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HomeMy WebLinkAboutMinutes BOC 022306BUDGET OVERSIGHT COMMITTEE February 23, 2006 Minutes The Budget Oversight Committee met on February 23, 2006 in the Council Chambers of the Municipal Complex, located at 10500 North Military Trail, Palm Beach Gardens, Florida. The meeting was called to order at 8:38 A.M. I. ROLL CALL Members Present: John Chaplik Martin Cohen Harvey Goldberg Also Present: Allan Owens, Finance Administrator Mary Anderson, Deputy Finance Administrator Hal Valeche, Council Member Patricia Snider, City Clerk II. STAFF LIAISON INFORMATION AND DISCUSSION REGARDING POLICE PENSION REPORT AND OTHER BUDGET ITEMS Allan passed out a copy of the powers and duties of the Budget Oversight Committee. He went over the powers and duties with the board which include: 1) Review the proposed operating and capital improvements budget as prepared by staff. 2) Request information form staff in order to analyze the proposed operating and capital improvements budget. 3) Review the recommended spending plan for compliance with current adopted financial policies. 4) Make recommendation to Council during the budget adoption process with regard to the recommended spending plan. He feels the committee has been focusing almost entirely on the pensions. Martin Cohen feels the pension is a continuation of last years report. Allan said he understands but would like to see the Committee be more focused on the budget process for the 2006/2007 Calendar year. Mr. Cohen added that he submitted a memo a few months stating that he doesn't feel the Police Pension is well funded. John Chaplik added that the funds are not well funded and it will require a substantial increase in spending and that should be reflected in this year's budget. He feels that that the report will have a reflection on this year's budget. Harvey Goldberg stated that this years budget has not started yet and Council has indicated that they are going to move forward with a workshop before any final decisions are made including bringing in an independent actuary to given them information about the pension plans. He feels they have given council their recommendation and until Council moves forward there is nothing else for them to do. Martin Cohen feels that this information will help City Council with their workshop. He stated that this is very important information and that they will be doing a disservice by not providing this information prior to a workshop meeting. Council Member, Hal Valeche stated that his intent is not to bring in another actuary, but to bring in a financial analyst. An equity analyst will have the experience to determine if there if there is a problem with the pension plan. He doesn't think that the actuary on the police pension board did anything wrong, but he would like a person with the experience to come in and analyze the issues. He brought up the fact the he went to the recent Fire Pension meeting and they are having a problem because the trustees cannot get insurance. This is because the pension fund is less than 50% funded. He was surprised that the response from the Firefighter's pension board was not, how to correct the problem and bring the fund up to 50% but rather, they asked the actuary if he could look into changing the accounting method to show that the fund is 50% funded. Council Member Valeche explained to the Board that the City Attorney recommended that this committee ask the City Council if they will allow them to look more into the pension issue even though it is out of the realm of their powers and duties. Martin Cohen gave the Committee a copy of an article about public pensions and their shortfalls. He explained the article and there was discussion. He stated that he feels the Committee has an obligation to inform the public that there is a problem with the pension boards. There was also discussion about the types of funds the pension is placed in. There was discussion about how the report regarding the pension board was drafted. Harvey Goldberg stated that he would like to read any report that is coming from this Committee that has his name on it prior to it being sent out. There was ongoing discussion regarding the liability of the plan. John Chaplik brought up the difference in private company plans compared to the police pension. He went over the earnings over the past 5 years and went over the liability percentages. He also discussed the assumptions and stated instead of decreasing to reflect reality, they have increased which is going the wrong way and should be more conservative. Harvey Goldberg added that the had recommended that not only does the pension board they need to reevaluate their assumptions, but they also need to figure out how they are going to reinvent their investment philosophy so the plan can start earning money. He agrees that a financial analyst should look at the pension plan and determine what they need to do to move forward. He also agrees with John Chaplik that the assumptions are incorrect. Martin Cohen agreed with Harvey and also gave some examples of private companies that had problems and what the outcomes were. John Chaplik spoke about the 40% funding level and the 8.5% assumption. He talked about the liabilities and the assets and gave examples of different situations regarding this level of funding. There was discussion regarding the Ordinance that was brought before City Council wherein staff had recommended against a police increase and City Council overrode staff's recommendation and passed the increase on the first reading. Because of that, John feels there is in an urgency to get this report to City Council as soon as possible. The Committee agreed they would like to get the report submitted as soon as they all agree on the content. Allan reiterated that if the Committee wants to work on the pensions they need to speak to Council for permission since this is not included in the powers and duties of this committee. There was continued discussion regarding the Committee's role in the pension boards and how they can become more involved in the future. The Committee discussed how sound the pension plan is and what can happen in the future if this is not corrected. There was also ongoing discussion about what has happened to other pension funds that were not sound. The committee also discussed the make -up of the pension boards and how the members are appointed. John Chaplik suggested going through the report and discussing it among the committee to see if everyone is comfortable with the content before sending it to City Council. They also discussed everyone taking a copy home and then holding a special meeting to discuss their feelings on the report. The Committee agreed to schedule a special meeting to go over their comments on the report. They are going to meet on February 28, 2006 at 5:30 P.M. John Chaplik asked Allan if discussing retiree health benefits would be and acceptable discussion for the Committee. Currently this is not an item in the operating budget but they would like to address this issue. Allan stated that according to the powers and duties stated in the resolution they can only discuss items that are part of the proposed operating or capital improvements budget. John asked the Committee if there are any specific items they would like to discuss on the agenda for the March 23, 2006 meeting. Harvey stated that he is anxious to get moving on the budget. Martin Cohen stated he would like to continue the discussion from last year regarding what is going to happen when the City reaches build out and he would like to look at the plan for the next 5 to 10 years. John Chaplik stated he would like to discuss the Capital Budget. There was discussion about the types of capital improvements that were in the budget last year and how the capital money is shown in the budget. John Chaplik asked Allan for a spreadsheet of all departments and the average of what was spent over the past five years. He asked to play a "what if game" as to what type of savings can be made in the budget and including different scenarios of savings. Martin Cohen asked Allan why there is no audit committee since this was recommended by the Budget Oversight Committee last year. He is convinced an audit committee would have picked up the problems with the pension board. Allan responded that this was discussed and typically in Cities that have internal audit functions they work without an audit committee. He doesn't see a function for an audit committee since the City has independent auditors. Hal added that he knows the Charter Review Committee has been discussing this, but does not know the specifics of their conversation. Martin Cohen reiterated how important he feels this committee would be and there was ongoing discussion about the functions of a possible audit committee. John Chaplik requested a copy of the auditor's discussion and report from last year. The Committee continued the conversation regarding capital projects and topics to discuss at future meetings regarding capital improvements. There was discussion about tradeoff calculations as part of retiree health benefits. They also discussed the comparison between the private sector and the City's benefits. There was discussion about Scripps, and different projects coming to the City and the taxes they will generate. John Chaplik brought up council's vision statement and the fiscal responsibility of the projects in the vision statement. There was discussion regarding the next meeting and what will be discussed. John Chaplik stated he would like to see the details for the capital budget, the criteria for expansion, and how the projects are added. Allan stated that the capital information will not be available as of the date of the next meeting. John asked him if they could talk theoretically and also how the projects are ranked and decided which projects will be done. He would also like to talk about "what if' scenarios in each department such as salaries increase to get an overall feel on what would happened to salaries if the budget is increased by 10% next year. He would like to see spread sheets with this information. He would also to have information regarding where all the expenditures will be to have a "buy in" for the committee to go in with. The Committee went back to discussion regarding the police pension fund and the actions that could be taken to recognize the problems with an actuary and financial analyst. John Chaplik suggested hiring an actuary that specializes in pensions and health insurance so he can review also reviews the City's health benefits. Council Member Valeche brought up the Ordinance that was voted on for the Police pension and told the Board that the fact that the vote on first reading was 5 -0 really that the vote will pass on second reading. He said the committees' recommendations will have a lot of impact in City Council's decision on second reading of this matter. Martin Cohen asked about the discussion last year regarding the City buying parcels of land for firehouses and police stations before the property values go up. He would like this to be considered this year because there is not a lot of land available. Allan stated that this will be planned in the future when the western communities are developed. John Chaplik suggested having the developers of the Vavrus site and Brigger site donate land as part of their development. Allan said it is too soon to discuss that but it will be coming in the future. V. Adjournment With no further business to discuss the board adjourned at 10:13 A.M. Attest: Chaplik, C �7L Ma in Cohen, Viee -C-h m Harvey oldberg, Bw- rt�ember v Ch Public Information/ Recording Coordinator