REPORT TO THE CITY COUNCIL
February 26, 2015
FROM: LEE BRAND AND CLINTON OLIVIER, Councilmembers
City Council Offices
SUBJECT
Title
*** RESOLUTION - Adopting the Enterprise Accountability and Oversight Act
Body
Background
Historically, financial oversight of Enterprise Departments has not been scrutinized as closely as General Fund departments. A lack of proper oversight and cost controls can lead to over-budget and late capital projects.
Salient policies included in the Act include the following:
ENTERPRISE REVENUE BOND CONVENANTS
This Act will require the City, through its Bond Counsel and underwriters to include specific covenants in the bond issuance that specifically identify the capital projects to be completed and financed by the bond funds.
APPLICATION OF UNUSED FUNDS
In the event an approved Enterprise Capital Project finishes under budget, at the conclusion of the project, the City shall deposit those funds into a dedicated reserve efficiency and savings fund. At the end of a period established by the Director of Public Utilities, with the approval of the City Manager, funds accumulated in this reserve that are not used for capital improvements, will be used to reduce future rates.
APPLICATION OF FUTURE CAPITAL PROJECT FUNDING
In the event an approved long-term Enterprise Capital Project receives additional funding including, but not limited to, State and Federal grant funds, below market interest rate loans or any other subsidy that can be legally applied to the approved Enterprise Capital Project, then the City shall re-evaluate the rate structure and consider appropriate and legal rate reductions based upon a comprehensive financial and legal review.
AUTHORITY TO SPEND FUNDS
This Act shall require identification of specific Enterprise Capital items in excess of $1 million before funds can be expended. Prior to expending funds, the Department of Public Utilities (DPU) director shall submit a line item request for authorization to fund an Enterprise Capital project that includes the specific capital item, the location that the capital item will be constructed, the price of the capital item and the source of funding for the item.
DEBT COVERAGE SERVICE RATIO
The Debt Coverage Service Ratio ("DCSR") should be set at a minimum of 1.5 but no greater than 2.0 on future debt issuances on enterprise projects. The amount of debt should be based on the ability to sustain the minimum DCSR based on an adopted rate plan.
OVERSIGHT BOARD
The City shall establish an Enterprise Capital Project Oversight Board. The purpose of this board is to provide third party oversight of any Enterprise Capital Project in excess of $20 million. The board shall serve in an advisory capacity. The board shall be composed of nine members from the public. Each Council member shall select one member and the Mayor shall select two members to the board.
ENTERPRISE CAPITAL PROJECT REPORTS TO COUNCIL
This Act shall require the City Manager to provide semi-annual progress reports to the Council on any Enterprise Capital Project. These reports shall be delivered at a regularly scheduled public Council meeting.
RECOMMENDTAION
It is recommended that the Council pass this Act to provide more accountability and oversight on Enterprise Capital Projects.
Attachment: