April 26, 2022 — Meeting Transcript

Okay, well, everybody, welcome to our April 26 board meeting. And we are ready to call the roll. Alderman Lentz.

Here.

Alderman Berkowitz.

Here.

Alderwoman McAndrew. Here. Aldermen Buse. Here. Alderaan Patel. Here. Alderman Gary Feder?

Alderwoman McAndrew. Here. Aldermen Buse. Here. Alderaan Patel. Here. Alderman Fader?

Here.

Mayor Harris? Here. City Manager David Gipson? Here. City Attorney O'Keefe? Here. Thank you.

Mayor Harris? Here. City Manager Gibson? Here. City Attorney O'Keefe? Here. Thank you.

Okay, I'd like to have a motion to approve the minutes from April 12th.

I will move to approve the minutes April 12th.

Second. All those in favor? Aye. Any opposed? Okay, great. Now is the time for public requests and petitions and I only see two members of the public here and I know that they're not gonna ask any questions. So I think there's nobody online, right? No, are there attendees?

There are two participants, three participants actually.

Okay, yes. Okay, so our listening audience, is there anything you'd like to bring up? It's not on our agenda tonight, which wouldn't be hard because there's not much on our agenda. Okay, I don't see any hands going up there. All right, we're ready for the city manager's report.

Thank you, Mayor. So the first item on the agenda tonight is a presentation by Reuben Brown. We have our auditor here this evening to walk through the annual audit.

Now it should be on. Okay, good evening. Thank you for having us. My name is Ted Williamson. I'm a partner with the County firm of Reuben Brown and with me is Alicia Barnum who's a manager with Reuben Brown just right up the street. Actually we, at least that's what I did. I parked in our garage and I walked down here this evening but we were the leads on the audit for the city of Clayton for the fiscal year ended September 30th, 2021. So we're here tonight to go over the results of that audit. And we have a presentation that's being shared on the screen that I'm gonna walk through, which summarizes the results. But big picture, everything went extremely well for the audit. We did issue what we call an unmodified or clean opinion on your financial statements. And we did not have any, what we call significant deficiencies or material weaknesses in your internal control structure that we identified during the audit. So that is very good news to report to you at the conclusion of the audit. Again, the fiscal year end is September 30th. We do most of the work in the early part of January with some wrap up later. And then the report is issued by the end of March in order to comply with both your continuing disclosure requirements for your bonded debt, as well as to submit to the Government Finance Officers Association for their Certificate of Excellence program. So that being the case, I'm gonna go with the first part of our presentation which summarizes the audit results. And then Alicia is gonna take the last few slides which give you some financial highlights. So if you wanna advance to the next slide, once you get past the table of contents, to the next one. There we go. So this begins what are called our required communications to you that under professional standards that we as auditors and accounts have to follow. These are the things that we are required to communicate to you at the conclusion of the audit. And what this letter here on the first page says is that the purpose of the audit is to determine whether your financial statements are fairly presented in accordance with generally accepted accounting principles in the United States. Since you're a city government, you follow the governmental accounting standards set by the Governmental Accounting Standards Board. And we perform our audit both following generally accepted auditing standards as set forth by the AICPA, as well as due to the level of federal funding that you receive, we have to follow what's called government auditing standards that are issued by the Federal Government Accountability Office. So the purpose of the audit again is to make sure that your financial statements are fairly presented. We do consider your internal control structure as part of doing the audit. And to the extent we would find any issues, we'd bring those to your attention. But it's important to note that our opinion is not on your internal controls in and of themselves. It's on the accuracy of your financial statements. So if you move to the next slide, we start to get into the specific results. As I mentioned, if you look on the one page back on page two, nope, other direction. There we go. If you look in the top right-hand section, we did issue, as I mentioned, an unmodified opinion on your financial statements for the year ended September 30, 2021. We also did issue a report under government auditing standards, which is where we would have to report to you any material weaknesses or significant deficiencies in internal control if we had found them. We do not have any to report. We're pleased to tell you. The one piece of the audit is still open is we have to do what's called a single audit, which is a compliance audit for the federal grant funds that you receive. If you expend more than $750,000 in a year, you have to have this audit for compliance purposes. This year in your case, the program we're looking at is the state and local fiscal relief funds received under the American Rescue Plan Act. The city is claiming as permitted by the regulations, the entire amount to replace revenue that was lost during the pandemic. You're allowed to do that up to $10 million. So that broadens the types of things that you can spend the money on. So consequently, we don't anticipate that it's going to be a very difficult audit because by using it as lost revenue, you're going to have a lot of latitude as to how those funds are spent. So that part we will finish up and the deadline for the single audit is June 30th. And we'll have that completed and submitted to the federal government by then. So you move on to the next slide, which is on slide three. The one thing I wanna highlight on this page is that the bottom right-hand box, the footnotes to your financial statements describe the significant accounting policies that the city follows. There were not any new policies adopted this year. In some years, The Governmental Accounting Standards Board issues new statements that you have to adopt, but this is not one of those years. There are a couple that we highlight I think at the end about new ones that you will have to adopt in future years, but this year there were not any changes to policies and there were not any unusual transactions either where it was unclear how they should be accounted for under the accounting rules. As we move on to slide four then, it is important to note that preparing financial statements in accordance with generally accepted accounting principles does require you to make some estimates. So the bullet points there in the top right portion of page four are what we consider the more significant estimates for your two defined benefits pension plans, the uniformed and non-uniformed plan, as well as your other post-employment benefit plan, which is retiree health care. Those liabilities associated with that are calculated by an actuary who has actuarial assumptions that are built into that as far as average age of employees, their estimated life and what discount rates to use and so on. So as part of doing the audit, we make sure that those estimates that have been baked into that calculation are reasonable. Additionally, for your capital assets, those are assigned a useful life and depreciated over that term. So we look at the useful life to make sure it's appropriate. And finally, we look at your receivables to make sure whatever allowance for uncollectibility you have against that is appropriate. Additionally, as noted at the bottom of page four, there are a number of footnotes in the financial statements. It's actually quite thick, but we've highlighted what we think the more significant disclosures are there. Note two describes your deposits and investments held. Note six, your long-term debt. Footnote seven is the two defined benefit retirement plans. Footnote eight, the other post-employment benefits. And then footnote 12, commitments and contingencies. So we paid particular attention to those disclosures as part of doing the audit. And again, we did not identify any issues with those as part of doing our procedures. As you move on to slide five then, we're pleased to report we did not have any difficulties performing the audit or any disagreements with management. We are required to let you know if we came up with any adjustments that had to be made to the financial statements during the audit. We did not have any uncorrected adjustments. That would be if we identified something that management decided was so immaterial they weren't going to bother to correct. We didn't have any of those. And as you can see, we had two very small adjustments adjustments that were posted within your financial statements as listed there that totaled $22,000. And the scope of things on an audit this size to only have two odd adjustments, that small is actually really good. So that's good news to report as well. And then we do have management provide a representation letter to us at the conclusion of the audit, basically representing to us that they've disclosed all significant transactions to us. They're not keeping anything from us or aware of any material transactions that they haven't let us know about. And the final version of this presentation has that letter attached to it if you're curious as to what management has represented to. And then as we move on to slide six, lastly, we're not aware of management consulting with any other independent accounting firms in an effort to see if they might give them a different answer than what we would on accounting issues. So you can rest assured that management has not been shopping around for the firm to give them the best opinion possible. So that is the required communications. We do have on the next slide one recommendation that we wanted to bring to your attention as part of the audit. And we don't consider this to be a control deficiency necessarily because the financial statements were accurate, but it's more of an operational suggestion. The city uses a pooled cash account at Commerce Bank that all of its funds participate in the pool. As additionally, as you might know, the city also manages the books and records for the rec center, the Clayton Recreation Sports and Wellness Commission. And they also participate in this cash pool. As of September 30, 2021, the rec center was at a negative position in the cash pool of about $575,000. So essentially what that means is they are overdrawn and the other city funds have funded that access. Now, we all know that the way that the rec center operates is that both the school district and the city make capital contributions or contributions to fund its deficits. We just bring this to your attention as it's almost sort of a accidental contribution, if you will, when the rec center allows itself to get into a negative balance within the pool. So we'd recommend considering either a separate bank account for the rec center's assets or else putting procedures in place to prevent the rec center from being overdrawn in the future. And then since they have a deficit position, as you go through the process, the next annual process for determining what amounts are gonna be contributed by the school district and the city to the rec center, you take this deficit into account to make sure that it's resolved. And that is basically what management's response indicates there that they're going to consider that recommendation in that case.

Can I just ask, because it's not new that the Center of Clayton has a deficit. So is this something new that you're recommending? Because even though our deficit is much worse this year, I mean, we always operate at a small deficit. It's just something new you're recommending?

It's not the fact that the rec center has expenses that exceed its revenues as much as it is that it allowed itself to basically be overdrawn on the pooled cash account is the reason we bring it up. And that situation, by the way, was also true a year ago. The reason... We decided to bring up this year is, is we're not we know that we are wrapping up some construction at the rec center. And with all of that going on in the multiple sources of funding involved. It's understandable how it at one point in time you could get to the place where they're overdrawn. But now that we're coming out of this and we're looking at what the rec centers operations are going to look like on an ongoing basis we just thought this was a worthwhile recommendation. Okay. Okay. There's not any further questions on that. I'm going to turn it over to Alicia. If

I could just follow up on that. Sure. I'm sorry, but so does that mean, though, that this is only the second year that that's been the case, that its contribution to the pool has been negative?

I know that it was for sure true as of September 31, 21 and 20. I don't remember what the case was as of

19. It's historically a little bit of a deficit.

Yeah, I mean, I know it operates at a deficit, but I guess the question is whether we're like depositing the money needed to pay the bills in advance of paying the bills. Is that right?

Yeah, that's the concern essentially. Right.

So we're letting our other city accounts like float the CRSWC.

That's correct. So at least at that point in time, there was that going on. Yes.

Can I just ask, is there a similar recommendation made by someone to the school district in terms of this account?

So what's unique about CRSWC The city in this case is that it's the city that manages the rec center's records and allows them to participate in the pooled cash account. So while the school district is definitely on the hook for contributing their 50% share to the rec center to offset an operational deficit, they don't have this logistical concern because the rec center participates in the city's pooled accounts.

So they're just reimbursing us essentially at the end of the day.

Yeah, so in theory, what will happen here, put aside whatever other operational deficits the rec center has, I would imagine you'd take this difference and say, okay, the city's on the hook for half of it and the school district's on the hook

PB, Harmon Zuckerman, So so just so I guess we're yet we're all this is probably not the time to bring this up because this is all a CR I don't know, maybe this is a city issue but the. PB, Harmon Zuckerberg, The alternative is if they set up their own fun fun own account. PB, HarmonZuckerberg, won't they be I mean they're going to be in a deficit, they

what will that mean they'll

need some funding

right and the reason. that we suggest that is at least then you'll have a formal decision to make a contribution to them in advance, put it in their accounts so they can pay their bills as opposed to this happening and then later on having to-

So it would effectively be a decision that both the city and the school district would have to ante up an assessment, so to speak, which would be part of their annual 50% or something. Okay. So it would just happen during the year, as opposed to one day. Okay. Thanks.

Well, we just, we always consider it in advance because we always have projections about what the deficit will be. So it's not like we find out later and it's a surprise just for the record, you know, but, but this is just via more. precise way of handling it. So we'll let our staff kind of take a look at it and recommend.

I guess I was thinking more, almost more of a cashflow issue. So, right. And we were, the city was funding the cashflow in the meantime. Yeah.

We're giving like a no interest loan to the CRS.

Yeah. You can think of it that way. Exactly.

Yeah.

Right, but wouldn't the solution be that CRSWC then would need to carry its own reserve, which would mean each of the parties having to participate and contribute more than they are now?

Yeah, I mean, I think it's going to be, again, instead of in the case of this year trying to make up this cash deficit after the fact, it's anticipating what are the cash needs going forward and funding them in advance. It's a timing effect. Yeah, exactly. And it's just so that, you know, there's not a surprise later on. You know what you contribute to them before it's spent.

Okay. Well, once again, I just think we ought to. let the staff take a look at it with Tony and see what they would recommend that we do and how we would handle it. Okay. All

right. So just a few financial highlights for you here. I'll give the mic to Alicia.

Thank you. So I'll be going over just some ratios that are common in the public sector. And the first one on page 8 is the change in net position as a percentage of net position. This ratio measures the change in the municipality's financial condition for the year. A positive ratio can indicate an improved financial condition, while a negative ratio could actually show a little bit of a deterioration of financial condition. As you can see, 2021 increased significantly. compared to 2019 and 2020, which is great. And it's very healthy. And this is primarily driven by a decrease in expenditures this year. Revenue stayed pretty flat. So under a general government, as well as parks and recs, there was about a $2 million decrease in both of those accounts. The first is primarily driven by those actuarial assumptions with the benefit plans that Ted had previously mentioned that really drives the pension expense that is recognized within the financial statements. And the second relates to all of the renovations that took place with the rec center this year, so the contributions to the rec Center was a lot lower this year as it was in 2020. And if we move on to the next page. This is the tax revenue per capita ratio. It's a measure of the tax burden of the citizens. A lower ratio is usually considered favorable because it gives the city the opportunity to potentially grow that revenue in case there's any major projects that need to be funded in the future. As you can see, the ratio has decreased but it's a little misleading. So revenue, like I mentioned, stayed relatively flat but the number of citizens increased pretty significantly compared to the other years. calculations so just kind of keep that in mind it is a calculation so it's not it's not a completely reliable measure but it is something that is good to look at and

is that just property tax or is it also sales tax yes all taxes

yep so it's property sales utility cigarettes and vehicle tax

thank you

you're welcome

and the population growth uh does that come from the census or is that where you get your population okay yeah Yeah, we grew quite a bit. Okay.

So if we move on to the next slide. This is the unassigned general fund balance ratio and this ratio. Think of it as a rainy day funds. So it is the fund balance that the city has to cover any expenditures without taking into consideration future revenue growths. So as you can see, it is a very healthy fund balance and this is specifically for the general fund because that's where a lot of the operating expenditures come from. So again, it's grown over the past few years which is great news and it just shows that the city is very conservative and make sure that it has enough to cover any expenditures that may come their way. If we move on to the last slide, So these are the emerging financial reporting issues that Ted mentioned. He said that there were no new accounting standards that were adopted in the current year. Well, GASB wanted to take a little break because you have a couple of them coming up. Anybody that's familiar with the FASB world knows that the lease standards have been coming down the pipeline for quite some time. GASB is the same way. So leases and this subscription based information technology arrangements are pretty similar standards to where operating leases will essentially be a thing of the past, they now have to go on the balance sheet if deemed material. So with any subscription based arrangement or any lease arrangement, the city will be required to record a right to use asset as well as liability on their balance sheet, and then amortize them or use those asset and liabilities up as the leases go through their term. So that concludes our presentation. Did anyone have any questions?

Very nice presentation. Thank you.

I just have one quick thing I would point out to on the change in net position, and then also the increased fund balance. In the notes there, the one thing that isn't mentioned, but I think it's important to realize is for at least the last fiscal year and certainly at the end of this fiscal year is that federal stimulus money that the city received. It really enabled us to drive that up. As you mentioned, tax revenues are relatively flat or down, but the federal monies really gave that the boost along with the expenditure cuts that were made along the way.

So I just wanted to highlight that point. That kept our revenue flat. Correct. Yep. That was a good point.

Thank you. Just wanted to point that out.

Okay. Well,

thanks. It's nice to do this in person again.

Yeah, it is. It is. Good point. Thank you.

Thank you both.

Okay. We don't need to do anything with it. Just hear it, right? That's

correct.

Okay. All right. Mr. City Manager, you've got another report.

Okay. This is certification of the April 5th, 2022 municipal election. So on April 5th, 22, a municipal election was held for the office of mayor. The results of the municipal election is certified by the board of election commissioners of St. Louis County are as follows. Michelle Mowry Harris had 919 votes, which was 100% of the vote. And so the recommendation is to adopt a motion to accept the canvas and certified results of the April 5th, 2022 municipal election.

All right. I'll open the discussion. Any comments here or from our listening audience? I'm sorry, I was trying to get my husband to wake up. I was motioning to his friend, wake him up. That's what all that was about. I guess he's awake now. So anyway, any discussion up here? Okay. Does anybody online have their hand raised or anything? Okay. Very good. All right. Alderman Lentz.

Well, then I guess I'll move to accept the St. Louis County certified April 5th, 2022 election results declaring Michelle Marie Harris as mayor of the city of Clayton. Don't clap yet. No, you didn't get a second.

Who's seconding? I'll second. Ira's on mute. We all did. I was seconding, but I was on

mute.

You were on mute. Well, that doesn't help

us. I'm seconding and I'm on mute. Sorry. All

right. Any discussion about that? Okay. All those in favor?

Aye.

Any opposed? Okay. I guess that's that. Yes. Thank you. All right, we could go around. Do people wanna go around and share anything they've been doing since the last board meeting? I'm seeing shaking of heads. Okay, all right, good. That will shorten our meeting even further. All right, so then I would entertain a motion to adjourn Sini Dai. Maybe Gary Feder will do that. So moved is good. I

Any opposed? Okay. I guess that's that. Yes. Thank you. All right, we could go around. Do people wanna go around and share anything they've been doing since the last board meeting? I'm seeing shaking of heads. Okay, all right, good. That will shorten our meeting even further. All right, so then I would entertain a motion to adjourn Sini Dai. Maybe Gary Fader will do that. So moved is good. I

was supposed to make that motion.

I'm just throwing that upon you right now. Go ahead.

I'll make that motion.

Second. Second. All righty. All those in favor? Aye. Any opposed? Okay, our first meeting is adjourned. And now I can welcome everyone to our second meeting. I thought, oh, well, so my two things are a little bit different. Okay. All right. I couldn't tell which was first. Okay. Okay.

I've heard it before. So I think I know what she said. Yeah.

Okay, so now I guess I will call the second meeting to order. And will the city clerk call the roll?

Alderman Lentz.

I'm still here.

Alderman Berkowitz.

Here.

Alderman McAndrew. Here. Alderwoman Buse. Here. Aldermen Patel. Here. Aldeman Gary Feder.

Alderman McAndrew. Here. Alderwoman Buse. Here. Aldermen Patel. Here. Aldeman Fader.

Here.

Mayor Harris. Here. City Manager David Gipson. Here. City Attorney O'Keefe.

Mayor Harris. Here. City Manager Gibson. Here. City Attorney O'Keefe.

Here. All right, since we have no minutes to approve, I will ask if there are any public requests or petitions, things that are not on our agenda. Anybody in the listening audience is still out there? No, okay. They're still there. Okay, but nothing. All right. City Manager, do you have a report?

I do not. Thank you.

I'm unprepared as always. Okay. All right. So I'll have a motion to adjourn this meeting. You want to do that one, Rich?

Motion to adjourn.

Second.

All in favor?

Aye.

Aye. Opposed? Okay. We are adjourned. Thank you all. Congratulations, Mayor.

Yeah. Congratulations, Mayor

Oh. Thank you guys, you guys on the screen. Good to see you.