Financial Planning & Policy Committee Meeting
Monday, May 5, 2014
7 p.m. - Mallinckrodt Community Center
(Immediately following the Lakefront Committee)


Commissioners/Committee: Chair Olvany, Benz, Brault
Commissioners: Crowley, Abbott
Staff:  Wilson, Bingham, Bowen, Eppelheimer, Lambrecht, Donoghue, Holloway

Kathy Routliffe, Pioneer Press
Ron Amen, CPA, Lauterbach & Amen, LLP
Eric Anderson, BMO Capital Markets

I. Meeting Called to Order
Meeting called to order 7:10 p.m.

II. Approval of Minutes
A. Commissioner Olvany moved approval of minutes from April 7, 2014, seconded by Brault; all voted yes, the motion carried.

III. Communication and Correspondence

IV. Recognition of Visitors
A. Ron Amen, CPA, Lauterbach & Amen, LLP
B. Eric Anderson, BMO Capital Markets

Commissioner Olvany changed the order of the Agenda to start with New Business then proceed to Old Business. All agreed.

V. New Business
A. Presentation of the 2013 Comprehensive Annual Financial Report

Superintendent Eppelheimer reported that the financial audit for 2013 was complete and went well.

Ron Amen presented the 2013 Comprehensive Annual Financial Report starting with the format of the Management’s letter and highlighting each area below:

  • Funds over Budget – table shows actual expenditures in first column, budget in second column and appropriations in third column.  Management responses are detailed on report of what happened throughout the year for the District.
  • Capital Fund with Deficit Fund Equity – December 31, 2013 was negative $2,368,634 compared to December 31, 2012 was positive $1,918,647.
  • GASB Statement No. 67 Financial Reporting for Pension Plans and GSAB Statement No. 68 Accounting and Financial Reporting for Pensions – Mr. Amen commented on the implementation process and provided necessary information to the District.

Commissioner Brault commented on the pension funding amounts and how would the GASB change effect this year’s funding.  Mr. Amen stated that the unfunded actuarial accrued liability would be $5.2 million. This is the number the District would have to book as a liability on the financial statements. It may not affect how you budget or internal operations on month to month reporting.  Mr. Amen stated that the approach this year is to make the District aware of the GASBs and next year gives the District a calculation that is more specific.  Mr. Amen stated that the way the actuaries will determine year-end fund liability is changing.  The higher percent funded the lower the unfunded liability will be.

Mr. Amen reported on prior recommendations outline in the report as follows:

  • Account Reconciliations Completed On A Timely Basis – Has been implemented.
  • Journal Entry Review and Approval – Has been implemented.
  • GASB Statement No. 34 Implementation – Has been implemented.
  • Fund Balance Journal Entries – Has been implemented.
  • GASB Statement No. 61 – The Financial Reporting Entity: Omnibus – An Amendment of GASB Statements No. 14 and No. 34 – Has been implemented.
  • Funds Not In Compliance With Fund Balance Policy – Repeat for next year since it has not been fully implemented.
  • Gift Certificates – Has been implemented.
  • Capital Assets Policy – Repeat for next year since it is not fully implemented.
  • Bank Reconciliations – Has been implemented.

Mr. Amen acknowledged Director Wilson, Superintendent Eppelheimer and staff for completing these procedural accounting recommendations successfully.

Commissioner Olvany remarked on the fund balance policy and what are the District’s thoughts. Superintendent Eppelheimer stated that he looks at this a couple of ways. How are we doing overall and he acknowledged we are out of compliance with some funds, but we are not that far out of compliance. At year-end we will look again at the fund balance to see where we need to true up through the budget.

Commissioner Olvany asked if this may be issue with a rating agency.  Superintendent responded, probably not since it is an internal compliance issue and the rating agency looks at the health of the entire District.

Mr. Amen reported that the District submitted the 2012 CAFR to the Government Finance Officers Association and that the District received the Certificate of Achievement for Excellence in Financial Reporting.  Mr. Amen acknowledged that this was a great award to receive and the District should be proud of that accomplishment.

Ron reported on the Independent Auditors’ Report, he stated it is referred to as an unqualified opinion.

Ron reported on Governmental Funds which reflects the District’s income state for the year. Reports show a decrease of fund balance in the amount of $4,617,157. He noted that this was used in the capital reserve fund and as the District put $8 million into its future through capital expenditures.

Commissioner Olvany commented on the insurance proceeds and where are the numbers reflected.  Mr. Amen stated that it comes through the capital reserve fund revenues.

Commissioner Benz moved and Commissioner Brault seconded a motion to accept the Comprehensive Annual Financial Report and recommended acceptance by the full Board

B. First Quarter 2014 Financial Results

Superintendent Eppelheimer briefed the Committee on the first quarter financial results.  Cash flow is adequate with fees being received in advance of summer programs and the first half of the 2013 tax levy has been received.  The Committee commented if year-end projections can be developed at this point in the accounting software.  Superintendent Eppelheimer stated we are looking into this, but the summer may not allow recreation staff to spend a lot of time on reviewing numbers.

C. Post-Issuance Compliance Report

Superintendent Eppelheimer reported that according to our last couple of bond ordinances, a report is to be prepared attesting that certain conditions exist to comply with the tax advantage of the obligations.  The Committee accepted the Compliance Report.

VI. Old Business
A. Financing Options – Lakefront Master Plan

Eric Anderson presented the Review of Levied Debt and Pro-Forma Debt Service report. He reported that the District is using the all-inclusive interest rate of 3.50%; keep in mind this number changes every day. The question the Committee inquired about last time was how much does is represented if the District were to issue bonds having a 3 year retirement and going back to the market each 3 years.  The headroom adds up to levy year 2029 about $7.7 million; smaller amounts of interest are incurred as we would be issuing over 3 year periods.
Mr. Anderson reported that bond levies could be structured that would result in o% increase year of year on the total levy throughout LY2014-2018; the operating side could continue to increase by 2.1% per year.

Commissioner Olvany asked if the 2.1% annual increase in the operating levy is a figure worked with staff.  Mr. Anderson confirmed that and that is based on the average CPI of the last 5 years.  Mr. Anderson also stated the past 20 years CPI averaged 2.3%.

Commissioner Olvany summarized to reflect that the District was tasked to have a flat 0% increase in tax levy for the first 5 years after the debt issuance. He stated that next 5 year period would average less than 1.2% increase per year to the Wilmette tax payers.

Commissioner Brault summarized that this plan tells us if the Board chooses we could raise $14 million in debt and set a repayment schedule that would allow us to not have a tax increase on any basis for the next 5 years.  He stated that the starting point would still be less than the total debt the District had in 2008. This plan allows us to raise $14 million dollars and freeze taxes for the next 5 years and then continue to have a projected tax increase of less than 1.2% per year between 2019 and 2028.  
Commissioner Brault commented on where we go from here, assuming this is a conceptual plan he would like see a recommend in two pieces: one, with the conceptual bond issuance plan and two, recommendations on how to treat the next 5 year taxes.

Director Wilson highlighted what is achieved in this model is the repayment of the debt within the first 5 years is at a level that we can utilize the full CPI of the capped fund within the tax levy and still net out to the bottom line to be no increase. This is within the structuring of the debt, not within the tax levy.

Director Wilson stated that this Committee should make a recommendation to the full Board on how to pay for the Lakefront Master Plan. The recommendation this Committee is looking at is debt financing and the only way to achieve this plan is by way of referendum. Commissioner Brault stated we need to go to the full Board with a financing plan for $14 million.

Commissioner Brault made a motion to recommend to the full Board as it is graphically depicted on page 5 to raise a total of $14 million. Commissioner Benz seconded the motion. Motion carried.

Commissioner Brault would also like to make a recommendation to the effect that the Board adopt a statement of intent that it will not seek a tax increase over the next 5 years in conjunction with the proposed financing structure.

Commissioner Olvany added to statement, as outlined in the proposal from BMO Capital Markets by our financial advisors.  Director Wilson stated that the debt repayment structure does not prohibit future boards from utilizing the CPI on the capped portion of the tax levy. Director Wilson is comfortable with this plan.

Commissioner Brault asked Director Wilson if wording could be added that there will be no tax increase for the next 5 years as recommended by the Financial Planning & Policy Committee and as supported by staff.

Commissioner Olvany commented on wording to reflect, that the Board adopt a statement of intent, in conjunction with the proposed funding pronouncement, that the District will not seek a net tax increase over the next five years, as outlined in the Pro Forma Plan prepared by the BMO Capital Markets and in conjunction with staff.

VII. Adjourn to Closed Session
Commissioner Olvany stated the Committee will not be meeting in closed session.

Commissioner Brault moved, seconded by Benz; all voted yes, the motion carried.

VIII. Next Meeting
The next meeting will be scheduled after the May Board Meeting.

IX. Adjournment
There being no further business to conduct, the meeting was adjourned at 8:20 p.m.