You comes over in Ward service chair. If you want to say a huge, thank you to my colleagues on the council here for your support and having the chair and also for having on council, vice PRESIDENT Service, vice chair. So we are officially kicking off our first Finance and Budget Committee committee meetings here today. I want want it to just sheer right off from the start that we did check in with staff like we don't need a qorum forward. The meetings here, we don't need a vote to do roll call nor to adjourn the meeting either. I asked for folks to come in fully engaged and ready to learn. Be curious and also ask questions to this is our space to get what we need related to finance and Budget Committee.
And so been really intentional about who we bring into meetings here really excited for us to dig into our first conversations for I would first like say thank you to our staff as well. So huge shout out to plum a legislative aide, our council director, j. Thank you Sherry, a small for all of the behind the scenes work. Ethan putting and just to make sure committee here is many wall that we have everything all ready to go with the agenda, getting items, items that ash questions answered. So really appreciate you all to everybody else who's been supporting in the entire process, too. So I would like to give a quick Refresher Buttercup Budget Committee goals. We will be having your around engagement with the administration departments, public and stakeholders. Half a follow-up conversations on
outstanding topics from their ppb U.S. Budget discuss and problem solve budget-related issues that arise. Identify a council wide budget priorities. Bulk of these things will be doing here in the space and some of them will be doing behind the scenes as well knowing that our time here is really limited. We just have an hour and a half and where for starting off or schedule by meeting every 2 weeks. Prior to terms of the timeline. But we want to accomplish is that prior to the official start of the budget season, we will be having discussions and public meetings to create customized priorities. Consummate priorities and that of discussion that is led by me and also the vice chair. And we look forward to having this conversations with their colleagues on the council.
We'd also like to meet with administration to introduced early budget conversations on at the council priorities that we put together. And then lastly, this is a really great space for us to game at baseline knowledge about finance and budget topics. Overall, that was a really huge interest that the council here express. I look forward to having very meaningful conversations that all of you. And the people who keeping it us. I would like to. The at. Calendar that we have in terms of topics. We have selected to come before as these are topics tied. Our council members were very interested and this is tentative schedule. It really having something like this really helps our staff do that because make requests ahead of time. And I do want emphasize that the schedule here is prone to change based on the availability and willingness of speakers to come before us. And you always do are part and doing the outreach beforehand
making the request so that the request be done by my legislative aide. Applause. If Oaks have questions about the schedule here at all, please let us know you can reach out to our office and will be in charge of communications on that. So take a look at this. We've also provided paper copies on east side of the council chamber. In case you would like to take a look at it. All right. So what I'm going to do it is I'm going to switch gears so that we can dive into first topic here. Which is about financial policies. One-on-one. The goal in today's presentation is to set up a conversation around the council's big picture role in financial oversight and set the stage future policy making that is done in close partnership with our finance department. I would like to introduce our special special
guest presenter. Enter. Dan is a municipal advisor with the Knesset, a municipal finance team. He regularly assists clients wth municipal debt transactions, economic development and redevelopment initiatives. Long term financial planning, fiscal studies and utility rate Analysys. Dan brings 10 years of direct local government experience to his role at Ehlers most recently serving as the director of finance for the city are friendly. He also worked in leadership and administrative roles for the city of Winstead in Dkota County. Dan has exceptional experience in developing and executing capital improvement plans. Crafting and managing multimillion-dollar budgets and managing public investment
portfolios. Clients rely on his wide range of municipal project. Experience everything from airports to dancing municipal liquor stores to wastewater treatment facilities to help them achieve the committee's goal. So and I said you before, this is such an impressive vile and we're looking forward to learning from you. Thank you again for your time for being here with us and passing on your wisdom and knowledge. And I we'll give you the floor. So we started our last agenda item. So folks can to raise your hand on to make comments or questions. If we had a packed agenda. As we get that, you leave those till the very end. But we don't self thank you. To hand it over to you. Well, thank you, MADAM Chair and members of the committee. I appreciate those compliments. Let's hope I live up to them.
I should say that right now my partner and I do live in the city of Woodbury of. But before he drug me kicking and screaming there, we were proud resident of the Cole Park neighborhood. Just a stone's throw from the Dale Community Center. So it's always nice to be back and say pollen, across the border and I see the sign I would say to him safe again. We so. Thank you for your time this morning. I appreciate the opportunity to present to the committee and to discuss financial policies as mentioned by the chair. I really envision this to be as conversational as possible week. Certainly have a number of areas that we're going to touch on. But since this is something of a survey of those various policy areas. There's any number of topics or policy issues are potentially rules or regulations that we're not going to touch on. And part of the Reg as for the presentation. But certainly if
you have questions as we walk through, we can definitely chat about them. And if I don't know, of course, I'm always happy to punter plead ignorance. So but today, as I mentioned, we're going to talk about a few things. First. You don't just really effective writing policy. So much of developing policy language and really making an approachable for individuals to actually use that the folks that day in and day out have to actually live up to these policies in force them understand them, make good decisions with them. So we'll talk a little bit about some of the best practices and even some tips and tricks that we've dollars when we help municipalities counties, shool district special taxing jurisdictions draft various financial policies. And then we'll touch on a few different areas. Public purpose, expenditures,
some professional ethics, which I'll say is sometimes overlooked area of financial policies. People often like to charge ahead and talk about the dollars and cents. But these are really foundational issues that are important to really how organization thinks about its financial management and how it will manage any number of situations that are not always anticipated by a policy fund balances. That management budget development and then perhaps my favorite policy world procurement. So that will be fun. So a little bit about financial policies and really, why are they important? Yu know, why do we go through the effort and the hassle to do all this research? Right? All this down have these meetings, talk back and forth about what makes
good sense and there's any number of of rationales for them. You know, first, they really are central to long term strategic approach to financial management. They really allow you to engage in strategic thinking and they often require you to think about the future. Often policies are forward looking and they try to anticipate any number of situations that you MAY encounter in the course of your role in the committee or certainly as members of the City council. They also provide an excellent vehicle for change. It's a nice forum in order to talk about certain shifts in policy, why you're going to do certain things. And there's often a moment at the end where it's adopted and everyone knows. Okay. Now we go forth and do well. And if not, we will end the policy. So there's always opportunity
to do that. It certainly promote stability and continuity in your financial practices and financial management. And that's also true of other areas of the city. This is not unique to the fun world of finance. But really they allow you to prevent reinventing the wheel to respond recurring issues. They really create a shared understanding of how financial practices and resources will be managed. So ultimately we went staff have to make decisions. Certainly the council and the mayor cannot give a rule for everything. But having these policies and procedures allows them to take inspiration from things that the elected officials have a pine don. And if a situation is analogous, they can usually make some sort of decision that is at least in the general vein of thinking of the elected officials that, you know, they're not really out on their own. They're not
on a limb. The situation feels like that situation. So this is how we're approaching the end for the same really reasons. Staff say you can't change your approach or have little nuances, but it's a nice way. I'll say especially being foreign of a former staff to really where to start and how to think about certain things. They often support your bnd ratings, bond rating agencies love financial policies and procedures. They will often scored municipalities on what's called their management framework assessment. So they will look through your financial practices and they'll also make sure that one you have the policies and to iu, in fact, following them and then they will assign a rating accordingly. And that rating actually then flows into the overall bond rating
for a community. So often they will ask him when when your staff goes through a credit rating, call to be furnished with copies of let's say the fund balance policy, the investment policy, a debt management policy, things of that nature. They'll be very interested and what it is the city is up to in those areas. For all of your staff to get to work with our family neighborhood auditors. They help ensure legal compliance. So oftentimes auditors when they're reviewing the transaction and books of the cities, they will engage in what's called a legal compliance review and they will test various areas of law and regulations to make sure that the city is compliant and often a good way for an organization to demonstrate compliance is to adopt policies that support good management. And then of
course, naturally that they're following those policies as they move through the individual processes. And I think perhaps touched on this a little bit. Most importantly, for members of the city council and the mayor. They really allow you to set the rules of the road. I like to think his policies as guide rails. So you've provided a formal opinion of what the goals and processes and regulations and in some respects like we'll talk about second here. The behaviors you expect from city staff and the individuals that engage with the city and that really allows you to know that you are promulgating certain values in the organization and that the your strategic thinking about what hppens in and around the city and with some of your partner's
actually permeates too, the administrative levels of the organization. And so you can often say what we want to do, something that's big and important and complicated and policies are an excellent way to translate those visions into actual action in a way that staff can follow Follow through any number of good ideas. So I think as everyone there are, of course, any number of regulations, laws, policies, rules operating directives. They take on any number of parlance as really for the point of our conversation today, we're focusing on things that are really in the local control or under the sphere of influence of the elected officials in the city of Saint Paul. Certainly you are charter city
and you're obligated to follow any number of state laws. Those certainly established organization they create legal parameters. They often are approved by the state or your charter commission. And I can tell you, having been the finance director of for the city of Friendly, which is a charter community. I have had all the joys of navigating some of the rules, some of them that can be unique that are baked into certain city charters. And so that's something that you certainly have to consider when you're drafting certain financial policies or of course, you can always go through some of the complicated ways that you can amend the city charter. If you're so inclined as a city council. The mayor and city council, you're really what we think about your stab wishing. We'll talk with us a little more when we really get into budget development. The mission and the vision of the organization. Where is the
administration or your staff is focused really on establishing and directing daily operations. And because of that, you will really adopt draft and adopt policies that are focused on strategic goals. Pop certain policy areas, certain things that you want to see happen. The organization. And then conversely, the staff will often adopt their own policies that help them in a department level. Translate that into regular processes or even operating procedures. In fact, i've seen some very complicated operating procedures that will have step-by-step things that you do. Let's say in bank reconciliation I assure you you do not want to read those or be involved with those. They are as fun as the day. As long as you might imagine. But only when it comes to those those global policies, the things that are focusing on strategic direction, mission vision. These ae the things
that are approved by the governing Board of the organization for those administrative activities. It depends sometimes on the delegate authority that exists in policies or state law or even federal law. They can be approved by the chief administrative officer of the organization. But there is some time some overlap where some of these operating procedures are, in fact, approved by the governing body. They are rare, but we can think of really 2 We'll touch on some of them later. But certainly one of them is the federal government will actually require the governing body to adopt something called post issuance compliance policies and procedures, which is basically a fancy way of figuring out how it is. You're going to all of your continuing disclosure in arbitrage requirements related to your outstanding debt. But the federal government wants assurances that the policy has been adopted by te governing
board and that you're making good on the promises that you've made related to your debt obligations. Additionally in this is what talk about a little bit more when we talk about travel and training. But there's actually a state law that says the governing board has to approve a travel and training policy for its own members. So you have to establish kind of what will happen and when and what the limits are. If you were to engage in travel as elected officials. But they're really rare. And where you have to actually dig into some of the operating procedures of the organization. And so we tend to say basically the council should focus on the big, broad strategic stuff, values of the organization. The staff focused on implementation service delivery procedures, daily operations. And naturally, as you might
imagine, there could be a little overlap that exist between the 2 areas. So it's just something to keep in mind as you as you navigate these areas. And I think also as you embark on this journey, reviewing policies and prevent potentially talking about what you want to do, kind of honoring the the rules that exist for each of the parties that are involved in both policy setting and puffs and service delivery. I mentioned starting on this. You know where to begin. There's any number of areas where we often see governing body city councils, mayors become involved in the policy process is really you are the vanguard of the organization. You are talking to constituents other elected officials, people that are having issues or challenges or just wonderful ideas. They like to see the city interact with. And so you
help identify the issue that can also come from staff because there could be changes in laws that deal identify over. They themselves who work with your constituents every day MAY think oji's like we should maybe change some of this and that can be an area that a bubble up eventually too, either. The mayor, the deputy mayor or it's appropriate eventually to the this committee or potentially the City Council for Action approval. Often staff will conduct policy analysis. Your city attorney's office and working with your staff, a draft policy language often councils will become involved again when you're revising draft policy language. So you MAY review something in this committee or as part of the council meeting and you MAY ask questions about it. Additional clarity you MAY want to see the city take a
slightly different posture. So there's an opportunity to fiddle with what MAY be included in the policy at that point. And then certainly you would adopt any policies that require city Council approval. The thing that we often see missed in this policy, a loop in this highlighted on the slide here is we often see organizations not take active role in educating and training are evaluating their policies. And when we talk educating and training, doesn't have to be anything complicated. In fact, we often encourage clients from draft, something to say ever the department director in charge of the policy or maybe the chief administrative officer in the case of the city. Let's say as a city manager schedule a meeting by some pizza and talk to people about what it is that you're going to do, why you're doing
it and why there's a change in policy. What the expectations are moving forward. Of course, any good policy development loop has an evaluation stage. And you MAY ask yourself when when should you evaluate things. Now, of course, that things change. Identifying immediate issue where there's something that requires a little more feedback. You probably want to do it sooner rather than later. But we often encourage organizations to. Consider developing a policy inventory. This is really of roster of all of the various city council in administrative approved policies. And then we encourage communities to assign a regular interval at which those policies are reviewed. Usually every 3 to 5 years, depending on the policy and often you don't have to amend the policy. But you at least want to look at it. Make
sure last haven't changed the position of the city Council hasn't changed. There are newer interesting issues that are bubbling up in the community that would warrant a policy change. So even if you go through the process and you figure out, you know, this is working just fine. That's okay. But at least you've made an active concerted decision about what is the policy position of the city. You are simply waiting and not addressing anything. The other virtual policy inventory. And we see this a lot in communities is that some policies are considered perhaps untouchable. You know, there is a 3rd rail. We don't want to mess with it. This is a charged issue, a policy inventory tat insists that everything should be reviewed on a regular iterval. I think takes away some of the consternation that can exist when you want to address some
of these issues. It's that we are not necessarily approaching this issue because we have a problem or an issue where we want to see a change. We've made a commitment as an organization to be forward looking in our regulatory posture and w want to make sure that we're addressing these things on a regular basis that were consistent with law. We're thinking about best practices where responding. Oftentimes the changes in technology and how that impacts procedures. And policy inventory can be a really a wonderful way to kind of begin those conversations rather than someone raising their hand and saying, hey, I want to talk about this policy that everybody has strong feelings about. That can sometimes create sme friction or early in the process. So this is a nice way to remove some of that thinking. Last thing I'll say is you always want to use brands and
template. We often look with communities through their policies and we see that they have any number of different writing Styles. A number of different layouts. Often they use different language. They will have different definitions for the same word. Proper noun in different policies that can lead to confusion. And so generally, if you can create some structure around this, that's advantageous for 2 reasons. One, you can certainly make the policy writing process a little esier because people understand what the expectations are. And 2, you can remove a lot of confusion in the process to make sure that you're not. Inappropriately, perhaps creating doubt because you drafted one policy that has one thing in our policy. It says another or we have different meanings between
them. So what are they include? We have a question here, of right here, I think in right now on your next slide that started in the space of evaluation. I think one of the things that we sometimes conflate is what is the point or impact in terms of whether or not a policy is being evaluated for its effectiveness. And so I think what I see is the policy purpose and policy statement. But also, can you just say it MAY be 2 more things around when you evaluate a policy? And feels like it's also helpful to have a goal statement or intent named for Ford said policy can used. Can you speak a little bit too? The types of evaluation you might see and whether or not you see a benefit of naming intended goal of policy as you
evaluating moving forward. Thank you, MADAM Chair, Councilmember can. Yeah. So as you mentioned and kind of leading into this slide when you're when you're drafting a policy, we generally include that you have some kind of purpose or policy statement. Really underpinning the reason or the rationale for why the policy is in place. What goals are you trying to obtain and the reasons for them to your point and as mentioned on the previous slide, you also want to have in your in your feedback loop some amount of evaluation that occurs the level and type of evaluation. Perhaps unsurprisingly, this is a wonderful finance answer is it depends. Because it often depends on how complicated the policy is. One of the stated goals of the policy. You know, for example, if let's say you have an affordable housing policy and you're trying to create a certain number of housing
units that can be pretty straightforward to figure out. Versus let's say if you have a policy that is designed to create certain administrative efficiencies in the process. You know, that can be a little more challenging release us out. Have we met our goals? There are certainly things that you can do in there. Any number of performance measures that you can attach. But oftentimes when you're developing the policy area, you can you can talk about all reach to perhaps some of the things that we've been working on with the Office of Financial Services with electronic payments is trying to reduce the number of paper checks that exist are used by the city because that creates additional cost. So you can calculate something like the cost per transaction. You can
just do a very rudimentary analysis of well, how many checks are we cutting versus how many electronic payments that we You can talk about time to reconcile. There are any number of areas in which you can really try to understand. Are we meeting the policy goals but to reach back to my earlier comment, what those look like but performance measures you would use how easy it is to do really depends on the tone, tenor and nature of the policy itself. But to your point earlier, call Kim, it really starts with a very clear well articulated policy statement to understand what do we have to and why? And that's just a little bit before definitions. And you certainly want to
define key terms. We often see confusion when there aren't key terms, well-defined that's often at the staff are sometimes the city attorney level when they're trying to figure out what exactly was the intent of the organization when they adopted this end? You know, it's what is what is that? They're there. We often encourage people to include statutory governing policy references. And we'll talk about this in another slide, but it's often very esy. Then if people want to go look at certain state laws or they want to look at certain federal regulations. They don't have to go search for them themselves. They can actually figure out what it is you're referencing to form their own opinion. Speaking back to the policy purpose and statement. You know, you really want really clear and concise policy statement you often want to use very clear
language, sometimes policies and procedures can take on a little bit of a legalistic, sound or feel and that can be a little more challenging to interpret. It's not to say that's always inappropriate, but really the by should be towards trying to make them. It's easy to understand as possible. Sep by step procedures if they're needed. And I will say this and I think if you take one thing away from this presentation, it would be this. Good form solves a lot of problems. It doesn't have to be a paper form. It can be an electronic format can be through. You know, some form of web form. What have you? But I haven't encountered any number of situations where staff is asked to do a certain thing. And they will write memos. They will create power point
presentations. They will draft very, very lengthy responses to certain areas. If you have a form that asks them the clear questions that you want answered that gives you the information that you want and it utimately saves staff and others. A lot of work in the process. So it can take a little time making a forum is certainly an art. But as you can tell, I am evangelist for forms. So primary contacts. We often encourage people to have primary contactless in the policy but not an individual. We often see folks say that you should reach out to Dan Center. Really? It should be a position because those people will change. Folks will leave. Folks will be promoted. They MAY tke advantage of other opportunities. But you want to make sure folks have an opportunity reach out to
someone to get any of their questions. Questions answered. That's important in terms of saving them time. Make sure they comply with the policy. But it also helps the staff and save them for potentially breaking the policy. If they have the opportunity chat with someone. Adoption and revision dates. A big fan of these primarily because you can look - to see how old is the policy. When was the last time we looked at it? Should it be revised again in perusing the city's website? I didn't know that your meal reimbursement policy is actually established by a letter from Mayor George Latimer released and posted on AUGUST. 16th 1984. S certainly that date and there is very helpful. But it MAY be time to say, you know, there's been a handful of years
between then and now perhaps we should look at some of the things that we're up to there in that area. If you were to draft a policy inventory, you MAY want to list some of those first. Certainly up to you. And then you want to establish with the approving authority. So as I mentioned, there are generally pretty clear lanes about is this a council policy? Is it something that set by the mayor to something that set by the deputy mayor's? It's something that said perhaps by department director, it's very clear to know who are helpful to know very clearly who is the approving authority who has ultimate responsibility, who can fill with this. And that's primarily because if somebody wants to change anything that going to talk to the right person. And if someone has given an opinion on a policy they are heard from and you're not ultimately stepping on
anyone's toes or depending on the nature of the policy violating state or federal law because you had an inappropriate body, our level approved the policy. We have seen people run into issues with that as well. So its always very helpful to be very clean about that. Council PRESIDENT, cure. Thanks, MADAM Chair, up first of all, I just want to say thank you are ready for this presentation that your enthusiasm for the subject is palpable and contagious, which, you know, sergeant get contagious enthusiasm for this kind of material. So I just wanted to know, just missed mostly for my colleagues that think this idea of a farm is really interesting. One, we've talked a lot about the format of the budget presentations that we receive from departments which have typically been in the form of power point presentations. And I think we've gone back and
forth on the right way to get the information that we need and also make it. That too time consuming department staff. And so this idea of a forum is something that I think about. Just MAY be a really interesting, clear cut way to get that even just as a cover sheet. In addition to a power point presentation during a budget presentation. So just want to say that thought about Well as amended. Metro Council member, they think that's an excellent observation. We work with a number of cities that will actually draft operating budget forms and then capital request, but forms. And will ask a series of questions and we'll even have a methodology for how it is that they want to see the the cost calculated. Classic example with a capital budget is it will include a discussion of what are the impacts on the operating
budget. And can you quantify that? So if you approve, let's say of big capital projects, you know, let's say expansion of the building. Have you thought about things like anything from, you know, pretty ordinary like utilities, but the one that we haven't seen missed a lot, which is do we need additional custodians who's going to be cleaning this this building? And so it's a nice avenue to bring up those conversations and just make sure you're addressing some of those issues. That when you're talking about. Very big, complicated budget decisions that can smetimes get lost. And in the discussion. Thank you. I will admit that I am a total to work for this. So. I didn't use that. I it's a it's a. It's a it's a label I use on my own don't mind it off. You know, you have a good job when you can just geek out
about it. So tips and tricks. We talked about some of these when I was walking through the different policy areas. But these are very common things that we see. Folks kind of put in policies that really lend themselves to confusion often are a little nebulous. Don't provide people with clear expectations about how it is they should proceed. So one of the most very common ones, we see something like approved by city staff. Really it should be approved by an individual. Good thing you can do here. And this is especially true of large organizations. Sometimes we'll see something like approved by the finance director or their designee. And so the finance director in this example could save really. It's the city treasurer that's responsible for this. And sometimes you can even draft a memo that says hear my list of designee. So people understand what their responsibilities are and
how it impacts their job. It's also very helpful for workload management in terms of making sure who's doing what is are we asking too much for an individual person? Why I all of this flowing potentially to one individual? It's a good way to make sure that you're thinking about what happens on a daily basis for the folks that are dealing with these policies. We often like very clear timelines. People walk in put in 5 days. But then the question we always get is that business days or calendar Good question. We don't know. That is the most common question that comes up. If you ever have an appeals policy for a resident or business owner, if it says will respond in 30 days was a calendar days or
business days and often an appeal situations. These are usually contentious situation. So you don't want to create more confusion in the process that just leads potentially to more consternation and perhaps more conflict. As I mentioned, we like to see exact Tory references. This is for 2 reasons. One, the person using the policy can actually referenced the material that's informing the policy. But it can also save you a lot of work when you're drafting policies. So if you say we are going to follow something in state law and that state law changes. You follow accordingly. Now, if you don't want to, you can and the policy at that point in time. But saves you from having to go back amend a policy just
because something has changed at a different level. And oftentimes when we do policy reviews, those the issues we run into a lot because people will take statutory language inserted in their policy trailing, which is change. And now that policy is no longer can grow with state law. And so you have to go in and make these minor administrative amendments and really it ends up being busy work most the time because often I can't say always but often community will say, well, yeah, we just want to do that anyways. So this is just an extra steps on the memo. It's a review by the city attorney, et cetera, just to work. Simple language. As I mentioned, you know, I just know that something you're ordinances. Cbi committee, you can just say committee, you have to keep saying cbi committee over and over again. In fact, I think the ordinance even says something like the
capital Investment Budget Committee, which he ran after 4 e's of understanding will be referred to as the Cip Committee. I would say that most of that language is unnecessary. Bt I should also say at this point that I am not an attorney or attorney spokesperson. That's just my opinion. But generally what we see in terms of best practices limiting trailing zeros are unnecessary being very clear about percentages and then always establishing kind of clear dates is very helpful. Other thing that I would stress is when possible use charts, tables and figures because you really, really want to. Make sure that people can understand what is it you're up to. And if you look at the research, it's something like 70% of all people are visual learners. So if you lean into that idea, you actually make your policies more approachable. The word I would stress on this slide, though, is
accessible as we move mre towards electronic policy documents, websites, what have you when you're drafting things, especially tables and charts. You want to make sure that you're doing so in a way that's accessible for persons with disabilities. And in fact, organization of your size, there's any number of regulations related to website content and federal rules on ground. The Americans with Disabilities Act. But often we see people wanting to use charge tables and figures and wheat. That is certainly laudable that sometimes I don't think about that kind of last step in the process to make sure everyone in the community can use them. Jonelle jump into some individual policy areas. And some of the site of a lot of information. So I would necessarily go through all of it. But if there's anything that you see, if you want to talk about, please feel free
to stop me. I've already made comments about how I am. I am not an attorney, but really when you look at public purpose policy expenditures, you really want a policy that supports something like this. You really want to think about what her pert permitted and prohibited expenditures of the organization. How are you going to use certain assets talk about some examples of that in a second. Any documentation requirements. So as we mentioned before, any forms that need to be filled out, things that need to be completed stuff that should be filed accordingly. In case someone comes asking about it and then really making sure that everything needs a public benefit. You MAY ask what is a public benefit and our friends on the Minnesota Supreme Court have actually established a four-part test for this. And it must be authorized
explicitly or implicitly to for the title by statute or charter. It must have as its primary benefit the community as a whole. It has to be directly related to a function of government and it cannot have it to prime rejected the benefit of a private interest. The reason Imention that you should have a public purpose. Expenditure policies is really when we look at things like implicitly benefit of the community related to a function of government. One of the things that the office to see has said if a city council make certain findings that these tests are satisfied. It can be considered a public purpose expenditure. Even if it's not explicitly authorized by state law. So that is an opportunity for potentially the council to breathe some life into what is around public purpose, doctor, and
what complies with the public purpose law. Of course, I would tell you in full disclaimer if you tend to do any of these activities, you would want to consult with your own legal adviser to make sure that they feel comfortable with the process. But this really is an opportunity to say we have certain programs, policy preferences. And we think that this is for the public's benefit. It meets the test and law and here the reasons why. So we look at a few policy areas and as I mentioned, these are some of the areas where you MAY want to take a little time to think about them either a city council or probably with some of these at an administrative level. I will tell you if you ever look at the the letters and reports for the office of the state Auditor. And I have because previously mentioned I'm a
dork meals and refreshments are perhaps the number one finding in the office of the state auditor, the other that will talk about his travel in training. You will find more state auditor level letters and reports on these areas than any other. So you want to think about water sponsored events, volunteer events recognition processes. Service awards, et cetera, hours. So if you have to have a a meeting over the meal hour, what happens in those situations? Our friends at sa have said that you cannot schedule a meeting over a meal hour and have the city by food just because he scheduled over the meal hour. That is dubious. They would say that you need an actual reason for health holding that meeting over the meal our Good enough that you just scheduled over the meal hour. And that's an
area where we often see cities run into some problems with the say and up to work as a good example as well. You know, oftentimes you have to feed staff that can't stop to eat. You know, they can't go on a lunch break. Perhaps. Let's say if it's a police officer pursuing a major crime, there's a water main break. Things of this nature typically food will be provided because people cannot step away from that central public service staff recognition. There's actually a state law that says you have to adopt a policy if you want to have a recognition program recognition program and wellness. As a matter of fact, they combine those 2 which creates a little confusion, the process and general gifts and appreciation yesterday. But can't give gifts. Under Minnesota state law. There's tremendous test. You can't
give gifts. And even if you have a recognition policy, sometimes if you're giving a gift between a subordinate and a supervisor that can follow the state's conflict of interest laws. So this is an area where you have to be quite careful in terms of gifts in general appreciation. But there's also statement of all pinion and position from the lsa on things is as specific as the use of gift cards and even the gifting of flowers, which flowers are allowable. Oftentimes these will get in trouble because they someone, let's say, has a relative that's passed. They want to give some flowers. They use public money for that. Those flowers are to the benefit of a private individual. They are not allowed public purpose. Interestingly enough. Membership. This one fairly self-explanatory essentially
allowed to pay for things that really benefit municipal operations? So you think about perhaps having a city engineer, that's a member of the Minnesota City Engineers association. Interesting local organizations. There is no public purpose to join local organizations unless it's authorized in state law. So on area where cities often talk about this is you cannot join a chamber o Commerce. Interesting, though. There's not a part of state law that says you can give thousands of dollars to them in partnership for certain programs, but you actually can't pay dues. There's no statutory authorization for dues barring equipment and use of public assets. This is where a lot of organizations tend to get in trouble and where policy can be very helpful. Essentially you can borrow equipment if it's to you know, think about if employee uses the city's computer and printer to print
a form for their private life. Generally that is viewed as being acceptable. Bt it could in a mess. But it is as far as the last borrowing a public equipment. But the other things you can't do, we work with the community wants who was allowing their public works professionals to watch their private cars in the state car wash. That would not be allowable or to store their vehicles in the fire bays when they were on a cold night. Also not allowable or there was one county in particular where they had a handful of staff that we're running a rich entire real estate business using te city computers, phones and multi-function machines. Certainly not allowable. So we talk about professional ethics really? Tried this before. You really want to have statements that allow you t guide behavior and decision-making. You have a fairly robust conflict of interest. Policy
was last adopted in 2007, again, probably reaching back to the all of the policy. Even Tory idea, it MAY be time to perhaps just revisit, make sure everything makes good sense. But as I mentioned, you're really trying to create expectations of the kind conduct for officials and staff that you're really telling them. This is how we expect people to conduct themselves in their daily interactions, both professionally and with constituents. And that is really designed and ultimately results in promoting confidence, integrity in the public process that everyone's doing what they're saying. They're operating with a certain level of professionalism and that when things go sideways, they take accountability. And there any number o resources you can reach out to. I would mention that a lot of these
particularly they have a confidential ethics hotline. So if you ever had any questions about behavior at the color, not ethical, you can actually call that hotline and it's staffed ethicists that will listen to you and pine on whether or not they think something is that the not? A few areas you might want to address talked about some of these for some standards upholding, you know, professionalism and integrity. He really want to make sure that people are operating with the highest ideals of honor and integrity in their personal relationships to merit respect and trust. Accountability, particularly when it comes to financial areas that they're truly managing funds and they're taking due care whenever they execute transaction. And that really they are upholding both the letter and the spirit of the law. Relating to any of their actions. And this is really perhaps the most important thing that they are
complying themselves. But they are reporting anyone's that they view not complying. So it's not enough in this area and to be unethical after to report yourself or to follow the rules. If you see someone breaking the rules, egregious Lee, yu have an obligation to report it. Confidence and growth. This is probably the area in the hope presentation I'm most excited about actually a professional ethic to make sure that staff and the council are maintaining the knowledge and expertise that's necessary to perform the job and meet the best practices of the order of. Really the local government industry. So this includes things like providing for travel and training professional licensure us. It's also extends to encouraging new talent and
career growth that you really want people to move to the next level. And if they do so, you celebrate that and you encourage them to go forth and do well. We do run in some organization sometimes that are not as perhaps seeing their people move on to the next stage of their career. But I would tell them that that that is that is unethical. You want people to grow? Confidence and growth is it is unethical value. a question for on the slightly professional ethics policy. Can you tell us what the acronyms are? Oh, excuse me. That is the government finance Officers Association Okay. There's a few other ones to mci amc is the Association of Minnesota counties. And then I cma's the international City County Management Association and then lmc is the League of Minnesota Cities. Thank you. Mortgage special effects. You really want to be providing reliable information, both from a staff level and then
also as an elected official to the public that, you know, there are accurate financial reports, everything's free of material misstatement that you are. Not purposely admitting any material facts and that really you are respecting private and confidential information, professional relationships. This is similar to some of the areas we mention on the previous slide. You're exhibiting loyalty. You're operating really with no duty trust in a duty of care in the affairs interest of the government. You're not knowingly party to or condoning any illegal activity. And of course, as we move into conflicts of interests, your discharge your duties without favor, you're not seeking or accepting personal gain, which would influence or appear to influence any of your decision making and that ultimately you're not using any public
resources for personal or private gain. The thing I would say a person, particularly when it comes to conflicts of interest and I'm sure as elected officials, you can certainly appreciate. Oftentimes the claim rings much larger and louder than the verdict. And so when I say it's important to avoid the appearance of impropriety, that's almost as important of waiting actual impropriety because the claims that people make are often reported much more in the newspaper than the actual investigation outcome of the process. And so really being buttoned up on the front and can save an organization, a lot of headache and a lot of consternation. South and balances. You know, the amount of money that the organization has you can think of fund
balance is as all of the money. The organization has accrued since its inception. So it's what you have in the savings account. They are used for a number of purpose is really to allow the organization to operate seamlessly. You like any going concern, have cash flow issues. You receive your major settlements for revenues really? 2 times a year most the time with lga and property taxes. And so you need a certain amount of money in the bank to smooth out that as you pay things like contractors payroll. Purchase materials and supplies. What have you? And generally that's designed to protect the financial
position of the organization. Other thing that I would say is they're also helpful for unforeseen circumstances. So these are things like emergencies or what we commonly see when there are elections on the governing body. So they're often times turnover in elected officials. And then those liked officials MAY have some different ideas about how they want the organization function. And if you have appropriate fund balances that allows those decision makers to make some of those decisions, kind of independent of financial constraints. Of course, money is fine. And they're always be financial constraints. But my general goal is often times to make sure that money is not a reason to do something or not do something. Sometimes it has to be the case. But if you have it's awful fund balance policies, you can certainly avoid some of those challenges but not always. You should really include a number of
different areas. We talk about the general fund a lot. But capital project funds are good for fund balance policy, especially if they're use regularly. If you have special revenue funds and certainly any enterprise and debt service funds that you hve, you MAY want to consider fund balance policies as well. And again, this is to ensure cash flow because ultimately you don't want to be in a position. And those other funds were potential. You have to borrow from another fun in order to make that phone call than the accounting staff gets to deal with a bunch of do choose from Xenophon lawns and oftentimes it ends up happening. Especially if the fund is strapped for cash. You end up for giving. Those are fun loans. And so it just ends up being booked as a loss. So that's always something to keep in mind. As a mission about this. You really want to
have to find clear policies for your unassigned fund balance is there are certain he's another acronym Gadsby rules. The government Accounting and Standards board. You might imagine, they they party as hard as you might think. Really tell look at unassigned fund balance policies that you really want to include the process for adjusting fund balances over time. And this might be an area where the council MAY have an opinion. Are you trying to increase your fund balance is because perhaps you want to bolster your financial position. Where do you have excess fund balances? Use that term gently because we don't a lot of communities have excess fund balances, but it happens and you MAY want to spend them down over time or you MAY want to try to say kind of his even keel as possible at a certain
percentage. He wanted to find any conditions are used. And if you do spend them down, you want to think about your plan to replenish them. So rating agencies, for example, understand that certain government activities or episodic, you MAY go through Syria series of savings and then a series of spending They don't mind if you go below your fund balance policy. But the question will ask you is what is your plan to replenish it? And generally we advise clients you want to replenish and 3 to 5 years sooner is better than later. Of course. So that's something to keep in mind. They think we often encourage in this area is you MAY want to consider what we call a windfall policy. So there are times when organizations for whatever reason encounter windfalls you have kind of. Bumped into some money that you weren't
anticipating getting either from the state legislature or sometimes you see it with donations. I was rich with an organization who had a hospital district that dissolved and they get a portion of the assets and some of they had an extra 2 million dollars. Well, they had a policy in place that said if we get a windfall goes of this funding, this is what we use it for. And that's really designed to avoid kind of conflict. If suddenly there's found money because eeryone will have ideas about what to use it for. Some say those ideas can't win out in the end, but it's always very helpful as a guide to say, ok, we didn't know how much we're going to get once upon time. We didn't know what we were going to use it for, but we have a good understanding of how it is. We want this to function and that will inform our decision-making in the future. And I have a question for
you. I was wondering with the previous slide with the clients that you work with common for them to have a clear policy on their assigned fund balance. It is yes. chair members of the committee moving into this next slide. I answer your question. Really when you look at small governments will more lot one for the time being. But really all local governments, they tend to adopt a 35 to 50% of fund balance faced on next year's expenditures. And so when you're doing a long-term projection, you're making financial decisions. You want to make sure that your fund balance remains at a certain level and that you're adjusting your revenues. Expenditures accordingly in future years. So you don't inadvertently start sending down money that's in your reserves. Getting to keep in mind is that the gf awaiting a fan's officers association. They recommend 35 to 50%. In
fact, the office of the state auditor says you should have 5 months of operating revenues up next year's operating revenues in reserve. If you're doing the math there, that's 42%. So there are a number of organizations that would be applicable to the city. That kind of have a pint on very specific reserve levels. Additionally, credit rating agencies. We'll have their own methodology in terms of what your reserve should look lke for the different rating categories. And so they MAY say, ok, you're reserves are a little too low compared to your peers. That's more of a double a amount of money. You haven't reserves Triple-a amount of money you have in reserve. So there's a number of folks that kind of a pine on what those specific level
should be. Thank you. Council PRESIDENT Thinks chair. I'm just curious since we have members of staff here, MISTER McCarthy or others, if they MAY. To share with us how our fund balance policy compares to this. I haven't seen it in terms of subsequent expenditures before architect, just total percentage of federal funds. So can you speak to? Works. Taipei and official percenter. Council. Chair Tim, certain cherry and cuncil PRESIDENT Make her. Yes, we do have a and adopted council that the fund balance policy and it I measured on the percentage of subsequent year's budget. Much winter is a line here. Policy minimum is 15%. But we've communicated to the council, we try to measure management or to a 20 to 30% to be more in linewith. It's a recommendations rating agency
recommendations and similar. So, yeah, but ours is based on percentage of following year's budget. Then just a quick follow-up chair. Do we the other types of fidelity policies as well? Special capital. We have from downs plicy. We have on several of our special funds. We have specific policies. Many of them fall under that kind of operating policy category that referenced earlier in the presentation that don't have official council, you know, council adopted policies, statements, but that we manage to very similar levels, depending on the on the revenue source. You know, our old Street maintenance fund is a good example where the same
kind of we get, you know, sort specific Revenues come in a certain time of year. And so we would manage to a specific fund balance policy for that fund as an example or Syria told fund is another one that really manage really closely with, you know, cash reserves and that some of are spending were selling bonds every year. And so that's a big part of the bond rating process for the I'm Ansel every year is writing that's on its balance in cash reserves. Thank Doctor McCarthy, a thank you to you in or financial services staff for being here and for taking the questions too. I do have a a couple of requests. I'm not sure where the policy for the fund balance lives and so. Can you send that to the council that have that? Thank you. Okay. Great. We can move So moving into debt
management, there's bit surprising touched on some of these areas as we can talk about that management in debt service fund. They really help you establish parameters for when you're going to issue debt. They're also often the case, the city of Saint Paul, some charter restrictions related around the use of debt that would inform this kind of policy development. But really they're designed to help you manage the debt portfolio and really help you understand what situations will be issued at what situations will be not issue debt, kind of terms and structures are we most comfortable with perhaps what kind of rating we are trying to obtain and maintain some communities will will make the decision that they don't necessarily or they can't necessarily get to being, let's say a aaa. And so. They won't even try to do that. Understanding some of the
restraints that exist for the organization. As I mentioned, talk about types and terms debt limits and metrics. And so perhaps reaching back to council member. Kim's question there in this area. There are number of performance measures that you can use to basically ask yourself is how much debt do we done? Is it too much so to speak? And then we will touch on this today. It will be on the brief, but you to policies that relate to how the city will issue private activity, bnds and conduit bonds and under what circumstances you would do so and what you MAY ask in return for that issuance. So sometimes the term we often see the policy really to be less than the useful life of the project. Really good
general rule is you do not want to issue debt longer than the thing that your that your to death for will last. So you don't want to, let's say, have a 20 year facility that you 30 year debt for because now you're paying principal and interest on a facility that you're no longer using or if you have to issue another series of debt. Now you're paying twice the amount of debt and those additional 10 years was overlapping. I mentioned earlier there's general obligation debt that is a pledge of the city council basically of your full faith and credit in any of your resources to repay the debt. This is perhaps my one bar trivia for the day. But in fact, this is the only time when issuing a general obligation of the current city council can bind a future city Council. Your general
obligation pledges irrevocable. In fact, even if you tried to revoke it, state law says the county is obligated then 2 levee, those taxes on your behalf and make those debt service payments. So there have been some enterprising city councils in the past, maybe try to gt up underneath that and that there is a belt and suspenders approach at the state level. Statutory authorities ad uses and certainly like what it is that you're willing to do or not do and then structure and limits. This can be that you want to retire a certain amount of principal. So sometimes we do see things like keeping the total length of the maturity of any general obligation debt at or below 20 years are potentially wanting retire. Let's say 50% of the
debt in the 1st half. Of the debt issue. And that's generally designed to help you save interest expense over time because you don't have as much principal outstanding for as long of a period. You can also have limits to us come out to our metric. Some communities will use a certain percentage of their property tax. Levy will not will be debt. Let's say 10% or they MAY look at debt per capita or debt per household and say we don't want to exceed something like $4,000 per capita or $5,000 per household or something to that effect. So something to keep in mind there. You also discuss what, what how you handle your reserves and at what level and potentially what we but re fundings. And that's a fancy bond word really means refinancing. He called fundings for whatever reason. Oftentimes your policy will say that you need to achieve a
certain percentage of savings to go through the refinancing process. Usually 3% of the net present value of the bond. And so that will describe when you would go through the time and hassle and the cost of potentially doing every science and then debt monitoring and reporting that's when those post issuance compliance procedures that I mentioned earlier come in. Thanks, MADAM Chair. And this topic and also a little bit on the fund balance topic. we do have a aaa credit rating and we're very proud of that. And we seek to maintain it at the same time we have us certain types of that have remained at the same levels for decades. So, for example, air capital improvement at issue hasn't got about 11 million dollars. I think since I was a teenager and obviously 11 million dollars doesn't go as far today on street maintenance as it used
to. And when we bump up against that during our budget process and discuss the possibility increasing that bonding, what we're often told him we often tend struggle with is this issue of our credit score be affected? And I'm wondering how it seems to me that there should be a way to assess objectively whether or not there is that risk or what that risk is rather than just constantly shying away from it because there's some risk. And I wondered how cities do that. Chair councilmember. So there are a few ways that you can do it. One, like my from Ehlers. We will do credit rating analysys. And look through the various rating criteria for an individual city and we can load in additional debt and see if that would impact a credit rating. Generally. Of course, we can't provide any
guarantees in that regard because ultimately the credit rating is the opinion of a 3rd party. But we do it from time to time with communities that are usually contemplating quite large projects. Let's say in a once in a generation investment like a city hall police station and they'll want to know if we issue all this debt. Will the impact be so those can be done on fairly objective basis. Tere is a more formal process. The city could go through credit rating agencies will often offer a confidential credit review process. You do have to pay for it on a tense Acosta and amount similar to a credit rating. But essentially you can furnish them with your ideas and ask them how they would respond to them. And they will give you what they call an indicative rating because it's an actual rating and they will provide you with a letter that outlines a
rationale. As I mentioned, letters confidential does not publish to the market. So if you are contemplating some kind of big move and then this Santa going 11 to 15 million dollars, maybe a big move. You could potentially either municipal advisor to perform a credit rating analysis with the disclaimers. I mentioned. Or you could pay for the privilege of going through the process with the credit rating agency and asking them for their really their formal opinion on a potential change in your debt. Issuance posture. So development and management so just another fun fact for you. In fact, I was just curious this morning. Case you're wondering, mllion dollars and $100 weighs. 22 pounds. A million dollars on it all. Those weighs 22 pounds. So that means really when. When I got off the scale this morning and was about
9 million dollars so just a little something keep in mind. If you're wondering about that. But really your budget and management policy, I'm sure, you know, as as counsel you're very familiar with the budget process. Often communities will have more articulated budget development policies that really guide the creation of the budget, the long-term financial plan and helps establish the annual budget. They will often described compliance levels. So from a council perspective, the questions of being when it's someone over budget. Are they over bdget? If the department has gone over budget, are they over budget? The fund has gone over budget over budget. If a business unit. Has gone over budget and so often you will have a policy that will describe what we call the compliance requirement that
you would say, ok? And I'm just making this up. Public works as a department. So - public works over as a department, their quote, unquote, over budget. But if the city engineer goes over, but they're underneath the public works budget, they're still in budget. And these are decisions that council can make to did basically described how much money can be moved around in the budget administratively. When does the council want to be notified that perhaps something is happening in the eye and with an operating are kept at the operating capital project. And so these policies can be very helpful in describing to the council generally and to the public and for your own benefit. When you exercise oversight. When do we want to know that when you are quote, unquote, over budgets, understanding that the administrative staff has,
of course, doing their best and a budget is a snapshot in time. You pick a date and adopt a budget and then the world changes. I like to joke with clients when it annual budgets are long-term financial plans. If I'm sure if anything, the wrong. And so that's always something to keep in mind. And so this is an opportunity to say, well, when we do get it wrong or something happens, when do we need to be notified? And and then again, as I mentioned earlier with policies that can be very helpful for staff to know, because then it gives them a clear understanding about what their obligations are. As I mentioned, you, including operating and capital improvement policy. You can also include things like performance measurement program. So you sometimes see cities that performance measures. To their budget outcomes, capital asset policy. When you capitalize things and how they get depreciated when they're going to be replaced. And then we also encourage people, if you serve as a fiscal agent
for a 3rd party. That you establish the fiscal agent policy because of that will describe how it is that you but for them account for them, what fees you're going to charge and what you're reporting requirements are for them. And what what interaction you would have as you extend certain services of the city. We talk about this a little bit in the fund balance area, but it MAY also talk about the treatment and use a certain funding sources. So we will run across organizations that will say because local government aid can be volatile. We're not going to put more than 10% of our local government allocation or operating budget. It's all going Capitol because of the state polls back then were in a position where we just have to delay project have to lay people off are we don't have to eat a very large increase in the property tax levy to backfill. Given on the amount of budget. Me put in the
budget. We're comfortable that we would have to levy an additional 3% or something like that. If that comes to pass. And so that's a way that you can kind of manage some of the risks that can be inherent in your budget process. When you're relying on other parties, tough and certain activities. I was like remind people that the missile budging, it's the most important. Annual task for elected officials. That really is when you're setting the policy when you're deciding where the fire resources of the organization will go. And I always caution elected officials that cmparing to other communities in your peers, can be very challenging and it's not always fair. In fact, sometimes it can be dangerous because different organizations pay for things differently. They have a
different revenue function there in adfferent level of development. Maybe they're mature versus a growing community. Maybe they just built that began Exxon, their city hall. And you're thinking about doing it in the fture. And so your tax rates might look different or you MAY have different structures so much like we've talked about here. You MAY have an organization that has their water supply by Saint Paul Regional water. And you MAY have another organization has their own water utility and these variables can be very difficult to understand when you're trying to make apples to apples comparisons about what it is that you're up to in any given year. It's not to say can't provide context and it can't provide inspiration for some of your decision making. I was just like to say
to take it with a little bit of a grain of salt knowing that you don't have oftentimes those comparative analysis, complete information about where they're at in the life cycle, their city and what this what decisions they have made to date. And then this is just a common misconception we bump into. Sometimes you only get you levy. Some folks operate under the assumption that if the tax base expands, you get more money. And that's not the case. The Levy is a fixed number that you have to adopt every year and then perhaps maybe my favorite quote about anything related to budget finance. And I really believe this. It's really not about of the men women in yourself. It's about making the things that excite you possible because invariably the next question somebody asks when they have a good idea is how we pay for it. Vice Chair Tim. Thank I makers perked up when you talk about the life
cycle of the city. Also nonprofit executive director right now. I'm doing a lot of strategic planning and we're looking at the life cycle of organizations are sort of areas of different. Topics and themes. And like when, you know, when you sort of need to like, revisit restart or reinvest and kind of the strategies that are working in or not. So, but it really my interest because I've never really thought about that question. Can you say little bit more about what life? What in your professional experience is when you're looking at different cities. What does that look like is it sizes the sophistication financial management, like how would you describe a life cycle of for a city as pertains to sort of like. Financial wellness. MADAM Chair, Councilmember.
So there are a few ways that you can. You can look at this issue. One is fairly straightforward. When you look at the physical structure and life of the city. So if you have a community, let's say like Saint Paul, that is generally considered to be fully developed versus a community that's on the bleeding edge of the metro. That is and the really the posture of turning farm fields in the subdivisions and perhaps even getting a little more dense as they have more people move out. So think about it in that way. And from a financial perspective that can have. Real impacts on what your fund balance is. Look like. We're capital plan. Looks like the amount of debt you need to issue and in what amounts can also change because in the case of a community that is expanding. You MAY be issuing a lot of water and sewer debt because
you are extending utilities. You are building new roads, etc. And so when you look at the life cycle of the city, you can certainly look at. Given the stage of development that they're in. Do some of these financial decisions kind of make sense. And so that's one way that you can think about it another way. Once you get into a certain process is where you add in the life cycle of certain assets. So often we see that communities will have to take big swings when they need to make another investment in a city hall, a fire station, a police station. What have you and working with the community now that hasn't invested money in their city hall that invest its a motion be unfair. But you know, they they need to make it kind of a generational
investment in it and they're going to issue probably close to 100 million dollars in order to build out, expand renovate this city Hall and police station. And so when you look at it, that's another kind of idea about where you're at in the life cycle. Your facilities have degraded, pass a certain useful life and now you have to make an investment. And when you talk about life cycles, those are things I like to caution about because you MAY have a community that just made the decision to that. They're doing it. And then you can look and say, well, look, our tax rate so much lower than theirs. But then a few years from now, going to make that big investment and you're going to be back to where you were before. And so those comparisons can be very difficult. The last thing you can look from a financial perspective is the health of
certain funds and how those funds are functioning. I mentioned earlier, often with capital project funds, you will go through a period of saving and spending. And so when I look at financial statements for community and I see that they don't have a lot of capital outlay and they're building reserves. That tells me they're about to spend a lot of money. You know, they they've made a purposeful decision to save some cash. Now they're gonna spend some cash, maybe even issue some debt along with it in order to do something. And so when you look at the development, when you look at the the developers, the community, when you look at the the state of their facilities and equipment and their needs. And then you look at their financial posture. From my perspective as municipal advisor. Those are the 3 things that I tend to look at. Think about where you're at in your in your life cycle because sometimes, for
example, when we look at like a financial management plan looking out 10 years, I will say cities. You know, we're looking at your capital plan. I don't see anything to like. You kow, I don't know replace roofs at the fire station or potentially build a new annex on the police station. Like, where are those projects? And then you start to figure out like, oh, yeah, we are approaching that next stage in our life cycle where we have to start making meaningful investments and some facilities that might now be 30, 40, 50 years old station. Council PRESIDENT, thanks, MADAM Chair. I just want say really appreciate the vice PRESIDENT's question because think about that. A lot of specialist treatment, then Seth and want to tell. You know, tell folks it's necessarily that. Saint Paul Public works. Engineers just don't know how to build streets like they do in the suburbs, but we literally have
streets that ae a century older and surrounding communities those communities get to be 150 years old. They, too, will have these kinds of expenses and this kind of street aggravation you know, almost regardless of how much they invest along the way, they're just gets to a point where these need to be replaced and at that point, you know, everyone because becomes in that same financial it doesn't mean we don't need to be constantly tracking and investing in doing deferred maintenance. But it does that just general life does seem to be a critical factor. So I appreciate the conversation about it. Just to, you know, quick time check of about 15 minutes gift. Been a great conversation. So I will keep what's good in One thing I would stress we're talking about budgeting is that it
really means a number of different requirements. You know, it is something that's defined by state statute in your city charter something you have to do. That's also process to incorporate needs. And once it's opportunity to set goals, it's a timeline. Usually 12 months. I do know that there's been some conversations potentially about a biennial budget. Other thing to keep in mind is that statue at this point does not allow for a biannual budget. So you would still have to go through the process every year to set the budget. You still have to make active choices about the property tax levy and adopting the budget. A lot of cities that Dube annual budget. Still they will adopt kindest a posture where maybe they do the operating budget one year and into the capital budget
the other year, understanding sometimes they MAY have to make little tweaks to the operating budget or capital budget in the off years. But generally, once they get into that cadence, they understand that like, oh, this year's the Capitol, you're going to focus more on capital. Yeah, we MAY hire new people or we MAY have like a union settle. So we got a fillet, the operating budget. But we don't necessarily ruffo cussing on that this year. So you can definitely do it. It certainly an option. You have a little more say in how it happened since your charter city. See explore ways with the city attorney that potentially you could move more towards of annual budget. But right now the certification process for state laws that you have to certify something every single year so you don't get adopt a budget and say this is the
next 2 years and we're done. Up to come back every year and make those formal choices. It's only streamlined everyone's comfortable with this with the two-year process. Keep in mind and also it's a value statement. And unsurprisingly, good budget document gonna we've all of these different things together. So you can meet all of these varying demands on the financial resources. Budget hire key. One spent too much time innocence for running a little short on time. But really for the council and can see on the slide as elected officials, you really focusing on vision strategic plan program plans and financial plans as you have drill deeper down. That becomes more. The area that staff kind of helps you in the process and, you know, make sure that service delivery and the decisions that you've made previously in the process are honored later in the process.
And so you might have situations where you do have something like and economic development plan or a pavement management plan and that eventually gets put into your capital plan for the next 5, 6, years. And then when the annual budget comes up or if you move annual budget, one that comes up, then you're putting those capital plans into the annual budget. I once worked at the mayor, one-time heir one time mask a city engineer. Like why are we doing this? Like why? How did this project? Why wind up in the in the annual budget and he said while MISTER Mayor, if you recall the council adopted this pavement management plan last year. And so we're following the pavement management plan and America sat there for a second. Your
scent. So it was me. I'm the one that put the project in the annual budget and it was great because the answer was yes. You tld us what you wanted to do. And now as we move down, he's kind of concentric circles. Staff is making decisions based on the strategic priorities and goals that have been established by the elected officials. And it's not to say you can't change your mind later in the process. But like we've talked about before that give staff the opportunity to really drill in and understand and help you. I think more importantly, as elected officials understand some of these decisions eventually impact you financially. And if the process is done well, help you understand opportunity costs and tradeoffs in the process with the limited financial resources. I will skip over the since we have a little we don't have as much time. But this is just generally the process of say that usually are developing
and refining a financial management plan and some of your goal setting earlier in the year. And then as you get later in the year, you're adopting a budget. The city does have some some. Hard and fast date establish an ordinance. I will say that is a little unusual from my perspective. It ehlers we often don't see budget deadlines in ordinances. And that's usually because the budgets little dynamic and there's some flexibility that can happen in the process of something you could possibly think about as you're going through this process. It's certainly give instruction and guidance that you want these things and certain times. But it can be a little challenging. Sometimes you're trying to hit like an exact date, especially in when it comes to capital projects. And then as you know, you have to do a And taxation hearing. So
pick and purchasing. Something to keep in mind. Here. Really, it we've talked about before it really allows. The organization to ensure accountability and transparency with money actually leave the city coffers. That you're promoting and a fair and open competition. In fact, you have a statutory obligation to do so depending on the value of the contract will talk about how that looks in a second. And perhaps most importantly, it protects you from legal liability if you adhere to the state process. And in fact, in some cities, charter cities and also planned the statutory cities which the city manager form, there's actually a language that says if a staff person makes in la without proper approval, it becomes a personal liability of that staff member. So again, if you're following these
processes your year, you are merely rating yourself. You're making sure that you are not but legally responsible for any of the process. There are 2 areas that really the city have to think about called the uniform Municipal contracting lawn. That's really difficult to capital projects that doesn't necessarily apply to professional services, although most organizations will same or similar standard. We'll talk about what that looks like. But then also chapter 82 in the city ordinance which describes your purchasing procedures and your public contracts. So as I mentioned, the policy should define as responsibilities and establishes appropriate levels who approves at what level and for how much in a dress, any procurement method. So things like so source contracts when you'll do competitive bidding and for how much and how and then any exceptions to the
process that the council would be so inclined entertain. It's really for the acquisition of goods and services, not for professional services. So you don't necessarily have to take the lowest bidder for, let's say, legal services or a consultant or someone of that nature, you can make a determination about what's the best value for the organization in terms of what those consultants offer. And the one area I would encourage councils to think about our big protests procedures. We don't often see these and policies. But we do see occasions where contractors will protest the decision of the city. And you'll have to ask yourself, what do they go through with the process to they undertake to do that? And it usually will include an appeal and some discussion. And what have you. It's rare, admittedly, but when it does happen, it's nice to have those in place. Is just some examples the city uses currently different purchasing levels. Really $50,000 is the
threshold for the city. But I would just point out that state law actually says that you can go up 275,000 kind of to the comment earlier about the value of bonds for the the street projects purchasing thresholds of also increased over time. In fact, the state used to have threshold of $100,000 and was are 25 an ounce 175? So the state regularly changes that understanding the inflationary pressure that exists on capital projects. But you can definitely see that for lower ones. You could just do quotes are even pushing the open market. And then as you get to the more expensive projects you actually graduate who then doing sealed bids and having the council approved the process. So this is something that you could certainly entertain changing if you're so inclined, it wouldn't. It wouldn't require that much of a change. And you can, even as I mentioned before, just make reference to state law. If you
are comfortable with that approach. Procurement cards. This is a fun one. They tend to be really more for minute. This is more of an administrative policy, but it's an off. It's a it's expanding way that we see procurement happening in something I just like to make elected officials aware of. They're really you can think of them as kind of credit cards for the city. They are for individual cardholders so they can go out and essentially swipe the card, make a claim and acquire things that they need really and daily operations or even for larger projects. So we have situations where let's say your accounts, payable person needs to process a certain claim, let's say, to acquire a piece of equipment and we do have situations where the vendors purchasing cards and they will use them. Let's 8 by 15, $20,000 worth
of stuff. The reason they do that is that purchasing cards have rebates attached to them much like you would see with a personal credit card so cities can actually get thousands and thousands and thousands of dollars back if they push more activity to the purchasing card programs. But we often caution folks and say you do not want to issue purchase cards just for the purpose of maximizing rebate because there's a control issue and you have to make sure that you do have policies and procedures not was a shunt levels in place to make sure that the right folks are proving needs and that the documentation is appropriate. And so this is just an example. It's unnecessary to say what the city does, but you would see it, for example, when you have like a department director, perhaps they could purchase up to
$2000, no more than $10,000 in a month. And then the expectation would be that the deputy mayor mayor would be the one that would counter signed those purchase card approvals because everything needs to be verified by someone who's not making the purchase. The other thing to keep in mind, as you always want to have a counter party for any purchase. So let's say if the deputy mayor does have a person cars, the mayor has a purchasing card. You would still want to make sure that the deputy mayor counter signs, the mayor or the finance director counter signs. A deputy mayor. It's not necessarily about being, you know, someone superior or not. It's just about appropriate checks and balances and internal controls. So travel in training. This is the other areas ios a really, really, really likes to talk about. And provides clear guidelines for really reimbursement processes o perhaps the area
where people get tripped up the most. And it's really designed promote accountability in the process. And it really does, if I, as I mentioned to employees and officers but also elected officials, you have to have an adopt a policy that says how it is that you undertake your own travel and training and it should cover in state and out of state travel. In fact, we even have organizations that will have in their travel policies that they prohibit international travel. They will only send people or the leaving only send people to the continental. 48 states. So you can't you can't put a conference in Hawaii. Try you might. Really want to make sure that you're covering passes. That's cost-effective. You're covering any appropriate arrangements in area where we see a lot of
older policies kind of fall down is Airbnb and vrbo is not contemplated. Some organizations will say that's just fne. It's another way of accommodations. Other organizations are taking the posture that a safety concern. People are just staying by themselves individually in some neighborhoods totally up to the to the council in the administration about what makes the most sense. Do things are going on this prohibited expenditures. This is usually things like you can upgrade to first class. You can't buy alcohol. You need to travel on days that are appropriate. So a common area where we'll talk about is someone is let's say going want pick on dc and they want to stay for a couple days because they want to some sightseeing. That's totally fine. But the policy would say only reimburse you for the lower cost of the ticket.
You've extended your trip. And if that ticket is more expensive, we're not going to pick up the difference because you decided to sightseeing. That's not city business. So you have to reimburse us for that. And again, we do see it very common that there's higher level approvals. If people want to do out of state travel. Often because there's more scrutiny with out of state travel. The question that comes up, can you not get that travel closer? That train closer to home. Is there a webinar or some type of electronic format? You can get it. So it was close with a few helpful guides and resources. Federal regulations, of course, in some areas reign Supreme State statutes are always important municipalities are a creature of the state. So you have to make sure that you are being sensitive to what is the state is up to and what they are
thinking. And often you, I'm sure you will have your. You're a legislative affairs folks and lobbyist helping out in that regard to make sure you're not backed into a corner and certain areas. Offices the state auditor and the attorney general have a number of statement positions or attorney general opinions. One of my favorite tracks of an attorney general opinion is one-time heir to the city attorney. And they simply don't they say about attorney general opinion. It's just the opinion of one attorney. And so they certainly provide a lot of guidance. But we do run into occasions where sometimes city attorneys pne a little differently than the attorney general, but generally try to follow what the attorney general is provide in terms of guidance course. The city attorney and any consultants, including your friendly neighborhood, Municipal
Advisors can lend a hand. Of course, the government Finance Officers Association, Minnesota Cities, association, Minnesota counties, you MAY ask the citywide the county on here, but they have great policies as well for other administrative activities. And you things that overlap with county. So those can often be resources for cities and vice versa in terms of trying to figure out like what are other organizations up, too, because some of the questions about financial management are ubiquitous to all local governments. Not necessarily just cities, counties, school district, special taxing jurisdictions and of course, your peers and similar organizations. I am never above scrub in someone's name off and slapping your name on it. I mean, often times people have a lot of
great ideas and there's no reason that you can take a look at it, make some tweaks, figure out that it works for you. And then kind of modified accordingly. I was trying to give a little attribution usually in a footnote. Most recently I did it once with the with the city of Richfield tours of the footnote that says thank you for the city of chilled for providing a little assistance in this process. And I do want to make sure we leave a few minutes for quietly last comments or questions till we have 3 minutes. Okay. Climb on the last line. So it works out well. So just always remember rules or your friend. People always talk about red tape, but I think of them as guardrails or as a side suggest your parachute. They make sure that you land softly and so thinking about them thoughtfully can ultimately save everyone. A lot of headache and consternation.
Plan like a pro. You know, it's an old saying, but feeling the plan is such a plan explain yurself later. So we take a little time to think in advance you do have the opportunity to save yourself. Some headaches. Write it down. This is a presentation about policies. So bsically, if it doesn't, it's not written down. It doesn't exist. If you're under examination by a 3rd party, the irs, your auditors, they will ask you for. Written information. And if you can furnish it, that will go a long way. It will. It will feel like manna from heaven when there are when they are actually asking the questions. And then just like to say, like, don't be that person. Part of these policies are just making sure that. How that staff elected officials. Policies hlp you have a have a radar and that something is
paying your radar and that you're not taking shortcuts. You're avoiding conflicts and ultimately know no awkward headlines. And so really if you're following the policies are being thoughtful about it. You avoid a lot of these issues and that can also be very helpful for organizations. Cause. Of course, everyone is is very busy and nobody wants to deal with some pop-up controversy that could have been avoided if someone just what if all the policy downhill training or even if you would have adopting something and thought a little more about what it is you want to do in this area. At the end. And that went along. For an hour. But I appreciate the wonderful discussion and the great questions. You're incredible. Thank you so much. I can sing of how timely all the information that you shared was. And I'd like to kick off with the last comments and questions from
everybody by sharing that as I reflect on the questions and even the suggestions that came from the table here I was. But it makes so many connections Iran, things that you share that are super belive into work that has happened with thank House members right now around traffic ordinance is making sure that we are being really thoughtful about policy making. And then even just thinking ahead about how things that you shared really relevant to our upcoming budget season 2 and lastly, I will share that. I as chair I'm invested in making sure that we do have an organized structure for how we can get the council information that we need, especially for the budget and psyche. If you council PRESIDENT Career bound, wanted to put together a Templet on the budget. So that presentations and come
before us are actually reflect what we want. And it's also helpful for all the staff and directors who are going to come before us to that, that so that they can pet for those things ahead of time. That's something that I will be taking in too. Anybody else have anything to share. Questions. All right. So with that, thank you again, Dan. And this meeting is adjourned. The MADAM Chair members fish. It was a joy to be with morning.