MINUTES OF THE METRO COUNCIL FINANCE COMMITTEE MEETING

Wednesday, December 9, 1998

Metro Council Annex

Members Present:  Patricia McCaig (Chair), Ruth McFarland (Vice Chair), Jon Kvistad,

     Susan McLain, Rod Monroe,

Members Absent:  Don Morissette, Ed Washington

Chair McCaig called the meeting to order at 1:01 PM.

1.  CONSIDERATION OF MINUTES OF THE JUNE 18, 1998 FINANCE COMMITTEE MEETING.

Motion:  Councilor McFarland moved to adopt the minutes of the June 18, 1998 Finance Committee Meeting.

Seconded:  Councilor McLain seconded the motion.

Vote:    The vote was 3 yes/ 0 nay/ 1 abstain. The motion to adopt the minutes passed with Councilor Monroe abstaining because he was not at that meeting. Councilor Kvistad entered the room after the vote.

2.  RESOLUTION NO. 98-2725, FOR THE PURPOSE OF ADOPTING THE CAPITAL IMPROVEMENT PLAN FOR FISCAL YEARS 1999-00 THROUGH 2003-04

Mike Burton, Executive Officer, said this was the third year for the Capital Improvement Plan which allowed the agency to take a long term look a their future capital needs and to allow council as the policy makers to determine where the resources for those improvements would come from. He said the proposed CIP had 73 individual projects with a total cost of $119 million. He noted that since the Convention Center project had been rejected by the voters, the Expo Center project would be considered this year. He introduced Mr. Imdieke.

Tom Imdieke, Financial Planner, reviewed the proposed 5 year capital plan ( a copy is attached to the permanent record of this meeting). He said it was a major capital investment for the future of the region and over 70% of the projects were $100,000 or greater. He said a primary objective of a capital plan was to set forth the best estimate and assessment of the long term capital needs for an agency and allow for better coordination of the timing and financing of individual projects. He explained the direct cost savings to the public from this capital improvement plan and gave an overview of the CIP from a comparison chart he had prepared (copy of the chart can be found with the permanent record of this meeting). He also noted a memo to the committee from Mike Burton regarding substantive adjustments to the FY 1999-00 through 2003-04 proposed capital improvement plan (a copy of which is also included with the permanent record of this meeting).

Discussion:  Chair McCaig said the process the last time was different and this was a mundane, housekeeping kind of CIP with the two significant items already authorized by the voters with the zoo bond and the open spaces bond. She said the amendment deserved some discussion and asked Mr. Imdieke for the basics on the amendment.

Mr. Imdieke said the OCC expansion replacement project, which was voted down at the last election, had been placed on the unfunded list and replaced with a proposal for Exhibit Hall D at the Expo Center, which was approximately $17 million to replace the old building.

Chair McCaig recalled two hearings on this matter, a Regional Facilities committee meeting where a hotel representative spoke to the resolution, and a full council where they heard the same testimony. She said there had been no other discussions in the public setting and felt putting it in the CIP was unbelievably premature. She said there was no hotel-motel tax committed to it and the revenue source they were looking at was the excise tax. She understood that the CIP did not commit them to the funding and that it was a separate entity, but felt it had not had the public scrutiny and/or discussion it needed for the Council to move it forward.

Councilor Kvistad disagreed. He felt it was a good investment because the facilities were outdated and had all kinds of problems. He said this project would allow the Expo Center more flexibility to keep generating revenue due to the improved floorspace. He said it did impact the budget because they would be building something, but the buildings needed to be updated and would be a positive investment.

Councilor McFarland said Metro had agreed not to do another revenue bond as long as they owed Intel money. In reference to that, she said the reason it was $2 million now and not more was that Metro had been paying it back at over twice the minimum rate required. She said Building E had been spectacularly and singularly successful and there was no reason to think that Building D would not be the same if they could get it done. She felt it was an expeditious time to go forward with the project.

Chair McCaig understood that the preliminary work from MERC had indicated this wasn’t necessarily a money maker and there were some questions about what kind of revenue it would bring in. She said it might ultimately be the right decision but she did not think it was something they wanted to begin solidifying given the financing plans they were talking about until there had been a broader discussion about it.

Councilor Kvistad understood that perspective but still did not agree.

Chair McCaig said if MERC and the hotel/motel were not willing to bear responsibility for it there was nowhere else to go for funding.

Councilor Kvistad said the hotel/motel people’s first priority was OCC but they were willing to look at other options. He said OCC was also a priority for Metro.

Councilor McFarland pointed out that the material they used at their last meeting was not prepared by the MERC staff but by their own analysis, Mr. Houser.

John Houser, Senior Council Analyst, said his work was designed to determine what level of debt service they might have to pay if they issued bonds at given interest rates, using the assumptions provided by MERC staff that they were willing to kick in from a variety of sources toward that purpose. He reported other non-excise tax related contributions that could increase that number. He said depending on the interest rate and length of term on the bonds, there was still about $180,000- $200,000 not spoken for from those sources. There were some undefined sources also. He said his work assumed there would be some form of excise tax contribution in the mix.

Mr. Burton was surprised to hear this was not in the MERC budget. He said the OCC had some deficits that needed to be addressed in relation to the bond issue and the issue deserved very careful analysis. He said whether or not it ended up with a public vote and support from the lodging association or whether council determined they could use existing excise taxes, therefore cutting other resources, or whether they could increase revenues from the facility remained to be seen. He said he had testified at the meeting and had asked for an analysis of the trade-offs for the new buildings from MERC. He had not received it yet. He had asked them what Metro would be gaining in a marketing sense and what the exact revenue sources were. He said clearly the building needed to be replaced. He reported after the defeat of the OCC measure he had asked the lodging association representatives if they felt the Expo Center could be a priority they would put additional resources to. He said they had not responded to him as yet. His goal was to fix Expo and if anything could be done to help OCC at the same time, fine. He wanted to send a clear message that whatever came back as a proposal to council would be one that did not do financial harm to the primary mission of the agency.

Councilor McLain agreed with Chair McCaig that every time they passed this on and gave it a placeholder status, they gave it more legs. She did not have a feeling for the revenue stream or the difference in the revenue stream from both facilities. She said if they were able to take some of the shows to the new exhibit hall would they be replaced with the same types of shows at OCC or would they look for a different type of show. She said she had not been sitting in on the Regional Facilities meetings and needed more education to feel comfortable with it. She believed they needed more support from MERC and the hotel/motel industry.

Councilor Monroe said he had not heard anything to change his mind that they needed to go ahead with the project.

Councilor McFarland asked if they were talking about less than the total of excise tax money they got from those operations. She said they were not talking about taking money from somewhere else if they used the money out of the excise tax they earned.

Mr. Burton said the money would come from other than excise tax.

Councilor McFarland asked where it would come from.

Mr. Houser said it would come as a lump sum. Among the sources it could be considered as coming from would be that they were paying $500,000 a year now to retire the Intel loan and the possibility that the parking fees would be increasing at the Expo Center which would generate another couple of hundred thousand dollars. He said they were also paying $100,000 a year on a flex lease that would end in fiscal year 2000-01. He said those sources had been identified by him as potential sources for the $800,000 but they had asked that he simply indicate they were willing to contribute $800,000 a year and that they would decide the sources.

Mr. Burton said the planning advisors had difficulty with that because it was not a dedicated stream for a revenue bond.

Councilor McFarland said she wanted to know if the $800,000 was less than the amount of excise tax they got from those sources. She said the bottom line was that they would still be getting $200,000 a year from that revenue.

Councilor McLain said the $800,000 was not coming from the excise tax revenue stream at all. She said this was a list of other things the money was being used for. She said it was not a dedicated stream but a grouping of dollars from operating funds that had been used for other parts of the budget. She said $180,000 - $200,000 was needed to pull this finance plan off and that money would come from excise tax. She said Councilor McFarland’s question was wouldn’t they still be getting x amount of dollars from the excise tax revenue. She said if they were asking to spend part of the revenue from the excise tax revenue stream, the rest of that pot would still come to Metro for other projects and resources. She said they were talking about three different groups of money, the $800,000, and $1 million income from excise tax and about actually dedicating $180,000 to $200,000 out of that $1 million for this D Hall project. She still did not think the Expo Center should come first.

Mr. Burton said the questions was whether those revenues would have to be foregone or funded some other way to be continued. He said issuing revenue bonds against that kind of conglomeration was probably a no go in the revenue market according to the fiscal advisers.

Motion:  Councilor McFarland moved to bring Resolution No. 98-2725 to full council for adoption.

Second:  Councilor Kvistad seconded the motion.

Vote:    The vote was 5 yes/ 0 nay/ 0 abstain. The motion carried unanimously of those present.

Chair McCaig assigned Councilor McLain to carry the resolution to the full council.

3.  RESOLUTION NO. 98-2730, FOR THE PURPOSE OF AMENDING THE CAPITAL IMPROVEMENT PLAN FOR FISCAL YEARS 1998-99 THROUGH 2002-03.

Mr. Imdieke, reviewed the projects involved in this amendment to the capital improvement plan including the lory exhibit and the refurbishing of the cafe and gift area to be a reptile house at the zoo, and replacement of the carpet and draperies at the Civic Auditorium which were now 30 years old.

Motion:  Councilor McLain moved to bring Resolution No. 98-2730 to full Council for adoption.

Second:  Councilor McFarland seconded the motion.

Discussion:  None.

Vote:    The vote was 5 yes/ 0 nay/ 0 abstain. The motion carried unanimously of those present.

Chair McCaig assigned Councilor McLain to carry the resolution to the full council.

4.  ORDINANCE NO. 98-768, FOR THE PURPOSE OF AMENDING THE METRO CODE AUTHORIZING EXEMPTIONS FROM COMPETITIVE BIDDING FOR UTILITIES AND CERTAIN OTHER TYPES OF CONTRACTS.

Scott Moss, Risk & Contract Management, said they were asking for 3 changes to their contracting code. The first would allow competitive proposals rather than competitive bids for such things as telephone, electricity, natural gas, and other utilities so they could consider service and experience along with cost. Secondly, it would allow proposals rather than bids for artwork and art related production such as fabrication and allow them to consider experience and education rather than just low bid. The third change would allow them to provide sponsorships without having to do sole source paperwork, for example if council approved giving money to SOLV, they would not have to deal with the donation as a sole source vendor but could take care of it under the contracting code.

Councilor McLain said she had some complaints about the artwork in the Metro building. She said if council had approved that piece, shame on them because if was awful and she was offended by it as well. She asked if they would be asked for approval of the art or a concept and it was just on the contract they would get the opportunity to consider experience and education.

Mr. Moss said it would be for art fabrication like signs, etc.

Chair McLain commented that “1% for art” dealt with a citizen review committee and Councilor McLain probably did not have a whole lot of ability to do any changes to the artwork. She said this ordinance did not have anything to do with the creative art, it dealt with signage and production and those kinds of things.

Chair McCaig asked what would be different if they accepted the change as far as utilities.

Mr. Moss said for example there was a great deal of competition with telephone usage and electricity would be coming up soon. He said rather than just accepting low bid they wanted to have the capability to look at their past experience and at their references, and a variety of other things besides price.

Chair McCaig asked for an example of when evaluating something just on price worked, where these arguments could not be made.

Mr. Moss replied that state law required everything to be decided on price except which this council allowed otherwise.

Chair McCaig asked why the same criteria would not apply to everything and not just the kinds of things he was talking about now.

Mr. Moss said it did apply, they had not thought to add the utilities when they put together the code.

Councilor McFarland pointed out that one of the last major things to be done on price alone was the garbage hauled through the gorge.

Councilor Kvistad gave an example of two utility companies bidding and the one who gave the low price had a history of overcharging or bill changes and the other company’s price was competitive but they did not have servicing or management problems. That could not be taken into account when the criteria was bid only. He said it was the same with the sign production folks, company A gave you “x” price for the production, but company B had a little better price but they sometimes did not make their timelines. He thought having some flexibility would be good.

Councilor McLain clarified that the language to be changed incorporated #13, #14, and #15. She wanted to be sure that Mr. Houser was comfortable with this change.

Mr. Moss said that was correct.

Mr. Houser said he was.

Motion:  Councilor Kvistad moved to bring Ordinance No. 98-768 to full Council for adoption.

Second:  Councilor McFarland seconded the motion.

Discussion:  None.

Vote:    The vote was 5 yes/ 0 nay/ 0 abstain. The motion carried unanimously of those present.

Chair McCaig assigned Councilor McFarland to carry the ordinance to the full council.

5.  RESOLUTION NO. 98-2722, FOR THE PURPOSE OF CONFIRMING THE APPOINTMENT OF HERBERT S. PLEP AND ERIC JOHANSEN TO THE INVESTMENT ADVISORY BOARD.

Howard Hansen, Investment Manager, gave some history of the portfolio he managed for Metro and said the primary goal was safety since it was other people’s money. He said liquidity was closely related as was optimizing earnings. He said the investment code provided for a 5 member advisory board which met quarterly to review the portfolio and ensure that code requirements were being adhered to and to discuss investment strategies. He reported that one member of the board had resigned and another’s term had limited out so Mr. Plep and Mr. Johansen had been proposed to replace them. He reported that Mr. Plep is assistant treasurer of Esco Corporation and Mr. Johansen is debt manager for the City of Portland.

Motion:  Councilor McLain moved to bring Resolution No. 98-2722 to full Council for adoption.

Second:  Councilor McFarland seconded the motion.

Discussion:  None.

Vote:    The vote was 5 yes/ 0 nay/ 0 abstain. The motion carried unanimously of those present.

Chair McCaig noted Mr. Hansen’s festive Christmas tie and assigned Councilor Monroe to carry the resolution to the full council.

6.  ORDINANCE NO. 98-790, FOR THE PURPOSE OF AMENDING METRO CODE 2.06 (INVESTMENT POLICY) REGARDING AUTHORIZED QUALIFIED INSTITUTIONS; AND DECLARING AN EMERGENCY.

Mr. Hansen said the present code allowed primary dealers but the additional sector that was the subject of this minor amendment was the ability to use a secondary market broker, for instance Seattle Northwest Securities. He said this ordinance would allow them to improve their yield using secondary brokers.

Councilor Kvistad asked for an explanation of “reverse re-purchase agreement” and why they were banned from doing that.

Mr. Hansen said a “re-purchase agreement” was where we owned an investment and sold it to someone with a promise to buy it back. A “reverse re-purchase agreement” is the opposite. We don’t like to do that because it puts the possession of that instrument in someone else’s hands. He said at this time Metro’s investment products were all in the hands of a third party custodian for safekeeping.

Chair McCaig asked what was the intention of the prohibition of a reverse re-purchase agreement.

Mr. Hansen said it was to avoid the extra effort of doing a credit and performance evaluation of the counter party.

Motion:  Councilor Kvistad moved to bring Resolution No. 98-2722 to full Council for adoption.

Second:  Councilor McFarland seconded the motion.

Discussion:  None

Vote:    The vote was 5 yes/ 0 nay/ 0 abstain. The motion carried unanimously of those present.

Chair McCaig assigned Councilor Monroe to carry the ordinance to the full council.

ADJOURN

There being no further business before the committee, Chair McCaig adjourned the meeting at 2:07 PM.

Respectfully submitted,

Cheryl Grant

Acting Council Assistant