2024-05-14 Council FIN MinutesFINANCE COMMITTEE MEETING
May 14, 2024
Elected Officials Present Staff Present
Councilmember Will Chen (Chair) Kim Dunscombe, Deputy Admin. Serv. Director
Councilmember Jenna Nand Oscar Antillon, Public Works Director
Council President Vivian Olson (ex-officio) Scott Passey, City Clerk
Mayor Mike Rosen
Guests Present
Mike Bailey
Scott Bauer, Northwest Municipal Advisors
Marc Greenough, Bond Counsel
CALL TO ORDER
The Edmonds City Council Finance Committee meeting was called to order virtually and in the City
Council Conference Room, 121 — 51" Avenue North, Edmonds, at 5:31 pm by Councilmember Chen.
2. COMMITTEE BUSINESS
1. Financial Policies
Mike Bailey reviewed a draft financial policy framework:
• Financial reporting policy
o Annual comprehensive financial reports
o Interim financial reports shall:
■ Identify any issues or items of note on the cover page
■ Provide beginning fund balance, revenues, expenditures and ending fund balance on a
modified accrual basis for all funds
■ Provide the unreserved and reserved cash balances for all City funds
■ Indicate any interfund borrowing necessary to maintain positive cash balances in a
manner consistent with the City's interfund loan policy
■ YTD status of all major fund revenue and expenditures of the City
■ Cash flow report for the General Fund illustrating anticipated receipts and disbursements
for each future month and the actual receipts and disbursement for past months
■ Project reports shall be presented on major projects (operating and capital projects)
previously identified by the committee
■ Investment balances along with YTD interest earnings
o Mid -year financial review
■ Review of the prior year's audit
■ Review of the current biennial budget to date
■ Preview of the future budgetary expectations
• Fund Balance Reserve Policy
o Introduction
o Goals of the Fund Balance Reserve Policy
o Fund Balance Reserve Policy
o Objectives
o Factors that Influence the Appropriate Size of Reserves
o Reserve levels for City Major Operating Funds
■ General Fund
■ Contingency Reserve Fund
05/14/24 Finance Committee Minutes,
■ Water Utility Fund
■ Sewer/Wastewater Treatment Plant Fund
o Utilization of Fund Balances or Reserves
■ Limitations of fund balance reserve use
o Fund balance and reserve replenishment
Questions and discussion followed regarding a suggestion to have audited financial reports come to
the finance committee and/or city council for review, 30 day period for the mayor to declare a fiscal
emergency on behalf of the administration, the mayor presenting an annual replenishment plan within
60 days, adding language to the interfund loan policy regarding how the interfund loan impacts CIP
projects, short term versus long term debt policy, requiring the administration to identify the length of
short term debt, monitoring, not using one-time revenues to support ongoing expenditures, timeline for
utilizing fund balances or reserves, the council's role in monitoring, whether lowering the General Fund
Unassigned Fund Balance would impact the City's credit rating, and whether a 12% reserve level for
the Water Utility and Sewer/WWTP Funds was adequate.
Mr. Bailey continued his review:
• Interfund Loan Policy
o Long Term Interfund Loans
o Short-term Debt Policies
• Budget Policy
o Purpose
o References
o Operating Budget Policy
o Long Range Financial Strategy
o Revenue Policy
o Expenditure Policy
Questions and discussion continued regarding policies related to maintaining assets at a level that
protects the City's capital investment and minimizes future maintenance and replacement costs, the
City maintaining an equipment replacement and maintenance needs analysis and updating the
projection every two years, whether City buildings are insured to their replacement value, defining long
range planning, what constitutes conservative revenue estimates, how conservative revenue estimates
differ from Finance's standard operating procedure, diversifying the City's revenue streams, policy
related to the City refraining from making budgetary decisions outside of the biennial budget process or
the formal budget amendment process, timing of budget amendments, understanding how the City
reached the current fiscal emergency, recognizing increased maintenance costs as a result of capital
projects (such as Civic Playfield and landscaping on Highway 99), not spending staff time on projects
until they have been prioritized, process for adopting framework policies, how the framework would
change how staff does business and how the council interacts with the administration, and utilizing
project numbers to ensure transparency regarding expenditures.
Committee recommendation: Return to finance committee next month
2. Utility Bond Issue
Mr. Bailey advised a bond issue is contemplated to support, 1) refinance of existing outstanding debt to
save money, and 2) borrow additional resources to complete significant water and stormwater projects.
Scott Bauer, Northwest Municipal Advisors, reviewed:
Background
March 2023 Reviewed Refunding with City
April 2023 Presented refunding to Finance Committee
June 2023 Council adopted refunding bond ordinance (Ordinance No. 4309)
05/14/24 Finance Committee Minutes, Page 3
Had received indicative rates indicating a refunding through a bank could be
close to the public markets
Informed the council that we would proceed with an RFP for bank financing, then
make decision based on results.
July 2023 Issued RFP to banks for refunding the 2013 bonds
Best bid showed NPV savings <$500K, less than half the estimated savings from
the public market
August 2023 City decided to proceed with refunding via public issuance
Financing process was to restart toward the end of 2023
January 2024 Restarted the financing; new money for water and stormwater projects included
May 2024 Finance committee and city council to consider new money Bond Ordinance
Current bond market
o Long-term interest rates increased for much of 2022 and peaked in October 2023
o Rates are below the 2022 and 2023 peaks
Bond Buyer ZO-Bond Gen era I obligation Index
November 20,1986 to May 9, 2024
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aw
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Limited Tax General Obligation Debt
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a ra
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rates
Continue to monitor
Water and Sewer Revenue Debt
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June 1. 2023
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0 2024 Bonds Financing Plan
05/14/24 Finance Committee Minutes,
4
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Refund $13,045,000 Water and Sewer
Revenue Bonds,2013
— Estimated NPV Savings of $1,015,000 or
7.8%of refunded bonds
— Rekaw 52,129.031 from Reserve Account
and contribute to refunding
' fotof tosAJbw fonngs of Sr.073,000.
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New Capital Project Proceeds for
Water and Stormwater
— 59.5 million for Water
— $2.5 million for Stormwater
— Level debt service
— final maturity 12/1/2044
Schedule and Next Steps
o Tues, May 14
Finance Committee (ordinance introduced)
o Tues, May 21
Council meeting to consider bond ordinance
o Thurs, May 23
Rating call
o Mon, June 3
Receive rating
o Wed, June 5
Post Preliminary Official Statement
o Thurs, June 13
Competitive Bond Sale
o Tues, June 25
Closing
Marc Greenough, bond counsel, was present to answer questions.
Questions and discussion followed regarding stormwater and water projects that would be funded by
the bonds, why the City would borrow when there is cash balance in the utility funds, difference between
cash balance and restricted cash balance, 2024 budget for the stormwater and water utilities, rate
analysis that considered upcoming projects, $25 million in stormwater and water projects in the next 5
years, potential impact on rates without bonding, providing council the financial modeling associated
with decisions described in the background, use of net present value savings to determine if refunding
is advantageous, net present value savings net of issuance costs, expected next steps, and risks of
deferring a decision.
Committee recommendation: Full council
3. March 2024 Quarterly Financial Report
Ms. Dunscombe advised she did not prepare a presentation for the March report but could respond to
questions. Questions and discussion followed regarding differences in the cash balance in the All Funds
Financial Summary and in the General Fund Overview, journal entry done annually rather than monthly
to separate cash and investments for financial statements, short term borrowing, restricted cash in two
CDs as collateral, and funds the General Fund borrowed from the cash pool.
Committee recommendation: Received for Filing
4. April 2024 Monthly Financial Report
Ms. Dunscombe highlighted the following:
• General Fund
o Revenue growth in 2024 compared to 2023
o Decline in utility tax revenue compared to budget
o Development services revenues are up due to Edmonds Green Apartments paying a large
permit fee
05/14/24 Finance Committee Minutes, Page 5
o Park revenues are improving due to programming
Street Fund
o Increased revenue from TBD vehicle tab fees beginning in March
REET
o Revenues are 19.5% or $145,444 higher than last year. Projections indicate REET revenues
are on track to meet budget target of $3 million.
Questions and discussion followed regarding whether to change revenue forecasts mid -year, the
General Fund 001 Cash Flow Forecast Report, and outstanding AR and AP.
Committee recommendation: Received for Filing
5. Council Rules of Procedure Section 1 & 2 Authority and Council Organization
Committee recommendation: Schedule at future meeting
3. ADJOURNMENT
The meeting was adjourned at 7:36 pm.
SCOTT PASSEY; L CLERK