Attachment

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE AGENDA JANUARY 30, 2014 - 4:00 P.M. CITY HALL CONFERENCE ROOM 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. Adoption of Minutes - Organizational Meeting of December 12, 2013 2. Establishment of Committee Priorities 3. Development of Committee Strategies 4. City Organizational Structures 5. Discussion of Meeting Dates and Times 6. Adjournment /js S:\AGENDAS-MINUTES-PACKETS-PRESENTATIONS-ATT&EXH\Misc-Agendas\FINANCIAL AND OPERATIONAL ADVISORY\01-30-2014 F&O.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.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE The Financial and Operational Advisory Committee organizational meeting was held on December 12, 2013 at 4:01 p.m. with Councilman Hutchison presiding. Members present were Mr. Holden, Mr. Larson, Dr. Newton, and Mr. Smith. AGENDA ADDITIONS/DELETIONS Mr. Holden moved for approval of the agenda as presented, seconded by Dr. Newton and unanimously carried. Self Introduction of Members Mr. Christopher Smith stated that he is currently employed by Edward Jones as a financial advisor and runs the investments office in Dover. He attended Hampton University and earned an MBA in business administration with a concentration in finance and a bachelor’s degree in business administration with a concentration in accounting. Prior to graduate school, he stated that he worked for PricewaterhouseCoopers, LLP and performed audits for MBNA and Chase in Delaware. After obtaining his MBA, Mr. Smith worked briefly at the Edward Jones corporate office and relocated to Dover two and one-half years ago. Dr. Cynthia Newton advised members that she has worked as an Associate Professor of Political Science at Wesley College for approximately three (3) years and also serves as the advisor for the student government and oversees their budgetary processes. Dr. Newton holds a Ph.D. in Public and International Affairs from Northeastern University as well as an MPA in Nonprofit Management from Clark University. Her focus is in public policy, American institutions, and governance. She has previously owned and operated several businesses, including non-profits. Mr. Russell Larson stated that he formerly served as the Controller General for the State of Delaware for 16 years and as Deputy Controller for 11 years prior. He also has prior experience working in the General Assembly in Richmond, VA. He informed members that he earned an MPA from Pennsylvania State University. Mr. Wayne Holden advised members that he was born in Dover and that his family founded and owns Holden Dodge. He stated that he served in the United States Army for four (4) years prior to working as a financial consultant for Dean Witter Reynolds. He also worked as a financial consultant for Merrill Lynch for 28 years and served as the Resident Manager of the Dover Merrill Lynch office for 14 years. He informed members that has experience with the non-profit sector including work with Bayhealth (Kent General Hospital), the Schwartz Center for the Arts, the Dover Art League, the Delaware Community Foundation (serving as Chair), the Nature Conservancy Delaware Chapter Board (serving as Chair), and the Delaware Symphony. He explained that he has experience with troubled balance sheets and operating expenses and enjoys helping to stabilize non-profit organizations experiencing financial difficulties. Welcome by Councilman Hutchison and Explanation of the Committee’s Purpose On behalf of members of City Council, James L. Hutchison, First District Council representative, thanked each member for their willingness to work with the City in this endeavor. He expressed pride in the work of Mrs. Donna Mitchell, Controller/Treasurer and Mr. Scott Koenig, City Manager.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 2 He explained that the City of Dover was experiencing a time of change, including internal changes within the management team, as well as a projected financial deficit of $7M in the next five (5) years, which may change based on market conditions during the next five (5) years. Mr. Hutchison stated that Council would like to hear members’ thoughts and ideas as the Committee examines the budget, hears presentations from the City Manager and Controller/Treasurer, and gathers facts and figures as the City begins to prepare for the FY 2015 budget and years beyond. He reminded members that the City is very restricted in regard to revenue sources and new income (property taxes, fines and fees, and utility rates). He stated that he was very proud that, over the years, Council had been very careful in regard to tax increases, noting that the City had not increased taxes since Fiscal Year 2011 when a rollback was implemented. Organizational Overview by City Manager, Scott Koenig Mr. Scott Koenig, City Manager, informed members that he had been the City Manager for a little over two (2) years but had been employed with the City of Dover for more than 23 years, previously working in the Public Works Division, with a background in public works operations and engineering. Members were provided a variety of documents excerpted from the FY 2014 Annual Operating Budget, including an FY 2014 Organization Chart, Personnel Table, Personnel Budget, Personnel Changes, and Overtime Comparison Fiscal Year 2011 Through 2014 (Attachment #1). Mr. Koenig provided an overview of the organizational structure of the City, explaining that Dover is a full-service city and a $130M corporation. He informed members that the City of Dover operates under a modified council-city manager form of government, whereby the Mayor and members of Council are policy makers and Council appoints the City Manager. The City Manager serves as the chief administrative officer and oversees the Library, Public Works, Customer Services, Human Resources, Information Technology, and Electric Departments. Other department heads, including the Tax Assessor, City Clerk/Assistant Treasurer, Controller/Treasurer, Fire Marshal, Building Inspector, and City Planner, are appointed by and report to Council. The City Solicitor is also a Council appointee. The Mayor appoints the Chief of Police. Responding to Mr. Holden, Mr. Koenig confirmed that it is typical in a municipality for the City Clerk’s Office to be an independent office that primarily supports City Council. Mr. Koenig explained the Controller/Treasurer oversees the Finance Department. As the City has experienced financial difficulties and several departmental directors have retired over the last few years, some functions previously performed solely under the City Manager had been reassigned, including administrative support for budget preparation and oversight of the procurement and warehousing inventory areas. Mr. Koenig noted that any differences of opinion that occur between the Controller/Treasurer and City Manager would be resolved by City Council. Mr. Koenig explained that the Dover Fire Department is a volunteer fire organization that provides service beyond the City limits. The City of Dover provides approximately $1M per year in administrative support to the Fire Department through employment of the dispatchers and Fire Chief’s Assistant. The elected, volunteer Fire Chief supervises the City of Dover employees and

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 3 reports directly to Council. The City Manager performs an annual inspection of the Fire Department but does not supervise the employees or volunteer members. The City covers the capital costs to purchase fire trucks and related equipment, maintain fire apparatus, and pay bills related to the fire houses, the personnel costs for the dispatchers and Fire Chief’s Assistant, and other costs associated with the administration of the Fire Department. Mr. Koenig explained that the Parks and Recreation Department was currently reporting to the Planning Director because the former director retired and this position was transferred to the Planning Office in an effort to save funds. He noted that the Tax Assessor is appointed by Council and that some outside assistance is used for commercial evaluations. Mr. Koenig advised members that the Mayor’s position is full time and the Mayor and City Manager share the services of an administrative assistant. The Economic Development Office was transferred to the Mayor’s Office and the Police Department is also accountable to the Mayor’s Office. The civilian employees in the Police Department are unionized and union contracts are negotiated through the City Manager’s Office, but these employees report to the Police Chief on a daily basis. Mr. Koenig explained that the City has a “hybrid” form of government. The City Manager administers the budget and the needs of all departments are incorporated into this budget, which is presented to Council. In the budget process, Council appointees can “go around” the City Manager in regard to budget requests, resulting in challenges in obtaining a final balanced budget. Responding to Mr. Smith regarding compensation for members of committees, commissions, and boards, such as the Historic District Commission, Mrs. Mitchell explained that members of some of these entities, such as the Planning Commission, Board of Adjustment, and civilian members of standing Council committees receive compensation. Members of other committees serve on a volunteer basis. Referring to the Fiscal Year 2014 Proposed Budget - Personnel Table, Mr. Koenig advised members that it is the employees who work for the City that make the City run. He noted the annual personnel obligation was approximately $30M. He indicated that staff had been trying to do more with fewer people over the last few years and the number of full-time employees had been decreased from 362 to 347, and part-time personnel had also been adjusted. Where appropriate, some operations, such as some custodial and grass mowing services, had been privatized and staff was hoping to obtain feedback on additional ideas for privatization. He noted that this was not a simple matter because multiple functions may be performed by employees, such as employees who perform grass cutting in the growing season but also put up Christmas lights, shovel snow, and do odd jobs throughout the City during the rest of the year. Mr. Koenig stated that there was pressure to add positions in the next budget year, including a position to assist in attaining federal compliance in the City’s stormwater utility. Some administrative areas had been cut back and feedback had been received that the City was not providing the level of service that some expect; therefore, adding some positions back was being considered. Mr. Koenig felt that a staff of 347 would be adequate if “the right people were in the right positions” and indicated that achieving this circumstance was a challenge.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 4 Referring to the Personnel Budget for Fiscal Year 2014 - Total City by Fund, Mr. Koenig advised members that the base wage expense was approximately $19M which was increased to approximately $20.9M when on-call, overtime, and part-time wages were added. When benefits were considered, the total expense was approximately $30M. At the Council and administrative levels, discussions had been held to determine when it is more beneficial to add employees versus paying overtime costs. Staff was trying to address the budget by managing the number of personnel and overtime costs while maintaining the service levels that residents have become accustomed to. Mr. Koenig advised members that the population of the City is approximately 37,000. Over the last five (5) years, additional land area had been annexed into the City. He emphasized that much of the City’s budget is tied to growth and construction in the community due to revenue from building permits, impact fees, and transfer taxes. He advised members of the importance of growth to the financial health of the City because growth of utilities, housing stock, commercial building stock, and jobs helps to keep up with escalating costs, such as personnel, gasoline, equipment. Mr. Koenig stated that staff was looking for ideas from the Committee for things that could be done to change the operation of the City and modernize it. He noted some improvements in the budget process and hoped that, when preparing the budget for FY 15, that staff would be developing a budget in which the revenues would equal the expenses. Mr. Koenig stated that previously efforts were made to save money in the current fiscal year and carry these funds forward to help balance the next fiscal year. Financial Overview by Controller/Treasurer, Donna Mitchell Mrs. Donna Mitchell, Controller Treasurer, reviewed a number of documents related to the City of Dover budget and finances which were provided to members (Attachment #2). Referring to the City of Dover Fund Listing - December 12, 2013, Mrs. Mitchell explained that the City had established 30 funds, each managed as a separate “business,” and the City functions as a parent company. Some are pass-through funds, for example, the 210, 212, and 214 accounts, which are related to State programs and, by law, are not co-mingled with City funds. She noted that in governmental accounting the General Fund consists of current assets and current liabilities. Long-term assets and liabilities are accounted for separately in the 901 and 902 funds. She indicated that the Finance, and Procurement and Inventory Departments October - 2013 Monthly Budget Report was a sample of the reports sent to Council each month. At the bottom of each budget, if a fund has a reserve, a Contingency Reserve Balance is listed. Mrs. Mitchell reviewed charts regarding the market value and unfunded liability of the Other Post-Employment Benefit (OPEB), General Pension, and Police Pension funds as of July 1, 2012. She advised members that the OPEB fund relates to health care benefits promised to employees in retirement. The City’s assets do not currently equate to the actuarial determined liabilities for these funds and the unfunded liability reflects the amount not funded. She noted that separate trust funds had been set up to manage these investments and advised members that the General Pension and Police Pension are closed plans. New employees are enrolled in a 401(a) plan.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 5 In response to Dr. Newton regarding the timing of institution of the 401(a) plan, Mrs. Mitchell stated her recollection that the City’s 401(a) plan was initiated in 1994 as an optional plan and the General Pension Plan had been closed since 2009. The Police Pension Plan had been closed since the 1980s since police officers belong to the State Police Pension Plan. Mr. Holden inquired if there were any plans, with the exception of current unfunded liabilities, that were incurring a shortfall annually in terms of contributions versus what is required. Mrs. Mitchell stated that, for the most part, the City had been meeting the Annual Required Contribution (ARC) for pension; however, the Governmental Accounting Standards Board (GASB) required implementation of a new OPEB standard in 2009. Previously, municipalities did not have to recognize these expenses. While there is still no requirement to fund these obligations, they must be recognized by showing the liability in the municipality’s reports. If they are not funded, deficit fund balances will result. When the GASB standards were drafted in 2004-2005, Council was informed that this change would be occurring and in 2006, when the City was doing better financially, excess funds were put aside in reserve. When the City implemented the change in 2009, $6M had been set aside to put in the OPEB trust. At the same time, because it was known that budget issues would prevent the City from fully funding the ARC for OPEB, a ten-year phase-in plan was developed for the ARC and the City is currently in the fifth year of that plan. Mr. Holden felt that this liability was the “Achilles heel” that affected jurisdictions such as Detroit and Jefferson County, putting the County in bankruptcy, and felt that the City needed to “attack” and find out where in its operating expenses the City could outsource or eliminate 10-20% of staff. Mrs. Mitchell informed members that the City had previously been paying 100% of individual health care coverage for all employees. If an employee had family or spouse and child coverage, the City paid 75% and the employee paid 25% of the additional fee for this coverage. The City is attempting to implement a 15% contribution from all employees for health care coverage, and this has been accepted by two (2) of the City’s unions and is under negotiation with the remaining two (2) unions. The City also provides Medicare Part B reimbursement to those on Medicare, a provision that affects the liability and was discontinued for new hires as of 2009. Mrs. Mitchell noted that 65% of the OPEB liability is due to retirees and that no plans had been made as of this date to change the benefits of retired employees. Staff was attempting to implement these types of changes for new hires only, with the exception of health care cost sharing. The City also discontinued the Medicare Part B benefit during the last union negotiations for all employees other than non-bargaining employees. (City Clerk’s Office Note: Subsequent to Council’s action to discontinue the Medicare Part B benefit, an additional labor union, the American Federation of State, County, and Municipal Employees (AFSCME) was organized in the City of Dover. AFSCME members also receive the Medicare Part B Benefit.) Employees who were grandfathered in will still receive this benefit, but no new hires will receive it. Mr. Larson expressed his opinion that the City was doing much better than the State in terms of health care liabilities and much worse on the pension side, and Mrs. Mitchell concurred. She stated that the City’s phase-in plan was developed to fully fund the ARC over ten years and the rest of the OPEB liability would be amortized over 30 years.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 6 Mr. Larson indicated that he would recommend focusing on the pension benefit rather than the health benefit in terms of funding the liability. Responding, Mrs. Mitchell stated that she had recommended to Council that excess carry-forward balances be applied toward the pension obligation first to resolve this issue and subsequently to address OPEB, and the City had adopted this approach. Mr. Holden questioned if Council realized that the “red ink” related to deferred pension contributions every year would increase the liability. He stated that the City was not required by law to put this money in, but was required to do so by employees through contracts. He indicated that the longer that the City waits to address this issue, the more catastrophic it can be. Responding, Mrs. Mitchell stated her belief that this was understood by Council. She stated that changes in accounting standards were also increasing the liability, for example a new GASB standard dictates that the actuarial assumed rate can be assumed for ten years; however, if the amortization is 25 years, the municipal discount rate must be used for the remaining 15 years. She indicated that this change must be implemented in 2014 and 2015 and will again increase the liability and that fully funding these benefits up to the ARC would require a tax increase or a government shut-down. She noted that there must be a balance on how to address these issues. Because the pension plans are closed, their amortization life is reduced each year. The Police Pension Plan was decreased to a 15-year amortization and, therefore, is not being refinanced every year. Referring to the General Fund Expenditures By Major Function, Mr. Holden questioned what portion of Police and Fire Expenditures was attributed to police services versus fire services. In response, Mrs. Mitchell stated that the Fire Department budget was approximately $1M and the Police Department budget approximately $13.5M, noting that property tax revenue is approximately $11.1M. In regard to the 2013-2014 Capital Improvement Program, Mr. Koenig informed members that during prior year budget discussions, several members of Council expressed frustration that the City had not been spending enough on infrastructure. Some members wanted to increase the amount being spent annually on roads. During the last couple of years, approximately $300,000 in City funds were allocated for this and projected needs were as much as $1M. In recent years, the City had invested heavily in water pipe replacement and addressing inflow/infiltration in the sewer system, dedicating approximately $1M of revenue each year to these two (2) functions, and there were additional projects that would require increased funding to be addressed. Mr. Koenig noted that increases in rates would be needed to sustain the Capital Plan. In regard to the electric system, the City had been successful over the last couple of years in bringing rates down due to the City’s ability to purchase power at reduced cost through the hedge programs. Staff believed that the electric rate was reasonably stable, although there were currently some factors putting pressure on that rate. Mr. Koenig stated that there were large concerns going forward regarding the tax, water, and sewer rates and these would be discussed as financial projections are examined. Mrs. Mitchell explained that the electric fund budget is approximately $90M and at one time this budget was $120M. Because power supply costs have decreased, the overall City budget has been reduced over the last couple of years. For clarification, Mr. Koenig noted that the City’s budget consists of approximately $30M for the General Fund, $15M for the Water/Wastewater Fund, and the remaining portion is the Electric Fund.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 7 Responding to Mr. Larson, Mrs. Mitchell explained that the Capital and Operating funds are two (2) separate funds; however, monies from the operating fund are used to fund the capital fund, in addition to grants or debt service. Three (3) or four (4) state revolving fund loans have been implemented for Water/Wastewater, for a portion of the Library construction. The City’s last Street Program was not funded out of the General Fund at all, it was financed through a loan with PNC Bank. Mr. Koenig stated that the Capital and Operating Funds are accounted for separately; however, there is one (1) budget document that is presented which includes both funds. Mrs. Mitchell reviewed a presentation entitled, “City of Dover General Fund - Financial Projections - 2014-2018.” She explained that the City partnered with Municast, who provided a licensed financial model. This model allows staff to enter every dollar amount in the General Ledger for the past ten years and future budgets for five (5) years. It then provides financial projections for the next five (5) years. She noted that Page 3, Revenues, Expenditures & Fund Balance, reflected a surplus deficit for each year and a cumulative amount (additional funds needed to meet budget requirements) of $7.6M in the fifth year. This was based on assumptions that were done at the time and some of those assumptions were included on Page 2. She noted that Page 7, Revenue Trends, reflected that the largest amount of transfer taxes, $3.5M, was received in 2008. In 2010, this amount was decreased to $867,795 and was approximately $1M in 2013. During the last two (2) years, revenues received were less than budgeted amounts. Responding to Mr. Smith, Mrs. Mitchell stated that this decrease was affected by a decline in property values. Mr. Koenig stated that the Transfer in-ERLSP (212) line on Page 7 referred to revenues received from red light camera funds and that, as drivers have become more aware of and obedient to the signals, revenues had decreased. Mrs. Mitchell noted that some of these cameras had also been out of service. Mr. Smith noted that the City of Dover assesses properties at 100% of the property value and that this was last done in 2010. He noted that this would be done again in four (4) to five (5) years and this could result in a negative effect on the budget. Mrs. Mitchell advised members that the tax rate was previously 60% of value and it was changed to 100%, but the tax rate was rolled back at that time. Mr. Koenig stated that a revaluation is scheduled for 2015 and that this is a revenue neutral exercise in that if values go up, the tax rate will be rolled back. If the values go down across the City, the City would have to increase the rate to recover the same amount of tax at the end of the revaluation. Mrs. Mitchell noted that if property values increase and the rate is not rolled back, this would be considered a tax increase and must be authorized by Council resolution. Concurring, Mr. Koenig stated that this would have to be advertised and Council would have to vote to increase the tax.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 8 Mrs. Mitchell advised members that the Water and Wastewater Fund Financial Projects and Electric Fund Financial Projects were not part of the Municast model; however, the rate consultant who helps develop rates by class and customer for electricity uses this forecast model when developing the cost of service rates. Mrs. Mitchell reviewed a presentation entitled, “City of Dover Budget Meeting - June 5, 2013 - General Fund Budget & Forecast, Water/Wastewater Fund Budget & Forecast,” noting that this report incorporated financial information related to the Calpine project which was not available for inclusion in the original forecast. She informed members that the Municast model also provides the ability to enter information to test various scenarios, such as what type of tax increase would be needed to obtain a positive budget balance, and she wanted members to be aware of how the model works and what can be done with it. She noted that the City’s financial policies require the City to maintain an 8% - 12% budget balance, which is one (1) month of expenses, for cash flow purposes and the City typically budgets 8%. She noted that Policy Compliance - Sensitivity Analysis on Page 4 of the presentation reflected whether this was achieved. Responding to Mr. Hutchison, Mrs. Mitchell confirmed that the budget process for FY14/15 had begun. Mr. Hutchison stated that the charge to the Committee was to review the financial information; income; expenses; current and future revenues; and cost drivers including payroll, benefits, capital projects, and debt service, and tie this into the organization of the City. He explained that the ad hoc Committee would make a recommendation to the Legislative, Finance, and Administration Committee and that Committee’s findings would ultimately be reviewed by Council. He expressed his excitement regarding obtaining the thoughts and ideas of members as they work with the City Manager and Controller/Treasurer moving forward. Mrs. Mitchell stated that a major part of the difficulty the City has results from the need to recognize unfunded liabilities and the ARC each year, at the same time revenues are decreasing, which she stated is a “double-edged sword.” In response to Mr. Smith, Mr. Koenig noted that Council had been reluctant to propose increasing revenues. Mr. Hutchison stated that, as a Council representative, he was unwilling to raise revenues until a hard look had been taken to ensure that “the house was in order.” Mr. Koenig noted that a sanitation fee increase was implemented in the FY 13 budget from $11.70 to $17.00 per month for residential trash collection in lieu of a tax increase. During discussions last year regarding tax increases, Council expressed a desire to make sure that the City had addressed internal issues as much as possible before going to the taxpayers. He also cautioned members that the City now has four (4) unions and slightly more than 90% of the workforce is unionized; therefore, changing the long-term trajectories for OPEB would not be an overnight process.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 9 Mrs. Mitchell noted that, unlike the State, benefits for City employees are part of union negotiations, as are medical benefits. Mr. Koenig stated that, in the past two (2) years, there had been discussions on certain revenues, including a brief discussion on a hotel tax, which would have pros and cons. He felt that this was a recognized tax in other locations and the City was an anomaly among municipalities in not having such a tax; however, the hotel associations and the Central Delaware Chamber of Commerce felt this was a very sensitive issue. A tax rate of $0.01 would raise approximately $316,000, which he felt was a substantial amount of money, but he noted that the City’s shortfall was projected to be in the millions of dollars. He indicated that the Electric Fund transfers a flat $8M to the General Fund, which helps to offset the cost of police and general government services. Responding to Mr. Smith, Mr. Koenig confirmed that on a normal day the City of Dover purchases electricity from external sources because it is cheaper than producing it and receives capacity payments and standby payments in some cases for having the power plant available. He noted that the City was constantly considering contingency planning in case this arrangement were to change. Discussion was going on at the Utility Committee and staff levels regarding two (2) vintage power production units from the 1960s and consideration was being given as to whether to take them out of service, perform maintenance on them, or replace them with a purchase power agreement. One (1) of Mr. Koenig’s hopes was that discussions could be held regarding revenue development and questioned if members had ideas for “making the pitch” to Council and the public as to where revenue could be raised, whether through the tax base, fees, or some combination of those things. From a staff standpoint, in many areas the City had reached bottom. For example, it had been necessary to downsize the Customer Service division and staff in this area was stretched to the maximum. There had been difficulty maintaining an acceptable service level and staff was trying to implement electronic billing and payment over the internet to be more progressive, as private sector businesses are. However, these changes take time and there are associated “growing pains.” Responding to Mr. Holden regarding his previous description of the City as a “hybrid” government, Mr. Koenig explained that in a traditional city manager form of government, all departments report to the city manager, versus having some functions managed by council appointees or other elected officials. In a city manager form of government, council chooses the city manager, who is charged with selecting department heads. In some “strong mayor” cities, there is an elected mayor who chooses all the department heads. Mr. Holden expressed interest in hearing from Mr. Koenig on how this structure could be made more efficient by changing some of these dynamics. He was unsure if this was within the Committee’s charge but felt that if organization could be improved, structural changes should be put on the table as well. Mr. Hutchison felt that this was within the charge of this group because organization and finances are interrelated.

AD HOC FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE ORGANIZATIONAL MEETING OF DECEMBER 12, 2013 PAGE 10 Discussion of Meeting Dates and Times Mr. Hutchison requested Mr. Holden to serve as Chair of the Committee. He stated that the next meeting would be held at the call of the Chair and requested that Mr. Holden call the City Clerk’s Office and inform them of when this meeting could be held. He stated he was impressed with the questions that were asked during the meeting and expressed appreciation for the group for assisting the City. Mr. Larson moved for adjournment, seconded by Mr. Hutchison and unanimously carried. Meeting adjourned at 5:21 p.m. James L. Hutchison Councilman, First District JLH/TM/dd/js S:\AGENDAS-MINUTES-PACKETS-PRESENTATIONS-ATT&EXH\Misc-Minutes\FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE\12-12-2013 Financial and Operation Advisory Committee.wpd Attachments Attachment #1 - Documents Excerpted from the FY 2014 Annual Operating Budget and Provided by Mr. Scott Koenig, City Manager Attachment #2 - Documents Related to the City of Dover Budget and Finances Provided by Mrs. Donna Mitchell, Controller/Treasurer

ATTACHMENT #1 F & OA Committee Meeting of 12/13/2013

ATTACHMENT #2 F & OA Committee Meeting of 12-12-2013

City of Dover Rate & Fee Trends (Updated 5/21/13) Actual Actual Actual Actual Actual Actual Actual Actual Proposed GENERAL FUND 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 Rolled Back Property Tax Rate @ 100% value $0.3100 $0.3108 Property Tax Rate Approved/Proposed $0.3300 $0.3300 $0.3300 $0.3300 $0.3300 $0.3378 $0.3378 $0.3378 $0.3378 Property Tax Rate Increase (without 100% rollback) $0.02 $0.0270 Trash Fees (in City) - implemented FY2000 $5.85 $5.85 $5.85 $5.85 $5.85 $11.70 $11.70 $11.70 $11.70 Trash Fees (outside City) $18.72 $18.72 $23.00 $29.00 $29.00 $29.00 $29.00 $29.00 $29.00 Transfer from Electric Utility 8.4% 5.1% * 7.2% 6.6% 6.5% 8.0% 8.0% $8 million $8 million Transfer from Water/Wastewater Utility 4.4% 4.5% 4.6% 5.0% 4.5% 0.0% 4.5% $500,000 $500,001 WATER/WASTEWATER FUND Water per 1,000 gal $2.45 $2.45 $2.45 $2.45 $2.70 $3.00 $3.00 $3.00 $3.00 Water per 1,000 gal (Outside City) $3.68 $3.68 $3.68 $3.68 $4.05 $4.50 $4.50 $4.50 $4.50 Water Flat Rate Charge (new source) $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 Wastewater per 1,000 gal. Charge $2.10 $2.10 $2.10 $2.10 $2.10 $2.65 $2.65 $2.65 $2.65 Wastewater per 1,000 gal (Outside City) $3.15 $3.15 $3.15 $3.15 $3.15 $3.98 $3.98 $3.98 $3.98 Wastewater Flat Rate Charge (new source) $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 Kent County Sewer Treatment Fee - Rate set by County $2.13 $2.13 $2.34 $2.34 $2.34 $2.34 $2.34 $2.34 $2.34 Kent County Sewer Adjustment (new source - City) $1.05 $1.05 $1.05 $1.05 ELECTRIC FUND Residential Rate Changes (includes any PCA adj.) $0.0976 $0.1218 $0.1343 $0.1450 $0.1450 $0.1407 $0.1364 $0.1316 $0.1204 Increase % 6.4% 28.9% 10.3% 8.0% 0.0% -3.0% -3.1% -3.5% -8.5% Cumulative % Change 35.3% 45.6% 53.5% 53.5% 50.6% 47.5% 44.0% 35.5% Electric Fund Customer Charge $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 Reconnect Fees $50 - $100 $50 - $100 $50 - $100 $50 - $100 $50 - $100 $50 - $100 $50 - $100 $50 - $100 $50 - $100 Return Check Fees $25 $25 $25 $25 $25 $25 $25 $25 $25 S:\ATTACHMENTS & EXHIBITS\Committee Attachments\2013\12-12-2013 F&O\Rate Increases FY06 thru FY13

City of Dover Budget Meeting June 5, 2013 General Fund Budget & Forecast Water/Wastewater Fund Budget & Forecast

General Fund

General Fund – As presented May 29, 2013 3

Policy Compliance – Sensitivity Analysis 4

Scenario Options – Five Year Horizon – FY14 thru FY18 5

Scenario 1 – FY14 Only 6

Policy Compliance – Scenario 1 – FY14 Only 7

Scenario 2 – Five Year Horizon – FY14 thru FY18 8

Policy Compliance – Five Year Horizon – FY14 thru FY18 9

Water/Wastewater Fund 10

Water with Calpine (Revenue only) 11

Wastewater with Calpine (Revenue only) 12

FY16 Forecast - Wastewater Rate Change • In City o From $2.65 to $2.86 or $.21 (5,000 gal customer = $1.05) • Out of City o From $3.98 to $4.30 or $.32 (5,000 gal customer = $1.60) 13

Electric Fund 14

Electric Capital Investment Plan • Meter Replacements with smart meters $150,000 • Increases the transfers to the Improvement & Extension Fund • All adjustments will be included in the budget ordinance 15

Pop- % % % African % % # of Median % below Police Fire City State ulation Female % Male Caucasian American Asian Hispanic Veterans Income poverty Form of Government Report Report Dover DE 36,047 53.6 46.4 48.3 42.2 2.7 6.6 3571 $48,117 16.9 council/mayor/manager Mayor Mayor Bangor ME 33,039 51.8 48.2 93.1 1.7 1.7 1.5 2733 $36,246 25.3 council/mayor/manager Manager Manager Burlington VT 42,417 51.4 48.6 88.9 3.9 3.6 2.7 1920 $43,135 26.2 Mayor/council Mayor Mayor Gloucester MA 28,789 51.9 48.1 95.7 0.8 0.9 2.7 2156 $62,059 8.3 Mayor/council Mayor Mayor Concord NH 42,695 50.4 49.6 91.8 2.2 3.4 2.1 4156 $53,567 10.9 Mayor/council Mayor Mayor Lancaster PA 59,322 55.2 49.7 55.2 16.3 3 39.3 2607 $33,619 27.8 Mayor/council Mayor Mayor Millville NJ 28,400 52.6 47.4 69 19.8 1.2 14.9 1864 $49,379 17.1 Mayor/commission Mayor Mayor Fredericksburg VA 24,286 54.1 45.9 64.2 22.6 2.8 10.7 1862 $45,951 17.2 council/mayor/manager Manager Manager Hickory NC 40,010 52.3 47.7 74.9 14.3 3.2 11.4 2705 $38,750 20 Mayor/council Mayor Mayor Union City GA 19,463 56.8 43.2 11.1 82.3 0.9 7 1066 $34,453 24.2 council/mayor/manager Mayor Mayor

City of Hickory Department Organizational Chart Citizens of Hickory Mayor and City Council City Attorney City Attorney City Manager Assistant City Manager/CFO Assistant City Manager Administrative Services Department Police Department Hickory Regional Airport Planning & Development Department Budget Office Fire Department Public Services Department Library Department Parks & Recreation Department Legal Department Communications City Clerks Office

DEPARTMENTS AND KEY STAFF 16

City of Salisbury Organization Chart Fiscal Year 2013 CITIZENS MAYOR CITY COUNCIL City Solicitor City Clerk City Administrator Office of the Human Poplar Hill Mayor Resources Mansion Neighborhood Information Community Building Permits Fire Services & Code Police Public Works Internal Services Technology Development & Inspections Compliance Planning & Zoning * *County Department providing services to the City under agreement

ToS Organization Chart Administration Town Manager (David Hugg) Assistant to the Accounting & Bus. Services Purchasing Manager/Safety Town Manager Manager Officer (Dawn Thompson) (Gary Stulir) (Charlie Boyer) Warehouse Clerk/Storekeeper Admin. Accountant/ Admin. Accountant/ (Maria Burritt) Accts. Recv. & Cust. Service Accounts Payable & HR (Robin Blendt) (Meloney Torres) Accounting Clerk Jr. Accountant (Yvette Sullivan) (Robin Kassing) Accounting Clerk (Michelle Wadkins) Office Clerk P/T (Larra Okoniewski) Accounting Clerk (Lucy Blood) Accounting Clerk (Sarah Hart) Office Clerk P/T (Vacant) Office Clerk P/T (Vacant) Effective: 07/01/2013

2014 PROPOSED FINANCIAL AND OPERATIONAL ADVISORY COMMITTEE MEETING DATES TO BE HELD AT 4:00 P.M. IN THE CITY HALL CONFERENCE ROOM JANUARY JULY S M T W T F S S M T W T F S H 2 3 4 1 2 3 H 5 5 6 7 8 9 10 11 6 7 8 9 10 11 12 12 13 14 15 16 17 18 13 14 15 16 17 18 19 19 H 21 22 23 24 25 20 21 22 23 24 25 26 26 27 28 29 30 31 27 28 29 30 31 FEBRUARY AUGUST S M T W T F S S M T W T F S 1 1 2 2 3 4 5 6 7 8 3 4 5 6 7 8 9 9 10 11 12 13 14 15 10 11 12 13 14 15 16 16 H 18 19 20 21 22 17 18 19 20 21 22 23 23 24 25 26 27 28 24 25 26 27 28 29 30 31 MARCH SEPTEMBER S M T W T F S S M T W T F S 1 H 2 3 4 5 6 2 3 4 5 6 7 8 7 8 9 10 11 12 13 9 10 11 12 13 14 15 14 15 16 17 18 19 20 16 17 18 19 20 21 22 21 22 23 24 25 26 27 23 24 25 26 27 28 29 28 29 30 30 31 APRIL OCTOBER S M T W T F S S M T W T F S 1 2 3 4 5 1 2 3 4 6 7 8 9 10 11 12 5 6 7 8 9 10 11 13 14 15 16 17 H 19 12 13 14 15 16 17 18 20 21 22 23 24 25 26 19 20 21 22 23 24 25 27 28 29 30 26 27 28 29 30 31 MAY NOVEMBER S M T W T F S S M T W T F S 1 2 3 1 4 5 6 7 8 9 10 2 3 4 5 6 7 8 11 12 13 14 15 16 17 9 10 H 12 13 14 15 18 19 20 21 22 23 24 16 17 18 19 20 21 22 25 H 27 28 29 30 31 23 24 25 26 H H 29 30 JUNE DECEMBER S M T W T F S S M T W T F S 1 2 3 4 5 6 7 1 2 3 4 5 6 8 9 10 11 12 13 14 7 8 9 10 11 12 13 15 16 17 18 19 20 21 14 15 16 17 18 19 20 22 23 24 25 26 27 28 21 22 23 24 H 26 27 29 30 28 29 30 31 Proposed Meeting Dates S:\CAFS\[01-30-2014 Financial and Operational Advisory Committee - Proposed Meeting Dates.xlsx]2014 F&OA Comm Prop Mtg Dates