Council work session-budget report/fiscal policy amendments, May 20, 2013

Homewood City CouncilWith half the members present for most of the 75- minute meeting, the council heard a detailed mid-year budget report from the city’s finance director and on a second item voted–with one dissent–to approve the mayor’s requested changes to the city’s fiscal policy.

Members present:  Council president Bruce Limbaugh, Michael Hallman, Britt Thames, Vance Moody, Walter Jones and Jenifer Champ Wallis. Arriving late were Peter Wright and the mayor, Scott McBrayer. Arriving before the final vote, Fred Hawkins.

Members absent:  Patrick McClusky, Heather Reid, Richard Laws.

Staff present:  City clerk Linda Cook, mayor’s chief of staff, J. J. Bischoff, city attorney Mike Kendrick, finance director Melody Salter.

Audience attendance:  3

Budget presentation:  Ms. Salter’s presentation looked at the city’s financial status in the general fund and capital fund at mid-year.  Overall, figures showed  total general fund revenues so far at $23.4 million, or 58% of the budget’s anticipated $40.2 million for the current year, against expenditures of $19.3 million, or just short of the 50% mark (of $40.2 million) at mid-year. General fund revenues by major category showed sales tax collected so far at $7.2 million, or 48% of the total at mid-year; property taxes at $489,617, or 89% of total; and business license at $532,942, or 87% of anticipated.  However, Ms. Salter said she was concerned that the property tax collections were not closer to 100% at this stage. The budgeted total for property taxes ($4.6 million) was based on levies provided by Jefferson County, which may have been inaccurate, she said.

[For comparison, sales taxes collected from 2007-2012 showed a peak of $13.5 million in 2007 declining each year through 2010 to $12.5 million, and increasing in 2011 and 2012 to $13.2 million.] Ms. Salter pointed out that the 3-cent city sales tax is divided equally to the city’s Board of Education, to the General Fund and to the Capital Projects Fund. Also, the current figure contains sales taxes collected from the new Target, of which one penny per dollar will go  to the Board of Education, but which the 75% of the remaining two pennies are rebated to the store every six months, due to the city’s incentive program.

The Capital Projects Fund showed revenues of $949,732 at mid-year, or 28% of expected income, and expenditures of $1.27 million, or 49% of expected yearly expenses.  Only $634,909 has been spent so far on the new rec center; there remains $15.6 million in the general obligation warrant fund.

In discussion, council members raised a few questions: Mr. Jones asked what were the financial benefits of moving most city accounts last year to Bryant Bank from other institutions, primarily Regions. (The city’s “Rainy Day” fund remains at Regions).  Ms. Salter said she would have to get the figures together because the funds were not all moved at one time.

Ms. Salter concluded by saying her job was to monitor revenues carefully as the year unfolds to make sure the city can make up any shortfall by cutting discretionary and other spending, following the mayor’s dictum to “present to the council an end-of year surplus.”

Approved on a 7-1 split vote: The council approved the following changes to the city’s 19-page Fiscal Policies document, adopted in 2010, and discussed in an earlier Finance Committee meeting.  The changes deleted certain financial reporting requirements, eased budget deadlines for the mayor’s office and eliminated requirements spelled out in the former document for maintaining certain reserve funds. Although voting in favor of the changes, Mr. Wright specifically asked that the deleted requirement for an annual public hearing on capital projects be reinstated in some fashion.

Voting no:  Michael Hallman, after asking why the changes weren’t made gradually since adoption in 2010, and objecting that new deadlines give the council only 30 days to approve a budget from the mayor’s presentation on Sept. 1 to the beginning of the fiscal year Oct. 1.

Of note are the following changes to the policy, found in each section:

Expenditure policies:  The mayor’s annual forecast of equipment and maintenance needs is reduced from five years to three years;

Pension and retirement policies:  Deletes requirement to maintain a fund to pay for various post-retirement benefits, not including pensions. New language calls for the city to evaluate the need for such a fund on a yearly basis.

Capital Projects Fund policies:  Moves the deadline for the mayor’s annual report on city inventory from Jan. 1 to April 1; The requirement for the mayor to present an annual five-year Capital Improvement Plan is eliminated. In its place the mayor must present a three-year Capital Budget Plan that encompasses the same capital assets valued at $5,000 or above. The plan must be part of the budget process, but with no deadline for presentation; The yearly public hearing on the plan has been eliminated.

Reserve policies:  Reduces the Capital Fund cash reserve from $1 million to $750,000; language that requires the city to build certain cash reserves for risk management (catastrophic expenses) and for paying vacations, holidays and overtime has been replaced, as follows:  “The city will assign fund balance reserves …”  [unclear]

Financial planning:  Deletes the mayor’s mandate to prepare a long-term financial plan, and makes it a “goal” instead.

Summary of key deadlines in amended policy:  Oct. 1 – Start of fiscal year; Nov. 15 – Finance Director submits investment policy; First meeting in April– Mayor presents inventory to city council; First May meeting – Mayor and Finance Committee conduct a mid-year review of the city’s finances; June 1– Department heads submit proposed budgets to mayor; Second meeting in August – Mayor submits proposed budget to council; Sept. 1 – Finance Committee begins budget hearings; Second meeting in September – Finance Committee submits budget to council for a vote.

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