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Finance Committee Meeting Minutes November 15, 2017

Written by Janice Meridith on . Posted in Finance Committee Minutes.

For your consideration, please read the minutes from the Finance Committee Meeting held on Wednesday, November 15, 2017.

Finance Committee Minutes 11-15-17 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

Wednesday, November 15, 2017 at 2:00 PM 

FINANCE COMMITTEE MINUTES

PRESENT:                             

Donald M. Elliott, Chairman

Steve Copeland, Commissioner

Mike Browning, Commissioner

Jimmy Junkin, Executive Director

John Donaghy, Director of Finance

ALSO PRESENT:                 

Cornell Harvey, Commissioner

Andrew Burroughs, Deputy Executive Director

Todd Kline, Director of Engineering

Pam Crosby, Director of Procurement

 Jay Sellers, Director of Administration

Charlie Dorminy, H.B.S. Legal Counsel

Jeffrey Singletary, T.S.I.                                                                                   

Chairman Elliott called the meeting to order at 2:00 PM.  

PUBLIC COMMENT PERIOD

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

APPROVAL

  1. Minutes from October 18, 2017 Finance Committee Meeting

Commissioner Browning made a motion seconded by Commissioner Copeland to approve the minutes from the October 18, 2017 Finance Committee Meeting.  Motion carried 3-0-0.

  1. Worker’s Compensation Renewal Recommendation – J. Singletary T.S.I.

Jeffery Singletary with Teamwork Services Incorporated presented the recommendation for the renewal of the Worker’s Compensation insurance.  He advised that as per the memo, the recommendation was to remain with Zenith who has been the carrier used for the past nine years for Worker’s Compensation insurance. He explained the Experience Modification and credit of 15% as compared with what would have been an increase of 13%.  He referred to the memo and the notation of the 4 carriers that were reached out to for quotes, of which only 2 others in addition to Zenith providing bids. Mr. Singletary mentioned that there was one bid slightly lower than that of Zenith, however it was not recommended to move away from the relationship with Zenith.  He also noted that Zenith has been the best carrier to work with out of the 28 that T.S.I. has to work with.  Their adjusters do a good job, the safety representative makes multiple visits to JWSC every year, and he is also a part of the safety stand down and the safety incentive program every year as well.  Zenith also provides JWSC with defensive driver’s courses every year.  Also mentioned is that if anything were to go to litigation, Zenith uses the same legal counsel group that JWSC is currently using.  Mr. Singletary expressed that during the past 9 years of quoting for Worker’s Compensation insurance, Zenith has consistently come in at the lowest or very close to being the lowest on their quotes, and the relationship has been very good.

Commissioner Browning made a motion seconded by Commissioner Copeland to move this item to the full Board for consideration of approval.  Motion carried 3-0-0.

  1. Surplus Equipment – P. Crosby

Pam Crosby advised that this is a request to take this item to the full Board for approval to declare this piece of equipment as surplus.  She referenced the memo and attached photos of the equipment as provided, and noted that it was a 2004 John Deere Excavator.  The planetary gear is no longer working and would cost an estimated $15,000 to fix it and the piece of equipment is not worth that.  It is recommended to declare it as surplus to move it out of inventory.

Commissioner Browning made a motion seconded by Commissioner Copeland to move this item to the full Board to consider.  Motion carried 3-0-0.

  1. Sixth Addendum to Operating Agreement – C. Dorminy

Charlie Dorminy advised that this item was previously discussed eight months prior.  It was approved and discussed, then it was decided to make a few adjustments.  He added this is to amend the Operating Agreement to give JWSC additional flexibility in structuring the rates, and the ability to utilize a flat fixed rate on water and sewer as desired from year to year. Mr. Dorminy provided the redlined copy and noted the changes to Sections 11 (b) and 11 (c), as shown on the memo.  This amendment will enable JWSC to determine the mix of the cost components and whether they want to initiate any type of flat fee rate for water and sewer service at the time that the Rate Resolution is passed.  Chairman Elliott noted that there will be a presentation of where we are in looking at our rate model and how we structure our rates.  He included comment that the addendum is needed to be written in such a fashion that the Commission can select how they want the rates to be structured and that once it is done, the rate structure needs to be kept to for a long time which adds credibility.

Commissioner Browning made a motion seconded by Commissioner Copeland to move item #4, the Sixth Addendum to the Operating Agreement to the full Commission.  Motion carried 3-0-0.  

DISCUSSION

  1. Director of Operations Position (Budgeted for 4th Quarter of Fiscal Year) – J. Junkin

Mr. Junkin noted that this position has been discussed and in looking at it, there is a variety of safety issues and concerns, including functions that require some oversight without consolidating everything yet.  He added that we can do a lot of those things that will benefit us as an organization and improve our efficiencies just by focusing particularly on our asset management program. We are going to hold off on doing anything with the position of Director of Operations because we think we may be able to get by with a different structure on this job, but we want to go ahead and get the duties and tasks outlined and do a business case to support if this is a good remedy or a good financial opportunity to get those resources in to do those things.  Mr. Junkin added in a program sense for the organization, there are needs in the safety area which certainly must be addressed, as well as asset management. So we are going to continue to evaluate that and probably look to do some more about it once we get some of the details worked out and try to talk about it before the 2019 budget.  Maybe then we will be closer to having enough facts to pull it together.  Commissioner Harvey added that he is asking for the funding of the position to be removed from the budget. He also noted that some of those duties should be covered by the Deputy Director position as well as by the Superintendents.  He would like to see this position defunded for now and those monies placed in other areas.  For the next year, consideration for this position should come before the Human Resources Committee.  He added that for the next year Mr. Junkin should take a closer look at it again in 2019 or the next budget year.  Commissioner Harvey also noted that Compliance should be inclusive in these duties. Mr. Junkin commented that he is not opposed to holding on until the next budget year to consider this restructured position.  Chairman Elliott asked if there is anything needed to be done by the full Commission to note that this position will not be filled.  It was agreed that it will be discussed within the Commission meeting and noted within the minutes that the position will not be filled during the current budgets year.  

  1. Planning & Construction Services Fees Structure and Process – T. Kline

Todd Kline presented to the Committee the Planning & Construction Fees Structure and Process.  He provided to the Committee a copy of the actual fee structure for their review.  He added that on May 4th of 2017 in the discussion for the full Board an overview of what Planning & Construction does and the different services that Planning & Construction provides to support private development as well as capital projects and operational internal support.  Staff had determined the need to ensure that the funding was appropriate and that operational fees are not supplementing development services, and that all of the capital costs are captured internally for our capital projects appropriately.  Todd provided and referenced the memo as prepared which would go out to the planning and construction community, shareholders, engineers, developers, architects, etc., including local government officials, to give them notice of what our Planning & Construction will be doing.  He summarized that on December 1st, they will begin collecting fees for the different activities as provided by the division, and added that the Board did revise the 2017-2018 Rate Resolution to include these fees. Todd continued to discuss the implementation of collecting the fees for the Planning & Construction services, along with the plan review process with the City and County development.

  1. Rate Model Development – J. Donaghy / Tony Hairston, Raftelis Financial Consultants, Inc.

John Donaghy presented to the Committee that in previous meetings the proposed changes in rate structure have been discussed.  He introduced Tony Hairston from Raftelis Consultants, Inc. and his presentation on the Rate Model Development, the structure as it is now and possible changes for next year. Mr. Hairston began by providing some of the background on the current rate structure, including base rates, administrative costs, operational costs, and usage rates.  He then continued with a detailed discussion of the current rate structure and the various fixed and variable charges: the base and usage charges and how the rate payers fund the cost of operations, the cost of renewal and replacement, and the cost of debt.  Statistics of current city and county, including residential and non-residential customer usage were provided and reviewed. Mr. Hairston then briefly touched upon what is currently in the Operational Agreement, the proposed changes to that, and then the rate structure options.  He then discussed some of the options that can be considered in reviewing the rates and the various charges.  There was some additional discussion among the Committee regarding the rates and fees and options for the future.  Mr. Hairston and Raftelis Financial Consultants will continue working with JWSC on the models and possible future options for the Rate Structure.  

  1. Bond Issue Calendar – J. Donaghy / Courtney Rogers, Davenport & Company

Chairman Elliott prefaced the discussion by noting that there is potential for a tax law change that will limit the ability to advance refund old bonds with new bonds.  John added that it will cause this to become a taxable event which because it becomes taxable would increase the interest rate on the bonds that would be issued to retire the old bonds, and which would negate any savings possible with the refunding.  So, the decision that the Commission has to decide is if it wants to advance refund to go out for new bonds for the existing bonds.  With possible and unknown changes in interest rates, the new present savings cannot be determined. Also, the 2010C bonds have a $3.8M reserve attached to them, and by refunding the bonds now this money could be freed up to transfer for use in completing infrastructure projects now if so desired. Davenport has developed some options to be considered regarding this $3.8M and the refunding of the old bonds.  Courtney Rogers believes there is a strong possibility that the market will not dictate that there will be a reserve fund necessary for the new bonds.  Mr. Rogers continued to advise that the original Bond Issue Calendar was based on anticipation of borrowing new money and the possible refinancing of the existing debt sometime in the Spring of 2018, however, with the pending tax legislation in Washington, there are some reasons that it may be beneficial for JWSC to look at refunding the existing debt now before the end of the year to obtain potential savings that are in that debt to do that.  He and Doug Gebhardt from Davenport & Company are present to discuss those changes and the potential impact of the refinancing of the remaining 2010C debt. The pending tax bill would stop local governments from refinancing debt in advance of the call date, as long as it was previous to 90 days before the call date with tax exempt bonds.  This Bill was introduced two weeks prior.  The passing of this Bill means that JWSC would not be able to refinance the 2010C bonds after December 31, 2017.  Mr. Rogers and Mr. Gebhardt presented to the Commission the savings that could be incurred if the Commission were to choose to refund the debt before that date. If this was not done, it would be March of 2020 before these bonds could be refinanced since the call date on them is June 2020.  Due to the short time period for this decision and action, an RFP for the Bond Sale was put out, of which the proposals are due back on November 22nd. The goal is to save on the interest rates, and to free up the reserve fund which could then be put back toward capital. Mr. Rogers and Mr. Gebhardt then discussed the process, reasons, and the three options along with possible savings in interest and freeing up the reserve of $3.8M. The revised Bond Issue calendar was presented and reviewed.  It was suggested to hold a Special Called Meeting for Davenport to present the RFP results and make a recommendation, and for the Commission to vote on the option of refinancing the bonds.

  1. 2017 Audit Report – J. Donaghy

John Donaghy presented the 2017 Audit Report to the Committee.  He advised that David Irwin form Mauldin & Jenkins will be present at the Commission meeting on Thursday to go over the audit report.  The Finance Committee was provided with hardcopies of the audit report with them to review prior to the Thursday Commission meeting.  John proceeded to discuss some of the findings of the auditors with the Committee.  He noted the section “Accounting Recommendations and Related Matters.”  One item cited in the Commission’s financial statements as a significant deficiency was the segregation of duties regarding the areas of cash management, disbursements and the posting of journal entries.  Due to the limited size of staff, this has not been possible previously, but is currently being addressed and corrected.  This should not be an issue in the future. The areas contained in the recommendations for improvement were voiding of cash receipts and billing adjustments, combination of bank accounts in the general ledger, customer deposits, capital assets, and written policies and procedures manual.  There are already remedies in place to reconcile some of these recommendations.

  1. Revision of Financial Policies – J. Donaghy

John Donaghy presented to the Committee the Revision of the Financial Policies.  He noted that this revision was in draft form only, and did not include the budget review process nor the segregation of duties which had been addressed by the auditors.  These items are to be addressed and added.  The revision of the financial Policies is expected to come back before the full Commission in the late December Commission meeting. 

  1. October End of Month Financial Statements – J. Donaghy

John Donaghy presented the end of month financial report for October 2017 to the Committee. He reviewed the balance sheet, noting the bond sinking fund and fixed assets.  John then reviewed and explained the supplemental schedule of cash balances for October 31. The condensed revenue statement was then reviewed and discussed.  The Committee requested that the reporting be provided by the divisions for budgeting review within each line item for each of the divisions.  Meetings should then be held either by the Executive Director or the Deputy Director with the Superintendents to review the budgeted areas and any notable variances each month.  This will ensure that budgets are followed, variances noted, and any necessary corrections are made.  John then noted the overtime report year to date and that the hurricane expenses were factored out.  The project report with the expenditures to date noted and the balance of cash reserves area revised was the final item for this discussion.

EXECUTIVE DIRECTOR’S UPDATE

There was no further update at this time.

Meeting was adjourned at 5:10 p.m.