Finance Committee Meeting Minutes Friday, March 22, 2019

For your consideration, please read the minutes from the Finance Committee Meeting held on Friday, March 22, 2019 at 10:00 a.m.

Finance Committee Minutes 3-22-19 with Attachments

To read the minutes please open or download the pdf from the link above, or you may see more below.

Brunswick-Glynn County Joint Water & Sewer Commission

1703 Gloucester Street, Brunswick, GA 31520

Commission Meeting Room

Friday, March 22, 2019 at 10:00 AM

 FINANCE COMMITTEE MINUTES

MEMBERS PRESENT:        

Steve Copeland, Committee Chairman

Donald Elliott, Commissioner

Jimmy Junkin, Executive Director

ALSO PRESENT:                 

Ben Turnipseed, Commissioner

Bob Duncan, Commissioner

John Donaghy, Chief Financial Officer

LaDonnah Roberts, Senior Financial Analyst

Janice Meridith, Executive Commission Admin.

 ABSENT:                               

Tripp Stephens, Commissioner                                                                                                                                           

Chairman Copeland called the meeting to order at 10:13 AM.

 PUBLIC COMMENT PERIOD

There being no citizens that wished to address the Committee, Chairman Copeland closed the Public Comment Period.

APPROVAL

1. Minutes from February 12, 2019 Finance Committee Meeting

Commissioner Elliott made a motion seconded by Chairman Copeland to approve the minutes from the February 12, 2019 Finance Committee Meeting.  Motion carried 2-0-1.  (Commissioner Stephens was absent for the vote.) 

2. Reserves Procedure

John Donaghy provided the draft of the JWSC Financial Policies from 2007 which had been marked for potential changes in 2010.  He informed the committee that those changes as recommended by the financial advisors at that time were never approved and officially made.  Committee Chairman Copeland advised that he would like to integrate the Reserve Policy into those financial policies, table the Reserves Procedure Item #2 from this agenda and add to the agenda for the next Finance Committee meeting an approval item for the drafted Financial Policies which would include the Reserve Policy.  Commissioner Elliott suggested that the approval item be tabled but to take about ten minutes to discuss the expectations of what is included in the Financial Policies. Chairman Copeland agreed.

Commissioner Elliott made a motion seconded by Chairman Copeland to move approval item #2 to the Discussion section of the agenda.  Motion carried 2-0-0.  (Commissioner Stephens was absent for the vote.)

DISCUSSION

1. Presentation of Forecast Model – Sources & Uses Including Expenses

John Donaghy stated that much of the staff have cumulatively worked on the forecast model.  He noted that the projects were worked on, and then the cash flows by quarter and then by fiscal year to get a workup of what the reserves would possibly look like in each of those periods.  Mr. Donaghy then reviewed and explained each of the columns and how the projections were calculated to reflect the expected project expenditures for the time periods indicated as well as the anticipated reserves and funding sources for those projects.  The goal of this forecast model is to show the impact of the projects to the reserves.  The committee discussed details of the forecasts, funding sources, reserves, etc.  This forecast model is not a final product.  It is intended to be a living document that can be updated or adjusted quarterly for review.  Chairman Copeland indicated that he would like to be able to review this forecast model and not only see the impact to the reserves, but also to be able to see how the rate structure is affected by all of this.  He noted that another piece to be included would be a reduced income statement that assumes a revenue structure based on number of customers, number of gallons, and the existing rate structure which adds another revenue piece to the forecast model, then an operating cost and a debt service and a net position which will all enable a vision of how this draw down on the reserves impacts the bottom line.  There was further discussion on how this information and forecast model does not yet show is how it impacts the rate structure, or assuming the same rate structure, how growth of customers, income or expenses affects the bottom line.  Mr. Donaghy informed the committee that Raftelis has already built a rate model in which data can be changed year by year to be able to see the effects on the rates in that model.  The committee asked to have that rate model sent to them and for it to be included in a look at the total package.  Mr. Donaghy continued to provide some of the details for using the rate model, and that a five-year forecast model was built into this rate model.

2. Fiscal Year 2020 Budget

Mr. Junkin advised that a big picture goal in the FY2020 Budget was to not increase the rates and to hold them flat.  An emphasis was placed on maintenance in the treatment facilities and maintenance in general.  He also wanted to create a reserve for capital equipment and vehicles to reduce the budget fluctuations because it is known that vehicles and equipment do not uniformly wear out in equal amounts every year.  In order to stabilize that and not have fluctuating operational budgets it was proposed to take the capital reserve of $2.5M and convert that to an equipment reserve.  Mr. Junkin stated that a survey of all the vehicles and equipment had been done including the approximate life on them, and that looking at the next fifteen years starting with a $2.5M balance, it gives a $500K replenishment rate to pay for everything over that fifteen year period, which should make it more functional to budget and plan for.  Revenues impacts and rates remain constant so there is not a need to increase rates; price elasticity as the rates were changed did not become a reality as was anticipated in the model, in fact there was a slight increase in volumes.   Mr. Junkin noted the loss of revenue from the closing of the CVS store which provided real income of about $96K per year. He continued to review some of the various budgeting details of the reserves, revenues, expenditures and personnel changes.  Committee Chairman Copeland stated that two of the high-level goals he would like to see are enhanced project execution and an enhancement to the maintenance program in general.  After some additional discussion pertaining to asset management and systems maintenance Commissioner Copeland advised that he would like to add improved customer service to the list of high-level goals for next year, as well as no rate increase and regulatory compliance.  Mr. Junkin indicated that regulatory compliance is a standing goal and that improved customer service is always on the mind set as something we are always trying to do.  He asked the commissioners if they had specifics in that area which need to be addressed, and Commissioner Duncan replied that improved customer service did not only include the retail customers but also includes the construction community (including engineers) and their stakeholder input to the construction process.  Commissioner Duncan commented that he would like to see resource management added to the list of goals. It was also noted that regulatory compliance is a requirement that is given and should not be included as a goal.  Returning to the discussion on the FY 2020 Budget, Mr. Junkin noted that four crew positions that have not been filled will be eliminated and also commented regarding the positions to be added due to asset management and maintenance.  Further discussion included more on operational expenses, debt payment, reserve transfers and funding, equipment and vehicles, etc.  The committee then reviewed and compared the FY 2020 Budget and compared to FY 2019 Budget via a top level summary by object code, by division code and detail.

3. Reserves Procedure

The various reserves were reviewed and discussed.  It was noted that the R&R Reserve and the Capital Reserve are funded with rate payer dollars.  Commissioner Elliott commented that there needs to be a rolling stock and other equipment that is not associated with the facilities, the collection lines, the plants, etc. and this reserve needs to be titled in a manner that identifies what it is.  He added that he feels it should be funded each year based on depreciation, or with a requirement for replacement.  Mr. Junkin indicated that it would be titled Vehicle and Equipment Reserve and be funded at $500K per year, which should be enough to handle vehicle and equipment requirements which is already reflected in the budget.  Commissioner Elliott stated that staff needs to at some point come back to the Commission for approval of the naming, funding, definition and funding of all of the reserves.  Committee Chairman Copeland asked if it was possible for the entire Financial Policies to be approved at the next meeting and for it to include the reserves as a part of that.  John Donaghy commented that there is some provision in the financial policy for the Commission to establish reserves as needed, but to specifically name the reserves within the financial policies would mean every time a reserve is established the policy would need to be changed.  Commissioner Elliott stated that this may be what should be done, and Mr. Donaghy agreed it could be done if the Commissioners decided to.  Commissioner Copeland added that he would like to see the reserves stabilized and not changed often.  The committee discussed combining the Capital Reserve and the Expansion Reserve to make one reserve and also for staff to condense the list of reserves to what is actually needed.  Mr. Donaghy advised that he would produce the list of reserves as requested and incorporate it into the financial policies to bring back to the Commission.  Commissioner Elliott indicated that the financial policies should also include a section on full internal control procedures established as required by the annual audit.

There being no further business, Chairman Copeland adjourned the meeting at 11:47 a.m.