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2019 10 09 FAC Minutes FINANCIAL ADVISORY COMMISSION MINUTES 1 OCTOBER 9, 2019 SPECIAL MEETING FINANCIAL ADVISORY COMMISSION SPECIAL MEETING MINUTES WEDNESDAY, OCTOBER 9, 2019 CALL TO ORDER A special meeting of the La Quinta Financial Advisory Commission (Commission) was called to order at 4:00 p.m. by Chairperson Mills. PRESENT: Commissioners: Batavick, Hoffner, Rosen, Twohey, and Chairperson Mills ABSENT: Commissioners: Hunter and Lopez PLEDGE OF ALLEGIANCE Commissioner Batavick led the audience in the Pledge of Allegiance. PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA – None CONFIRMATION OF AGENDA Chairperson Mills said the title of Business Session Item No. 3 should read: “Appoint Two Financial Advisory Commissioners to Formulate and Prepare the Annual Measure G Sales Tax Oversight Compliance Report.” The Commission concurred. ANNOUNCEMENTS, PRESENTATIONS, AND WRITTEN COMMUNICATIONS 1. PROCLAMATION – RECOGNITION OF SERVICE FOR OUTGOING COMMISSIONER TURBOW Finance Director Romero said Commissioner Turbow was unable to attend the meeting due to observing a religious holiday. The Commission expressed their appreciation for Commissioner Turbow’s service and commitment. 2. 2017/18 COMPREHENSIVE ANNUAL FINANCE REPORT AWARD Finance Director Romero said the City was awarded the Certificate of Achievement for Excellence in Financial Reporting by Government Finance Officers Association of the United States and Canada for its Comprehensive Annual Financial Report; staff was recognized at the October 1, 2019 Council meeting; the City has received this award consecutively for 22 years; the Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting; and explained the disclosure requirements the City must follow and comply with in order to receive this notable recognition. FINANCIAL ADVISORY COMMISSION MINUTES 2 OCTOBER 9, 2019 SPECIAL MEETING The Commission congratulated Staff. 3. CITY BOARDS AND COMMISSIONS – ROLES AND RESPONSIBILITIES OF APPOINTED MEMBERS City Clerk Radeva provided the Commission with copies of the Commissions’ Handbook; background on how the Commission was established; and gave a presentation on the roles and responsibilities of members serving on City Boards and Commissions; and a brief overview of California state laws and La Quinta Municipal Code statutes governing public meetings (Brown Act), disclosure of financial interests (Political Reform Act and Form 700), conflict of interest, City’s Rules of Procedure, requesting excused absences, required trainings, and the California Public Records Act. COMMISSIONER HUNTER JOINED THE MEETING AT 4:08 P.M. Finance Director Romero gave an overview of the work items slated for Commission review in fiscal year 2019/20. General discussion followed regarding annual notifications for Form 700 filings, and related reporting guidelines; as well as state mandated training requirements and online training opportunities. PUBLIC SPEAKER: Steve Cherry, La Quinta – asked if Forms 700 financial disclosure filings are a public record; Staff confirmed. Commissioner Rosen inquired if state training requirements are completed with another jurisdiction, if they are transferrable to the City; Staff confirmed. CONSENT CALENDAR ITEMS 1. APPROVE FINANCIAL ADVISORY COMMISSION MINUTES DATED AUGUST 7, 2019 2. RECEIVE AND FILE REVENUE AND EXPENDITURE REPORT DATED JUNE 30, 2019 3. RECEIVE AND FILE THE FOURTH QUARTER 2018/19 TREASURY REPORTS FOR APRIL, MAY, AND JUNE 2019, WITH FISCAL YEAR-END SUMMARY Chairperson Mills asked Staff to provide a breakdown of funds or explanation of titles to the Commission with the treasury report; Finance Director Romero said a description of funds is included at the end of the City’s budget, and Staff will email it to the Commission. Financial Services Analyst Hallick mentioned that the report was inadvertently missing a section that includes the breakdown of total interest earnings for all investments and provided the Commission with the missing section. Motion – A motion was made and seconded by Commissioners Twohey/Batavick to approve the Consent Calendar, as submitted. Motion passed: ayes 6, noes 0, absent 1 (Lopez). FINANCIAL ADVISORY COMMISSION MINUTES 3 OCTOBER 9, 2019 SPECIAL MEETING BUSINESS SESSION 1. REVIEW AND APPROVE CASH MANAGEMENT POLICY Senior Accountant Martinez presented the staff report, which is on file in the Finance Department. Senior Accountant Martinez provided the Commission with an overview of the Cash Management Policy (Policy); the City’s current process for cash handling; explained the City’s primary insurance provider, California Joint Powers Insurance Authority, and the CalTrans Department of Transportation audit team recommended that the City formally adopt a Policy to have a reference document for Staff, during audits, and it is a best practice. Staff noted that the Housing Commission had reviewed and approved the Policy as well. General discussion followed regarding the Policy, including internal control checks and balances; segregation of duties and cash vault access; process for cash over/short discrepancies and refunds; voiding and reissuing of old/stale dated checks are completed in accordance with the City’s Accounts Receivable Write-Off and Unclaimed Property Policy for escheatment and unclaimed property; and training provided to Staff for cash handling. Staff explained the language under section No. 21 on page 5 cannot be rephrased because it stems directly from federal guidelines which the Policy must adopt so that the City is in compliance. Staff also explained that should the City have $750,000 or more of federal funding spent, the City’s single audit team, Eide Bailly, formerly known as Vavrinek, Trine, Day & Company, requires a formal Policy that references these uniform federal guidelines. Finance Director Romero said CalTrans, the California Department of Transportation state agency, also references these guidelines because state funding follows federal funding since the state does not have their own guidelines, and Staff will review the Policy annually to ensure the referenced guidelines stay current. The Commission recommended reviewing the Policy for further improvements in the Spring of 2020; Staff concurred and said the Policy will be scheduled for Commission review and discussion at a future meeting. Motion – A motion was made and seconded by Commissioners Hoffner/Batavick to recommend that Council adopt a Cash Management Policy; and table if for review in the Spring of 2020. Motion passed: ayes 6, noes 0, absent 1 (Lopez). 2. REVIEW BROKER/DEALER SELECTION AND APPROVE EDITS TO INVESTMENT POLICY ADDING NEW BROKERS TO APPROVED FINANCIAL INSTITUTIONS LIST Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. The Commission inquired on how many investment reports would be generated ; Staff explained the treasury investment report would remain unchanged, and a new safe keeping and custody account will be established for all three brokers, which will generate one additional statement. FINANCIAL ADVISORY COMMISSION MINUTES 4 OCTOBER 9, 2019 SPECIAL MEETING General Commission and Staff discussion followed regarding the transactions and services the selected brokers will provide; their qualifications and experience; and the principal benefits of selecting to add Higgins Capital Management and Great Pacific Securities to the approved list for broker/dealer services including: competitive price comparisons, additional educational resources for staff, and their involvement with professional financial government entities. Commissioner Hoffner commended Financial Services Analyst Hallick for her efforts and high level of service she delivered in organizing the submitted information to facilitate the review process for the subcommittee. Motion – A motion was made and seconded by Commissioners Hunter/Rosen to recommend Council approve edits to the Investment Policy adding Higgins Capital Management and Great Pacific Securities to the approved list for broker/dealer services. Motion passed: ayes 6, noes 0, absent 1 (Lopez). 3. APPOINT TWO FINANCIAL ADVISORY COMMISSIONERS TO FORMULATE AND PREPARE THE ANNUAL MEASURE G SALES TAX OVERSIGHT COMPLIANCE REPORT Finance Director Romero presented the staff report which, is on file in the Finance Department. Commissioners Batavick and Hunter expressed their willingness to serve on the subcommittee to verify revenue and expenses associated with Measure G funds, prepare a report, and present their findings to City Council on November 19, 2019. Motion – A motion was made and seconded by Commissioners Hoffner/Rosen to appoint Commissioners Batavick and Hunter to serve on the subcommittee to formulate and prepare the annual Measure G sales tax oversight compliance report. Motion passed: ayes 6, noes 0, absent 1 (Lopez). 4. APPOINT UP TO THREE FINANCIAL ADVISORY COMMISSIONERS TO REVIEW THE 2019 UPDATE TO THE DEVELOPMENT IMPACT FEE (DIF) STUDY Finance Director Romero presented the staff report which, is on file in the Finance Department. The Commission and Staff discussed what is outlined in the DIF report; the scope and purview of the subcommittee; review timeline; frequency of DIF updates which are completed every five years per state law requirements; and the process for amending DIF fees. Commissioners Hoffner, Mills, and Twohey expressed their willingness to serve on the subcommittee to review the 2019 DIF study update. Motion – A motion was made and seconded by Commissioners Hunter/Batavick to appoint Commissioners Hoffner, Mills, and Twohey to serve on the subcommittee to review the 2019 update to the development impact fee study. Motion passed: ayes 6, noes 0, absent 1 (Lopez). FINANCIAL ADVISORY COMMISSION MINUTES 5 OCTOBER 9, 2019 SPECIAL MEETING STUDY SESSION 1. REVIEW AND DISCUSS PRELIMINARY 10-YEAR FINANCIAL PROJECTION FOR THE GENERAL FUND Finance Director Romero and Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. General Commission and Staff discussion followed regarding the City’s General Fund fiscal stability and financial projections; revenue sources; potential impacts should the United States’ economy experience a recession; restricted funds types; and funding sources used for bridges. The Commission suggested showing what the potential reaction of revenue could be on the expense side of projection ledger if a minor recession was to occur ; inquired about the projected 7% increase of public safety services (police), and the City’s ability to mitigate cost increases based on its contractual powers and obligations. Staff said the City annually conducts a police services study, with Matrix Consulting Group, to evaluate service needs, find efficiencies while maintaining the safety of the community, and is collaborating with neighboring cities to create a more favorable platform for negotiations with the Riverside County Sheriff’s Department. Further discussion followed on whether increases in police compensation correlate with increased hours in patrol, staff explained increases are due to raising pension cost; Measure G projections when it was first presented to the former Financial Committee; and projected capital expenses from Measure G and Commission recommendations on how to present these expenses to the public. PUBLIC SPEAKER: Steve Cherry, La Quinta – asked about the percentage decrease between the General Fund financial projections on current economic conditions versus i f a minor recession was to occur; time frame for the revenue decrease; and how police services growth projections were reduced from 10% in fiscal year 2018/19 to 7% in fiscal year 2019/20. The Commission and Staff discussed the City’s reserves; the City’s outstanding fiscal stability compared to other cities; and potential expenditure variables and adjustments that would be considered if a recession occurred. Staff explained the City would never adopt a budget with a deficit; the police services decrease of cost projections stem from expenditure reductions imposed by the new sheriff, which in turn directly affects the City’s contractual obligations. The Commission inquired how Council reviews the possible scenarios for a recession and suggested ideas on how to show adjustments for transparency to avoid public concerns. Staff said that Council reviews the Commission’s agenda packets, meets one-on-one with Staff to review the budget and discuss the City’s needs and fiscal stability in order to determine what is feasible and in the best interest of the community prior to adopting the budget. Staff noted the 10-year budget projections would be brought back to the Commission for additional input at a special meeting in early December prior to taking the projections to the public community workshop scheduled for January 11, 2020. FINANCIAL ADVISORY COMMISSION MINUTES 6 OCTOBER 9, 2019 SPECIAL MEETING 2. DISCUSS PENSION TRUST AND UNFUNDED LIABILITY Finance Director Romero presented the staff report, which is on file in the Finance Department. The Commission and Staff discussed the City’s three pension tiers; current unfunded pension liability; required California Public Employees Retirement System Agency (CalPERS) annual contributions; the City’s pension funding obligations; how investment returns for Public Agency Retirement Services (PARS) funds are compare to CalPERS funds; reserve fund balances for the City and how the overall funded percentage is calculated; how payments to CalPERS are calculated; the City’s reserves policy outlines targets for each reserve category; and the investment strategy selected for the PARS pension trust. DEPARTMENTAL REPORTS 1. FIRST QUARTER 2019 (JANUARY – MARCH) SALES TAX UPDATE FOR THE CITY OF LA QUINTA Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. Staff announced that the City would hold a Special Joint City Council/Planning Commission Meeting on Monday, October 28, 2019, at 6:00 p.m., regarding the draft Highway 111 Corridor Plan, and would send out a calendar invite to the Commission. The Commission noted the commentary on the second page of the attachment to the staff report was very helpful and added credibility to the projections. 2. 2019/20 INVESTMENT POLICY CERTIFICATION Financial Services Analyst Hallick presented the staff report, which is on file in the Finance Department. Staff announced that the City’s 2019/20 Investment Policy had been granted the California Municipal Treasurers Association Investment policy certification for adhering to the state of California government code and meeting best practices guidelines in various topic areas. COMMISSIONERS’ ITEMS – None ADJOURNMENT There being no further business, it was moved and seconded by Commissioners Twohey/Hoffner to adjourn this meeting at 6:38 p.m. Motion passed: ayes 6, noes 0, absent 1 (Lopez). Respectfully submitted, Jessica Delgado, Management Assistant City of La Quinta, California