COUNCIL COMMUNICATION

Transcription

1 1000 Englewood Pkwy Council Chambers Englewood, CO AGENDA City Council Study Session Monday, November 5, :00 PM Council dinner available at 5:30 p.m. I. Englewood Environmental Foundation, Inc. (EEF) Discussion a. Public Works Director Maria D'ndrea and staff will be present to give an overview of the Englewood Environmental Foundation, Inc (EEF) and discuss two recommendations for future Council action: A process by which the City Council would become the Board members for EEF; and A forensic audit of EEF finances from inception to current date Englewood Environmental Foundation, Inc. (EEF) DIscussion - Pdf Please note: If you have a disability and need auxiliary aids or services, please notify the City of Englewood ( ) at least 48 hours in advance of when services are needed. Page 1 of 21

2 COUNCIL COMMUNICATION TO: FROM: DEPARTMENT: Mayor and Council Maria DAndrea Public Works DATE: November 5, 2018 SUBJECT: Englewood Environmental Foundation, Inc. (EEF) Discussion DESCRIPTION: Englewood Environmental Foundation, Inc. (EEF) Discussion RECOMMENDATION: Staff will present an overview of EEF and discuss two recommendations for future Council action: A process by which the City Council would become the Board members for EEF; and A forensic audit of EEF finances from inception to current date PREVIOUS COUNCIL ACTION: On March 19, 2018 the City Council voted not to enter into a Professional Services Agreement for a performance audit of both the Englewood Environmental Foundation and the Englewood McLellan Reservoir Foundation. SUMMARY: The Englewood Environmental Foundation, Inc. (EEF) was formed on August 14, 1997, to take title to certain land and improvements which were a part of the Cinderella City site and to perform certain environmental remediation services on the property. EEF was established, per its Bylaws, with a three-member Board made up of three staff persons holding the following positions: Finance Director, Engineering Manager, and Director of Neighborhood and Business Development. The makeup of the current EEF Board consists of the Finance Director, the Director of Public Works, and the Director of Community Development. A 12-acre portion of the CityCenter, owned by Weingarten Realty, was foreclosed on in summer The potential for redevelopment of the site creates a potential conflict of interest for the current staff/eef Board members. Given the opportunity for redevelopment of the CityCenter site and this potential conflict of interest, staff is recommending that the City Council become the Board members of EEF, effective January 1, Staff also recommends that a forensic audit be conducted of EEF's finances from inception to current date in order to provide an independent analysis, with findings, of any issues. ANALYSIS: The Englewood Environmental Foundation, Inc. (EEF) was formed on August 14, 1997, to take title to certain land and improvements which were a part of the Cinderella City site and to Page 2 of 21

3 perform certain environmental remediation services on the property. Articles of Incorporation and Bylaws were established. The Cinderella City lands were transferred from the city to EEF on November 3, Per the terms of the IRS determination of September 29, 1998, the Foundation was created by the city to: (i) Serve as its designee to receive title to the bulk of [Cinderella City] (ii) Enter into a bargain purchase of the balance of [Cinderella City] (iii) Perform and hold title to [Cinderella City] during the performance of, environmental remediation of the property, and (iv) Retain consultants to formulate a multiple use, transit oriented development plan for the property Certificates of Participation (COPs) were issued in Dec to fund rehabilitation of the current Civic Center building; re-financing took place in 2005 and again in The final debt service payment is due June 1, EEF was established, per its Bylaws, with a three-member Board made up of three staff persons holding the following positions: Finance Director, Engineering Manager, and Director of Neighborhood and Business Development. The makeup of the current EEF Board consists of the Finance Director, the Director of Public Works, and the Director of Community Development. So, the positions described in the Bylaws are not consistent with current positions of Board members. A portion of two staff members' salaries are paid to the city by EEF: 45% of an Engineering Technician to oversee maintenance and repairs to the common area property 5% of the Finance Manager to pay invoices, prepare financial reports, etc. Through September, 2018, $26, has been paid from EEF to the City of Englewood for staff salaries, (see Attachment - Transaction List by Vendor City of Englewood). To date, the total of all payments from EEF to the city (including the amount list above) is $45, In the summer of 2018, 12 acres of the CityCenter lands, owned by Weingarten Realty, went into foreclosure. The potential for redevelopment of the site creates a potential conflict of interest for the current staff/eef Board members. Therefore, staff recommends that the City Council become the EEF Board members in order to not only avoid this potential conflict of interest but also to actively participate and engage in site redevelopment discussions and to provide direction & insights to staff. Staff would still serve to provide technical and financial support, the only difference would be that all Board actions would be contemplated and made by the City Council, as the EEF Board instead of by staff. Minutes of the meetings would be created, approved, and posted to the city's website as is currently done for EEF Board meetings. With the change in oversight of the Board, this would also be an ideal time to consider evaluating EEF's finances through a forensic audit. A forensic audit is the process of reviewing Page 3 of 21

4 a company's financial statements to determine if they are accurate and lawful. While the city conducts an annual audit, which includes EEF, a forensic audit would help to answer questions & respond to accusations from the public regarding possible mismanagement of funds. Staff has estimated the cost for this type of audit to be approximately $55,000 and take between 3-6 months to complete. Funds from EEF's fund balance would be used to pay for the audit. At the October 24, 2018, Study Session, Dan Poremba, Redevelopment Manager, referred to the EEF reserve. In response to the question raised by Council about this reserve. it is the Central Cash-Unrestricted balance. As of September 30, 2018, the reserve amount is $322,388.98, (see attached EEF Balance Sheet). These funds are collected as a part of the Administration Fee charged to the Common Area Maintenance (CAM). They are not a part of the CAM Maintenance Costs. The Administrative Fee charged to CAM is somewhat like a property management fee charged by an HOA, for example and are used to cover insurance, legal fees, bank service fees and telephone costs. Any remaining funds are kept in reserves in the Central Cash-Unrestricted balance account. These funds can be spent at the Board's discretion, there are no restrictions. FINANCIAL IMPLICATIONS: There are no costs associated with changing the Board makeup. The estimated cost of a forensic audit is approximated at $55,000. Formal proposals, with more accurate costs, would be solicited. The EEF's Central Cash-Unrestricted fund balance would be used to pay for the audit. ALTERNATIVES: The alternatives include keeping the current Board members or assigning different staff members to serve on the Board. This could lead to potential conflicts of interest, as outlined above. EEF is included in the annual audit conducted for the city. The alternative to a forensic audit is not doing any further investigation into the finances of EEF and continuing to perform an annual audit. CONCLUSION: Given the potential conflict of interest and the opportunity to have City Council take a more direct role in any potential redevelopment, staff is recommending that the City Council become the Board members of EEF, effective January 1, Staff also recommends that a forensic audit be conducted of EEF's finances from inception to current date. ATTACHMENTS: EEF Balance Sheet (as of 9/30/18) Draft resolution CityCenter Ownership Map Transaction List by Vendor City of Englewood Presentation Page 4 of 21

5 RESOLUTION NO. SERIES OF 2018 A RESOLUTION SUPPORTING THE MODIFICATION OF THE BYLAWS OF THE ENGLEWOOD ENVIRONMENTAL FOUNDATION TO NAME THE CITY COUNCIL OF THE CITY OF ENGLEWOOD AS THE BOARD OF DIRECTORS OF THE ENGLEWOOD ENVIRNOMENTAL FOUNDATION. WHEREAS, On August 14, 1997, the Englewood Environmental Foundation was established through its Articles of Incorporation; WHEREAS, The Englewood Environmental Foundation was created to perform every act necessary or incidental to or connected with the furtherance of its exempt purposes, including, but not limited to, taking title to certain land and improvements which is[were] part of the Cinderella City Shopping Center located in the City of Englewood, County of Arapahoe, State of Colorado and performing or arranging for the performance of certain environmental remediation services with respect to such property ; WHEREAS, Article IV of the Articles of Incorporation of the Englewood Environmental Foundation, entitled Board of Directors, provides that "[t]he number of directors, their terms of office and the manner of their selection and election shall be determined according to the Bylaws of the Corporation from time to time in force." WHEREAS, The Second Amended Bylaws of the Englewood Environmental Foundation were adopted on December 29, 1998, and provides: The affairs of the Corporation shall be managed solely by a Board of three persons who shall be appointed by the City Council of the City of Englewood, Colorado (the ''City"). Unless otherwise designated by the City, the three persons shall be those individuals holding the positions with the City of Englewood, Colorado, of Finance Director, Engineering Manager, and Director of Neighborhood and Business Development. WHEREAS, The anticipated redevelopment of the area of development upon which the Englewood Environmental Foundation has authority will necessitate the Director of Finance, Public Works Director, and Director of Community Development to perform services in association with their underlying positions with the City of Englewood; WHEREAS, The terms of the I.R.S. determination of September 29, 1998, provides: the Foundation was created by [Englewood] to (i) serve as its designee to receive title to the bulk of [Cinderella City] from the owner thereof, (ii) enter into a bargain purchase of the balance of [Cinderella City], (iii) perform, and hold title to [Cinderella City] during the performance of, environmental remediation of the property, and (iv) retain consultants to formulate a multiple use, transit oriented development plan for the property which is acceptable to [Englewood] (including the use of a portion thereof as a new City Hall). This will protect [Englewood] from potential liability which might be imposed on the owner of property arising out of environmental contamination; allow environmental contractors, property managers, land use planners, and others to be retained without going through public bidding processes required by [Englewood]; permit the land use planning process to proceed while allowing [Englewood] to limit its direct involvement to the performance of its normal land use review and approval function; and shelter [Englewood] from financial responsibility relating to the development and operation of the property. 1 Page 5 of 21

6 WHEREAS, The terms of the I.R.S. determination of September 29, 1998, provides: [t]he directors and officers of Foundation are all employees of [Englewood] who are appointed by [Englewood] to serve in those capacities. Foundation's office space is located-in a [Englewood] building ; WHEREAS, The Director of Finance, Director of Public Works Director, and Director of Community Development believe that such redevelopment will require them to make decisions for the City in association with their positions as directors for the City, as well as make decisions for the City in association with their positions as directors for the Englewood Environmental Foundation, which could create an appearance of conflict of interest in association with such redevelopment; WHEREAS, To maintain the I.R.S. status as a 170(b)(1)(A)(v) entity, the Englewood Environmental Foundation should maintain all of the key elements recognized by the I.R.S. in its letter ruling the Englewood Environmental Foundation a 170(b)(1)(A)(v) entity, including that all of Foundation's directors and officers are [Englewood] employees who are assigned to work on Foundation matters ; WHEREAS, Per the terms of the Certificates of Participation (COP) obtained to finance the purchase of the Englewood Civic Center and the environmental remediation associated with the 53 acre site, as long as the COP remains outstanding EEF may not be dissolved. However, the COP s and the associated lease purchase agreement by and between the Englewood Environmental Foundation and the City of Englewood for the Civic Center is set to expire in 2023, necessitating some determinations by the City regarding the future of the Englewood Environmental Foundation; and WHEREAS, Several steps associated with concluding the Englewood Environmental Foundation will require the active involvement of the City Council, including a determination of whether to prepay the remaining COP. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ENGLEWOOD, COLORADO, THAT: Section 1. The City Council for the City of Englewood, Colorado, hereby supports the amendment of paragraph 4A of the Englewood Environmental Foundation s bylaws as follows: 4-A. Board of Directors. The affairs of the Corporation shall be managed solely by a Board of three seven persons who shall be appointed by the City Council of the City of Englewood, Colorado (the ''City"). Unless otherwise designated by the City, the three seven persons shall be those individuals holding the positions of members of the City Council of with the City of Englewood, Colorado, of Finance Director, Engineering Manager, and Director of Neighborhood and Business Development. The City Council of the City of Englewood shall assume the role of Board of Directors of the Englewood Environmental Foundation effective January 1, Section 2. The above amendment to the bylaws shall be approved by the current Board of Directors, and filed with the Colorado Secretary of State s Office prior to January 1, Page 6 of 21

7 ADOPTED AND APPROVED this day of, ATTEST: Linda Olson, Mayor Stephanie Carlile, City Clerk I, Stephanie Carlile, City Clerk for the City of Englewood, Colorado, hereby certify the above is a true copy of Resolution No., Series of Stephanie Carlile, City Clerk 3 Page 7 of 21

8 Englewood Environmental Foundation, Inc 10/26/18 Balance Sheet As of September 30, 2018 Sep 30, 18 Sep 30, 17 ASSETS Current Assets Checking/Savings Central cash-unrestricted 322, , Cash-Designated for CAM reserve 257, , EEF-Checking 208, , Total Checking/Savings 788, , Accounts Receivable Accounts receivable - CAM 116, , Interest receivable 2, , Rent receivable-other , Due from City of Englewood-Rent 14, , Total Accounts Receivable 133, , Other Current Assets Prepaid insurance 77, , Rental Deposit Total Other Current Assets 77, , Total Current Assets 999, , Fixed Assets Land and land improvements 30,242, ,242, Operating Machinery & Eqpt. 26, , Accumulated depreciation (17,838,612.72) (17,184,521.30) Total Fixed Assets 12,430, ,084, Other Assets Receivable-capital lease-lt 6,813, ,095, Deferred Loss on Refunding 69, , Total Other Assets 6,882, ,189, TOTAL ASSETS 20,311, ,194, LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable General Deposits 5, , Interest payable-cop 14, , Total Accounts Payable 19, , Total Current Liabilities 19, , Long Term Liabilities COP Payable-LT 6,882, ,189, Total Long Term Liabilities 6,882, ,189, Total Liabilities 6,902, ,211, Equity Contributed Capital 14,530, ,530, Opening Bal Equity 162, , *Retained Earnings (1,540,970.84) (917,277.01) Net Income 257, , Total Equity 13,409, ,983, TOTAL LIABILITIES & EQUITY 20,311, ,194, Page 1 Page 8 of 21

9 Ownership s Englewood Environmental Foundation, Inc. City of Englewood Wal-Mart Real Estate Business Trust Community First National Bank ShowBiz Pizza Time, Inc. Josephine Arlene Selbe Trust, et al. 801/901 Englewood Parkway Investors, LLC WRI-GDC Englewood, LLC (ground floor retail) Building owned by Land Owner D A R T M O U T H Building owned by Miller Weingarten Realty 4.66 Acres E A S T M A N Acres 4.07 Acres Acres I N C A H U R O N G A L A P A G O F O X E L A T I Acres Acres Acres F L O Y D Acres S A N T A F E 3.49 Acres 1.44 Acres 5.97 Acres Acres Acres Acres 4.93 Acres E N G L E W O O D P K W Y Acres Acres 2.96 Acres 2.86 Acres Acres Acres 1.15 Acres 2.98 Acres Ac Acres I N C A 3.00 Acres G A L A PA G O Acres U. S Acres Acres City Center Owners hips N SCALE: 1 inch = 250 feet DATE: January 22, 2010 Page 9 of 21

10 3:00 PM 10/30/18 Englewood Environmental Foundation, Inc Transaction List by Vendor-City of Englewood January 1 through September 30, 2018 Type Date Memo Clr Amount City of Englewood Bill 01/31/2018 Salaries 2, Bill 01/31/2018 ServiCenter storage rental Bill Pmt -Check 01/31/2018 Monthly billing -3, Bill 02/28/2018 Salaries 3, Bill 02/28/2018 ServiCenter storage rental Bill 02/28/2018 City Traffic Department services provided to EEF 5, Bill Pmt -Check 02/28/2018 Monthly billing -9, Bill 03/31/2018 Salaries 2, Bill 03/31/2018 ServiCenter storage rental Bill Pmt -Check 03/31/2018 Monthly billing -3, Bill 04/30/2018 Salaries 3, Bill 04/30/2018 ServiCenter storage rental Bill 04/30/2018 Vehicle maintenance Bill Pmt -Check 04/30/2018 Monthly billing -4, Bill 05/31/2018 Salaries Bill 05/31/2018 ServiCenter storage rental Bill 05/31/2018 Vehicle maintenance 2, Bill 05/31/2018 signs Bill Pmt -Check 05/31/2018 Monthly billing -4, Bill 06/30/2018 Salaries Bill 06/30/2018 ServiCenter storage rental Bill 06/30/2018 Vehicle maintenance Bill Pmt -Check 06/30/2018 Monthly billing -1, Bill 07/31/2018 Salaries 13, Bill 07/31/2018 ServiCenter storage rental Bill 07/31/ Audit fee 2, Bill Pmt -Check 07/31/2018 Monthly billing -16, Bill 08/31/2018 Salaries Bill 08/31/2018 ServiCenter storage rental Bill 08/31/2018 Concert security reimbursement Bill Pmt -Check 08/31/2018 Monthly billing Bill 09/30/2018 Salaries Bill 09/30/2018 ServiCenter storage rental Bill 09/30/2018 Vehicle maintenance 1, Bill Pmt -Check 09/30/2018 Monthly billing -2, Salaries 26, ServiCenter Storage Rental 6, Vehicle maintenance 4, Other 7, Total payments from EEF to City of Englewood 45, Page 1 of 1 Page 10 of 21

11 Englewood Environmental Foundation, Inc. Evaluation November 5, 2018 Page 11 of 21

12 Discussion Points Discussion Purpose: Determine process for City Council to become the Board members for EEF Determine if a forensic audit of EEF finances should be conducted Page 12 of 21

13 Overview Page 13 of 21 EEF was established on August 14, 1997 to perform every act necessary or incidental to or connected with the furtherance of its exempt purposes, including, but not limited to taking title to certain land and improvements which is [were] part of the Cinderella City Shopping Center located in the city of Englewood, County of Arapahoe, State of Colorado and performing or arranging for the performance of certain environmental remediation services with respect to such property Per the terms of the IRS determination of September 29, 1998, the Foundation was created by [Englewood] to: (i) Serve as its designee to receive title to the bulk of [Cinderella City] (ii) Enter into a bargain purchase of the balance of [Cinderella City] (iii) Perform and hold title to [Cinderella City] during the performance of, environmental remediation of the property, and (iv) Retain consultants to formulate a multiple use, transit oriented development plan for the property

14 Overview Articles of Incorporation & Bylaws were established on August 14, 1997 Lands were transferred from the City to EEF on November 3, 1997 Second Amended Bylaws (December 29, 1998) allows for Council to determine Board makeup and establishes Board as those individuals holding the following positions for the city: o Finance Director o Engineering Manager o Director of Neighborhood and Business Development Page 14 of 21

15 Overview Certificates of Participation (COPs) were issued in Dec to fund rehabilitation of the current Civic Center building; re-financing took place in 2005 and again in 2015 The final debt service payment is due June 1, 2023 Page 15 of 21

16 EEF Board Current EEF Board members: Director of Public Works Director of Community Development Interim Finance Director EEF Board duties consist of managing: Common Area Maintenance (CAM) agreements Sub-lease in the Bally s/24 Hour Fitness Building Certificates of Participation (COPs) Page 16 of 21

17 EEF Board A 12-acre portion of CityCenter owned by Weingarten Realty was foreclosed on via an Arapahoe County Public Trustee s sale in summer 2018; the foreclosure covers approximately 219,000 square feet of space Potential for redevelopment of site creates a potential conflict of interest for staff/current EEF Board members Page 17 of 21

18 EEF Board Staff recommends modifying EEF s Bylaws to remove the current Board members and assign the seven City Council members as the EEF Board Effective January 1, 2019 Page 18 of 21

19 EEF Finances Page 19 of 21 Questions have been raised by the public regarding management of EEF funds Expenses are approximately $1.4M per year for items such as: o Snow plowing/snow removal o Irrigation/fountain maintenance o Site maintenance o Site security o Insurance Costs of city personnel are recouped from EEF (0.45 of Engineering Technician and 0.05 of Finance Manager) o $26, in salaries to date in 2018 o $45, total (including salaries) to date in 2018

20 EEF Finances Staff recommends conducting a forensic audit of EEF s finances from inception to current year Approximate cost = $55,000 but difficult to estimate without more information; typically based on number of transactions/documents to be reviewed Approximately timeline = 3-6 months Page 20 of 21

21 Questions & Discussion Discussion Purpose: Determine process for City Council to become the Board members for EEF Determine if a forensic audit of EEF finances should be conducted Page 21 of 21