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FEDRAC MINS 05-22-2012CITY OF Federal Way City Council FINANCEECONOMIC DEVELOPMENTREGIONAL AFFAIRS COMMITTEE FEDRACI Tuesday May 22 2012 530 pm Federal Way City Hall Hylebos Room Meeting Summary Preliminary until approved 1 CALL TO ORDER 2 PUBLIC COMMENT 3 COMMITTEE BUSINESS 1 D DESIGNATE KEY BANK AS THE CITYS PRIMARY BANK T KRAUS 73 Consent Resolution 0605 Council E APRIL 2012 MONTHLY FINANCIAL REPORT TKRAUS 77 Consent 0605 Council F VOUCHERS TKRAUS 94 Consent 0605 Council Additional materials may also be distributedfor reviewaction during the meeting 4 OTHER 5 FUTURE AGENDA ITEMS 6 NEXT MEETING Tuesday June 26 2012 Committee Members City Staff Dini Duclos Chair Tho Kraus Finance Director 253 835 2520 Roger Freeman Steve Cain Executive Assistant Bob Celski 253 835 2402 Action Topic TitleDescription Presenter Page or Discussion A APPROVAL OF MINUTES APRIL 242012 summary by Brook Lindquist S CAIN 2 Action Committee approval B CDBG COMMERCIAL LOAN FUND PROGRAM JBENNETT 11 Consent 0605 Council C CDBG COMMERCIAL EXTERIOR IMPROVEMENT PROGRAM J BENNETT 53 Consent 0605 Council 1 D DESIGNATE KEY BANK AS THE CITYS PRIMARY BANK T KRAUS 73 Consent Resolution 0605 Council E APRIL 2012 MONTHLY FINANCIAL REPORT TKRAUS 77 Consent 0605 Council F VOUCHERS TKRAUS 94 Consent 0605 Council Additional materials may also be distributedfor reviewaction during the meeting 4 OTHER 5 FUTURE AGENDA ITEMS 6 NEXT MEETING Tuesday June 26 2012 Committee Members City Staff Dini Duclos Chair Tho Kraus Finance Director 253 835 2520 Roger Freeman Steve Cain Executive Assistant Bob Celski 253 835 2402 CITY OF FEDRAC May 22 2012 Federal Way 1 CALL TO ORDER By Councilmember Freeman Time 530 pm Committee Members in attendance Dini Duclos 0 Roger Freeman x Bob Celski x 0 Excused absence Page 2 of 8 Other Council Members and or elected officials in attendance for all or part of the meeting Councilmembers Honda Burbidge Kochmar Mayor Priest Deputy Mayor Ferrell Staff in attendance Tho Kraus Finance Director 253 835 2520 Steve Cain Executive Assistant 253 835 2402 Pat Richardson City Attorney 253 835 2570 Jay Bennett Community Services Manager 253 835 2650 Michael Capenos Key Bank 2 PUBLIC COMMENT None 3 COMMITTEE BUSINESS A APPROVAL OF MINUTES APRIL 24 2012 summary by Brook Lindquist S CAIN 2 Action 0024 Committee approval Discussion Changes Steve Cain Executive Assistant Steve Cain was absent on 424 Brook Lindquist recorded the meeting and prepared the summary in his stead Motion Councilmember Celski moved to accept the summary as presented second and passed Councilmember Freeman explains he is acting as Chair because Councilmember Duclos is out of state and is excused CITY OF FEDRAC May 22 2012 Federal Way Page 3 of 8 B CDBG COMMERCIAL LOAN FUND PROGRAM J BENNETT 11 Consent 0112 0605 Council Presentation discussion Jay Bennett Community Services Manager 2538352650 Jay Bennett provided handouts to the committee Community Development Block Grant CDBG Program slides Community Development Block Grant narrative Community Development Block Grant CDBG Funding Categories narrative all are included at the end of this summary Jay then discusses the summary of the program and 2012 budget page 11 13 The sources and proper uses of the money and the program definitions for the Micro Business Product and the Small Business Product presented on pages 11 13 provided the basis for Jays discussion A draft of the CDBG Commercial Loan Fund Programs Policies and Procedures Manual was referenced by Jay in his discussion of the program The program requires the establishment of a Loan Review Advisory Committee LRAC with members appointed by the Mayor Community Development discussed and determined the allotment of the monies between the Micro and Small Business Products Applications for the programs are already under review Questions and discussion by committee members Are there similar programs in other cities All cities with CDBG money offer similar programs and loans Major difference is interest rate on the loans How is job creation measured The programs require reporting results on forms provided Are business plans required Micro businesses must have a business plan and principal must have graduated from accredited business training program There is committee concern with staff time requirements and additional workload Also the committee would like to see more council involvement in the LRAC committee appointment and recommendation approvals Jay commented that the described arrangement was to expedite the process appointments to the committee would be individuals with expertise in loans and the products Adding additional Council involvement would slow the process While the committee recognizes that time is of the essence it still would like to see more Council involvement Why is there a loan rate percentage discrepancy prime 3 vs 1 Percentages are based review of other cities programs and risks involved There followed a short discussion of interest rates and rates in other cities Jay introduces Michael Capenos Key bank representative who adds comments on the Key Bank loans and rates generally the smaller the loan the greater the risk hence the higher interest rate What is the city recourse on loan defaults Loan collateral is required as part of the program There are comments on the value of the program in making money available Because of the lagging economy money and loans are difficult to get and this program makes money available to the Micro enterprises Additional committee follow up comments on the staffing concerns mentioned above for both time and funding CDBG budget page 11 has 115K for administrative cost funding Jay stated he has also gone to Federal Way citizens for outside help and expertise Motion Councilmember Celski moved for Option 1 followed by discussion of procedure for incorporating Council oversight and amended the motion with the amendments that Council will approve members of the Loan Review Advisory Committee and their recommendations Second and passed Note Jay Bennett is to make needed changes to CDBG Commercial Loan Fund Programs PP Manual for presentation to Council 1 47 U E o Qa 00 4 1 0 4 vs r 4 d n wo a O m Ln 19cL O WE Ln c0075a Magorn maci cLE 6 m m O CLO6 tn LO CO a T z J W W C Q Q3 z C gyp n C ai z o 4 J a a Co 4 LORI Z C I L TVIJm E 4 v MT m O a c E w MMmV H O J a c Q O U O m Ln 19cL O WE Ln c0075a Magorn maci cLE 6 9b a q w U w Q w g b N a tnawr mL wU rn Im0 E M AAAA N a M 7 AN CITY OF Federal Way Community Development Block Grant Introduction The federal Department of Housing and Urban Developments HUD Community Development Block Grant CDBG program provides an annual grant to entitled cities and counties The purpose of this grant is to help develop viable urban communities by providing decent housing and a suitable living environment and by expanding economic opportunities principally for low and moderate income persons The City of Federal Way receives its CDBG allocation directly from HUD The allocation is based upon the Citys population and percentage share of low and moderate income individuals The City implements programs by contracting for services with its own departments or through area non profit agencies Prior to 2012 the City was part of the King County Consortium as a Joint Agreement City and received its CDBG money as a passthrough from the County The County took a percentage of the Citys annual CDBG entitlement to administer the program In 2012 Federal Way became a direct entitlement city and will receive its entire CDBG entitlement directly from HUD National Objectives CDBG can be used to carry out a wide range of community development activities directed toward revitalizing neighborhoods economic development and providing improved community facilities and public services The City funds CDBG programs by means of an annual application process Each project or program proposal is measured against locally established goals and three nationally established objectives The national objectives support activities that Benefit low and moderate income persons Aid in the prevention or elimination of slums or blight or Meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community where other financial resources are not available to meet such needs ie disaster recovery relief In general the City of Federal Way does not exhibit the characteristics necessary for a project to be justified under the second or third objectives Therefore the vast majority of the Citys CDBG projects are justified under the first objective of low and moderate income benefit The criteria for how an activity may be considered to benefit low and moderate income persons are divided into four subcategories Those involving area benefit Those serving a limited clientele ie the disabled or elderly Those involving housing and Those involving job creation or retention Eligible Activities Once a project meets a national objective it must also qualify as an eligible activity under local and federal requirement CDBG funds may be used for activities that include but are not limited to Acquisition disposition or clearance of real property Rehabilitation of residential and non residential structures Construction of public facilities and improvements such as water and sewer facilities streets and neighborhood centers Direct human services Homeownership assistance programs Activities relating to energy conservation and renewable energy resources and Assistance to for profit businesses to carry out neighborhood economic development or job creation or retention activities Implementation of Activities The City as a CDBG recipient can undertake activities directly or can identify a sub recipient to undertake activities Sub recipients are public or private non profit agencies authorities or organizations CDBG assistance to private for profit businesses is allowed with the addition of an extra level of regulatory scrutiny and performance reporting Exceptions to this rule include aid given to microenterprises businesses employing less than five persons and exterior rehabilitation of commercial buildings Examples Since Federal Way incorporated a wide variety of programs and projects have benefited from complete or partial CDBG funding Reconstruction of sidewalks for wheelchair accessibility Transitional shelter for homeless women and children Signalized pedestrian crossing in a lower income neighborhood Child care subsidy program First time homeownership program Domestic violence advocacy program Playgrounds serving lower income neighborhoods Home repair loan and grant program Community Development Block Grant CDBG Funding Categories Introduction The block of Community Development Block Grant means that the grant is not for one speck use Rather the grant is available for a wide range of projects and programs that benefit low and moderate income individuals The Department of Housing Urban Development HUD has developed parameters that define how CDBG can and cannot be spent Eligible projects or programs can be categorized under three general criteria including planning and administration public human services and capital construction or construction related projects Planning Administration Planning Under this category CDBG can be used for planning exercises including studies and analyses data gathering and preparation of written plans and action items Funds may also be used under this category for activities designed to improve the grant recipients the City or sub recipients a non profit organization capacity to plan and manage programs and activities for the CDBG program Administration CDBG funds may be used to pay reasonable program administration costs and carrying charges related to the planning and execution of community development activities assisted in whole or in part by CDBG Funding Cap There is a federally mandated cap on the amount of CDBG that can be used for Planning Administration activities The cap is 20 percent of the Citys entitlement for the year Prior to 2012 King County took 10 of the annual entitlement for admin and Federal Way received 10 for its planning admin Public Services Under this category CDBG funds may be used to provide human services that meet basic survival health and quality of life needs for residents of the city A program can be funded with CDBG as long as it is 1 a new service or 2 a quantifiable increase in the level of a service In other words the grant recipient cannot use CDBG as a replacement for other local public funds previously used to provide the service This is typically referred to as the supplanting rule Once funded with CDBG the same level of funding can be provided from one year to the next If the amount of CDBG increases the program must provide a proportionate increase in level of service As with Planning Administration activities of this category are subject to a federally mandated funding cap The cap for Public Services is 15 percent of the Citys entitlement for the year Prior to 2012 King County took 5 of the annual entitlement and Federal Way received 10 for public services Capital Projects There are many subcategories to capital projects The common sub categories are described below There are no federally mandated caps or finding restrictions place upon CDBG capital projects Special Needs Housing construction renovation and acquisition of facilities used for the purposes of housing individuals with disabilities or other special needs Housing Rehabilitation preservation of existing housing stock by assisting low and moderate income homeowners in improving their housing conditions Infrastructure physical improvements of neighborhoods through construction or reconstruction of streets sidewalks and or utilities Community Facilities construction renovation and acquisition of parks and public facilities Economic Development Projects Economic development projects are capital projects that meet the goals the City has established in its Comprehensive Plan for economic development These projects might be located in the city center area or they might create or retain jobs for low and moderate income individuals There is no funding cap for Capital or Economic Development projects Prior to 2012 King County took 2 of the annual entitlement for capital implementation and Federal Way received the remaining amount after Planning Admin and Public Services were subtracted CITY OF FEDRAC May 22 2012 Federal Way Page 4 of 8 C CDBG COMMERCIAL EXTERIOR IMPROVEMENT PROGRAM J BENNETT 53 Consent 3433 060 Council Presentation discussion Jay Bennett Community Services Manager 253 835 2650 Jay discusses the program pages 53 54 and the P P Manual The loan process and requirements are similar to Item B above There was a short committee discussion of loan forgiveness in five years It was followed by a discussion of the LRAC approvals and the need to amend the recommended option 1 to include the Council Motion Councilmember Celski moved for Option 1 and amend that Council will approve LRAC recommendations Second and passed D DESIGNATE KEY BANK AS THE CITYS PRIMARY BANK T KRAus 73 Consent 3940 Resolution 0605 Council Presentation discussion Tho Kraus Finance Director 253 835 2520 Tho describes the proposed resolution to designate Key Bank as citys new bank along with necessary authorizations Motion Councilmember Celski moves Option 1 second and passed E APRIL 2012 MONTHLY FINANCIAL REPORT T KRAus 77 Consent 4030 0605 Council Presentation discussion Tho Kraus Finance Director 253 835 2520 Tho provided the following handout APRIL 2012 MONTHLY FINANCIAL REPORT HIGHLIGHTS General Street Fund Summary Page 78 Revenues are below budget by 40K or 03 with major variances in Above Budget 42K criminal justice sales tax 186K building permits fees 11K franchise fees 30K miscellaneousother Below Budget 86K property tax 114K sales tax 19K intergovtI liquor profits fuel tax 26K gambling tax 44K court revenue 11K police services animal licenses Expenditures are below budget 123M or 9 timing of payments 1 time not spent some true savings Property Tax Below YTD budget 86K or 4 Below YTD 2011 by 366K or 13 Timing Difference As of 51412 collections exceed YTD May 2012 by 500K Sales Tax Pages 80 81 YTD 2012 revenue of 345M is below YTD budget by 115K or 32 Below YTD 2011 by 75K or 21 April 2012 sales tax down 63K compared to April 2011 due to In June 2010 the City received 79K in additional sales tax as result of State use tax audit In April 2012 the City sales tax was reduced by 67K the business proved use tax was paid Project 2012 annual sales tax is 1061V 272K or 25 below 2011 actual CITY OF FEDRAC May 22 2012 Federal Way Page 5 of 8 YTD 2012 Compared to YTD 2011 by Category Retail up 1K or 01 Up 38K buildinggarden furniture home furnishings motor vehicleparts dealers non store retailers health personal care stores Down 37K cloth ingaccessories electronicsappliances food beverage stores general merchandise stores sporting goodshobbybooks Services down 49K Up 46K accommodation food servicesdrinking places personal laundry repairmaint Down 95K admin support services health carehospital amusement hospitals technology Construction down 26K or 82 Up 23K building construction Down 48K heavy civil construction Information down 8K or 45 Up 2K Publishing Down 10K telecommunications internet programs Government down 13K or 30 non classifiable establishments FinanceInsuranceReal Estate up 15K or 24 Up 23K credit intermediation real estate amusement rental leasing Down 8K credit union audit No major changes from previous months report on Sales Tax Comparison by Area YTD 2012 Compared to YTD 2011 by Area S348 1h Retail Block up 7K electronics appliance down buildinggarden wholesale up The Commons down 25K book store general merchandise retailers other misc stores down S 312 to S 316 down 10K discount retailer down Pavilion Center down 51K electronics appliance down video rental closed book store increase Utility Tax Pages 81 82 YTD 2012 revenues total 524M Above YTD 2011 by 173K or 34 Above YTD budget by 363K or 75 HOWEVER YTD 2012 includes 266K in additional revenues due to timing of receipts Taking into consideration of the 266K timing difference the adjusted variances are as follows YTD 2012 revenues net of rebates total 497M Below YTD 2011 by 93K or 18 Above YTD budget by 98K or 20 YTD 2012 adjusted for timing difference is 93K or 18 below YTD 2011 Electricity down 25K or 13 Phone down 5K or 13 Gas down 34K or 33 Cellular down 31K or 34 Solid Waste up 3K or 16 Cable down 1K or 03 REET Page 83 YTD 2012 revenues of 301K is Below YTD 2011 by 350K or 54 Below YTD Budget by 270K or 47 2012 annual budget estimate of 14M is consistent with 2009 2010 2011 revenues 14M to 15M YTD Significant Transactions sales price of 1M YTD 2012 YTD 2011 Centerpoint Management Inc sold for 29M 14K tax Palisades Apartment sold for 675M 334K tax Lowes Home Improvement sold for 5M 25K tax Woodmark Retirement sold for 92M 45K tax The View at Redondo Apartments sold for 51M 25K tax Vacant Business Building sold for 44M 22K tax Office Building So 333 sold for 14M 7K tax Vacant Lot sold for 2OM 10K tax Garden Depot sold for 15M 7K tax CITY OF FEDRAC May 22 2012 AAFederal Way Page 6 of 8 Animal Services Page 86 2012 Budget is comprised of 153K revenue and 330K expenditure for a net cost of 177K o Budgeted net cost is lower than the 400K 500K estimated cost had City stayed wKing Co YTD 2012 license revenues total 23K or 15 of annual license revenue estimate Below YTD 2011 by 14K or 38 Below YTD budget by 36K or 62 YTD 2012 expenditures total 75K Below YTD 2011 by 6K or 7 Below YTD budget by 9K or 10 Savings in personnel and shelter costs YTD 2012 net cost is 47K Above YTD 2011 by 6K or 15 Above YTD budget by 22K or 88 Red Light Photo Page 87 YTD 2012 net revenues total 546K Above YTD 2011 by 128K or 31 Increase is due to improving safety in the school zones Court Revenue Page 88 Annual revenue estimate 15M YTD 2012 net revenues total 507K Below YTD 2011 by 40K or 7 Below YTD budget by 44K or 8 Traffic non parking down 25K criminal costs down 11K public defender recoupment costs Shared Court cost down 11K but is due to timing difference Federal Wav Communitv Center Page 90 YTD 2012 Revenues total 592K Above YTD budget by 57K or 11 Above YTD 2011 by 36K or 6 Continue to see shift from daily drop in to membership passes Net increase of 38K compared to YTD budget Net increase of 16K compared to YTD 2011 Continue to see increase in fitness classes fitness training Silver Sneakers enrollment specialty fitness training classes personal training programs Increase of 12K compared to YTD budget Increase of 4K compared to YTD 2011 Youth Athletic Programs Passholder PE Kidz Love Soccer Basketball Life Increase of 6K compared to YTD budget Increase of 2K compared to YTD 2011 Aquatic Programs Lessons Increase of 5K compared to YTD budget Similar to YTD 2011 Rentals Return of long term meeting group and church rental clients special event bookings Increase of 1K compared to YTD budget Increase of 10K compared to YTD 2011 YTD 2012 Expenditures total 651K Below YTD budget by 2K or 03 Above YTD 2011 by 6K or 1 Utility Tax Contribution Reserves Annual Budget 87K YTD Actual OK Transfer from Utility Tax by year end Operations Annual Budget 619KYTD Actual 77K or 13 CITY OF FEDRAC May 22 2012 Federal Way Page 7 of 8 Ending Fund Balance Reserved for capital maintenance replacement o End of Year Budget 992K YTD Actual 936K Dumas Bav Centre Pase 91 YTD 2012 Revenues of 213K Above YTD Budget by 39K or 22 Above YTD 2011 by 46K or 28 Increase in number of larger retreats and use of in house food service YTD 2012 Expenditures of 196K Below YTD Budget by 16K or 8 Below YTD 2011 by 4K or 2 YTD Operating Income is 17K YTD budget anticipated 37K operating loss YTD 2011 actual was 33K operating loss Ending Fund Balance End of year Budget OK YTD Actual 243K Roof repair and capital maintenance not all spent any balances will roll over to 2013 Discussion Use tax is down Tho explains that amnesty program in 2011 added to previous revenues and a state audit this year gave a tax payer a 10K refund That accounts for the 70K difference Councilmember Celski noted on page 93 Fund Activity Summary Downtown Redevelopment Capital Project the 945K expenditure and was curious what that was for Kraus responded she was not expecting expenditures to be that high but would follow up on it Also noted that a total income of plus 1M is a healthy trend overall Questions regarding store openings Home Goods stores to open soon one in FW one in Alderwood Mall Opening of the Ram is in the works Mayor briefly discusses Mr Parks Mall challenges and that the Alderwood Mall is for all practical purposes closed In budget preparations keeping such volatility in mind we are conservative allowing for one or two percent change in tax revenue which is walking around money four or five percent however is significant Also noted is the decline in utility taxes gas and electric Tho explains electric consumption is down as is gas additionally gas rates also decreased Motion Councilmember Celski moves Option 1 second and passed F VOUCHERS T KRAUS 94 Consent 5920 0605 Council Presentation discussion Tho Kraus Finance Director 253 835 2520 Committee questions and discussion Page 117 ck 229728 Why pay Metropolitan Market invoice dated 2008 Tho explained it was part of vouchers for shopping bags and the recycling program She will provide more information Why do we have three cellular providers Tho and Mayor weigh in explaining various cell phones varying service coverage and ongoing discussions about services coverage and cost It has been a long and continuing discussion and review of charges Some such as Councilmember Freeman have even given up their phones Mayor adds that Thomas Fichtner IT can provide additional details Motion Councilmember Celski moves approval and forward to June 5 2012 Council Meeting second and passed FEDRAC May 22 2012 4 OTHER None 5 FUTURE AGENDA ITEMS ACITY OF Federal Way 6 NEXT MEETING Tuesday tune 26 2012 Meeting adjourned 634 pm COMMITTEE APPROVAL DIM Duclos Committee Chair Kw s Page 8 of 8 Attest AA Steve Cain Executive Assistant Roger Freeman Committee Member Committee Bma Member