Background

At the November 7 City Council meeting, a presentation was made by Councilmember Joyce to the City Council calling into question the annexation process and financial analysis presented to the City Council leading up to the vote to annex Greatwood and New Territory. Questions were raised around the integrity of the numbers used and the financial impact of the annexation to the City’s finances.

City staff did not have the opportunity to review the Councilmember's data in the presentation before the meeting on Nov. 7, and the city's Director of Finance was not present. City staff later conducted a complete, thorough analysis of the information presented and determined that the analysis contained errors. City staff will present a report on the financial analysis related to the annexation at the same City Council meeting.  Nothing has occurred to change the conclusion that the annexation has no financial impact to the city.

Review of Calculations

At the meeting, Mayor Zimmerman suggested retaining the City's independent auditor to review the financial data and processes utilized for annexation.  With that, Whitley Penn has prepared a scope and an engagement letter for "Procedures to the annexation calculations relating to the City's Ordinance No. 2075 dated November 16, 2016 prepared by the City of Sugar Land, Texas' management and presented to City Council from September 1, 2016 to October 31, 2017" (see attached).

Mayor Zimmerman has stated publicly his confidence in City staff presentations and is certain that an independent review will confirm the information. Accordingly, Mayor Zimmerman has requested that this item be placed on the agenda for consideration.

According to the engagement letter, the procedures are as follows:

• Acquire calculations used to develop the debt service fund impact of annexation prepared by City Management and presented to City Council.

• Trace and agree calculations to supporting documentation and assumptions.

• Identify and document changes made to the calculations over the time period described.

• Agree changes to presentations to City Council.

• Recalculate the calculations to determine if the annexation has a net neutral impact on the City’s debt service fund.

• Trace and agree the amounts included in the calculations to the amounts included in the fiscal year 2018 budget document.

• Recalculate impact of changes of tax rate allocation for fiscal year 2018 debt service budget.

• Obtain annexation analysis packet prepared by Councilmember Joyce and compare those calculations to the calculations prepared by City management.

Timeline and Next Steps

Should Whitley Penn  be retained, they will begin work on November 22 and submit their findings by December 8, 2017.  Mayor Zimmerman recommends the report be shared directly with the entire City Council upon completion.  Whitley Penn will then present a report at the next City Council meeting.