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HomeMy WebLinkAbout07-31-17 Finance Committee MinutesDUBLIN CITY COUNCIL FINANCE COMMITTEE MEETING OF THE WHOLE Monday, July 31, 2017 Council Chambers Minutes of Meeting Mr. Keenan, Finance Committee Chair, called the meeting to order at 6:04 p.m. Finance Committee Members present: Mr. Keenan, Ms. Alutto, and Mr. Lecklider. Also present were Mayor Peterson, Ms. Amorose Groomes, Vice Mayor Reiner. Staff present: Mr. McDaniel, Ms. Mumma, Ms. Kennedy, Mr. Gaines, Ms. Gibson, Ms. Crandall, Ms. Richison, Mr. Plouck. Approval of Minutes of 4-24-17 Vice Mayor Reiner moved to approve the minutes of the Finance Committee Meeting of April 24, 2017. Ms. Alutto seconded the motion. Vote on the motion: Ms. Alutto, yes; Mr. Keenan, yes; Vice Mayor Reiner, yes; Mayor Peterson, yes; Mr. Lecklider, yes and Ms. Amorose Groomes, yes. Second Quarter Financial Update Ms. Mumma stated that she will review the financial status through the end of June and then Ms. Gibson will share information about the impacts on the City of the recently passed state budget from an Income Tax perspective. Ms. Mumma stated that the General Fund balance was used to temporarily advance the funding for the High Street rebuild as well as the Pedestrian Bridge. The bond proceeds will be received on Wednesday (August 2), so those funds will be reimbursed by the end of the week. The General Fund balance is at 83.1% of the budgeted 2017 operating expenditures. She noted that a large fund balance like this allows the City to proceed with projects before issuing debt. Many entities must issue the debt before they can begin any projects. The General Fund balance is driven in large part to City income tax revenues. Projections at the beginning of 2017 were a 5.8% decrease in income tax revenues due to the loss of jobs from Nationwide and Chase. However, the Nationwide move is taking longer than expected and will not be completed until the fourth quarter of 2018. Because this move is taking longer, the revenues are exceeding the expectations. These revenues are down 2.4%; however, the City remains ahead by 3.7%. Of the three components of income tax revenues, the withholding, which is generated from those who work in the City, is the most vital and makes up 80%. Through June, the City is down 1% in that one component. Chase and Nationwide are driving that down. The remaining businesses are growing and she is confident that the 2017 estimates are good. The estimate for 2017 is being used as a baseline moving forward. There are a few changes coming in the future that do not have an estimated impact, such as the jobs coming from United Healthcare. Income receipts are monitored daily and if the situation were to change, she would advise Council as quickly as possible. In terms of expenditures, the General Fund expenditures increased 98% over the second quarter in 2016. However, that is a result of the advances made for the North High Street and Pedestrian Bridge projects. Excluding those advances, the City’s General Fund expenditures are 11% higher Finance Committee of the Whole July 31, 2017 Page 2 than the same time last year. The largest increase (excluding the advances made) falls in the “Other Charges and Expenses” category, which reflects the increase in income tax refunds. There was a one-time large income tax refund at the end of 2016 that was paid out in 2017. Ms. Mumma stated that Personal Services increased a modest 1.4%; Contractual Services increased 11.5%; and Supplies increased 22.5% or $430,000. The capital outlay decreased 25.8% from last year due to the 2016 purchases of the Nationwide property and the Rings farm. With respect to revenues, there was an increase in the charges for Services and Fines, Licenses and Permits revenue categories. This is due in large part to the construction activity that is occurring in the City. Staff is beginning to see interest earnings that historically had been low; this year reflects a 218% increase over last year. The Hotel/Motel tax revenue reflects a 2.3% decrease over collections through the second quarter 2016. The City’s financial outlook remains strong. The City was pleased to receive triple A ratings from the three rating agencies. She thanked Council and the City Manager for their continued support and conservative leadership that has led to these ratings. Ms. Mumma provided each member of Council with a copy of the 2016 CAFR (Comprehensive Annual Financial Report). State of Ohio Budget Impact on Income Tax Collections Ms. Gibson emphasized the uncertainty of the state budget. The HB49 throwback will have a minimal effect on Dublin. HB5 changed the dates for the individual estimated payments, so payments for 2017 will be due in January 2018. This will result in the December revenues appearing to be down due to payments received in January. Next year, for calendar year tax payers on the net profit side, they will have to declare by the end of March whether or not they will choose to file through the Business Gateway. For those companies that file through the Business Gateway, all forms, procedures, etc. will no longer be governed by ORC 718, but will be governed by the State Tax Code. If all of the City’s businesses filed through the Gateway, it would result in costs to the City of $110,000 plus, and there would be no ability to audit or in any way deny a refund. It will also delay all payments by 45 days. Mr. Keenan stated that it will be their accountants who elect to use the Business Gateway – not the businesses themselves. He asked if the CPA community was leaning that way and if they lobbied for this. Ms. Gibson responded that some of them did so, but the Gateway is used for net profit, and is not used by many companies. However, once they opt in, they have to remain for that year. Over 90% of the companies in Ohio only file with four cities or less. To summarize, a state law has been enacted for a small percentage of companies that may not even use it. The City will not know until after March how many companies will use the Business Gateway and the impacts to the City. The City can ask for an audit of a company tax returns, but they are not required to do it. In response to a question by Ms. Amorose Groomes concerning how many audits the City conducts, Ms. Gibson stated that the City audits every return filed. Finance Committee of the Whole July 31, 2017 Page 3 Ms. Amorose Groomes asked how often the City follows up with a company that is audited and how many problems are found. Ms. Gibson responded that after auditing, approximately 40% of the refund requests end up being a balance due versus a refund. In response to Ms. Amorose Groomes’ question regarding what that translates to in dollars, Ms. Gibson stated that the last time it was tracked, it was approximately $2 million of actual revenue. Mr. Keenan stated that the City cannot expect that the state will do internal audits to the same extent that the City has done. Ms. Gibson stated that is correct. Based on her experience in working with the state on utilities, she believes the state reviews will not compare to the audits done local. This will all play out in 2019. Ms. Amorose Groomes stated that she is aware that time was spent working with the State on what it would cost the cities, but did we fully represent fully what it would cost us on the audit side? Do we have any recourse for the auditing procedures? Ms. Gibson stated that in the state budget bill, the Tax Commissioner is listed as the one who controls all of that. Ms. Amorose Groomes clarified that it can therefore be addressed with the Tax Commissioner. Mr. McDaniel noted that when the Ohio Municipal League addressed this issue, was Dublin able to represent the loss of funding and the revenue impact to OML? Ms. Gibson responded that the information was provided to them. Ms. Amorose Groomes stated that the Tax Commissioner is still in the process of making those rules and that the “ship hasn’t sailed” on the auditing piece. Ms. Gibson responded that the House Bill provides that it is the Tax Commissioner’s decision on how things will be handled. If the City wants to request an audit, the City would need to file a Mandamus. Ms. Gibson noted that the Ohio Business Gateway is currently undertaking a modernization project. The Gateway is not fully capable of handling the withholding at this point, but the state believes they will be ready by the beginning of the year. Mr. McDaniel stated that municipalities worked with this Bill and the House members to make this a “business as usual” technological change that would still allow the state to have a piece of this process, but be transparent and work with the municipalities. Those efforts did not get translated to the Senate when the bill was introduced and that was the bill that was ultimately passed. Mr. Lecklider asked if the Central Ohio Mayors and Managers Association (COMMA) was involved in taking a stand on this issue. Mr. McDaniel responded affirmatively. Mr. Lecklider asked if the City has a “scorecard” reflecting how its state representatives voted on this issue. Mr. McDaniel responded affirmatively. Mr. Lecklider stated he would like to review it. This will be a factor to consider in the next budget.