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HomeMy WebLinkAbout2016-03-15 Finance Committee Summary MinutesRegular Meeting Tuesday, March 15, 2016 Chairperson Filseth called the meeting to order at 7:03 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: Filseth (Chair), Holman, Schmid, Wolbach: Absent: Oral Communications Chair Filseth: We have one item on our agenda tonight, but before that we have oral communications. Are there any members of the public here? None. Agenda Items 1. Introduction and Discussion of the Draft Fiscal Analysis of the City of Palo Alto 2030 Comprehensive Plan Update (Continued From March 1, 2016) Chair Filseth: In that case, why don’t we proceed to our list of action items this evening, which is Introduction and Discussion of the Draft Fiscal Analysis Comp Plan. With that, thank you for joining us and you have the floor. Hillary Gitelman, Director of Planning and Community Environment: (Crosstalk). Chair Filseth and Council Members, I am Hillary Gitelman, the Planning Director. I am joined by Roland Rivera on our staff and Benjamin Sigman from EPS Consultants. They have done this fiscal study for us. We also expect Joanna Jansen, the prime consultant from Placeworks to join us. She is in traffic. The discussion this evening is about a draft study to look at the fiscal impacts of the Comp Plan update. It is meant to compliment the draft Environmental Impact Report (EIR). I think the Council rightfully recognized that under the the Calrifornia Environmental Quality Act (CEQA) we don’t have to analyze the fiscal impacts of a project, but it makes good sense governance-wise to do so. This is a supplement to that exercise and like a draft EIR, we are welcoming comments and questions and we hope to build a stronger and better final report to ultimately aid in the Council’s decision-making process. We are certainly going to need to supplement the study. We already know the Council has directed us to develop, with your help, I hope, the fifth scenario or quality-of-life scenario, and we will have to add that to this study at some point. Just so you know, in fact, Council Member Schmid just heard this at the Citizen Advisory Committee (CAC) meeting, our plan on that fifth scenario is to get the Council’s input on housing issues next Monday, to get input on sustainability-related issues on April 18, when you will hear our presentation on Earth Day and the Sustainability and Climate Action Plan (S/CAP) to get input from the Council on mitigation measures when we have the hearing on the draft EIR April 25, and then to come back to Council in mid-May for that discussion about the fifth scenario and to bring you the information and options that you requested when we talked on February 22. We are expecting quite a dialogue this evening. We have a brief presentation, Ben has a brief presentation. We intentionally have left a lot of time for questions and comments. We understand that the results of this study don’t necessarily match the narrative that some Council Members have adopted based on prior studies, so we are going to have to talk about the data and results here and we are not really requesting a formal action. What we would like are your comments and questions and we will bring those forward to the full Council. We will probably put this on the same agenda as the draft DIR and get Council questions and comments to respond to and address in a final document. With that I will hand it over to Ben. Ben Sigman, Executive Vice President for Economic & Planning Systems, Inc.: Thank you for having me. It is really an honor to be working on this assignment with the City of Palo Alto. I am Ben Sigman, Economic and Planning Systems. I am an Executive Vice-President and I have about 15 years of experience in this kind of work. We have done fiscal studies for specific projects, specific plans, general plans all over the State of California. This reflects sort of the standard in practice in our area and I think we have also built on that a bit, given the direction from Staff and from the City as to what you are looking for, and so we have about a 20-minute presentation. I am happy to make this as conversational as you would like, if you would like to ask questions along with it, that is just fine. I think we have plenty of time to get through the material, no matter which way we do it. I am going to walk you through the alternatives, I should say, we build off the Comprehensive Plan scenarios, and so we will review those really briefly. I am going to show you the findings of this study. I think everyone has had the hard copy of the report, so you are familiar with that, so we can move through that, but I want to make sure we are all sort of on the same page about the order of magnitude of the findings. Then I will walk you through the methodology and some of the data assumptions, and then we will talk about where we go from here. This study has a very focused scope. We are looking exclusively at your General Plan or General Fund and we are looking at the operational cost factors, right, so what we are not looking at are the capital expenditures the City may need to make as part of the Comprehensive Plan scenarios. We are not quantifying the cost of any mitigations associated with quality-of-life here in Palo Alto. I know there is a lot of sort of uproar about traffic and other quality-of-life affects that come with growth. This is purely a financial look at the General Fund, so it does not capture all these things, and that is really important to state right off the bat. It is consistent in a lot of ways with the study you all had done in 2009, the Applied Development Economics (ADE) Study, a very similar look at the General Fund. We focused more on the revenue and cost drivers by land use, so where as they would have assigned sales tax to commercial uses because that is the point of sale, we try to break out where that spending that generates the sales tax is actually coming from in terms of households versus workers and I’ll walk you through those methodologies momentarily. We also, as compared with the ADE Study, are looking at the margin. We had the benefit of having these comprehensive plan scenarios and we are saying, “What happens from here going forward,” not, “What is the sort-of fiscal makeup of the General Fund today on average overall.” The other thing I would point out about our work compared to the ADE work is we had the benefit of time. It has taken a while to get this study in front of you, and that is largely because we spent a lot of time meeting with City Department Staff, working through some of their cost data to understand the cost implications of growth at the department level for the major departments. I also note from some of your preliminary comments, you might have been hoping for some taxation policy analysis, and that is not something we have done here, but could be something certainly in the future. On this Slide it is important to note we did look back 15 years at some of the trends, so we are not operating in a sort of bubble. We are looking at sort of long-term trends in the City and it is important for me to point out that there are a whole bunch of things that might go on externally and in the world that we are not able to guess about and we don’t try to guess about, so regional growth, technology, environmental changes, we are not adjusting anything to reflect what we think some of those categories might have in terms of effects on the City. I just want to give you a sense of the process we have been going through. It has been more than a year, extensive review of documents and data from the City, a lot of meetings with City Staff, as I mentioned. We have done two major presentations to City Staff already, so we have gotten a lot of input from the Finance Department, a lot of input from Planning and Community Environment, input from the City Manager’s Office, so this reflects a sort of collaboration between our firm and Staff on this analysis, and as Hillary said, I think we are interested in hearing where we’re right or where you have questions. There is definitely a lot of opportunity for sensitivity analysis around some of the assumptions or deeper research where we had to go with available data sources, but perhaps you are interested in primary research. I am going to move right to the scenarios. I think you are all familiar with these from having studied the Comprehensive Plan draft that is out. We are looking at between 10 and 16 percent growth in population and housing and 10 to 16 percent growth in jobs, so that is the range. We have, I don’t know if we need to get into all the detail, but Scenario 1 is sort of a business-as-usual scenario; Scenario 2, business-as-usual with a jobs reduction; Scenario 3 is sort of a modest-growth scenario where we explore different options for the office cap; Scenario 4 is our high-growth scenario. Flipping to the sort of bottom line, if you will, the findings of the study are that from a General Fund perspective, just at the margin looking out at this 10 to 15, 10 to 16 percent growth in the next 15 years, today’s dollars, excluding any trends that you might have in health care costs or pensions, those types of affects are sort of held constant, we see that the growth scenarios would yield between $5 and $7.4 million, 2015 dollars in additional net revenue accruing to the General Fund. It is really relatively modest, right, that is between three and four percent essentially of your current General Fund. Chair Filseth: And that’s over 15 years? Mr. Sigman: Over 15 years, yup. Chair Filseth: This is fascinating, and I am glad we are going to do all this, but the short answer is the net financial fiscal impact of all the scenarios is based on (inaudible). Mr. Sigman: Yup. And I think this is, in Palo Alto… Chair Filseth: Tremendously valuable right. Mr. Sigman: We are not answering every question that people have, but it is important to put this to bed, right. It is important to have studied this and be confident that you understand the effects of growth on your General Fund, so it is not going to please all the people and it doesn’t, there is more work to be done, but I think, I don’t want to suggest that this wasn’t necessary. So what is going on here is, this is a mature city, right, with a mature City Government that at the margin can expand services without a lot of cost affect. I will get into the details of that on a department-by-department basis as needed, but that is the sort of headline. When we ran around to various departments, maybe with the exception as you’ll see of your Public Safety, many of them can scale up and accommodate additional population and employment levels in the City without adding a lot of cost. Then similar to some of the other studies you had done, I did want to report these costs and revenues to the General Fund on a per capita or per job basis. As you can see, what we are showing is the residents actually net provide a little bit more revenue to your General Fund than the workers, so that is sort of an interesting finding, a little bit out of the ordinary as compared with other cities. Usually we see residential as being a bit of a drain on the General Fund, but in this case again, because for instance, your Parks Department is so well established and so sizable, they can accommodate these additional residents without a lot of additional cost burden. It took a lot of digging with them to kind of get to that conclusion. Chair Filseth: I don’t want to derail this, but since at this point it is really basic, one of the results from this is basically for both additional residents and additional employees, basically they contribute twice as much revenue as the cost? Mr. Sigman: Yea, roughly. Chair Filseth: However, every year the General Fund basically breaks even. How is that possible, from 90,000 (inaudible). Mr. Sigman: Yea. Chair Filseth: Not including our unfunded long-term (inaudible). Mr. Sigman: Right, well, you may be better positioned to answer this. (crosstalk). You fill the spending to meet the budget in a lot of cases. I think it is also sort of departmental habit, this is speaking broadly, I don’t know if it is a Palo Alto culture or not, but to always seek to grow your budget, to do more, and I think that in this community where high-quality services are so valued and City Staff try so hard to deliver good quality services, they are always looking for more resources to do that. There is always more that can be done. Chair Filseth: Yet if that is the case, because the General Fund expenses are basically head count which correlates to services, so if we expand services to fit the available revenue, you would think that would show up in the costs. Mr. Sigman: Right, so the methodology we use locks current services. We assume that the current service levels remain perfectly unchanged. It is as if we said, “These additional 15 percent … Chair Filseth: So the next person is different from the last person. Mr. Sigman: Incrementally. Chair Filseth: Right. Mr. Sigman: We do costs at the margin and the costs are not the average costs. That is a distinction between our work and the ADE work and eventually I think it can be argued that all costs revert to the average, so if we were projecting a 75 percent growth, I think at that point you start to hit some cost thresholds and you need the new police station or the new fire station, which may be a better example here, so those costs do kind of come back to the average as you expand, even at the margin, to meet dramatic growth, but because we are talking about 10 or 15 percent, some of those fixed costs are not changing, so this increment is modest and when we worked with the departments to talk about what this kind of incremental grown meant to them, they all felt they could accommodate it with minimal affects. Council Member Holman: Can I ask a question too, which is if we are talking about incremental change at the same time, if you look at the difference between Scenario 2 and Scenario 4, the next to last row on there is adding three million to four million square feet of additional workspace, so that, we might call that incremental, but it is wow, so that much square footage to be considered incremental is just… Mr. Sigman: Right, it is just, so we have pretty good data about square feet in the City and you know it is still on the same order of 12 to 15 percent growth in work space, so the growth in employment space is similar to the overall growth in jobs, it is not out of whack. It is not as if we are going to have to increase work space by 50 percent to get 15 percent more jobs. Council Member Holman: I guess what I am getting at is, you know, incremental, of course it does depend on what your base is, but three million to four million square feet of additional work space is not incidental. It might be incrementally small, but it is not incidental, and that is what I was trying to… Ms. Gitelman: Council Member Holman, you are absolutely right. It is not an inconsequential amount of new development that would happen. The interesting thing for me in how we have analyzed both the fiscal impacts and the environmental impacts, is it is really based on the number of jobs, it is not based on the amount of square footage, so a lot of the analysis is based on the job number and the different scenarios assume different employment densities, different amounts of new development, to look at those impacts that come from building footprints, aesthetics, land use, but most of the impacts that we think of as quality-of-life, traffic, noise, the fiscal impacts come from the job number, not the square footage number. I think that interaction is fascinating. Council Member Holman: Except, of course, they are so absolutely directly related. Ms. Gitelman: They are related, (crosstalk) but are not proportional. So the economic cycles really determine the employees per square foot and it is not always a direct relationship, new development to new employees. We saw, for example, after the recession, it took us a long time to start adding square footage, but we added jobs like crazy, so it is not a directly proportional relationship, so these scenarios are trying to show and test various amounts of employment and various amounts of square footage, recognizing that relationship is not always proportional. Council Member Holman: I guess the other point I would make, pardon me for not going through you, Chair, the other point I was trying to make too is that once the building is built, we only have so much control, so the fluctuations that we almost can’t monitor in terms of changing markets at least, is whether it is two per 1,000 or 12 per 1,000. That fluctuation exists in reality if the amount of square footage is added that we are contemplating. Mr. Sigman: You are just speaking of that employment density in the space, so you build the space and then you could end up with a lot more jobs than you anticipated. Council Member Holman: Yes. Mr. Sigman: Right, that is a fair point and we have keyed in exactly to the assumptions within the Comprehensive Plan update and so there are fixed ratios for each scenario, but (crosstalk) the net new square footage of work space. Chair Filseth: The scenarios state a ratio of jobs per square foot, and you just used that. Mr. Sigman: They state the square feet, do they not? Chair Filseth: And they state the number of jobs. Ms. Gitelman: That’s right, but some of the job growth may be in existing building square footage, not in new square footage, so that’s the complexity. Mr. Sigman: Okay, thanks. I’ll keep moving (crosstalk), I don’t have, that’s okay, we have the time, but we don’t have too many slides to get through. So this is the revenue side. Property Taxes are far and away the largest source of revenue to the General Fund under these growth scenarios. They make up 50 to 56 percent of the total revenue. Sales Tax is also quite significant in terms of the magnitude. Just to keep moving, I wanted to make a point here about Property Tax, it is, because it is such an important category of revenue… Council Member Wolbach: I’m sorry, can we just go back. You said, I didn’t crunch the numbers myself, but you said Property Taxes account for 50 to 56 percent of the new revenue or of total revenue? Mr. Sigman: Of the revenue we are generating in these scenarios, so it is the new revenue, so in this table here it is the top line, Property Taxes, over the total revenue associated with each of these scenarios. Council Member Wolbach: That’s what I thought but I just wanted to check. Thank you. Mr. Sigman: Yes, I think to answer the other point though, it makes up about one-fifth, about 20 percent, Property Tax, of your total General Fund revenue and actually residential is about three times commercial in terms of the assessed value contribution to that. One of the things we wanted to sort of be clear about, and there is a lot going on in this slide, but the upper left-hand corner is assessed value, residential versus non-residential in the City of Palo Alto over roughly a five-year period that we had data for, and it has been pointed out, I think, in some of the Council meetings, that this residential value is increasing as a share of the total. It has gone up about five points over this period. We wanted to just sort of be clear that we believe this is a baseline condition. That sort of no matter what you build new in Palo Alto, you are probably going to see this trend continue. We pulled some data from the County Assessor’s Office and what we found that for recent years the new construction actually accounted for only 15 percent of the change in assessed value year over year. So really what you are seeing is dynamic in assessed value is a result of your existing housing stock, so that’s one note we wanted to make, just going in. We did quite a bit of research looking at the real estate market to arrive at the assumptions we used in this study. Here is the sort of schedule of new product pricing that we are using. The for-sale residential, it is important to note, is essentially representative of multi-family, condominium product. We are not assuming a whole lot, if really any, in the analysis new single family detached homes. We are assuming it is in fill multi-family attached. We do include the housing element policy for affordable housing. We follow Housing and Urban Development (HUD) guidelines for pricing that housing. We also did quite a bit of work using data from Costar Group, which tracks with all the brokerage houses in terms of retail, office, industrial and some of the other land uses out there. Other includes things like hospitality, so hotels as well as health care uses. Because we wanted to be realistic about the effects of Proposition (Prop) 13 and appreciation in the market, we did create a sort of separate model that looks at turnover in the property markets. We have some sort of assumed whole periods that reflect the market data we have, as well as appreciation factors, so the long and short of this is that by 2030 the real value of affordable housing will be slightly lower than it is today, and the real value of the market rate products, both residential and commercial will be slightly higher because of the real appreciation in the market place. Council Member Wolbach: Even with Prop 13? Chair Filseth: Is this a 2030 number, or is this a today number? Mr. Sigman: So you are looking at our assumption from today’s on the left-hand column there, the assessed value column, that is where we start. Chair Filseth: Okay. Mr. Sigman: And it is not in this slide, but in the report I can direct you, we have this sort of market adjustment factor that comes from this turnover model that we built. So I want to say something like the for-sale residential goes up about 40 percent in real terms by 2030. Chair Filseth: Got it. So office space at $700 square foot? Mr. Sigman: That’s right, and you have to remember that… Chair Filseth: So that is like $30 million an acre, is that accurate? Mr. Sigman: I’m sorry, per square foot of built space. Chair Filseth: Of built space. Mr. Sigman: Built space, so Floor Area Ratio (FAR) space, yeah. So not acreage, all of this is per unit, I should be more clear. Chair Filseth: That’s within constructed building on top of it with plumbing, heating, electricity and so forth, not just a lot. Mr. Sigman: So for the office, if you bought a 1,000 square foot office, it is $700,000. So we can come back to some of these assumptions. A lot of this presentation is just walking you through the data, so moving on to the retail sales, we rely on, since this data concerning the income levels in Palo Alto for the households and their spending, their retail spending pattern comes from a survey provided by the Bureau of Labor Statistics, the Consumer Expenditure Survey, a very common source for this kind of work. Then the capture rate, how much of that spending actually happens in Palo Alto, is an assumption we make. We are justified by that being the fair share of retail space in the market area of Palo Alto versus the broader, roughly five-mile radius of retail, so a pretty reasonable capture assumption. Then on the worker’s side, very similarly we used the best available survey data, same survey that ADE used in their prior work, and it is International Council of Shopping Centers Survey on workers’ spending and we are able to make adjustments for the type of retail that is available in Palo Alto, so based on that we are assuming $9,300 in spending, and this is spending that workers make to and from their place of work, in the vicinity of work, so it is not just lunch, it is also groceries on the way home, also shopping they might do at the Stanford Shopping Center after work or before work or at lunchtime, so it is sort of all-encompassing in that regard. We are careful to adjust for double counting, so any workers that also live in Palo Alto are counted as households and excluded from the worker spend here. Then we also capture a variety of business spending types, so business-to-business, particularly in the technology industry is a significant source of retail tax revenue. In Palo Alto we have seen it vary greatly over the years, up to 30 percent of total sales tax down at 12 percent, so we found middle ground at about 15 percent of your total retail sales tax revenue from Business to Business (B-to-B) is kind of a stabilized number, and what we did was divide it by the real estate that we think produces that type of sales tax in town and came up with this $20 a foot, which corresponds very closely to some survey work that we have access to from Menlo Park in one of their business parks, so I think we are pretty comfortable that this reflects a sort of typical B-to-B sales tax generation. Chair Filseth: So what is a typical example of a transaction that you are talking about? Mr. Sigman: Yeah, so… Chair Filseth: Hewlett-Packard (HP) in Research Park sells a logic analyzer to somebody. Mr. Sigman: Yes, servers and other technology where they make the point of sale the office headquarters. I don’t have a lot of very specific examples, but we see it in aggregated sales tax data for all kinds of cities. We have done a lot of this work recently in Cupertino and there where they have Apple as a significant generator of B-to-B I think it is like 100 times, you know, so this is pretty modest, but they are a special case too. I think in their case, I think they are basically accounting for a lot of the on-line music sales and device sales that they sell over the internet, point-of-sale is registered in Cupertino. Chair Filseth: That would be retail wouldn’t it, not the B-to-B? Mr. Sigman: I believe because it is, that is a good point, but because it is not coming from a retail outlet, it is registered at a headquarters location, I think it gets counted as B-to-B. Chair Filseth: So Tesla sells somebody a car here, is that B-to-B? Mr. Sigman: If Tesla sells, so do they have an office location here? So if they have designated this as the point-of-sale, and I know there is some flexibility in that because where… Council Member Schmid: They did that for 18 months, then they ruled to move that over to the East Bay, so that was… Mr. Sigman: I know Cupertino made a deal a number of years back where they compelled Apple to move point-of-sale for a variety of transactions to the Cupertino location and in return the City gave them a sales tax kickback, so there is, you know, it can move. Council Member Wolbach: That is interesting, because basically what we are saying here is that we actually got sales tax dollars from office space sometimes. Mr. Sigman: Oh yeah. Council Member Wolbach: It is interesting to know that. Mr. Sigman: And like I say, it (crosstalk) 27 percent of your total Retail Tax has been from B-to-B which is presumably from office locations or similar industrial locations. Lalo Perez, Chief Financial Officer: Industrial locations, probably the (crosstalk) and the HP example. Chair Filseth: Clearly so, I mean that is the difference between HP and Flipboard. Flipboard doesn’t make any money so they don’t pay any tax. Actually, I don’t know if we get sales tax from Flipboard, I doubt it. Actually, I’m sure we don’t. I’m sure their point-of-sales is in Ireland or someplace like that. Mr. Sigman: The other category of business spending that we have, and we can come back to B-to-B if we want to talk about those, it is fine. The spending a business will make on its employees on a day-to-day basis, so food they might bring in from local restaurants, stationery, other business supplies, incidentals that they bring in. We made a pretty simple assumption of $500 a head for employees spending. Council Member Holman: Is there any way, a wild question here, is there any way at all to understand what the spending for businesses persons is for restaurants versus other retail? Mr. Sigman: Yes, so in the International Council of Shopping Centers Survey, they asked workers, they go around the country, they ask workers a sample, how do they spend their money on their way to and from work, and they have a number of categories. They may leave you wanting, but it is more than a total number. For instance, they tell us about transportation spending, which we don’t believe is taxable so we take that out, and we were able to make some adjustments to try to capture the portion of their spending we think is taxable, and I believe they do a pretty good job of breaking out restaurant spending or food spending. I don’t have it off the top of my head. I can certainly follow up. Chair Filseth: Sorry to dwell on this briefly, but this is sort of a major, one of the small number of significant divergences between where you guys did and some of my colleagues’ analyses here before, but it has to do with, sort of, the household spending. So if I understand, you made an estimate for what the average household in Palo Alto spends on stuff per year, and that is the $32,000? Mr. Sigman: Taxable retail items, yeah. Chair Filseth: And how do you get that number? Mr. Sigman: We have again survey data from the Bureau of Labor Statistics, Consumer Expenditure Survey. Chair Filseth: So that is a nationwide… Mr. Sigman: It is a national survey, but what it allows you to do is categorize household spending by income, so we select the bracket of spending profile that most closely matches the average household income in Palo Alto, so while it doesn’t reflect even a California household, it does reflect a household with $150,000 and more annually. Chair Filseth: Right, so you said if you are in this income bracket you probably spend this much and if you are in that income bracket you will probably spend that much and so forth on a national basis. Mr. Sigman: Correct. And so we take the profile, which is essentially a distribution of spending across retail types and we apply it to your specific household income average. Council Member Wolbach: In that capture rate, that means of that $32,000 that they are spending, 30 percent of it would be here in Palo Alto, the other 70 percent would be in other communities. Mr. Sigman: Exactly right. Council Member Wolbach: (inaudible). Chair Filseth: And you said you have a formula based on sort of the amount of retail space in Palo Alto as a proportion of the amount of retail space within a five-mile radius. Mr. Sigman: Yes, which we would consider to be the trade area, correct. Chair Filseth: And you assume that some percentage is, you did something, you said there is a combination of the amount of area and how close it is to you, whereas the amount of area elsewhere, 4.9 miles away? Mr. Sigman: Actually, it may be even simpler than you are thinking. It literally is that the City of Palo Alto has 30 percent of the retail square footage in a five-mile radius. Chair Filseth: So you assume that, okay, so it is a straight ratio. Mr. Sigman: I know you have had quite a bit of retail work done in the past, you could get very sophisticated on this and I am not sure if it would make the answer any more accurate or not. (crosstalk) Joe Saccio, Assistant Director of Administrative Services: I was just going to say (crosstalk), this percentage which shows a fair amount of, this percentage of 30 percent shows a fair amount of like leakage to other surrounding areas, and that is supported by sales tax data that we get quarterly from our sales tax consultant, and it is basically, you know, there is a Wal-Mart out there, there is a Costco out there and the big box stores. Chair Filseth: I shop at (crosstalk). Mr. Saccio: I just thought I would add that. Council Member Wolbach: I also wanted to ask, so in the end we are looking at, according to this model, $9,700 of retail spent by a household in Palo Alto, it is actually spent here. Mr. Sigman: Spent here on taxable items. Council Member Wolbach: On taxable items. Okay, per year. Mr. Sigman: So prescription drugs wouldn’t be in there, transportation might not be in there. Council Member Wolbach: Right, so then the next question is, how much money do we actually end up getting from them, and what percentage of that goes to, where? Can I see it broken down? How much goes to County versus State versus City. Mr. Sigman: So that is detailed in the Appendix and we do not estimate any tax revenue that accrues to the County in our study. It is completely outside the analysis. So… Mr. Saccio: Here we got $97, out of that $9700. If someone spends $9700 in Palo Alto we get 1 percent. Mr. Sigman: Right. So the Appendix figure, A9 is where you want to look. So each of these Appendix tables is for one of the scenarios, so Scenario 1 for example, the residential uses provide $26.5 million almost in taxable spending, $265,000 a year in Sales Tax revenue accruing to the General Fund and in that particular scenario, because you have quite a bit more employment relative to households, it is $150 million in spending and $1.5 million in sales tax revenue accruing to the General Fund. Council Member Wolbach: Thank you. Mr. Sigman: Of course. So we will keep going. We can come back to any of this, of course. Transient Occupancy Tax is our next category of revenue. We use a firm called Smith Travel Research, which is the most reputable hotel data available. (inaudible) A full percentage points of the study costs, but $240 was your average room rate at the time of the study, so at the middle of last year. That part is easy. The tax rate is easy at 14 percent, that all accrues to your General Fund. We did a couple of things to break it out and this is where we are focusing here on the demand drivers rather than just calling that commercial tax revenue. The residential we did a pretty extensive literature search on what households attract in terms of visitors from out of town and what share of those visitors stay overnight in paid lodging and we arrived at this two nights per household estimate or assumption, and then in terms of the worker-driven demand, so this is folks coming from out of town on business to meet with Palo Alto firms, an informal survey in Menlo Park had us at about three room nights per worker, so we sort of stress tested that a few different ways, and so those are the assumptions we ended up with here. Similar to the Sales Tax, we do have a capture rate that we apply, so these households may attract overnight guests and these businesses may attract overnight business, but we are assuming there is a 10 percent leakage that some folks to over the Menlo Park or go elsewhere to stay and so that are the assumptions that go into that piece of the analysis. Chair Filseth: So those numbers are marginal numbers, right? Mr. Sigman: Correct. Chair Filseth: Are they the same as the average numbers? Mr. Sigman: We applied it to the current composition of the City and compared it to your Transiet Occupancy Tax (TOT) revenue now and it made sense, so it is probably pretty similar to the average. This was, quite honestly, very challenging. There is not a lot of data about this. We did some interviews with the hoteliers. You know, they tell us it is a very business-driven hotel market. Chair Filseth: But I thought it was all business actually, my guess here. Mr. Sigman: Yes, and you know, so we went to the literature which is not exactly robust and did a little bit of this informal survey work and we fell like this is a pretty strong estimate, given the level of effort we put in. Chair Filseth: So Stanford must account for a chunk of this too. Mr. Sigman: Yeah, so I don’t present it here but in the report, on both the Sales Tax and the TOT, I try to put our model results in the context of the City today and so, let’s see TOT. Chair Filseth: It’s this one, right? Mr. Sigman: Yeah, there you go. Council Member Wolbach: Which (inaudible). Mr. Sigman: No, this is in the body, this is Page 28, Estimated Transient Occupancy Tax Generation By Demand Source, so I basically take the model and run it through your current households, current businesses. We have a survey from Stanford that they did. It is a few years old, but it still gives us a sense of their level of visitors to both the hospital and the campus. So what we get, I think, at least past the lab tests with business supporting about, this is sort of today, right, rather than at the margin to your distinction, about 45 percent, 44 percent of TOT coming from businesses, about 9 percent coming from households, a little over 20 percent coming from Stanford, 30 percent other visitors. Chair Filseth: I know what I wanted, I should have asked it before, I’m sorry. So this one I understood, but I wanted to ask you about the same breakdown in sales tax, because you sort of say, “Okay, half of it comes from visitors,” so that is a big bucket. So does the visitors, this is on Page 25. Does it map to the same proportions as the TOT? Is some of this visitors-to-residents and some is visitors-to-businesses and some of it visitors-to-Stanford? Mr. Sigman: Right, so in this instance it could be visitors to any of those things. And I think our explanation here for why this other visitors is such a huge share of the pie is because the Stanford Shopping Center is a regional mall, so it attracts lots of shoppers from outside the City and similarly the downtown is a regional attraction as well. Council Member Holman: So does this track, what’s on Page 25, business spending at retail establishments, does that really track with what we had on one of the earlier slides, business spending at retail establishments is $2. Is that, (crosstalk). Mr. Sigman: The business spending at retail establishments, the 1 percent, yes. Council Member Holman: So the two do… Mr. Sigman: We are using the same assumption of $2 a foot. Chair Filseth: I’ll let you finish, then I’ll ask my question. Council Member Holman: Well, the only other question I had about the presentation on Page 11 is, I don’t know how many hotels we have in Palo Alto, but any time I checked, room rates $240 seems low, even as an average. Mr. Sigman: Right, but there is a distinction between what is called the rack rate and the average daily rate, and the average daily rate takes into account vacancies in the hotel room, so any unfilled rooms are zeros and then the rack rate is whatever they sell the rooms at. So you look up a bunch of room rates on line, it is going to look a lot higher than this, because you are not seeing all the zeros that go into the average. Council Member Holman: It is an interesting term, rack rate. Mr. Sigman: I’m not really a hotel guy, I’m sorry, but that’s what I believe they call them. Council Member Holman: So what’s our, maybe Lalo knows this, what’s our hotel vacancy rate? Mr. Perez: Go ahead Joe. Mr. Saccio: The occupancy rate? Council Member Holman: Yeah. Mr. Saccio: Right now because of the addition of rooms, it is between 75 and 80 percent, roughly. You know that 80 percent and a little bit above it could represent full occupancy, but it has gone a little bit lower recently because of the expansion of the room base. The $240 is accurate in terms of what we are getting even right now, the $240 per day. Mr. Perez: One of the things that we discussed internally with Ben, but we knew that we had to pick a point in time and move on to finish this is that our experience has been since then, that the TOT revenue has come in at a much different pace, and so there are adjustments to these numbers based on that experience of the expansion in terms of the average daily rate, but as Joe mentioned, the occupancy has gone down a little bit, and you know, we still have another hotel coming on line that hasn’t had a full year, so this is developing. Chair Filseth: So back on this one, for purposes of allocating to households or to businesses, how did you allocate the, or did you allocate all the businesses? Mr. Sigman: That is a great question. The visitors in both the TOT and the Sales Tax model are what we call the residual, it is the leftover portion of the pie, so what we are able to estimate using the model is the household spend, the employee spend, the Stanford visitors, the B-to-B and this business spending at retail establishments. Everything else is what’s left over is this other visitors. Chair Filseth: I understand. So you said okay, because you have your model for how much households spend money by income times 30 percent and that is how much these people who live here spend. And then you’ve got your employees spend that you went through your process, and they said, “Okay, anybody that is left over must be a visitor,” right, but some of those visitors, if somebody comes to visit Karen from out of town and goes shopping at the shopping center, right, they would be part of the visitors, because they wouldn’t be part of the household, right, because that only included Karen. So some portion of these must be households, some portion must be (crosstalk) you know I have my East Coast sales team come in for the week or something, and they eat in restaurants while they are here, so that would be a business expense and that is not in visitors, right? Some of it is people that want to shop at the shopping center and drive here from San Jose because it is closer than (inaudible) than it is from the City, right? I’m asking how they allocated visitors between businesses and households. Council Member Wolbach: Like you did for TOT. Chair Filseth: TOT you broke it out very explicitly. Council Member Wolbach: So you didn’t do a breakdown? Mr. Sigman: This is a good point. We don’t, it is not assigned either. Chair Filseth: It is not assigned to either. Mr. Sigman: It is outside the model. So we do count (crosstalk). Chair Filseth: Why to the 229 or the, it’s not even in here at all. Mr. Sigman: That’s right. Chair Filseth: Okay. Mr. Sigman: But I think it is an astute point, because we certainly could start to take our assumptions about visitors that we do apply to the TOT and break up this orange piece of the pie. Chair Filseth: I actually took a whack at it and allocated it by the same portions as you did the TOT. Council Member Holman: You are doing very well, by the way. Our astute Chair hasn’t thrown you yet. Mr. Sigman: Wait, we are still at the beginning, right? Chair Filseth: I just want to say, for the record, okay, we haven’t heard from Greg yet. Sorry, please proceed. Mr. Sigman: Okay, moving on from TOT, let’s move to costs. So those are the big, we have gone through all the big revenue items. We did take a close look at the Utility User’s Tax as well. We went and actually obtained the data from your department, splitting out Utility User Tax generated by businesses versus households, so that is pretty good data from you, and in that instance we do just assume the average, so the average Utility User’s Tax that comes from households and businesses on a per-head basis is what we use. That is the other category, not getting into detail on this presentation. Okay, on the cost side, Public Safety is far and away the big item and this is true of most cities we work in. We have seen most of these numbers before I am going to go into detail, but here they are arrayed for you. We started off, I should say, everything is based in our 2015 Budget. We sort of locked in that and I think, while there are more recent budget data available, I think we sort of took our snapshot and stuck with it. It dovetails nicely with the horizon for the Comp Plan analysis and I don’t think, you all tell me if you see issues, but we felt like it was fairly representative of Palo Alto today. Here it is important that we tried to focus on the big ticket items, so Police, Fire, Community Services, there were others, Library, Public Works. We did detailed interview work with a number of the other sort of lesser cost departments, we didn’t spend as much time on. We didn’t do multiple interview process and data collection exercises with, so this was sort of helping us sort through the wheat from the chaff. Like I said, we did look at the trends over time. Council Member Holman: Before you go to that, a question about Public Works. In your interviews with Public Works, so at what point, you know, we have sewer lines, we have water lines, we have some improvements are being made that at what point do we, what did you include in here? Just delivery of services or infrastructure costs, or what’s included in Public Works? Mr. Sigman: Yes, so this goes back to my comment at the beginning that there is no infrastructure investment that… Council Member Holman: I missed that, sorry. Mr. Sigman: Okay, that is included. This is really an operational view where, and you know we really probed the departments, are you going to need new facilities to carry out your mission with 10 to 15 percent growth. And what we heard from Public Works was, “We are not going to build any new roads, so no. What we are going to experience is a greater degree of depreciation on the existing roadways,” and so we worked through with them essentially an increased cost of road maintenance that accounts for higher vehicular traffic on the City’s roadways. And that was the extent of the Public Works costs. Council Member Holman: The roads are kind of the least of my concerns. Mr. Sigman: Yeah. I understand and I think that (crosstalk) Chair Filseth: I thought that was a major component of what you looked at in Public Works. Council Member Schmid: Why didn’t you use (inaudible) tax allocate since business uses much more utilities, the commuters use much more of the roads, wouldn’t it be natural to allocate the Public Works on the same basis as the (inaudible). Mr. Sigman: So we actually used the Comprehensive Plan’s traffic consultant to give us worker trip versus household trip generation factors, and that was the weighting we used, so it reflects the traffic engineer who is supplying the analysis to the Comprehensive Plan, that firm’s professional judgement and their assumption for your Comprehensive Plan and the EIR, the roadway usage by use category. So I understand your point, but that is what we went with. Mr. Perez: Let me see if I can add a little bit. Just so we are on the same page, because as you know, other work as you mentioned, storm drains, refuse, airport, water treatment, so none of that stuff was included. It was mostly the administration and the engineering factors, and even with some of the engineering, some of it is in the capital side as well of the General Fund, so it is a smaller piece of the Public Works. Because, like I said, we had the same question for him, like, why is that number so low. Because it is really, we have pulled most of the other items out. They were on the Enterprise Fund side. Council Member Holman: Some of those were Enterprise, a lot of them weren’t. Mr. Perez: We did it based on the fund expense and revenues. Whatever belonged on those funds, they stayed in those funds, so they focused on the General Fund side and that’s how we looked at it. Chair Filseth: So for example, the digester, a big ticket item. That’s going to fall on the Enterprise Funds, so it doesn’t appear here? Mr. Perez: A portion of the administration would because we allocate the administrative costs of the plan, so the administrative functions of it does, so the Director and his support. Chair Filseth: And that shows up in City Administration. Mr. Perez: Correct, and the Public Works. Chair Filseth: Okay, because I would guess. Mr. Sigman: It would show up under Public Works then, not under that administration plan, I don’t think. Mr. Perez: I’m sorry, administration of Public Works, not administration over… (crosstalk) Mr. Saccio: Can I ask a question? What proportion are the trips that are generated for residential versus commercial, I mean versus business. Mr. Sigman: It’s in the report (crosstalk). Let’s double check because I can’t remember well enough to be on the mike. Chair Filseth: It’s 60/40 or something like that. Mr. Sigman: Thank you. So household trips 44 percent, worker trips 56 percent of total trips generated. Council Member Wolbach: What page was that? Mr. Sigman: We are on Page 43. Chair Filseth: It’s almost half and half actually. Mr. Sigman: It’s in the last paragraph, under cost attribution. Alright, keep going? So we did look at these trends over time and what you are looking at here is the same General Fund expense trend, one adjusted for inflation, one not. The flatter one has been adjusted for inflation in this chart. When you look at real, so adjusting for inflation, we have seen over the past 14 years or so, about 1.5 percent real increase in your expense budget. This kind of goes to your point about rates. I think a lot of that is attributable, again, correct me if I am wrong, this isn’t something we got into great detail on, but health care costs, pension costs, those kinds of things moving up in excess of inflation, but as you can see, we have this sort of steep line 2000 to 2003. It is pretty flat after that in real terms, and that, I think, is what is noted. So now here, how do we think about costs at the margin? How do we talk to the departments about it? It is pretty tricky. Do you want to… Okay, so in a mature city like this, as I said, most of these departments aren’t going to scale up dramatically to meet additional service demands from 15 percent more population and employees. Some departments maybe a little bit. We put Plan A and Community Environment in, for instance, they take care of your Transportation Demand Management (TDM) Planning, right, so we are expecting with increased population, Transportation Demand Management, transportation solutions, they are going to be working hard to accommodate this growth, so they may scale up a modest amount. Public Safety really does have to increase its activities in lock step with people. You know, more people, more problems, and so and that is what we heard from them. Then I just wanted to reiterate here, you know, there are factors, regional growth, density around you, might increase costs, we are not including that here. Technology may make things cheaper for you in the future. You may find cost savings along the way. We are not factoring in that kind of potential benefit. We took great care to focus on the net costs of providing services. You have a number of departments that do generate revenue, Community Services, the Recreation Programs for instance, revenue there, those kinds of things. We looked at cost recovery factors and then looked at net of that cost recovery, the real cost to the taxpayer in the General Fund of providing services, and that’s what we focused on in doing our cost estimating, so we are assuming that your cost recovery, the revenues that you take in as a share of the costs of running this department stays constant going forward. I mentioned doing this sort of detailed, deep dive with various departments. Here is the list. We spent a lot of time with Police, Fire, Community Services in particular, your Library Staff and your Public Works Staff, as I mentioned, involved two to three interviews, in some cases Community Services, more, and some unique analyses. So I think this is the right place to talk about, yes, so we worked with each of these departments to determine basically their service populations. You know, to what degree are they serving residents versus employees. In some cases, Community Services, we had some survey work. When you guys did your Parks Fee Nexus Study, you went out and interviewed park users and figured out were they residents or were they workers or were they from elsewhere with no relation to the City. So we used those data where we could. Police did a custom calls-for-service or incident reporting analysis for us and did their attribution of the expense of Police services to commercial districts and to businesses versus residential areas, and a very similar analysis from Fire. For Library we used your circulations data, so we actually know, based on the library cards, people taking out books, if they are residents or they are from elsewhere. In Public Works I sort of had the discussion already with the data from the Transportation consultant. I wanted to give you an example here so you can sort of follow along, how we allocate out the costs. So in the Police calls-for-services analysis, they arrive at attributing about 70 percent of their service burden to commercial and 30 percent of their service burden to residential. I can get into that a little bit more, but just moving on from that, we have their 2015 Budget. We net out the cost recovery and we get this sort of what we call variable effect on the General Fund. We divide that by the service population, you know, the 30 percent of the net effect divided out by the population gets us $112 a head to serve a resident in town. Then employment, 70 percent of the cost divided by 95,000 employees gets us about $180 a head to provide Police services to an employee in town. That is a snapshot of the math. We go through this exercise with each and every department. I should also mention that for the departments we didn’t interview, we used an assumption that is very typical of this type of work, where we assume that basically a worker creates 50 percent of the burden of a resident. It is kind of based loosely on the hours spent in town, the full basis for cost allocation in the ADE where they didn’t do the detailed department interviews, so I think we have sort of gotten a richer answer for you on that point, but for some of the smaller ticket items we did use this kind of stock assumption. Council Member Wolbach: And I just wanted to question here, on where you list employment uses, that would probably include things like restaurants, bars, etc. So if people are coming to visit, say had a few too many, there is an altercation or tussle and the police are called in, that would probably fall under employment uses, even though it is not necessarily employees misbehaving, it could be, it’s really business. Chair Filseth: (crosstalk) the detail on this. Mr. Sigman: That’s exactly right. So in our conversations with representatives from the Police Department, that is the way they view it. The commercial areas in the City are essentially an attractor for criminal activity, and it’s the mix… Chair Filseth: I thought it was just City Hall here. (laughter) Mr. Sigman: So yes. It’s not as if their calls for service analysis went through and said, “We picked up that guy, he was a resident, we picked up that guy, he works here.” It is very much looking at areas in town that generate calls for services by type of crime and allocating the types of crime out so they basically said, “These are commercial zone crimes, these are residential zone crimes.” Council Member Wolbach: So this is really commercial, not necessarily the employees. Chair Filseth: Is it really that concentrated in the downtown core? Is it really that disproportionate? Mr. Sigman: Yes, that is the way it was described to me and I think we had an actually pretty robust discussion in one of our meetings about could this assumption be extrapolated to other areas of town. So, for instance, the research park or the shopping center, and I think in both cases… Council Member Wolbach: Or California Avenue. Mr. Sigman: Mm-hmm, exactly. That one is, I think, a little easier to connect but, you know, the stand-alone shopping center or the Research Park right now don’t necessarily have that same conglomeration of mixed of uses… Chair Filseth: Well (inaudible) private security right? Mr. Sigman: Yes, you would know better, but I think down the road where these places may evolve into mixed-use centers, they could have, the idea is that in our projection as we look forward with growth they could be vibrant in the same way that Downtown is, so making that extrapolation seemed pretty reasonable. Council Member Wolbach: Thanks for spending some time on that. Mr. Sigman: Sure. And then… Council Member Holman: I just want to make sure I’m clear on something. So you’ve got Police here that, I think it is Fire that actually has the much higher demand then Police, and so the table here shows employment uses, and this is Police, and it is broken out as 70 percent in marginal per capita expense, so there is a difference between per capita expense, there is a per capita expense, but there is also the proportional aspect during the day certainly, demand. So did you do that for Fire as well as Police? I mean you have Public Safety on next and you did Public Safety. Mr. Sigman: Yeah, so let me be clear, because I can understand your confusion. So this slide is illustrative of the calculations we used for every department, or representative. So there is a table, and I apologize for the font size, but it is the last table in the whole study on A17. It shows essentially this map for every department and it shows it specifically for Fire broken out in detail, so in their case the analysis showed 64 percent of their cost burden going to residential uses and 36 going to employment, so essentially the revers almost of this, largely because they are converting or they are evolving into Emergency Medical Services Department more than fire. Their story was, “We don’t really put out fires any more, there really aren’t fires any more, or big fires, one a year maybe.” So they are spending all their time, or the majority of their time providing emergency medical services, which is, based on their analysis, much more due to households than places of work, and so we end up with, so yes, we can see this cost allocation, the percent variable we assigned to it and the same per capita expense, specifically for Fire in this Appendix Table A21, and then here in the presentation, yes, I have rolled Fire and Police into one for summary. Council Member Holman: I guess I am misremembering that, because I was thinking that, yes, we are using a lot more paramedics and I was thinking especially in the Downtown and the work-day demand was so much greater than the evening or even weekend. I was thinking it was much more out of kilter than that in the other direction. Council Member Schmid: Yeah, if I could bring up some data by the Utilization Study, City of Palo Alto, they did a map of the community with intensity of responses and this shows exactly what Karen was saying. The downtown is by far the place of the greatest number of responses for Emergency Medical Services (EMS) and the ones that come in after that are the Stanford Shopping Center, Cal Lab and El Camino commercial. Mr. Sigman: It sound like a similar story to the Police. Council Member Schmid: That sounds like it should be the same as the Police. Mr. Sigman: Right. Council Member Schmid: Now fire incident is a little more spread out, but still clearly the downtown is the center of activity. So I don’t see why they are any different than Police. Mr. Sigman: So in both cases these are responses from these departments and… Council Member Schmid: Again, if you look at time of day most of them were midday. They are not spread out over 24 hours so that would mean it’s the daytime population that brings the demands. Council Member Wolbach: Midday is the demand? Mr. Sigman: Yeah, we can go back to the departments. Mr. Perez: The only thing I can think of is, I think when that was done, I think I am looking at the Report, it is the International City/County Management Association (ICMA) Report 2009… Council Member Schmid: 2011. Mr. Perez: 2011, there was a re-categorization of the calls and how they were being captured was one of the recommendations I recall, so I think we can have Ben discuss it with the Chief and specific to that to see that they update the way they are classifying. Council Member Schmid: That is the only hard data we have. It says quite the opposite here. Chair Filseth: Thinking off the cuff here, so maybe this is completely wrong, okay, but if you took that chart and overlaid it with a chart of where the population is in the City, because the analysis here on Fire EMS, particularly EMS, says basically it is primarily residential to mean household, right, and therefore, it ought to follow where the households are. So if you found that there was a big proportion difference in the ratio of calls to households downtown is different from the ratio of calls… Council Member Schmid: These are incidents that occurred per square mile per person. Chair Filseth: Incidents per person, so that is built in, the population density is built in, so yeah, so if it were primarily residential you would expect a… Council Member Schmid: (inaudible) a string of old peoples’ homes from San Antonio, (inaudible), California Avenue, saying lots of old people here so it is not just the distribution of old people. Chair Filseth: So yeah, if it is normalized to population… Council Member Holman: I’m getting sensitive to the term old people. (crosstalk) Chair Filseth: If it is normalized to population right, then you would expect it to be flat if it is mostly residential, so to the extent that hot spots (inaudible). Is there a correct train of thought? Ms. Gitelman: The greater density is definitely North Palo Alto. Chair Filseth: He says it is normalized to density though. Ms. Gitelman: I’m not sure. Council Member Schmid: No, it is normalized by square mile. Chair Filseth: Okay, so it would follow density, it would have to follow density. Ms. Gitelman: Greater residential that is North Palo Alto, near Downtown. Chair Filseth: So you would have to normalize for that. Council Member Wolbach: It is per square mile, not per, not normalized for density or structure or population. Mr. Sigman: So I summarized the costs here on just a per-head basis per resident, per worker, and that is the end of the presentation. I am happy to continue this discussion. Chair Filseth: On the previous slide, maybe I was looking at one of the attendant slides. Mr. Sigman: You know, I have, maybe this was confusing you a little bit, but I have rolled these up in a way that is really just for this presentation. The City Administration category you are looking at here encompasses a lot of things that are broken down. Chair Filseth: Did you make any assumptions about the growth in City expenses per worker. Did you assume they would follow inflation? Mr. Sigman: Everything in the study is done in today’s dollars, 2015 dollars, so it is really inflation neutral, so we are not making any, the only exception to that is we took care to look at housing escalation, because we have seen historically in California that outpace inflation. Really we are assuming that, with the exception of that, housing pricing, everything perfectly keeps pace with inflation. Chair Filseth: So you said that City wages and benefits kept pace with inflation? Mr. Sigman: Yes. Chair Filseth: And you did per capita costs. Council Member Wolbach: Right, so you didn’t include the per capita costs, but as you mentioned earlier, you did account for greater strain on the City resources and infrastructure that exists. For instance, the greater expenditures on maintenance of roads, because of the assumption of greater car travel. Mr. Sigman: That’s right. And even the Fire Department, because we are anticipating they are going to need to scale up a good bit. They indicated to us they may need to make some modest capital improvements, but it would be within the scope of their General Fund spending. So what we are not capturing are, I have sort of categorized it as two distinct items. There is mitigation, I think, for any quality-of-life issues you are suffering now. So whether it is really significant investments in transportation that haven’t occurred to date really aren’t captured in the budget we studied. Those aren’t in here. (crosstalk). Council Member Wolbach: (Crosstalk) last night. Mr. Sigman: I didn’t watch the tape yet, but I knew that was on your agenda. Chair Filseth: They are all externalities. Mr. Sigman: Then the other is the investments that are envisioned as part of the scenarios in the Comprehensive Plan. There are some pretty significant infrastructure investments in there and we believe those would be paid for in other ways, through impact fees, through other sources of funds. It is a next step for Fiscal Study. Council Member Wolbach: And that is actually really useful for us. I appreciate you just being really clear about what this Study does and doesn’t try to do. There are certain variables you said we are going to look at these variables and focus on that and, I think, it is actually very helpful to not break it down across five or six different axes. Mr. Sigman: We’ll take a reasonable first bite. Council Member Wolbach: I think that is very useful so… Mr. Sigman: So the way I like to think about it is, to just sort of try to add a little bit on is if these people were here today, if your 2030 projection were here today and you were running the City the way you are now, this is how it would affect your General Fund. Chair Filseth: Great. Council Member Schmid: Yeah, if I could ask a couple of basic questions. The fiscal impact is very important for us. It grapples with the question of who pays, who benefits and it is a key element in our dealing with the Comp Plan and your report says that the new residents, new workers add more in revenue than they cost and that the impact is modest, so it is all right. I guess that is counter to what I would have thought. Now let me go back to our Comprehensive Annual Financial Plan and you are only looking at the margin. If you take the last five years of this plan on Property Tax, it says that the change in Property Tax, to go a step backwards, changed in assessed valuation at the County of residents has gone up by $5 billion. For businesses it has gone up $460 million. A ratio of 11:1. Now that is a marginal change, a change over time and there are reasons for that, as you say is built into the system, but it also is measuring what we can anticipate the last five years, the next five years, and that ratio of 11:1 is taking place during a time period where the construction for nonresidential growth has added three jobs for every employed resident. So there is a ratio of 3:1 of commercial growth and yet the change in payment has been 11 times on the other side. Now if I was looking at a Comp Plan and asking fiscal impact, I guess I would start from that question, “What is going on, what has gone on, what will be going on, and can we influence that number,” and it seems out of balance on any cost analysis that the residents are paying. As a matter of fact, if you look at Property Tax as the basis, not just the most important tax for the City, but it is also for the County, the School District, the special districts, it is local government. So it is very upsetting and the question is, “How do the choices we make on jobs and housing and land use affect that ratio?” Can we influence the future or are we stuck. So I go to your numbers that you are looking at in here and it seems as though you are using as the basis for your evaluation, real estate values. You are not using the assessed value in the Count Assessor’s Office, you are using real estate values. But the reason the County doesn’t get any upgrades on the business is there are no sales, or the number of sales of business property is so small that it doesn’t show up in these numbers. The implication is in the next five years that ratio of sales between residential property and commercial property will be as it has been. Now you make an assumption that the sales rate of commercial property will be half that of residential properties and I guess I don’t believe that. You say it is the turnover ratio, you had a slide, you showed a turnover ratio. Mr. Sigman: I’ve got it up on the screen, sir. Slide 9. Council Member Schmid: Yeah, I think the ratio is probably 1:20. That only a dumb landowner developer would move out of Prop 13. Chair Filseth: Do you understand what he is talking about? Mr. Sigman: I believe I follow. Chair Filseth: There is a loophole that allows you to transfer ownership of commercial buildings without actually selling them and, therefore, it never gets reassessed. Did you guys consider that? Mr. Sigman: So it’s illegal to transfer the majority share of the property without triggering a reassessment. You can have minority shares switching in and out. Council Member Schmid: It’s 90 percent. Chair Filseth: That’s how it works in this town. Mr. Sigman: So I’ll take a moment to comment. I understand where you are coming from. I think we have heard you speak on this subject previously, so we went, we felt, to great lengths to establish what the baseline condition is. Say we turned off the tap, no more building. You are going to continue to see the residential assessed value outpace commercial. So we agreed with that and can you influence it? I think what we are showing is that at the margin, as you say you have had this period of sort of relatively robust real estate development in town and, at least this particular year we are looking at, it is a small fraction of the total change in assessed value, so redevelopment has a minimal influence I would say. Council Member Schmid: I guess that is one of the things that we are looking at in these alternative scenarios is, let’s look at a scenario in which there is, say more housing built than residential. The problem is, these scenarios you have looked at because we gave them to you, each continues the 3:1 ratio of commercial to employed resident, so we don’t even get a chance to see, is it a 1 percent change or a 10 percent change if we vary that ratio. That why it is essential that one of the things we look at is a balance in jobs it has, just to see if as you say it would be insignificant or, gee, it does make a change over the decades. Because what we are dealing with now where the residents are carrying a $5 billion charge every five years, and you are right, it’s not all the residents, just the new ones, and the businesses that are growing much faster and earning much more money are not contributing to local government finances. Mr. Sigman: I understand your point. I think one thing that I could offer is that on the turnover rate, so we are assuming on these commercial assets, 25 year holding period, which is three times the national average or something like that. It is a long hold for any commercial investor. I understand we have some extenuating circumstances here, so we can do some sensitivity analysis around these hold periods. Council Member Schmid: It is not unusual in California, or especially the Bay Area where property values are rising so high (inaudible) Mr. Sigman: So I think we can certainly explore the impact that very much even lower than this turnover would have on these fiscal outputs. Council Member Schmid: And again, the other one to look at is what happens if you have a better jobs/housing balance. If you move toward better… Ms. Gitelman: Can I ask a question on that? Part of what we want to do is understand what additional analysis is needed, so you are going to help us at the Council in May define this quality-of-life scenario that will further depress jobs below what we have in Scenario 2, and potentially have the same housing numbers or more housing numbers, we don’t know that yet. That, in our last discussion was I think the extent to which the Council wanted us to address the jobs/housing imbalance. The Council was not willing to go and test really aspiration goal, 2.4 or something like that. I am just wondering whether the Committee, on the fiscal side, wants us to do a sensitivity analysis that the Council was not willing to do on the land use side, or whether you would be satisfied just doing this Fifth Scenario once it is defined. Chair Filseth: I just want to make sure I understand the explanation Ben just gave, which is, there are two issues you are talking about. One is the jobs/housing ratio, the other is this business of how fast does the commercial property turn over. If I understand what you said, you said, “Aha, we include the fact that stuff doesn’t turn over very often, assuming a very long… Mr. Sigman: Right, so the… Chair Filseth: A very long holding period. Is that what you said? Mr. Sigman: Right. Everything that is commercial, 25 to 50 years, including the rental residential. The condominiums or for-sale residential turns over twice as much in this model. Chair Filseth: So I might be interested in what happens if you assume a lower turnover. Council Member Schmid: I think there are two things, the lower turnover… Mr. Sigman: Does it make a big impact or little impact, that’s what you want, right? Let’s talk about it, but I’m not sure what we can do to study the baseline condition. I think we establish that is the case, we acknowledge that we have this sort of disproportionate contribution to Property Tax now, but we are looking forward. A lot of this is really… Chair Filseth: Your question is really, does it move the needle or not right, basically? Council Member Schmid: Yes, and we are doing the Comprehensive General Plan that looks out 15 years, so we have to ask the question, if we started doing something that had an impact over that time. Chair Filseth: Notwithstanding, but none of this moves the needle very much. Council Member Schmid: And it is not just looking at, “Gee, there is an imbalance,” but there is a striking imbalance over all local governments. It is not just us. The School District gets three times as much as we do out of Property Tax, so it is our future of local government and it is an important issue. I think one of the reasons Council didn’t get to that issue is because we didn’t have the fiscal impact. We didn’t see the numbers and say, “Wow, that’s a big number.” Chair Filseth: So it shows up in Property Tax and Document Transfer Tax. Is that what goes for that? Mr. Sigman: Yes. Council Member Schmid: Well the Document and Transfer Tax actually (inaudible) but it is a 3:1 ratio, residents paying over, because that is a better reflection of a number than what you come up with on the property taxes. Council Member Wolbach: I just wanted to ask, so a lot of this is caused, frankly, by perversions to our real estate market caused by Prop 13, right? And that is why no matter what scenario we pick, that’s not, like I said before, you tried to study certain variables. You tried to limit the number of variables in a reasonable way, because if you have too many variables then it is apples and oranges and your study could take 100 Staff people and 100 years to put together and one of those variables is, “What if there is Prop 13 reform,” which would, maybe, be useful, but that is way beyond any of the options (crosstalk). Chair Filseth: No wait, when Mark gets to Sacramento, he is going to fix it. Council Member Wolbach: I’m sure he will talk to his 119 colleagues and try to do that. Council Member Schmid: Last night we had a discussion at the Council of the Business Tax, should we do that in November? We need to make a decision in the next month or the next six weeks. So what we are talking about is not, “Oh, we can’t do anything about that.” We do have options and they are on the table. Council Member Wolbach: This also goes back to what Ben was saying before, that beyond business – basically what we are looking at here is business as usual with population of daytime and nighttime population changes of four different options. But as you said before, the way we conduct business, according to this study, is consistent with what we do today. So all of those questions, all of those options about what happens in Sacramento, or what happens if the economy completely tanks or if it turns out everybody is driving self-driving cars win 15 years, which I think is very overly optimistic, and what if we end up passing some kind of significant taxes locally or have some other major windfalls by diverging from status quo practices in order to fund major transportation issues or whatever. That is all important stuff we can consider, but this actually provides, I think, a useful baseline to overlay those discussions on top of. That’s how I look at this. If I am wrong, somebody let me know. Chair Filseth: I thought this was vastly valuable, especially the existing stuff. I mean, the marginal stuff is very interesting, but it doesn’t add up to very much in the grand scheme of things, but the assessment of structural stuff I thought was tremendously valuable. Sorry, go ahead. I’m agreeing with you. Council Member Wolbach: Great, again, I guess I was looking for either agreement or if I was missing details. Chair Filseth: Greg still has the floor too. Council Member Wolbach: I thought it was conversational, but of course. Council Member Schmid: One other point, on the Sales Tax, you have a chart I believe you put up which shows a circle. Mr. Sigman: It’s in the document, not the charts, sorry. We are on 25. Council Member Schmid: Now you cite here the Stanford Study. The Stanford Study is very nice. You don’t need decorated, top drawer economists working on it, but it is Stanford. Stanford is saying, “We spend money in all kinds of different places.” Now we have this ADE Study, you mentioned it so you are familiar with it. It has quite different numbers on that circle. You have households at 11 percent, they have households at 53 percent. You have local employees at 25, they have them at 17. Both have the business-to-business at 15. You have other visitors 47, they have other and Stanford at 15. Now they claim that this is a purely Palo Alto study. They went into the files of each of the local merchants and said, “Okay, what is your revenue, where are your customers coming from?” They look at the employment center around town to do the calculations. So they have some credibility as a local study. I know you ultimately cite, they also cite, this study from the national organization… Mr. Sigman: International Council of Shopping Centers. Council Member Schmid: Yeah, but this study is based on a national data base of suburban shopping centers around the Country, 4,000 entries. Mr. Sigman: Urban and suburban, yeah. Council Member Schmid: Yeah, but there are 4,000 altogether so maybe 1500 suburban, maybe 150 suburban California, so it doesn’t sound, and the questions they asked the workers, “Are you within four minutes of a shopping center, of a department store, of a grocery store?” So the data that they have attracted is not necessarily relevant to the Palo Alto, where we have three commuters to every employee resident, we have tens of thousands of people every day moving in and out of town. We have the Stanford Industrial Park as the biggest unit. There are no stores there. I don’t think there is anyone who by 5:00 or 5:30 is going to hop in their car and drive half an hour to get to University Avenue to shop. I don’t think in the Stanford Health Center, where they are touting the number of people on Caltrain, who are going grocery shopping in Palo Alto carrying their groceries onto the train. So the numbers you have of 80 percent spending of that $9,000 by commuters doesn’t make sense in Palo Alto. I find it hard to imagine someone facing a 45-minute commute saying, “I want to go shopping.” Council Member Wolbach: Can I, for anecdote in thinking about that, I used to work in San Mateo while living in Palo Alto just until about, oh, less than a year ago. I did that for a couple of years and that was counter commute, and in order to avoid a commute, even that, I agree, you don’t want to sit in all traffic, but while I was in San Mateo I would often stick around, have dinner there, maybe do some shopping there, and wait until the end of rush hour, so I would actually end up being longer… Council Member Holman: But you were Downtown San Mateo. Council Member Wolbach: Not really. I could get there but in the same way, Research Park, for instance, we heard last night that there are shuttles that run from Research Park to our Downtown where people get on the Caltrain. Council Member Schmid: She said it took 25 minutes to get to Caltrain’s station. Council Member Wolbach: That’s right. I’m not saying that every Stanford Research Park employee is doing that, but I would not dismiss the possibility that Palo Alto… Council Member Schmid: Palo Alto is a little different. We’re unique. We’ve got this 3:1 ratio. The only big cities in the Country that have that are Manhattan and Washington, D.C., and so we are a little different from California suburbs. It is hard to take the data you get from the suburban business park and apply it to Palo Alto. So… Mr. Sigman: I understand the point and I appreciate the anecdote. We are using the same data that ADE used on this point, and actually ours is from a more recent survey than theirs. It is just a more current year of a very similar (inaudible). I take your point. It is not Palo Alto data and I would certainly welcome the opportunity to bring better data to bear on this. So if that is an issue and an intercept survey is appropriate, and we want to get some Palo Alto data to make this stronger, because we are not convinced we are getting the right answer here, that is totally within our power. We are using the same household spend, the same worker data (crosstalk), so I take your point about Stanford. It is their study. We are basically relying on it to understand the number of visitors they report drawing to the community. The spending profile looked pretty reasonable to us, given what we know. On that point we might have differences on how that other piece that isn’t even attributable to residents and workers in Palo Alto, we might have differences there, but (crosstalk) I don’t think it is that different and I would, again, welcome better data if it is available. Council Member Schmid: The reason I bring it up is because we are thinking of the impact of residents against workers, and in your data it shows local employees are spending twice as much as households, 80 percent of their discretionary money in Palo Alto. Mr. Sigman: The way the survey asked the question was, “How much do you spend in proximity to our place of work.” It is not their full retail budget. Council Member Schmid: And the earlier ADE data has a 3:1 share of households over workers, so those are opposite directions. Mr. Sigman: I’m sorry, could you repeat the last point. I apologize. Council Member Schmid: The chart you have shows workers spending twice as much as households. The data in the ADE states households are spending three times what the workers are. Mr. Sigman: I can certainly spend more time trying to dissect what they have done, and I wasn’t aware that they may have interviewed local businesses. I think our impression, our professional opinion, is that these survey data are the best data available. You get into trouble with anecdotes, you get in trouble by samples of businesses, so we used the published data because these are the best available. Ms. Gitelman: Can I ask a question. I wonder whether the capture rate is where the difference between the two studies are. The gossip internal on the ADE Study was the capture rates were overestimating the percentage of the sales tax that was staying in Palo Alto. Maybe we could look at that. Chair Filseth: Can I weigh in on this for just a second. I had some of the same questions, so I took a whack at it because this meeting got delayed a couple of weeks so nothing better to do, right. I tried to do a household versus businesses versus Stanford breakdown of all this stuff, and the only really material variance is sort of your approach for trying to calculate the distribution allocation of Sales Tax versus your approach to try to calculate allocation of Sales Tax. I did it both ways and, I actually did it three different ways, and it looked to me like overall it actually didn’t make that much difference whether you did it your way or Greg’s way. And the third way, by the way, was where I went and took that orange piece and tried to allocate it between. So my numbers for all of this were, in all three cases, Stanford comes in at 6 to 8 percent of revenues and for the others, depending on whether you use your method, Greg’s or one with this allocated in between, it was pretty much an even split between businesses and households. Your method, a little more businesses, your method a little more households, with this allocated kind of in the middle. So either way you look at it, at least what it looked to me like, was that pretty much, I mean, after Stanford’s 6 to 8 percent, probably about half and half. I liked that the ADE Study actually did sort of bottom’s up locally, so if I had to weigh them, I would probably weigh that one a little more than your approach, but they both seemed like viable approaches. This stuff is inexact. The way to do it is do it three different ways and see if they are all clustered together. So that was my conclusion from this. It didn’t actually make that big a difference. Again, the dominant ones are property tax, some of the other kinds of things. Utility User’s Tax (UUT), TOT were pretty big. Council Member Holman: Can I go in a different direction? I don’t want to interrupt that line of thinking, so can I go in a different direction? So the Comprehensive Plan Scenarios assume no different land use designations and if we are learning from this that it actually costs more to have an employee than it does a resident, can we find out without a horrible amount of effort, what some changes would indicate, since this is fiscal analysis, just fiscally. So let’s just say, for instance, we changed our mixed-use designations from 0.4 residential to 0.6 commercial, and at least flip those, because, again if it is a better financial picture to have a resident than an employee, so let’s flip those. Do you know what I am saying? It’s not a different land-use designation, but it is a zoning change. Ms. Gitelman: I do know what you mean, and we will talk about some of these ideas on Monday, when we talk about housing sites and programs, how you might modify our mixed-use categories to encourage more housing and less employment. I just want to get back to your base assumption that it costs more to have employees than residents (crosstalk). Council Member Holman: Well, the revenue is greater from a resident. That’s what it says in here, right? Mr. Schmid: Yeah. Ms. Gitelman: My takeaway from these results, these are such small numbers, my takeaway is like, thank goodness, we are looking at over the next 15 years not really having a negative drain on the General Fund (crosstalk). We may have mitigation costs up the wazoo. We may have infrastructure costs up the wazoo, but when you look at the big picture, we are not going to have a significant negative drain for many of these scenarios. Council Member Holman: I don’t disagree. At the same time, we talked about earlier how our density in commercial buildings varies over time. This analysis is based on a four per thousand, correct? Ms. Gitelman: This analysis is looking at those four scenarios that vary in terms of employment densities, so those four scenarios are testing a range of options, because, as you pointed out, we don’t control the amount of employees you can stuff in a building, so we looked at a range to be able to test what the results would be. Council Member Holman: Okay, so the housing we are going to talk about Monday, I saw Corey kind of light up, and there are some other things, and I don’t know how many of these will come up, but for instance, and it is a little one but it kind of has a double whammy impact, we allow such things as, and I don’t want to get in the weeds about this, but I just think there are some things we ought to look at, at least, we allow businesses to have their own on-site cafeterias if they are not really close to commercial areas, but that includes areas like the California Avenue part of the Research Park. I mean, we allow them that close, but that takes away from how much the employees spend in our retail places. I don’t know if you happen to notice any accumulation of those kinds of changes that we could or should make to better enhance. No one thing is going to make an enormous difference, but there is an accumulation factor in some of these just from a good business practice, and some, at least, financial impact. So I don’t know if you happen to notice any of those other… Ms. Gitelman: This is not that kind of fine grained analysis, and I think the Council knows inherently these are policy tradeoffs. You include an on-site cafeteria and it means that a portion of the workers are not going to spend their dollars in the neighborhood, but it also means a proportion of the workers are not going to get in their cars and drive, so you are trading income for… Council Member Holman: That’s why proximity is important. Ms. Gitelman: Which is why (crosstalk) direction we are really trying to be more discriminating about when we let businesses take advantage of that exception. Council Member Schmid: Hillary, if I could make one follow up. You said the scenarios shown would not make much difference. That implies that in each of the scenarios we are looking at, continues the 3:1 ratio of jobs to employed residents, and that sort of implies going along this path for another 15 years is okay. I think some of the data coming out of our (inaudible) is saying, “Wow, there is something fundamentally wrong going on to apply that to a model. If you do it for another 15 years, you might be entering more serious problems than you have now.” So, I think the Fiscal Analysis should at least open up that issue, address the issue that if you acted differently it might have a longer-term impact. Council Member Holman: That’s kind of what I was bringing up earlier about, especially when we look at per employee or per resident, it doesn’t give, if we are focusing on that, it doesn’t really give the full picture. And if you look at the various scenarios that we have in front of us now, let’s just say at Scenario 4, which is the highest amount of growth, four million square feet, that is 16,000 residences that we are behind, but we are only building, again, according to the scenarios, 4420, so that is almost a 4:1 ratio that we are behind, so… Ms. Gitelman: If I can jump in, I think Council Member Schmid is correct, as everyone has pointed out and as we discussed on the 22nd of February, the ratio of jobs to employed residents in all of these scenarios is pretty similar, and so the Council has said, “Hey, we want to look at another scenario that has a lower job growth, and potentially higher housing growth.” We are going to talk about that on Monday, but I think the questions for you, I think we would appreciate your input. We know we are going to update this study to analyze whatever the Fifth Scenario is going to be, and you are going to help us craft that scenario over the next 60 days or so, but do you want us to also do some kind of hypothetical sensitivity analysis that goes farther afield and towards a jobs/housing ratio that, frankly, all of us think is probably not achievable in 15 years. That is the question. Council Member Schmid: Right. I guess could we use Ben’s talents and knowledge to just give us a simple… Ms. Gitelman: Sensitivity analysis? Council Member Schmid: Yeah, sensitivity analysis. Council Member Wolbach: What do you mean by sensitivity analysis? Mr. Sigman: When we say that, we just mean that we have made some assumptions here, turnover rate is a good one, and it is not fact. That may not be the right number, so a sensitivity analysis would say, “What if it goes up or down 5 percent, what if it goes up or down 10 percent. What does that do to the fiscal outputs that the model generates?” So it puts some brackets on the fiscal outcomes when we start looking at what if certain assumptions we made were likely to be higher or lower. Council Member Wolbach: Okay, so we are adding another variable or two. Mr. Sigman: Same variable, just changing the assumption up or down. Council Member Wolbach: Okay. Chair Filseth: You’re looking at sensitivity study. Mr. Sigman: Yeah. And then I just want to come back to this idea of, we are on the wrong track and what does the (inaudible) tell us. We had sort of a number of discussions with Staff about could we somehow integrate this kind of relatively traditional land-use fiscal impact methodology, somehow make it into a Long-Range Financial Forecast, and I don’t think we have figured out a good way to do that. What if we did nothing or we just stayed business as usual. You have a different model here in the City that analyzes that, so that is another resource to bring to bear. I don’t think, it doesn’t isolate the land-use changes or potential rate, and it is… Council Member Schmid: The Long Range Financial Forecast doesn’t say where the Property Tax money is coming from, it just says here’s it is. Mr. Sigman: Right, so I don’t think we have, (crosstalk) without a lot of complexity, a model that kind of bridges the two. We have something, hopefully, relatively elegant here that sort of teases out some of the impacts when you change land use and land use only and you have a long-range financial forecast that says, “Are we on the right track, is this sustainable?” Council Member Schmid: Yeah, I was at a land use meeting earlier and I listened to maybe 15 people, each had two minutes, on this committee, and virtually every one of them said we have a housing issue. Just it is unaffordable for anyone except the rich and the old people who are here. That’s something we have got to address in our Comp Plan and the fiscal impact is the major cause of what’s going on. Chair Filseth: Are we drawing to getting through this, because I want to circle back to the question you asked at the beginning. Thanks for coming here and doing all this and letting us like jump all over you. That’s why we are doing this, because we are so interested in this. Mr. Sigman: I am impressed with the level of effort on that side of the table. Chair Filseth: So the thing that sort of struck me looking at this, and again, in the context of this the numbers are not that big in the context of this, especially between the scenarios, but I am still struck by the fact that the bottoms-up analysis says that revenues are more than twice as much as expenses for each additional employee, and yet here’s the history of the General Fund revenues and expenses. I mean, that’s almost one line there, it is the red and the green line. Sorry, never mind the green line, the red and blue, our revenues and expenses from the General Fund. Guess what, since the turn of the century our General Fund revenues and expenses are almost identical. We break even every year. And you pointed out that it is natural that as we see, “Gee, we got a few extra dollars, gee, we can do some more services,” and so forth. But the implication is that actually it is past. If you follow your number, the behavior you are talking about, then yes, each new employee and each new resident has something small in the overall context, but adds something to the finance of the City. On the other hand, if we follow the track we have done for the last 15 years, then it is going to be a zero net impact, or at least whatever impact is going to be externalities, right, something we can’t measure, which brings me to the other piece of this which is another externality, but very, very real for us. The green line is actually the Unfunded Pension Liability to the City, just pension I looked at in this case, and that has gone up dramatically. So the implication is, in fact, if you consider that, we are actually not breaking even in the General Fund. Actually we are losing money in the General Fund, but a bunch of it is being deferred. So I thought about that in your analysis of sort of revenue and expenses per person. I said, “Well, how much is that?” We don’t have good ways of calculating that, so here is a really, really handy way to calculate that. Right now the accumulated unfunded pension and (inaudible) liability for the City is about $450 million if you believe CalPERS assumptions on returns, and so forth, and it’s been 13 years because it was zero in 2002. It was all since the Gray Davis era. Okay, so that is a little over $30 million a year. If you look at General Fund expenses in that period of time frame, you know, at the beginning of the century there were about $115 million and now they are about $180 million, so on average $150 million, so $30 million a year as a percent of $150 million, on average our costs are 20 percent higher. So if you take that and apply it to your numbers of revenues versus expenses per employee and to say the expenses are 20 percent higher than yours, you still come out with a net positive contribution to the General Fund. But if you assume that we are going to be like that, the historical pattern, then we are losing money on every resident and new employee. So I don’t know how to account for that in a report like this, but it is quite real. So a huge impact goes back to the question of, “Why does yours say every resident and employee earns twice their keep,” but if you look at our trajectory that hasn’t been our experience and that seems to be a really fundamental question. Mr. Sigman: Because we are looking at what you do fund, not what you don’t fund. So this trend is a baseline condition and you raise a totally valid point. It is outside this study, but it is an issue you have and it is going to take some fiscal prudence to deal with it. Just as we come out with the results that expenses are less than costs, yielding this net revenue, well, it takes some fiscal discipline to realize that. You have to lock down that spending because it is, balanced budget, I think in municipal finance, is the norm. It could go the other way too. Stock market collapses, Property Taxes readjust to lower levels, Sales Tax falls dramatically. We have seen this. You cut some Full Time Equivalents (FTE’s), you have to balance the Budget. It works both ways. I think you are right to point that out, but as I said, we take a snapshot in time and hold everything constant. This pension liability is one of those things. So just like these other mitigations, quality-of-life mitigations, there is a fiscal mitigation that you have to develop to account for this, to deal with it, and we can think about that. That is something that, as we add in these other costs that are external to this analysis, if you direct us to look at those, that would be appropriate, but because this is a static model in essence it simply doesn’t capture that. It is a limitation of it. Chair Filseth: I understand. I think the pension piece, unless you guys have a way to calculate that, which we don’t, at least not an easy way, there is probably not much you can do with it. I think the issue of the discrepancy between revenues to actual costs in our actual experience is the one that I’m not really sure we understand that one. Mr. Sigman: And I think if we use this and we said you always balance your budget, there would be no point in doing this, right? Chair Filseth: Well, actually given the percentage and the scale of all these (crosstalk) Mr. Sigman: You make very good points. Chair Filseth: What you just said occurred to me. I think it is worth doing this. Mr. Sigman: Good. Council Member Holman: So you’re not out of a job. Chair Filseth: Absolutely not. I appreciate it. Ms. Gitelman: Just because I feel like we are starting to wind down, I think one of the things that we would really like is some input on the additional analysis that you are seeking from us. You know, the blogs over the weekend were, “Don’t spend another penny on this, it’s not worth it.” You know, we do feel like this is adding something to the dialog. We want to do the sensitivity analysis you talked about with the slower turnover rate for commercial… Chair Filseth: Yes, that one I would, sorry… Ms. Gitelman: Then we have, obviously, the Fifth Scenario, the Quality-of-Life Scenario. We are going to look into the Fire cost data from the ICMA Study and try to come to some understanding about how that varied. Those are the three big ones I have, and then potential ones are looking at hypothetical aspirational jobs to housing ratio in 15 years. Council Member Schmid: I think rather than that, just what happens if we have a 1:1 for five years, what would be the impact. Council Member Holman: Five years or 15? Council Member Schmid: Well, 15, just sensitivity of a balance between jobs and… Ms. Gitelman: So the growth in jobs as 1:1 to the growth in employed residents? Council Member Holman: Yeah. Ms. Gitelman: Okay. Mr. Sigman: I think another major point was the worker spending, so if sensitivity analysis around that is appropriate? Council Member Schmid: Yeah, workers, services. Council Member Wolbach: If you haven’t already, may I recommend touching base with Stanford Research Park and the Downtown Transportation Management Association (TMA) for information about their employee travel habits. They might have information about this question raised earlier about when people leave town, do they stick around to buy dinner at a restaurant, and give us sales tax revenue from that or not. They might. I just throw it out there as a suggestion. Ms. Gitelman: I bet we will have it for Downtown, probably not for the Research Park for a couple of months. Council Member Schmid: They will have it probably after their August (crosstalk). Ms. Gitelman: Okay, so anything else that you would like us to do. We are developing a contract modification with a cost number that we will bring to Council. Council Member Wolbach: That is actually the question I was about to ask is, we are not authorizing further expenditures that come. Ms. Gitelman: No. Council Member Wolbach: Just triple checking. Ms. Gitelman: No. We are benefitting from your input to prepare a cost proposal and a contract modification that will come to the full Council. Council Member Wolbach: And do you need a Motion tonight or is this good? (crosstalk) Council Member Schmid: I guess not as far as contract, just part of Council absorbing it would be good to have the contextual data of what is the current changes going on out of (inaudible) residents versus nonresidents and the property values. Council Member Holman: So I guess I had one other question that is potentially something addition. We talked earlier about capital investment and the department you talked to said that, and Lalo comments said that in the capital investment, should it be required but mostly this seems like not, would be in Enterprise Funds, but I would like to know what isn’t, what might be required. I ‘m thinking park land in particular, what might not be included in park lands infrastructure, but it is not Enterprise Funds, so what isn’t captured in Enterprise Fund that could be some additional, and I am particularly thinking about park land, that’s required in the Comp Plan. Mr. Sigman: I can simply say that in our interviews with Community Services Department, they described to us their capital investment strategy for the coming years. It did not involve significant land acquisitions. It does involve a new amenity or investment at the golf course. We discussed that in pretty good detail with them and came to the conclusion that it was essentially a baseline investment they were not making due to the new population, but rather to enhance the overall suite of services and amenities they have for the community as a whole. Council Member Holman: We are currently behind on park land, so why would we be looking to add to it with the population growth? Ms. Gitelman: This is General Fund revenue and expenses. It doesn’t include the Impact Fee revenue. Council Member Holman: Yes, I understand, but if we… Ms. Gitelman: So there are Impact Fees that would be generated and could be used for park land acquisition. Council Member Holman: It’s not going to measure up to… Ms. Gitelman: I think all of us understand our park land goals are aspirational in the extreme. Over 15 years I don’t think we are going to get to the goals we have set, unless you disagree. To quantify what it would cost to get there, that number would be astronomical. Council Member Holman: But maybe not in totality, but at least in part and is there anything else besides park land that isn’t in an Enterprise Fund that we might consider? Mr. Perez: I think from the Enterprise Fund that should take care of itself within its own rate structure. I think what we are talking about is more the General Fund capital side, which is, I think, your point. Council Member Holman: Yes. Mr. Perez: So I agree with you that there is the base assumption here has us transferring somewhere in the $14 million from the regular pot, and now the new number, the total number there it is about $8 million in addition from the TOT, the Hotel Tax, so it is about $22 million that is going to go towards infrastructure. At some point we are going to finish the infrastructure massive plan over 126, it has to be updated. The assumption that we would make here with this view is that then you are going to have those funds available to do something else, so what is not included in here, for example, is the 7.7 acres of foothills… Council Member Holman: The Animal Shelter. Mr. Perez: The Animal Shelter, the… Council Member Holman: The park land. Mr. Perez: The three, I forget how many acres at the golf course that we need to put fields in, the three fields, the massive plan update that has been getting closer to completion. So there are going to be things that are not going to be there that we are going to have to – and then this view we are assuming if there is going to be something done and now something else is going to have to go in, can we keep up with those revenues that are coming in with the future costs of these items? That is something that we would work on through the Capital and Operating Fund, five-year view of the capital and then the ten-year Long-Range Forecast. I have some concerns I am expressing to the Council about funding all of our needs because of the escalating costs, so there is a tug there and we are going to be forced to reprioritize, whether we want to spend less on operating and more on capital, or finance more or defer more, which is obviously not desirable. Council Member Holman: To the extent that it is relevant to this study and the growth scenarios, I would actually like what you just talked about and what we have been talking about to be captured in some kind of fiscal analysis. I know these are going to be captured elsewhere, but to the extent that we can. Mr. Perez: I guess what we are trying to distinguish is the view of this study versus the going forward of these other things that we know need to be addressed. I am kind of coming in for one piece of the wedge of this whole view that you are looking at, so I may not make sense to you. Chair Filseth: What you are asking for, Karen, that is Council’s job, not Staff’s job, to decide, to make that kind of decision. What do you need from Staff to facilitate that kind of decision? Council Member Holman: I guess from an impact, we are changing – I don’t know how I am going to be able to say this very well – but we are changing from, if we are reducing our commercial growth especially, we are going to be reducing to that extent, our Impact Fees, and so how does it make sense to fund and what do we have to fund that we should look at in the Comprehensive Plan Fiscal Analysis. So, should we use this vehicle to look at, and I am particularly focused on park acquisition, where would we buy it, so I am particularly focused on that one. Ms. Gitelman: This actually raises an interesting question. In the original scope of work we talked about doing some kind of analysis of infrastructure funding options. You know, how might we fund park acquisition and infrastructure costs during the life of the Comp Plan? What are the funding mechanisms available? It is a little bit like what the Council is going to undertake with regard to transportation funding. We didn’t end up doing that as part of this study, but it is something we could add. It would, maybe, inform additional discussions. Mr. Sigman: Should it go here or should I go with the regular Comp Plan Study? Ms. Gitelman: Well, it would go in this Fiscal Study and we would look specifically at infrastructure proposals that are included in these scenarios and others that may be required over the 15-year period. Chair Filseth: You’re not going to ask those folks to design a revenue enhancement? Ms. Gitelman: No, no, no. It would simply be providing to us information about the various funding mechanisms available for infrastructure, right? Mr. Sigman: Right. So we would, for most of these capital improvements we would start with fees and we would look at your fee programs and try to understand the degree to which your park’s fee, for example, is capable of funding the level of park amenities that is envisioned by the Comprehensive Plan. If there is a gap, how do you fill that gap? Are there other revenue sources, whether it could be an Enhanced Infrastructure Financing District (EIFD), it could be an Assessment District or a Community Facilities District, one of many tools. I don’t think those are appropriate necessarily, but I am just saying what are the tools available to Finance, would they be appealing and are there regional or State sources that might also help you fill the gap. It think it is important, as a next step and to satisfy, I think, some of the comments I have been reading in some of these blogs that you have to look at, after you establish, that there is a General Fund operational element to this. There also is a very significant investment program that comes with the Comprehensive Plan. How does that get paid for, and that is something that has not been done yet. So I would advise that both pieces are complementary and appropriate to have in hand when you start to decide or narrow in on what the next 15 years are going to look like and what comes with that. Chair Filseth: So one of the takeaways from what we have concluded here is that none of the four scenarios in the (inaudible) none of the four scenarios generates significant amounts of capital in order to do that with, so we are going to have to look at other places. Council Member Holman: What I don’t want is to just because we have both a shortage of land and because we are not going to generate, as you say, funds here, and fund under any scenario, even the Fifth Scenario, the funds to bring up to what the Comp Plan requirements are for park land, and again, I am just kind of focusing on that one, we shouldn’t just ignore it. Ms. Gitelman: I think this is going to come up when we ask for your input on the mitigation measures in the EIR. That is associated with the scenarios. You are going to look at them and some of them you are going to like and some of them you are going to hate, but your first question is going to be, “What is it going to cost?” We haven’t done that and so we could see doing that additional work at the end of this process once we have your feedback on the mitigation and incorporate. My feeling is, once we get that feedback, those will be incorporated into the Quality-of-Life Scenario, and so in the course of that analysis we could do this kind of General Fund revenue/expenses test, but we could also look at the costs inherent in those mitigation measures. Council Member Holman: Can I bring up two other issues here, and again, I hope this doesn’t appear to be in the weeds, but the more residents we have more than the more workers we have, we also have an effect, and I can’t remember if in the animal shelter audit this was, I can’t remember if in that audit there was any reference to per capita the animal shelter houses X number of animals. So that’s kind of one, maybe I could ask Tina that. That’s one, but the other one is, that I don’t want us to ignore, is our canopy. Mr. Sigman: Tree canopy. Council Member Holman: Tree canopy, yes, our tree canopy, both in terms of planting and replacement of trees that reach the end of their lifetime, and also maintenance, because that is also, it is a different kind of infrastructure, but I don’t know, I have no reason to know if that was captured in any of this analysis. Mr. Sigman: No, on the surface (crosstalk) that is one where I would struggle, I do struggle to see the connection between a few more people and the tree canopy. I guess maybe there is one, but it wasn’t expressed in the interviews we had. You know, in other instances here I have referred to sort of a baseline condition. It’s not one of the things that changes when we think we are going to add 15 percent or 10 percent more people. Does that make sense? Council Member Holman: Yes, I could maybe come back to that at another time. Mr. Sigman: You know, these mitigations, these quality-of-life mitigations or enhancements, if you are on the wrong track, if you are not doing the work that needs to be done on tree maintenance and canopy, that is something that we have to find a way to do, but it isn’t directly related, at least in our study, and you could make – I would be curious, maybe we could table it, but it is not captured here. Council Member Holman: It’s probably more related to our Urban Forest Masterplan. Chair Filseth: Head slap here. I figured out where you’re going, I think. So one thing you could do and would fit in the context of an analysis like this, is you could say, “Comp Plan says four acres per 1,000 residents, land 10 million an acre, if you can find it.” So each resident is going to cost, in this case at four acres, $40,000 per resident over the next 15 years in terms of park acquisition. So you could add that to the cost. (crosstalk) Mr. Sigman: It kind of sounds like you just need a fee update. Chair Filseth: But she is making a (crosstalk) it could be part of an analysis that says here is how much it costs for each resident, right. Not necessarily how you pay for it, but when you are looking at revenues brought in by each resident versus cost brought in by each resident (crosstalk) Council Member Holman: Right now you are ignoring it. Mr. Sigman: You know, the fee act is there for you to charge new development for its fair share of these types of things, and so if the fee is insufficient… Chair Filseth: So you’re saying it shouldn’t come out of the General Fund, it should come out of fees, and therefore, it should be off this analysis, because it is a General Fund focus? Mr. Sigman: That I think sounds more strategic than I am trying to be. I think when we look at funding shortfalls for parks and you have significant development pressure in place and your fee is insufficient to do what you need it to do… Council Member Holman: Always. Mr. Sigman: It is time to update it. Council Member Holman: But we have been doing that and… Mr. Sigman: When we have a recession, you guys can get out there and buy some land. Chair Filseth: I think you’re right, because if you make the assumption that there is not going to be millions of square feet in redevelopment in the next 15 years, then putting a fee on it isn’t going to yield any revenue and it’s going to have to come out of the General Fund. Council Member Holman: That’s right. Chair Filseth: So at that point you’re using the General Fund to fund capital expenditures. If you can’t fund it with fees, then that’s what you do. Mr. Perez: Now you’re back to the points I was making, aren’t you? You look at the fee recovery level, you saw some of those examples for (crosstalk) Chair Filseth: Since the Comp Plan does say X many acres per thousand residents, that seems like it ought to be in the (inaudible) maybe as a footnote or something. That’s a footnote, so why couldn’t this be? Mr. Perez: Absolutely, and I think then you task us to figure out how we would make that work within your other priorities. That’s kind of where I was going. You set up some base, we identify the issues and this drives some of the policy and decisions, okay, strategically from a… Chair Filseth: (Crosstalk) asking for something quite a bit less ambitious than that, which is just shows up in the bottom line analysis. Council Member Holman: Exactly, because like I say, right now it is ignored. Mr. Perez: It shows up in the report. Council Member Holman: It’s not even a reference, and I would say the same thing with Animal Shelter, which surely there is with population growth, there is additional pressure on animal services. We don’t charge an Impact Fee for Animal Services, but there is an impact with additional residential, and to some extent at least, commercial growth, certainly both park land and Animal Services, which means we need a new Shelter. Chair Filseth: So if you amortize it over 40 years, amortize it over 30 years and you discount interest costs then it is a couple thousand per new resident. (crosstalk) It blows away his analysis because it is like 20 times higher than it is now. Council Member Holman: So however you want to capture that, and I am not going to try to dictate that, but Greg. Council Member Schmid: No, I was just going to wrap it up. (crosstalk) Chair Filseth: There would have to be an asterisk somewhere that says, Policy sees (inaudible) Council Member Holman: Well, more than a footnote, because a footnote tends to be in that 4.5 to 5 (inaudible). I don’t want to (crosstalk) Ms. Gitelman: I think we can talk about the fact that the City has an infrastructure plan that is not addressed here, or capital costs that are not addressed here, and those include your infrastructure plan, also includes the acquisition and development of new park land. We can say that. Council Member Holman: Let’s focus it on the things that are actually referenced in the Comprehensive Plan. You know, not all the infrastructure things are referenced in the Comprehensive Plan, not all of them are. Chair Filseth: True. Council Member Holman: But some of them very specifically are, especially park land. Ms. Gitelman: That’s true and I just wanted to say we have an existing deficiency, a substantial existing deficiency in park land if you use that ratio, and so I don’t want to pretend that over 15 years anyone could imagine we would have the funds to resolve that. Chair Filseth: I actually did it two ways, one with the aspiration ratio and one with the existing ratio. Council Member Holman: Understanding a deficiency but we don’t want to exacerbate, so I think Greg is trying to call us to a conclusion. But you’re a park land fan, Greg, come on. Council Member Schmid: Well, you could add schools to that as well. Chair Filseth: Well, that’s not part of the Comp Plan. Council Member Schmid: It is. Chair Filseth: That’s true, it is. So are we reaching a point of wrap up here? Council Member Schmid: Yes. Chair Filseth: I think there is probably no further discussion from this side. Ms. Gitelman: Thank you very much for your input. Council Member Holman: Thank you for going from meeting to meeting. Were you at the CAC as well, Roland? Roland Rivera, Business Analyst for Planning & Community Environment: I was not. Council Member Holman: Well, thank you for being here anyway. Mr. Sigman: Thank you all for our comments. I really appreciate it and I appreciate your time. Council Member Holman: Thank you Ben. NO ACTION TAKEN Future Meetings and Agendas Chair Filseth: Okay. Thank you guys for coming in. The next item on my list is discussion of future meetings and agendas. Lalo Perez, Chief Financial Officer: Yes, so we are coming to you then back on April 5. We have the beginning somewhat of the budget process with the Community Development Block Grant (CDBG), that’s (crosstalk) we have a Federal deadline that we must meet so this starts a little bit earlier than the regular process of the Budget. Then we have Mr. John Bartel coming in. Chair Filseth: So is he here on April 5? Mr. Perez: Yes. He is not available April 4. He is a very busy man and we tried to see if we could switch him from the 5th to the 4th, so he could be here for the Long Range with the whole Council, but unfortunately, he is in Southern California, so you get him on the 5th. Council Member Wolbach: How do you spell his last name? Mr. Perez: Bartel, one l. Council Member Wolbach: Thank you. Mr. Perez: And then the pool car utilization. You have been waiting for this one so it’s coming and that’s it for that night. I think we will probably have a good agenda for that. Then on the 19th it gets a little more packed, but I think a couple of those items are going to go quick, at least that’s what I would expect given prior history with you. You have heard some of the early warnings and proposals on the rates, so it’s the water and wastewater, and they’re coming now because of a notice of 2/18, so that’s why you are only seeing some of them. Storm drain is based on the Consumer Price Index (CPI) so it is pretty straightforward. We will probably do that one first and get it out of the way. Then, it’s not listed in here, but we have agendized the refuse rates as well. Then the last item, Community Services Department (CSD) wants to give you an update on the Junior Museum and Zoo (JMZ) and in regards to the construction of the new building, give you a status on that. Then from there we go to the month of May which will be full of budget hearings, as we gave you that schedule and for June we are working on tentative items. Council Member Schmid: Supposedly again, the Budget would come to the Council. Suzanne Mason, Assistant City Manager: April 25th. Mr. Perez: April 25th is the levy of the budget document fees by the Council and then the first hearing of the budget is the 3rd of May, that is a Tuesday, but keep in mind that we segment it so you don’t have to read everything, I mean, you could if you wanted to. You got it segmented so we’re not giving you too much time it’s in trenches. I think that’s all we have. Chair Filseth: So this is sort of a tentative schedule for May? Mr. Perez: It’s still holding until you, the Committee tell us otherwise. We arrange the Staff to be prepared for these nights based on the departments and the listing of those. And I remember Council Member Wolbach is absent on the 12th. Chair Filseth: Which day, the 12th, that you’re not available? Council Member Wolbach: I believe that is correct. Chair Filseth: So you would miss Municipal Fee Schedule, Public Works. Council Member Holman: If I am remembering right, the wrap up is kind of that and potentially not very much, and the reason I am saying this is because I may be out of town May 24th. Chair Filseth: So my recollection of last year, if I get this right, the wrap up session actually took multiple days, because as we went through it there was stuff that we weren’t, we didn’t feel comfortable with (crosstalk) but it was stuff that we had trouble making a firm decision on until we saw other stuff, and so we had a bunch of stuff ended up in the parking lot and then the last couple of days is when we went through that. Council Member Holman: So does wrap up not start on the 19th, because I look at “hold for additional discussion, if needed”. Is that not actually wrap up? Mr. Perez: We have a problem. Jim’s out if my recollection is correct. We had held it in there, but then he notified us that he is out. Chair Filseth: So what does that mean? Council Member Holman: So what do we do? Mr. Perez: Well, his preference would be to be here with you on the 24th. Chair Filseth: So what does that mean for the 19th? Mr. Perez: I’m sorry, there would be no meeting at this point. Council Member Wolbach: So should we cross it off the Agenda at this point, or what. Mr. Perez: Let us confirm, see if anything has changed, but given what we just heard. Council Member Holman: Is it just that night he is out? Mr. Perez: No, he is out a couple of days that week. His thinking was that he wanted to be here for the wrap up, to discuss it and the potential issues. Council Member Schmid: Yeah, that’s reaching conclusions, right. Chair Filseth: Which day was that? Was that the 24th or the 19th? Mr. Perez: Right now the wrap up is on the 24th. Council Member Holman: So does that mean if we don’t have the 19th, but there is a 24th, does that mean the 24th might also be the 31st? Mr. Perez: Let me correct myself. What we (crosstalk). We just don’t want to do the wrap up on the 19th, so it could be a meeting to follow up on some discussions, but we were trying not to hold the wrap up that night because he’s not here. So, I’m sorry for not being clear earlier. Council Member Wolbach: Are parking lot items wrap up items, or is that separate? Mr. Perez: Yeah, typically because you want to make decisions on them and it would probably be good for, you know. Council Member Holman: So I guess my question is, if the 24th takes the place of the 19th, or the 19th isn’t happening, so if we have the 24th, is the 24th actually going to be two meetings as opposed to the 19th and 24th, is it going to be the 24th and something else? That was the question. Mr. Perez: The wrap up should be all of the outstanding items, but if you want us to look at an alternative night that week, we can look at that. Council Member Schmid: But the goal is to have that one night. Mr. Perez: If possible. Council Member Holman: Just one night. Mr. Perez: Because typically you’re just dealing with the outstanding items. Council Member Holman: Then why did we have the 19th scheduled? I’m confused. Mr. Perez: That’s if some department hearing from earlier did not get completed, there have been cases where we just don’t get to a department because we got… Council Member Holman: Doesn’t that then bump them to the 24th? Mr. Perez: It would enough in this schedule because it is a backup. Council Member Schmid: So that could be done without Jim? Mr. Perez: Yeah. Council Member Wolbach: So here’s my question, going back to where this was kind of commencing Chair Filseth brought up, which is do we need an extra spot on here? Should we reserve on our own schedules the 26th, two days later? Do we need a spillover? Do we need a back-up date and should we start reserving that on our schedules? That’s my question. Mr. Perez: Yeah, I was just going to say as a process we try to have all four of you in the wrap up night. That’s been our goal. Chair Filseth: So Cory’s question is, I think, is that if the wrap up takes more than one day, should we have a tentative place holder, a tentative back up day. Ms. Mason: Why don’t we confer with Jim his schedule and then we will come back and talk about that. I think last year we started a few in the afternoon too, so that we would potentially have longer. Council Member Holman: Can you suggest an e-mail. Mr. Perez: Sure, we will e-mail the Committee and let you know the confirmation of those dates and then if you want us to work on having a back-up date to the wrap up, then we will check our dates and let you know. Chair Filseth: It seems like now is the time we want to check. Council Member Holman: And I’ll see if I can move the 24th. Council Member Wolbach: And I’ll also say that the 26th and the 31st are both currently free for me, so I’m happy to keep them reserved until we have confirmation. Just based on what you were saying about past experiences, it sounds like it might be a good idea to have. Council Member Schmid: Karen, right now are you available on the 24th? Council Member Holman: Well, right now I’m not, that’s why I’m saying I can double check, but right now I’m not. I am on the 19th. Council Member Schmid: So that’s an issue. Ms. Mason: We’ll confirm and then we will check on the 26th as well, which is a Thursday night, and the 31st. Council Member Holman: So you will confirm the 19th and the 26th and the 31st? Ms. Mason: We will confirm he is out on the 19th and then we will see about the 26th as an alternative. Mr. Perez: Could we say we will confirm the 19th, we will look at the 25th and 26th, just in case, because we are bumping into the Memorial Day weekend and some here might have plans, I don’t know. Council Member Holman: But you’re not going to take out the 24th? I’ll see if I can… Mr. Perez: Okay, we’ll hold onto that. Chair Filseth: It is also High School Finals Week, so it’s hard to travel that week. Before we break and leave completely the issue of the Agenda, I wanted to ask, with respect to the City Auditor’s presentation and discussion around that for the last couple of weeks, one of the issues that came up was there is this whole issue of the Parking Assessment District, which the finances seem very murky to all of us, and we just don’t understand, it’s like a black hole. There is precedent for property owners claiming that their membership, belonging to the Assessment District basically grants them access to certain numbers of parking spaces and it isn’t clear whether those are in any garages or not, whether the claim is valid or not, and particularly, since we are talking about building more parking garages as part of the infrastructure plan, right, are there claims against some of those spaces that are not even built yet? Is that something that the Finance Committee ought to look at and see what are the claims, what are the finances involved here and is this something we are going to have to worry about. I think this sort of came up, Karen ducked the issue last night, right, which is why it didn’t come back here? She left when she knew it was coming up. Council Member Holman: Oh, no. Chair Filseth: That seems like something the Finance Committee might consider taking a look at, because somebody should. Council Member Holman: I’d second that, for whatever it’s worth. Council Member Wolbach: I’d be open to that. Mr. Perez: So I think the question is, is that within your prevue to assign or is that something that needs to be assigned through the Council. So let us check into that because it may tie into other discussions that you have and that could be brought up at that point and referred. I’m thinking out loud here, but off the top of my head, but let us check on that. Chair Filseth: Okay. Council Member Holman: So you got the issue, right? Ms. Mason: Right. Council Member Holman: Okay, thank you. Chair Filseth: Okay, in that case we are adjourned. Thank you very much. Thanks for staying late guys. NO ACTION TAKEN ADJOURNMENT: The meeting was adjourned at 9:37 P.M. TRANSCRIPT Page 4 of 63 Finance Committee Transcript: March 15, 2016 FINANCE COMMITTEE TRANSCRIPT Page 1 of 63