EDC Board discusses 2016 budget, questions city staff’s proposal
By SHELLY WILKISON
Members of the appointed Economic Development Corp. Board of Directors questioned whether city staff was accurately representing the amount of time and resources spent on EDC matters as they combed through line items in a proposed budget last week.
While some questioned whether the staff had fairly accounted for time and resources dedicated to EDC matters in a spending plan for fiscal 2016, items such as meals for EDC directors and sponsorships for some events were not discussed.
The EDC, which is funded by 1/4 cent sales tax is projected to generate $286,078 in revenue in the new fiscal year, which begins Oct. 1. Combined with its current fund balance, total revenues in 2016-2017 are projected at $787,678. While projected expenses total $636,300, EDC directors were told it is unlikely that the total budgeted would be spent, and funding for any special projects would come to the Board for approval.
In the current budget year, the projected year-end expenditures total $180,517. The budget was $588,176.
Prior to the workshop last Thursday, board members submitted 19 detailed questions to Assistant City Administrator Amber Lewis regarding the proposed budget. Her responses were provided to the Board prior to the meeting, and shared with The Independent upon its conclusion.
Members asked for explanation on increases in audit and accounting expenses, and inquired as to the percentage of time City Administrator Greg Boatright and City Secretary Barbara Zwernemann spend on EDC matters weekly. They also asked what percentage the EDC is charged for use of city’s total office space.
“We’re trying to get a feel for where the numbers are coming from,” said Board member John Johnston.
City staff provides administrative support to the panel and resources are spent managing and accounting for EDC funds. The budget proposal included funds to pay for those services. Lewis said there is an increase in line items for accounting and audit as the City changed auditors and the fiscal 2015 projected year-end total was about $2,000 over what was budgeted. The new budget includes $10,000 for accounting.
“I wanted to be sure we have enough there for accounting,” Lewis said. “You’re just doing more, there’s more activity, and it’s what it takes to get the job done.”
Having a CPA reconcile the books regularly may cost more, but also helps keep the price of audits down, she added.
“But the audit also doubled, so I don’t see where the savings are coming in,” said Eric Van Natter, a board member.
“I just wanted to make sure we have enough money in there. You don’t have to spend it all,” she said, adding that it is better to come in under budget at the end of the year than to keep returning to the board with budget amendments.
She said the EDC pays a flat $40,000 for contract labor, which buys time from Boatright, Zwernemann, Lewis, the Senior Planner, and other staff members.
“If the EDC is going to pay, I want to know that (staff members) are actually doing EDC duties during that time,” said President Lance Dean.
“I didn’t want to pin you in. In the spirit of cooperation, we are sharing resources,” Lewis said. “I think the EDC should pay its share of that (accounting, labor, office space) as well.”
Lewis said that last week, she spent 10 hours on EDC matters, Zwernemann had spent more time than that preparing documents for the meetings Thursday.
“Maybe you want to pin it down. But if $1,000 is going to set you off…,” Lewis said.
Board members asked what the EDC’s percentage is when it comes to sharing expenses with other city funds for services like accounting.
Lewis said the percentage varies each month.
“It’s about accountability for all of us. At some point, we have to answer for that,” Van Natter said.
“This (system) doesn’t leave you without an answer,” Lewis said.
“If our percentage varies, it does leave us without an answer,” Van Natter argued.
“If you hired your own accountant, you wouldn’t be enjoying the discount you get by being part of the overall system,” said Boatright. “It buys down everyone’s costs. You’ve been more active than boards in the past, and a cost is associated with that.”
“No one is questioning what it is that you’re doing, we’re just trying to understand from our aspect,” Dean said. “If we start contributing to pay for city resources, what is dedicated?”
Lewis noted that the proposed budget includes the same amounts budgeted last year for meals and entertainment, business development, sponsorships and advertising.
“I didn’t cut anything. That’s your job to tell me what to cut,” she told the Board.
Lewis said she had increased the line items related to the salary and corresponding costs for an Executive Director, even though the position has been vacant since Kirk Clennan was asked to resign in January.
“I guess I would say I don’t see any sense in increasing this. We should leave it at $70,000,” said Van Natter.
Lewis said she added some cushion there in case the Board wanted to negotiate with a new employee at some point.
Instead, the Board agreed to cap the salary at $70,000 and appropriately reduce the related personnel expenses.
At most every meeting of the EDC Board, food is brought in for Board members and staff. In the budget proposal discussed last week, $5,500 was included for meals and entertainment. While unchanged from the current fiscal year, the EDC has spent $2,842 so far this year and its projected year-end total is $3,789.
Last Thursday, the Board ate dinner brought in from a local Mexican restaurant. Members ate between adjournment of the workshop and the beginning of a regular meeting. Combined, both meetings lasted two and one-half hours, including the dinner break.
Lewis told The Independent that the former executive director began the practice of serving food at EDC meetings. The EDC also hosted a few events where food was served to area business leaders.
In the area of sponsorships, the Board agreed to keep $40,000 in place to support events like the Liberty Hill Christmas Festival and the Liberty Hill Pro Rodeo.
In the current fiscal year, the EDC and the City Council agreed to set aside $20,000 for the Christmas Festival and $20,000 for the rodeo. To receive city funds, event organizers were asked to produce receipts of actual expenses.
Johnston told Lewis he would be interested in hearing suggestions from staff on where to reduce expenses in the proposed budget.
Lewis noted the Sponsorships line item, but Board member Van Natter said the allocations could be discussed at a later date.
“We can discuss that as it gets closer,” he said. “I’m comfortable with what we have here.”
Boatright and Lewis advised the Board that it should be spending the funds generated by sales tax.
“There have been cases where EDC and city got in trouble with the Attorney General’s office for setting on cash,” Boatright said, adding that there are no real restrictions on how the 4b corporation funds could be spent. However, he clarified that EDC funds should not be spent to purchase police cars, as was done years ago by a previous council.
“It’s not just supposed to set in the bank and collect interest and be a pile of reserves. If we’re not spending sales tax dollars that are meant to be spent, that’s a concern to auditors,” Lewis added.
Boatright suggested the EDC could partner with the city to pay for such things as needed drainage improvements, or provide additional parking downtown. Both items are included in the new budget for capital outlay.
Johnston said he was concerned that projected expenditures in the new budget “are more than double what our income is going to be, which means reserves would be decimated.
“Even if we took out capital overlays, we’re overspending, and setting a trend here like our big brothers in Washington, and we don’t have a printing press,” he said.
Boatright pointed out that by fiscal year’s end, the EDC will have spent less than half of what it budgeted for 2015-2016.
“Sometimes projects fall out, that kind of thing. We don’t want to have to come back and ask for more money, as opposed to being over budget at end of year,” Boatright said. “When the budget is adopted, y’all can make adjustments you feel like you need to make. These are numbers we see and give our best estimate for you all to consider.”
After much discussion, the budget plan was adopted when the board convened into its regular meeting by a unanimous vote with board member Jack Harkrider not present.