Carefree Truth
Issue #624, February 12, 2018
Items 2 & 3 were requested to be pulled from the Consent Agenda concerning Paid Bills. Councilman Gene Orrico questioned a payment in Item #2 for $7,349 for computer monitors. Town accountant Jim Keen explained that there were a couple pages of credit card charges, mostly for minutia such as office supplies that are in the vicinity of $20, and he does not list them in the description. Several old computer monitors needed replacement, costing around $200 each, and he always lists the more costly items.
Mr. Orrico also questioned a payment to Brown & Associates for building inspection hours, and asked if they were for the new Council Chambers. Mr. Keen explained that they were not. The hours were for two commercial buildings. One was for Bacan, the restaurant that recently opened in Spanish Village, but most were for Civana's (the Carefree Resort) extensive remodel. Civana is on a fast timetable to complete their renovations. Carefree building inspector Mike Tibbetts helps but he can't do it all himself. Mayor Les Peterson added that when the workload reaches levels that are too much for one person to handle, the Town subcontracts the extra work out to Brown & Associates. Vice Mayor Crane felt it was also important to explain that those expenses are recouped in building permit fees.
Councilman Farrar had requested that Item #3 be pulled, but said he had made a mistake and meant Item #2. He had planned to question the expenses listed as computer monitors, which Mr. Orrico had already done.
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Mr. Keen presented the 6 month financial overview later in the meeting. He reported that sales tax revenue (STR) was up almost 12% over the same period from the previous year. Some of that was due to retail and some to recent construction. As homes build by Toll Brothers and Eastwood (Keystone) sell, the Town receives the STR. Over $100,000 in STR was collected in November and December, which has not happened since 2008. People are also buying construction materials at Lowe's in Carefree in order to remodel 10-15 year old homes. The Bashas' remodel has been popular and far more people are grocery shopping there, making it another good source of STR. The STR from restaurants and bars has also increased. Utilities and other sources of income have been stable for many years.
$148,000 was taken out of the bank so far this year, down from $418,000 by this time last year, but much of that was attributable to the tenant improvements being done to ready the Council Chambers. Most normal expenses are tracking level with last year. As always, the WIFA loan was paid in July, almost $200,000, so each year starts out in the hole. Mr. Keen expected the $148,000 to be recouped as the year progresses and for money to be put into the reserves at the end of the 2017/18 fiscal year.
Newly appointed Councilman Steven Hatcher noticed there was a drop in interest earned on the Town's cash position in 2017. Mr. Keen explained that the Town has invested in Treasury Bills, which are very conservative instruments. There was a situation in 2002 when the Town had invested in more risky funds, the state Local Government Investment Pool (LPIG), to get more interest. A health insurance fraud was perpetrated by an employee of LGIP and the loss was spread out over all the cities and towns in Arizona. Carefree suffered a $600,000 loss, which was traumatic for a small town. Big cities like Phoenix, Tucson, and Scottsdale suffered huge losses. The fraud was nationwide. After that experience, the money was put into T-Bills with the Vanguard Fund. The Town has $1.3 million in T-Bills. During the bad times, more money was made in those funds.
Mr. Hatcher, whose field is finance, asked if anyone had looked at the internal structure of the fund. Mr. Keen replied, "I'm the accountant and computer guy. You guys make the decision on how things are invested." Mayor Peterson asked how much latitude the Council has in terms of investment options. Mr. Keen said that as far as he knows, they can gamble it all. But the auditors do look at how funds are structured each year, and if it's questionable, you get an audit "find". Mr. Hatcher said that looking at it from a performance standpoint, relative to how it's structured, are two different things. There are characteristics of a fund that can work against you. He wanted to look at how it's structured and offered to do so as a courtesy because of his background. He thought that was why there was a loss. Mr. Keen said it's rare to have a loss. When the stock market went so high, it caused the bond market to flip. The Town usually makes $15,000-20,000 each quarter. They lost $3993 this past quarter. But during the 15 years that he has worked for the Town, there have only been 4 months with losses.
Mayor Peterson said he would welcome Mr. Hatcher's participation. Mr. Keen noted that there have been 2 or 3 others on past Councils who, like Mr. Hatcher, were financial advisers. They looked it over and didn't bring anything more attractive to the table than what was already structured. But he would be glad to show it to Mr. Hatcher and to hear any suggestions. Mr. Keen reiterated that the Council has to vote on any changes; he has no say. But it's always good to have another opinion.
The Mayor said the Town would go in the direction that makes the most sense. He would appreciate any new knowledge and a review. He felt the report was overall very positive. The short term future is looking fine, but at 65-70% build-out, the construction sales tax revenue won't continue. The Town is involved in a difficult and in-depth investigation of long term solutions.
Mr. Hatcher questioned the earlier mention of the WIFA loan that is paid every July. Mr. Keen explained that it stands for Water Infrastructure Financing Authority, and was obtained in 2003 for the large underground water tank at the western edge of town. There are 2-3 years left on the loan, which is almost paid in full. Everyone laughed about government acronyms and Mr. Hatcher thanked Jim for his patience.
Mr. Keen thanked everyone for their condolences on the passing of his wife. Mayor Peterson noted that Jim was holding up remarkably well under the circumstances. He also said that no one is tougher on bills coming in than Jim.
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Lyn Hitchon
Prepared by Carefree Truth
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