HomeMy WebLinkAboutFebruary 7Finance and Investment Committee Regular Meeting Town of Los Altos Hills - February 7, 2022
Members present Nate Blair, Allan Epstein, Kjell Karlsson, Susan Mason, Chris Nam, Roddy Sloss and Chris Welborn Members absent: Cheryl Evans and Medha Rishi Associate members present: Jim Lai and Frank Lloyd Council present: George Tyson, Mayor (departed at 5 PM); Linda Swan, Vice Mayor Staff present: Peter Pirnejad, City Manager; Sarina Revillar, Administrative Services Director; and Oscar Antillon, Public Works Director.
Public present: Monique Spyke, Managing Director and Wale Kajgpaiyc, Senior Project Manager, PFM; Rick Simonson, Senior Vice President and Geoff Michalcyzk, HF&H Consultants. Meeting handouts: Meeting handouts can be viewed on the Town’s website: https://www.losaltoshills.ca.gov/AgendaCenter/ViewFile/Agenda/_02072022-1976 Ms. Mason called the meeting to order at 4 pm. Public comments: None Approval of Minutes - Susan Mason Minutes of December 6 and 15, 2021, and January 11, 2022 Regular and Special meetings were approved by all attending members as presented. PFM Financial Quarterly Update – Monique Spyke and Wale Kajgpaiyc Ms. Spyke and Mr. Kajgpaiyc presented a fifty-page handout distributed to members before the meeting and took questions. Highlights include: Fed forecasts 4-5 interest rate increases in 2022 compared to the prior forecast of three; inflation is expected to slow during calendar 2022 and 2023; Chairmen Powell was appointed for another term as Fed Chair; Unemployment remains at 3.9% while the labor force has been shrinking; Longer term interest rates are expected to rise to 2%; presently the Town’s portfolio is managed to a 1 – 5-year maturities compared to the previous policy of 1-3years; Portfolio is weighted toward Treasuries due in part a lack of product in other categories; PFM
modeled alternative duration strategies and concluded the current 1–5-year strategy is still optimal and therefore is not recommending a change in portfolio investment strategy; a negative mark to market return for the fiscal year ended June 30, 2022 is presently forecast; while the fiscal June 30, 2023 year mark to market forecast is
expected to show a positive return. PFM will provide staff with an estimate of the FY’22 loss. A link to the related handout is included in the introductory information above. Sewer Rate Study, Five Year Sewer Capital Plan and Status Update – Oscar Antillon Mr. Simonson of HF&H presented an updated version from that provided prior to the meeting for the proposed Sewer
Rate Study recommending increases in capital spending and routine maintenance costs resulting in proposed annual rate increases of 6% for four consecutive years and 4% in year five. A 3% annual cost increase assumption was made for third party contract routine maintenance spending based on a vendor negotiation that has not yet been completed. Cost increases from Palo Alto Sewer Treatment Plant renewal construction is based on the most recent (November Continued
February 7, 2022 February 7, 2022 FIC Minutes, continued page 2.
2021) estimate and thirty-year financing of the related costs resulting in annual cost escalation from 1.1% to 24% during the five-year forecast period ending in June 2027. Internal capital spending is forecast at $1.2 million per year during the five-year forecast period and then declines to approximately $500,000 per year attributable to renewal of
several older sewer mains based on engineering studies prepared by CSG =(Recommendations and Budget Needs for Sanitary Sewer Capital Improvement Plan (CIP) from FY2022 to FY2026, dated December 2, 2021). Mr. Simonson commented that it is normal practice to fund long term internal capital expenditures without external financing for similar sewer systems in the area. Attending members voted in favor of recommending the Sewer Rate
Study to Council for adoption except Mr. Sloss, who abstained. Proposed rate increases, if approved, represent the maximum rate allowed during the five-year period, but each year the rate will be set by Council action. The fairness of the fixed effluent volume per EDU used to calculate Town cost and 50% conveyance mark-up used in the PA and LA sewer plant billing was raised. Mr. Simonson stated that HF&H could assist with a fairness analysis of these charges. A link to the related handout is included in the introductory information above. Fiscal Year 21-22 Mid-Year Budget to Actual Review – Sarina Revillar Ms. Revillar presented slides to the Committee which updated slides sent to the Committee before the meeting. Overall, revenue is expected to be higher, expenses lower, and ending Unassigned Fund Balance higher than budgeted. Licenses and Permit revenue and Charges for Services are running at twice the budgeted rate. Ms. Revillar attributed this revenue increase to significantly greater Building and Planning activity substantially offset by third party (CSG) professional fees. Committee inquired whether this increase was due to higher volumes, higher construction valuations or FY’ 20 changes in fees and expressed the need to assess the impact on cost recovery rates. Staff intends
to investigate the cause, noting fee and cost revisions will be addressed before the fiscal year end. Several presentation clarifying suggestions were proposed. (The February 18, 2022 Council presentation including points discussed in the FIC meeting is attached along with a link (below) to the related Council meeting discussion (Item 6a) where it was
noted that a review of Reserves will be included in the Fiscal 2022-23 Budget presentation.) Finance Activities of Interest - Sarina Revillar Ms. Revillar presented a comparative analysis of the Town’s bank and investment accounts. Mr. Sloss asked if quarterly investment reports from PARS for Pension funds and CalPERS for OPEB funds could be included in similar future presentations. A brief update was provided on the ad hoc committee’s plans for allocating the $2,014,480 ARPA grant. A link to the related handout is included in the introductory information, above. Council Matters of Interest – Linda Swan - None. Next meeting date - March 7, 2022 Topics are Development Fee investigation, Overhead Allocation process, OPEB actuarial report, follow-up on
Liability Insurance review and other topics that may be suggested. Adjournment: As there were no further comments, the meeting adjourned at 6:12 pm.
Respectfully submitted: Roddy Sloss, Committee Secretary Attachment: A video recording of the February 18, 2022 Council meeting including the Mid-Year Budget Update presentation can be viewed at: https://losaltoshillsca.civicclerk.com/Web/Player.aspx?id=431&key=-1&mod=-1&mk=-1&nov=0. ---