Finance Committee - August 27, 2025 Minutes
The Regular Meeting of the Finance Committee of the City of Fargo, North Dakota, was held in the Commission Chambers at City Hall at 10:00 a.m., August 27, 2025.
Commissioners present or absent were as follows:
Present: Kolpack, Piepkorn, Strand, Turnberg, Mahoney.
Absent: None.
Staff attending: Kolpack, Piepkorn, Turnberg, Strand and Mahoney.
Mayor Mahoney presiding.
Order of the Agenda:
Commissioner Kolpack moved the Order of the Agenda be approved. Second by Strand. There was unanimous approval.
Minutes:
Commissioner Strand moved the Minutes from the June 23, 2025 meeting be approved. Second by Kolpack. There was unanimous approval.
Sales Tax Update:
• Finance Director Susan Thompson provided an update on Fargo's year-to-date sales tax revenue, which is down 3%. This trend began in the fall, ending the previous year just under 1%.
• The decline is primarily attributed to a drop-in retail sales in the eastern part of the state. In contrast, the western part of the state, particularly the industrial sector, is performing well, possibly in anticipation of future tariffs.
• Grand Forks is also experiencing a similar downturn, with a reported decline of more than 5%.
• A question arose regarding the impact of the decrease in Canadian traffic, which was acknowledged as a contributing factor to the lower sales tax revenue.
• A discussion about the existing sales tax cap took place. One attendee suggested exploring the possibility of eliminating the cap, which would require a public vote. The concern was raised that this could jeopardize the stable funding for the flood protection project, as it's tied to an existing sales tax.
• The point was made that the cap does not primarily affect luxury items, but rather large purchases by contractors who may not be aware they can get a refund on a portion of the sales tax paid.
General Fund Financials and Projections:
• June Financials: The general fund was trailing slightly behind budget for June, with revenues below expectations and some expense timing issues. The report was an improvement over the previous month, as revenues were up and expenditures were down.
• July Financials: The City saw an improvement in July, with a revenue surplus of about $500,000 over budget. However, issues with franchise fees, particularly from Xcel, continue.
• Projections: Susan presented projections showing a "break-even" budget, with a positive revenue over expenditures of $5.5 million due to an unbudgeted land sale. This money will go directly to the City's fund balance.
• Land Sale Proceeds: Susan proposed allocating the $6.7 million net proceeds from the land sale. Her recommendation is to put $5.5 million into the general fund and $1.2 million to the Solid Waste fund for future land acquisition. Moody's, the credit rating agency, views the City's fund balance as a whole, so the specific fund doesn't matter as much for the City's overall rating.
• Public Safety Sales Tax: The Fire Department was unable to hire six new staff members in 2025 as planned. As a result, the Public Safety Sales Tax revenue designated for these positions will be transferred to a new reserve fund to start saving for a future facility, such as a new burn building. The facilities plan is being developed and will be presented at a later date.
2024 City of Fargo Audit Presentation: Brian Stavenger, Eide Bailly
• Audit Standards: The audit was conducted in accordance with generally accepted audit standards (GAAS) and government audit standards (GAS).
• Audit Opinion: The City received an unmodified (clean) opinion, which is the best possible result.
• New Standard: The audit team noted the implementation of a new standard from the Government Accounting Standards Board (GASB) regarding compensated absences, which was a significant undertaking for the City's finance team.
• Audit Finding: One finding was reported regarding the lack of a formalized review process for special assessment receivable calculations and reporting. This has already been addressed and formalized by the City.
• Federal Dollars: The audit of federal dollars expended found no issues. The federal dollars received by the City have declined significantly since 2020 and 2021, and this trend is expected to continue.
• Fund Balance: Fargo's total fund balance has seen steady growth over the last three years. However, the unassigned portion of the fund balance, which represents true reserves, is at approximately 20% of total expenditures, slightly below the city's internal goal of 25%. The recent land sale will help to increase this percentage.
• State 3% Cap: The new state-imposed 3% cap on spending was discussed. Brian noted that this cap makes the City's reserves and fund balance even more important for long-term stability.
• Upcoming Standards: Three new GASB standards are on the horizon, with GASB 103 expected to have the most significant impact on the presentation of the Annual Comprehensive Financial Report (ACFR).
Fall 2025 Refunding Improvement Bond (RIB)
Susan discussed the process and schedule for the Annual Refunding Improvement Bond, which is used to pay back (reimburse) construction projects once they are nearly complete and ready to be certified.
• Purpose: To pay back the cost of completed construction projects.
• Timing Goal: The refunding should ideally be done in the fall to avoid disrupting month-end and year-end ratios and potentially causing cash flow problems (a past spring issuance caused issues).
• Scope: There are about 20 projects to be bonded for this year, totaling approximately $55 million, which is consistent with the previous year.
• Initial Discussion: Generally starts in July and August.
• Preparation: Working on the process will begin in September and October.
• Sale Date: Slated for November 17th. (Chosen strategically by the bonding agent to avoid holidays, Fed meetings, and competing debt issuances like Grand Forks' in October).
• Funding Date: The City would receive the funds on December 11th.
• Since the November 17th sale date does not align with a Commission meeting, two options for approving the bond resolution were presented:
• Special Meeting: Hold a special meeting to approve the sale.
• Parameter Resolution (Preferred): Issue a parameter resolution on the 13th (presumably the day of this discussion/meeting) that assigns approval authority to a pricing committee (the Mayor, the speaker and Michael). The committee would be given parameters (e.g., maximum interest rate and par value) and would select the lowest cost sale that falls within those limits.
• Outcome: The group was comfortable with the parameter resolution approach, and that is what the staff will proceed with, bringing the necessary resolutions on the 13th.
Auditor’s Office Restructure
• Susan initiated a discussion about a proposed restructuring of the City Auditor's Office due to the upcoming retirement of City Auditor Steve Sprague at the end of this year or early next year.
• Problem: Many of the Auditor's Office duties are historical and no longer align with current best practices for a city of Fargo's size. Other large cities have shifted away from a traditional auditor's office structure.
• Proposal: Susan suggested that the "true financial responsibilities," such as special assessment calculations, be moved to the Finance Department. This would streamline operations, as the Finance Department already has a team accustomed to project-related work.
• New Structure: The Auditor's Office would be restructured to focus on "clerk functions." These include:
o Records retention
o Business licensing (including complex liquor licenses, occupant licenses, and job licenses)
o Water utility billing
o Handling freedom of information requests (which would involve tracking and directing requests to the appropriate departments).
• Rationale for Change: The ultimate goal is to increase efficiency, avoid duplication of effort (specifically with special assessment accounting) and simplify processes as the City transitions to the new Tyler ERP system.
E-Permit (Event Permit) Fee Change: A proposal was presented to change the fee structure for e-permits, which allow licensed liquor dealers to sell at off-site events.
• The current fee is $25 for the application plus $10 per day.
• The proposed change is a flat $25 per event, regardless of duration. This change is capped by state law.
• The proposal will be brought to the Liquor Control Board before an ordinance change is drafted and is tentatively set to go into effect in January.
• The possibility of future changes to liquor ordinance fees, such as removing caps or increasing transfer fees, was also mentioned.
__Adjourn: __
The meeting adjourned at 10:58 o’clock a.m.