Attachment

LEGISLATIVE, FINANCE, AND ADMINISTRATION COMMITTEE AGENDA MARCH 10, 2014 - 6:00 P.M. CITY HALL COUNCIL CHAMBERS 15 LOOCKERMAN PLAZA DOVER, DELAWARE Public comments are welcomed on any item and will be permitted at appropriate times. When possible, please notify the City Clerk (736-7008 or e-mail at CityClerk@dover.de.us) should you wish to be recognized. AGENDA ADDITIONS/DELETIONS 1. FY 14 - Discussion of Pension Appropriation Changes (Committee action not required) 2. Update on Financing Plan for Garrison Oak Technical Park Project (Committee action not required) 3. Adjournment by 6:30 p.m. /tm S:\AGENDAS-MINUTES-PACKETS-PRESENTATIONS-ATT&EXH\Committee-Agendas\2014\03-10-2014 LF&A.wpd THE AGENDA ITEMS AS LISTED MAY NOT BE CONSIDERED IN SEQUENCE. THIS AGENDA IS SUBJECT TO CHANGE TO INCLUDE THE ADDITION OR THE DELETION OF ITEMS, INCLUDING EXECUTIVE SESSIONS.

Fiscal Year 2014 Budget Discussion of Pension Appropriation Changes March 10, 2014 Presented by: Donna Mitchell, Controller/Treasurer

Net Pension Asset - FY14 Budget Revision 2

Civilian Plan Contribution – Budget Revision 3

4

City of Dover Finance Department PO Box 475 Dover DE 19903-0475 Phone: (302-736-7018 FAX: (302) 760-4930 E-Mail: dmitchell @dover.de.us MEMORANDUM To: Members of Legislative, Finance & Administration Committee From: Donna Mitchell, Controller/Treasurer Copy: Mayor, City Manager, & City Clerk Date: March 10, 2014 Subject: Update - Financing plan for Garrison Oak Technical Park Project Please accept this memorandum as an update to the work being done on the financing plan for the Garrison Oak Technical Park street, storm water, and landscaping project. We have two options to finance this project. One option is to bond the project with a municipal debt issue and the other option I am researching is the potential to inter-fund borrow the funds by leveraging our reserve accounts. Our annual return on our investments this past year was .17% due to the current interest rate market on short- term durations. A five year Treasury Note (longer duration) was yielding 1.76% as of December 31, 2013. If we financed the project through an inter-fund loan we would forgo all the issuance cost and receive a greater return on our own money. The drawback is how this would be perceived by the ratepayers and bondholders. We also need to insure compliance with all policies, municipal code, and debt covenants. This would include a review of investment, debt and financial policies. If we were to establish a formal program for inter-fund borrowing, some of the above mentioned policies may need changing. The work that has been accomplished to date is as follows: • Contacted City Auditor to discuss (1) “reasonable assurance” of repayment in order to classify the transaction as an inter-fund loan rather than a transfer and (2) is reasonable assurance restricted by the duration of the loan. The auditor agreed we can set up the inter-fund receivable/payable (loan) as long as there is the intention and ability to pay the funds back in a reasonable amount of time. He would look at what the money is being spent on to determine the reasonableness of the borrowing time frame. I.e. operations or capital. • Contacted City Bond Counsel to discuss the potential for any debt covenant restrictions for inter- fund borrowing. Our Bond Counsel pointed to our Bond Resolution. Under the Bond Resolution, the Improvement &Extension Fund is held in trust for the bondholders. Section 507 creates the fund. Section 507A (c) describes how it should be funded from Revenues. The amount to be funded each fiscal year is determined by the engineers (Section 504). Finally Section 510 sets forth how the funds can be applied. All of them relate to the electric system. My understanding is that the City wants to fund Street/Storm Sewer/Landscape shortfall for Garrison project with monies from this fund. The only way I see you can do that is to show there is money in the fund in excess of what the Engineer says is required to be there.

Legislative, Finance, & Administrative Committee Financing plan for Garrison Oak Technical Park – Update March 10, 2014 • Contacted City Engineer – Burns & McDonnell and asked for them to review our reserve levels with the knowledge that Units 1 & 2 will not be bid into the 2017/18 capacity auction and Mr. Betts is working on a PPA and Future Capacity agreement with Calpine. The Lead Engineer is traveling but has responded that he will contact me to review the details. I would also mention that the current balances in our reserves have been set by City Council through the financial policies and not by the Electric Engineer. I have always understood the Engineer to opine whether they believe them to be sufficient for future improvements. • Contacted Financial Advisor to request their input and to assist with debt structuring. I would prefer a greater amount of principle be paid back in the early years, so if we have future debt needs as this debt drops off we could add on the future debt without a lot of impact on the budget. They will also provide their thoughts on the proposed financing plan. In closing, I expect to have the remaining research done by March 31 to provide a final recommendation to City Council. Any policy change recommendations would be included. Depending on the interest rate and payback period the debt service could range from $250,000 to $500,000. 2