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HomeMy WebLinkAboutMinutes - Audit Investment Finance Committee 03/28/2017 : -�-- .. MINUTES 6 fi► REGULAR MEETING OF THE PALM DESERT row �i ''€ AUDIT, INVESTMENT & FINANCE COMMITTEE IPAJUN / ITuesday, March 28, 2017 I. CALL TO ORDER Meeting was called to order at 10:01 a.m. Present Absent Lauri Aylaian, City Manager Robert Leo, Community Member Russell Campbell, Community Member Robert Hargreaves, City Attorney Jan Harnik, Mayor (10:03 a.m.) Brian Holcombe, Community Member Sabby Jonathan, Mayor Pro Tempore Stan Sperling, Community Member Janet Moore, Chair, Director of Finance Also Present Jared Burns, Desert Willow Golf Resort Luis Espinoza, Asst. Finance Director Anthony Hernandez, Senior Financial Analyst Thomas Metz, Deputy City Treasurer Niamh Ortega, Recording Secretary Derek White, Desert Willow Golf Resort II. ORAL COMMUNICATIONS A. Chairman Moore stated that this Committee was unique to the City in that it has a staff member chairing the Committee. Most others are chaired by a member of the public, with the Chair running the order of the meeting, and staff presenting the reports as required. Chairman Moore asked if the Committee would entertain this structure going forward. Member Campbell expressed concern that it would seem to be a full-time job for those volunteering their time. Mayor Harnik noted that staff would still be responsible for the agenda and all associated reports, and the Chair would simply run the meeting. She furthered that staff should bring a recommendation back to the next Committee meeting. Mayor Pro Tern Jonathan agreed with Mayor Harnik and said that Finance is a sensitive area, and it would be good to have staff at arm's length. He also noted that it provides a level of accountability for staff. Mayor Harnik INVESTMENT & FINANCE COMMITTEE MINUTES March 28, 2017 agreed and suggested the Committee consider who should be the Chair and Vice-Chair. Member Aylaian suggested that at the next meeting there be an item added to the agenda for election of officers. Mayor Pro Tern Jonathan also asked if this Committee should continue to meet monthly or if it should be quarterly. Chairman Moore responded that she would also bring back a recommendation to the next meeting for this item. III. APPROVAL OF MINUTES A. MINUTES OF THE MEETING OF FEBRUARY 28, 2017 MOTION was made by Member Campbell to approve the Minutes of the regular meeting of the Palm Desert Audit, Investment and Finance Commiftee of February 28, 2017 as presented. Motion was seconded by Member Sperling and carried by a vote of 7-0, with Aylaian, Campbell, Hargreaves, Holcombe, Jonathan, Sperling and Moore voting AYE; Harnik and Leo ABSENT. IV. NEW BUSINESS A. FINANCIAL REPORT ON CITY INVESTMENT SCHEDULE AND SUMMARY OF CASH FOR FEBRUARY 2017 Mr. Metz provided an overview of the report. He stated that for the month ended February 28, 2017, the book value of the City portfolio was approximately $279.4 million. Interest earnings were approximately $202,000. Yield-to-maturity was approximately 0.97%. He noted that there are 18 new cash balances related to Successor Agency bond refunding that total approximately $15.9 million. Mayor Pro Tern Jonathan noted that the City has a total portfolio of about $279 million. He asked where that is broken down so that he can see where the funds are located. Chairman Moore responded that they can be found on the financial statements; this particular report is a blended report. Mr. Espinoza furthered that the balance sheets and income statements reflect the allocated funds but it won't show where specific funds are located such as LAIF or CDBG; it would show the cash balance by fund. He offered to review the accounts with Mayor Pro Tem Jonathan, and Mayor Harnik indicated she would be interested in that also. With Commiftee concurrence, the City's Investment Schedule and Summary of Cash for February 2017 will be forwarded to receive and file by the City Council. 2 INVESTMENT & FINANCE COMMITTEE MINUTES March 28, 2017 B. FINANCIAL REPORT ON LOCAL AGENCY INVESTMENT POOL ACCOUNT STATEMENTS FOR FEBRUARY 2017 Mr. Metz highlighted that approximately $10.9 million was moved from the City's LAIF account to the City's Riverside County pool account to take advantage of a higher rate, approximately 12 basis points. Similarly, approximately $14.6 million was moved from LAIF to CAMP for the Housing Authority's account for a higher rate by 7 basis points. MOTION was made by Member Campbell to receive and file the reports for Local Agency Investment Fund (LAIF), California Asset Management Program (CAMP), and Riverside County Investment Pool for February 2017. Motion was seconded by Member Sperling and carried by a vote of 8-0, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Jonathan, Sperling and Moore voting AYE; Leo ABSENT. C. FINANCIAL REPORT ON CITY FOR FEBRUARY 2017 Chairman Moore reviewed the revenues and expenses and summarized that overall the City is on target. Member Aylaian asked if the business license revenues were down due to businesses not renewing. Chairman Moore responded that licenses renew throughout the year, and there were • some changes in the number of businesses. She also pointed out that some business license fees are based on their revenues, so this may change significantly from year to year. Mayor Pro Tern Jonathan asked about the remainder of the year, and Chairman Moore responded that overall it looks good and is on track for what was anticipated. MOTION was made by Member Harnik to receive and file the City financial report through February 2017 as presented. Motion was seconded by Member Campbell and carried by a vote of 8-0, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Jonathan, Sperling and Moore voting AYE; Leo ABSENT. D. FINANCIAL REPORT ON PARKVIEW PROFESSIONAL OFFICE BUILDINGS THROUGH FEBRUARY 2017 Mr. Hernandez reviewed the report. He also distributed a lease term analysis for the current occupants at the Parkview buildings. Mayor Pro Tern Jonathan noted the equipment replacement reserve and asked if it was just an accounting entry. Mr. Hernandez confirmed that it was, and an adjustment would be done at the end of the fiscal year. Mayor Pro Tern Jonathan stated since the City is looking at capital improvements at the Parkview buildings, at some point it would be good to discuss the plan and 3 INVESTMENT & FINANCE COMMITTEE MINUTES March 28, 2017 the budget. Mayor Harnik added that several of the tenants will be leaving by or before the end of their lease, and she is concerned that if the building is not competitive, it will not be attractive to other lessees. Member Aylaian stated that this is an item that will be included in the budget and will also be addressed with Council to determine the direction. Mayor Pro Tern Jonathan asked if selling the building would be considered. Mayor Harnik replied that it is part of the whole complex and it does make a profit. It also assists with offsetting the Civic Center park expenses, so it may not be a good idea to sell at this point. Mayor Pro Tem Jonathan said it makes sense to hold onto the building and keep it geared to quasi-governmental and non-profit agencies. MOTION was made by Member Campbell to receive and file the Parkview Professional Office Buildings financial report through February 2017 as presented. Motion was seconded by Member Campbell and carried by a vote of 8- 0, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Jonathan, Sperling and Moore voting AYE; Leo ABSENT. E. FINANCIAL REPORT ON PALM DESERT RECREATIONAL FACILITIES CORPORATION THROUGH FEBRUARY 2017 Mr. White reported February was a fantastic month. Staff was originally looking for February and March to bridge the gap for the first six months, and they were able to do it in one month. From an expense standpoint, labor was slightly down compared to budget and prior year. There is a certain amount of turnover also, and when staffing levels are already low it is more noticeable; this is not impacting the guest experience, and reviews are still very positive, with voter satisfaction at 93.5 points. Currently, there is the potential for earning the highest green fee revenue ever for the month of March. Mr. White said that if a guest is unhappy, they express their dissatisfaction more readily than someone who is pleased, and reminded the Committee that some things just come down to personal preference, but staff considers all comments received to determine what can be improved upon for greater guest satisfaction. MOTION was made by Member Harnik to receive and file the Palm Desert Golf Course Facilities Corporation financial reports through February 2017 as presented. Motion was seconded by Member Sperling and carried by a vote of 8- 0, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Jonathan, Sperling and Moore voting AYE; Leo ABSENT. 4 INVESTMENT & FINANCE COMMITTEE MINUTES March 28, 2017 F. PRESENTATION OF THE INDEPENDENT ACCOUNTANT'S AGREED- UPON PROCEDURES REPORTS FOR VARIOUS PALM DESERT HOTEL OPERATORS' TRANSIENT OCCUPANCY TAX COMPLIANCE REVIEWS Annually, the City enlists an independent accountant to review several of its 15 hotel properties to ensure their method for the calculation and collection of transient occupancy tax is accurate. Each year, five or six hotels are selected, so all hotels are reviewed at least once in a four or five year period, with larger properties and those having difficulty with calculations being reviewed more frequently. The challenge is typically the exemptions, and discrepancies in what constitutes an exemption. Overall, approximately $4,600 was found to be underpaid in the files tested, and will be collected from the appropriate hotels. There was discussion relative to AirBnb and VRBO and the collection of TOT to be remitted to the City. The two platforms work differently, so while there is an agreement with AirBnb to collect and remit TOT on behalf of the owners, VRBO and the cities have yet to finalize a similar agreement. Mayor Pro Tem Jonathan asked the mechanism staff uses to discover unpermitted locations, and Chairman Moore responded that the neighbors will often report a home being used as a rental, and Code responds, following up with the Finance Department. The City also uses a consultant who researches advertised properties to ensure the City's permit number is listed on their online advertisements, and will follow up with the property owners to inform them of the registration process if they don't already have a permit. There is currently a moratorium on permit issuance while the City reviews its regulations for short-term rentals (STR), and Mayor Harnik discussed the STR review committee that was recently formed to determine the best path forward for the City. Member Aylaian stated there is currently a draft ordinance that will be reviewed by the STR review committee at its upcoming meeting in the next few weeks. Mayor Pro Tern Jonathan asked if issues resulting from the transition from 9 to 11 percent TOT were resolved. Chairman Moore replied that for the most part, any issues that arose have been resolved. There were very few issues with hotel reservations as most of these are not paid in advance, and those that had already paid at the lower rate were accepted with proof of reservation and payment prior to the effective date of the higher TOT rate. Member Aylaian asked if it would be appropriate to audit a larger number of properties due to the increased TOT rate, and Chairman Moore answered that the higher rate would not be reflected until auditing the 2017 calendar year, which would most likely be in FY 18/19 in order to provide enough time for the properties to close their books for CY 2017. 5 INVESTMENT & FINANCE COMMITTEE MINUTES March 28, 2017 Mayor Pro Tern Jonathan asked if it was possible to verify the hotels were collecting the higher tax rate, and Mr. Espinoza informed him that they submit monthly returns which are calculated by the hotel operators and verified by the City, and any discrepancy is followed up by City staff. He also noted that the operators try to be in compliance and will often contact the City to determine correct tax collection or seek guidance on a particular situation that is out of the ordinary, so he has a reasonable amount of comfort that they are collecting as they should. MOTION was made by Member Sperling to recommend that the City Council receive and file the Independent Accountant's Agreed-Upon Procedures for Various Palm Desert Hotel Operators' Transient Occupancy Tax Compliance Reviews as presented. Motion was seconded by Member Campbell and carried by a vote of 8-0, with Aylaian, Campbell, Hargreaves, Harnik, Holcombe, Jonathan, Sperling and Moore voting AYE; Leo ABSENT. V. CONTINUED BUSINESS None. VI. OLD BUSINESS None. VII. INFORMATIONAL ITEMS Member Aylaian shared that she had recently obtained information relative to the ranking of Palm Desert hotels compared to other valley cities for standard measures such as occupancy, average daily rate, revenue per available room and other measurements. The data represents January through November 2016. Year-round occupancy was 68.4% for Palm Desert, and was the highest of any valley city for that time. She noted that the average occupancy used to be in the 50th percentile, and 60% is considered the benchmark. There was generally steady growth year over year, and Palm Desert beat the average of the overall market across the board. For January 2017, Palm Desert's occupancy rate was 76.8%, with a 7% growth in occupancy and ADR, and 15% in revenue per available room. These numbers were extraordinary, and Member Aylaian is excited to see how the year progresses. Chairman Moore informed the Committee that Members Leo and Campbell have agreed to serve on the audit services review subcommittee, and RFPs are due on March 31, 2017. Once they are received, copies of the RFPs will be 6 INVESTMENT & FINANCE COMMITTEE MINUTES March 28, 2017 distributed to the review subcommittee, and reviewers will be informed of the next steps in the process at that time. VIII. ADJOURNMENT With Committee concurrence, Chairman Moore adjourned the meeting at 11:07 a.m. Niamh Ortega, Record' Secretary 7