Meeting Agenda GLWater.org AGENDA. Park Billing

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1 Great Lakes Waterr Authority Audit Committee Meeting Agenda Friday, February 19, 2016 at 8:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan GLWater.org AGENDA 1. CALL TO ORDER 2. ROLL CALL 3. APPROVAL OF AGENDA 4. APPROVAL OF MINUTES A. February 5, PUBLIC PARTICIPATION 6. OLD BUSINESS A. FY 2017 and 2018 Financial Planning Update Including: Implementationn of Lease and Related Documents including Cash Transferss Financial Planning Implications for Use of Lease Payment Upcoming Goals & Objectives Session DWSD R Current and Next Year Budget Update Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer Proposed Action: None. B. Update: Highland Park Billing & Collections (verbal) Presenter: William M. Wolfson, Chief Administrative and Compliance Officer/General Counsel Proposed Action: None. 7. NEW BUSINESS A. Treasurer s Cash Flow Report for Januaryy 2016 Presenter: Deirdree Henry, Treasury Manager Proposed Action: Receive and file report. 8. REPORTS A. ERP and HRIS/Payroll Implementation Verbal Update Mike Huber, Finance Director; Butch Johnson Procurement Director; and Denis DesRosiers, ERP Program Director; Nicolette N. Bateson, CFO

2 9. INFORMATION 10. LOOK AHEAD Next GLWA Board Meeting: Wednesday, February 24, 2016 at 2 pm Next Audit Committee Meeting: Friday, March 4, 2016 at 8 am 11. OTHER MATTERS 12. ADJOURNMENT

3 AGENDA ITEM 4A Great Lakes Water Authority Audit Committee MINUTES Friday, February 5, 2016 at 8:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan g l w ater.org 1. CALL TO ORDER Chairman Baker called the meeting to order at 8:05 am 2. ROLL CALL Chairman Brian Baker, Director Robert Daddow, and Director Joseph Nardone 3. APPROVAL OF AGENDA Chairman Baker requested approval of the agenda. MOTION BY: SUPPORT: ACTION: JOSEPH NARDONE ROBERT DADDOW APPROVED 4. APPROVAL OF MINUTES Chairman Baker requested approval of the Minutes of January 15, MOTION BY: SUPPORT: ACTION: JOSEPH NARDONE ROBERT DADDOW APPROVED 5. PUBLIC PARTICIPATION None Page 1

4 6. OLD BUSINESS A. Water and Sewer Refunding & New Money Timeline & Task List for 2016 Presenters: Jon Wheatley, Public Finance Manager Dan Hartman and Kari Blanchett, PFM Action: Receive and File Report MOTION BY: SUPPORT: ACTION: ROBERT DADDOW JOSEPH NARDONE APPROVED B. Financial Planning Update: Budget, Capital, & System of Revenues/Charges Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer, Monica Daniels, Capital Manager, Jon Wheatley, Public Finance Manager, and Bart Foster, The Foster Group, LLC Action: Receive and File Report MOTION BY: SUPPORT: ACTION: ROBERT DADDOW JOSEPH NARDONE APPROVED Nicolette Bateson requested a Special Audit Committee Meeting for February 19, 2016 at 8:00 am to do a status report/review of the budget and the schedule of charges. 7. NEW BUSINESS A. Proposed Water Bond Notice of Intent Resolution Presenters: Jon Wheatley, Public Finance Manager Bart Foster, The Foster Group, LLC Action: The Audit Committee recommends that the Great Lakes Water Authority Board approves the resolution authorizing publication of Notice of Intent to issue water supply system revenue bonds in a principal amount not to exceed $300,000,000 as presented at its Regular Meeting on February 10, 2016 Page 2

5 MOTION BY: SUPPORT: ACTION: ROBERT DADDOW JOSEPH NARDONE APPROVED B. Proposed Sewer Bond Notice of Intent Resolution Presenter: Jon Wheatley, Public Finance Manager, Bart Foster, The Foster Group, LLC Action: Audit Committee recommends that the Great Lakes Water Authority Board approves the resolution authorizing publication of Notice of Intent to issue sewage disposal system revenue bonds in a principal amount not to exceed $125,000,000 as presented at its Regular Meeting on February 10, MOTION BY: SUPPORT: ACTION: ROBERT DADDOW JOSEPH NARDONE APPROVED Director Joseph Nardone excused from the meeting at 9:10 am 8. REPORTS ATTACHMENT 8A A. DWSD Retail System Revenue and Collections Update Presenter: Marcus Hudson, CPA, Chief Financial Officer, DWSD Action: Receive and File Report MOTION BY: SUPPORT: ACTION: ROBERT DADDOW BRIAN BAKER APPROVED B. December 2015 Wholesale Water Revenue Report Variance Analysis Presenter: Jon Wheatley, Public Finance Manager Action: Receive and File report MOTION BY: SUPPORT: ACTION: ROBERT DADDOW BRIAN BAKER APPROVED C. ERP and HRIS/Payroll Implementation Verbal Update Group presentation presented o Dan Rainey Update on Ceridian: o GLWA completed two payroll cycles successfully o A program like this usually takes 12 to 16 months to implement but Page 3

6 o o o o GLWA did it in six months There were 60 issues that did arise since January 1 st, but the priority was given to payroll. We had 38 payroll issues, but are now down to seven open issues. 22 open issues (non payroll related), plan to have completed by the end of February. We have 40 time clocks, there are no more paychecks, now you get direct deposit or a pay card Would like to clear up all old issues before going into Phase II Phase II is the HR System which includes document management, dashboards for Managers, a recruiting component that includes online job postings. Training, performance management, the capability to do biometrics, mobile access which we can limit by location, Manager selfservice and the ability for single sign on. o Denis Desrosiers Update on BS & A: o Phase I is to get BS & A up and running o Get WAM implemented and split with DWSD o BS & A has been installed and is up and running, working on training, configuration and data o Software to be installed on desktops in the Finance and Procurement Departments o Additional comments made by Cindy Cezat via phone o WAM the HP Team is working on the technical side to do the split o o Gaylor Johnson: o They have two teams. o First Team will do a data cleanse of the WAM database and master files o Second Team will load data into BS & A o This should be ready by the City s Black Out, as we emerge from the Black Out, data should be good to go. (Black out is when the City shut down and do their roll out of Oracle fusion) Mike Huber: o The budget module is great with a lot of features and can report on different phases with great tracking mechanisms o Rush checks can now be printed out the same day D. Chief Financial Officer Verbal Update Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer o o Mike Tilley and Joe Perry met with the State, and the State agreed that GLWA can be self-insured, which saves us about $40, We are trying to wrap up the DWSD June 30, 2015 audit. This is important to GLWA because this is a key component of the financial history. The City Page 4

7 o o has committed to completing by March 31 st. Pension system is still waiting for the actuarial report to wrap up its audit. Received bankruptcy adjustment entries, we have questions on those 9. INFORMATION A. Billing Status Report City of Flint B. Billing Status Report City of Highland Park C. Transition Budget Competitive Grant Assistance Program Action: Receive and File reports MOTION BY: SUPPORT: ACTION: ROBERT DADDOW BRIAN BAKER APPROVED 10. LOOK AHEAD Plan to have a Special Audit Committee Meeting on February 19, 2016 at 8:00 am Regular Audit Committee meeting will be Friday, March 4, 2016 at 8:00 am 11. OTHER MATTERS None 12. ADJOURNMENT Chairman Baker requested a motion to adjourn. MOTION BY: SUPPORT: ACTION: ROBERT DADDOW BRIAN BAKER APPROVED There being no further business, the meeting adjourned at 10:00 a.m Page 5

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14 AGENDA ITEM 6A Great Lakes Water Authority Financial Services Group Audit Committee Communication Date: February 19, 2016 To: Great Lake Water Authority Audit Committee From: Nicolette Bateson, CPA, Chief Financial Officer/Treasurer Re: FY 2017 and 2018 Financial Planning Update Background: The FY 2017 & 2018 Biennial Budget, FY Capital Improvement Plan, and FY 2017 System of Revenues/Charges financial planning cycle iss underway. Analysis: Attached are a number of items related to financial planning cycle that will be reviewed at the Audit Committee meeting. Topics that will be covered in this discussion include the following. Implementation of Leasee and Related Documents including Cash Transfers Financial Planning Implications for Use of Lease Payment Upcoming Goals & Objectives Session DWSD R Current and Next Year Budget Update Proposed Action: None. Page 12

15 Financial Planning Cycle: Lease & Related Documents Review GLWA Audit Committee February 19, 2016 Page 13

16 Executive Summary OBJECTIVE: Refresher course of the legal framework which defines the GLWA and DWSD financial planning cycle Status Report: Lease payment and cash transfers to DWSD in 2016 Status Report: Financial planning cycle key dates Page 14

17 Key Documents Impact Financial Planning Cycle Lease documents (online at glwater.org) 1. Water and Sewer system leases approved Water & Sewer Services Agreement approved Shared Services Agreement approved Water and Sewer Master Bond Ordinances and subsequent amendments 5. Pension system agreement approved Documents include a number cross references Prior year budget (FY 2016) prepared simultaneously with lease and related agreements FY 2017/18 Biennial financial planning cycle is first year of budgeting within approved legal framework Page 15

18 Cash Transfers Since Effective Date Great Lakes Water Authority Cash Transferred to DWSD FY 2016 Water Sewer Total Notes Operations & Maintenance Pension Lease Payment (I&E Fund) Operations & Maintenance Pension Lease Payment (I&E Fund) January 2016 $ 3,740,800 $ 2,486,700 $ 11,767,600 $ 2,824,900 $ 1,669,300 $ 4,380,000 $ 26,869,300 Lease and pension are for 7 months (Jul Jan) February ,740, ,200 1,681,100 2,824, , ,700 9,466,200 Regular monthly transfer February ,740,800 2,824,900 6,565,700 Extra one month of O&M per Lease 4.4(a)(ii) Total Transfers $ 11,222,400 $ 2,841,900 $ 13,448,700 $ 8,474,700 $ 1,907,800 $ 5,005,700 $ 42,901,200 Note: Per Section 3.5 of the Lease, the Lease Payment may be used for: a) bond principal and interest for Local System Improvements, b) bond principal and interest for the City's share of common to all System Improvements, and c) Local System improvements paid from the lease payment deposited to the Improvement & Extension (I&E) Fund. The Lease payment above is net of debt service allocation established by City during its rate setting for FY Page 16

19 GLWA/DWSD Schedule Coordination GLWA Scheduled Dates February 24, 2016 Budget Update to Board March 2, 2016 GLWA Budget Public Hearing TBD GLWA Budget Adoption (may occur independent of CIP and Schedule of Charges A number of DWSD budgetary decision interdependencies that impact GLWA budget and timing Page 17

20 DWSD Budget Commitment Timeline January 1: Preliminary Budget Including key assumptions and impact statement February 1: Capital Improvement Plan March 23: City Adopted Biennial Budget Date referenced in lease is April 23 May 1: Direction to Apply Lease Payment Page 18

21 REFERENCE: LEASE* AND SERVICES AGREEMENT EXCERPTS (*EXCERPTS ARE FROM SEWER SYSTEM LEASE WORDING IS COMPARABLE IN WATER SYSTEM LEASE) Page 19

22 LEASE AGREEMENT Page 20

23 Lease Payment Lease Excerpt Page 21

24 Use of the Lease Payment Lease Excerpt Page 22

25 Opening Cash Balance Transfers Lease Excerpt Page 23

26 GLWA Budget Provisions Lease Excerpt Page 24

27 Other Key Provisions Lease Excerpt Page 25

28 Agency Relationship Defined Lease Excerpt Page 26

29 SERVICES AGREEMENT Page 27

30 Agency Performance Standards Services Agreement Excerpt Page 28

31 City Payment for Services Services Agreement Excerpt Page 29

32 Measurement of City Usage Services Agreement Excerpt Page 30

33 Lease Payment for Debt Service Services Agreement Excerpt Page 31

34 Notification of Rates & Charges Services Agreement Excerpt Page 32

35 Application of Lease Payment Direction Services Agreement Excerpt Page 33

36 City Preliminary Budget Due January 1st Services Agreement Excerpt Page 34

37 Impact Statement Services Agreement Excerpt Page 35

38 City Biennial Budget due March 23rd Services Agreement Excerpt Page 36

39 Budget Tracking Services Agreement Excerpt Page 37

40 City Capital Improvement Plan due February 1 Services Agreement Excerpt Page 38

41 Executive Summary Illustration of FY 2017 Revenue Plan As Designed - All Lease to Retail I&E Maximum Possible Impact of Lease Allocation Water Sewer Combined Water Sewer Combined 1 Wholesale Revenues (includes Detroit CTA) 329,135, ,286, ,422, ,135, ,286, ,422,200 2 plus: Misc Non-Op Revenues 2,077,100 4,115,200 6,192,300 2,077,100 4,115,200 6,192,300 3 less: GLWA O&M (111,879,200) (175,858,900) (287,738,100) (111,879,200) (175,858,900) (287,738,100) 4 less: GLWA O&M Pension (6,037,100) (10,838,400) (16,875,500) (6,037,100) (10,838,400) (16,875,500) 5 plus: DWSD Retail Net Revenue 37,790,500 32,338,700 70,129,200 15,290,500 4,838,700 20,129, Net Revenue 251,086, ,043, ,130, ,586, ,543, ,130,100 7 Net Revenue after Debt Service (6)-(15) 60,589,600 69,057, ,646,900 38,089,600 41,557,300 79,646,900 Applied to: 8 Non-Op Legacy Benefit Obligations 10,297,000 14,026,200 24,323,200 10,297,000 14,026,200 24,323,200 9 Budget Stabilization Fund Deposit 360,400 2,654,200 3,014, ,400 2,654,200 3,014, WRAP Deposit 2,076,800 2,654,600 4,731,400 2,076,800 2,654,600 4,731, Lease Pmt Deposit to Retail I&E 22,500,000 27,500,000 50,000, Balance Available for I&E (7)-sum(8->11) 25,355,400 22,222,300 47,577,700 25,355,400 22,222,300 47,577,700 Debt Service 13 Senior Lien 145,902, ,907, ,809, ,902, ,907, ,809, Senior Lien and Second Lien 187,944, ,930, ,874, ,944, ,930, ,874, All Bonds, Including SRF Jr. Lien 190,497, ,985, ,483, ,497, ,985, ,483,200 Debt Service Coverage 16 Senior Lien (7)/(13) Senior Lien and Second Lien (7)/(14) All Bonds, Including SRF Jr. Lien (7)/(15) Retail Revenue 88,738,200 70,454,900 88,738,200 66,238,200 42,954, ,193,100 less: DWSD O&M (50,947,700) (38,116,200) (50,947,700) (50,947,700) (38,116,200) (89,063,900) DWSD Retail "Net Revenue" 37,790,500 32,338,700 37,790,500 15,290,500 4,838,700 20,129,200 PRELIMINARY TFG THE FOSTER GROUP 2/19/2016 Page 39

42 Executive Summary Illustration of FY 2017 Revenue Plan As Designed - All Lease to Retail I&E Possible Impact of Lease Allocation (FY 16 Proxy) Water Sewer Combined Water Sewer Combined 1 Wholesale Revenues (includes Detroit CTA) 329,135, ,286, ,422, ,135, ,286, ,422,200 2 plus: Misc Non-Op Revenues 2,077,100 4,115,200 6,192,300 2,077,100 4,115,200 6,192,300 3 less: GLWA O&M (111,879,200) (175,858,900) (287,738,100) (111,879,200) (175,858,900) (287,738,100) 4 less: GLWA O&M Pension (6,037,100) (10,838,400) (16,875,500) (6,037,100) (10,838,400) (16,875,500) 5 plus: DWSD Retail Net Revenue 37,790,500 32,338,700 70,129,200 35,290,500 12,338,700 47,629, Net Revenue 251,086, ,043, ,130, ,586, ,043, ,630,100 7 Net Revenue after Debt Service (6)-(15) 60,589,600 69,057, ,646,900 58,089,600 49,057, ,146,900 Applied to: 8 Non-Op Legacy Benefit Obligations 10,297,000 14,026,200 24,323,200 10,297,000 14,026,200 24,323,200 9 Budget Stabilization Fund Deposit 360,400 2,654,200 3,014, ,400 2,654,200 3,014, WRAP Deposit 2,076,800 2,654,600 4,731,400 2,076,800 2,654,600 4,731, Lease Pmt Deposit to Retail I&E 22,500,000 27,500,000 50,000,000 20,000,000 7,500,000 27,500, Balance Available for I&E (7)-sum(8->11) 25,355,400 22,222,300 47,577,700 25,355,400 22,222,300 47,577,700 Debt Service 13 Senior Lien 145,902, ,907, ,809, ,902, ,907, ,809, Senior Lien and Second Lien 187,944, ,930, ,874, ,944, ,930, ,874, All Bonds, Including SRF Jr. Lien 190,497, ,985, ,483, ,497, ,985, ,483,200 Debt Service Coverage 16 Senior Lien (7)/(13) Senior Lien and Second Lien (7)/(14) All Bonds, Including SRF Jr. Lien (7)/(15) Retail Revenue 88,738,200 70,454,900 88,738,200 86,238,200 50,454, ,693,100 less: DWSD O&M (50,947,700) (38,116,200) (50,947,700) (50,947,700) (38,116,200) (89,063,900) DWSD Retail "Net Revenue" 37,790,500 32,338,700 37,790,500 35,290,500 12,338,700 47,629,200 PRELIMINARY TFG THE FOSTER GROUP 2/19/2016 Page 40

43 AGENDA ITEM 7A Great Lakes Water Authority Financial Services Group Audit Committee Communication Date: February 19, 2016 To: Great Lakes Water Authority Audit Committee From: Deirdre Henry, Treasury Manager Re: January 2016 Cash Flow Analysis Background: As a new entity, the Great Lakes Water Authority has prepared a cash flow analysis to summarize the receipts and disbursements for its first month of operations. To provide perspective for the ending balance at January 31, 2016, the cash balances for the prebifurcation Detroit Water & Sewerage Department as off the quarters ended June 30, 2015, September 30, 2015, and December 31, 2015 are provided. All amounts are unaudited. Analysis: A decreasee in cash was expected for the month of January 2016 for the following reasons. 1. The centralized City of Detroit Accounts Payable Division is closed the last two weeks of December. Accounts payable disbursements in January represent six weeks of invoice processing. 2. Revenue collections represent billings for the beginning of the off peak season. 3. With the operational effective date for the Greatt Lakes Water Authority and stand up of the Detroit Water & Sewerage Department Local Retail System on January 1, 2016, cash transfers pursuant to the lease and master bondd ordinance were executed. The transfers represent seven months of the lease payment (July through January) and one month of operations and maintenance expense. Proposed Action: Receive and file report. Page 41

44 Great Lakes Water Authority Treasurer's Entitywide Cash Flow Report Water & Sewer Combined Preliminary Summary of Activity Unaudited & Subject to Bifurcation Validation January 2016 Cash Inflows & Outflows Jan 16 Beginning Balance, Cash & Investments $ 848,998,931 Cash Received by GLWA Super Receiving Fund Retail Receipts 26,243,625 Water Wholesale Receipts 23,661,728 Sewer Wholesale Receipts 21,815,017 Interest earnings 2,943 Total Receipts 71,723,313 Cash Disbursements by GLWA Accounts Payable (Pre for DWSD) (27,088,768) GLWA Accounts Payable (1,571,186) GLWA Payroll & Benefit Transfers (4,536,299) Debt Service Payments (74,189,001) Total Disbursements (107,385,254) Transfers to DWSD Retail pursuant to Lease and Master Bond Ordinance Operations & Maintenance (6,565,700) Operations & Maintenance Pension (4,156,000) Improvement & Extension (Lease Payment) (16,147,600) Total Transfers to DWSD Retail (26,869,300) Ending Balance, Cash & Investments $ 786,467,689 Page 42

45 Entity wide Cash Balances Report Water and Sewer Funds Combined (Unaudited) As of the Month Ended, DWSD (Pre bifurcation) GLWA Allocation of Ending Bank Balance (Cost Basis) (1) Jun 15 Sep 15 Dec 15 Jan 16 Trust Indenture Funding Senior Lien Debt Reserve $ 89,201,181 $ 89,201,181 $ 88,201,181 $ 88,201,280 Second & Jr Lien Debt Reserve 46,357,623 46,357,623 47,357,623 47,357,865 Debt Service 139,400,122 90,705, ,987,507 81,532,111 Debt Service State Revolving Fund 72,428,584 16,169,227 17,310,388 20,378,668 Construction Bond Funds 158,707, ,290, ,158, ,207,856 Pension Obligation Payment Fund 12,483,300 Water Residential Assistance Program Fund 2,628,700 Budget Stabilization Fund 4,619,100 Improvement & Extension Fund 10,503,911 9,734,544 9,673,311 9,634,280 Emergency Repair & Replacement 56,958,837 56,958,837 56,958,837 57,564,837 Operations & Maintenance Accounts Operations & Maintenance (2) 35,616,225 29,224,826 15,946,179 55,604,205 Operations & Maintenance Pension (3) Accounts in Transition as of January 1, 2016 Retainage 26,241,560 27,094,847 25,722,157 25,169,742 Retail Customer Refund 13,549 13,351 17,399 16,110 Detroit Residential Water Assistance Program 1,097,184 1,097,023 1,064,312 1,064,312 Purchasing Card 41,205 35,377 79,571 41,172 Super Receiving Fund Pending Allocation 46,655,669 90,669, ,558, ,999,387 Water/Sewer Wholesale Receiving Funds 92,453, ,956,889 69,963,131 62,964,765 Ending Balance, Cash & Investments $ 775,676,750 $ 746,509,806 $ 848,998,931 $ 786,467,689 Notes (1) This report is on cost basis whereas market value is used for financial reporting. (2) Cash in bank will not equal financial reporting due to reclassifications and transfers in process at month end. (3) Operations & Maintenance Pension subaccount established in February 2016 in accordance with amended GLWA Master Bond Ordinance. Page 43

46 Great Lakes Waterr Authority Audit Committee Meeting Agenda Friday, February 19, 2016 at 8:00 a.m. 5th Floor Board Room, Water Board Building 735 Randolph Street, Detroit, Michigan GLWater.org AGENDA 1. CALL TO ORDER 2. ROLL CALL 3. APPROVAL OF AGENDA 4. APPROVAL OF MINUTES A. February 5, PUBLIC PARTICIPATION 6. OLD BUSINESS A. FY 2017 and 2018 Financial Planning Update Including: Implementationn of Lease and Related Documents including Cash Transferss Financial Planning Implications for Use of Lease Payment Upcoming Goals & Objectives Session DWSD R Current and Next Year Budget Update Presenter: Nicolette N. Bateson, CPA, Chief Financial Officer/Treasurer Proposed Action: None. B. Update: Highland Park Billing & Collections (verbal) Presenter: William M. Wolfson, Chief Administrative and Compliance Officer/General Counsel Proposed Action: None. 7. NEW BUSINESS A. Treasurer s Cash Flow Report for Januaryy 2016 Presenter: Deirdree Henry, Treasury Manager Proposed Action: Receive and file report. 8. REPORTS A. ERP and HRIS/Payroll Implementation Verbal Update Mike Huber, Finance Director; Butch Johnson Procurement Director; and Denis DesRosiers, ERP Program Director; Nicolette N. Bateson, CFO

47 9. INFORMATION 10. LOOK AHEAD Next GLWA Board Meeting: Wednesday, February 24, 2016 at 2 pm Next Audit Committee Meeting: Friday, March 4, 2016 at 8 am 11. OTHER MATTERS 12. ADJOURNMENT