NUMBER 22-10
TITLE
MEETING
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LINDSAY
ADOPTING A FISCAL SUSTAINABILITY AND FINANCIAL
ADMINISTRATION IMPROVEMENT PLAN IN ACCORDANCE WITH
CITY OF LINDSAY CORRECTIVE ACTION PLAN.
At a regularly scheduled meeting of the City of Lindsay City Council held on February 22, 2022 at 6:00 PM at 251 E. Honolulu Street, Lindsay, CA 93247 WHEREAS, on August 26, 2021, the State Auditor issued Report 2020-804 regarding the City of Lindsay which was conducted as part of the high-risk local government agency audit program; and WHEREAS, on November 9, 2021, the Lindsay City Council approved the City of Lindsay Corrective Action Plan by Resolution 21-48 outlining the City’s corrective actions in response to State Auditor’s recommendations; and
WHEREAS, the State Auditor recommends Lindsay adopt a policy for long range financial planning by February 2022 that, at a minimum, identifies the forecast period for the plan, the funds it will include, efforts the city will make to increase revenues and decrease expenditures, and the frequency with which the finance director and the city manager will review the plan and propose any updates to the Lindsay City Council; and
WHEREAS, on November 9, 2021, the Lindsay City Council approved the City of Lindsay Corrective Action Plan by Resolution 21-48 outlining the City’s corrective actions in response to State Auditor’s recommendations; and
WHEREAS, City staff has prepared a Fiscal Sustainability and Financial Administration Improvement Plan and budget forecast for Fiscal Year(s) 2022-2026 as a part of the City’s overall strategic planning efforts.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LINDSAY DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council adopts the Fiscal Sustainability and Financial Administration Improvement Plan.
SECTION 2. The resolution shall be effective immediately upon its approval and adoption.
A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF LINDSAY
RESOLUTION NO. 22-10
SECTION 3. The Mayor, or presiding officer, is hereby authorized to affix their signature to the Resolution signifying its adoption by the City Council to the City of Lindsay, and the City Clerk, or their appointed deputy, is directed to attest thereto.
PASSED AND ADOPTED by the City Council of the City of Lindsay as follows:
MEETING DATE February 22, 2022
MOTION
SECOND MOTION
AYES
ABSENT
ABSTAIN
NAYS
CERTIFICATION OF THE FOREGOING RESOLUTION AS FULL, TRUE, PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF LINDSAY AS DETAILED.
MAYRA ESPINOZA-MARTINEZ RAMONA CAUDILLO
CITY CLERK MAYOR
STAFF REPORT
TO: Lindsay City Council
FROM: Juana Espinoza, Director of Finance
DEPARTMENT: Finance Department
ITEM NO.: 10.4
MEETING DATE: February 22, 2022
ACTION & RECOMMENDATION
Consider the Approval of Resolution 22-09, A Resolution Establishing Advances To and From Various Funds and Defining Repayment Schedules and Terms in Accordance with City of Lindsay Corrective Action Plan.
BACKGROUND | ANALYSIS
On August 26, 2021, the State Auditor issued Report 2020-804 regarding the City of Lindsay which was conducted as part of the high-risk local government agency audit program. The report recommends that by February 2022, the City should address the $6.3 million transferred to its general fund, re-establish the loans to its restricted funds, and develop and implement a plan to fully repay those funds.
In response to the State Audit Report and in accordance with the City of Lindsay Corrective Action Plan, City staff have prepared a Formal Repayment Plan for consideration of the Lindsay City Council. This plan will record the advances to and from previously vacated at their originally vacated amounts. While the total amount remains unchanged, the amortization terms and schedules have been modified to allow the City to begin making annual payments based on priority beginning in Fiscal Year 2022-2023.
Formal action by resolution of the Lindsay City Council must be taken to authorize an advance between funds. The purpose of Resolution 22-09 is to formalize the advances and repayment schedules for funds borrowed prior to 2017. Action to formalize the advances will be reflected in the City’s FY 2020-2021 financial statements.
FISCAL IMPACT
The General Fund will begin making payments of $70,000 beginning in FY 2022-2023.
The full impact to the general fund is $6,332,305. Repayment costs will reduce the spending capacity of the General Fund which will necessitate organizational and operational adjustments over the course of the full amortization for the repayment of eight individual advances from restricted and committed sources.
STAFF REPORT
ATTACHMENTS
• City of Lindsay Formal Repayment Plan FY 2022-23
• City of Lindsay Proposition 218 Amortization Schedules • Resolution 22-09
DRAFT
City of Lindsay Formal Repayment Plan
FY 2022-2023
Approved on February 22, 2022 by Resolution 22-09
DRAFT
Introduction
The City of Lindsay recognizes the need to repay the advances vacated in 2019, a decision made while the City was operating in a state of functional bankruptcy. To meet competing obligations under GFOA standards for operating reserves and the repayment of restricted and committed funds, the City will have to amortize the full repayment over several years. It is the intention of the City of Lindsay to develop an amortization schedule that will maintain a structurally balanced budget and thereby secure full repayment of borrowed funds.
It is essential that the City maintain adequate reserves to mitigate current and future risks from future revenue shortfalls and unanticipated expenditures. There are currently limited cash reserves in the general fund.
Annual payments for advances from restricted and committed funds to the general fund shall not be made against general fund reserve balances or in any manner inconsistent with the reserve policy established by resolution of City Council which shall be a percent no less than two months of unrestricted fund balance as a percent of total expenditures consistent with the GFOA expenditure coverage recommendation.
This amortization schedule is integrated with our long-term financial planning document and five-year budget forecast.
Additional Considerations
• The predictability of general fund revenues and the volatility of its expenditures (i.e., higher levels of unrestricted fund balance may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile); • Its perceived exposure to significant one-time outlays (e.g., disasters, immediate capital needs, state budget cuts);
• The potential drain upon general fund resources from other funds, as well as the availability of resources in other funds;
• The potential impact on the entity’s bond ratings and the corresponding increased cost of borrowed funds;
• Commitments and assignments (i.e., the need to maintain higher levels of unrestricted fund balance to compensate for any portion of unrestricted fund balance already committed or assigned by the government for a specific purpose).
Loan Terms
Section 1. Loan conditions established
This loan agreement shall establish payment terms and amounts to be repaid by fund.
DRAFT
Section 2. Priority Established
The City establishes the following priority for repayment.
Priority Borrower Lender Amount
1 General Fund Water Fund $1,906,797
2 General Fund Sewer Fund $2,108,163
3 General Fund Street Improvement Fund $1,557,120
4 General Fund Refuse Fund $401,922
5 General Fund Wastewater Capital Reserve Fund $70,000
6 General Fund Storm Drain Fund $163,303
7 General Fund Parks Fund $90,000
8 General Fund Curb & Gutter Fund $35,000
Section 3. Triggering Event(s)
Excess cash flow. The City shall present to City Council and the public its audited financial statements for review in consideration of this matter beginning with the Fiscal Year ending June 30, 2021. General Fund cash flow determined to be $70,000 in excess of required reserves shall be considered a triggering event. Notice of event and authorization to begin repayment shall occur within 90 days after the delivery of the audited financial statements.
The Audited Financial Statements shall be prepared in accordance with GAAP and fairly present in all material respects the financial condition of the City and the results of operations for the period covered and show all material indebtedness and other liabilities, direct or contingent, of the City.
Section 4. Application of Payments
Upon the occurrence of any event triggering a payment requirement, the Finance Director and City Manager shall promptly deliver a Notice of Payment requirement to the City Council, and such notice shall be publicly presented for review during the next available regular City Council meeting. Upon receipt of such notice, the City Council shall:
• Review the circumstances presented as a triggering event. • Agree that such event has occurred.
• Establish a payment due date for the first payment due. • Authorize the Finance Director to transfer funds in accordance with the attached loan agreement schedule.
DRAFT
Any refinancing, extension, adjustment, amendment, or prepayment of the schedule set for in this loan agreement must be authorized by City Council.
Section 5. Prepayments
Prepayments are allowed under recommendation of the Finance Director and approval of recommendation for prepayment by City Council.
Section 6. Extension of Maturity Date
The City may, upon written request, notice to the City Council, request one or more extension of the maturity date. Each extension request shall specify the date on which the City proposes that the extension shall be effective, which shall be a date reasonably satisfactory to the public. Within the time period specified in such extension request, the City Council shall notify the City whether it consents to such extension.
The first payment shall be no later than ninety (90) days following the occurrence of any triggering event.
Section 7. Payments Generally
If any payment to be made by the General Fund shall come due on a day other than a business day, payment shall be made on the next following business day.
DRAFT
EXHIBIT A
NOTICE OF TRIGGER EVENT
Dated as of: _____________
City Manager
Esteemed Mayor and Members of Council,
This irrevocable Notice of triggering event is delivered to you pursuant to Section 3 of the Loan Agreement dated as of February 22, 2022 (the “Loan Agreement”), between the General Fund, as Borrower (the “Borrower), and the Water, Sewer, Wastewater, Storm Drain, Curb and Gutter and Refuse Enterprise Funds, as Enterprise Funds (the “Enterprise Funds”), and Street Improvement Fund and Parks Fund, as Committed Funds (the “Committed Funds”).
1. The Borrower hereby provides notice to the Enterprise and Committed Funds that it shall begin repayment of the following funds in order of priority.
2. The General Fund shall submit the first payment on the first month of the fiscal year immediately following this notice.
The General Fund hereby instructs the Enterprise and Committed Funds to apply the amounts delivered in connection with this notice of payment against the outstanding principal installments of applicable loans and with regard to applicable maturity dates.
IN WITNESS WHEREOF, the undersigned has executed this Notice of Prepayment as of the day and year first written above.
City of Lindsay
By:
Name:
Title: City Manager
Priority Borrowed from Fund Description Borrowed by Fund Description Amount Recommended Action Notes: Recommended annual amortization: Not to exceed $70K, annually. 1 552 Water 101 General Fund 1,906,797.00 Reinstate in full 2 553 Sewer 101 General Fund 2,108,163.00 Reinstate in full 3 200 Street Improvement Fund 101 General Fund 1,557,120.00 Reinstate in full 4 554 Refuse 101 General Fund 401,922.00 Reinstate in full 5 576 Wastewater Capital Reserve 101 General Fund 70,000.00 Reinstate in full 6 856 Storm Drain 101 General Fund 163,303.00 Reinstate in full From development fees - no prop 218 violation; auditor included as a restricted use. 7 471 Parks 101 General Fund 90,000.00 Reinstate in full From development fees - no prop 218 violation; auditor included as a restricted use. 8 841 Curb & Gutter 101 General Fund 35,000.00 Reinstate in full Previously funded from SIP. 101 General Fund 400 Wellness Center 800,505.00 None
101 General Fund 300 McDermont Field House 740,635.00 None 7,873,445.00 6,332,305.00 Recommend to reinstate
6,332,000.00 Auditors Recommendation
Total reso 19-02 Reso 22-XX
Recommendation
Row Labels Sum of Principal Payment
SEWER 2,108,163.00
WATER 1,906,797.00
SIP 1,557,120.00
REFUSE 401,922.00
STORM DRAIN 163,303.00
PARKS 90,000.00
WW CAP RESERVE 70,000.00
CURB & GUTTER 35,000.00
Grand Total 6,332,305.00
0.00 500,000.00
1,000,000.00
1,500,000.00
2,000,000.00
2,500,000.00
SEWER WATER SIP REFUSE STORM
DRAIN
PARKS WW CAP
RESERVE
CURB &
GUTTER
Total Principal Payments by Loan Type
Total
LOAN TYPE
Sum of Principal Payment
-
200,000.00
400,000.00
600,000.00
800,000.00
1,000,000.00
1,200,000.00
1,400,000.00
1,600,000.00
1,800,000.00
2,000,000.00
Water
GRAPHS
$0.00
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
$1,600,000.00
1/1/20821/1/20831/1/20841/1/20851/1/20861/1/20871/1/20881/1/20891/1/20901/1/20911/1/20921/1/20931/1/20941/1/20951/1/20961/1/20971/1/20981/1/20991/1/21001/1/21011/1/21021/1/21031/1/2104 Street Improvement
$0.00
$50,000.00
$100,000.00
$150,000.00
$200,000.00
$250,000.00
$300,000.00
$350,000.00
$400,000.00
1/1/2082 1/1/2083 1/1/2084 1/1/2085 1/1/2086
Refuse
GRAPHS
$0.00
$500,000.00
$1,000,000.00
$1,500,000.00
$2,000,000.00
$2,500,000.00
1/1/20231/1/20281/1/20331/1/20381/1/20431/1/20481/1/20531/1/20581/1/20631/1/20681/1/20731/1/20781/1/20831/1/20881/1/20931/1/20981/1/21031/1/21081/1/2113 Balances to Payments Schedule
Principal Payment Balance
$0.00
$500,000.00
$1,000,000.00
$1,500,000.00
$2,000,000.00
$2,500,000.00
Sewer
GRAPHS
Years calculated @ max cap 27.24 water
Credit for operating deficit:
Interest Rate 0% 143,000 in fy 2018-2019
Term (Years) 28 149,000 in fiscal year 2019-2020
Payments / Year 1 xxx,xxx in fiscal year 2021-2022
ORIGINAL AMOUNT: 1,906,797
cumulative credit recalculated annually
Water Water option 1: take credit at end of loan term
Principal Payment Balance option 2: take credit at beginning of loan term 3/30/2023 $68,099.89 1,838,697.11
3/30/2024 $68,099.89 1,770,597.21
3/31/2024 $68,099.89 1,702,497.32
4/1/2024 $68,099.89 1,634,397.43
4/2/2024 $68,099.89 1,566,297.54
4/3/2024 $68,099.89 1,498,197.64
4/4/2024 $68,099.89 1,430,097.75
4/5/2024 $68,099.89 1,361,997.86
4/6/2024 $68,099.89 1,293,897.96
4/7/2024 $68,099.89 1,225,798.07
4/8/2024 $68,099.89 1,157,698.18
4/9/2024 $68,099.89 1,089,598.29
4/10/2024 $68,099.89 1,021,498.39
4/11/2024 $68,099.89 953,398.50
4/12/2024 $68,099.89 885,298.61
4/13/2024 $68,099.89 817,198.71
4/14/2024 $68,099.89 749,098.82
4/15/2024 $68,099.89 680,998.93
4/16/2024 $68,099.89 612,899.04
4/17/2024 $68,099.89 544,799.14
4/18/2024 $68,099.89 476,699.25
4/19/2024 $68,099.89 408,599.36
4/20/2024 $68,099.89 340,499.46
4/21/2024 $68,099.89 272,399.57
4/22/2024 $68,099.89 204,299.68
4/23/2024 $68,099.89 136,199.79
4/24/2024 $68,099.89 68,099.89
4/25/2024 $68,099.89 (0.00)
4/25/2025
1 Water
Years calculated @ max cap 30.12
Interest Rate 0%
Term (Years) 31
Payments / Year 1
ORIGINAL AMOUNT: 2,108,163
Sewer Sewer
Principal Payment Balance
4/25/2025 $68,005.26 2,040,157.74
4/25/2026 $68,005.26 1,972,152.48
4/25/2027 $68,005.26 1,904,147.23
4/25/2028 $68,005.26 1,836,141.97
4/25/2029 $68,005.26 1,768,136.71
4/25/2030 $68,005.26 1,700,131.45
4/25/2031 $68,005.26 1,632,126.19
4/25/2032 $68,005.26 1,564,120.94
4/25/2033 $68,005.26 1,496,115.68
4/25/2034 $68,005.26 1,428,110.42
4/25/2035 $68,005.26 1,360,105.16
4/25/2036 $68,005.26 1,292,099.90
4/25/2037 $68,005.26 1,224,094.65
4/25/2038 $68,005.26 1,156,089.39
4/25/2039 $68,005.26 1,088,084.13
4/25/2040 $68,005.26 1,020,078.87
4/25/2041 $68,005.26 952,073.61
4/25/2042 $68,005.26 884,068.35
4/25/2043 $68,005.26 816,063.10
4/25/2044 $68,005.26 748,057.84
4/25/2045 $68,005.26 680,052.58
4/25/2046 $68,005.26 612,047.32
4/25/2047 $68,005.26 544,042.06
4/25/2048 $68,005.26 476,036.81
4/25/2049 $68,005.26 408,031.55
4/25/2050 $68,005.26 340,026.29
4/25/2051 $68,005.26 272,021.03
4/25/2052 $68,005.26 204,015.77
4/25/2053 $68,005.26 136,010.52
4/25/2054 $68,005.26 68,005.26
4/25/2055 $68,005.26 0.00
4/25/2056
2 Sewer
Years calculated @ max cap 22.24
Interest Rate 0%
Term (Years) 23
Payments / Year 1
ORIGINAL AMOUNT: 1,557,120
SIP SIP
Principal Payment Balance
4/25/2056 $67,700.87 1,489,419.13
4/25/2057 $67,700.87 1,421,718.26
4/25/2058 $67,700.87 1,354,017.39
4/25/2059 $67,700.87 1,286,316.52
4/25/2060 $67,700.87 1,218,615.65
4/25/2061 $67,700.87 1,150,914.78
4/25/2062 $67,700.87 1,083,213.91
4/25/2063 $67,700.87 1,015,513.04
4/25/2064 $67,700.87 947,812.17
4/25/2065 $67,700.87 880,111.30
4/25/2066 $67,700.87 812,410.43
4/25/2067 $67,700.87 744,709.57
4/25/2068 $67,700.87 677,008.70
4/25/2069 $67,700.87 609,307.83
4/25/2070 $67,700.87 541,606.96
4/25/2071 $67,700.87 473,906.09
4/25/2072 $67,700.87 406,205.22
4/25/2073 $67,700.87 338,504.35
4/25/2074 $67,700.87 270,803.48
4/25/2075 $67,700.87 203,102.61
4/25/2076 $67,700.87 135,401.74
4/25/2077 $67,700.87 67,700.87
4/25/2078 $67,700.87 0.00
4/25/2079
3 SIP
Years calculated @ max cap 5.74
Interest Rate 0%
Term (Years) 6
Payments / Year 1
ORIGINAL AMOUNT: 401,922
Refuse Refuse
Principal Payment Balance
4/25/2080 $66,987.00 334,935.00
4/25/2081 $66,987.00 267,948.00
4/25/2082 $66,987.00 200,961.00
4/25/2083 $66,987.00 133,974.00
4/25/2084 $66,987.00 66,987.00
4/25/2085 $66,987.00 -
4/25/2086
4 Refuse
Years calculated @ max cap 1.00
Interest Rate 0%
Term (Years) 1
Payments / Year 1
ORIGINAL AMOUNT: 70,000
WW Cap Reserve WW Cap Reserve
Principal Payment Balance
4/25/2086 $70,000.00 -
4/25/2087
5 WW Cap Reserve
Years calculated @ max cap 2.33
Interest Rate 0%
Term (Years) 3
Payments / Year 1
ORIGINAL AMOUNT: 163,303
Storm Drain Storm Drain
Principal Payment Balance
4/25/2089 $54,434.33 108,868.67
$54,434.33 54,434.33
$54,434.33 -
6 Storm Drain
Years calculated @ max cap 1.29
Interest Rate 0%
Term (Years) 2
Payments / Year 1
ORIGINAL AMOUNT: 90,000
Parks Parks
Principal Payment Balance
4/25/2087 $45,000.00 45,000.00
4/25/2088 $45,000.00 -
7 Parks
Years calculated @ max cap 0.50
Interest Rate 0%
Term (Years) 1
Payments / Year 1
ORIGINAL AMOUNT: 35,000
Curb& Gutter Curb& Gutter
Principal Payment Balance
4/25/2079 $35,000.00 -
4/25/2080
8 Curb & Gutter
A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF LINDSAY
RESOLUTION NO. 22-09
NUMBER 22-09
TITLE
MEETING
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LINDSAY
ESTABLISHING ADVANCES TO AND FROM VARIOUS FUNDS AND
DEFINING REPAYMENT SCHEDULES AND TERMS IN
ACCORDANCE WITH CITY OF LINDSAY CORRECTIVE ACTION
PLAN.
At a regularly scheduled meeting of the City of Lindsay City Council held on February 22, 2022 at 6:00 PM at 251 E. Honolulu Street, Lindsay, CA 93247 WHEREAS, in 2019, the City of Lindsay adopted Resolution 19-02 a resolution authorizing staff to take corrective action to revise, make, or vacate advances, transfers, and prior period adjustments; and
WHEREAS, on November 9, 2021, the Lindsay City Council approved the City of Lindsay Corrective Action Plan by Resolution 21-48 outlining the City’s corrective actions in response to State Auditor’s recommendations; and
WHEREAS, on August 26, 2021, the State Auditor issued Report 2020-804 regarding the City of Lindsay which was conducted as part of the high-risk local government agency audit program, recommending that the City of Lindsay develop a plan to fully repay funds borrowed from restricted and committed sources; and
WHEREAS, the State Auditor recommends Lindsay address the $6.3 million transferred to its general fund, re-establish the loans to its restricted funds, and develop and implement a plan to fully repay those funds by February 2022; and
WHEREAS, the City wishes to formalize the repayment of the borrowing made prior to 2017 in a “Formal Repayment Plan” as advances under Generally Accepted Accounting Principles.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LINDSAY DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council of the City of Lindsay does hereby formalize the cash advances and repayment schedules for the funds presented in Attachment A for the total borrowed amounts as of June 30, 2017.
SECTION 2. BE IT FURTHER RESOLVED that the advances are presented in order of priority with the highest priority to be repaid first.
A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF LINDSAY
RESOLUTION NO. 22-09
SECTION 3. BE IT FURTHER RESOLVED that the City Council of the City of Lindsay shall have the option to accelerate the repayments whenever fiscally responsible.
SECTION 4. The resolution shall be effective immediately upon its approval and adoption.
SECTION 3. The Mayor, or presiding officer, is hereby authorized to affix their signature to the Resolution signifying its adoption by the City Council to the City of Lindsay, and the City Clerk, or their appointed deputy, is directed to attest thereto.
PASSED AND ADOPTED by the City Council of the City of Lindsay as follows:
MEETING DATE February 22, 2022
MOTION
SECOND MOTION
AYES
ABSENT
ABSTAIN
NAYS
CERTIFICATION OF THE FOREGOING RESOLUTION AS FULL, TRUE, PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF LINDSAY AS DETAILED.
MAYRA ESPINOZA-MARTINEZ RAMONA CAUDILLO
CITY CLERK MAYOR
A RESOLUTION OF THE CITY
COUNCIL OF THE CITY OF LINDSAY
RESOLUTION NO. 22-09
Attachment A
Priority Borrowed from Fund Description Borrowed by Fund Description Amount Recommended Action 1 552 Water 101 General Fund 1,906,797.00 Reinstate in full 2 553 Sewer 101 General Fund 2,108,163.00 Reinstate in full 3 200
Street
Improvement
Fund
101 General Fund 1,557,120.00 Reinstate in full
4 554 Refuse 101 General Fund 401,922.00 Reinstate in full 5 576 Wastewater
Capital Reserve 101 General Fund 70,000.00 Reinstate in full 6 856 Storm Drain 101 General Fund 163,303.00 Reinstate in full 7 471 Parks 101 General Fund 90,000.00 Reinstate in full 8 841 Curb & Gutter 101 General Fund 35,000.00 Reinstate in full