Recommendation to Accept the Fiscal Year 2016-17 Audited Financial Statements and Compliance Reports. (City Council/SACIC) (Finance 2410) [Not heard on February 6, 2018]
All those in favor I hear is unanimously. Now b3b is a recommendation to accept the fiscal year 20 1617 audited financial statements in compliance. Thank you. And our our speakers. Kevin Kearney, our auditor. Mayor, City Council. Jeff, nice to see you. Just wanted to talk briefly about the, uh, the catheter that that's being transmitted tonight and just make a couple of points that I think that just to be clear of a few things. Regarding the financial statements. The financial statements are a snapshot in time. It's indicating the assets, the liabilities at a particular time and the results of operations at the end of a period. In this instance, it's June 30th, 2018. And over the years, there's been different items have been included in this snapshot. And gas by the government accounting standards. Boards of pronouncements have mandated over the years various adjustments in what actually goes into the financial statements. And some of the items now that are in the financial statements due to recent pronouncements are the net pat, the net pension liability and the OPEB liability. And on page 52, you can see the amounts. And the total is $266,000,267 million. And these were approximated by GASB 73 and 74. And in my discussions in the current audit with the outside auditors, there's going to be an additional change to the OPEB liability commencing next year. And the liability that's about $39 million right now is going to be about $100 million. And this is as a result of Gatsby 75, and that's on page 53 in the audit, if you if you want to check that out. So that's going to be some additional liability that's going to hit our balance sheet. And then in my discussion with the outside auditors, I was asking him if there are any additional Gatsby's that are, you know, on the horizon that, you know, that he would thought would be, you know, kind of big deal, you know, not ones that where there's actually going to be, you know, an impact to our financial statements. And one of the things generally the way Gatsby works, they they start out, they solicit opinions, they come out with a pronouncement in it and it hits the footnotes first. And then there's a run up period. And eventually it actually becomes a number in a financial statement. And in my discussion with the outside auditors, one of the things they were talking about is the recognition of deferred maintenance and the quality of your infrastructure. Now that's much like the the pension liability and OPEB. You know, several years ago they weren't a part of the financial statements, now they are a part of the financial statements. And he was confident that at some point in the near future, this additional liability is going to hit the the financial statements. Well, based on the you know, the last meeting in the presentation by staff, $293 million of infrastructure that's been estimated that eventually will I'm just going to keep trucking that'll that'll eventually hit the financial statements at some point so there's going to be another liability that's substantial that's going to be a part of our financial statements. And I think it's important for you, the counsel, to be aware of these, you know, possibly pending pronouncements, because it certainly would, you know, affect probably your decision on certain decisions that are, you know, fiscal in nature, where you're going to be considering expenditures. And for the public, I think it's particularly important just just to know that we have this liability that soon going to go on the financial statements, much like these other ones that I've mentioned before. So the other point that I think is important on page ten, when you're talking about unassigned fund balance, $26 million. Well, that that I mean, I think that's it's a nice number. It's been lower. It's been higher. But. There's no recognition of $293 million, certainly based on committees I've been on over the years. Fiscal sustainability. Regarding the pension and the recent consultant's report that indicated that the pension liabilities are going to be increasing substantially in the next couple of years. In my mind, although it's not committed today, again, this is a snapshot in time today that is every bit true. This this is unencumbered. But next year, the subsequent year, when you have to start recognizing additional liabilities, you know, it might be $0.26 or it might be 26 million. It just it just depends. And I just want everybody, mainly the public, because you guys are aware of this, that there are this fund balance is for this snapshot in time, not tomorrow, not now. It was back in the rearview mirror. So I think it's important that everybody realize that, especially when you're in, you know, your charge now is to maneuver through budgets with very, very severe liabilities. And if somehow make this thing work and it's then, you know, it's not a task that I that I envy and I and I wish you well. And I'm confident you guys will do a great job. But I really want the public to understand where we stand. So when somebody says, oh, we have this big fund balance, you know, just take another step back and realize what that represents. And so finally. For the, I guess, the 27th year in a row, we've received a certificate of achievement from the Government Finance Officers Association, and that's a part of your packet as well, and that's on a Roman numeral x 515 and that was for the preceding year. And in talking to the outside auditors and staff, we've submitted for this this current fiscal year. And so I'm going to be very confident that it's going to keep a perfect record going. And then and then finally, I just would like to commend the staff for the outstanding effort during this particular audit. And I want to commend our finance director, Elaine Adair, who up until basically the 11th hour was here trying to pull these numbers together and just doing a real bang up job before she went out on maternity leave and talk about somebody that, you know, had definitely some other pressing issues and really, you know, put her nose to the grindstone. And I think that we're lucky to have somebody of that commitment to the city working on behalf of citizens. I'd also like to thank Edwin Godwin, who stepped into her shoes and did a wonderful job and, you know, is wearing about 15 hats in the finance department and also the staff back in the day when the the staff was located in a little bit different area, there was a lot more people in there working. And over the years, because of various reasons, there's a lot less. And they're really having to do a lot of double duty. And I commend them for doing a wonderful job. And also, I'd like to I'd like to thank Jill, our city manager, and Liz, our assistant city manager, for having to pick up the slack in areas. You know, they're not the finance director and they were doing double duty as well, being a really integral part of the audit and making sure that the timelines were followed. And I commend them as well and thank you very much. I wanted to give Council the opportunity to ask any questions while our auditors here. I do have a question for a couple. So if you could just do the highlights of the, um, the amount of the unfunded pension liabilities. Well, if we look, if we look on page 52, you're going to see that the, the net pension liabilities, 227,000,320, let's say 227,324,000. And I can't read my writing at the end, so it looks like 871. And then the OPEB is 39 million 668 326. So again, that's at that snapshot in time at 630. And do we have an estimate of the deferred maintenance that's. Well, the deferred maintenance doesn't appear in the financial statements because by pronouncement it's not required. So not not only is there not a number, there's not footnote disclosure. And that will probably be something that Gadsby is addressing as we speak. And at some point in the future that will definitely be a part of the financial statements. Okay, thank you very much. Okay. On this item, then, I'd like to follow up with questions. The staff. So the 227 million for the unfunded pension liabilities of. Do we have a payment plan of how we're going to be paying for that? Yes. It's we've had a work session with this council, and the council has shown a lot of foresight and funding as much as possible to get that down the council to date. Last. Fiscal year, they committed about 15 million to the unfunded liability that has saved us about a million annually in our CalPERS payment. And then coming forward, when we do the midyear, we are also, because of the council policy of 50% of any surplus is proposed and directed to go towards this unfunded liability. And so when you see the mid-year, we'll have an estimate and then at the mid-cycle we will put that money into the CalPERS unfunded liability and continue to draw down and. Flatten the curve. So if you remember, we had a bell curve of our payments going forward and our payments to CalPERS are going to increase exponentially and then especially in the next 3 to 5 years. And so what we're trying to do is put as much money up as soon as we can to bring that bell curve down at a flatter level. So it looks like out of the 15 million that we've given, we have savings over that time period of 150% of what we put in approximately. And we'll be talking to the council about that. In. Midyear. In regards to the Bell Curve, what was the highest amount that we will have to at this point estimate that the city will have to pay? It's, I think, 34 million. Four for one year, 34 million. And what year is that year you call? I don't. It's pretty far out. Like. 2020. Probably 2025. Yeah. And when do you anticipate coming back with the update on this? We're preparing it now and it will come at the next meeting. Next council meeting. Oh, next council meeting. I was coming for mid-cycle. Yeah. Midyear. Okay. So midyear. So very not yet. Remember addressing and can you also give the rundown on the OPEB? Because in 2015 there was a contract agreement that had public safety employees paying in ahead of time to the operating room. We're going to we flatten that curve by was it $30 million or is that still on track there? There was a contribution to that OPEB as well. And it went from just two or three years ago, a 0% funded to now I believe it's in the 12% range of being funded. So we have made a significant dent in, you know, the last several years and that will also be coming to council. And my last question is a technical question. Mr. Kennedy mentioned that Gatsby's currently sorry, Kevin. Kevin mentioned that Gatsby is going to in in his auditor's estimation, going to be requiring this on our financial disclosures, the deferred maintenance. Is there a way? Because I think that's a good thing for us all to know what what the liability is and the public to know is there a way that we can do that without being required to do it? Including yes. The council can make that. So we can do something about that. In talking about that, probably at mid-cycle mid-cycle. We can talk about. That which is not the next meeting, but. Or it's. Coming July one. Okay. I'd like us to bring that up so that we get ahead of the curve. And we started collecting that data with that for the infrastructure form that came before council. So we already have an initial number for that. Thank you. Thank you, Madam Chair. Just one follow up. So you will also come back then with the estimate of the deferred maintenance when you can not come back at the next meeting. I don't think we can't bring that at the next meeting, but we can do that for mid-cycle, which would be coming to council in May. Okay. So we need a motion to accept that report. Second, all those in favor. I. I. That motion carries unanimously. I will now adjourn the Joint City Council FCIC meeting, and now we will open the revised regular City Council meeting. And the agenda was revised on March 5th. For those of you that aren't aware of that, so you'll need to pull that up and get the latest version if you don't already have it. Roll Call council members as you're here. You're here they are. Spencer here I present. Thank you. Agenda changes. Madam Mayor. Vice Mayor. I would like to move up item six be since we continued the Greenway Golf lease from last meeting and I believe we have a number of individuals who are here again tonight.