HSVPOA F & P Committee 3-28-22

Finance and Planning Committee discusses options to achieve a higher return on Emergency Reserve Fund investment; 2023 budget guidance from F & P; Committee tables discussion on employee recruitment challenges; Offering a competitive wage

The following committee members were present at the Monday, March 28 Finance and Planning Committee meeting: Larry Siener, Chair; Tom Heau, Vice-chair; Cathie Moeller, Secretary; Jeffrey Lofgren; C. Ford Williams, and; Beckie De Young.

Also present were: Staff, Karl Russ, Controller, and Gary Belair, Board Director

Additional staff present: Kelly Hale, General Manager

Approach for Obtaining a Better Return on Emergency Reserve Fund Investments

The Finance and Planning Committee is looking for a little better return for the reserve fund than what can be earned sitting in a bank account. Siener asked Controller Russ if they needed to appoint an Emergency Reserve Fund Investment Subcommittee.

Russ answered, “Maybe approach it a little bit differently” After talking to the Board, Russ’s suggestion was to seek out a non-committee member that has experience in ‘Treasury’ and working with these types of groups.”

“We can certainly account for this, but we are not investment experts,” explained Russ.

Siener asked Controller Russ to put together a description of the skill-set desired and they can publish this need in the HSV Digest.

Additionally, some of the Policies, including the Emergency Reserve Fund Investment Policy, may need to be updated with some language changes.

The committee asked whether other “excess cash” should also be invested.

Just so we are all clear. We don’t want to use terms like ‘excess cash’. We don’t have excess cash. I want to make that clear to everyone. We’re 30 million dollars behind the eightball, from what I’ve gathered just in my short stint to fix all the things over the next ten years. We don’t have any excess cash… I want to caution… We will be sitting on money that I need to keep liquid, but not just in cash.

Kelly Hale, General Manager of Hot Springs Village POA

Due to supply chain issues, ordering equipment has been difficult. Hale said we need to keep money available for when a buying opportunity arises. We were unable to buy lawnmowers for the golf courses. “All of a sudden we got a phone call from John Deer and they said we can get you seven pieces of equipment that you are looking for.”

Vice-chair, Tom Heau, asked, “I have been keeping track of capital spending and I would say the last six months our rate of spending has been a couple hundred thousand a month. This year we have round numbers of a $10 million capital budget, which kind of says if we want to meet that, we have to spend about $1 million a month. Whatever cash we have is getting eaten away by inflation. Nobody is saying we got to ‘spend the money to spend the money’, but there seems to be a wide gap in terms of how we have been spending the money over the last six months and kind of what we need to do just to get the rate of spending…”

Hale responded, “There is a difference between what we need to do and what we can do. Because if you can’t buy something, then what do you want me to do with the money?” A lot of the items the POA is looking for are not available for purchase right now.

Heau asked if there was a way to lock in prices?

Hale stated, “Yes, I just locked in a firetruck. I might be able to get it in 36 months.” Normally it would take six months for delivery on a firetruck.

Heau said, “but if you don’t lock in the price for 36 months you are going to get a 15% price increase.

We are also looking at stuff that is already jacked up 40% – 50% over where it was just six months ago. I don’t have an appetite for being taken advantage of, either. There’s foolish spending and there’s wise spending. Right now I am not going to pay 50% – 75% over what we just did six months ago on tractors just because I can’t get the chips from China…I am going to wait that one out and see how it plays and I’m going to see a surplus build up in the market that will help me get the price targets I need.

Kelly Hale, General Manager, Hot Springs Village

Suppliers are reserving the right to change the price. There are very few companies offering a guaranteed lock-in. “Those days are long gone.”

Hale said that staff is constantly calling the exact same vendor in an attempt to buy needed items. This strategy worked in the past when they were able to buy the John Deer lawnmowers. Hale understands the supply chain issues and this is why he is repairing “found” equipment. (Some of this equipment is broken and has been parked, with weeds growing up in and around the equipment.)

The committee discussed risk and safety. Siener said, “I think the real situation when you step back and look at it if you look at it from a risk standpoint, the consequence of an occurrence, the consequence of bank default and your deposits not being insured is certainly significant. The probability of occurrence, however, is, under certain circumstances in the world, extraordinarily low. I don’t think there has been a banking failure in the United States since the ’30s, that the FDIC didn’t make deposits good. I might be wrong on that number, but I know a lot of these rules were put into place post-1929 because of what happened… I don’t think anybody ever lost a nickel of the deposit in a bank…”

Director Belair responded, “Up to the insurance limit.”

Siener did not agree.

Belair repeated, “Up to the legal insurance limit.” Belair said he has first-hand knowledge of exceptions.

Budget Guidance from F&P for 2023 Planning

All departments need to justify expenses. Jeff Lofgren said, “The word ‘justify’ means so many things to so many different people. That is a big challenge. [Budget] “guidance should be focused on what data supports the justification.”

The Finance and Planning Committee will help the staff determine what data to use. Some data is interesting, but not compelling.

Vice-chair, Tom Heau said in developing a budget, the first thing he would look at is the calendar. Heau feels a good starting point would be to look at last year’s calendar.

Heau said he did not see any goals in the last two budgets. Heau explained that with the budget, “you are trying to accomplish something the next calendar year with an eye on the following calendar year after that.”

The goals are usually promulgated by the Board and the General Manager.

Board Director, Gary Belair, said the Board did have goals last year. The goals for 2022 were all about infrastructure. Supply chain issues have made it more difficult to achieve the 2022 goals and goal dates have had to be extended.

Options to Obtain Candidates for Village Jobs

Some of the options are establishing relationships with the area schools, mentoring, and co-op work. General Manager Hale has talked with some of the area schools. Click here to read Mr. Hale’s report where this issue is discussed. You will need to scroll down to the subtitle, “HSVPOA Partners with Area Schools to Develop Apprenticeship Programs.”

Siener says this is structured on-the-job training, rather than a formal internship program.

Options to Increase Worker Salaries to be Competitive with Other Employers

The Finance and Planning Committee tabled this discussion. Click here to read the GM’s discussion on this topic.

Cathie Moeller asked about eliminating benefits for workers and paying the money saved in higher wages. (This was a suggestion made previously.)

Russ said they think this is not an option due to ERISA laws. The reason has something to do with discrimination. The attornies looked at this and advised against it.

March 28, 2022 Finance and Planning Committee Agenda

3-28-22-Agenda

Cheryl Dowden, Hot Springs Village Digest, March 30, 2022

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