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HomeMy WebLinkAbout2018-1-25Minutes for January 25, 2018, adopted Feb. 20 Town of Nantucket Finance Committee www.nantucket-ma.gov NA+rtTf_ii,��-r Committee Members: David Worth(Chair), Stephen Maury(Vice-chair), Clifford Williams, Joseph T. Grause Jr., Peter McEachern, Henry Sanford, Joanna Roche, Christopher Glowacki, Denice Kronau MINUTES Thursday, January 25, 2018 4 Fairgrounds Road, Community Room — 4:00 p.m. Called to order at 4:02 p.m. Staff in attendance: Brian Turbitt, Director of Finance; Julia. Lindner, Financial Analyst; Terry Norton, Town Minutes Taker Attending Members: Worth, Maury, Williams, Grause, McEachern, Roche, Glowacki, Kronau Absent Members: Sanford Late Arrivals: None Early Departures: Roche, 5:01 p.m. Documents used: January 22, 2018 minutes; Review of FY2019 Budget, Capital and Collective Bargaining; FY2019 County proposed budget; Warrant Articles for 2018 Annual Town Meeting. ANNOUNCEMENTS1. COMMENT11. PUBLIC 1. None III. APPROVAL OF PRIOR MEETING MINUTES 1. Wannacomet Water Company (WWCo) 2. Siasconset Water Company (SWCo) Sitting Worth, Maury, Williams, Grause, McEachern, Roche, Glowacki, Kronau Discussion Mark Willett, Manager WWCo and SWCo — Reviewed status of goals for FY2018. The Wannacomet-Siasconset merger is at the State House level waiting for a third committee review. Looking at FY2019, carried over the main water audit, which tells how much water can be pumped per day, and doing a Leak Protection Survey; those two have to be accomplished before moving forward with a rate study. Plan to increase staff by two. The water rate is proposed to remain consistent. Looking toward to the Water Management Act to be updated in a couple of years. Looking to provide Level 3 Licensing courses on Island. Roche — Asked how many hook ups in 2017. Willett — Had 127 and expects 2018 to be about the same; it's hard to project with the number of new subdivisions popping up. Worth — Asked if WWCo will run up against any limits with the subdivisions coming on line. Willett — We did a study to define the aquifer; it's on-going to map the entire Island. The last study found saltwater intrusion in Madaket. They wouldn't put a moratorium on connection; a scientific study would restrict outside water use; according to the latest study, we should be okay even with the growth. Reviewed ways to improve water delivery. The salary budget didn't change much. A larger change occurred in professional services because of the groundwater survey. Travel increased due to the Level 3 License training. Material supply also increased so we could be prepared for equipment installation and replacement. The FY2019 budget is less than FY2018. Page 1 of 5 Minutes for January 25, 2018, adopted Feb. 20 Grause — The water main replacement for $3.5M and water tank maintenance for $700,000; asked how those would be paid. Willett — We would use some retained earnings, especially for the tank maintenance. The goal is eventually to have tank maintenance in the operating budget maintenance. His goal is to have a maintenance plan for all tanks in 2020. Grause — Asked about the new office building. Willett — Construction is moving along with the move-in date sometime in March. Grause — WWCo has about $3.3M in retained earnings, how much will go toward the building. Willett — $2.5M. Worth — Asked if the meter tech position approved last year has been filled Willett — The two people hired will both be learning that job. No additional staff is proposed. Worth — The history is that expenses under run the revenue; There is the 2018 projection of a $1.7M, which generates about a 26% profit margin in local utilities. A year ago we asked for a rate study to be done due to an apparent excessive amount of debt earnings being generated. Asked if some of that could be used for capital projects rather than borrowing. Willett — We are talking about a rate study but we first need to know the condition of the system; much of that has been done. The Leak Survey will be completed before spring and it's the last piece before the study. McEachern — Over the past four years, the revenue increased 35% and rates haven't changed since 2016. Revenue and expenses are averaged over 25% over the past four years. WWCo undercuts its revenue and over perform every year. Its variance is currently at 1-1-1-2 and will easily surpass last year's variance. He's concerned about putting money into a building that doesn't directly impact the user and not putting it into repairing the aging water mains. If FinCom doesn't make a recommendation to the underinflated expense, he'd like to see a motion to cut operation $800,000. Worth — The question is, should the public utility run above break even or be run like a private utility. Perhaps next year FinCom might have a hard time approving the budget and will let the voters hear that. To run a $1.7M net income on a municipal utility seems "out of whack." Willet — Emergency replacement of a pump or server could cost $1M. That's why that money is held. Alan Reinhard, Board of Water Commissioners — He hears the FinCom's argument but the water company is one of the most efficiently run departments in the Town. The Town is one disaster away from a huge expense; that's why the retained earnings are maintained as an account WWCo is an enterprise account not directly under the management of the Town; that's why they feel they retain the level of retained earnings they do. Maury — Asked the actual amount of certified retained earrings. Turbitt — $3.3M. Maury — The Town has guidelines it tries to adhere to in terms of its operating budget Asked what the Water company control is. Reinhart — Over the years' we've had different amounts. When doing major sewer work, we ensure we have the equipment and build up our retained earnings to cover the cost We're looking at an incredible build out in regards to connections. We're a public health agency; if there is any problem, we need to have the reserves in place to respond quickly. Advanced planning includes replacing water lines and fire hydrants and we plan for those. Maury — Asked what the 2020 money might be. Reinhart — That would be pulling a number out of the hat. We do have an analysis of future build out and needs of the project. He doesn't believe WWCo has been irresponsible in maintaining the retained earnings account; The Board looks ahead and plan. Maury — Noted that many of this year's goals and priorities are the same as last year's. He doesn't know for what the retained earnings are needed, so he doesn't know what the level of retained earnings should be. Last year the balanced budget turned into $1.7M profit; that's a huge cushion. Page 2 of 5 Minutes for January 25, 2018, adopted Feb. 20 With this year's projection, the retained earnings would end up being $3.5M. The question is what should that number be. Reinhard — The Board doesn't view retained earnings as profit. Worth — In municipal finance, retained earnings are considered profit. Maury — Last year, Bob Gardner told FinCom that retained earnings is money to be spent as WWCo sees fit. In that sense, it is profit. Roche — She's not sure why the FY2019 budget is predicting 150-200 hookups when you came in at $6.5M for actual revenue for FY2018. You know you're going to make that; it's misleading because a budget is being presented as balanced when in fact WWCo will make more money than it spends. Feels WWCo is not reporting its actual revenue on purpose. A cushion is reasonable but you need to say what the number is. Glowac1d — This conversation is worthwhile topic for FinCom to have, and it's not lost on him that this conversation is necessary because the water companies are very efficiently run. One way to clear this up is for WWCo to spend the $1.7M each year so we wouldn't have to have this conversation every year. Reinhart — The Board of Water Commissioners will take a close look at this issue at its next meeting and try to better address FinCom's concerns. Kronau — Would like a more accurate revenue number for FY2019. Moving to the expense line, the numbers generated should reflect what's happening. It is an efficiently run organization; everyone should know the actual. McEachern — Asked if there's an accounting reason why WWCo doesn't show something closer to reality. If we get revenue and expenses closer to reality, we'll have more transparency. WWCo has never shown a balanced budget. No one is answering the question. Willett — Part of the problem is trying to project connections. Worth — We would like to see a more realistic budget. Second would like the water commission to write a policy and establish a dollar amount for yearly expenses and retained earnings. Thirdly, the smaller items had money capitalized for them paid for out of retained earnings; borrowing should be used for larger capital expenses. 3. Airport Enterprise Fund Sitting Worth, Maury, Williams, Grause, McEachern, Glowacki, Kronau Discussion Noah Karberg, Assistant Airport Manager — Reviewed status the FY2018 goals. Clarified that (5:04) airline upgrades mean going to large aircraft, which in turn means looking at the interior lay out of the terminal and making appropriate changes. Have installed a new revenue control for the parking lot. American Airlines and Delta has upgraded to larger aircraft and increased their service. United has announced a conversion to newer larger aircraft. The extension of United service recalculates additional revenue of approx $135,000 and the two JetBlue extensions of service represent $400,000. Key issues include: repayment to the Town, sustainable annual revenue through the General Aviation fee. Glowacki — Asked about the General Aviation fees and how they make money. Karberg — Each user has an equivalent rate based on weight. Another key issue is funding of the national system; explained how airlines by pass those fees. Kronau — Noted insurance is going up. Turbitt — That's based on consultant recommendations. McEachern — There was a revolving tenant but that's now empty; asked if that's a net gain or loss. Asked if the Airport or tenant is bearing the cost of restaurant improvements. Karberg — Explained the leasing process for the spaces. The restaurant currently has no tenant; explained that they'd have to investigate who put down the floor. The Restaurant lease RFP has a bid alternative; the community places strong value on year-round service. Williams — The Board of Selectmen (BOS) says our airport is underutilized when in fact it's not in the Summer. Page 3 of 5 Minutes for January 25, 2018, adopted Feb. 20 Karberg — Explained how scheduling alleviates passenger backlogs. We forecast we provide service at a C or D- level; we are trying to bring that up to B. It's crowded especially in the peak of the summer. Grause — Budget numbers look like a bigger operating loss is being budgeted for FY2019; that it keeps going up in the out years isn't encouraging. Asked if revenue lines are overly conservative or what. Karberg — We do budget conservatively. The upgraded service will provide additional revenue flow. Turbitt — The fuel revolver has two parts. $2.2M goes into the general fund; costs are consumed in the revolver. It's not reasonable to insert revenue numbers from the restaurant and shop and facility charge when we don't know what those revenues will be. The way they are doing it is consistent. Kronau — Asked how much of the expense is fixed and variable. Turbitt — He doesn't look at the numbers that closely. Karberg — We don't know from year to year how much Massachusetts Department of Transportation or the Federal Aviation Administration will provide. Worth — The actual fuel for FY2017 showed a margin of 17% on $4M of revenue; the prior year the margin was 33%. Asked if they're under pressure on the fuel margin because of competition with other airports or if they have to absorb in the increase in wholesale fuel. Turbitt — To do the margin calculations, you should add the actual revenue into the enterprise to find the total sales, which should be about $6.2M total for the two years. Maury — Asked what the upper end limit is for flights the facility can handle; that's where the revenue potential lies. Karberg — There's a limit on that. The highest number of aircraft turns at a single ramp is nine a day; JetBlue will be doing that in the high season four days out of seven. There is space for Delta and United to expand their service to that level. Currently we have 25 carrier turns a day scheduled; we could accommodate another 12 turns. We're working to define the limit and looking into additional large -aircraft pads. Reviewed other means by which to increase passenger traffic and to meet the needs of that traffic. McEachern — Asked if the constraint is physical or personnel. Karberg — It's equal. One constraint is airspace capacity; the Northeast is one of the busiest flight areas in the US. Sitting Worth, Maury, Williams, Grause, McEachern, Glowacki, Kronau Discuss on Turbitt — The Board of County Commissioners adopted their budget. Departments include (5:01) Registry of Deeds and Town Clerk; reviewed the budget. Explained maintenance of effort. DEVELOPVIII. REVIEW, DISCUSS, AND • • FOR 2018 ANNUAL TOWN WARRANT 1. N ne at this time. 1. Di cussion about the Affordable Housing Trust Fund (AHTF� presentation at the BOS on January 23. The BC S supported 4-1 reducing the "ask" to $300,000; it won't show up in the article but something is being w tten down. Until they have a dedicated way to acquire land, the BOS is loath to "throw money" at A TF. A BOS member pointed out they have enough money to put down options and make down pa e�t on properties; they can then come to the Town for the purchase funds. 2. D' cussion about whether or not FinCom will be involved in the solution for the South Water Street sewer br ak.urbitt — There will be a debt exclusion question put on the ballot relative to potential funding. We arc weks away from the exploratory assessment work to determine exactly what happened. If costs rise to thc need to borrow, the question becomes what allocations are to be put where; those motions would be ad4 led to Articles 10 and/or 13. Page 4of5 Minutes for January 25, 2018, adopted Feb. 20 3. Glowacld — There's a lot of discussion about talks at the 11`" hour, that implies a decision to mess up something that's planned. There's a bunch of stuff the Town is doing in regards to affordable housing, there is no pulling back from housing. Worth — Noted that this year has been odd in that capital and the warrants were not received or approved when scheduled. X. NEXT MEETING DATE/ApIOURNMENT Date: Saturday, January 27, 2018 8:30 a.m.; 4 Fairgrounds Road Community Room Motion to Adjourn at 5:57 p.m. accepted by unanimous consent. Submitted by: Terry L. Norton Page 5 of 5