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
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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