Rochester Hills Legistar System

* All operating revenues and expenditures are accounted for in this one (1) Fund.

* The Ordinance language reflects how the City "shall" have the Funds set-up as

follows:

* Receiving Fund

* Operating and Maintenance Fund

* Replacement Fund

* Bond Interest and Redemption Fund

* Improvement Fund

* Surplus Fund

* Modifying the Ordinance could eliminate contradiction between Ordinance Fund set-

up language and the City's actual revenue placement.

1. Receiving Fund has the same function as the current Water and Sewer Fund: Water

and Sewer revenue is separated from other revenue, therefore, the Receiving Fund is

redundant and should be eliminated.

* Receiving Fund used for receiving water and sewer charges.

* Allocation of revenue is determined and dispersed.

2. Operating and Maintenance Fund is the day-to-day Operations Fund but is called the

Water and Sewer Fund.

3. Replacement Fund is used for replacing what currently exists in the ground.

Black & Veatch report states:

* Replacement can fall under Operating and Maintenance Fund.

* Replacement Fund should be City's annual depreciation Costs.

* Replacement Fund should be Fifteen (15%) percent of Operating Costs.

* Therefore, Black & Veatch says that the Replacement Fund is not necessary because

both the annual depreciation and fifteen (15) percent of Operating fall under Operating

and Maintenance Fund and should be eliminated.

4. Bond Interest and Redemption Fund - City has not had since there are none

outstanding.

5. Improvement Fund is for future improvements or expansion of the City system.

6. Surplus Fund is where excess revenues fall into this Fund and should be eliminated.

* Ordinance reads "whatever Council deems necessary in those Funds".

* Fifteen (15%) percent Operating language comes from Black & Veatch.

Ms. Jenuwine's recommendation is to separate the Funds for the following reasons:

1. Because the Budget shows that the City will Bond, so a Bond Redemption Fund

will be needed.

2. Separating the Operating Fund and Capital Replacement Fund creates a "checks

and balance".

* Recommendation is to change set-up from the six (6) Funds to the following three (3)

Funds:

* Operation and Maintenance Fund.

* Bond Interest and Redemption Fund.

* Capital Improvement & Replacement Fund.

Ms. Hill stated the six (6) Funds present a better understanding of where the revenue is

placed.

* Water rates are subsidized with the Capital Revenue and Fund Balance.

* Operating Fund should sustain itself without Capital and Lateral charges and should

not be used as Operating Expenditures or for annual depreciation.

* Annual Depreciation Expense is $3 million

* Capital and Lateral charges are $1.5 million.

* Capital and Lateral charges accumulated to $50 million of intended savings at one

time.

* The July 1, 2005, water rate estimated an increase of 17.63% or .38 cents which will

change the current residents' rate from $2.18 to $2.56.

Mr. Lee Zendel, Citizen Representative, explained how City accumulated excess Fund

Balance as follows:

* City charged residents a Capital and Lateral fee for hook-up into the water and

sewer system.

* City accumulated Capital and Lateral charges of $50 million which was intended

to be used as a future system Replacement Fund.

* Residents complained about the City "stock piling" money.

* City complied with residents by subsidizing water rates with excess Fund Balance.

* City's dilemma is Replacement Fund has been depleted.

Ms. Hill's recommendation would be for the City to start following the Ordinance as it

pertains to Fund model.

Committee members briefly discussed Radio Read System and its affect on customer

cost noting:

* Radio Read costs will be charged to all residents.

* Currently Radio Read covers only a portion of the City.

Committee discussed Officer/Deputy representation in the Rochester Community Police

School Liaison Program as follows:

* Council at the 2005 Budget Work Sessions communicated that they would like to have

the police representation in the Rochester Community Schools Police School Liaison

Program more closely match the community composition in the student population.

* This proportionate representation could mean replacing one Rochester Officer with an

Oakland County Deputy from the Rochester Hills substation.

* Currently there are two (2) Rochester Officers in the program with Rochester students

making up approximately ten percent (10%) of the population; as a result, Rochester

Hills is subsidizing the Rochester City Police Officers to be in Rochester Hills Schools.

* It was suggested that if Rochester Hills is going to pay for an Officer, s/he should then

be a Rochester Hill's Officer (Oakland County Deputy).

* Total paid out for two (2) officers is $167,000:

* Ten (10) months for work at the schools

* Two (2) months for work for the City

* Both Officers are full-time Deputies assigned to the schools for ten (10) months.

* A concern with the current set-up is that the Rochester City Officer is not required to

respond should an emergency happen in Rochester Hills; whereas if an Oakland County

Deputy was assigned, s/he would be able to respond if deemed necessary

* It was suggested by Committee Member to reduce down to one (1) Rochester Officer

based on proportion to Rochester student enrollment.

* Rochester Hills is currently paying for two (2) Deputies and one (1) Sergeant, in

addition to subsidizing part of the City of Rochester Police costs.

* Rochester Hills pays seventy-two percent (72%) of the cost and only has one-half (1/2

) of the officers. .

* Rochester Hills rate for a Sheriff's Deputy is less than the City of Rochester's rate for

a Police Officer

Ms. Jenuwine stated that Rochester Hills reimburses City of Rochester based on the

Deputies rate not the City of Rochester's rate.

Consensus of the Committee is to reduce the City of Rochester's number of police

officers to one (1) at the time an officer vacates and for Ms. Jenuwine to convey this

information at the next Police School Liaison Meeting to be held in May.

Committee members discussed the 2004 12th Period Variance Summary Report noting

the following:

Julie Jenuwine, Finance Director, made the following points:

* 12th Period Variance Summary Report is provided as an update through December

30, 2004.

* Final numbers or auditing numbers are not included in this report, final numbers will

be available in mid-April.

* Detailed information packets are available to members who are interested in having

one.

Revenue Funds that exceeded 100% percent are as follows:

* R.A.R.A.

* Fire Apparatus

* Pedestrian Pathway Construction

* Capital Improvement

* Rochester Avon

Expenditure Funds that exceeded 100% are as follows:

* OPC Construction, did not spend more than what they had, they spent more than

Committee members discussed the taxable dollars involved in regards to the Smart

Zone.

Jack Dalton requested that Dan Casey, Planning/Development Department, provide

cost involved and lost taxable dollars as Rochester Hills develops out or commits to

Smart Zone.

Mr. Casey provided the following introduction and defined Smart Zone and an LDFA.

* Generally, a Certified Technology Park is a thirty (30) acre undeveloped site

designated as a Smart Zone.

* LDFA or Local Development Finance Authority determines capture and expenditure of

tax increment revenues, facilitates new development projects .

* City currently has an existing LDFA and a Smart Zone.

* Technically an LDFA's maximum is thirty (30) years, City's LDFA has existed for ten (

10) years.

* Smart Zone Plan proposed approval date of January 1, 2005, has not occurred and

City is currently working with the State Treasurer to draft an amendment.

* There were issues with getting City of Auburn Hills on board and the process has

been delayed.

* As a consequence for not meeting this deadline date, the City could lose its

designation as a Smart Zone and Certified Technology Park.

* Current language in the law regarding LDFA and Smart Zone was written by current

State Treasurer that says Communities should not be allowed to use school tax capture

to fund public infrastructure.

* Rochester Hills LDFA and Smart Zone Plan is the first community to fall under this

current State Treasurer's review and, therefore, will not be allowed to fund local

infrastructure projects through school tax capture.

* State Treasurer did provide a plan for Rochester Hills with the following requirements:

* Rochester Hills public infrastructure projects placed in an existing or new LDFA or

part of an LDFA and remain separate from a Smart Zone Plan.

* All Oakland University projects should only be funded in the Smart Zone Plan.

* Redefine your LDFA as a business development area so the City can capture

taxes from entire community.

* State's opinion is a Smart Zone is not an LDFA.

* City can only do TIF capture in an LDFA.

* City needs to amend the LDFA district to be the same as the Smart Zone Plan or at

least to cover the areas that are projects.

Mr. Casey presented his strategy noting the following:

* Identify if cost is more than the original plan.

* Identify new plans.

* Evaluate assessments of all properties currently in the LDFA to show inflationary

increase which will determine if properties are eligible for TIF capture for LDFA.

* There are 1,290 parcels.

* Assessment varies based on type of development.

* City will continue to capture tax from existing LDFA.

* City will capture tax from the Letica property once it is sold.

* City will capture tax from Devondale properties amount to approximately $21,000

annually.

Mr. Casey noted new development which could potentially generate revenues, includes

Grand Sawkwa, City Properties and Devondale noting the following assumptions:

* How much development will occur.

* What is the type of development:

* Mixed: Office/Flex/Light Industrial

* Office

* Flex: Office/Research and Development/Light Industrial

* Whether millage rates will remain the same.

* When construction of buildings will take place and be completed.

* Inflationary increase of the buildings.

Mr. Casey reviewed scenarios on the following developments:

* Letica Property with mixed use

* Letica Property with office use

* Austin Drive Light Industrial development with extension to Devondale

Mr. Casey in summary noted the following:

* City continues to capture from existing LDFA district.

* Amendments to the Law allow City to capture from Manufacturing, Technology and

Engineering which is why Assessing is evaluating properties to determine eligibility for

additional tax revenue.