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HomeMy WebLinkAbout10-11-10 Finance CommitteeDUBLIN CITY COUNCIL FINANCE COMMITTEE OF THE WHOLE MEETING Monday, October 11, 2010, 6:00 p.m. Council Chambers Minutes of Meeting Mr. Gerber, Chair, called the meeting to order at 6:00 p.m. Council Members present: Mayor Lecklider, Mr. Keenan, Mr. Gerber, Mr. Reiner, and Ms. Chinnici - Zuercher. Mrs. Boring arrived at 6:15 p.m. Vice Mayor Salay was excused. Staff present: Ms. Grigsby, Ms. Gibson, Mr. Thurman, Mr. Smith, and Mr. Harding. Mr. Keenan moved to approve the minutes of the August 9, 2010 Finance Committee of the Whole meeting. Mr. Gerber seconded the motion. Motion carried unanimously. Mr. Gerber noted that there are two items scheduled for Finance Committee discussion — clarification of the Dublin Cornet Band Bicentennial grant award and the Third Quarter Financial Review. • Dublin Cornet Band Bicentennial Hotel /Motel Tax Grant Application Ms. Gibson, Tax Division, stated that the Dublin Cornet Band has obtained its EIN and submitted its request to the IRS for 501(c)(3) consideration. This discussion is to clarify which items in the grant Council considers appropriate. Since the EIN is for the Dublin Community Bands and the City's grant was to the Dublin Coronet Band, it is necessary to re- approve the grant itself. Dublin Community Bands will act as the fiscal intermediary. Tim Jameson, 7629 Tartan Fields Drive Concord Township presented an overview of their Bicentennial application, stated that they are willing to do whatever it takes to facilitate Council's consideration. If it means filing for a DBA, they will do so. If it is easier to re- approve the grant, that would be fine, as well. It will also be beneficial to them to have clarification regarding the instruments. Are they to buy specifically the instruments referenced in their application, or could those be considered as examples of the instruments they would buy? The latter was their intent. Ms, Chinnici - Zuercher stated that the EIN assigned to them is a 27 number. Is that a holding number? Mr. Jameson responded that this is an EIN number, not a 501(c)(3) number. Mr. Smith stated that this document was sent over by Jack Pigman, DAC. He has spoken with Mr. Pigman. The organization is now licensed under the State of Ohio. They have just submitted their IRS 501(c)(3) request, and until they receive a response, they are not authorized to accept grant monies from Dublin, except for some performance payments. Ms. Grigsby clarified that the funds for actual performances of $1,700 were paid to Mr. Jameson. Ms. Gibson stated that the City received the refund of these payments made to the Dublin Arts Council, and paid that money to Mr. Jameson last week. Finance Committee of the Whole October 11, 2010 Page 2 Mr. Gerber stated that, going back to the organizational structure, the organization has filed articles of incorporation with the Secretary of State to be designated as a 501(c)(3) organization. The issue of their name also needs to be addressed, either by filing a DBA or by amending their grant application with the new name. Have they also filed the requisite 501(c)(3) forms with the IRS? Mr. Jameson responded that Mr. Pigman had indicated to him that the IRS filing would have occurred either Friday or today. Mr. Gerber stated that once they have made that application, they can operate as a 501(c)(3) but cannot collect charitable donations. Ms. Chinnici - Zuercher inquired the signification of the EIN number that has been assigned to them. Mr. Gerber responded that when the organization was initially formed, they applied for and received from the IRS an organization identification number. However, that does not give them authorization to operate as a 501(c)(3) status. Mr. Jameson stated that they have been incorporated by the State of Ohio and recognized as an Ohio corporation by the IRS, but they have not yet been approved by the IRS as a tax - exempt organization. Is Council's question whether they can be paid the grant funds based on their 501(c)(3) application date, or is it necessary for the entity to have received formal approval of 501(c)(3) status by IRS? Also, must formal clarification of the revised name occur before they can receive funds? Mr. Gerber responded those are the concerns. The name on their application does not match the name of their corporation. An amendment in the application or their articles of incorporation must occur. Mr. Jameson responded that they are willing to do whatever is easier for Council and would facilitate the process. Mr. Gerber stated that the third issue is which items listed on their grant application are items the City will fund. Mr. Jameson responded that they are aware that some of the items originally listed for City funding cannot be covered, specifically rent for facilities at the schools and the insurance the Schools required them to purchase. They will conduct fundraising to pay those costs. However, he assumes it would be acceptable for them to receive City grant funds for the instruments, equipment and uniforms. Mr. Gerber stated that their grant application listed specific items. Should they be held to that type of detail, or is it acceptable that purchasing equipment in the categories of instruments, band uniforms, and sheet music would be acceptable? Ms. Gibson responded that, previously, Council replaced a "tuba" designation with "instruments." Therefore, it is necessary only to define whether the item is instruments, music or uniforms. Council should revisit that information along with the information as to how the City will pay the organization. Previously, Council voted not to release payment until the 501(c)(3) status has been approved. The latest communication from the IRS indicated this may require one to four weeks, which would mean November. Finance Committee of the Whole October 11, 2010 Page 3 The organization entity or DBA should first be clarified, and then the grant terms need to be addressed. Mr. Jameson needs to amend the grant application to clarify what he is requesting be covered. Mr. Gerber stated that the City should also have a copy of the form Mr. Jameson filed with the IRS to verify that application has been made for the 501(c)(3) status. Mr. Gerber stated that those items need to be addressed, and then a subsequent meeting should be scheduled. Mr. Jameson agreed. Ms. Chinnici - Zuercher requested clarification of the items to be addressed. Mr. Gerber responded that they are: (1) show evidence of 501(c)(3) application with the IRS; (2) amend the grant application with the correct name and file a DBA to reflect the name Dublin Cornet Band; and (3) amend the grant application to eliminate rent and insurance and specify what the grant will be used for: musical instruments, equipment, uniforms, and sheet music. Mr. Keenan stated that the name should be exactly what they wish to be called. Mr. Jameson responded that they would amend their name on the application as well, so two names would not continue. Mr. Gerber agreed with the suggestion. Mr. Jameson indicated he would contact Ms. Gibson the following day to verify the best way to do that. Ms. Grigsby stated that by motion Council could direct that the name of the group is modified to the correct name, so unnecessary paperwork can be avoided. Mrs. Boring inquired if the assumption is that once they show evidence of the application, that is sufficient to receive funding, or must they show that they have received IRS approval of their tax exempt status. Ms. Chinnici - Zuercher responded that two items are needed: (1) the City has evidence that their initial corporation papers were submitted to the State of Ohio and they are now an Ohio business entity with an EIN number; (2) evidence of the IRS 501(c)(3) application, and when the formal approval of that status is received from the IRS, that will then be provided. It will take one to four weeks to receive IRS approval. Ms. Grigsby stated that to avoid a similar situation with a future grant application, staff recommends that there be official approval of 501(c)(3) status before any payment can be issued. Mr. Keenan stated that the City has not previously been in a similar situation. Ms. Grigsby responded that is correct. Mayor Lecklider clarified that to date, the City has not disbursed any monies beyond $1,700 for the performances by the band. Finance Committee of the Whole October 11, 2010 Page 4 Mrs. Boring noted that payment was not from bed tax funds. She agrees with Ms. Grigsby's recommendation that future similar situations be avoided by requiring 501(c)(3) approval to be in place for an applicant for bed tax. Mr. Gerber stated that, in this case, however, the applicant will amend his application. Ms. Gibson agreed. The grant was awarded to the Dublin Cornet Band, which is now the Dublin Community Bands, which encompasses the Silver Band, and perhaps others. The grant does need to be specific regarding the name of the applicant and in regard to how it will be used. Ms. Chinnici - Zuercher stated that Ms. Grigsby's recommendation regarding Council direction would address that need and avoid excess paperwork. Mr. Gerber stated that Council action at this time would take care of the approval clarification. Mr. Jameson can subsequently provide the paperwork to Ms. Gibson. Mr. Jameson agreed. Mr. Gerber moved to approve an amended grant application that will reflect the name of the group as Dublin Community Bands; that further disbursements of the grant funds will not occur until the organization has obtained and provided evidence thereof of receipt of 501(c)(3) status from the IRS; that the amended grant application will eliminate request for reimbursement for rent and insurance and reflect that the monies will be used for music instruments, uniforms, sheet music and other related equipment. Mr. Keenan seconded the motion. Vote on the motion: Mr. Keenan, yes; Mr. Gerber, yes; Mrs. Boring, yes; Mayor Lecklider, yes; Ms. Chinnici - Zuercher, yes; Mr. Reiner, yes. • Third Quarter Financial Update Revenues Ms. Grigsby stated that the packet information included a staff memo, spreadsheets, and a copy of the memo distributed to department /division heads for preparation of the 2011 Operating Budget. The third quarter update included background information from the first quarter update. The income tax revenues for 2010 through the third quarter were up approximately $2.2 million or 4.38% compared to the third quarter of 2009. The original budget for 2010 assumed a 3.9% decrease from 2009. Compared to the original projections, the actual income tax revenues collections are up approximately $4.2 million. At the Second Quarter Update, the fact was discussed that in the months of September through December 2009, income tax revenue had been down, but the anticipation was that those four months in 2010 would be up compared to 2009. As reflected in the spreadsheet for the third quarter update, September was an extraordinarily good month. Those increases were not anticipated, but it has been learned that the increase was primarily related to the fact that one of Dublin's large corporations gave merit increases or bonus increases in the August— September time period, which impacted the income tax revenue received in September. More significantly, the withholdings (reflected at the bottom of the spreadsheet), indicate the City is up 2.2% for withholdings. Without the impact of the bonuses, however, it would have been 0.5 %. Therefore, the news is good, but perhaps not as good as the spreadsheet reflects, due to the source of the revenues. As mentioned for both the Tax Budget and CIP budget recently prepared, it was Finance Committee of the Whole October 11, 2010 Page 5 anticipated that revenues would be up two (2 %) percent for this year, although the two budget documents had been conservatively prepared with an assumption of being flat for the year. Based upon the September revenue receipts, the projection is now that the City will be up three (3) percent for 2010 compared to 2009. Expenditures Through September, including the Operating transfers to the Street and Safety funds, General Fund Expenditures reflected a 2.4% decrease. At this time, they are projecting that the General Fund Expenditures will be between $53.7 and 54.7 million for the year. Last year, they were $53.7 million. It anticipated that Expenditures will be consistent with or less than last year's Expenditures. General Fund Balance: The City has a practice of maintaining a General Fund balance that is equal to or greater than 50% of the operating General Fund expenditures and transfers. At the end of 2009, that percentage was about 65 %. Through the end of September, it has increased up to 73 %. So the General Fund balance has increased throughout 2010 due to the better than expected income tax revenues and the fact that the Expenditures are down. Property Tax Revenues and Service Payments: A couple of other indicators that are considered are Property Tax Revenues and Service Payments. Property Tax Revenues can reflect what is occurring within the community in regard to the valuations of homes as well as the receipts of property taxes. That revenue is up slightly from last year — approximately .6 percent. There was a significant jump in Service Payments, which relates to the private investment occurring within some of the larger TIF Districts. In the appropriation ordinance that will be considered at the Council meeting tonight, information on the Perimeter West District will be discussed. The fact that it is generating significantly higher dollars than is needed to retire the existing debt provides additional flexibility in the Capital Budget. Staffing: In regard to staffing, positions are evaluated when they become vacant. There are more vacancies now than at the end of the Second Quarter report. As part of the 2011 Operating Budget review with the individual divisions, those vacancies will be discussed. Last year, those vacancies were reflected as authorized positions, although many were unfunded. This year, more than 50% of those vacancies will be removed as authorized positions in the 2011 operating budget. Staff will continue to watch closely for companies whose increases are significantly higher than what appears normal. Mr. Gerber stated there is a concern that many companies will try to load what they can into this year in anticipation of a higher tax rate next year. How can that be monitored? Ms. Grigsby responded that staff runs reports on the daily income revenue receipts from the Dublin companies and compares this year's revenue to last year's and perhaps the Finance Committee of the Whole October 11, 2010 Page 6 year before. Any "spikes" would be evident. In 2009, some companies did not give merit increases or bonuses, and this year was a catch -up one. Mayor Lecklider asked for confirmation that, after deducting the merit increases and bonuses paid by one large company, the income tax withholdings for the year were only up about .5 percent. Ms. Grigsby responded that is correct. Mr. Keenan stated that during the 2011 Operating Budget review, he would like to review some statistics on overtime in the larger departments. Sometimes not filling a position can have more financial impact if it results in a need for a significant amount of overtime from other employees. Ms. Grigsby responded that has been monitored closely the last couple of years. Overall, the overtime is down. One department has vacancies, which has resulted in overtime. That will probably result in a recommendation that one of those positions be filled. Mr. Gerber thanked Ms. Grigsby for providing a copy of the memo regarding preparation of the operating budget which was given to departments. Mayor Lecklider agreed that it was helpful in understanding the process. Mr. Keenan asked if investments have remained steady from 2009 through 2010. Ms. Grigsby responded that it has remained somewhat consistent, down just slightly because rates have continued to drop. It should not drop significantly. Mayor Lecklider requested that she comment on the State budget and potential cuts to local government funds. Ms. Grigsby stated that staff is aware of the status of the State budget. Typically, one of the first areas the state looks to for reductions is in local government funds. Fortunately, that is not a large revenue source for Dublin, but should be watched closely. At this point, the local government funds are expected to be flat or perhaps reflect a slight increase. Mayor Lecklider asked what Dublin receives each year from local government funds. Ms. Grigsby responded that the total amount of local government funds disbursed by the state is approximately $1.2 million, but Dublin receives only a portion of that. Ms. Chinnici - Zuercher that, regardless of who is governor, the local government fund will be cut. Mr. Keenan stated that there are many local entities that will be impacted, as it is a larger percent of their revenues than it is for Dublin. Mr. Gerber stated that are more local levies this year, as various entities are trying to offset the loss of State funds. There will be more school levy requests in the future for the same reason. • Other Business Ms. Chinnici - Zuercher stated that she received an email today from Ms. Amorose inquiring about hotel /motel tax grant funding for the Dublin Area Art League (DAAL). Recently, a DAAL representative requested funding for the Dublin Arts Festival and that Finance Committee of the Whole October 11, 2010 Page 7 person has now resigned from that volunteer position. Now, DAAL is considering the possibility of paying someone to fill that role and would like to request that Council increase their grant by $5,000. They already have been awarded a $5,000 grant for City services and related festival costs. Ms. Gibson responded that DAAL received a grant in 2010 of $10,800 for the cost of City services and tents. At that time, there was discussion that there was a need for more volunteers for that event and that the DAAL Board needed to be better trained. Mr. Keenan noted that they were to seek training as a not for profit Board to better understand how they should operate. Did that occur? Ms. Gibson responded that direction was not tied to the current grant; it was a recommendation for the future. DAAL did discuss their need for volunteers with the City's Volunteer Administrator. Ms. Chinnici - Zuercher asked if this year's grant funds have been disbursed. Ms. Gibson responded that one portion of the disbursement remains to be made. Mr. Keenan inquired if those funds were related to the Art Festival held in July. Ms. Gibson responded that is correct. Mr. Gerber asked if the funding request would be for next year's event. Ms. Chinnici - Zuercher responded affirmatively. Ms. Grigsby stated that the City's notice regarding applications for 2011 bed tax grants was sent out yesterday. The grant requests would be reviewed by the Finance Committee and Council in late November /early December. Ms. Gibson noted that the deadline for receipt of requests is November 5. A Finance Committee meeting to review the requests is tentatively scheduled for November 22. Ms. Chinnici - Zuercher clarified that DAAL is asking if Council would entertain this additional purpose as part of their grant application. Ms. Gibson noted that the only occasion she recalls that Council made such a grant was several years ago, when they partially funding the salary for the Leadership Dublin director. Mr. Keenan asked if the request would be consistent with the bed tax grant criteria. Ms. Grigsby responded that if the request is tied directly to the Art Festival event, it would be consistent. Mr. Gerber stated that it would be appropriate for the DAAL to include this request in their application. The Committee can review their request and consider the merits of it. Ms. Chinnici - Zuercher stated that recently, the Art Festival event has improved. The Dublin Arts Council currently receives 25% of the hotel /motel tax revenue. Does the DAC receive additional hotel /motel tax funds for the community grants that they award? Ms. Grigsby responded that there is no additional grant to DAC for that purpose. Ms. Chinnici - Zuercher suggested that a future more comprehensive discussion on this topic might be warranted. Are there other art events in town that the City has been overseeing? The City has not taken over 100 percent of the art events. The City is larger now, and this Art Festival event has grown commensurate with the size of the City. Should Dublin Arts Council (DAC) be the entity engaged with the distribution of funding Finance Committee of the Whole October 11, 2010 Page 8 for the Festival, or should the City continue to award a separate bed tax grant for the event? If so, what is the implication of that? This event does not bring in additional bed tax revenue. It is an event with a target audience of the Central Ohio community. Mr. Keenan stated that Council has discussed this issue previously. The DAC and DAAL are separate entities and do not collaborate. Ms. Chinnici - Zuercher responded that she is aware of that, and perhaps that issue needs to be resolved. Regardless, Council does need to consider how it will handle a special event that is staged by an all- volunteer group, as it is costly to produce the event. Mr. Keenan stated that another reason DAC discontinued handling this Festival and the Japanese Art Festival was that their budget could not cover the cost of those events. Would Council consider increasing that funding percentage under the condition that the Festival is included in their responsibilities? Ms. Chinnici - Zuercher responded that she is saying only that Council needs to think through this issue. Although she understands the budget implications for the DAC, she does not believe the DAC staff is supportive of the Festival. However, DAAL has made significant effort to improve the quality of the event. Mr. Keenan stated that the event was two days this year, which made the set -up costs worthwhile. Mr. Gerber stated that the event was nice and was well attended this year. Mr. Keenan agreed. Ms. Gibson noted that the last time that DAC held the Festival, there were problems because of the timing. They concluded that they held it at the wrong time of the year. Mr. Keenan agreed. However, he did like the fact that a couple of the streets were closed in the Historic District for that event. Mrs. Boring asked if there are any funds remaining in those set aside for Bicentennial grants. Ms. Gibson responded that there are no remaining funds. In fact, more was spent than was budgeted for the Bicentennial grants. Mr. Keenan stated that funds do remain available in the bed tax fund. Ms. Gibson confirmed that is correct. Mrs. Boring stated that the Dublin Historic Society has shared that when staged the Heritage Day event this year, they were surprised and unprepared for the costs of City services. She wonders if they could be encouraged to return to the City to request additional funds to cover the cost of the City services for that event. Ms. Chinnici - Zuercher asked if their grant included the cost of City services. Ms. Gibson responded that perhaps they did not apply for a City event permit where they would have obtained the anticipated costs upfront. Mrs. Boring responded that the Dublin Historical Society has indicated that there were permit fees, etc. that were not waived. Mr. Gerber suggested that the Historic Society contact Ms. Gibson to address the situation. Finance Committee of the Whole October 11, 2010 Page 9 Ms. Chinnici - Zuercher stated that she is very interested in knowing more about this. This was the City's Bicentennial and community volunteers stepped forward to stage events on the City's behalf, so these organizations should not be charged for City costs. Ms. Grigsby stated that Ms. Crandall had a conversation with Tom Holton, and he did express concern about the costs of City services. Ms. Crandall and Ms. LeRoy were to have a follow -up conversation with Mr. Holton. Follow -up information will be provided to Council. Mayor Lecklider moved to adjourn into executive discussion at 6:40 p.m. for land acquisition, legal and personnel matters. Mrs. Boring seconded the motion. Vote on the motion: Mr. Gerber, yes; Mrs. Boring, yes; Ms. Chinnici - Zuercher, yes; Mr. Keenan, yes; Mayor Lecklider, yes; Mr. Reiner, yes. The meeting was reconvened and formally adjourned at 7:00 p.m. Clerk of Council