Finance Committee - Regular Meeting

Sounds smart. We'll let Jesse and Tamara speak for you. Great. So this um amendment to the fund balance policy is really clarifying and adding a section that's specific to our special revenue funds which include our state street a storm water fund and hotel motel. Um with our um approval letter for budget for this year from the controllers's office. They recommended that our fund balance policy also include the recommendation for having the balance of 2 months or 16.67% six seven% of our operating budget in those. So the update to this policy is really adding a section for that that um you know specified that these should be full of those special revenue funds as well as the general fund.

Okay. Um and which funds specifically are not meeting that criteria so far? Um storm water state street aid um hotel motel is very close. Um drug fund doesn't really have any um ongoing operating. It's you more one time. They have a they have an ample balance in the drug fund. It does app it does apply to that but drug fund does meet the requirement already. Yeah. State street aid hotel motel and storm water three funds. Is the state street aid the one that was going to be close to depletion or was it the storm water? Both of them. Both of them. Both of them were utily utilizing them. So it's a good word utilizing.

All right. Thank you. And with with that, you said working toward it. So what's the plan? Does it My question was okay. So we we set that we've already set the budget for this year. Are we going to have to do something midyear to get this to the point where there are funds in there so we can have a 16? So it's basically going to be pulling funds from someplace else.

Right. I don't think the way that this um revision on the policy is drafted is that if a fund um falls below the threshold that's recommended that we would um come up with a plan to bring it to that point over over a three fiscal year period. So we don't have to do it all at once. We can um phase it over a couple of years to get it to the point where um we meet that recommendation. And roughly what would the dollars be to for the storm water to get to 16.67? What would that dollar amount be? I would have to go back and confirm. I can um send that out to you after question. Wasn't that in some of the documentation you sent us? I don't believe so. The budget. Okay.

Thank you. For the record, the way she explained it was exactly the way that I was going to. Well, it was well said. You did a great job, J. All right. Um, I I think this makes a lot of sense. This should be in place anyways. I'm surprised it it hadn't been in place already. You know, being proactive as we typically are, but it just those funds are have a specific purpose. So, it's always been, okay, well, let's use it. If we got it, let's use it. We'll refund it the next year. But, it makes sense to have that little buffer

uh for for those those cases where you just get the unexpected expense coming through. So, um, makes a lot of sense to me. Yeah. And to be clear, there is no problem or we're not doing anything because there's a lot to read here. The other reserves are sufficient. We don't have to do anything with those. We're not changing the policy on those. We're not raising the amount. No, we're not changing any of the other. Okay. All right. Is this the first year we've had the u uh recommendations from the comproller regarding this or has this been for for this particular

Yes, for this particular is this something new that the state is looking at the comp is looking at or is this something that we've just uh just been made aware of? I don't know what is so we were made aware this year um the last two budget cycles that I've been here this was not um brought up. I can tell you that in prior years we weren't nearly as close. We had a little bit of a buffer in both of those. Okay. Not quite to that. Cautionary planning because we have salary and benefits in there. They want to make sure that if something happens, if our revenues come in short, we have enough um funds available um to keep the payroll flowing. Good deal.

Excellent. Thank you. That's all I got. Okay. Uh so need a motion motion to approve reading of resolution 202534. Motion to recommend approval. Recommend approval. I'll second. All right. All those in favor? I. That's unanimous. Thank you. Uh let's go on to reading of reading or ordinance. That's what it says on here.

Reading of ordinance 202521. An ordinance ordinance amending budget ordinance 202509 to reflect final year and department adjustment to the city's 2026 fiscal year budget and do we want to go that

sure tamar again okay I'll I'll start this one so uh we have many multi-year projects and what we what we do each each time we set a budget is we set a budget for how much money we think it would spend in the upcoming year uh but we never want to be in the situation where we have, let's say, $4 million set aside for a budget, uh, if the if the project's moved along, we want to have that money available for us. So, very often we set more money in a fiscal year budget, uh, than we really think we're going to use. What that means is that when we get close to the end of the year, we have to make forecasts on how much we're going to use by the end of the year. And then for the next year's budget, we have to hold some of that money back for the next year's budget. Uh we made those forecasts just like we always do in March and April and then included them in the fiscal year 2026 budget. But now that 2025 fiscal year is finished, we know exactly how much we spent. We need to move some of that money into fiscal year 2026. Okay.

Is that pretty good?

That that's perfect. And then in addition to those project trips, um we have since the beginning of or since the budget was set, we have received um several grants that um we didn't know if we were going to get or not. And so both the expenditure and the revenue side are um established in here related to um those grants. Um those are all um no impact to the general fund at all. Um and then the one um additional item is the U dollar amount that would be necessary for a restructure of the parks department that's currently being worked on that um will be going before a general committee um in two weeks. And then the final approval for that would be coming to Bulma the same time as the second reading for this amendment would be. So there's time to adjust that if depending on how that um results. Um the total impact for this amendment um of new new impact outside of the project um reps to the general fund is just over $9,000. It's a pretty minimal impact for all of the items that are on here. And how much is the parts that's going to be coming in from general approximately?

Um, it's about $8,000. Yeah, it's just about $8,000. Yeah. $8,300. Okay.

Okay. Um, any any comments or questions? Seems straightforward. I appreciate the documentation on it. clear. Thank you. Okay, I get a motion. I'll make a motion. Second. All right. Motion's been made to send Obama with a positive recommendation. All those in favor say I. I. I. That passes unanimously. Thank you. Uh, next we have discussion of a letter to Summer County regarding funds be to the Harrisville Public Library. We've got that letter uh behind tab three. We have not heard back. So, why are we sensitive on food?

Did was there a deadline on the letter to answer? And I know that money's been in there for a while anyways. It's been earning interest. Um, it wasn't because they gave us a 14-day deadline to pay them 200. You were exactly right. The next letter will have deadline. Okay. So, are you going to follow up with the another letter? Well, okay. Excellent. Um, any questions or discussion on that? No, let's start like let's move maybe till next month then. Yep, absolutely. Yeah, it's good for next month.

Uh, discussion of letter for summer county regarding payment of adequate facilities tax and uh we received a uh very thorough packet by uh Mr. Lance Ray. So, thank you very much for for that. Absolutely. Um, and yeah, well, let's let's just want Can you take it over take it over from here then? And I can do you want me to summary discuss what's in this or

Yeah. discuss your findings and uh your recommendations. So in 1999, the county adopted a private act um for adequate facilities tax AFT uh on new development for residential and industrial. And for 25 years, the city has uh verified that uh a developer when they come in uh to apply for a permit that they have paid that aft to the county. Um, in 2024, apparently there was a legal determination by the county that industrial could also include commercial. the county sent uh a letter in February 2024 to the mayors and to the legal uh at legal council for the cities that and you have that letter that says there may be some confusion as to what qualifies as industrial. Please look at this list of um industries under the uh US government um

SIC.

Yeah, SIC. But it didn't say we're going to start assessing aft on commercial. It didn't say start collecting or start verifying for commercial aft paid. It was a little vague and confusing. Um, nothing was done until April of the following year, 2025, when the county codes director sent the city codes director a letter to say, "You guys haven't been collecting or haven't been verifying aft tax, aft pay for commercial development." And um, Mr. story. The director here uh immediately contacted their codes director got some clarification and with all new applications going forward after that uh began verifying that in July of this year uh a couple of months after that letter we received pretty much a demand letter from the county saying that we haven't been collecting or haven't been verifying the aft paid for uh for commercial dating back to the February 2024 letter. And they uh submitted a list of permits that we issued that we did not verify the AFT paid. Uh they totaled uh around $225,000 and they said that we needed to pay that within 14 days. to back up the act that was adopted um by the county in 1999 um had a provision that the a city would be liable for any aft that was not paid and not verified but you know there may be some shaky legal ground as to whether or not the county can enforce that against the city. There's some constitutional issues

with that and there's also some statutory issues with regard to uh citizens indemnifying another public entity in that way. And so based on that, what is your recommendation that we do?

Uh put what we just said into a letter into a response letter. We haven't ever formally responded to the county. I've had some communications with the county attorney just on the surface level about um some time to investigate and look into this, but we've never really discussed the merits um to any real extent. So, put some kind of response letter to say that um you know, we're not sure that that's enforceable. We've done everything that we could. We didn't understand from the February letter that now commercial is going to be involved with this. Uh we've always tried to be a good steward of their aft collection and to see if they're doing anything to pursue the people that actually owe the money to the count. That would be my recommendation at this point. Okay. So prior to this um we were collecting based on what we thought the interpretation was and they were satisfied with that.

Verifying. Yeah. We don't collect. Right. Right. Right. Yes. Right. Right. You're right. Um no, you're right. U be clear about that. So but in February of 2024, that's when we got noticed that it's changed in some way. the February 2024 letter um like I said just didn't say anything about commercial specifically just said hey look at this list of industries under sick um because there may be some confusion as to what is industrial and that that looks pretty that's where it came from

yeah but then in April of you know what 14 months later is when it was clear that we should be verifying commercial Mr. Did you look into those properties they said we did not collect on and determine the validity of each one of those? Uh, yes. I Greg did all the work. Okay. Credit Greg. He's not Greg's not here. Is he Greg's story? No. Okay. Um, one of them we did verify was ver was verified and was was b. Um, I think that was in the amount of 3,100 or so. 36, right?

Yeah. But there were 17 of the there were 26 total. One was actually um incorrect. 17 of them I think occurred between that time frame of February 2024 and April of uh 2025. And the other ones were um on permits issued after April 2025, but none of them were when applications were made when I think um generally is when the city would uh um verify that when when applications were made. So there is some something to distinguish between when the permit was issued and what when the permit is applied for. The uh the act talks about when the permit is actually issued but um at that time applications had already been made and uh so nothing had changed

before April 10th 25.

Right. Um before we continue, I just want to state that I want to make this part of the record, the entire packet that uh Mr. Ray provided. Uh so if we can include this in the minutes, um I would appreciate that. Guess one thing I probably should add is it's it was mentioned they included I think in the packet and and also included in mine but in 2008 the state controller did a uh minor audit aft um around uh for Sun County and um the various municipalities and the city of Gallatin responded that they were in litigation or had been in litigation with the county over a similar issue is this with regard to the uh resource authority and had prevailed on one of those constitutional well it it appeared what they were saying was it it did prevail but it appeared because of one of the constitutional issues that I brought up um and the controllers's response to that was it its recommendation was that the county have mutual agreements with all the municipalities uh on its obligations and responsibilities.

And do we have that agreement in place? No. County. No, we I don't think that agreement's ever been done. Okay. Thank you for providing that 2008 2008 uh audit. There was lots of recommendations in that audit uh going forward. Things were not clear, but the controller made some recommendations. Several. Yeah. It was very thorough. Yeah. Informative. Okay. Um, any other questions? Well, what's your recommendation going forward?

Just the if if the committee would like to send a response letter pretty much, uh, memorializing what we just discussed. Make that motion. Okay. Second. Uh, I think we're all in agreement there. Great. Uh, let's get ahead of this and respond in time. um and make sure that you know with your findings of fact uh illustrate to them exactly uh where we stand with this and what the city's response. So we appreciate that. We'll do. All right. Thanks.

Great. Uh moving on. Discussion regarding whether the city should accept partial payments allow payment plans for uh property taxes property tax bills. You want to take take that? So, I'll just preface this with Tamara brought this up to me a week ago and I'm trying to figure out what's a bad idea. I have failed so far to accept payments. Well, she'll explain it. I think it's a good idea, especially for some of our older residents.

So, um TCA does allow for the city to accept a partial payment or set up a payment plan for um citizens um to pay their property tax bills. we have to go through and do an ordinance. Um, there are a few stipulations, requirements. The big one, and why this has not been ever brought up before, is that you have to have software that's capable of doing that.

Our old software that we literally just upgraded to our to Munis, our old software would not allow for a partial payment. Now that we are on our new software, we do have the ability to do so. So, we thought we would bring this forward and um talk about uh you have to have a plan which is your or which would be outlined in your ordinance that gets submitted to the um state. You can determine if you want to accept you know two monthly payments, three or four um MTAS recommends no more than four monthly payments. Your total bill is still due by the end of February. You begin acrewing interest on any remaining balance effective March 1st. Um I know in some discussions with the mayor, one of the questions came up is, you know, would um this encourage people who are currently paying in full, right? You know, to maybe pay only part of the part of their um bill and then pay part later. Um I I looked into it. Over half of our um property taxes are paid through mortgages. So that's going to be paid in full. Um, I also had staff look at when the larger taxpayers are or businesses are paying. Most of them are holding their money and paying in January or February in full as it is now. So, I don't think that's really an issue where I see um we every year we have multiple people, not a ton, but enough that it's noticeable come in and they ask, "Can I pay $100 now and come back next month and pay the other $100?" and they typically are folks that are um older, their house is paid off and they're fixed income. Um and so, you know, they they come in and ask, you know, if they can pay for part of it. Um I think some of them don't ever come back and pay any because they just don't have it. We have at least um one or two

people who will come in and they will pay their um property tax bill with four checks because every month as they're writing out their bills from October through February, they write out a check each month because that's how they keep track of it and then they come in and they pay it all at once that this might could encourage them to potentially pay, you know, as pay along the way. I can't figure a bad idea.

Well, is there any additional costs to the city to do this? No, we can do it with um existing staff. Um our upgrade to our new system is actually going to have a um savings of time for staff um with just in in our general processes. Um it will depending on how many I can't imagine that we'd have more than maybe I I'm going to throw a number say 20 people, you know. So you have 20 people that make two or three payments instead of one. Yes, there's a little bit of um staff time, but there's no real cost to the city associated with it. It's completely manageable within our resources that we have.

Um and do we send out any follow-up letters if they pay just a partial payment? Um and do we send them another letter saying, "Hey, your bill's come due," or is it on them to no to manage it? When they get a receipt, it shows what their balance is and it's up to them to come in and pay their bill. Okay. Are there me um things in place to collect if they don't pay it? What do we do? Or is it the same processes we're already doing? It's the same process that we're already doing. Um I mean, I hate to Yeah. put it that way, but

yeah, it is. you know if any unpaid um balance effective March 1st they start acrewing um interest and then the following year come April 1st they get turned over to the clerk and master um for collections and that's the process that we do for any so that would be the same for these um you have any questions so you just need our ordinance written up so that we can make this change is that what you were saying if if y'all don't find any major problems with it I'm going to add a stance to Lords. I I have all kind of ask Lance to talk to Tamara. I figured Tam had something ripped out. Well, MTAS does. They have a they have a um give it away

a bottle. Hey, I think it's a great idea, a great thing to do. Uh give them that opportunity. And like you said, it's probably not more than 20 25. You don't have to make it as a you know, public notice to people. Just have it available for people who ask. I do have a question regarding taxes there. What do other um municipalities in the area do the same thing? What is that's pretty common place. Yeah, most counties um accept partial payments and then going out looking at what other cities are doing. Um

most of I won't say probably half the cities are doing it. Maybe more than half of the cities. any of them that are our size or bigger are almost all accepting partial payments. Okay. Okay, makes sense. Then, um the only question I've got then this can be a separate issue. Um other comp other cities in the areas, maybe not in this area, I don't know if it's in Tennessee or not, but they do accept early payments and they give the homeowner discount on the taxes if that's something that we'd be interested in doing. No constitutionally do that. No, I don't think is that against our constitution? Yeah,

I think it is because we have to we have to charge everybody the same way according to the constitution. What vehicle they use too? Yeah, I am too. So I know the city looked at about 20 years ago. Yeah. Uh because I think there's doing it and found out, oh, you can't do that. Then they would if they paid it by November the previous year, what year they discount? Yeah. All right. That's that's a state law, right? because I know Washington state does that. Do they? Okay. I Florida does that. Yeah. Okay. All right. Thank you all very much. Appreciate it. Any other questions?

Well, um I I would like to say that I I I do have some concerns just on the I think it there's a potential for it to invite people to not pay like an increased number that we're not getting. at that's at the same time I think this is something we need to do for for our citizens and I think it makes sense and if you need someone to sponsor I'd be happy to sponsor it um unless you're taking care of that care happy okay uh next on the agenda thank you uh next on agenda is sales tax analysis

we have some continuing good news with our um revenues here. The first page that you see here is our state shared taxes. Um I know and you can see that um again this month they are coming in strong compared to the prior year which is very lovely to see. Um and fingers crossed that we continue that way through the year. Absolutely. I thought last I thought last month was a fluke that it was um higher, but it's continuing that same trend. So, um

yeah, if you look at the 24 to 25, there were much smaller variances and now we're seeing bigger variances this year, which I would have not have imagined that would happen this year. Although although inflation did calm down a bit, so that may be playing a factor in this and that your interest rates are about to go down. So that may help too maybe. We'll see. We'll see.

Yeah. So that's our state shirt tax. Um local option is looks the same. I don't have the official number for August yet. I will say that I I looked at I have an estimated number that I didn't put on here as I haven't got the number from the county yet. Um but my estimate is just a hair over 1.9 million. So it is looking like it's going to be right about the right around that 1.9 million. Do you call every retail shop in Hendersonville and ask them how much is that what you did?

No, I can see what the total is on the state, but then there's these calculations that happen behind the scenes when it once once it goes from the state and they take their fee and then it goes to the county and they take theirs and then there's some other calculations that happen to add in um the unallocated basically meaning they there are some in their county but they didn't tell them tell the state what um city they're in. those get devied up. So, I can't see what those calculations are until the county sends the information to me, but they won't. It'll probably be the end of the week before I see that. Speaking of admin fee, just the state's admin fee is reduced. Okay.

And that that's reflected on actually was reflected effective July. And wasn't there something about reducing what the county could charge as well? Um, I don't think that that's gone anymore. I haven't heard that. Lance, do you know anything about that? Sorry. Would you a big question? Wasn't there something at the state level that would reduce the amount of admin fee that the county would uh subject our sales tax revenue to? Recall there has been discussions uh but I can't answer that. I can find that for you. What? Yeah, I think there was discussion. Thank you, J.

But I think what where Atlanta was the state ended up reducing their fee for now. So I think there was discussions about county and state and what ended up happening this is their fee was reduced from the state but not by the counties. Okay. So that may be a continued discussion. Uh but it is it is a revenue source for the county. So where the state has a bigger buffer than the counties do, it's a little easier to pull a little back from the state than it is a county. Okay. So it may come forward again. Okay. Good answer. Thanks. Um hotel motel also um coming in strong. Um

and I will say the August amount there is one of the the one tiny little hotel. We have not received their check, but they average about $600 a month. So when we do receive that, I'll add that in there. So that amount will change slightly between when you see this report next month. Okay. Um, but I wanted to show this. It's Yeah, it's looking significantly better. It's looking more like what we are hoping it to continue to do. Yeah, that's what we expected last year and didn't change. That's exactly. So, we're we're on the right track so far this year with Hotel Motel.

Okay. um our investment interest earnings um a little bit lower in August than they were in July which we anticipate um we're to the end of the year before our property taxes start coming in um it's going to that's going to drop a little bit especially if interest rates come down also we've got a lot of um pretty large expenditures and projects planned this year so we'll be using some of our um money that's currently invested to you know do things for our but it's more than last year for the month of August. It is a little bit more than last year for the month of August.

I'm looking for any kind of any silver lining. That's it. And we're definitely on track to exceed the amount that we have budgeted at this point in the year as well. So the projected that's taking into account the funds we're going to the fund balance being reduced. Yes. Okay. Yeah. Great. um store water. Last month, um there was a question on the fiscal year 25 and why it was less than fiscal year 24. So, we went back and looked. When I pulled the numbers for last month's report, we hadn't reported our final approval um for FY25. That's now included in there. Great. So, the numbers look like they um really should.

Yes. And then unlike any the well the prior two years, we've actually collected some delinquent um storm water fees in both July and August this year, which is not um common, but we've had a a few people paying. Okay, good.

And then our PIP fund. Um again, this first section is our revenues. We're currently um projected to come in a little bit over what we have budgeted. Um it's it does look skewed looking at last year's revenues to this year's these first few months. It it's going to look skewed until we hit February because that's when the um grocery tax um fell off. So um but we are coming in, you know, think right where we want to be um on those. And then our second page has a summary of what we have budgeted and um what's being um worked on for the current fiscal year. Any questions on that?

Um just want to step back to storm water real quick. Have we had any discussions on I know we never increase the storm water fee. Have we had any discussions on increasing that slightly? We've we've discussed it. It has to be done almost like an impact via utility. So it's cost recovery in large part. So we've had some discussion about potentially looking at doing that. As of right now, we're able to keep up with our projects using the storm water fund. There hasn't been I think there's no need

urgent need to do it right. Excellent. you know, we will we we were able to use some of the ARPA funds for a storm water project that we're doing right now. If we continue to get grants and funds outside of the city that we we can supplement storm water, we can probably keep the rate flat for a while, but um we'll have to just monitor it throughout the year next year to see if if we're in need of increasing that or grants dry up and we need to supplement. Well, going back to the issue about the fund balance, you know, that that would have to be a consideration, too. If we're spending the money that we're getting in, we might need to raise it a little bit just to get that 16.67% fund balance that we need every year.

Something to consider. I don't want to do that. What's What's the process if that's what we elected to do? Yeah, we we'd probably have a consultant come in and run calculations for us on costs and then recommended feeding to the point. That was a utilitarian almost a a utilitarian fee almost um meaning cost what it costs and if it costs more then we have to charge more. But we're kind of kind of in a pickle between increasing the storm water balance fund and then what our costs are. We want to run lean, right?

So um I guess anyway the consultant won't have to give side here. consider and the the control that we have is how many projects we do. So if we want to go do more projects and get them done sooner for citizens, it's a benefit to them to get them done sooner, but it also comes with an increased cost. And when we're talking about the necessary fund balance, um when we're calculating how much we need any of the projects that are done in there, don't we don't count those towards our budget that looks at the um operating. We would count our salary and benefits and then like the the drainage line basically. So it's only a small portion of that overall budget. So

you know it's it's much more attainable. You know, when you look at that budget as a whole, it's pretty large. But then if you um take all of the projects which are one-time expense, they're not operational, they're they're onetime projects out then when we are calculating out what that um balance needs to be, it's much smaller. Well, thank you for that information. Thanks. Yeah. Any other discussion? dismiss