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Finance Committee Meeting Minutes Wednesday, October 16, 2019

For your consideration, please read the minutes from the Finance Committee Meeting held on Wednesday, October 16, 2019 at 1:00 p.m. in the Commission Meeting Room.

Finance Committee Minutes 10-16-19 with Attachments

To read the minutes, please open or download the pdf from the link above, or you may see more below.

Brunswick-Glynn County Joint Water & Sewer Commission

1703 Gloucester Street, Brunswick, GA 31520

Commission Meeting Room

Wednesday, October 16, 2019 at 1:00 PM 

FINANCE COMMITTEE MINUTES

MEMBERS PRESENT:        

Steve Copeland, Committee Chairman

Donald Elliott, Commissioner

Andrew Burroughs, Interim Executive Director

ALSO PRESENT:                 

Ben Turnipseed, Commission Chairman

Bob Duncan, Commissioner

John Donaghy, Chief Financial Officer

LaDonnah Roberts, Senior Financial Analyst

Janice Meridith, Executive Commission Admin.

 MEDIA PRESENT:               

Taylor Cooper, The Brunswick News

Pamela Permar-Shierling, The Islander 

ABSENT:                               

Tripp Stephens, Commissioner

Chairman Copeland called the meeting to order at 1:00 PM.  

PUBLIC COMMENT PERIOD

There being no citizens that wished to address the committee, Committee Chairman Copeland closed the Public Comment Period.

PRESENTATION

            Courtney Rogers – Davenport & Company

Mr. Courtney Rogers with Davenport & Company, financial advisors to JWSC were asked to present an update on the credit markets and the financial position and strength of the JWSC as compared with other similarly rated utilities.  In Mr. Rogers’ presentation, he covered the following areas: an overview of current market conditions; a review of key characteristics that constitute a highly regarded, credit worthy Utility System; a discussion on comparatives with peer Utility Systems; a review of the Commission’s financial trends; and a review of the Commission’s currently outstanding debt. The final observations as provided by Mr. Rogers in the conclusion of his presentation were as follows. (1) The previous refunding timing for JWSC worked out great; JWSC saved on interest costs and freed up the Debt Reserve Fund for needed capital projects. (2) Even though the Commission is not looking to go to the debt market anytime soon, it should put itself in the best position to get the highest rating possible in order to get the lowest borrowing cost possible if it does need to enter the bond market.  (3) JWSC’s coverage will look historically stronger in Fiscal Years 2018 and 2019 due to taking the refunding savings in those years which allows the Commission to essentially pull out the dollars associated with the Debt Reserve in order to be used for capital projects.  (4) JWSC should continue to monitor Days Cash on Hand to stay within best practices levels.  (5) JWSC should consider updating policy guidelines as previously discussed. (6) The ultimate goal is to get the Commission fully into the AA category and to hopefully push higher within that category. 

APPROVAL

  1. Minutes from September 18, 2019 Finance Committee Meeting

Commissioner Elliott made a motion seconded by Commissioner Copeland to approve the minutes from the September 18, 2019 Finance Committee Meeting.  Motion carried 2-0-1. (Commissioner Stephens was absent from the meeting.) 

  1. Acceptance of FY2019 Financial Audit – J. Donaghy / Trey Scott, CPA, Mauldin & Jenkins

Mr. Trey Scott, CPA, a partner with Mauldin & Jenkins, Certified Public Accountants presented the audit results for Fiscal Year ending June 30, 2019 to the Finance Committee.  He advised that the two documents included were the Financial Statements and the Auditor’s Discussion and Analysis, which was the main document he presented from.  Mr. Scott first referenced page 4, the auditors’ report which is where the auditors’ present their opinion based on the audit, and he noted that he was pleased to report that the auditors’ issued a clean opinion on JWSC’s 2019 financial statements, which is the highest level of assurance they can provide and is an unmodified opinion or clean opinion.  Mr. Scott noted that a positive was that there were no findings to report this year which is a testament to the hard work the finance department and Commission does to ensure everything is reported correctly.  He provided that assets increased and liabilities went down during this year, so the net position was up for the year.

He added that there were increases in operating revenues and decreases in operating expenses, which were also very positive.  Mr. Scott said that what he prefers to see and gauge the general health, he looks at the cash flow to see what the operations are doing to generate and drive the cash.  Page 6 reports good strong positive operating cash flows this year of about $13.2M for the year.  Also noted was that it was good to see the reinvestments into the system of about $3.5M of capital acquisition and the paying down of debt of about $2.4M with interest in that. Decrease in cash was seen but is misleading with the purchase of some $22M in investments this year, and this is seen as cash outflow, however the investments are not reported as cash on the balance sheet.  Cash technically went up when investments are included in the calculation of cash.  Mr. Scott continued to discuss that there were no difficulties in performing JWSC’s audit, the finance staff provided everything as needed, there were no disagreements found with management, there were corrected adjustments that may have been found in previous audits, and everything that needed to be posted was posted.  On page 11, there was only one recommendation noted for improvement, which was the suggestion for one comprehensive document or manual for the financial policies and procedures. JWSC does have financial policies and procedures, and the combining all into one comprehensive document has been a work-in-progress, however they are separate at this time.  Mr. Scott stated that this audit provided a clean opinion and was a seamless audit.

Commissioner Copeland inquired if they had looked at the defined pension plan for JWSC.  Mr. Scott provided that they did as per GASB #68 reporting requirements to look at that liability as provided by the actuary.  Commissioner Copeland then asked if it was looked at as a solvency type of question of whether or not it is funded appropriately.  Page 33 of the audit reflected that JWSC is covered at 67%.  Mr. Scott provided that the State of Georgia plan is at 80% and the State of South Carolina is at 54%, so JWSC’s plan is about in the middle of those two state plans.  He added that if he looked at a single employer defined benefit pension plan, he estimated those are usually around 70%.  Mr. Scott further discussed and explained the funding of pension plans, and advised discussing with the actuary to fully understand if JWSC is properly funded for the liability of its pension plan.  This is not an area that the auditor gets very involved with during an audit.  Mr. Donaghy provided that he could send the Commissioners a copy of the actuarial report for their review.

Chairman Turnipseed asked Mr. Scott to explain the Management’s Discussion and Analysis as it relates to debt coverage ratio on page 9.  Mr. Scott provided that this section is prepared by the management of JWSC as an analysis and is an unaudited part of the financial statements, yet Mauldin & Jenkins does read through it.  Mr. Donaghy added that JWSC actually writes this is an analysis, and then sends it to Mauldin & Jenkins who will go through it and verify it for accuracy with the rest of the audit.  Chairman Turnipseed asked if one column was from last year and the other from this year.  Mr. Donaghy responded that they were actually two different computations and explained what each column included.

Committee Chairman Copeland stated that this looked like a clean audit with all contractual requirements having been met and that he favored moving the acceptance of the audit forward to the full Commission.  Commissioner Elliott agreed.

Commissioner Elliott made a motion seconded by Commissioner Copeland to move that the Finance Committee recommend to the full Commission the acceptance of the audited financial report for the June 30, 2019 Fiscal Year and authorize its release to the public and reporting agencies.  Motion carried 2-0-1.  (Commissioner Stephens was absent from the meeting.) 

DISCUSSION

  1. Financial Statements Month End September 30, 2019 – J. Donaghy

Mr. Donaghy presented the financial statements for the month ending September 30, 2019 and mentioned this was the third month for the current fiscal year.  He explained various account balances on the Balance Sheet, the Supplemental Schedule of Cash Balances, and reviewed the Combined Revenue Statement as well as the Detail Revenue and Expense Report and the Project Report.

  1. Approved Projects Budgeting Discussion – Design, Construction, etc. – A. Burroughs

Mr. Burroughs provided that the project cash flow module had been updated with a detailed layout of all the existing projects with some potential future projects from the present date through Fiscal Year 2025.  Page 1 of the report provided project listing, the funding source for each noted project as well as the projects’ budgeting breakdown for quarterly periods of FY2020 and FY2021, then annually for FY2022 through FY2025.  Page 2 provided the funding details for the Capital Reserve, Expansion Reserve, R & R Reserve, CIF Reserves, and SPLOST funding for the same time periods as on page 1, and reflected that there should be “healthy” balances maintained in each of the reserves.  The project cash flow module will remain a living document and be maintained monthly to reflect project funding and expected balances in the reserves.  Commissioner Copeland requested that a line be added at the bottom as a total of all the balances.  Mr. Burroughs further discussed and explained the details included in the report.  Commissioner Duncan suggested adding in programs and more detailed forecasting.

  1. Approved Unsolicited Proposals Discussion – Tap Fees, Reimbursements, etc.–A.Burroughs

Mr. Burroughs provided that there are currently several unsolicited proposals of which the Pilar unsolicited proposal has been completed.  JWSC has a currently liability of $50k on one unsolicited proposal at this time for which as the taps are sold in the 2002 Basin 70% of those funds will apply towards until that liability has been satisfied.  Mr. Burroughs noted that out of the unsolicited proposals that are currently underway Bergen Woods, which will involve force main improvements coming into PS4107, is currently at the EPD for review, and Coastal Club Apartments, which includes upgrading two pump stations and a force main, is under design at this time.

  1. Academy Creek Update – Sludge Hauling Savings, Operating Costs, Budget Comparison, etc. – A. Burroughs

Mr. Burroughs advised that the sludge hauling equipment had been received, and JWSC began sludge hauling in September.  Eleven trips were made during that first month.  Mr. Burroughs advised that by JWSC doing its own sludge hauling for those eleven trips a savings of about $6,500 was incurred.  Regarding unit costs as compared to last year, at Academy Creek unit costs are down about 9% year to date (per million gals.)  Southport has seen 16% decrease in unit costs.  Mr. Burroughs noted that across the board based on power, sludge and chemicals (which are the three major operational costs) the operating costs are down 4% from FY2019 to the current Fiscal year.  Commissioner Copeland asked about the increase at Dunbar, and Mr. Burroughs replied that there was a 20% increase at Dunbar, yet it has little impact since most of the sludge comes from Academy Creek.  He also noted that there was less rain resulting in lower flows causing higher operating costs due to having to oxygenate more.

There being no further business, Chairman Copeland adjourned the meeting at 2:34  p.m.

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Brunswick - Glynn Joint Water & Sewer Commission - 1703 Gloucester Street Brunswick, GA 31520 - 912-261-7100