Finance & Debt Oversight Committee - Regular Meeting

Good afternoon. The regular monthly meeting of the Finance Debt and Budget Oversight Committee will come to order, and the clerk will call the roll.

Sorrento?

Here.

Driscoll? Gaddis? Hartman? Here. Hobbs? Martinez? Two present.

Thank you. Alright. A little cooler today, 87 degrees, so that's always good. So we will start with the Director of Finance, Melanie Campbell.

Thank you, and good afternoon, Chairman Sorantu, Council President Hartman. I'm happy to be here to present May revenue and expenditure reports to the committee. I'm joined today at the table by tax commissioner John Zavisha, our accounts commissioner Tom Buckley. In the audience, we do have our interim purchasing commissioner Natalie Bronagh as well as wage and hour enforcement commissioner, Dan Mori. Hopefully everyone has the May packet in front of them, and I will go ahead and turn it over to John to start with an update on income tax.

Okay. Good afternoon. I'll be starting on Page two of the report, where we're doing a comparison of twenty four and twenty five income tax collections. The withholding category for the month of May was down just under $400,000 So for the year, that puts us down just shy of $440,000 which is negative 0.7%. Withholding is a huge category for us. It's usually slightly more than 75% of our total revenue collection. So this is something we're watching a little bit. Over the last couple of years coming out of COVID, we had a couple of years where holding was up 6%, 7%. The last couple of years, two years ago, we were up like 3.6%. Last year, we were up just slightly over 3%.

So the fact that we're sort of trailing last year a little bit is just something we're sort of watching at this point. The April withholding numbers were due May 15, so this is about onethree through the year for us. So nothing too bad right now, but we are sort of watching to start to see how much of this could potentially become a trend. Sort of the opposite side of it, we have the business net profits, which were up just slightly less than $3,000,000 for the month. So far this year, the business category is up 3,600,000 This is very much pushed by sort of our top five net profit companies.

They make up over 40% of our number. We just sort of watch the business net profits. It's a lot of estimate payments as opposed to withholding an individual, which are more closer to be an exact numbers. So we do sort of watch that. It's roughly 5% to 10% of what were total collections for the year, but it is nice to see a nice bounce in that.

Last category, individual net profits. For the month, we were down just over $05,000,000 but for the year, we're still up $358,000 We sort of attributed the individual category was this year we switched to the lockbox, which got the money to the bank faster, which allowed us to have a strong March in April and now you're giving a little bit back of that of May. Mentioned that at a previous meeting. This was something we were sort of watching of how much of it was true gains and how much of it was just simply money coming early. But again, up $358,000 at the May. So overall, we've collected $3,500,000 more than last year, which is 4.3%. And over the next month here, we'll

be watching. Second quarter estimates are due June 15. So we'll see where those go to see both the business net profits and the individual on that and move forward from there. Sort of continuing with that to just go on

to Page three real quick. So where does sort of that place us? Projection wise, we're right now at 231,700,000 The budget was 231,300,000.0 So at this point, we're still looking good for the year on that. We wouldn't be looking for any changes in that category at all. And then just to also note on that page, the refunds through the May, we've issued just under $600,000 in refunds so far this year. And if there's any questions on Page two or three, be willing to answer.

Was the $600,000 pretty much what you expected in terms of refunds?

It's a little less than last year. So we're sort of seeing where June because right now, these next three months, May, June, July are big ones for refunds. I would say that, like I said, the refunds are a little lighter at this point. But again, this is sort of a first month of a three month cycle where we'll really get a good idea of where the individual refunds will take us. And then later in the year, if we're usually getting business, partnership and corporation refunds, they're usually happening more fourth quarter of the year.

Right. And those are much larger

Yes.

The refunds, obviously. Okay. All right. I just wanted to convey that I had a call from a constituent regarding the tax department, and they had failed to file their taxes for the last two years. They had an accountant, and then the accountant retired, so they did it on their own, and they just forgot.

And they conveyed to me that Darnell, who is in your tax department, was very professional, very helpful, guidance, and they were able to refile and, in fact, get a refund. So I just kind of wanted to pass that along, a lot of times in the tax department it's not the most popular department Correct. As the IRS also has those issues. But again, I wanted to convey that they wanted to take the time and let you know he did a heck of a job. Appreciated

it. to hear.

Good. Okay, next.

Thank you. Moving on to page four of the report, you'll see the general fund revenue summary through May. 41% of the year complete at this point, and collections as a percentage of budget are at 36.3. Comparatively we were at 33% the same period last year. Looking through the report, you'll see commissioner Zavicha has already covered income taxes, property taxes haven't changed since last month, those are semi annual payments.

Our license and permit fees at 43 percent are right on track with where we would expect for that category. Within the intergovernmental category, overall collections are at 36% of the budget. We do have some areas where we don't see payments until the second half of the year, which is causing that variance there. Other taxes typically come the bulk in December, and then the homestead and rollback payments, we'll see those second payments typically in October. The charges for service category at 51% trending ahead in total over the budget.

The EMS fees that reflects one payment from the county, that's an annual payment, and that's causing that variance for the year to date. Then as you look through the rest of the report, court fines and fees at 41%, just about where we would expect them to be, And then the other financing sources, that one will trail overall as a category, the transfer in from CIP is typically made at year end. I'd be happy to take any questions if you have them.

On the JEDD, Joint Economic Development Areas, by way of referral, could you just indicate if there's any entities that are behind payments to the city of Toledo?

Yes, we can check that.

Okay. Thank you. Seeing no other questions, go ahead and proceed.

The next two pages of the report move into the general fund expenditure summaries, first by category and then by cost center. Overall through May, expenditures are at 42.6 percent of the 2025 budget either committed or expended. As you look through the categories on the report, you'll see, the variance in the labor category, that is driven by the Toledo police patrol collective bargaining agreement that was settled in April, but was retroactive to April 2024. So that payment, that payroll was the first payroll of May, which you see then on this report, causing the year to date variance. That's something that we'll address and include in our mid year budget adjustment.

The overtime expenditures in total and across the three categories on the report are within budget similar to last month. The rest of the labor categories, the one we are watching is medical expenses. You'll see at a year to date variance of $882,000 that's one that's ahead of where we were at this point last year and something that we've seen increasing over the past several months and really driven by prescription drug costs. That's one that we'll continue to monitor and maybe looking at amending the budget for at mid year. Supply and service costs, supplies were running under budget.

In the service area, we do have a 43% of the budget expended or committed, as we've touched on in previous months, that's really driven by contracts that are set up for the year to cover mowing and recycling costs, activities. Any questions on this page? I'd be happy to take them.

No, I think it's wise to keep an eye on the medical expenditures, and I'm glad you zeroed in and said it was the prescription costs that have risen, and we're hearing that all over the country. But let's keep an eye on that, and if we have to make a midyear adjustment. And you expect midyear adjustments, director, to be introduced when?

We are looking at the August meeting for counsel. We ask all of our departments if they have any requests for consideration to submit them to us by mid July so we can evaluate and prepare that. We do request that it's not really new spending or initiatives or programs or positions. It's just anything that might need to be modified within the existing budget.

Okay. Great. Alright. Thank you. Next.

Page six is the breakdown by cost center. Several areas on the port I won't touch on because we've talked about them before where we're running ahead of budget, but, we don't have concerns at this time. A few areas just to highlight where we're maybe behind where we would expect. The economic development area they're at 19%. The bulk of their budget is the vibrancy initiative as well as the tax expansion incentive program. Those are things that we'll see expenditures for over these next coming months. But I'd be happy to take any questions if you have them on this page.

Okay. Seeing none, let's proceed.

Okay. The last two in the packet are the revenue and expenditure reports for all funds. And then we also have submitted, the ARPA report and the CIP report and would be happy to, answer any questions that you might have as you've reviewed the reports.

Seeing none, let's go next.

I will just then briefly touch on ARPA. We're now through May '25 for the program starting it started back in 2021. All of the ARPA funds are obligated, as they were required to be at the '24. There's 34,000,000, remaining expenditures that will happen between now and the 2026, which is the end of the performance period.

Okay. Great. And Commissioner, as far as the IRS activities, pretty much on schedule?

Yes. Again, slightly positive month again this past month. I will be watching the second half of the year. We had a very strong second half last year. So to get to the 6.5 number we had last year, we would need to continue that this third and fourth quarter. So we'll be watching that, but we're definitely excited at this point to be ahead And at the end of

the IRS unit, is it fully staffed? Yes. Okay. Very good. All right. Okay. Anything else under finance?

No further updates.

Okay. As far as the audit goes, Commissioner, things are proceeding. I know we filed Hinkle at the May.

Right. And then that's when our auditors take over, and they're still working on submission by the end of the month to the Auditor of State's Office. So that's on track.

Okay, great. All right. Thank you very much. With that, I think we're complete.

Thank you.

Okay, thank you. And then our city auditor is next on the agenda, And John our CPA, will give a report and also discuss the plans for this year for the internal audit. Welcome, city auditor.

Thank you. Good afternoon. John Rovulski, city auditor. Today, I'll be presenting the twenty twenty five-twenty twenty six internal audit plan for your adoption. Let me pass out a handout.

Okay. So the twenty twenty five-twenty twenty six internal audit plan will outline the audit priorities for the upcoming year beginning 07/01/2025 and ending 06/30/2026. If you flip to page two So, here I list the audit topic, the preliminary objectives, the timing and the hours. To note, each audit and its objectives will be refined down to a more specific scope. Audit number one is the city grass cutting program as the topic.

And the objectives there include does the city's monitoring of vendors ensure work is performed to agreed upon scope? And does the city use its complaint management systems effectively? So, here it's looking into vendor performance of the contracted work. And that to know that one was a city council recommended audit. This year, I took in feedback from city council if there are any audits that all of city council to determine if there are any audits that they thought could be good audit topics for the year and this one was one that was recommended and seemed to have multiple council interest.

The second audit is the asset management audit. This was included in the 2024 audit plan. And this one is our physical assets and expendable inventories recorded and safeguarded properly. And the third audit is the topic is cash and receipt handling. And this was an alternative topic from the 2024 plan.

And this one focuses on whether controls are in place to protect petty cash at in other cash handling and smaller scale operations. So, the audits will take place from Q3 twenty twenty five to Q4 twenty twenty or Q2 twenty twenty six and each will be approximately two hundred to two fifty hours and these audits will be performed alongside other city auditor duties such as the biannual review of investments, budget recommendations, ad hoc city council reporting and support, advisory audit committee meetings to review the external audit, for example, follow-up procedures on prior audit recommendations, and other office projects and daily activities. With that, I welcome any questions you might have and also request that this committee adopt the plan. Thank you.

Thank you, John. On the asset management I'm sorry, on the management issue of assets, will you also be doing some auditing with Department of Public Utilities?

That's a good question. I still need to refine the scope. So, I'll go through a risk scoping procedure where I consider where might be the best place to focus my efforts. And for asset management, physical assets, for example, that might be the fire department looking at movable assets like trucks and furniture and fixtures and the controls around those. And then the other side of that is expendable inventory, that could look at water treatment, for example, and whether they have good controls and security over their different parts they need, like pumps and other plumbing parts, for example.

Right. And I also, as you well know, DPU has a lot of different vehicles that they're utilizing, so I think that would probably be part of it too. I know it's a lot of work, but we do have an obligation to make sure that we have the assets properly safeguarded and they're being utilized. Any other questions from members of counsel? Okay.

And as you've stated, you know, members quite often are asking you to audit various areas and look at things, and we really appreciate your efforts in that area because, again, there are things that come up all of a sudden that raises questions, and we want to make sure that we're accurately recording the information. So we appreciate your efforts in that area, too.

It's my pleasure. And I did make my plan so I can continue working on city council requests, special requests.

Right. Yep. Because that is important. And very often, they need the information in a very timely manner, and you've been very good about doing that for us. Okay, any other questions? Did you have anything else you wanted to present? Okay. Are there any members of the public that would care to address the Finance Committee? Anyone care to address the finance committee? Okay. Seeing no further business, we stand adjourned. Thank you.