February 14, 2002-ns SCHERTZ ECONOMIC DEVELOPMENT CORPORATION (4-B BOARD)
FEBRUARY 14, 2002
The Schertz Economic Development Corporation (4-B Board) convened on Thursday,
February 14, 2002 at 6:00 p.m. in the Municipal Complex Conference Room, 1400
Schertz Parkway, Schertz, Texas. Those members present were as follows: President
Ken Greenwald, presiding; Vice-President Steve White; Secretary Johnie McDow;
Director Ramon Cook, Director Norma Head, Director Reginna Agee and Director Tony
Wilenchik. Also present were City Manager Dewey P. Cashwell. Jr., Finance Director
Vijay Jain and Recording Secretary Norma Althouse.
#1 Call to Order
The meeting was called to order by President Ken Greenwald.
#2 Approval of Minutes: March 15, 2001
Director Cook moved to approve the minutes of the meeting of March 15, 2001, as
written. Director Agee seconded the motion, which carried with the following votes:
AYES: Directors Greenwald, White, McDow. Cook, Head and Agee.
NAYS: None.
ABSTENTIONS: Director Wilenchik.
#3 Consider and take action regarding selection of Treasurer for 4-B Board.
Mr. Cashwell explained that Councilmember Glyn Williams was the previous Treasurer,
but since he is no longer a member of Council, a new person must be selected. The Board
is certainly welcome to choose one of the Staff, either him or Mr. Jain if they so desire.
Director Agee questioned if there's a problem with the Treasurer not being an appointed
member. Vice-President White stated that previous to Mr. Williams, L.J. Cott, City
Comptroller, had been the Treasurer and when he retired, Mr. Sweatt served in the
interim, and nobody brought that back against them. He would assume from that they
don't have to select an appointed member. President Greenwald suggested they make
the motion pending approval by the City Attorney.
After a brief discussion, Director Wilenchik moved that Vijay Jain be selected as the
Treasurer, pending approval of the City Attorney. Secretary McDow seconded the
motion, which carried by unanimous vote of all Directors present.
#4 Approval of FY 2001/2002 Budget.
Mr. Cashwell noted they have a pretty straightforward budget in that they have a limited
amount of funds and a limited amount of things to which they can commit those funds.
The fact is the majority of the revenue is in use and Mr. Jain can give them a sense of
what cushion maybe in there.
Mr. Jain commented they are projecting the one-half percent sales tax will result in
$725,000. They are expecting that the interest and investment income will be another
$22,250 for a total of $747,250. They have a fund commitment for the debt service,
which is through interlocal agreement, of $388,342. What was discussed last year was
the possibility of purchasing an aerial platform fire truck. The City already purchased
that around Christmas time. This five-year note and annual payments will be the amount
shown in the budget. Because it is related to public safety, this will be paid for by 4-B
money, or if the motion fails or it is deleted from the budget, then it will have to be a
general fund expense.
Vice-President White inquired, if at the last meeting, they didn't bring up approximately
$225,000 or $228,000 for the purchase of this fire truck. Mr. Jain answered that was not
this truck. President Greenwald mentioned they also purchased an ambulance. Mr. Jain
went on to say the other truck purchased was a replacement because the old truck had run
its course.
Director Wilenchik, indicating it is his understanding the purpose of the Economic
Development Corporation (4-B Board) is the promotion, development and enhancement
of economic development within the City of Schertz, questioned how the purchase of a
fire truck falls within the scope of that purpose. Mr. Jain explained that right now,
without the platform truck, they could not reach the height of some of the buildings in the
industrial complex. Director Cook, saying that's a separate subject, related they're using
voted for tax money, specifically enumerated in the ballot for public safety. Mr.
Wilenchick then questioned if that's a specific function of the 4-B Board. Director Cook
replied he doesn't know if that's a function of the 4-B Board, but he does know it's a
function of the sales tax money. President Greenwald went on to say it's part of the
incorporation of the 4-B sales tax. You can go either 4A or 4B and in this case the voters
passed the 4B portion. The initial sales tax pledge was for the public safety issue.
Everything that comes in has to go for the public safety buildings or support equipment
for the public safety buildings. It cannot go into General Fund. As sales tax revenues
increase, anything above what is pledged for this bond issue can be used for other items.
Obviously they're hoping for an increase in sales tax revenues.
Mr. Cashwell noted that what you find in the legislative history of this area is that
originally, the use of sales tax was fairly narrowly defined. Since then, it has been
broadened by the legislature. This community has chosen to use it for this purpose,
which supports economic development.
Mr. Jain pointed out the expansion of the use by the legislature allows them to include the
Economic Development Director and the Public Information Officer in the 4-B budget.
Council has approved moving those funds from General Fund into the 4-B budget. It is
now coming to you to either verify or say it is something you would rather not do. It is
permitted by law and those people are now being charged to the 4-B fund. Secretary.
McDow asked if they anticipate eventually taking those employee expenses and working
them into the General Fund. Mr. Cashwell replied those expenses have been coming out
. of the General Fund and they recommended to Council it be brought to the 4-B Board to
have these activities be paid for out of Economic Development dollars. Vice-President
White asked what they gain by changing the money from one fund to the other. Mr.
Cashwell answered it actually pays economic development activity from an economic
development source and relieves some of the M & O burden of the General Fund budget,
which helps stabilize the tax rate. Mr. Jain indicated they're moving the funding from ad
valorem tax to the 4-B tax.
Vice-President White, asking if he's not seeing something right, wondered if the
economic development employees are being paid part of public safety funds. Mr.
Cashwell replied if the change hadn't been made in the legislature, that would be correct,
but legislature has expanded the ability for communities to make use of the 4-B money.
So, this is a legitimate use at this time.
Secretary McDow mentioned they had discussions about this in their initial meetings. It
was pointed out their first obligation is to pay the bond. At some point in time, you
overlay and have money left over. At that time, the legislature would not have allowed
them to pay the economic development employee expenses they are talking about. Vice-
President White agreed and said that's why he's questioning it now. He just wants to
make sure they're legal.
Mr. Cashwell told the Board another important thing for them to know is that economic
development is placing a great deal of emphasis on commercial activity in the City.
That's what generates these revenues. It establishes a priority. Director Head
commented it's kind of nice to have someone else generating funds to help keep the tax
rate down.
Mr. Jain noted the $700 allocation for the audit by Armstrong, Vaughan and Associates.
It is $50 less than last year. He also remarked they try to keep bank charges at a
minimum. They try to move the money into the investment accounts so it earns higher
interest. They pro-rate bank charges to the various funds. In the case of the 4-B Board,
the charges were $200. The cost of office supplies, for preparing agendas, etc. pretty
much covers the items listed in the budget.
Director Wilenchik ,saying in 2000 the sales tax revenue was $679,000 actual and that
jumped up by $9000 in 2001, asked why they're projecting a $37,000 increase for 2002.
What is that based on? Mr. Jain answered just the trend. They have been experiencing
about a 6% to 7% increase. Mr. Wilenchik, noting the increase was much higher for
2002, inquired if the increase comes as a result of declining .interest rates. Mr. Jain
answered yes. Mr. Wilenchik was concerned about the large jump if in fact the economy
is slowing. He thought they would experience a lower growth versus a much higher
growth. If they come at a similar figure as 2001, they're looking at a fairly significant
deficit. Mr. Jain said he understands Mr. Wilenchik's point. Something the State
Comptroller has allowed them to do this year is just send them the net amount. In the
past, sales tax was sent on a monthly basis and then the State would turn around two
months later and charge a service charge for returning the money. The money staying
here improves the cash flow.
Secretary McDow asked what happens next year if they don't bring in $747,250 because
of flat economy or whatever the case maybe. Obviously they have options. 'The City
may have to come up with the fire truck payment. Mr. Cashwell agreed.
Mr. Jain pointed out that between 2000 and 2001 they improved the year end fund
balance from $450,000 to $790,000. To him, that represents almost two years worth of
bond payments. Mr. Cashwell admitted it's difficult to rely heavily on sales tax. You
make your best guess on trend analysis, and what you know about the national and local
economy. What they see going on in Schertz is the establishment of more commercial
activity on a steady basis. 'They try to be conservative as far as sales tax revenues.
There being no further discussion, Secretary McDow moved to approve the FY
2001/2002 budget as presented. Vice-President seconded the motion, which carried by
unanimous vote of all Directors present.
#5 Review and approval of audit report and expenditures for Fiscal Year ending
September 30, 2001.
Mr. Jain indicated they have a clean audit. Page 2 shows the balance on hand as
$728,000. They had a $60,840 accrual because this was money that was collected. The
auditor said it was collected for September 30th, but the City had not yet received it from
the State Comptroller. She added that to come up with the $789,657 balance. That is
now in the Board's account.
The next page compares the budget to actual. We had a budget of $612,500 for sales tax
revenue and actually collected $688,983. They projected interest and investment income
at $25,000 and actually had $30,395. They had a favorable balance in the revenue of
$81,878. Cost for the audit decreased, as he mentioned previously, from $750 to $700.
'They budgeted $133 for Supplies and Material and the actual cost came in at $196. They
have a $63 unfavorable balance on that. The big amount that is footnoted is they did a
capital outlay of $87,772 for an ambulance. It was not budgeted or formally approved at
a later time by the 4-B Board. That was an oversight. Former Treasurer, Glyn Williams,
questioned whether the Board should be paying for that. It could have been taken out of
the leftover money from the bond proceeds. Since the settlement on the public safety
buildings, that amount has been paid in its entirety. Mr. Williams had questioned why
they should be paying for the ambulance over atwenty-year period. They went with a
five-year note on the fire truck. Since the Board had a very healthy fund balance, the
Council approved the outright purchase of the ambulance. Mr. Williams did vote in favor
of that. The oversight was that with Mr. Cashwell coming on board, they did not
convene the 4-B Board a second time to get a formal approval to purchase the
ambulance.
Director Agee commented Council voted to approve $86,000 for an ambulance. Since
approval was not formally given by the 4-B Board to purchase the ambulance from
existing funds, the auditor has listed that as an unbudgeted expense. Despite that
expense, an additional $150,000 was added to the fund balance.
Mr. Jain stated the footnotes are pretty much standard language in an audit, but he did
want to explain the circumstances surrounding the purchase of the ambulance. Also the
Bank of New York charges $200 to make the bond payment.
Vice-President White questioned if they need to go back and amend the minutes from
$86,000 to the actual $87,772. Mr. Cashwell said it's his understanding you can't go
back and correct the sins of the previous year. It was noted it as an unapproved
expenditure.
There being no further questions, Director Cook moved to approve the audit, as
presented. Director Agee seconded the motion, which carried by unanimous vote of all
Directors present.
President Greenwald commented that in talking with Mr. Jain, the budget they just
approved is $200 short already for the bank charge for making the bond payment. After
discussion about whether or not it had gone up, it was decided to make a motion for a
maximum of $300
Secretary McDow moved to modify the motion to approve the FY 2001/2002 budget to
show .$300 worth of bank charges. Director Agee seconded the motion, which carried by
unanimous vote of all Directors present.
#6 Approval of payment of 5-year note for purchase of aerial platform fire engine.
Mr. Cashwell expressed the hope this action would hopefully prevent the sins of the past.
They are asking that the 4-B Board accept the payment of the five-year note on the aerial
platform fire engine. It is provided for in the budget. Hopefully, everyone has seen it.
The City had nothing that would reach the buildings in the industrial park. They were
able to get an extremely good price on it and saved $240,000. Council approved the
purchase. Vice-President White asked what the payments would be and was told
$826,070 over five years. Mr. Wilenchik pointed out they've already approved $163,000
of that, so they're talking about approximately $663,000.
There being no further questions, Director Cook moved to pay the amount of the balance
(approximately $663,070) plus the $163,000 already approved for the next five years on
the aerial platform fire engine. Secretary McDow seconded the motion, which carried
with the unanimous vote of all Directors present.
Director Wilenchik thanked everyone for putting up with him.. He's new.
#7 ADJOURNMENT
Secretary McDow moved to adjourn the meeting. Vice-President White seconded the
motion, which carried by unanimous vote of all Directors present. President Greenwald
adjourned the meeting at 6:51 p.m.
MINUTES APPROVED this the day of , 2002.
Signature of all Directors whether present or absent.
President Director
Vice-President Director
Secretary Director
Treasurer