Finance Committee - Regular Meeting

Hi. Good afternoon, and welcome to the Monday, January meeting of the Olympia City Council Finance Committee. We have committee member Kelly Green excused, hoping to join us a little later in the meeting. Council member Vanderpool and myself, Clark Gilman here. And we could start with an approval of the agenda. So move. Second. All in favor? Aye. Aye.

Alright. Have you had a chance to review the 11/19/2025 meeting minutes from the meeting you weren't at? Checks out. Good. So move? Well, good. Yeah. We well, I'll tell you. We'll go ahead, and we can revisit it when Kelly's here next meeting and and just make sure that it it makes sense to me. It it it lined up with my experience in the meeting. Alright. Second. All in favor, say aye. Aye. Aye. Okay. That brings us to item six. Oh, wait. There's no public comment. There's nobody in the room for public comment.

Is there anybody online, Owen?

No one online to

get public comment.

So that brings us to a budget snapshot. We do short hits on different finance city finance topics as a snapshot at the beginning of most of the finance committee meetings so that we kind of all get the same language and sort of a primer on the on the different areas. So the color of money, funding sources, uses, and restrictions.

Thank you. For the record, Joan Lutz, senior finance manager, and I am let just turn this call off. Okay. Here to tell you about the color of money, which is really just a colloquial, terminology for fund accounting. And so the reason the color of money matters is because municipal revenue is often limited in its uses.

And that's all that occurs by the source or where we get the money from. We use the term buckets, which are basically just different funds that we use to track those revenue resources and ensure that they're spent in accordance to, anything that's, required by law or a policy that the council sets. And then, also, it helps with accountability, prevents money that, we've gained from one area to being used in another, and, also, it provides a a bit of transparency and and helps the community build trust in us. Okay. So the main fund and the most flexible of the funds is the general fund, and this is the city's primary operating fund.

The sources of revenue are property tax, business and occupation taxes, sales tax. There's also some cost of goods served as so, like, if we make copies for public records or those types of things, that those funds would all come into here. It is the most flexible of the the money. It can be used for any good governmental use, and it is limited, by basic, by laws, RCWs, and then also whatever stipulations the council has placed on those funds. For example, parks is in the general fund, but it has, some restrictions on on what fund or some stipulations on what funds and resources must be made available to it.

The challenge with the general fund is that it is since being that it is the one that can be used for basically anything and everything that's good governmental use is that it gets, stretched. And there is no dedicated funding source, and so it's always, basically a diminishing supply. The next major grouping of our funds is the special revenue funds. This is money that we've obtained, and has, legally restricted specific purposes. And so there's some compliance strings attached.

Some examples of that are the home fund, cultural access, tax funds, and then the transportation benefit district. We have the two funds. And the challenge for that is that the money can't be just willy nilly moved and used. It has to be used for, specific reasons, tracked, and reported as such. And I'm just proud of myself for getting willy nilly into a presentation.

I don't know where that came from. Enterprise funds, these are the funds that we have, where they basically operate as a business within the government entity. It's the funding sources are user fees. In general, it's not, property taxes or any other taxes. Although, since that is can be used for any good government use, it can be used.

So, but for the most part, it should be fully supported by user fees and rates. Examples of that are the drinking water fund, waste and storm water, as well as water waste resources. And then the challenge for that is that, again, the revenue is supposed to cover operations and infrastructure. And so rates are usually continually on the incline due to payroll and benefits as well as the cost of keeping infrastructure in in working in order. And then we have capital project funds.

And, so this is money that we set aside to do cool stuff, build, buildings, repair our physical assets. Sources for that are, real estate excise tax, impact fees. We we all go out for grants and bonds. The focus on these assets is on building, not the operations. And so the challenge with this is that you could have a whole bunch of money dedicated and and and obtained to build these cool things, but have $0 in the general fund to operate it and maintain it. Of course.

Yeah. I wanna be careful with that last challenge. I think what Joan's getting at is whether sometimes whether it be enterprise funds, it could be fleet fund, it could be facilities funds. You know, we do set aside a money to to operate and maintain things, but it's not necessarily general fund dollars that do that. We have to be very specific in setting aside money. So within transportation, they both have money for capital, and then they have money for ongoing operation maintenance. So it just sits in different funds. And so I think that's what you're getting at, Joan. So I just wanna I don't wanna leave anyone with the impression that we don't set money aside for operations or maintenance.

Yes. When we build our capital, facilities plan, the operations aspect of it is considered, and so we ensure that we have the ability to to maintain it. What this is saying, though, is that we could have millions of dollars sitting in a capital fund that you wanna use. And if you don't have the operating side planned out and, worked out, you can't do it. Okay. Cool. Alright. And then we have internal service funds, and these are, funds that charge other departments within the city for the services they provide. And these, the sources of that are through internal rates and user fees. There's also some external, component to it.

So, for example, we have fleet. We also have fire fleet where we, service provide service to multiple other districts. And so those are the external customers. And then facilities, we charge rent for city hall rent, and that was to go to the operations and maintenance as well as any capital expenditures. And then for that, it's just communicating and, calculating the shared costs.

Not everybody understands how we get the city hall rent, and that number that goes out to everybody or the fleet, rates and fuel costs. And so we're working on continually always fixing that communication and conveying it. And then we have fiduciary funds. This one's the easiest one. It's money that's not ours.

We're we are collecting it, for other entities or it is for internal services such as, employee pension funds. And so, the challenge with this is we can't we can't use it or touch it at all. We have interfund transfers, and this is moving money between funds. It is heavily regulated, and it is audited. And it the risk is that, you know, we can improperly transfer funds from one to another, and then it, would be a primary cause for auto finding.

The challenge is is that when people ask for a transfer, finance always goes, for what? And then we require more detail. And sometimes, you know, we have to work work within the restrictions that we have. So in summary, Color of Money is, helps ensure taxpayer dollars goes exactly to what we promised and, what the commit community has told us they want our their money used for. It also provides a clear audit trail, for the for the public as well as auditors, and, it provides some sustain sustainability by, helping people understand how their decisions can be made and the impacts of those.

Any questions? No.

Not off the top of my head. I think that I will you know, I I had a pretty good idea of this prior because of the last year of having presented on it, you know, I don't know, a dozen times, it feels like. But, you know, I I I'll be I'll be happy to talk about capital projects later this year. I'm very interested, and I've talked to Jay a little bit about the bonds that are in '29 that we paid off and thinking thinking about where we're going around transportation. And the comment about operations around transportation is just as important and trying to find ways to if you resize a road, how do you reduce the operational cost of that?

If you reduce a lane and you put a bike lane in, that's a different type of maintenance. You may not be dealing with the maintenance of wear and tear of cars going on it, but you still have to have something to go in there and clean it out. And so those are things I'm doofily thinking about, and I appreciate the presentation.

So I was wondering if you could speak a little bit about how community planning and development I I believe it fits as an enterprise fund, or maybe there's sort of a kind of in there and kind of not. So what what is that structure when we started doing more chargebacks to other departments?

So these this was at a very high level, you know, fund accounting for government. The city of Olympia likes a little more, little more restriction councils put put on the funds. And so, development fee fund is one of the funds that actually for our financial reporting roles is part of the general fund. We have pulled it out to track it separately, into fund zero zero six. But when you look at our, it's actually recorded in the general fund.

So it's not it really is con considered a general fund, but we do charge fees and chargebacks for, you know, rent, mail service, you know, those types of things to try to recoup the unrestricted general fund for some of the cost of that. Is that

Thank you. And yeah. No. I was just gonna say go ahead and and I just I this is it's this has been intriguing to me, and it's been a shift that's happened across my time at the city. So Thank you. That's what

I was gonna talk about. So so, Clark, you remember in your time and that we used to have a separate development fee fund, and all the fees that were paid went into a fund, and then we'd settle up at the end of the year. Because most of the positions in CPED that that are related to permitting and planning are covered by the fund. We aim for an 80% cost recovery. As you know, it's hard to get year over year.

So which means the general fund, at a minimum, was subsidizing 20%. But year over year, could be more than that. And so rather than kind of wait to settle up at the end of the year and not know where things are, we changed our process, to Joan's point. And we we made an we used forecasting and kind of future casting to say, what do we think is gonna be the delta between what we bring in in fees and what the general fund will support? And we looked at, I think, a five year average, maybe longer than that, to determine what we normally put in at the end of the year.

And now we put that in upfront. So we budget upfront versus kind of chasing it at the end at a year end. And as you know, this past year, we actually put additional 1.3 in over that because of the state of development right now. So that is a shift that we made is rather than trying to make it up later, we're forecasting it ahead of time and putting it into one fund. So it exists in the general fund.

We do track it as its own fund in o o six, as Joan mentioned. So I like to be able to see, and I do this quarterly with the staff, how are we how are the funds coming in? Are they tracking to the budget we we set both with what we thought we'd come in in fees and the general fund contribution? In fact, last year, part of the reason we put a spending freeze in place is I was watching that not come in the way we thought it would. I was watching fees not come in and expenses remain the same, and then coupled with some other things that we are that we track as well. Those are some of the things that I look at on a quarterly basis to to make sure I'm keeping track of what the market's doing and what this looks like to make sure we remain on budget. So did that help? That's that's that's really helpful,

and and it's also helpful. I didn't understand, but it's still part of the general fund. But for our own internal management purposes, not for the audit, But for our own purposes, we're tracking it and and trying to make sure that it's as self supporting as possible. While this side of the table is warmed up, there's there's another one I've been wondering in enterprise funds. The Public Works Service Center, the Eastside Service Center, has been a need that we've been talking about for decades, and a lot of the work that happens there is utility related. How is it that we haven't adjusted the fees and rates so that they could handle capital needs? Do want me to why

I'll do my best on this one. I think this is an ongoing challenge that that all cities have in terms of as you know, the way we we charge what we call a rent for through indirect. And so there's there's utility funded portions of the maintenance center, and then there's general fund portions of the maintenance center. So, obviously, all the utilities, their indirects are factored into their rates. And for the general fund portion, which is really the transportation maintenance portions, they're factored into the indirect rates that affect the general fund.

And every year, we've done a lot of work on this to try to figure out how we charge the right amount of rent to recoup the costs of that site. But if we were truly trying to put in enough to factor in long term replacement, we'd probably double those rates. Right? So it's this it's this really tough spot we're in to try to make sure we can manage the budget we have. We're still looking towards long term replacement.

So on on this particular, the way we've we've done this is we split it into two pieces. A large portion of what's there at the current maintenance center is waste resources. So we've been planning, as you know, through waste rates is a new maintenance center for the utilities. And then once we get that built and get them moved off of that site, it reduces the footprint of what we're going to need longer term for another main for our to revamp the rest of the maintenance or for everyone that's left, which is something we're going to have to do and something we're going to have to put into planning here in the next few years. So it's not perfect science in terms of, I think, where we where cities really struggle is setting enough site in building repair and replacement.

You you've been doing this a long time too and know that every year at year end, we try to account for account for that. Instead of doing that, I had the finance team years ago, they spent some time saying, rather than wait till year end, how do we better fund our building repair and replacement? And we adjusted our indirect costs. So we're now actually pulling more out of indirects to fill in the building repair and replacement gap that we used to have over time. Now is there enough in there to replace the maintenance center tomorrow? No. But are we heading in the right direction to pull money out at a at a better clip than we were years ago? We're better planning for it now, and that's something I'm really proud that we've gotten to. That help?

Debbie has something to add also.

One of the things I might add to that too is in that calculation they're looking at the repair and replacement of the major systems, not the entire building. And I think that's very common in these types of formulas. So for City Hall they do the repair and replacement of the HVAC system and lighting, but not to build a new City Hall. Right.

Yeah. Thank you. That's just something I've I've wondered when we've we've talked about the utilities being sort of has to be a break even affair, but then we talk about separately going out for bonding to build a new maintenance facility, and I thought, well, it's it's not it's not really budgeted at breakeven if we're not planning on building the next facility thirty years from the the first one. That's just thank you for I I appreciate both those conversations. They they help my understanding. Anything else for this budget snapshot?

Am I delaying? Is that what I'm doing?

No. Oh, okay. No. You do it. You look great. Great.

No. I get I think that the only other item I have a kind of an interested interest in is, you know, as we've you know, when I think of our budget, I always think about how certain aspects of our budget are always not always, but fairly well funded and pretty steady. Right? Parks is a perfect example of that. And I'm wondering and that's kind of into the special revenue side of things.

And I'm wondering as we've went through this process over the last few years and and looking at our future process for the city, I'm wondering if there's ever been more of a, I guess, temptation to break up general into more special buckets rather than having a continuous I mean, we've had this conversation with I guess, Fire Regional was one of those conversations. But I'm always thinking about, has there been more of a temptation has other cities had the temptation to do that, to to try to enable stability for the general public and to advertise it. And I yeah. So

there has been temptation. Mhmm. Mhmm. But, also, breaking up the general fund restricts your use for general fund. So if you, you know, before when we had the housing and homeless, before we had the home fund, we were able to pull money, pretty rapidly from the general fund because it's for good governmental use, and it wasn't restricted by a policy or, a councilmatic decision.

When you look at parks, parks is actually in the general fund. It's not a special special revenue. We have that restriction in the general fund placed on us by the ILA and the, the council's decision to do that. So you can put restrictions in the general fund, and breaking it into different funds also places restrictions. So, like like, the development fee fund is is part of the general fund, but we do have that councilmatic restriction.

And so we can't just pull that money in an emergent need. Parking is the same. That's in a gen it's still considered part of the general fund, but it's in a different fund that we track and have some restrictions around the use for that. So pulling everything to specific uses and then limits your ability to bop, you know, bop and wave as as needs arise.

Makes sense. Thank you. Thank you, Joan. Appreciate the snapshot. And I I think that are we good? No. Here I I I believe that Mike is going to lead us through the work plan conversation next.

Yes. Thank you. Mike Githens, finance director. So we bring you this evening the finance committee 2026 work plan for your consideration and then to move it on to full council for consideration. I think we have a very robust year when it comes to our discussion items.

I did want to offer that we have some openings for budget spotlights. And as we've been speaking here this evening, I made note of a few possible ideas, but I wanted to hear from the committee on things you might like to hear us, spotlight much like Joan did tonight on the color of money. Just to give you some ideas, I know that we have a lot of talk around our reserve, and if that would be perhaps something you'd like to hear about. I'm impressed with the forecasting our finance team does with revenue. I think that could be, a learning, kind of budget highlight for you because it's more than just saying we're going to increase sales tax by 3% next year.

They look at many factors in making those estimates along with the b and o tax forecast. We can I think one area that I noticed as we were going through the budget last year, sales tax, we have a lot of different sources of sales tax that could also be a highlight that might be of interest? Just what what sales tax avenues or options has the city of Olympia accessed. We have on here, a review of the 2025 budget and, really, financial position where we end up. I don't wanna make staff nervous and offer that too early, but that's a discussion item.

We can certainly maybe bring a high level highlight if you'd like sooner. I know I've, I've already told the city manager I'll be giving him kind of a preliminary look at where we're ending because that's a a big focus for me is where did we end 2025? As soon as we can pull that together, what's our reserve and our unreserved level going to really shake out at once we are able to close things out, which just to give you an idea, by the end of this month, we're hoping in finance that we've processed most of 2025 through the system. That's a bit of a wishful thinking, but then kind of have something for you at that. Again, I I have to dream big at at, you know, where I'm at.

So that's another thing we can look at it kind of maybe quarterly. You know, Jay mentioned we give him an update. We include the monthly financial report in here, but we could also call that out in a presentation to go over it a bit more. We're gonna be making it a little bit more accessible as we, I should say, more online and accessible to the public. So that's another highlight I might suggest.

But we're certainly, open to ideas that you have that would really be good highlights for the committee. Otherwise, we have a pretty packed year ahead of us. Next month, the, I'm gonna be meeting with, chief Morris, and he's going to be presenting on the fire capital facility plan. As you remember, that was a, pretty aggressive plan in the capital facilities plan overall. So he'll be giving you some more, information about that.

I'm going to bring the investment policy to you for your reading. March is gonna be the waste resources Carpenter Road facility, presentation by public works. So I imagine that'll be a pretty, packed evening. And then several items this spring and early summer before we, start pulling you into the 2027 budget process, we'll have a look at, we'll have our investment firm come and give a presentation and some another, Kenzie Wang, one of our accounting managers, will talk about the audit and annual comprehensive financial report. But I can, certainly follow-up with you, chair Gilman, about other budget spotlights that maybe the committee would like, but I'm happy to take notes on that tonight also and come up with some ideas if you have, any inclination towards that now.

For for these short budget snapshots. Something you'd like to have a Something you'd like to have a primer on in a ten or fifteen minute budget snapshot at the beginning of a meeting.

I'd probably need an example of what of of this probably. Yeah.

Kind of like the color of money presentation or learning about what are our reserves, and, we talked about reserves and bonding capacity in a in a very broad strokes.

How we forecast. We can go through many different spot bites. We can come up with some certainly, but I wanted to make sure it's meeting your needs and what you wanna see highlighted as well.

I I think that the early look at at the closing out of 2025 and and how our our adjustments we made last year impacted the budget, that it it could be just making sure we set enough time in that April meeting so that before we begin hearing different departments' hopes and suggestions that that we we have a shared understanding of what were the impacts of the cuts we made and and what are the early impacts of the additional revenue. So we just kinda know what we're starting with as we begin to build next year's budget. Okay.

Well, Mike mentioned this, and I think Joan did too. But one you know, I meet with the team quarterly, and there's things that I pay attention to that I'm tracking so that I can make get a good handle on where we are financially and then make decisions. It might be good as a budget snapshot for you to come and talk a fan. What are those things? What are those buckets of things that we track, that I track, that staff tracks? Because you may have something else. You're like, hey. How come we don't track this? Or or maybe you should track this as well. And so I just wanna give you a sense of, like, what we're looking at and and how we're making decisions. It might be a good one.

Yeah.

Those are great ideas. And if you if something occurs to you that please, let us know, and we're happy to highlight it in this kind of early part of each meeting. Just wanna make the topics relevant to you, not necessarily just what we want to cover, but what really can be meaningful. So And and I will check-in with council member Green and and Great. Make this same offer. Yeah.

I have items that I that I listed on here that I'm curious about. That's a that's You were? I've had some time to to do that. So Great. I'm glad the fire plan got brought up. I'm very curious to hear where that's coming from. That's a highlight. This was a place. The investment policy, I'm gonna be curious about what options we have as a city. I've I've heard lots of feedback from the public about where are we investing our money, where is it going, does it meet the goals of the council, so on and so forth, getting an understanding of what we can and we can't do.

The levy information, I'm very curious about about that, particularly around levies, about bonds, about just kind of financial tools, where we are, get an understanding, even just an idea of where we already have money tied into and what we've done in the past. Same thing with capital facilities. I just want to get a good understanding of where we are, financial planning around public works, and where we are with a lot of that stuff. Now, there's another item I wrote down but isn't on here. I'm very curious about legislative updates regarding tax reforms and opportunities after the session.

I don't know if that can go to the full council or come to this committee, but I really would like to know just an idea because there's a lot of what we're doing, but then there's a lot of there's quite a few interesting bills right now. And I wanna know how that will affect us. And it may not be if we took it on in the spring, hypothetically, and passed something, it would still take a year at least. Mhmm. But I still wanna know how would that fit in worth where we are. It may just be with the lobbyists.

Yeah. I think we'll give you an initial update at the end of session. The lobbyists will come and and provide an overview of everything that happened in this session, including those, and I'll make sure they include that. But there may be things that then get referred out of that discussion to the finance committee for further for for further discussion. Right? So, depending on what the impacts are on cities or or if there's some new revenue they provide to cities, and we wanna evaluate whether it's something we want to to do or not do. So I think we'll definitely bring that to the lobbyists, but depending on what those items are, yeah, I can see some things maybe get referred to the finance committee for further exploration.

And the, the investment poly policy is actually, a proposed policy coming to us in February. We worked on this across last year, and I've been working with a couple of community groups and consulting with some other local governments around the country. And so so we we can you and I could start by talking about Yeah. What I've seen so far. But this is hopefully an ethical investing statement that we would be willing to recommend to council.

That's and and but then the other possibilities of where else money might be invested, council members for a long time have been asking how do we spend part of our reserves investing in affordable housing or or whatever else. And so far, we haven't won because of all the government officials in the room, but but we keep asking. Yeah. We keep asking. Anyhow, so there there are more I mean, broader than just having an ethical invest there's there's more questions about what would be more pro social impact sorts of ways we might invest resources we have.

Anyhow so I'd I'd be glad to continue that conversation, and I hope that I'll be able to win your support for an ethical investing statement that we'll bring forward. But we'll anyhow, that's both both things could happen this year.

Yeah. Yeah.

Do you wanna continue, Stephanie?

Yes. And our plan is to bring that investment policy to you at the finance committee next month for then if there's any fine tuning that you would like to see to occur with the policy and then on to full council. Otherwise, with this year's plan, I wanted to just draw your attention towards kind of that late summer and into the fall where we start working on the budget. We're going to we moved into September to look at rates and fees. That, felt a little bit late this year.

It was kinda packed into October, so we tried to spread this out a little bit more to give you time to really be able to consider the budget and and really know what's happening with all of the rates and fees. We brought also the Washington Center report in October, And then in November, that kind of final budget balancing that gets referred on to full council. Looking for a a little smoother move towards the 2027 budget, but you never know. We won't have the revenue increases that, you know, I'm not anticipating that we have any that we have this year that definitely took a big focus of both finance committee and city council to get the 2026 budget launch. But this is the work plan that we have before you.

Again, we'll add on budget spotlights. I took some notes on things that you've

brought

up as in of as interest. We can certainly be nimble and make some changes as the year goes along. I'll look at something for February with you, chair, that might fit well in there to highlight. But we're looking for, any other input you have and then a motion to move this on to, counsel for consideration.

So we were gonna check with Debbie, and she's here to ask about when we might receive a priority based and sort of the the consultative budget building process that we're doing in the city. Would there be a moment that would make the most sense in this year for us to hear an update?

That is an excellent question because when I gave the presentation to counsel at the annual retreat, we talked about it coming through the regular budget process, some of the decision making. So I would like to hear more about what you would like to what type of update you would like to have on priority based budgeting.

I just don't want you to be excluded from the finance excitement. So if if it's if it's just rolled into how you know, last year, every meeting had a budget touch. And if if you're reporting on how you're helping people process that information and consult with their teams, then that's I think it satisfies. I just wanted to make sure if you wanted more time or a specific point in the annual calendar, this would be the day to ask.

Yeah. I'm going to consult with my boss, Jay Bernie, on this. But also, one thing that you might be interested in is when we roll it out to the public and maybe seeing just a little bit of preview of what's on the website and how we're rolling that out. That might be of interest. But but yeah. Go go ahead, Jay.

I'll jump in. I think there's I think there's a few pieces here. I think one is, and Debbie's right, as we roll this out to the community, priority based budgeting, it might be good to kind of come back here and kind of talk about when how it gets launched and and and those things and kinda circle back. I think that the council saw it out there, retreat, but the broader community could use that, and we can do some of that here. Maybe we can find some time to do that.

To the other point that Debbie that that Debbie was making is and then what we've done is we've kinda woven how we do parties budget into our budget process. So as we work on the 2027 budget, we'll bring that to council and out to the community in that format. In fact, as you see the budget document that gets prepared for 2026, it's moving in that direction as well. The other then the third piece is the work that the departments are doing to evaluate all the I don't wanna call them return on investments. You you had it's a different word.

Opportunities. Yeah. Opportunities for cost savings or other revenue opportunities that may be available, and we're evaluating those. And I would say that at some point in time this year, we might be at a place where we've done a lot of work there, and it'd be it make it would make sense to come back to the finance community first and talk about where we are and what what seemed to be those opportunities that we might wanna move forward and get your sense of whether there's interest there or not. And the timing of that, I'm not sure. Maybe it's it's probably more closer to the budget process in the fall.

Well, some of those opportunities are are being implemented. We're moving forward on evaluating them. So maybe we can check-in with departments and see where they are and then bring them to you. I think that would be of interest. Yeah.

So I think we can work to fit this in where you have some gaps here, and we can check-in as we do with you to plan agendas in the future, we can find spots for all these conversations. Because I I agree with you. Think we need to have them.

So there's two other things that we we discussed getting some more clarity about. One is economic development efforts and and whether either the trying to fund the Economic Development Reserve or efforts aimed at downtown, whether this is a place that they would make a visit, whether some of those belong in the community livability. But we don't I at least I don't see anything from Jennica this year, and we had her a couple times last year. So Yeah. The thought process here, and you'll

see it down below kinda scratched out because we're planning to come to council in April with a study session on Olympia Strong. And the work that that Jenica is doing right now is to take that document and turn it into an implementation plan. So what's the work look like moving forward? And I think as we once we have that study session with the council in April, it could lead to some follow ups, so it may may need to happen here. So I think I think the thought process, we'd start there with a study session, see what conversation comes out there, and then see what might logically then make its way back to the finance committee as the work progresses. That makes does that make sense?

Actually gives me deja vu. I think we already had this conversation. I I appreciate your Yeah. Reminding me. And the other one that I I don't recall is we talked about perhaps alongside the Washington Center annual report here or perhaps during the presentation to counsel having a a bit of a backgrounder from our staff about how the relate the financial relationship and the responsibilities with the Washington Center.

It's up there where? On July. Oh, I that's right. We made an item a history of the funding item and then in October to have the annual report. So we separated them, and I I'm just I I think that that's it's a huge commitment we make in terms of a facility, and it has many strings attached to how how that relationship works. So so I I think it would be worth bringing the current council up to a shared understanding of that. So

There's a lot of information there. Know, assistant city manager Debbie Sullivan, has briefed me quite a bit, but there's, I think, a lot of historical information that we would be well served to capture while we have staff here. And so a presentation on that, I think, is really important that it occur, and we understand. I learned so much from her briefing and just some of the information she was able to pass on to me that we really need to have that captured and on record. So but we can fit these things in. And that one's already

fit. I just

But these other items you mentioned so that we are sure to capture the things that, you as a committee want to hear, and it's not just totally driven by us and finance, but really getting at some of the topics that he needs. So let us know, and we can continue to kind of develop this as we go.

Welcome, council member Green. So I I we're we're talking through the work plan. It's a living document, so it's not we're not chiseling it in stone. Yeah. Yeah. And I I guess what I can offer is that you and I could have a coffee or walk, and I could talk you through some of the highlights and some of the opportunities for more counsel input into items that we we just discussed.

I will happily tick you up on that. Thank you

for my patience. You're patient. Yeah. And,

Robert, do you have anything else on the the work plan right now?

Not off the top of my head. I kinda highlighted some of those those long term funding rec thoughts. Part of the reasons why I jumped on to finance was thinking about well, I was certain things I wanted to see if we can ever figure out how to fund them. And I said, do you know and I said, yeah. Councilmember Madrone actually said to me, that's not what we do on land use. That's what finance does. And I said I said, well, there's an opening in finance, so I'm gonna go go over there and bother them about that. So yeah.

Good. So we're hope hoping for a motion to send this this iteration of the finance committee work plan for 2026 to counsel for approval alongside the other two committee work plans. Does that seem reasonable?

Yeah. Motion.

Alright. I'll second. That's a trusting soul. Great. All of any other discussion on the matter? All those in favor, aye. Aye. Aye. Alright. So we have approved the finance committee work plan to forward to counsel for their consideration, And that's the end of our scheduled business, but we have some media reports for tonight.

Yes. Thank you. Would you like to kick off our reporting? I would. I wanna bring the finance committee, an item to ask you to give us direction on.

So for a little kind of setting the stage here, we use a firm called Government Portfolio Advisors to really advise us on our investment portfolio. So the city has investments. We follow our current investment policy. We don't have a dedicated staff member who would be considered an investment officer. We do this with, really myself and then, one of our accounting managers with the advisement of GPA.

They were under contract with them. The contract was extended last year. I think it was extended largely because I wasn't on board yet to give the city time to hire a finance director the finance director to get, his feet under him a bit and then, kind of decide what to do with this. What I'm asking you to consider here is my recommendation, but also what you're comfortable with in having this contract go forward. So as I mentioned, we don't have a dedicated staff person.

We use GPA. There's really three options for a city to invest its funds. You can do that, with your county treasurer, and they can handle it. Many of the junior taxing districts will do that. They just let the county treasurer pool it with the county money and other funds from various districts within the county and then disperse it according to their investment policy.

When you reach a certain level of holdings, another option is to go with an investment firm that would go out on your behalf and buy certain holdings, and then they reduce the rate of return based on that. Or you can go with what the city of Olympia does, which is a regular investment adviser. Adviser. That's what GPA is. They act as our they have a fiduciary responsibility to the city of Olympia.

So they're acting on the city's best interest according to our investment policy. They charge us a fee. They so they're getting us the best rate that of return that we can. And we rely on them quite a lot. Just to give you an, an example, the city holds so as of Friday, we hold about a $170,000,000 in our investments.

That doesn't count the bond proceeds that, we received last year. We are constantly looking at how much do we need in checking to pay the bills. So we I don't like checking to go under $5,000,000, but you don't wanna keep too much in checking because just like your own personal checking, it doesn't pay much interest. But it's very difficult sometimes for us to anticipate what we'll need. We pay semimonthly, as you know, twice a month.

We know that each payroll will need about $2,400,000. But then accounts payable check runs, where we're paying our bills, come up every week. So last week, as an example, we had our payroll. And because we're paying quite a bit out on some of our year end projects, we had our, payment to lot as an example. We had an AP run of just over $3,000,000.

So right there was $5,000,000. So it's really a balance of those investments that are coming due, how much do we keep in the LGIP. That's the local government investment pool. It's been having really unprecedented returns during this interest rate period of the last few years. In fact, all of our holdings I have some figures that staff helped me pull today on what our investments have returned, and they've, just been really quite good.

But aside from that, this investment firm is really there for us since we don't have a position to advise us on what our needs are. I tend to be a bit conservative about it about it because I wanna make sure we have the cash, that we're liquid enough to be able to make these payments. We don't always know in finance sometimes when we're going to need to make a payment on one of our larger construction projects. You know, we know, but we don't necessarily know the exact timing that some of those are gonna come in. And so having the ability, to be able to get that money, have it structured still in a way that's giving the city and its citizens the best return is is very important to us.

So GPA is able to advise us through that. There aren't they're a local, firm. I mean, they're based in Portland, but to the Northwest. Really, there aren't very many firms if you were one of the options, with this ask of you to, extend their contract would be we could go out for a request for proposal. There aren't very many firms that do this, advise government portfolios.

A couple of the other big ones are in the Midwest and on the East Coast. GPA advises several cities in Washington state, a couple of counties. They also serve as kind of ex officio advisers to a couple of counties, meaning they're just advising a couple of larger counties on a part of their portfolio. But each of us are treated distinctly, so we're not pooled together. Our assets are managed separately, and, again, they act as our fiduciary.

So they're doing what's best for the city of Olympia according to our investment policy. So their contract is up for renewal. And what I'm asking for your guidance on is what do you feel the best next steps would be? Are you comfortable with us? It's within, signing authority of staff.

But do you feel it should go to full city council for consideration? Do you feel confident in my recommendation and staff's recommendation that we continue with GPA, or do you need some more information about it? I mentioned that I had staff pull the returns. And preliminarily in 2025, through November, because we haven't booked all the investments into to close out 2025 yet, Our investments made $518,000. We budgeted a 130,000.

We increased that budget this year in anticipation of kind of better capturing our our revenue in the budget. Now investments have been doing very well. The kinds of investments that the city can invest in, That's based on our policy, and that's not the stock market just to for anyone listening to to make that clear. But that's largely due to the advice we get from our investment advisers. And, again, we could opt to try to hire someone to do that, but that's not a recommendation I would at all make.

We wouldn't have really a full time position for that person. They'd have to diversify and do other finance things. So this is really using, the staff we have and really supporting us in what we need. That's why I was telling you about kind of the challenge I face sometimes in making sure that there's enough cash available and really being able to go to our advisers and have them be able to kind give us the backstop support that absolutely you know, we try to keep a a really good balance between our portfolio. I, you know, I made the decision.

We have some, maturities coming up Friday to turn those into cash just to make sure that we have enough. Obviously, we wanna structure that so we're getting the best return that we can, and they're very good to advise us, I can tell you, in working in a different way with another city. I really appreciate GPA's ability to advise us and really look at what our policy says and what's best for the city of Olympia. And I think the fee is very appropriate. It's, again, a huge savings compared to what we would have if we hired a position and paid that as an investment officer for the amount of holdings we have.

I mentioned to you we on of Friday, we had about 170,000,000. With the bond proceeds, it's just over 214,000,000. And they did GPA advised us very well on those bond investments because, as you might recall, the, Hands On Children's Museum bonds are relying on some interest earnings, and they have those structured to really maximize that in a good way for bonds that bond sale. So I bring you this for your direction on how you would like to see this proceed with the contract renewal and city manager bring as a con

Yeah. I just wanna add some additional comments to Mike's. I mean, I think GPA has done a very good job for us, for our community. I think the the agenda item on investment policy is a really important one for the finance committee because that really it doesn't matter who we contract with. The investment policy should be what drives their work and making sure that we have good direction from the finance committee and the full council about how we invest and what that looks like is probably the most important discussion more so than the who.

But in this case, the who's important, and I'm glad that because Mike asked me about this. He said, you know, it's within our signature authority, and we kind of have operational control over this. But I think it's a good question. It's come up. It's a good question for the finance community to say, are you comfortable with where we are, or would you prefer that we go out with an RFP and with with some different criteria, and you wanna have that conversation. So I think that's really what what we're looking for.

Thank you, chair Gilman. Thanks for all that info, Mike. Excuse me. Director Gibbons. When was the last time we did an RFP?

I believe it was

2015, so it's been some time. Okay. And do you note do we have a flat fee with GPay? What is our fee with them?

It's a a percentage. We pay them I can tell you an amount. It's based on our investment portfolio and a percentage. It's about $5,000 a month.

Okay. So it's not a basis point percentage. It's it's flat fee?

It's based on our investment volume, and there is a basis point percentage, but it ends up being about $5,000 a month. So it increased just slightly over 5,000 with the bond investment, but it's right in there.

And when did we last review our investment policy?

It's had some ongoing conversation, over the last couple years, and, the reason it's on your agenda for this year is to make sure we're checking in on kinda where we are. And then, you know, counselor McGuin, you might wanna jump in here too because there's some very specific things that you're interested in here that we're gonna be gonna be part of that conversation.

Oh, narrowly, you know, you were along for a couple conversations about the ethical investing statement. But in in reading these documents, we also realized there were some changes that had come past counsel, some that hadn't, and that the sort of the the governance and structure part at the head of the investment policy has been amended to give counsel less of a role. And so that's something that we have the prerogative to reconsider. And so there's some I think there's some broader cleanup about and and at a minimum, having it come every year or every two years or something to the full council as a as a presentation, I think, would be really important because it also hadn't come to council in several years. It'd been just about every year report to the committee, which was pretty hands off, I think, for something that we have so much interest in.

So and yeah. Yeah. So

A couple questions I have, and I and I do wanna I I feel that coming waiting for maybe waiting a little until we get to that that agenda item this year and just kinda seeing what with that said, when is the renewal due? When do when do we have to when is the date of being able sign it?

Officially in April. That's why I brought it to you as early as possible so we could get some direction and certainly, put the investment policy discussion on next month. So if you if you wanna wait the and you're asking that, the answer would be we can. Mhmm. We have some some time here. Would you know, we would need to, make a decision or ask for an extension by April, though.

And how long is the contract for?

It would be a two year contract. Two years.

I guess, you know, this is fairly new to me, but I I would wanna know an example of just kinda give me an idea, just a few examples of what the types of investments they've been doing for the city. That'll help inform me, particularly next month when we start looking at it because I wanna I wanna know exactly what we're what we're doing.

May I speak to that for just a moment, Mike? Is that alright? That while it's true, as as you both said, that the the city policy drives what the investment firm is is advising us to do. It's also true that as a municipal government, there's a pretty narrow lane that mostly we're invested, like I mean, by mostly, I mean, like high nineties percent in other local governments and in federal government, essentially government bonds. The one exception in our portfolio, it was last year, we had three items that were capital construction bonds for large corporations.

We we don't do stock market sorts of investing or or mortgage securities or anything like that. So so when we're talking about trying to influence it, we're influencing a world where all the cities in the country are invested in each other's sewer systems and in farm home USDA programs. And anyhow, just just that's part of the the universe of what we're looking at. I think that's that's why there's not a whole lot of money managers. Like, pensions have a little more flexibility, and there's a whole industry of people that wanna take you to Tahiti and feed you prawns and encourage you to invest.

That's not true with municipal investments. So we we this is the this is the largest West Coast firm. And it it it both means that they're doing, you know, many local governments, but it also means there's just not a bunch of competition for this. So that's my 2¢.

And we're largely in US treasuries. You're right. Just a lot of that investing in even local governments. King County bonds were invested in some of those. Safe and secure.

So, personally, I would be inclined to be okay with the extension. However, asking that before the next extension we do an RFP, ten years seems like a a pretty good gap to me. And but I recognize RFPs take time and commitment, and the answer may end up being the same. But I through another organization I'm affiliated with, we went through one last year, and I was, really pleasantly surprised by some very unfamiliar names that that sent in proposals. So I and I I only say that to say, you know, I would be curious. Are there new firms that have entered the market? Are there other people who just haven't had the opportunity before? So that's kinda where I sit with it.

For sure. I appreciate that. And I think I should also have added I think one of the reasons I would ask for a renewal is just so I have some time to work with them, especially given the fact that we've structured a couple of fairly sizable bond purchases with them. Now that doesn't mean those wouldn't stay no matter who we're with, but just to develop the relationship a bit more. And I completely agree. An RFP seems, very appropriate before our next renewal. I will have had some time to work with them, but also then kind of look at what the landscape is. And is it you know, who do we have? It just because there are three main ones doesn't mean there aren't others that would enter into the pool that we would consider.

Just checking, Robert. And we don't we don't necessarily have to make a motion, but it'd be nice to have some general consensus. It's I'm agreeing with Kelly's suggestion that we support Mike renewing the contract right now and and that he plans a request for proposals across the two year duration of this comp contract. And so we can learn more about who's out in the world doing this work, what's the generational change look like. And

Yeah.

That's fair. That's fine, Betty.

We'll still plan on having a robust discussion around the investment policy and getting that moving forward. But then taking that direction, we'll move this, renewal forward. I'll work with, legal, and you'll see it well, you won't see it on council agenda because it's within our signing authority. But we'll we will have a presentation by, our investment advisers later in the year. We have it on the work plan, so you'll hear a bit more from them and be able to ask some questions about some of these things.

And I we tried to position that well enough after the investment policy is decided on, so you can have that direction. Otherwise, in my report, I think I can tell you that things are busy with closing out 2025, as I mentioned. The budget team's working hard to get the budget document ready, for the presentation to GFOA and, that consideration for the budget award that the city's received annually. The annual comprehensive financial report preparation begins pretty heartily starting, some really in February. That's due in May.

We'll start to be contacted by the state auditor's office wanting to look at our federal our federal filing for that single audit that we'll have. And then, of course, we'll be right back into the, accountability and financial audit on 2025. So we'll be working on that. We have one of the accounting managers is on parental leave, so we're down a person. So I'm even getting, pulled into the annual comprehensive financial report a little bit more.

So that's a good learning time for me and to really kinda get my feet wet whether I wanted to or not in more ways than one with that document. So everybody's busy, but, we you know, we payroll, did an amazing job getting the beginning of the year is busy getting all the COLAs out. We're working hard to get, once counsel ratified, in particular, going back on the police union contract, it's getting those retroactive pay calculations made so we can get that out. So there's a lot happening. One other thing I wanted to tell you, when Workday was launched, the city went with, ADP, which is a payroll processor to do our tax filings.

We were able to pull that back in house so that we'll be doing that. We were paying ADP, over a $100,000 a year to do that. So this will be not only a big savings, but something really we can do and use Workday. It help really helps create, the nine forty one filing. But then our employees will have the w two statement within Workday that they can go and get.

We'll even have it available for 2025 even though we mailed them out. So that was a big lift that we were able to do in finance and really proud of the payrolls, accountants for leaning into that and getting it done. But everybody's working hard. The b and o tax team, of course, getting all those new changes implemented. So we're well underway as the first month of the New Year comes to an end this week. So thank you.

That's another victory that taking the payroll tax in house. That's kinda like our our portal and and taking over the priority based budgeting internally. It's pretty cool. BBB efficiency right there. Yes. It is.

Your first report of the year.

Yes. Beautiful. Beautiful. Jay, do you have any reports for this evening? K. When's the next football game for your team? February 8, Super Bowl. Congratulations. Yeah. He's one of the million assistant coaches who've been giving advice.

Oh, I didn't miss it.

Debbie, any reports this evening? Owen, Joan? No? Thank you. Well, seeing no further well, any good of the order, Friends and colleagues, countrymen?

Good first meeting. I, didn't mention this earlier because it's not really the work plan, but I'm very I'll be very curious after the session to hear more about, like, the public banking and seeing how that goes. Mhmm. We'll see where that goes. This you know, flip a coin on whether or not that'll make it through this session, but I'll be curious to see how that will maybe change some of what we're doing here.

Thank you. And and, Kelly, just and just to comment on that briefly that Robert had suggested that there might be when we get our reports from legislative session, if there are new local revenue options or there's changes in the state tax code, that could be something we would wanna discuss in here if it has implications on the budget. Go ahead.

Alright. Thank you. I just wanted to say welcome to to councilmember Vanderpool. I'm sorry I missed his initiation. I'm sure it was as extensive as mine, so I look forward to to catching that on video later.

It was almost the same. Alright. So at 05:39, we'll adjourn the finance wait. Wait. Oh, there's one other good of the order thing we were going to discuss. Yeah. Yes. Does Thank you. Go ahead.

You you saved the day. We wanted to ask the committee. In the past, given that we're starting just a bit later, we've provided a meal if that would since we're getting out of bit earlier tonight, but these could tend to go, through the dinner hour. We wanted to get your input on if you'd like us to have, a dinner here for you. So if you could give us one more piece of advice before we adjourn.

Very appreciative of that consideration. I'll say for myself, probably, like, I would be unlikely to eat as early as pre meeting, but that's just me.

I don't maybe. I mean, that's the thing. Council member Green points out very important thing. And it's like, you get here, and you're like, you know, do you do you eat, like, right before the I mean, it's it's it is kind of in between. So it's it's I'll I'll I'll leave that decision, that that really difficult decision to the chair.

And, I'll tell you, if we're oh, Debbie has advice for us here. I think she just reminded that that finance committees of

the past have had their meal while they're working. Yeah. So

I'll blame you.

So here's what I'll offer. We will make every effort to never go beyond two hours, 04:30 to 06:30. And if if meetings are consistently pushing against that 06:30 and there's a, you know, an audible rumbling in the room, then then we'll rethink the issue of of having a meal either available at the beginning of a meeting or or considering eating during the meeting. Although, I I share my colleague's hesitation to eat pasta on Zoom. So that's it's awkward.

Good. So so it sounds like it's a no to meals at this point and a yes to making sure we don't go too long as we load up our agendas. Thank you. Alright. And now with no further business before the finance committee of the Olympia City Council, we are adjourned at 05:41.