Baltimore Overhauls Grants Management

April 15, 2014

As reported in the Baltimore Sun, Baltimore finance officials are planning to overhaul city policies on grants management, train staff and keep grant records in a centralized database. The action follows a September study that found accounting gaps with regard to grant money that Baltimore received from state, federal and other sources.

Bill E. Harris, of Glen Burnie, was hired this month to serve as the first ever citywide grants management director. . . Harris and his deputy will lead the efforts to write new policies and procedures, using best practices from other large cities.

The goal is improve oversight of the grant application process — including whether the grant’s purpose matches the mayor’s priorities — and better control the receipt of the money and the monitoring of subrecipients, Black said. Doing so will allow the city to better “track, monitor and enforce compliance,” he said. “We’ll know what’s going on at every corner of the city.”

By putting all of the records into an internal database, finance officials also will have access to real time data, Black said.

For more information, see the full story from the Sun.

April is Financial Education Month

April 11, 2014

The Financial Education and Capability Commission, co-chaired by Senator Katherine Klausmeier and Delegate Dana Stein, recently released a calendar of events highlighting financial education opportunities across Maryland. Events will focus on teaching children to save, planning for retirement, saving for college, among many others. From the organization’s press release:

In celebration of National Financial Education Month, the Financial Education and Capability Commission issued a “Knowledge Pay$ Off” calendar highlighting financial education opportunities across Maryland. The calendar lists free financial education classes and events which are open to the public and provide non-biased, fact-based information on a wide variety of financial topics. “We are committed to promoting financial education programs that provide high quality financial education services, so that our residents in Maryland have access to the information they need to build a successful financial life,” states Co-Chairs Senator Katherine Klausmeier and Delegate Dana Stein.

Events are being hosted by the Maryland Bankers Association, Junior Achievement of Central Maryland, Maryland Supplemental Retirement Plans, and the College Savings Plans of Maryland.

Financial Education Calendar


Washington County Receives Highest Bond Rating in History

April 10, 2014

Standard and Poor’s Ratings Services recently upgraded Washington County’s bond rating to AA+, the highest bond rating in the county’s history. As reported by the Hagerstown Herald-Mail:

“It’s a very positive thing for Washington County,” County Administrator Gregory B. Murray said after a weekly meeting of the Washington County Board of Commissioners.

“In these economic times, to be upgraded to a Double-A-plus is next to unheard of, and we’re very proud that through the hard work of our employees and the support of our commissioners, we’ve been able to maintain an operating and financial plan that allows the rating agencies on Wall Street to consider us very strong, very stable and able to move forward with a higher rating,” he said.

Washington County was upgraded from a AA rating due to its history of operating surpluses and maintaining cash reserve funds to cover debt service and expenditures. The upgraded bond rating will assist the county in securing better interest rates and repayment terms when borrowing money.


QA’s Bonds: Rates Drop as Outlook Soars

April 10, 2014

On April 1, Moody’s Investor Service Inc. removed Queen Anne’s County from the “negative watch” and gave it a Aa2 rating.  And although the negative outlook has been removed, the county received an interest rate of 3.16, which was lower than projected. Last year, Fitch Ratings revised the AA+ rating from negative to stable with the bond agencies attributing the better credit scores to better financial management.

From MyEasterShoreMD.com’s article,

“The removal of the negative outlook reflects the county’s improved financial position,” according to the report. “Since fiscal 2011, the county has increased its General Fund balance by 175% through implementation of various expenditure cuts and revenue raising strategies including increasing the property and income tax rates in fiscal 2012. Going forward, we expect the county to maintain a satisfactory position supported by conservative management and recently instituted formal financial and debt policies.”

County Commission President Philip Dumenil said in a prepared statement: “When we took office we inherited a projected $18 million budget deficit and the potential of seeing the county’s AA+ bond rating downgraded. This Board of Commissioners made dramatic budget cuts, increased revenues and re-established our Rainy Day Fund.”

“Now two years later, we have returned the county to financial stability and showed a full understanding of the level of financial wellness we need to maintain our bond rating,” Commissioner David Dunmyer said in a news release. “Having ‘credit watch’ lifted from the rating of the county was an indicator of the improvement in our financial position…”

When looking to future bond sales, the higher credit rating and lower interest rate is expected to save Queen Anne’s County between $350,000 to $400,000, according to county Finance Director Jonathan Seeman.

To read the full story on Queen Anne’s County’s bond ratings, visit myeasternshoremd.com.


2014 End of Session Wrap Up: Finance and Procurement

April 8, 2014

This post summarizes the status of finance and procurement legislation that MACo either considered or took a position on.

Lowering Prevailing Wage Threshold for School Construction: HB 727 / SB 232 lowers the prevailing wage threshold for school construction projects.  With this change, all school construction projects that are funded with 25% or more State funds would be subject to the State’s prevailing wage law.  As introduced, the bills would have lowered the threshold to require prevailing wage rates to be paid for a local project receiving any amount of State funds. MACo expressed concerns that lowering the threshold would increase project costs and affect the number of projects budgeted each year. After committee deliberations on SB 232, the bill was amended to only apply to school construction projects and instead of eliminating the threshold, to lower it from 50% to 40%.  However, the bill was reconsidered by the Senate Finance Committee and the threshold was lowered to 25%. The House Economic Matters Committee took the same action.

Final Status: HB 727 / SB 232 passed the General Assembly and is now awaiting the Governor’s signature.

Investment of Self-Insurance Funds: HB 772 clarifies that self-insurance funds and trust fund accounts may be invested in the same manner as pension funds and other postemployment funds. Legislation enacted two sessions ago (Ch. 516, Laws of 2012) excluded self-insurance funds from the definition of public funds. However, upon review by the Attorney General, it was found that the law was ambiguous because the legislation failed to make changes to another section of statute that would have made it absolutely clear that these funds could be invested in a more diversified manner. HB 772 was introduced to address this ambiguity and clearly express the intent of the General Assembly to authorize local governments to invest self-insurance funds and trust funds in a more diversified manner.  MACo supported this bill.

Final Status: HB 772 passed the General Assembly and is now awaiting the Governor’s signature.

Contractor Safety and Health PrequalificationHB 951 creates a workgroup to study the effects of public works contractor occupational safety and health prequalification requirements. As introduced, HB 951 would have prohibited a contractor or subcontractor from bidding on a public works project with any public body in the State unless they had been prequalified as a bidder based on a safety rating system established by the Department of Labor, Licensing, and Regulation (DLLR). MACo expressed concern that this approach would limit the number of qualified bidders and place more onerous requirements on local governments when procuring for projects, thereby increasing costs. MACo also expressed concern that the bill would have a limiting effect on small and minority contractors. HB 951 was turned into a study to address the concerns of MACo and others.

Final Status: HB 951 passed the General Assembly and is now awaiting the Governor’s signature.

Prevailing Wage Expansion: SB 204 would have substantially expanded the applicability of the State’s prevailing wage law to apply to all local government public works projects regardless of whether State dollars are received. The bill also would have lowered the dollar threshold for a project to $25,000 and expand the calculation of the prevailing wage to include combined hourly wages and fringe benefits. MACo opposed the bill stating that placing new, overly broad prevailing wage mandates on local governments would further limit the number of projects funded each year by increasing project costs and limiting local flexibility.

Final Status: SB 204 had a hearing on February 27 with no further action taken by the Senate Finance Committee.

Increasing Prevailing Wage Threshold for School Construction: SB 1068 would have increased the share of State funding required for a school construction project to be subject to the state prevailing wage law from 50% to 75%. The bill was introduced as an alternative to HB 727 / SB 232 described above.  MACo supported the bill stating that increasing the prevailing wage threshold for school construction purposes would provide for additional utility of limited school construction funds at the state and local level.

Final Status:  SB 1068 was voted unfavorable by the Senate Finance Committee.

 


This Week’s MACo Testimony – Week of March 31, 2014

April 4, 2014

The MACo staff gave testimony this week on the following bills:

April 1, 2014:

MACo supported a compromise bill altering the processes for hiring and removal of local health officers.

MACo supported an amended bill providing greater flexibility with a local tax incentive.

MACo withdrew its previous opposition to a procedural bill on officer discipline, honoring an agreement reached with police chiefs, sheriffs, and officer representatives.

MACo supported a “complementary approach” to bail reform, citing concerns that the broad reforms of earlier bills may not reach final passage.

April 2, 2014:

MACo sought an assurance of state funding for this study looking at school technology, capacity and costs.

April 3, 2014:

MACo opposed a broadening of non-rebuttable worker compensation presumptions to further classes of employees.

To see online versions of MACo’s written testimony from the 2014 legislative session, click here.


Worcester County Receives Bond Rating Upgrade

April 1, 2014

Worcester County received an upgrade from AA to AA+ from Standard & Poor in its most recent meeting with the bond ratings agency.  Fitch Ratings & Moody’s Investor Service confirmed that the county’s finances are still in good health.

From the Worcester County news release,

In March 2014, Standard and Poor’s raised its rating on Worcester County’s general obligation (GO) debt one notch, from AA to AA+, based on recently implemented local GO criteria published September 12, 2013 on Ratings Direct, as well as the county’s strong financial performance supported by management’s strong policies and practices.

Concurrently, Fitch Ratings assigned an AA rating to Worcester County’s $48.3 million Consolidated Public Improvement Bonds, 2014 Series and a stable AA rating on the county’s $67.6 million outstanding GO bonds. Moody’s Investors Service assigned a stable Aa2 rating to Worcester County’s $48.3 million Consolidated Public Improvement Bonds, 2014 Series and affirmed the Aa2 rating on the county’s existing outstanding parity debt, stating that the bonds are secured by the county’s unlimited ad valorem tax pledge.

“During our meetings with Fitch Ratings, Standard and Poor’s and Moody’s Investor Services, they each carefully examined the county’s tax base, financial reports, recent economic trend data, as well as our debt burden and financial policies,” Finance Officer Phil Thompson said. “These ratings clearly indicate that the county continues to make prudent financial decisions during challenging economic times. The relationship and cooperation between our leadership, the staff and our community leaders is something to be very proud of.”

To read more about Worcester County’s bond ratings, visit Worcester County’s website.


NACo Cost Savings Tools for Counties

April 1, 2014

MACo’s website is a one-stop-shopping place for ways to save your county money. From health savings to cooperative purchasing opportunities, it’s all easy to find in one place!

Visit the NACo Cost Saving Tools page on MACo’s website and select any one of the options to start saving!

The National Association of Counties (NACo) offers many ways to save counties money, including:

In addition, NACo, in connection with U.S. Communities Cooperative Purchasing program, is able to reduce the cost of goods and services by aggregating the purchasing power of public agencies nationwide.

 

MACo logo horiz for light bg - WEBNACo

 


Top 5 Misconceptions about the Procurement of Energy Commodities

April 1, 2014

Why overcoming them is critical to reducing costs

Every day, energy decision-makers are bombarded with phone calls and emails from energy firms proclaiming they have the best ideas about how to procure energy. However, energy procurement may be just one of many “hats” the decision-maker wears. The resulting confusion can lead to faulty opinions about energy procurement best practices. These misconceptions are typically held by those ”responsible” for energy procurement – purchasing agents, facility managers, assistant superintendents, city managers, county judges, auditors, and others. While most energy managers have a great deal of expertise managing facility operations, they are not experts in the energy commodity markets. Here, we outline the five most common misconceptions held by energy decision-makers or anyone who is part of a team making energy procurement recommendations for their organization.

Misconception 1: “I already understand the energy markets and how to procure energy.”

Especially if the decision-maker is someone who has procured energy before or has some background in the energy markets, the tendency is to believe he or she knows enough to handle things successfully. While many energy managers are certified to handle demand side issues, which relate to how an organization uses energy once it’s delivered to them, managing the physical energy commodity itself requires a completely different knowledge base. Just as you wouldn’t want to trust cardiac surgery to someone who “used to be in the medical field” but never performed surgery, you wouldn’t want to leave energy procurement in your own hands or anyone else’s who is not fully involved every day in the energy wholesale markets. Your job is not to be an energy expert, but rather to shepherd the process for your organization – you must rely on seeking expertise to make the process successful.

Misconception 2: “I manage procurement of all commodities according to the bid calendar.”

Every purchasing professional maintains one, and it is the lifeblood of the procurement organization: the master bid calendar. This is how almost all procurement is managed, by working with contract expirations and end user needs to determine when each contract should be bid. The reason this doesn’t work with energy commodities is the same reason energy is so unique – volatility. Energy commodities in general, and specifically electricity, are the most volatile commodities you will ever procure. The impact on your budget of locking in a fixed price for electricity on Tuesday afternoon as opposed to Friday morning, for example, can easily be a difference of hundreds of thousands of dollars annually. While you can’t do anything about the volatility itself, you can manage your procurement process by having the tools and resources in place to follow the market and lock in prices during favorable market dips, thereby saving your organization tremendously in the long run.

Misconception 3: “My supplier is very good and always helps me secure the best price.”

It has been a growing trend to foster “partnerships” with suppliers, and in the energy world this sometimes means sticking with one supplier and trusting that they will always help you secure the best pricing. We mentioned before how essential it is to follow the market in order to find the best windows to secure pricing, and relying on one supplier to provide this guidance can lead to problems. This one supplier is only able to give you “their view” of the market. In addition, they are only able to deliver one solution – theirs. To ensure you are achieving the best possible procurement (product strategy, price, term, contract, etc.), you must use a competitive process that incorporates supplier responses from all suppliers in the market, not just the incumbent. Don’t worry – your current supplier will understand.

Misconception 4: “My contract doesn’t expire for another year, I’m fine.”

So many opportunities for savings in energy commodities are lost by not being ready to execute a contract. Unless they are within six to twelve months of contract expiration, many make the mistake of believing there is no point to even discuss energy procurement. It has been shown time and time again, though, that this strategy is the equivalent of rolling the dice and hoping for a seven. The best approach is to continually monitor the markets, because history shows that the best contracting window may be even three years prior to the expiration of the current contract. For example, in today’s market, known as a “declining market,” energy market prices are lower the more years you go out. This characteristic can mean that a 12-month contract purchased and starting today may be priced at 7 cents per kilowatt hour whereas a 12-month contract purchased to start in 24 months may be priced at 5.5 cents per kWh. The bottom line? It’s never too early to start looking at energy prices!

Misconception 5: “We can’t control energy prices, so there is no need to monitor the market.”

This is a summation of much that has already been discussed. The misconception is that since no one has a crystal ball, there is no point in even trying to manage the process. In this scenario, the decision-maker just throws up his or her hands and says “We’ll bid this out next September.” The procurement is executed regardless of what other factors are happening in the market, and frequently attempts made by consultants and others to help are rebuffed because the belief is that no one knows the future, so why even try. Just because you have “put the energy contract to bed” for the next three years doesn’t mean you shouldn’t be monitoring the market and your contract’s performance. This monitoring will help determine how well your previous strategy performed, as well as show you market windows to make future decisions. A continuous feedback loop regarding contract strategy and performance is essential to increase an organization’s opportunities for future savings and cost control.

So all in all, don’t be a reactionary victim of doing things the same old way. Many analytical studies show that energy is one of the top three areas of spend for organizations. Take charge, and establish a proactive, managed strategy that pulls in expertise and professional resources to truly transform your organization, save thousands of additional dollars and make energy the hero of the annual budget.

Written by Bob Wooten for Government Procurement magazine

Bob Wooten, C.P.M., CEP, is Director of Government Accounts for Tradition Energy, where he manages energy procurement for a wide variety of governmental entities including cities, schools, colleges, universities, housing authorities and municipal districts. Contact Bob at Bob.Wooten@TraditionEnergy.com

Tradition Energy is a supplier with U.S. Communities Government Purchasing Alliance. U.S. Communities is the leading national government purchasing cooperative that reduces the cost of goods and services by aggregating the purchasing power of public agencies nationwide.  To learn more about Tradition Energy and U.S. Communities’ other contracts, please visit www.uscommunities.org.


Treasurer Kopp Addresses MACo Legislative Committee

March 28, 2014
Nancy Kopp Addresses MACo 3.26

Treasurer Kopp addresses MACo’s Legislative Committee

Maryland’s State Treasurer Nancy Kopp addressed MACo’s Legislative Committee on March 26 discussing changes to the plan for reinvestment of pension savings and reforms proposed by the US Securities and Exchange Commission (SEC) that could affect money market funds. The Treasurer described how her past experience as a member of the House of Delegates and her current positions as Chairman of the State Pension Board of Trustees, the Chair of the Capital Debt Affordability Committee, a member of several national associations for state treasurers, and a newly appointed board member of the Financial Accounting Foundation(FAF) gives her a unique perspective on a variety of issues facing the State.

The Treasurer has been an outspoken advocate of continuing to reinvest savings from recent pension reforms back into the pension system in light of a provision included in the Governor’s budget to permanently divert a portion of the pension reform savings to the State’s General Fund. Both the House and the Senate have modified the Governor’s proposal, making it applicable only for the next several years. The Treasurer was pleased that the General Assembly eliminated the permanent diversion of pension savings and committed to a plan that continues to make progress towards 80% funding in 2025 and 100% funding by 2039. As a fiduciary of the fund, along with other members of the Board of Trustees, the Treasurer’s aim is that the State pension fund stay on track to reaching 100% funded status by 2039.

Through her involvement with national associations of state treasurers, auditors, and comptrollers, and as a Board member of the FAF, the Treasurer tracks national financial regulations affecting the State. The SEC’s current proposed reform of money market funds includes a proposal to require money market funds to sell and redeem shares based on the current market-based value of the securities in their underlying portfolios, rounded to the fourth decimal place, i.e., transact at a “floating” net asset value per share. This proposed reform could adversely impact the utilization of local government investment pools. The Treasurer would like to work with local finance and budget offices on this potential fund management issue.

The Treasurer finished her remarks with a pitch for Maryland’s College Saving Program.  The savings program is one of the best in the nation, according to the Treasurer, providing tax incentives to parents, grandparents and others who want to invest as little as $25 per month towards a child’s college education.  She encouraged those running for office to share information about the plan with their constituents.

Members of the MACo Legislative Committee include representatives from Maryland’s 23 counties and Baltimore City. Each county gets one vote on the Legislative Committee. The committee meets regularly on Wednesdays at the MACo office during the General Assembly Session. During the interim, the committee meets quarterly to develop legislative priorities for the coming year.

For more information, see the following previous posts on Conduit Street, Treasurer Kopp Tabbed for Accounting Leadership, House Gives Preliminary Approval to Budget Plan, Final Vote Today, House Republicans Announce Plan to Limit Budget Growth to 1%, Senate Passes $39 Billion Budget Plan for Fiscal 2015, and this information on the Maryland’s College Saving Program.


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