2007-06-25 Regular Meeting and Workshop Meeting (2)

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City Council Meeting and Workshop Meeting - June Z5, ZUU7 Page 3 Christina Delgadillo - Ms. Delgadillo informed Council that Mr. Flanagan would be addressing Council. Mr. Flanagan addressed City Council about the leased property from the City of La Porte with Flanagan Shipping. Mr. Flanagan wanted Council to know renewing lease is critical to their business. He informed Council he had contacted the City but has not heard anything back from the City to date. They want to work out renewing lease with City and wants Council to know they have been responding and working with the City. 9. Close Regular Meeting at 6: 18 and Open Workshop at 6:20 p.m. Item C was taken out of order. C. Interim City Manager John Joerns updated council's request for information on GASB45 and HB2365. Interim Finance Director Michael Dolby informed Council during the pre-budget retreat they were given a pre presentation ofGASB45 and its implications for the City of La Porte. He reminded Council the City has been directed by GASB to do an actuarial study for benefits provided for health care cost. We do not have to fund the study but the standard requires that the City perform the study and make certain disclosures on external audit report. A disclosure is a liability if the City does not fund the annually required amount by the actuary. This approach will insure us receiving a qualified opinion on the audited financial statements. The state of Texas has passed legislation in changes to local code to allow cities to follow a statutory modified accrual basis which will lead to an audited opinion that is not based on generally accepted accounting principles and it will be regularatory opinion and not GAP. Therefore staff is requesting that we do the study for $8,000.00 to see exactly how much is required for us to fund then come back to you to and try to come up with ways to mitigate that liability and reduce it down. The various things that we told you about during the pre-budget retreat. We can change from defined benefits to the defined contributions. We can move people in and out of the plans so we can adjust it so as to lower our liability. We provided you with a pamphlet and I hope you have had the chance to look it over. It has some very good information in it, and should have answered some of your questions about what the accounting rules are and where they are on that. This evening Mr. Tom Peterson from the Audit Firm of Null Larson is present and can answer any auditing questions you have. Also, I called Mr. Ryan O'Hara our Financial Advisor and asked him about the question you had in regards to how the rating agencies would handle a City that did not follow GASB45 and he has not been able to get any answers yet. As soon as he gets those he will come back and give us a presentation. Again, the liability itself is there its not going to go away so, we have to at least look at it and address it and come up with a plan to try to reduce it because we are definitely funding health care for retirees. It is upon us to report it as a liability. We have to do that. Whether we do the study or not. If we don't do anything at all the liability is still going to be there because it is implied in here. Mayor: What the State's doing were they not going to footnote the liability? Michael: I think that the literature that we read indicated that they are not going to do anything with it but in the future it also says that if they decide to go with it and provide the benefits for the employees then they themselves as state is saying they got to come back and do the exact same thing were talking about.