withdrawal, Some kind of timeline for reviewing the replenishment process. All the sources and the sizes of the funding is to go back in. And an annual update on that progress. One of the big considerations right now nationwide that I've found is that a lot of states and cities who have too restrictive of a fund are finding it to be a deterrence to accessing their contingency fund. So a lot of them are going back now and trying to make sure they kind of loosen the strings on and holding their feet to the fire and replenishing these funds. So overall, we would say that assessing our fund, the 10% target within our fund is good. What we need to, what we'd recommend, I think we can further flesh out, is looking at more useful accessibility requirements. And so with that, the recommendations we would like for you to consider today is to maintain our 10% goal. adopt the methodology to reach and maintain that 10 percent along with the current method that we were using we're going to recommend in in the following presentation on the fund balance a contribution of 4.6 million dollars to the fiscal year 2015 fund balance which would get us at our 10 percent target and we would also ask you to consider changing the access requirements from the calculation test to a council approval approach which would also include the replenishment plan. We could also look more deeply at identifying allowable cost categories and getting council's input on what kind of guidelines you would like to put in place for allowable costs within this ordinance. With that, I'll take any questions. Tyler, thank you. We have a couple of council members signed up already. Council Member Farmer, you're up first. Thank you, Mr. Chair. Tyler, thank you for this. It's an issue I placed in committee because I wanted to articulate policy about coming to a cap, which you've raised a lot of different and great policy questions. Let's start on page 45 or page 11 of your handout. So those are AAA or AA1 bond ratings? Is that what you have said? Is that the outline there? Yes, and that's only based on the cities that we focused on in our study. I think, I mean, in the conversations I've had, I think we're relatively consistent in everybody. I mean, there's room for change all the time. I'm getting to about a 10%. I realize that further in the packet, it says that some people never capped it. I mean, we would be kind of unusual in capping this, I guess is what I take from your presentation. I won't say it's unusual. It's 50-50, but it's picking a percentage is something that if it's done, it is more in the 10% to 15% range, while others just continue to put money into it if they have excess fund balance each year without identifying a specific target in that way? So it could be in the same way you're suggesting changing the trigger, so to speak, we could decide to place more in the fund than what 10% might actually be that year. You may consider that short. All right. Then on your page 12, why did you use FY 2010 specifically? That was the year that the actual consideration was placed before council, I believe, during the recession. That was the only year that we found where we actually went through the calculation approach. But we didn't meet the trigger requirement, did we? You met the trigger in two consecutive quarters of unexpected revenue shortfall, which triggered the calculation. Now, I believe this is correct. You did not actually go all the way through and withdraw. We decided we would wait until the end. And we did, and it curved back in our favor. So we really didn't want to dip into it, but that's kind of part of the background discussion that brought this up was how hard a trigger is it and under what consideration do you finally get to use the opportunity there. All right, then next page. All right, requires reasonable adjustment of the budget first. So what are you saying a budget amendment? What are you saying here? Right. I mean, in typical years, we have some kind of snow emergency. We've looked at other funds that we thought may have been over-projected and reallocated funds with budget amendments to make adjustments for overtime or SALT or things like that. And then the reasonable steps to adjust to the current budget would be where we would pull those funds, what we would do with them, or? Right, where we think we could access additional funding to make those adjustments before we tapped into the contingency fund. And then on the next page, and this is a great, and I don't know that it's currently considered in the ordinance, sources and sizes of refunding. So a critical path to get back to 10% or get back to whatever the goal is. Correct. And then, you know, on your recommendation of using fund balance, I think that's an open discussion among the council and something I don't want to weigh in on just yet. I mean, there's been times where I've been for it. There's been times I would have been against it. I think it's a great discussion point among ourselves as we move forward here very shortly. But I think that the access requirement is very important for us to refresh. And the idea of the replenishment plan to be included in that analysis, I think, is very important. And I think if we set a target, we can decide to reach it. And we've been very dedicated and very disciplined about adding to this fund over the last five years, six years. And I think that's the trend line we want to keep with us, deciding how we want to get to the goal and what we do when we get there, I think, is the point of what we'll give you direction on when we're done here. Absolutely. Thank you, sir. Thank you, Mr. Chair. Next up, we have Council Member Brown. Thank you, Chair. That same schedule up there, the administration is recommending the 4.6, or did you get other input on that number? Correct. That's an administration request, yes. And why did you all propose that? We saw it as an opportunity with the fund balance we have to take a fiscally responsible approach in this year to go ahead and reach a target that we've been working towards incrementally for years. Did you look at any other priorities in the government where that $4.6 million could be used? Of course. Of course? Great answer. So this happens to be number one priority? Commissioner, just in time. Let me weigh in on this. During the analysis, we felt that the analysis showed very clearly that our current ordinance was too restrictive. Even in a 50-year downturn, one we hope we don't see for another lifetime, we could barely get into any of the money, which kind of brings into question the value of having that. So what we're hoping to recommend and for the council to consider is visiting that ordinance and specifically those triggers and those assessibilities. Now, I think we have one that's way overcompensated and it's too tight so that we can't ever get to it. We're not recommending that it's a free-for-all. We're trying to come up with a valuable discussion with council on where is a good medium and looked at the guidance that we had from those other benchmark cities. So one of the things to do, since we did find that the 10% goal is a valuable goal to have, it's reasonable, it's concurrent with our benchmark cities, let's go ahead and reach that 10%. We have the opportunity to do that this year. We're fortunate that we're now on an uprising economy and have fund balance. So we want to put into play the conversation of let's reach that 10%. That takes the pressure off of where do you want to have your fund balance so that we can open up then further conversations about triggers and uses in future years. So that's kind of the reason we recommend it. Okay, I respectfully know where you're coming from. I don't agree with it. I think one thing is you said we do need a new ordinance. related to what we can do with this particular fund. If you go back to 1997, this fund was kind of a brainchild of Dr. Stevens and myself. We happened to have a large fund balance that year, and we decided instead of spending it, and a lot of people wanted to spend it, that let's put some back for a rainy day fund. So that's how that kind of got started 20 years ago or 19 years ago. I never envisioned that it would grow such as it has, not that that's not a good idea, but there comes a time when we don't have a really solid ordinance to use this money, and we've got this amount sitting there, and I just think it's too hefty, because over the 19-year period, we have never got into this fund, so you've got some history there. so why take 4.6 million just to get it up to the 10 percent and then say okay we're finished now we'll do an ordinance when in fact there's other priorities in this city and i'll name three paving public safety and parks which we are not funding adequately but we're taking 4.6 million and sticking it back in the savings account. I just can't go along with that line of thinking. So anyway, back to a couple questions here. I'm not sure who will answer these. Page 51, you talked about there's a list of cities there. And, Bill, no disrespect to you. I know exactly where you're coming from. I just don't agree with where you're getting your dollars. on those yeah all those I don't know is there any city there smaller than Lexington I'm not sure on my population but a lot of those cities are certainly larger than Lexington so that comparison I don't know I know you're going by a percentage but I still not crazy about the comparison and then if you notice page 51 you don't have 51 that's not 51 it'd be 17 on your slide it goes on another slide or two. Oh, after? Yeah, you actually went after the questions, and I don't know why. Are you here? Yes. And when I look at this, Lexington has a committed fund type, and then the majority of those others are unassigned. Correct. So their contingency is not earmarked contingency. It's just unassigned fund balance. Right. This is what I was saying earlier. You're right, comparing apples with oranges here. Right. When you're trying to sell the goods that, oh, we've got to get our percentage up. But when we're talking about a committed contingency versus an unassigned contingency, that is a completely different picture. Let's see. And then I noticed on the next slide, page 52, you show the history of the net changes. I'm curious, in 2010-2011, the balance did not move. And I suspect we had interest income those years. We didn't put it back into this fund? Or did we spend it? Well, that was the year where the ordinance was suspended. And so we, by order of counsel, at the request of the administration at the time, the ordinance was suspended and no dollars were put in. Now, we may have overstated the net change and not shaved out the growth in interest. I'd have to go back and verify one more. So you're not sure this schedule is correct in relationship to the net change? I mean, I thought interest income stayed with the particular savings and funds. I have to go back and verify. Okay. I was just curious about that on that. And I noticed, you know, we've done a pretty good job, or the council before us, and I commend them on that. Put $4 million in $12 million, $4 million, $8 million, $13 million, and then dropped back down to a couple million and then a million. All this was done while my streets were not paved in the 8th District. Okay? And now we're having to pay that price because we saved money for whatever reason, a contingency that we never use. So I kind of make that plea. And the other thing on this, I know my time's running out, is that we're talking about this contingency fund, and it's a big part of the fund balance, but we've got fund balance discussion to go to, and I don't know that I'm ready to do any recommendation of voting on this particular contingency fund until we look at some other components of the fund balance itself. So thank you. Thank you, Councilor Graham. And we're not going to vote on this right now in terms of the actual dollar that they're recommending. We're going to go through the fund balance presentation first because the only thing that relates to is what goes in the CAFR for publishing here in November by ordinance. Council Member Farmer, do you want to speak again? Okay. Anyone else want to speak before Council Member Farmer has a second time up? I would like to ask a couple questions. My vice chair is not here, so I'll ask him from this point. On the bond ratings between AAA cities and AAA1, what's the difference in interest rate? What's the difference? and having that rating. Why is it important to be a AAA versus a AA1? It all matters on what interest rate you would lock in for a 10- or 20-year bond. It would be the same thing as when you go to finance your house and you have to pay a percent more for the total 20 years that you're paying off your house. So that compounds over the 20 years of the life of the bond. And so the bond rating is followed by the bond market in determining what kind of rate that they're willing to pay for the value of your money. The one question, if I could, on we do have a dedicated in the CAFR contingency fund. These other, we could not find other people that reported it that way. However, they have policy that's saying that of their uncommitted, this much is for contingency. So what Lexington has done has made that policy higher at an ordinance level. It's not that these cities don't have one. It's that it's not at the level of an ordinance and is reported separately in the CAFR. So I acknowledge that it's not a good apple to apple, but I don't think it's apple to oranges, if that makes any sense. Back on the bond rate, what's the difference in interest rates between the two? In other words, they're looking at this contingency fund and giving us extra points for our rating. Right. So our total rating between a AA stable and AA looking up is about a half a percent. Half a percent. Okay. If we moved up to AAA, then it would be even more. Okay. Okay, and the $4.6 million recommendation, is that in addition to the ordinance calculation? It is. I'll have that in the presentation when we talk about fund balance assignments. Okay, so it would be in addition to the current ordinance. Okay, thank you. Next we have Council Member Bledsoe. Just to follow up, when you say AA looking up, is that a AA positive on this chart? Okay, what would it take to get to a AA to move to a AAA, in your opinion? in? Well, that's the secret behind the committee. The committee meets, and the discussions of a ratings committee are not public, so we would have to be a fly on the wall in order to do that. But a lot of things, well, let me go through some of the things that they do consider. They look at our pension obligations. There's not really, I mean, we've done a lot to improve that, but I don't know that we can improve it more. So that's going to ding us because we do have a pension liability. Now we're also sharing the state's liability. I'm going to talk to you in December in the CAFR that new GASB rules trickle down and put the total liability of the state's unfunded pension actually on our financial reports. But that's been factored for the last two years by the rating agency. So even though it's the first time reporting, it won't be the first time they've taken that into consideration. You have the average earning power. You have the average education. Those are not really financial that we control. Those are the things you either inherit or are very thankful for that are in your community. You have management expertise. You have governance expertise. They're evaluating how much governance that you have and show with your votes, as well as how much governance we show as administration with what we administer, proceduralize, and report to you. They look at total liquidity. How much is your total cash on hand? They look at your volatility of revenue. Revenue based on property taxes is assessed differently than revenue based on sales tax or based on payroll and net profit. So it's a combination of all of those. I hope I'm not rattling on too much. Not at all. I was just curious. Okay. That's what I would guess. It's interesting. I didn't realize the state's liability would have an impact on ours, and that would be significant in our case. So thank you, sir. Thank you. Councilman Farmer. Thank you, sir. Even if we don't change anything, we have a funding mechanism in place that would get us to, well, unless we cap it, it would take us to whatever amount in the ordinance as it's on the books right now, correct? That's correct. And leaving out the conversation about either the minimum of a million or this maximum the administration has put forward of the 4.6, What I would like to see is an additional language to the ordinance that would provide us with a rolling 10% general fund balance of 10% as a minimum. And to change the methodology for figuring what the contribution is based on us reaching that 10%. So moved. And you want to comment first? I got no second anyway. Yeah, I understand. Yeah, we're standing some people. People weren't following. Well, this is not about spending the money today. This is about changing the policy. And right now we don't have a stated cap. And the reason that at the time I placed this in committee and I'd been talking with Council Member Lane at the time was to come up with a cap. How do you know when you're there unless you have a goal? So I'm saying the goal is potentially 10% of the general fund, which is what we've been saving toward. And I'm saying let's change the verbiage in the ordinance so that when we reach the 10%... I'll second so we can talk about it. Okay, we have a motion and a second. But Councilman Farmer, for everyone else, can you state it as you're trying to finish it just now, exactly what your motion is? Well, then it would be to add into the ordinance verbiage that would direct us to reach a 10% minimum and then to change the, I don't want to say the figuring or the trigger so that it would alter how much we put in there to keep it at a minimum of 10%, because this leaves us in line to add more money to it if we want to, but establishes a 10% minimum as what our goal is. We may want to get to 15% or 18%, but I think until we have a minimum in place, we don't know where we're going. I'm just trying to place a minimum in this motion. All right. Is everyone clear on the motion? All right. First up, we have Councilman Brown. I'm not going to support the motion, but I seconded it for discussion because I think maybe what you intend there is good, but I think it's piecemeal. I think this particular thing about reestablishing the policy should go back into this committee and look at not only how we cap it, so to speak, with the 10 percent, but we also need to really, we need to look at what we can do on the expenditure side. I think we're negligent in the fact that we're so tied up we've never used it for 19 years, and it just grows and grows. And, you know, I, for one, just I don't mind saving money, but I don't like to save money on the heels of trying and not paying your bills and not doing things that this charter calls us to do. And the charter does not recommend a contingency fund, but it does recommend that streets and roads get paved. Council Brown I would say on page 49 the administration that is one of the recommendations number three will appoint to change how we access the money or spend it and that's one of their recommendations it's not part of the motion but they are recommending that Vice Mayor Kaye thank you chair I would for the most part agree with Council Member Brown's comments it seems to me that keeping money in an account that is earning us very little when we have needs that will accelerate and cost us more in the long run is not fiscally responsible. And we've had this conversation before. Also, it seems to me if we're going to have a recommendation, I would agree about having it be a comprehensive recommendation. And I'm more inclined to support a cap than a minimum. So right now it says we're aiming at 10% As I understand the motion What councilmember Farmer saying is just make that a minimum of what we're committed to I would be more inclined to make that a maximum I'm not sure we need more than 10% under any condition. So I'm not going to support the motion. Thank you chair councilmember Hensley I think in general concept I agree that you know we don't want to spin the thing down, but having a 10% budget set so that it doesn't grow continuously is a good idea and concept to me. I mean, I think the state of Kentucky's contingency fund is like $272 million, and it's like half a percent of the total budget. So, you know, when you look at the percentages, it's out of whack. I may be wrong when we compare the city to the state, but I think that's roughly the same numbers. And I know there's other priorities that the city needs to address, but it seems like if we keep putting the money perpetually in there, we're never going to get access to it. So I think this is a good start to stop that. So I would support the motion to limit it to 10% of the total budget. To the minimum, right. No, I think I'm saying the same thing. So I'd support this. Councilor Masati. Thank you, Chair. Whether or not we have a minimum cap of 10% or a maximum cap of 10%, I have a concern that we don't have a lot of consistency of what we put in every year. And I know that's depending upon revenues and so forth, but some years we put in $4 million, some years we put in $5 million, some years we put in $5 million, and I think if we have some kind of a point of consistency that we know that this is a budget item every year, at least this minimum or this maximum, I think that would be helpful. So, Council Member Farmer, although I don't support the motion, I think if you're going to go forward, we need to have some kind of a mechanism in place in reference to that. At some point. At some point. Thank you. Council Member Scotchfield. Thank you, Chair. I guess one of the questions I have is to Bill maybe as well. Does it have to be, are you saying Bill 10%, both bills, I'm sorry, Council Member Farmer. Are you saying for sure 10% or researching whether it should be 15%, 12% or? In my mind, based on the presentation, there's no specificity. We can decide what we want. I think as a community of council members, we're very comfortable with 10%. But part of the presentation that I latched onto that I think is really good is we may decide, yes, the ordinance says potentially keep it at a minimum of 10%, but we may want to add on to it in a consistent fashion. It takes us above 10, but I just think it gives us the post to say, all right, we've got 10%. Now, if we want to add more to it and maybe increase our bond rating, we can. But I think until you have a place to go and say, okay, we're there, we've made it, you can't get anywhere until you know where you're going. That's what I'm trying to get us to because it would be, yeah, a 10% rolling cap. But yours is to make it 10% as the minimum, but not making it 12% as the minimum is what I'm saying. That's correct. Yes, ma'am. Okay. Thank you. Councilmember Bledsoe. Thank you, Chair. To make that exact point, what I think I heard from Commissioner Amara is that we would want to leave it open so that we don't rule out the potential of having 13 or 14, 15. If I'm a bond analyst, I might be looking at it and say, well, they're done at 10, they're done. This allows us to have the window and the opportunity that we might invest more, which I would think makes us look more appealing. Am I interpreting that right? Actually, that was not our recommendation. The bond rating agencies look to see if you have a goal and if you're moving to the goal. They're also interested in total liquidity, which is your total fund balance, not just the one that is earmarked for contingency. They're looking to see, do you have a firewall, something to catch you in some disastrous situation? But that's not the only thing. They look at your total cash flow and whether you're growing it year over year, and is it growing whether there's an economic downturn or not if you're adjusting your expenses. They're looking at your total budget management, not just your contingency fund. So I'm practicing without a license here, but our goal is 10% now by ordinance. So I'm not sure the advantage of the recommendation unless its minimum is the key word. Okay. All right. And you would support, so the administration would support Councilman Farmer's motion? Well, we were recommending to go ahead and get to 10% and then have an all-encompassing conversation of how to revise the contingency and talk about all of these issues and all of these points at one time and come out with a consensus as to where we want to be. Okay. Thank you. Thank you, Chair. Vice Mayor Kaye, back up. Thank you. Bill, you mentioned briefly other fund balances. What's the – and we've got the information in the packet about the individual fund balances. totaled there quite a bit more than the contingency fund. Isn't that correct? That's correct. And the bond rating agencies would look at the whole question of all the funds that we hold and not just? And the components therein. Yes. They look at all of them. And I couldn't do the math quickly. Can you do the math? Roughly, what ballpark are we talking about? Contingency funds for the other funds outside of the general fund? I could, I mean, it looked. I'm sorry. I'm totally focused on the general fund today. I would have to look at the other funds today. The chair is willing to hazard a guess, right? Somewhere in the $100 million range. Okay. So, you know, I think that's, yeah. I'd have to look at it. Okay. I don't want to force you to talk off the top of your head. But anyway, I mean, the point is that while the contingency fund is important at some level for bond rating agencies, it is not in and of itself that significant compared to all the other things that they would be looking at. So not that it's not important, but let's, you know, kind of keep it in perspective. So thank you, Chair. Thank you. Anyone else have a question or comment on the motion? All right. Seeing none, on favor say aye. Aye. All opposed? No. All right, that fails. It was a nice discussion. Any other motions on this contingency topic? And we're going to keep it in committee because I think there's still some other room to work on this going forward. Councilman Farmer. Thank you, Chair. For next month, if possible, my motion would be to have language drawn up for us to consider based on changing the access requirement from a calculation test to a council approval. Let's see what that verbiage looks like, see if we're interested in it, because I think that was kind of the focus of at least this part of this recommendation. So moved. Second. Okay, we have a motion and a second to come back with recommendations on blowing point number three and four. Any discussion? Yeah, I'm confused. Would you put up on the screen what your motion? I'm sorry. I was going to talk about the last thing. Just nothing. Okay. Councilman Brown. I'm sorry. I thought I had my finger was faster there. Do you have that on the screen that you're talking about? You're talking about? Well, it's on page 49. What page is it? Huh? Page 49. Okay. Change the access requirement from a calculation test to council approval. And a replenishment plan included in the analysis. And then for the discussion, I'd like to have an outline of the guidelines for allowable costs, just as a follow-up for the packet. Okay. I don't have any problem with that, but are we including what we can spend it for in this analysis? Well, I think that's what the guidelines for allowable costs would be, the very last point there. Does the minister, Bill, do you agree with that? Okay. Okay. I just wanted to make sure we had the whole package there. Okay. Thanks. Thank you. Anyone else? Okay. Motion on the floor. All in favor say aye. Aye. Any opposed? All right. That passes. Thank you. Thank you, sir. On to our next issue on the agenda, the FY15 fund balance. Commissioner O'Mara. Chair, I'd like to pass out a couple of handouts while he's getting ready to discuss this particular. Please do. Whenever you're ready, sir. This is a discussion on preliminary fund balance, and it's following somewhat the same format that we've done the last two years. And to clarify what we're discussing and what we're asking for today, the first step is reporting requirements. We're coming before the council to discuss fund balance categories to be reported in our annual financial statements. So we're asking council to either endorse the recommendations that we make to you by category or amend those amounts per category. What we are not asking for is the second step. We're not asking for council to decide spending authorizations or the actual spending of any of these categories. We're just asking for the categories to be approved or amended so that we will have the sufficient information to publish our annual financial statements. So, with that background... Hold on, Commissioner. So, are you asking for us to report out today? Is it that urgent for the CAFR to be published? Can you kind of give us a timeline on what you are expecting? We were hoping that the council would be comfortable with whatever their decision is today. If you can report that out today, that would be great. We were hoping to make the CAFR presentation at the next Budget and Finance, which I believe is December 1st. if council deems that it needs more time to deliberate I would ask that you give us more time then to to publish and report out the annual financial statements so is it by ordinance November's a report out for the CAFR or is that just I can't remember if it was by ordinance or not if we need to suspend that for I think I think there was a lot of discussion a few years ago about the CAFR being finished in October. And so we were trying to have the CAFR basically finished by October 31st to meet your expectations. But if January is fine, then we'll go to your wishes. Okay, we'll finish the report and we'll see where we're at. All right. So this year, FY15, the financial statements ending June 30, 2015, our change in fund balance was $19.5 million. Now, the first question that everyone seems to ask me is, how did that happen? So this is a slide trying to address that question. And the first... Okay, I have the presentation with my notes. Thank you. I feel much better now. Sorry. Sorry. Revenues actually exceeded budget for the 12-month ending June 30 by 9.5. Now, the last time we talked was May, and we were looking at about a $15 million favorable variance. $3.5 million was picked up in favorable variance because of year-end accruals. I don't need to get into the accounting, but basically we look at each July and how it compares to the prior to July, because those revenues were earned in June and prior. And so with a rising economy, you actually can pick up revenues that are accrued back or reported back into the June 30 financial statements. We picked up three and a half of that nine and a half million in that accrual closing the books. The next highest category was the favorable personnel variance, where our total personnel costs were less than the total budget. And the major drivers there were basically the budgets having to do with benefits. And so we will look at that when we're budgeting for future years. The next is operating expenses. We had a favorable variance of $3.6 million. Those were basically in utilities, fuel, repairs and maintenance, and professional services. We had favorable variance in debt service of $1 million. That was a product of the low-interest environment that continues to be in the United States, as well as a refinancing of some bonds that we did last year. We had $1.8 million favorable variance in insurance, where the actual claims and expenses that incurred were less than what we had budgeted. Finally, the last two should have brackets around them, my mistake. The Affordable Housing Fund changed by half a million that it was established and started spending money. And then we had various other changes that were actually overspent by about .7. So that kind of gives you the highlights of where we picked up $19.5 million more than what we had budgeted. So the nitty-gritty of the things that we want to talk about, and this is kind of the same format that we've had in prior years, we start out with a total fund balance of $83.3 million. That compares to last year. I didn't put last year trying to keep this from being so busy. But we had $63.7 million. That's the $19.5 million that I just explained. That's the total fund balance this year compared to last year. From that, by ordinance or federal regulations, we need to take out reserve that are non-1101 funds. We need to take out what's called non-spendable. Those are prepaid, things that are already committed. We accrue for the 27th payroll every, I think it's nine years, we have an extra payroll. So each year we put about a million dollars away so that we're prepared for that when that happens. We also have two federal programs, the Energy Improvement, which was part of the TARP, I believe it was, where we were given funds and required to whatever energy savings we incur, then we have to reserve those to be reinvested in other energy savings in the future. And then last year we sold a qualified energy bond to help the infrastructure at the jail and are required to have reserves. So after taking those out, you're now at $68.9 million. The next ordinance level is the economic contingency. At June 30, we were sitting at $26.3 million. Our ordinance requires us to put in 25% of the change in balances, and I have a slide for that to explain. That calculation comes up with an additional $1,052,000. We're recommending that additional $4.6, which we alluded to in the presentation before, And that will bring you to achieving the 10% goal of 10% of prior year's revenues. So after that, if you look at reserves that we've also recommended in the past, we're recommending $11.5 million for litigation reserve. We're recommending $3 million for insurance. We're self-insured, and BIM, our consultant, says for the size of our insurance pool, that $3 million is an appropriate reserve to have for those years where the claims may not be as predicted by the actuary. And then finally, we have to bring out prior project assignments. That's $13.5 million, and that is the balance at June 30 of those capital cash-funded projects that Council has approved to date, whether that was in last year's fund balance conversation, this past March, where we allocated a little over $10 million to be cash funded, or even from the prior March, if those projects had not been spent. Many have. We're putting out a quarterly report to let you know where we stand on those projects. But as of June 30, that $13.5 million was committed. That brings to a subtotal of 8.9, and we are proposing for your consideration to have an unassigned fund balance, no strings attached, of the 4.273, and then a non-recurring uses, those things that council would want to spend that would not be ongoing, not salaries and utilities, but one-time costs to cash fund at 4.7 million. If I could jump back to the 4.2, that for good governance, for my sleeping at night, that 4.2 needs to cover the 1.5 budgeted fund balance that was approved in the 2016, as well as we have about 2.2 of rolled encumbrances, those things that we committed to in last year's budget that we're now paying in the first few months of this year. and that leaves about half a million dollars of fudge money for things that we have not predicted. So that's kind of the logic and the presentation. Be glad to answer whatever questions I can. Okay, we have several. First up, Council Member Brown. Thank you, Chair. That schedule right there, you, Council Members, you have a handout. That's got 2013, physical year 2013, and physical year 2014, and then that presentation is 15. So I was looking at this in a comparative manner so that I could get some questions answered. And first question, the qualified energy bond of 198-175, that appears to be a new item that was not on the last two years. Could you speak to that? Yes, yes. That is the bond that was issued last fall. It is a specially subsidized federal bond. And it requires us to build a reserve, and so we're required to do that based on that. We got, oh, I think it was 2% or less effective interest rate. And that has to be used on energy improvement, infrastructure improvements at the jail. So that's kind of a reserve then. Yes. We've set back. We haven't spent it yet. We've reserved it. No, we have to reserve it. Okay. And then the next question there on the 27th payroll, maybe some of the newer council members are not familiar with that, but we instituted that in the 90s. We got caught when I was on the council before a 27th payroll trying to come up with it, and we had to scurry around for the money. So ever since then, I think we put, I believe it's ordinance. We put in ordinance there. That's correct. All of the things in that top tier are either ordinance or federal commitments that we have made. Can you give me real quick what the 27th payroll, what that amount is on an estimate, and what year that's going to take place? No, sir, I can't give you that. We're occurring about $920,000 a year, and I think it's once every, maybe if my staff would text me, but I was thinking it's nine years, maybe it's seven years. Seven? Oh, seven. Seven. So we're putting, so we've got, that's a reserve for that particular. We'll build that. And I just want to make sure all the council members knew that we were, that's another reserve. We're doing another savings, so to speak, because you are budgeting the $900 and some thousand each year. That's a budget amount, isn't it? Actually, that's not a budget amount. That's a reserve amount. Okay, so we're taking down a fund balance and it's not a, so. It's a reserve. I thought we set that up. My memory must be – I thought we set that up in an ordinance form that it would be a budgeted amount coming out each year, but maybe it got changed. I'm pretty sure we're following the ordinance. I can't quote you the word. Okay. But the next time – It ought to be a budgeted amount, but that's neither here nor there. Okay, go on down. It'll happen in 2017. I know I don't have too much time. Go on down to the additional calculation on economic contingency. I understand that. Recommended additional 4.6. I'm definitely against that because you just want to bring it up to max out. Health insurance, you went from, let's see, well, you had $2 million in $13 million, $2 million in $14 million, and then you jumped $1 million more in $15 million. What's the reasoning behind that? It's twofold. We use BMI as consultants to advise us on our self-insurance medical fund. and have been quite pleased with the advice they've given us in order to establish the health center and the programs that we have. And they recommend that a health insurance plan that has the volume that we have, that $3 million is the recommended reserve for any spikes in those returns. So have we used this in any form? We have the last two years. We've had to draw into it. It's quite a quandary for me where you go into the incurred but not received, and the actuary says you're fully funded, but on a cash flow basis, we've had to go to that reserve both times in the last two years. So we are using that particular reserve. In excess of a million dollars. Okay. Going on down, well, the litigation reserve. Yes, sir. I noticed you went from, let's see, it looks like $5.5 million in $13,000. You went to $8.5 million in $14,000, and now you put another $3 million into that reserve. So none of that's been used. I don't know when you started the reserve, what year you started it, but none of that has been used. So that's in a separate fund as reserved. It is in this fund as a reserve. What does this council need to know about that? Well, there are several pending litigation matters that are not part of the self-insurance fund. And so I, as an accountant, am supposed to be conservative in reporting. And so we have recommended this reserve in case those are needed. For further information, we'd have to go to a closed session, either out of the budget committee or work session. Is that okay, Bill? Sure. You all, Sally? Okay. Okay, that's, and then a final question I have, unassigned fund balance. Is this comparable to the million five that we was going to have a rollover fund balance, beginning fund balance? It is part of the budgeted fund balance. Right. So we budgeted that that unassigned fund balance would be at least $1.5 million. So you've bumped it up to $4. Yes, sir, I did. I recommended it to be enough to cover the budgeted fund balance of $1.5 million, as well as rolled purchase orders of $2.2 million, which are bringing up to $3.7 million, and a half a million of unanticipated needs. One other point there, Chairman. We had some discussion on the 4-273 and the $4,700,000. And the $4,700,000, that's got non-reoccurring uses assignments. I'm not sure about the terminology there, what you're calling that. Is that unassigned period? If you want to make it unassigned, but council in the last two years has used that for cash capital. Right. But that's the 4-7, not the 4-2. We talked about the 4-2. But you could add the 4-2 to that minus the million five and be the same as we started for the year, right? Is that you with me? It's council's discretion on recommending these. I'm just looking for money. I know. I'm just giving you my logic for making these recommendations. Thank you, Chair. Councilman Bledsoe. I was actually going to ask about the litigation in particular. So let me ask the question that maybe you can answer that doesn't require closed session, which is, is there a target we're going towards in that fund? Well, that would be a discussion each year. Based on litigation guesses. Right. Okay, so that 11-5 that you're recommending today is based on our, I don't want to say threat analysis, but our... Risk analysis. Risk analysis for where we are of the suits we have today, apparently. Yes. Is that right? Okay. Okay. Thank you, Chair. Mr. Mayor, if you could go back to the 4.273 and say again exactly what your plan was to unassign. I think there was one point glanced over. Okay. Okay, what I have recommended was that the unassigned fund balance be sufficient to cover whatever the budgeted fund balance that has been adopted for 2016. This year, that's $1.5 million, and $2.2 million of rolled purchase orders. Those are purchase orders out of last year's budget that have rolled into this year that we have already made commitments to that we have to pay, and then about $500,000 for unanticipated. it's also very similar to the same as last year. Last year, unassigned was $4,176,000, 4.2 to 4.2. I like for the rating agencies to see that those are comparable from year to year. So in other words, if we don't approve that, we'd have to find money for the $1.5 million fund balance budgeted and the 2.2 somewhere. Well, yes. and I'm trying to make sure that it's covered through this fund balance and not from future variances throughout next year. Okay, I just want to make sure we all understand that because it's not extra money that we can add to the 4.7. 4.273. No? You can do half a million. 2.2. Yeah. Okay, I just want to make sure we all understood that before we glanced over it. Any other questions on this? All right. Seeing none, any motions on this topic for the fund balance? And we're talking about just for this page, not the 4.7. Well, he needs our direction to accept it so that the boxes can go in the CAFR to be reported on our audit. So this page or the page before? This page. only those only those highlighted in yellow I'm looking for for guidance on the others are dictated by actions already made by council or commitments that we've made to other parties okay, Councilman Brown no that's to speak on the motion once a motion is made we don't have a motion, Vice Mayor K I'm sorry I'm in the same position and we you need a motion if we need well it's each yellow box we can do it line by line or you can do everything however you want to do it chair for purposes of discussion I will make a motion to accept all of it although I have questions about some of it but let's put it on the then we can amend if we need to we have a second we have a motion and second to accept all the yellow boxes and numbers as reported and recommended by the administration and we have a second my councilman Bledsoe now chime in to speak to the motion first up thank you like smear case and you thank you chair so it's the 4.6 that I have a question about and so right the 4.6 which is recommended to bring us to the full 10%. I don't see that necessity. I think there's better uses for the money. In the short term, we can save money by using that to address the three Ps that Council Member Brown has put forward, if not other things. I think it was parks, paving, and public safety. Thank you. for information purposes council members know that I circulated a memo about using the upcoming quarterly cow as a time to discuss the full fund balance and I will be sending I'll be asking actually Stacey to send a notice to the council members that we will cancel the quarterly cow and an email saying that we will use that time to address the fund balance in general. So I'm inclined to make an amendment to my own motion, which is to delete the additional 4.6 that's recommended to bring us to the full 10% on the economic contingency fund. So move. Second. Second. Okay, we have a motion to amend, and the amendment is, instead of approving everything in the yellow box, to take out the $4.6 million recommendation. Discussion on the amendment? Raise your hand. First up, Council Member Lamb and Council Member Farmer. Thank you, Chair. Mr. Merrill, if we were to put this, approve this 4.6, do you still intend on having the monthly increases as they are now for the contingency? The current ordinance requires us to put that $50,000 per month. Until Council amends that ordinance, we would obey the current ordinance in place. Okay, so this is in addition to even that, so. well yes okay all righty right right I just I just want to make sure that everybody's understood that because I need the clarification thank you thank you chair thank Council reformer so just following through if the motion is to remove the 4.6 where it is now would it just naturally to flow down to the non-recurring uses assignment at the bottom yes thank you you know the discussions on the amendment to the motion? I would just say, you know, when we redid this ordinance in 2006, Councilman Lane and I and Dr. Stevens, and we were wanting to get to the 10% and then stop and then make sure we maintain it. I think this is an opportunity to get there. I think we have the money. I think one of the bigger issues we have, and I don't disagree with what our priorities are, we funded the heck out of them in the spring. We put 10 million extra out of this number on this page already spent it on public safety a lot of it we've already put a lot of money in the roads this year that we can't spend in the spring and really this money needs to be something we can spend in the next six months before next budget otherwise it's going to roll over again into f5 16 fund balance so you know putting a whole bunch of money down here that we can't spend parks is at their width on number of projects they have now anyway they can't do any more in the spring to that magnitude so i don't think adding into our bottom line today so we can divvy it up next week and is a good plan. I think finalizing our savings, stopping the ordinance, stop doing the $50,000 a month, and reevaluating what we want to do going forward. I think getting to the 10% is critical, an opportunity to do it now, and then we can change the ordinance and move forward. So I would not be in support of the amendment. Council Member Rosati. Thank you, Chair. Not yet. In reference to what you just said, I can agree somewhat, but then I think that we kind of pigeonhole ourselves. We put that money in that we agreed to this 4.6 today and make a motion on that. It's gone. So, and we don't get it back. I know what you're saying. It can't be all spent. But again, we've earmarked it for this specific purpose, and that's what my concern is. I would just say when we change the ordinance, though, I think the recommendation is to change it so that you can spend it. But that's not going to be until next month in December. Hopefully. Yeah, they're coming back with that recommendation to change it. It only requires council approval to spend any of it. And if we agree with that, it changes the whole use of that fund. And that's what Councilman Farmer's motion earlier was to come back to council and change that trigger. But it doesn't change the number, though, does it? No, it keeps the number, but if we spin it, it would, obviously. Okay, thank you. around. And we may take a contingency fund to pay some legal stuff like that. We may have that as a category on what expenditure depends on it. I guarantee you we're not going to be able to take how they continue to fund infrastructure. And then Vice Mayor Cady. Thank you, Chair. So I think a few other folks have spoken to some of the same concerns that I have about the allocation of these funds. I would add only one thing, and that is I would trust the council to look at those funds and not think that we have to spend it. That is, we will get into discussion. We will see what things people think are important to fund, and we will see how much they add up to. We just need to keep the people who represent the districts in some kind of, you know. Okay. But anyway, that's not an obligation to spend that money, and if we don't spend it, it will stay in the reserve. So I think we need the flexibility. Thank you, Chair. Anyone else on the amendment? All right. Seeing none, all in favor, say aye. All opposed, say nay. And then we can vote up there. This is on the amendment. This is to delete the 4.6 million. All right, that fails five to four. All right, back to the original motion to approve all yellow boxes. Are there any other discussion on the motion? Council Member Lamb. I'm just going to throw this out there. If we don't, what would be the difference if we chose to go halfway, the half mark, 2.3, as opposed to the 4.6? I mean, it's meeting the administration halfway, and then perhaps if we have another fund balance of luck, what I call luck, next year, then we put in the 2.3 next year. Second. Okay. That's a form of amendment then. So the amendment is to do half of the 4.6, 2.3? All right. There's a motion. And Council Member Farmer, are you seconding it? Yes, sir. All right, there's a motion and a second discussion on the amendment. Any discussion on the amendment? Council Member Hensley. Sorry, I mean, I guess I can go in the same if we're going to do splitting up these numbers. I mean, I go back to the litigation or the health insurance reserve and heard that the number was only a million dollars spent on the reserve last year. Did I hear that wrong? I'm sorry. On the health insurance reserve, how much did you dip into that last year? I think it was 1.7, and the year before it was close to 1.5. So we're double what the reserve is. So why not lower that number? I mean, it's over 50% overstated. And there's another million and a half. To the amendment. Anyone else to the amendment? I second it. Of the motion? Sorry. Mr. Mayor, do you want to respond to what he... Well, remember, council made the decision to share the rate increase with the employee this year. And so that is pressure on this reserve. And then what we're trying to do is make sure that we're prepared if people have open-heart surgery or premature babies or something more than the actuarial projects out, that we're ready to handle that type of thing. All right. Anything else on the amendment to take half of the 4.6 and make it 2.3? I would just say the same comments I said last time. I mean, getting to the 10% is important. I think this gets us there and we can move away from the contingency allocations going forward. It's an opportunity to do it. Again, we're not going to spend it all right now anyway. I'd like to see us get there and change the ordinance and move past it and change the ordinance so that we can access it for capital improvements, which we'll have that discussion in December. Okay, all in favor of the amendment, say aye, and vote accordingly on the screen. We need one more vote. We need nine. There's nine of us. There we go. Oh, no, you pressed it. All right. That passes 5 to 4, so the 4.6 motion is down to 2.3. That's quite a coalition there, Vice Mayor. That's an interesting idea. So now that changes the bottom number to this almost $7 million. Now we're back to the main motion to approve everything else in the yellow boxes. Council Member Brown. Thank you, Chair. Fellow council members, I want to read this because I can't think of all the things and I might get a little angry. I have some grave concerns about our infrastructure, mainly the upkeep and repairs of our streets and roads. As a result of the paving management plan, we have information that is quite alarming. I took the liberty of looking at the numbers and paving needs for the 8th District. The grand total to get the streets at 100% rating was a little over $11 million. And this is after my $769,000 in allocation. We know 100 rating is not, you know, it's not realistic. So I lowered it down to 50 rating. Anything below 50 is going to cost my district $8 million. Now, you can always get in there. It may be less. So anyway, I thought there's no way I'm going to get $8 million. So I went down to 30 and below rating, 30 out of 100. And I had over $3 million in streets that I need paved based on a 30 rating. So that's just some background that I did, and I'm sure the other council members have got the same type of numbers. So I'm opposed to any fund balance increases related to the contingency fund and fund balance reserves because of our needing monies for paving. Our government charter requires us to maintain our streets and highways. It does not require contingency funds and or fund balance reserves. We need a five to ten year plan. There's three items there that I think we need this plan. We need to maximize our paving based on how much can be paved each year under our contract. We don't know that number yet. Two, we need to revitalize our neighborhoods and new paving that shows the city's interest. It makes property owners feel better about their neighborhood, and it makes property values go up. Third, we must be proactive, not reactive, to our paving needs. So I'm going to introduce in a work session that we put this plan or try to get a plan into the budget committee. So I just wanted to make sure, go on record as to my feelings and why I'm opposed to these increases this year, because I think we can better use the money. Thank you, Chair. Thank you. Council Member Massadi. I'm assuming by that last motion that we've already discussed a litigation reserve of 11 and a half. My concern was since this is an item that we're going to discuss in closed session, maybe we shouldn't go ahead and have this vote on this just because we're not exactly sure what it all entails. Yeah, and the thought was, I mean, I know we're asking the committee to go along with it now, but we can change it at work session. When I report out, the full council has to vote anyway. Okay. And we can adjust it after we come out of closed session down from 11 1⁄2. This just kind of gives us a cap at 11 1⁄2, and we can always redo it. All right, fair enough. Because we all have to vote again anyway during work session today. If that's okay. That's fine. Okay. I think the concern we have is at least a couple of these cases would probably require outside council coming in to fully explain to you our risk on these cases, and I don't think we're going to be able to line that up this afternoon if that was the expectation to go into closed session to discuss the $11.5 million. But don't you all have the information of how you came up with 11 and a half to kind of give us that? We don't need the full details of the case today. Yes, we could make that available. And that's all we're asking. We're not asking for the details. We can do that later, of course. Yeah, that's fine. Okay, anyone else on the full motion to approve the rest? Customer Lamb, I'm sorry. Thank you. I just, Mr. Amara, I was going to ask for another clarification on the additional 2015 calculation, the 1.052. Explain again. That was 25%, you said, and is that in the ordinance? Yes, by ordinance, we track the changes from one year to the next. Okay. And so this is the actual spreadsheet where we came up with that number. Okay. We're looking at the changes in fund balance, that 19.5, and then the changes in each one of these required reserves, minus the budget carry forward and minus any capital reappropriations. So after taking those out, you have a base of 4.2, and you multiply that times 25%. That's the $1,052,000 that we recommended. That's following the calculation from the ordinance. Okay. So even though you're saying that the calculation is created, we still have to approve that amount, though, right? Is that what you're... Well, council asked several years ago to be involved in the publication, so I've always included that because in many years they have changed the total allocation to the contingency fund. Okay. All righty. I just wanted to know for clarification because I know you said all these items toward the top that weren't highlighted in yellow were either by ordinance or federal law, and I just want to make sure that... I can unhighlight the yellow, but the council has suspended the ordinance and then also done in addition to the ordinance. So it's a matter of presentation. All right. Thank you. Thank you, Chair. Thanks. Anyone else on the full motion? All right. Seeing none, all in favor say aye. Aye. And vote accordingly. Opposed, say nay. Nay. All right. That passes. all right anything else on the fund balance and we do need a motion if we're going to report out today from the committee um the fund balance sheet discussion otherwise we can wait till december motion by council member farmer second by council member bledsoe to report out just the fund balance portion of the meeting today during work session and can you adjust the the sheet for us before work session in the next 30 minutes? I can. Thank you very much. All right. A motion to report out the fund balance discussion today in work session, and we have a second. Any discussion? Councilman Brown. I'm opposed to this simply because we're setting our own deadlines on this, and as the commissioner did mention, December 1 is not a magic date. It's good to get the report out and have everything done, but with this council going on break, it's our fault that we're not meeting that extra time. We could have a special meeting any time between now and the end of the month or before December 1 and address these. I don't think we've vetted these enough, although I was the only one against the proposal, but I've got some lobbying to do. And this doesn't give me time. So I'm going to vote against this. Any other discussion on the motion? And, again, if we don't do it today, it would be January when we'd actually get the printed CAFRA to the council. And they used it during the budget process, too, so that's the other issue. Anything else? Okay. All in favor say aye. Aye. Any opposed? No. One no. That passes. All right. Items in committee. Any changes? Any changes? I would ask a motion to be made to remove the solid waste user fee structure through the Waste Management Task Force. and I'll give you two reasons. One, our committee is down to two people. And the bigger issue, though, is with the changes with the LexServe bill as well as the issues at solid waste. Now is not the time to continue our work until we bring that billing system in-house and then change collections. As Rusty explained, we're going to go up to 120 turnoffs. That should help on our collection rate. Until we get that a little more stable, it really can't have any more work done in the meantime. So I'd ask for a motion to remove that at this point. I move. Second. A motion and a second. All in favor say aye. Aye. Any opposed? I'm sorry, go ahead. Vice Mayor Kay, I apologize. That's okay. So I've been interested in having this move forward because there are certain other things we can't consider until we hear back from this committee. So I guess my only, I'm not going to vote against, my question is what do you, do you have a timeline now? Do you want to restructure that committee if you've only got two people on it? What's your thoughts about how to move this fund? Because there are some legitimate concerns, I think, that have been expressed about the way in which we do the solid waste. You mean charge for service going forward? Well, and there's some other issues. Yes. Well, for the purpose of this committee, it was just looking at how we're charging the residential and commercial services and looking at a new funding mechanism. And not looking at also the way in which, I mean, who gets charged and under what conditions? No, we were not looking through that primarily. It was part of some of our discussions at the time. Okay. So I guess my question is that issue is the one that I've been a little bit concerned about. Is there a plan to work on it? I think that would be another item we could put into committee and take a look at just that specific item if there's an issue there. But the overall structure, again, with the Lexer bill changes, it's been very tough to recommend moving to a system that would cost us $3 million a year from what we're currently doing with the property tax. Okay. Thank you. Thank you. Quarterly development reports. That's going to be in January. Oh, I'm sorry. That needs to vote. We already voted. Okay. On removing this all the waste, but I'll be glad to vote again if you'd like to. I just want to make sure we got it. Okay. Quarterly development reports. I would ask for a motion to have that removed. Motion a second. Any discussion? All in favor say aye. All right, that's on. Right to work, Council Member Bledsoe. We still have that going forward. Okay. Economic contingency fund, Council Member Farmer, we're standing in for December. Is that correct? Yes, sir. Okay. Streetlight funding will be in December. We were going to try to do it today, but we weren't sure it on timing, so we'll have that in December. World Trade Center? I think we can remove that from committee since we heard it last month, so I'll make that motion. Second. Motion and a second to remove. All in favor say aye. Aye. Aye. All right, that's removed. Score, do we want to keep that in? We'll hear that next year. Okay, we'll hear that next year, okay. What about Lyric Theater, Councilmember Blitz, or Scutchfield? I think it's got a limited answer right now. I think the view of this all. Okay, what about Lexard's eternal fund? same thing. I don't know if we can hear that hopefully January, February. Downtown DDA and its projects, Council Member Akers put this in. I'll follow up with her to see what the timeline is on that. And then combining all economic development partners, we just put that into the committee and hopefully we can do that the first year as well. Is that your idea, Council Member Bledsoe? I think Kevin Adkins was working on this as well and so I think his thought was more closer to next summer. Okay, we'll follow up with him. After budget solvers. Any other items we need to adjust or refer? Alright, do I have a motion? Council Member Hensley, I'm sorry. In one of the previous council meetings, I'm new, so excuse me. I had one more month and I'm done. I had brought an issue with public safety having aviation complex being built for our police assets at the airport. And I didn't know if I brought it to the right committee because I don't see it on here or if I didn't follow the process to get it put in there. Is this the right venue for that? I thought you put it in public safety and planning. That was for the helipad issues. Okay. This was for the construction. I thought I put it in finance, but maybe. I'll double check the minutes, and Teresa can double check if Paul missed it. He was out last week, I think, when you made that motion. Okay. We'll double check. two things but we'll make sure that i've got it going very good thank you we'll make sure it's on here anything else before the committee motion to adjourn second all in favor say aye we're adjourned thank you all you