HomeMy WebLinkAbout09-11-18 Personnel and Finance (#7) 1.
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OFFICE OF THE CITY CLERK
KAREEMAH FOWLER, CITY CLERK
PERSONNEL & FINANCE SEPTEMBER 11, 2018 5:00 P.M.
Committee Members Present: Karen White, Regina Williams-Preston
Committee Members Absent: Gavin Ferlic, John Voorde
Other Council Present: Jake Teshka, Tim Scott, Oliver Davis, Jo Broden
Other Council Absent: Sharon McBride
Others Present: Kareemah Fowler, Bob Palmer, Bianca Tirado
Presenters: James Mueller, Jennifer Hockenhull
Agenda: DCI Operations and Grants
Debt Overview
Committee Chair Karen White called the meeting of the Personal and Finance Committee to
order at 5:00 p.m., introduced the members and outlined the agenda.
Department of Community Investment
James Mueller, Director of Community Investment, with offices on the 14th Floor of the County-
City Building stated,Good afternoon, Councilmembers. I appreciate the opportunity to present the
2019 Budget proposal. There's two (2)parts to this,tonight is looking at the Operations and Civil
City Funds. Tomorrow night,we will look at the Redevelopment Fund. Let's get right into it. We
are looking at Fund #211, where the operations come out of. We'll look at the key performance
indicators that we track, accomplishments, and programming. Tomorrow we will look at the role
playing, depending on timing. I think the presentation will be a little shorter. The mission that the
department worked on before I joined was this: Community Investment for a stronger South Bend.
They do it three (3)ways: attracting,retaining, and growing businesses, connecting residents, and
economic opportunities and planning for a vibrant difference. We are looking for more of an
organization structure and what you see here is a current organization,Department of Community
Investment and Building Department. There are fourteen(14) currently in DCI,there's a Planning
and Community and Resources team, there's a Neighborhood Development team, there's a
Business Development team, and there's an Engagement and Empowerment team. You see the
positions under there (Referring to the Presentation available in the City Clerk's Office). On the
other side, you'll see more of this in the Building Department presentation next week, but this is
the current structure. There's a Building Commission,design Product Specialist,and a Zoning and
Services Administrator, when Building used to administer zoning ordinances. That switched the
beginning of this year with the Area Plan Commission. Referring to the presentation, he stated,
INTEGRITY' SERVICE'ACCESSIBILITY
JENNIFER M.COFFMAN BIANCA L.T n Ano JOSEPH R.MOLNAR
CHIEF DEPUTY/DIRECTOR OF OPERATIONS DEPUTY/DIRECTOR OF POLICY ORDINANCE VIOLATION CLERK
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The proposed organization for 2019 is you see the changes here noted in blue or yellow, changes
to existing positions from the Building Department and Community Investment. The green are
new additions or proposed new positions. Key changes here are the Business License
Administrator position that was in the Business Development team in DCI would move toward the
centralized licensing and registration over there on the right on the building Commissioner side.
The previous Zoning Administrator would move over to the Planning Team which would be the
lead staff member to oversee the new South Bend Advisory Municipal Planning Commission.
Similarly, the Administrative Assistant that used to work on BZA activities in the Building
Department would move to help cover the processing of the Planning Commission and BZA
Activities in DCI. The Zoning Specialist new position would help support the new Zoning
Commission and the Engagement Specialist. When we organized this team last year, we weren't
one-hundred percent (100%) sure exactly the profile, but we have learned in the past eight (8)
months is that there is a lot of bandwidth for economic empowerment programing and grant
opportunities. We will look at that tomorrow and we haven't been able to have this much focus on
the direct neighborhood engagement, although there are some early successes there and this is a
proposal to make sure that we cover both sides of that adequately. So this side just summarizes
what I just said. There's the transitioning of the two (2) positions for the Planning Commission
and creating the new position, the Zoning Specialist. There's the consolidation of the Licensing
Registration Activities. The other piece that we didn't talk about was creating a new part-time
License Auditor to verify contractor licensing and this would be the cost covered by donations
from folks who want to think we are leaving money on the table by not enforcing contractor
licensing right now and associated fees. They are willing to put some money in to try it out in a
pilot to see if we can start collecting and seeing a revenue increase for the long term.Finally,there
is an internal shuffle where we have a Business Analyst that was in the DCI Fund from a previous
position that will be formally moved into the Innovation and Technology Analytics Team and then
the cost will be allocated back to us.
He continued, for the Community Investment budget, we touched on several funds. Today we are
focusing on the orange funds, specifically the Operations #411 Fund and programing #404 Fund,
#408 Fund and tomorrow we are focusing on the bright funds. The green funds are managed by
DCI and a lot of those are debt service funds and have the same discussion that other funds do. We
are trying to reduce the budget where all the different grants and different sources come through,
the question is how do you make that impact? Similarly, to how we look at the overall budget,
when we focus on enterprise funds individually and then we look at the overall budget of the
General Fund plus income tax funds as these are the operations funds, if one (1) fund does this,
what matters is then how do they look. Here are the questions, are we are getting grant revenue in,
we're doing contract revenue in all these different places. The real questions are, what is the net
difference on EDIT? What is the net difference on what we are proposing? What does it do to the
Operations Funds? The top line is a $325,000 increase in that EDIT transfer in 2018 and then we
have broken it down to what are the reasons for those changes. The first (1St) one (1) is what are
the internal changes it's the $169,000 of that, it's the two-percent (2%) raises and the allocations
and things from the Central Services and also there is the audit cost increase of$9,700, but then
you will see that first (1st) line in the subtotal is $182,618. As President Scott has mentioned on
several occasions,there's been some transitions in DCI over the last few years, so there was a time
where we had accumulated a surplus. So last year the Controller's Office asked us to spend down
the account and we built that up this year. But that was all seen as a one (1) time event to get the
fund back in toward the reserve target.And then you see some of the other changes externally. The
two (2)positions that are not new,this is salary with benefits. We will get into a salary discussion
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CITY OF SOUTH BEND I OFFICE OF THE CLERK
next week, but there are mid to high fifties (50's) in salary but averaging about $75,000-$80,000
for each of the positions with benefits. This is where the net new burden on the Operations Funds
is coming from our proposed budget and that's the breakdown. Our PDI that we track, our private
investments for projects, owner occupied rehab,home buyer assistance, and residential ends. You
can see we want to report an update of where we are with ADI's of last quarter and quarter two (2)
at the end of June; we are roughly on track with 2018 goals. Those were actually stretched goals
of what we thought,but we are on track, even with the tightening with unemployment rate. Going
through some accomplishments on inflation, transportation, and Parks and Public Safety, we are
excited about the Martin Luther King,Dr. street;we removed a lot of uneasy pavement and opened
new development opportunities. There's the City Cemetery improvements, the Colfax two (2)-
way and LaSalle intersection conversion. There's the completion of the Western Avenue Phase II
which was last Fall.There's the cross streets that are located on Colfax by the Morris and stretching
all the way down to Main Street. There are the renovations to Charles Black Recreation Center,
that are expected to be completed in the upcoming weeks. There's been a lot of design work
anticipated from the TIF Fund, in addition to the general obligation bond for parks and trails
projects. The Howard Park project is coming along. The Seitz Project is a little behind due to the
Notre Dame Hydro Project,but more or less looking to be completed in 2020. There's also been a
lot of Public Works investment, if you recall we passed the water rates and we are committed to
substantial TIF resources for water capital projects and there are still more plans for next year.
He went on,we were excited for the South Shore's alternative study,we think we got a lot of good
information about additional alternatives than moving it from one (1) side of the airport to the
other and we look forward to continuing dialogue on that. Fire Station#4 has opened and that was
with the use of the River West TIF Funds, and that was paid for in cash and not with a bond. We
try to use cash when it's available, but oftentimes it's been appropriate to use bond finances for a
fire station like that. Planning a Neighborhood Revitalization, we are excited to do the Portage
Neighborhood Visioning,a week-long session,and we have some proposals coming out of that for
next year in tomorrow's presentations.In the Lafayette building,the roof is on,we are still working
to get the skylight, and it is working towards stabilization. The Skylight is custom, you would
think we'd have it on by now, maybe next year. We completed the housing market study, which
provided a lot of good data and places we are trying to promote zoning from a regulatory standpoint
and also from an incentive and financing standpoint. The Council allocated a substantial amount
of resources for zoning reform for this year and we have been doing some quick fixes, but those
have taken some time. We hope to bring more changes regarding the Zoning Code to Council next
year, as we have been working with a consultant. The Neighborhood plans, we are hoping to use
some of the dollars on the new NNN plan starting later this year. I know we did a plan a few years
ago, but it wasn't a full master plan. This neighborhood plan would go towards our housing pilot
that we have been given to take on. We are also excited to have the Incremental Developmental
Alliance here to help figure out performance and what is standing in the way of some of these
neighborhood developments in different areas. Homelessness has received a lot of attention
recently, we don't have as many accomplishments as we hoped for at this time, but I will say we
are getting close to a weather amnesty site for this winter and we are looking to get a group and
make positive progress on the intake center location; which has been good news in the last few
days.
He continued, the Engagement and Economic Empowerment team, they started out the year with
bringing in the Federal Reserve for the Inclusive Empowerment Summit hosted at the NNN and
started to look at how we can tap into the CDIF in Fort Wayne, IN and other cities. The NNN in
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CITY OF SOUTH BEND ; OFFICE OF THE CLERK
collaboration with our team was able to get the building inclusion grants from the U.S. Conference
of the Mayors. We talked about this not too long ago, when you have the Love Your Block
Program. We are a JPAL Grant finalist, which is looking at the rental control trail for different
programs regarding jobs for American graduates. When the innovation group comes, you'll hear
more about the Bloomberg Mayor's Challenges and the Public Narrative Workshop,this is looking
to address the last mile gap in transportation for people to get to work. If they do take Transpo
from near their house to where they go on the route when the employer is a mile away, is there a
way that the ride share can help fill gaps to where the public transit can't address?Bloomberg gave
us $100,000 to try out this pilot and fronted the pay for the ride shares to see if it would increase
employee dependence.At some point,we could make the business case for employers to cover the
cost as it shows that employees show up for work reliably. We have done two (2) neighborhood
empowerment fairs with partners and we are also continuing to support the Bowman Creek
Educational Ecosystem and looking for ways to expand their reach potentially to other
neighborhoods. In terms of development on the opening side you saw a lot of these in the tax
abatement presentation period last night—The Marriot,The Aloft, Holiday Inn Express, etc.,JMS
down around the corner, and The Riverwalk development down by the Transpo Site. Another one
(1) that may have received some attention with invested interest by Sample Street, is LimeBike,
which has moved their offices there. I would encourage people to check that place out. We finally
closed on the Michigan Street Shops. We are not the best landlord it is just not something that is
the strong suit of government; so we are excited to get that in the private sector. We were able to
move the Hamilton Towing Block. The other exciting one (1) that just closed about a month ago
was JSK, which just took ownership of the Football Hall of Fame. We were going to get the lot to
build the Marriot Hotel Project, if we are able to expedite that sale of ownership of the Hall of
Fame this year.
He went on, we also moved the VA Clinic and we are hoping to see some tenants in there in the
upcoming months and some miscellaneous small parcels. Underway there are several large
projects including the Eddy Street Phase II, which is moving at a rapid pace. The Studebaker
Project, you can see the pace of the project coming along. The windows are ready to go in and the
brick work and detailing has happened. JC Luneburg should be restored later this year, maybe
moving in early next year. That one (1) is looking to be a City-Wide liquor store. The Westside
Business Support Center on Lincoln Way has opened and will have a broader coming out party in
the next coming weeks. It's an exciting opportunity to connect with the small businesses on the
Westside. Another exciting announcement this year is the Washington Colfax Apartments. We
had a chance to tour them early this year. There is a lot of promise for those that are still in good
shape, we are excited to bring those back online working with South Bend Heritage. Finally, the
South Bend Chocolate Factory site,this is the envisioned relocation of the South Bend Chocolate
Factory as well as museum and tourist destination and we will probably have more to share about
that in the coming weeks as well. The projects that have not started yet,The Commerce Center has
had several challenges and is looking to break ground later this fall. The Franklin Street Project,
we brought a tax abatement before you a couple of months ago and we are looking to bring that
forward.The Technology Resource Center in Ignition Park,we talked about in the previous budget
and we found a way to bring this forward and we would love an opportunity to discuss this in
detail. It's a very exciting project that deserves more time to discuss. The drive-thru coffee shop
and tax abatement were scheduled to go this fall but looking at the different construction materials,
it's going to begin next year. The two (2) tax credit projects which are dependent upon the low-
income housing tax credit are the big replacement for NNN and historic Lincoln Way West homes.
This is a map roughly where these projects are and when they will take place.
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CITY OF SOUTH BEND I OFFICE OF THE CLERK
Here is a map of where these projects are, it's hard to get them exactly where they belong. So let's
get into what we are looking to do going forward. These are our COIT programing proposals; the
top line is $1 million for development for construction financing. This is the same amount that we
asked for in this year's budget. This is the place where we have been trying to figure out how to
make this work. The idea here is that we would combine this year's appropriation with next year's
appropriation and have a fund where we could really unleash the housing development. The
$600,000 for the owner occupant home repair program,this is double the request of what we asked
for last year, which was $300,000 in addition to the federal funds we apply towards home repair.
We keep expanding it to two (2) different corridors. This started in recent times along the
Western/Lincoln Way Corridors. We are expanding to Mishawka Ave. and Miami Street. We are
looking to expand it to Linden Street working with Councilmember Preston. In the discussion of
the gateway center, we have also realized that it is a straight corridor coming on the Southside of
town that we want to look at as well. We are excited to expand this program with more investment
we can attract through our major corridors.
He continued, then we have $250,000 for the Property Acquisition Commissioner sale, this is
where we buy our lots during a tax sale and we only pursue these in target areas from our plan;the
Southeast Master Plan or the Westside/Main Street Plan as they are our target areas. So this is a
few thousand dollars per property just to do the fees assessed with it. This will help us acquire
properties to do projects down the road. Then there is the proposed strategic private property to
facilitate neighborhood plans. It's also called urban acupuncture in some circles. This is to look at
properties that are problematic for some neighborhoods. If you could address these properties in
the neighborhood, it would be so much better off. So that is what this proposal is for to get us
resources to get those into better appearance and moving into a positive direction. There's also
$200,000 for small scale development into neighborhoods to figure out the barriers, and why we
aren't seeing the same types of development in certain areas. There are things you need to do to
centralize and promote development in our neighborhoods as well. There is an $800,000
transportation project,this is roughly level that is trying to fix the streetscapes in a TIF area where
there is this problem. We can make it safer and neighborhood friendly—depending on the zoning
type it is in. The next two (2) items are a continuation of this year's appropriation to implement
non TIF cemetery plans and non-plans. There is $197,000 in miscellaneous pieces; these are
different cost centers that are required to move land and work on development. The tree
maintenance project with Venues,Parks,and Arts is$130,000 and$45,000 for some neighborhood
programing in addition to other development and tool creation for lots.
He went on, going into Engagement and Economic Empowerment,we are looking at$125,000 for
neighborhood organization support. Tentatively we have discussed$50,000 for the Neighborhood
Resource Connection. This is twice (2x) what we have funded historically, it's half(1/2) of what
we funded this year.It's been a big one(1)time use. If you are looking at the three(3)-year average,
that's where it's at. There is also a historic contract around $75,000 that we are in. We are also
looking at how can we move these funds, and have it more competitively granted or metrics that
are across the City. Then we are making sure we are getting the best outcome for the dollars for
the organization support. We also put in$20,000 outreaches for census outreach. Next year it will
be important to make sure everything is accounted for. We want to keep people informed in
relation to Washington, we want to get ahead of that. We had $25,000 which is like what we had
for neighborhood engagement. This is also known as the quantitative housing study, where we
went to knock on 1,000 doors/ households to collect data. I know we had a briefing before the
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license housing committee a couple of months ago,we look forward to the completion of the study.
We have $350,000 which is meant to be the match for a federal grant application which is much
larger,but even if we don't get money,this is for the lead issue. We have $100,000 for permanent
supportive housing that is in line with a commitment for the homelessness strategy. Tomorrow we
will discuss the Redevelopment Funds.
He continued, Finally, there is the business development component, there's $520,000 for our
Pathways Development Component. There is the membership and partnerships with regional
Chambers of Commerce. On that partnership, they engage a company called Economy that has
been analyzing South Bend/Elkhart on what we can do to increase our economy support and a
report should be released; an invitation should be sent to you soon. I want to end on the case study
regarding the home repair pilot as there has been a lot of talk removed from a City-wide approach
to trying to get targeted on geography; there's more effect on the same block because people see
the improvements happening and you see a positive movement happening. But also,it enables our
team to go door to door to advertise this program that we are doing for those that are not following
the media. We hang door hangers for residents to get the word out. There has been a huge increase
in applications, we assume this must be what is needed but also the proactiveness. That's one (1)
of the things the Engagement Specialist can do; seek services at that level. President Scott has
recommended trying to look at how the applications overlap with Code Enforcement needs. Is
there a way this program can help compliance address these issues? Looking into next year, we
are proposing double funding. The need is still greater than what we will have available, so we are
looking at a possibility of smaller blocks further around the City to focus on the wider area.
Committee Chair White stated, Does the Council have any questions and then we can go to the
public? We will go to the public if I have Council's approval. Anyone wishing to speak or have
comments,please state your name and address.
Scott Palmer, 517 North Sunnyside, Marketing Director for the NRC, stated, We do not have a
question at this time, but we do have comments from residents regarding our program and I can
provide the copies to the Clerk.
Councilmember White stated, Anyone wishing to speak? Stand and state your name and address
please.
Jim Bognar, 807 E. Washington Street, South Bend, IN stated, Thank you Dr. Mueller for this
presentation. I do have a question, maybe this is going to be discussed later. At a Development
Commission meeting,Vice-President Dr.Varner asked you about five-hundred and fifty-five(555)
acres of South Side TIF on the River West and you explained that the River West is tied up this
time. We can work on more projects like Scottsdale pool? I know you have been here a couple of
times and I am wondering how much of this presentation is allocated to the TIF adjustments that
you have given Council. Is this something you are going to be discussing tomorrow, if Council
doesn't approve is there going to be a back-up plan?
Mr. Mueller replied, Redevelopment funds are tomorrow.
Mr. Bognar interjected, But you've made a presentation asking about money today?
Mr. Mueller replied,None of these funds will be used for this.
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oi CITY OF SOUTH BEND OFFICE OF THE CLERK
Bernie Macenbird, 905 Colfax Ave, South Bend, IN stated, I am the President of the Near
Northwest Neighborhood Organization and a lot of the projects you are discussing are positively
affecting our area. So, thank you for all of that. I did want to speak regarding impact on our
organization.We are a relativity smart group of people,but we didn't necessarily have the tools to
run our neighborhood. Some of the exposure came from getting involved and growing our
organization from seven (7) to thirty (30) people. The other side of that too, we ran a successful
Diversity and Inclusion workshop in August at the Civil Rights Heritage Center. It was very
expensive, and it cost us $2,000 to do. I applied for a grant to make this possible and this has
benefited our organization deeply as we look at Diversity & Inclusion issues. We are the potluck
people, we knock on doors and this gives us the opportunity to connect with other residents. We
are grateful for the support in helping us to do our job better.
Barbara Sutton, 528 Ostemo Place, South Bend, IN stated, I am the President of the Northshore
Triangle Neighborhood Association. I just want to mention the tremendous support that the NRC
has given us over the years and during our leadership transition. They are helping us plan and
trying to help us build a stronger neighborhood. The quarterly round table meeting has been very
helpful in helping us build relationships with other neighborhoods.And it's given us opportunities
with the City to work through some of our issues. Strong neighborhoods are safer neighborhoods.
Sharon Banicki stated, Moving those position to IT, but don't they bill you back when those
services are used, so you're just doing a shelf gate?
Mr.Mueller replied,We are clarifying the proper reporting structure,but yes County-wise yes,the
cost is still working.
Ms. Banicki interjected, So you are not really saving any money in your budget?
Mr. Mueller interjected, It didn't say that, it had the cost that we're going away with and the
allocation coming back.
Ms. Banicki stated, You have FUSE down here as an accomplishment, but there's no support for
the housing now. What's being done to put it in a successful plan and what's being guided?
Pam Meyers interjected, I can send you a full report.
Ms. Banicki stated, You have an Engagement Specialist, what can they do better than the NRC
right now? Do you think this would be better than reinventing the wheel?
Mr. Mueller stated, We are not replacing the NRC. The approaches that we have when we go to
outside entities are can we leverage the dollars or can they bring things that we don't have. The
City has funded the NRC at $25,000. We boosted it this year with the hope of getting outside
money to help leverage. So,if you look at the overall budget,the City covers ninety-percent (90%)
of the budget. We can hire a staff person and have all the administrative functions, figuring out
health insurance and all those pieces of an organization. We have asked for that bump in
programing help with capital expenses and increased programing. Our thought was if it brought in
more programing, there would be more opportunity for fundraising, so we can get into our own
sustaining. We are not getting rid of the NRC, we are still funding it at a historic level, which is
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why we came to a responsible budget. There were discussions in July about more funding than the
$50,000 we have. What we want to see is some path to attracting outside funds to come online
with that. We told them that we would be more than open to increasing their budget and I know
we have talked to Council about this. But we need to start seeing progress in attracting outside
funds. I am disappointed that this is what it has come to.
Jessie Davis, PO Box 205 South Bend, IN stated, So basically you are wanting to hire someone
with a salary of about $70,000 a year, but you normally fund the NRC program which is a
neighborhood program for about $50,000. What if you invest the money you plan to hire into the
NRC, so they can do more. Maybe it could be money contained on their end. It just doesn't seem
wise to hire a new position. Like she said, why reinvent the wheel again.
Mr. Mueller stated, This is a great idea and we are looking into this with Council.
Committee Chair White stated, Anyone else? We ask that you come and state your name and
address please.
Rene Alton, 121 E. Tutt Street, South Bend, IN stated, Has the NRC been given the same
opportunity to present a sustainability plan?
Mr. Mueller replied, We asked for one (1) at the end of last year. We have a different suggestion
regarding their funds and they chose not to follow it.
Committee Chair White stated, If there are not any additional questions, I am going to ask
Councilmembers to plan as tomorrow we have a wrap up meeting looking at the PARC and TIF.
Please put your questions in writing and prepare to ask those questions at the next Council meeting.
Councilmember Oliver Davis interjected, I can't particularly do that because we haven't heard his
rational as to why he did that.
Committee Chair White replied, James Mueller will be coming back with his staff to answer
questions. I am just saying to write out any questions that you have
Councilmember Davis replied, We need to have a meeting because this is an important
conversation to have.
Mr. Muller interjected, We are open to more funding for the NRC. We have stated this on
numerous occasions about the funding for them. I just want to make that clear.
Committee Chair White replied, I wanted to make sure the Councilmembers are clear on what's
going to happen next. There will be a public meeting. Council will be able to ask all the questions
as it pertains to the Community Investment presentation.At that time,it will be at our next Council
meeting. We only have a few bills on that day and I just want to make sure we have everyone on
board. If you look at the agenda for Monday it is packed.
Councilmember Jo Broden asked, So will these be in the context of our committee meeting, or at
the 7 PM meeting?
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CITY OF SOUTH BEND I OFFICE OF THE CLERK
Committee Chair White replied, We will get the details to the Council. I just want you to know
that I may have to add another meeting. I just want you to know.
Councilmember Jake Teshka stated, I think this is our primary responsibility and we can't rush
this, so if we must add another meeting then that is what we need to do.
Committee Chair White replied, That's what we will do. Thank you! This portion of the budget
hearing has ended. The next one (1) will start at 6:00 PM.
City Wide Debt Overview
Committee Chair Karen White called the meeting of the Personnel and Finance Committee back
to order at 6:00 P.M., introduced the members and outlined the agenda.
Jennifer Hockenhull, City Controller with offices on the 12th Floor of the County-City Building
stated, We are here to talk about debt. There have been high-level conversations about it and it
makes us happy to be here with you today. We have made it understandable for everyone and we
appreciate any feedback you have as it's the first (15t) time we have done this. We welcome your
feedback and please let us know what you would like to see differently next time. We can do this
before we post it on the website. Tonight, we are going to go through some terminology, I know
we talk about things differently. We will discuss credit ratings, why and how the City is in debt.
We'll talk about responsible debt issuances and have an overall discussion on the City debt. We
have here myself, Benjamin Dougherty, Deputy City Controller, we also have our partners from
Crowe; we have Mr. Herschel Frierson, Managing Director and Mr. Nathan Flynn, Crowe
Representative; they have been very helpful with putting this together.
Councilmember Davis interjected, My question is to the committee chair,will we have time to go
through all of this? By the time we look at this, will we have gone through any of this? The main
point is why we have this debt and come back to the rest of the presentation. Because what is being
asked is what our debt is because I want to able to answer this question.
Committee Chair White replied,Jen could you start on that page and if we have time we can come
back to that descriptive information. If you would want to start us off on page nine (9).
Mrs. Hockenhull replied, I want us to all understand why we issue debt and not just why we have
it. It's a crucial point to our conversation, so I would like to circle back to this tonight.
Councilmember Davis interjected, I am fine with circling back, but it is just nice to know why,
and what it is.
Mrs. Hockenhull stated, one (1) of the pages you have is our debt summary and it's broken it up
in three (3) different ways to view the same number. On the first(1St)page (referring to a handout
which is available on file in the City Clerk's Office) and on page nine (9) is the principal and
interest payments that is taking you from 2019 to 2038 which is basically out of the debt period
here. On the left-hand side, it shows you which funds we are paying the debt out of. This is
summarized, and you will see more details on this before the final version. On the left hand side,
you see what is being paid out of River West and River East. I have been explaining to some
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Councilmembers as we sit down and do our budget, the first (1st) things we factor in are our debt
payments. Everything else there is all icing on the cake as we want to make sure we are paying our
debt first (1St). We always manage to include all the debt for the next ten to fifteen (10-15) years.
The first (1St)two (2) are going to be paid out of the River East and River West TIFs and you can
see in 2019 these interest and principal payments factored into these various debts.We can go back
into details of each debt and see exactly which debt is in here.I see that these are very summarized.
If it helps to do it in a different way, we can make it however you want to see it. So, then we get
into Public Works, obviously we issue Sewage Works and Water Works debts as well as Solid
Waste debt, which typically is going to be your trash can and everything. Debts in this context
include capitol debt owners on this page.
Councilmember Teshka asked, all of these are inclusive with interest, correct? Including the
original debt?
Mrs. Hockenhull replied, Yes, except the original debt but the payment is. We want to show on
this page exactly what cash is going out the door.
Mrs. Hockenhull stated, So that is what this very first (1st) page is showing. It is also showing a
TIF pie chart debt by funds. Public Works again, are huge projects. We are not going to issue debt
for a little sewer main break. So that's where you get the thirty-six percent(36%)rate. The General
Plus Funds are going to be General Funds and Public Safety EDIT. We consider those General
Plus Funds due to the many lawful purposes of the funds and they are all tax funded. So those are
what we are paying out of. Parks & Rec are included in the General Plus Funds. Those are funds
that we usually come back and say look we balanced these budgets. We are not spending more
taxes than what we are getting.
Committee Chair White asked, Council are there any questions you have regarding page nine (9)?
Councilmember Tim Scott asked, So I am looking at 2019-2023, it looks like even with it going
down,you were bringing in around $30 million. So,what's our cash reserve/rainy day fund?
Mrs. Hockenhull answered, Fund #102 has $10.6 million in there right now in our cash reserve.
This question is a little tricky. Each fund has its cash reserve requirement. If you are looking at
your Capital Funds and your Debt Funds, those don't have it, the goals are not to have the funds
rarely available to spend out right. For instance, in our General Funds, we aren't over fifty-six
percent (56%) in general expenses. Our goal reserves in the General Funds are very steady which
is why we get the credit rating and everything.
Councilmember Scott asked, In the case of an emergency, what I want to know is that if we pull
all the funds together, can we pay everything off?
Mrs. Hockenhull stated,this is effective in the same report. As you can see we have some broken-
down by the economic development. You can see on here the Eddy Street Parking Commons
Parking Garage is $36 million and how much we are going to pay in principal. This is a principal
interest report.
Councilmember Teshka asked, Do you have anything on this report where the interest is broken
down?
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Mrs. Hockenhull replied, no not on this report, but I can provide the details of that this week.
Councilmember Scott asked, In Kronos, do you have the growing rate report?
Mr. Frierson replied,It's about two-four percent(2-4%)of the majority of your debt. The City has
been very good at entering the market from a debt standpoint,it's at an all-time low.Nathan Flynn
who joined Crowe a little over a year ago, a former under writer, can give details from a market
interest standpoint.
Nathan Flynn, Crowe Representative followed up, The average cost of your debt reflects the fact
that you have a lower credit rate and we have been at a historic low in terms of interest rates.That's
reflected in your borrowing rates currently.
Councilmember Jake Teskha asked, That's changing, correct?
Mr. Flynn replied, Your current debt rate will not change. We have not seen a sufficient increase
in rates at this point.
Mrs.Hockenhull stated, On page eleven(11),this is just giving you our principal balances and it's
page nine (9) and ten(10)together with just the principal balances through 2025. You can see the
balance being paid down. And I should point out that for reporting purposes, the Zoo Bond is
included in this presentation, should it pass in all these reports.
Councilmember Teskha stated,During first(1st)reading last night it was three point seven percent
(3.7%) and today it is four point two percent(4.2%)?
Ms. Hockenhull stated, Yes, the three point seven percent (3.7%) will be the bond interest. It's
going to include any debt reserve funds that may be required. We are required to put the last year
principal interest in a standalone account. In our last conversation, we discussed the debt reserve
bond per ordinance.
Mr. Frierson stated, I would like to add a couple of things as it relates to the Zoo Bond. Those are
estimates. But much of that make up is what we have called a Debt Service Reserve Fund. When
you do pre-revenue deals, it's usually one (1) year's principal interest set aside. Once again, it's
all estimated. Regarding the Debt Service Reserve Fund, the City, due to its strong credit rating
and great management, gets something called a surely policy which is in lieu of the Debt Service
Reserve Fund. We're anticipating trying to obtain that, when we go out to the market place.
Mr. Dougherty stated, I'll add on that, What we promised through the Park Board is to deliver
three point seven percent(3.7%)and here's what you're going to use this to build with. The 4.205
you see is the approval ordinance and it is the highest amount that we would need to get Council's
approval to ensure that we are going to be able to deliver three point seven percent (3.7%). After
that of course, each step along the way is to make it as affordable as possible. This summary is the
result of the best debt service we can get,from what the underwriter has somewhat told us how we
would expect to price the bonds. It's double from the perspective of everyone on the bonds team.
Councilmember Teshka stated, I think it's important for the public to understand the language so
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thank you for your explanation. Our residents hold us accountable for that and we need to
understand what we are doing.
Mrs. Hockenhull stated, The last thing I want to provide to the Council and residents is a reminder
of our monthly financial report on page twelve(12). This is an example of what we send out. I also
included a second (2°d) page of the report and walk you through what you will see in that report.
The last four (4) pages are what we included in our monthly report to our Council and residents
that lists all the debts and information that you could possibly think of regarding what debts we
truly have.
Councilmember Davis asked, Can you share a little about the $77 million spenddown?
Mrs. Hockenhull answered, In our next report for next week, we will share withyou fresh reports
p p
and detailed spenddown details. We included in that spenddown number, spenddown
most of that
p p
is going to be for the 2017 Parks Bond. We received all the proceeds in December 2017 and they
have shown up as a revenue and in 2018 we are going spend that $13 million. It's showing up as
a spenddown but it's in the capital section of the budget.
Councilmember Teshka stated,In the adopted 2018 budget would that$13 million show up or not?
Say we approve this bond in October and it's done by December, then the amended 2019 budget
includes that as the account to balance. I just want to make clear again, it's great that we are
transparent but at the same time when people look at it, it's indigestible.
Mrs. Hockenhull replied, Next week you are going to get a full report on this. You can see in the
budget we are not spending our general plus funds and hopefully this is more digestible. We are
always trying to improve our presentation and how we present information to you.
Committee Chair White stated, When we look at some of the reports, they are running a high
percent of debt. What you have shared with us now is how the funds are taken in and then how we
spend out when they are available. Somehow, we need to make this clear for me and everyone
else.
Councilmember Teshka stated, I know you all are working hard to get this information done and
this department is running a$9 million deficit.
Councilmember Davis stated,When it comes down to the Park Bond,given our credit rate,is there
a limit on how many bonds we can have out at this time based on our credit rating, without it
hurting our credit rate?I know it's just not the amount of bonds, but where are we with that?
Committee Chair White interjected, I want to make sure Councilmembers financially, were you
able to get your questions addressed?
Councilmember Davis followed up, again the question is there a limit, how close are we to that
limit, and this should be able to help us prioritize for a better situation?
Councilmember White followed up, I know the point to tag onto that question is even though we
may not be at the max but from another perspective,how much of this information do we pass on
to our citizens. What is reasonable?
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Councilmember Scott stated, that is a good question. I asked this to the Mayor too. What is that
debt number. Households and businesses have workable debt and that is what we look at for the
City as well. We must look at the return investment. We know CSO would bankrupt the City
probably three (3) times over. I think we need to set some examples down the road so that people
can understand the budget and bonds. I know at one (1) point Dr. Varner put together how much
it's costing each individual for CSO, which as least defines where we stand per person and where
we stand as the City.
Councilmember Teshka stated, especially with this debt conversation, I think the focus is how
much is too much?
Councilmember Scott stated, it really starts with the Mayor to say this is what we need to tag on
to do whatever we want to do to in our City and it's up to us to agree to go with that, we are all
accountable. Are we going too high or too low?
Mr. Frierson stated, Thanks for your question, the one (1) thing from a commentary standpoint,
someone might say one (1) thing is higher than the other. One (1) of the good reasons why you
have a credit rating is to get an outside perspective on a global basis on where the City stands.
Individuals like myself as a municipal advisor, I have a judicial duty to make sure the City has the
capacity to issue debt. I have a duty to make sure the bonds that were put into place make sense.
Before we even come to you, we are working on this months before hand, we're going through
analyzing what is the revenue capacity of the City. What does this potential debt look like, what
does the debt service look like, and what is the coverage—we do a lot of what are called stress
tests.These tell us what happens if the revenues fall behind fifteen percent(15%),is the City going
to be struggling, or if a certain tax payer leaves, what does this do to the City. We work with the
Deputy Controller to work out the pros and cons and what is your capacity. We put this side up,
from a GO standpoint (this is very key) because you are at a Double A (AA) rating and what that
says globally is that you can meet your financial capacity commitment. So, we go through our
process, then go through the rating agency and the process to give their rating.
Councilmember Davis asked, Is the reason why Indianapolis has a Double A(AA) rating because
it's their size or is it more than that?Is it worth it for us in South Bend to do this process to get the
Triple A(AAA)rating?
Mr. Frierson answered,There are various reasons and I don't want to get into that. There are some
in your control and there are some that are not. There are only two (2) cities in Indiana that are at
a Triple A(AAA) status(Fishers and Cannel). What I will say is that we always like to go through
the write up after the rating to see what other opportunities are within the City.
Councilmember Jo Broden stated, I think the Council would be interested in a follow up of this
conversation.
Mr. Frierson answered, When the Zoo Bond passes, we will be going through that process of the
rating and I encourage everyone to read that report because the report really details what the City
is doing, and what are some of the potential growth areas in the City.
Councilmember Davis asked, Can we get a copy of this on the website and have it emailed to me?
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Mrs. Hockenhull replied, Yes, I will make sure you receive a copy.
Councilmember Teshka asked, What do they take into account?
Mr. Frierson answered, they will consider your cash flow, how great of a job Jen is doing.
Mr. Flynn stated, And you will find in each of these reports explicit commentary regarding the
details. Internal management and budgeting is strong.
Mr.Frierson stated,but why you are rated at a Double A(AA),I go back to the strong management
and you are what I call, smart debt issuers,in the sense you go through a process first. The projects
that are happening are very good feedback projects for the City.
Councilmember Scott stated, Taking on those bonds and paying of those bonds, doing good
projects that improve your City. And people wanting to invest in those bonds for the City.
Mr. Frierson stated,When I say smart debt and it's important that I say this. If you go to this bullet
point here it's a positive, sixty-eight percent (68%) of your debt being returned here, that's
excellent. You are also looking at from a structural standpoint, how is your debt coming off. You
are making sure that you are issuing the right amount in the right years and when those opportunity
projects come about, you address those.
Councilmember Davis asked, From some Municipal standpoint fifteen (15) to twenty-five (25)
years,then you see a challenge for that.
Mr. Flynn answered, That's unique. The SNP rating is for all the US. Specifically, in the State of
Indiana, you typically see a quick acceleration paid out of debt. But if you compared that sixty-
eight percent(68%), to what percent you pay in the first(1st)ten (10) years,that number is going
to be much lower.
Mr. Dougherty stated, Before we go on just briefly, do you want to address the specific question
about the bulk of our debt?
Mr. Frierson answered, it doesn't. There are certain parameters in place to make sure you have the
capacity.
Councilmember Davis asked, You consider the property issues that will come up in 2020 on all
those considerations and how the City will use the taxes, how do you look at that?
Mr. Frierson answered, I guess from a property tax standpoint, as that is more of a general
obligation, the City has very little actual debt that you are putting on property tax payers. That is
one(1)of the great things about the Double A(AA)rating is that your debt is being paid by revenue
and not being put on the property tax payers itself
Mr. Dougherty interjected, Maybe we can use the Zoo as an example here; the analysis that goes
into the fact that the Zoo Bonds would be repaid out of the EDIT Revenues, income revenues
instead of property tax revenues. This has already been analyzed and deemed to be sufficient. In
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light that there are 2015 EDIT bonds being paid out of that same bucket of income tax revenue.
So that being done and none of those affect the property taxes. To the same point, it's been drawn
out of the income tax bucket and the process is to ensure that the bucket is full to add a new
obligation to it.
Councilmember Teshka stated, That's the issue with bottom lining here, I mean we got so many
different funding sources available here to so many different things.
Councilmember Davis stated, And that is a part of the General Fund issues because people will
consider this part of their revenue.
Councilmember Teshka followed up, Coming from a business perspective, this is different from
looking at the PRO because there's so many different whys behind each line and why we do what
we do with different funds. It is very complex.
Councilmember Davis asked, Now this is not necessarily for the debt fund, and some would say
there's enough room for us to do that again while others might say well if we don't use those funds
for the Zoo we would have the ability to fix up our streets and curbs better. Yes, we can do that,
but then this is taking away from the other things. What is the cost of this?
Mr. Dougherty answered, This is correct, and you are thinking about it the right way. This comes
down to what the Council would do to prioritize where those revenues would go. The way that it
functionally goes forward if you approve it then that piece of the EDIT would be pledged and it's
almost like it's not there. It's the idea that we pledged, let's say for twenty (20) years, it's a piece
of how it's sustained,but how it's promised.
Councilmember Davis asked, You promised it but since we are going to have other cuts coming
from other parts of this with that property tax issue and yet we promised this money out then my
concern is when we look at this, it's an issue. Some of the issue that is shared (the assessments,
census, and evaluation), we have never really discussed all of this.
Mr. Dougherty answered, If I may from the Municipal point of view,what the analysis is going to
deliver to us is the idea of for budgeting that revenue to pay debt, yes you have enough, they are
not so interested in getting into these other priorities.
Councilmember Davis asked, So our question is when it comes down to this budget do we have
enough money?
Committee Chair White stated, We need to have input from the public. We appreciate all of your
work and this was a great meeting.
Mr. Frierson stated, I appreciate you coming and having this discussion because it is all about
education. The thing I keep going back to is kudos to the Council and the City,you are at a Double
A (AA) and you all will do very good in the market place. One (1) thing you can always point to
is where you are stable at with the Double A(AA) rating.
Councilmember Scott stated, I completely get whatyou are saying about that and it's all about
p YY g
those choices and we are a part of that choice. I will use Parks for example. Seven (7) years ago
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CITY OF SOUTH BEND OFFICE OF THE CLERK
when I got on here,we didn't do anything with any of the parks in the City,and we made a choice.
We made a very big choice to do that versus alright let's not do the Parks Bond. It was let's try to
eke out a little bit of the General Fund to do a little here and there and it would have taken decades
to do instead of that one (1) big thing. People are going to look at the Parks Bond and think do I
want to live here. Do I want to live here where the parks haven't been changed in thirty(30) years
who are seeing something new and vibrant when they come into town?It's a very little increase in
population but I have six (6) new families on my street and they were looking at the amenities as
to why they moved.
Councilmember White stated,Thank you so much. We are going to go to the public. I ask that you
stand and state your name and address.
Jim Bognar, 807 E. Washington Street, South Bend, IN stated, Thank you Council and Jen for the
very important discussion. When you prepare information for Council I think you should account
for how much you are going to be paying on it and how much the interest is going to cost us. I
noted here that you had mentioned before about the Parks Bond in 2018 and this said TIF revenue
is the first (1St) source and property taxes is the second (2nd) source, and it says the Commission
intends to use the River West tax to pay tax debt on the bond,but it is not formally pledged. I think
a lot of times the bond lease report goes through Gateway and that's why I ask a lot of questions
about Gateway that it's critical that Council pays attention to this. So, if they are going to decide
and I compliment President Scott, because if they are going to decide as to what they are going to
spend money on I think that is critical.Another thing in the presentation,we didn't discuss interest,
but we talked about principal. We did use the information in the Global ratings which says weak
economy. The City wealth and income levels are however persistently low and continue to slip.
Like we do with the shortage of high paying jobs in this area. The fact that we have a Double A
(AA)bond rating,that is very impressive. I think it's important for Council working with Jennifer
and her staff to say we are on the edge of this. I think the challenge comes right back from what
President Scott says, it's important for you all to be much more involved in coming into these
things. If you are coming to pass this,this is how much it is going to cost. You two (2)forces have
got to work together. We have a lot of debt and I think this is really something that needs to stay
put soon.
Jessie Davis, PO Box 10205, South Bend, IN stated, Kind of on the same lines as that and talking
about what your debt ceilings is the question that is being asked. There is always a top pay scale
if you are in a business, there's always a percentage in your borrowing power. So, the question
asked is what our debt ceiling is to what our debt is right now? Do we have borrowing power for
another $20 million or can we only borrow $5 million. I'm not politically correct and I am not a
huge business person, so I am just going to lay it out there. Then we look at your little graph down
here where we talk about your spending; Water Works, well let me tell you, we need a lot of
upgrades in our water works system, I used to do a lot of digging so I know that as a fact. I know
we still have old lead lines in this City. Our Mayor has denied, I have dug these up personally, I
have photographs of them. So why are we only putting six (6) percent in our water system and
drinking water? You got your priorities mixed up so you guys I am assuming in Community
Investment or whatever they call your department now. You kind of work under the Mayor now
and bring things to the Council. Council needs to understand that you are our checks and balance,
you and the Mayor are two (2) different legislative bodies. So the Mayor can come up with what
we call debt pride, and you can bring them in a proposal all day long. We really depend on you
Council Members elected to represent us and say hey enough is enough. We have other priorities.
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The CSO that Tim Scott brought, that started out as $4 or $5 million dollar projects and then we
did a couple of studies and we spend a lot of money on these studies, and then we were supposed
to be reducing the cost.Where is that cost compared to the original.We need to watch the priorities.
Where is our debt ceiling at?
Mr. Frierson answered, It's more complicated. It's based on which revenue stream we are talking
about. It also depends on which debt you may be issuing. You may be issuing a bond issue that's
related to a specific project. So, it's difficult to answer your question and tell you where the debt
ceiling is because you have so much different kind of revenue(case by case basis). This is the role
and Jen and Ben go through before they come to the Council. They come to me and I advise them
and give them different perspectives based on the outcomes.
Jessie Davis, PO Box 10205, South Bend, IN interjected, He said all our revenue is tax revenue
period. It's tax revenue from somewhere. It comes out of our pockets. So, if the economy takes a
crap tomorrow and we go into a huge recession again and we've got property tax caps coming that
we have been kicking down the road since 2018 and those revenues are going down, I don't care
how many of them are. We are going to lose at the end of the day?
Sue Kesim,4022 Kennedy Drive, South Bend,IN stated,You have received a handout on the cash
reserves, we were concerned that it dropped $87 million. That also means we lose $711,000 in
interest income. The River West TIF deserves some attention. I also gave you a second(2nd)hand
out regarding revenue bonds. There are some years that are missing on the State Gateway and they
need to be updated on there. On the Double A (AA) bond, one (1) of the things I noticed is that
the numbers continue to slip on a national level and we need to consider this. On the revenue
projects,we are concerned that there is a fourteen(14%)decrease which is$54 million when there
is expected revenue of$372 million and we only got$324 million.That was a lurch of$54 million
and I think when you over spend, that goes to the cash reserves going down. We appreciate your
time,thank you.
Committee Chair White stated,we have time for one(1)more,Please state your name and address.
Sharon Banicki, South Bend,IN stated,Does the Controller answer to the Mayor or to the Council?
Tim, you were saying the bond they were looking at was four-hundred and thirty-five dollars
($435) a person and personally thought it was a great idea that you got that much enjoyment out
of it,but Oliver and Regina can't go to their areas or get the enjoyment out of this.
Committee Chair White stated, We appreciate your time and effort that you have put in. This is a
very important conversation that we have had.As we investigate the 2019 Budget,we need to have
this discussion. In the upcoming month,we need to have quarterly special meetings. I am not one
(1) to add meetings; but any time we have an opportunity to have clarity, we come out more
informed so that we can share with our constituents. I am making a recommendation now and
putting this is writing. So, once the committee chair is selected,they have that vote.
Councilmember Davis stated, Will the staff be answering these questions?
Committee Chair White answered, The questions will be recorded and posted on our website.
Mr. Frierson stated,whatever we can do,please don't hesitate to call us.
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Committee Chair White adjourned the meeting at 7:07 PM.
Respectfully Submitted,
Karen White, Committee Chair
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