HomeMy WebLinkAbout2016-05-03 Finance Committee Summary MinutesRegular Meeting
Tuesday, May 3, 2016
Chairperson Filseth called the meeting to order at 6:08 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Holman, Schmid, Wolbach
Absent:
Oral Communications
Chair Filseth: Are there any members of the public who would like to speak in Oral Communications? None.
Action Items
1. Fiscal Year 2017 Proposed Budget Overview.
Chair Filseth: With no members of the public to speak, let’s proceed to the first action item, which is the Fiscal Year 2017 proposed budget overview. Yes please.
Council Member Schmid: I wonder if I could just upfront ask a process question of how, what is included in Item Number One and how does it fit with the rest of the evening?
Chair Filseth: You want to answer that?
James Keene, City Manager: Item Number One would be the proposed budget overview.
Chair Filseth: Are you asking, is it the same material we went over in Council last week?
Mr. Keene: Are you looking at this document right here, or the agenda itself. (crosstalk) Same thing on the agenda, yes. So a lot of it is a recap of what we went over with the Council
as a whole when I presented the budget. I had asked the Staff to not dilly-dally along the way on a lot of those charts that you saw, but there are a couple, I think, that are more notable
than others, and there is some follow up information, both from comments the Council made and some prep for the structure of the sessions tonight and going forward that we will do, we
will cover.
Council Member Schmid: Okay, I guess my perception here is that in the introduction there are some critical issues about how we approach the Budget and I assume that this is the right
time to have any discussion about overall budget strategy.
Chair Filseth: I think that’s correct.
Council Member Schmid: Okay.
Mr. Keene: So you mean, when you said the introduction, you mean this very second the introduction, or tonight the introduction?
Council Member Schmid: Well, Item Number One on my working agenda has 45 minutes, and if Staff takes 20 minutes or 25 minutes, I want to make sure there is adequate time to talk budget
strategy.
Mr. Keene: Okay, so if the Chair would bear with us then, I don’t have that long-boat rowing technology, but whatever the coxswain or whatever, I’ll play that role of keeping the beat
with our rowers here, and I will speed it up, if that’s okay, so we’re not taking too much time, and then if you suddenly said, whoa, wait a minute, that’s a slide we want to be sure
we pay attention to, we’ll do that.
Chair Filseth: Okay. From a procedural perspective aspect, those of us who were here in previous years sort of have this, but the whole concept of parking lots and soft motions and so
forth, should we go over that, or does everybody understand that?
Council Member Wolbach: If we’re brief, sure, let’s do that.
Mr. Keene: We were intending to do that as part of this introduction, if that’s okay.
Council Member Wolbach: I’d be fine (inaudible).
Chair Filseth: Okay.
Mr. Keene: Then we will eagerly look at what you want to talk about in the introduction part, from your part of view as far as strategy. There is both strategy as it relates to process,
and then there’s strategy as it relates to content issues, so that will be interesting.
Chair Filseth: Are you okay with that, or is there anything specific we ought to clear up now.
Council Member Schmid: No (inaudible)
Chair Filseth: Okay.
Mr. Keene: Okay, so I will turn this over to Kiely Nose, Budget Manager. Is that right, our Budget Manager and in a sense, Acting Office of Management and Budget (OMB) Director. As I
mentioned to the Council, when we did present the Budget, our Director of the Office of Management and Budget, Walter Rosman, who all of you have worked with, departed for Sunnyvale.
I was able to express my unhappiness with that fact with the Sunnyvale City Manager yesterday in a meeting I was in. I told her to deliver Walter a personal message for me, but I will
keep that between us. Secondly, as we also pointed out, we have four budget management analysts, and I think we have three of them here tonight, three out of the four. Shawn, who will
be staffing tonight’s meeting and maybe the next one we have is departing this week, so we were down to 40% of the Office of Management and Budget. Think of that as just a little bit
of a symbol for the dynamics in our organization and community, but please be kind to Kiely, as we go through the budget in that regard. So I will turn it over to you.
Kiely Nose, Budget Manager: Thanks Jim. I’m Kiely. So like Jim said I’ll keep it really brief, and if we want to come back to any additional details, I’m happy to. So, just starting
out, a quick overview, we’re going to go through our city-wide funds, kind of hit on our internal service funds, general fund, enterprise and then our capital program, and wrap it up
with those policies and procedures in terms of how we’re going to get through these. So on a city-wide basis, just like Jim had mentioned, we’re at the $544 million revenue mark. The
biggest component of that are our net sales for our utilities and then property taxes after that. On the city-wide expenses side, we are budgeting a total of $626 million. Again the
big component is utility purchases, salary and benefits, as well as our Capital Improvement Program. Those are the three largest components of that. The major changes are also seen in
those three components, with about an 11 percent increase year over year in total. So, City-wide positions, we’ve talked about this back on that first night. This budget recommends an
additional 10 full-time positions scattered amongst the various funding sources. So of that, only 3.23 of that 10 is recommended to be added in the General Fund, 2.52 is recommended
as part of the enterprise funds and 4.25 as part of the other funds. So combined those 3 are what makes up those 10. The departments that those are in, there are 2.5 in the Planning
Department, there are four in Public Works (PW), there is one in Community Services, there is a 0.5 addition in Library, one in Human Resources and one in Information Technology. Something
we wanted to go over is looking at average salary and benefit changes, so what this slide is doing is comparing the ’17 proposed figures to our ’16 adopted levels. There are some methodology
changes that have occurred between the two years, but what’s a good gauge on the growth is actually that bottom line total, because although there may be some categorization changes
between the two years, bottom line we’re looking at the kind of annual growth of 3.7 in the General Fund and 4.3 in all funds. To get into a little bit more detail on this one, one of
the things that is going to look pretty odd is that “other benefits” line item that has the negative 45 percent. What that is, is that in the Fiscal Year ’16 Adopted Budget, the organization
was still in negotiations with a number of our bargaining units, and instead of allocating those funds into departments by the actual expense category, we put the anticipated increased
costs in a reserve for the General Fund, so what you’re seeing is a methodology change between ’16 and ’17 is actually, now that we have these agreements in place, you’re seeing those
increases in the actual expense categories themselves as opposed to in a reserve. So you see the negative $1.9 million, but you also see the raises the salary and pension line items,
and that’s because we’re moving things between the categories as a result of that methodology change. You will see these changes as you go through departments as well, because each department
has those individual expense categorization outlines.
Chair Filseth: Can I ask you a question on this slide?
Ms. Nose: Yeah, of course.
Chair Filseth: So, since the budget projects an increase of 10 heads, which out of 1,000 is 1 percent or something like that, and the 5.5 percent average increase in salary is primarily
the existing staff, right?
Ms. Nose: Correct.
Chair Filseth: So in the actuarial calculation of the unfunded pension liability, we assume, or the actuary assumes a 3.5 percent per year salary increases. Should they be using 5.5
percent instead of 3.5 percent?
Ms. Nose: I would argue on this year, you’re looking at a really unique picture where, in Fiscal Year ’16 what that 5.5 is being compared to is essentially we should have had labor agreements
that occurred at the beginning of Fiscal Year ’16, but they didn’t occur until the end of Fiscal Year ’16, so you’re looking at a salary number that’s jumping essentially two fiscal
years, between your ’16 adopted and your ’17 proposed. So that 5.5 is a pretty large jump from what I think you would probably normally see because of that compounding factor of where
we were in negotiations between this time last year and this time this year.
Chair Filseth: So in other words, if we went back one year ago from tonight and looked at a similar curve, it would say something much, much lower because we hadn’t entered into these
contracts, is that right?
Ms. Nose: Correct.
Mr. Keene: But not only…
Chair Filseth: I remember seeing that and arguing with Lalo about it, and Walter.
Mr. Keene: Well, the other way to think about it, though, is if we had reached these agreements, I mean, in one sense in 2016 we got a pass of sorts on the cost increases because we
had a delay, in a sense of, we didn’t have the full, let’s just sort of say normal increase that we should have had in 2016, so we’re having a magnified amount in 2017. I think later
on, I don’t know whether it’s here or later, we have a little bit of a comparison to the 2017 base year in the Long-Range Financial Forecast. We also have a slide in there on that, how
this compares to the long-range forecast for 2017 when we look at that. I would imagine this will be a topic that will be coming up off and on. This probably fits in under the strategy
area for the budget.
Chair Filseth: Okay, thanks.
Ms. Nose: I would also comment that what you looked at last year was budgeted increases that didn’t necessarily happen because our negotiations extended, and so what you’re seeing now
are those actually coming true. So we budgeted last year that didn’t even actually happen until the end of the year.
Mr. Keene: Okay, let’s push on.
Ms. Nose: Yup, so moving into Internal Service Funds, these are all of the funds that are providing services to various City departments and they were covered through allocated charges.
The big things to kind of note in here are we actually have used these as a one-time budget balancing strategy in a few certain areas. I know it’s cramped on the slide, but you’ll notice
in the General Benefits Fund, the General Liability Fund and the Worker’s Compensation Fund, you’re actually seeing some pretty sizeable decreases, and those charges that are being allocated
between the ’16 adopted and ’17 proposed. That’s because over the course of the year, expenditures have accumulated in those funds, and so this year, in order to help ourselves bridge
this financial gap, we are recommending that we draw down on those fund balances as opposed to allocate those charges out to departments again, and then back in Fiscal Year ’18 we would
resume that. So you can kind of see year over year you do see a decrease in the allocated charges, either completely to zero in some of them, or reduced in others. This is partially
offset by us truing up some of the charges in the vehicle fund. We did an analysis of the operation and maintenance costs based on actual usage and we trued up both the funding level
as well as the matrix between general fund and all the other funds as part of the base development this year. That was all part of your long-range forecast though. So kind of moving
into our general fund, not to be redundant with again on Monday, we have $193 million in revenue and then about $4.9 million draw on that Budget Stabilization Reserve, and that’s to
fund our $198.1 million general fund expense budget, 59 percent are salaries and benefits. So hitting on that next major slide that we think will tune in on a few things are the major
expense changes from our long-range forecast. So what we’ve done here is just highlighted some of the expense categories and the changes between what was included in that long-range
forecast in April to this current proposed budget and all that’s contained within it. You can see things are moving up and down, but a lot of this is the result of things that we’ve
discussed. For example, if we go under our contract services, included in that $2.97 million increase is money for Track Watch, for Project Safety Net and our operating transfers out
of $3.1 million. That is partially or primarily a result of that street light and street signal electricity cost transfer to the electric fund of $2.3 million. You can also see that
being offset by the transfer to infrastructure that we talked about, the $1.4, as well as you’re seeing salaries and benefits go down by the $2.7, so that’s actually those allocated
charges to the Benefit Fund and the Worker’s Compensation Fund. We consider those allocated charges as salaries and benefits, so that’s why you see those changes in that cost category.
It’s a reduction in the actual allocated charges as opposed to a reduction in Staff salaries. Continuing on this strategy front, we have a number of one-time budget-balancing solutions,
including reducing our budget stabilization reserve to $35.6 million. That’s still at about an 18 percent funding level with the goal of bringing it back up to that 18.5 percent target.
Mr. Keene: I just want to restate the Council’s existing policy is to have a budget stabilization reserve between 15 and 20 percent.
Ms. Nose: So the second one-time solution that we are looking at is that reduction of our internal service fund allocated charges. So using those fund balances for one year, it’s about
$5 million in all funds, and $3.1 million savings in the General Fund. Then the last one-time solution is that uncertainty reserve of $2 million. It is a one-time reserve to deal with
unanticipated costs, so whether it comes to fruition or if those issues become ongoing or one time is something to be determined. Moving on the enterprise funds, just a high-level look
at our revenues versus expenses in these funds, it’s in total about, I mean, electric is always the largest fund and you can see the expenses in blue against the revenue. There is some
use of reserves here; however, as we look at the rate changes we are looking at some significant rate changes across the board with about a $22 increase for the residential bill per
month. Moving right along to capital, we have in total 211 projects in our 2017-2021 Capital Improvement Plan. Of that, you can see 48 percent is in that Capital Improvement Fund. The
next biggest slice would be our enterprise fund. Within the Capital Improvement Fund itself, so the general capital improvement fund, the plan is for the five years about a $269 million
plan; however, if we keep moving forward to Fiscal Year’s ’17 budget, which is essentially the only appropriations that we’re making as part of this budget process is $71.9 million,
and of that $71.9 million, the largest slice is for building and facility infrastructure, and the parks and open space. So this $71.9 million is inclusive of the Fiscal Year ’17 Capital
Improvement Plan, of that general fund plan, that $71.9 million. The next slide is just highlighting our infrastructure management plan, and that infrastructure management plan is just
a reminder of the projects that Council approved as part of the original, I want to say, $126 million project that’s now about $128.8 million. So it’s our public safety building, the
bike pedestrian program, our fire stations, etc. So the $128.8 million value is the plan over the course of the five years. To summarize all of that, our city-wide budget proposals are
the Project Safety Net, Track Watch and collaborative costs are about $1 million in the General Fund as opposed to the Stanford Fund, the street light and traffic signal electricity
costs that transfer to the electric fund of $2.3 million. We have the Fiscal Year ’17 Capital Improvement Budget so again, the ’17 value is the $170.5 million and the five-year plan
is that $639 million number, which includes our capital infrastructure management plan, salary and benefit increases as well as that uncertainty reserve. It’s important to remember what’s
not included in here, so things like our Stanford negotiations, animal shelter service delivery changes, parks master plan, the Cubberley master plan, the Junior Museum and Zoo construction.
None of those kinds of large work efforts that Staff are working on, such as the purchase of the post office potentially, are factored into any of these budget assumptions that we’re
going over. So it’s really important to keep that in mind as we are weighing our decisions here. Looking forward, to just kind of reiterate, I think how we kicked off this budget is,
we are going to need to look at managing our expectations within the organization and with our community, really work at addressing our structural imbalance in Fiscal Year ’18 and doing
so in a thoughtful way so that Staff can go back and actually look and analyze and come back with some solid recommendations to you, and then always keeping in mind our pension costs,
our healthcare costs and that unfunded liability. Now a little bit to process, for Committee review as we go through our hearing dates, we, I think you guys have the budget hearings,
each of the item numbers are the departments, and so each department will do a quick presentation for you, or if they don’t have any proposals, they may just go straight to questions
that you may have based on their department proposals. As the Chair had mentioned, we will look to do soft motions for each of the item numbers and to the extent we have follow-up issues,
obviously we will try to address it at the current meeting. If we are unable to, our next goal will be to follow up with you at the immediately proceeding meeting, and if we’re not able
to make it at that first time we will follow up as part of the wrap-up meeting. That’s just to keep us on pace and moving along through our processes. I don’t know if anyone has anything
to add on that.
Mr. Keene: I think we’re ready to turn it back over to the Committee again. The sort of master calendar for your work for the month of May is on this two-page sheet, the green heading,
and again just to repeat, the comments early on, what we look for are sort of soft kind of motion from the Committee, and the parking lot typically exists for unresolved matters at the
Committee where you don’t have a majority to sort of say whatever it is approved at this point in time, and again, we will have an additional process in addition to the parking lot to
be trying to capture up, if there’s follow up information that we need to bring back at one of the subsequent meetings of the Finance Committee. Thank you. 20 minutes.
Council Member Holman: I’m going to start with two or three, and I may have more, but under Slide 22, you know I often listen to CBS Morning News and they start off with something called
Your World in 90 Seconds. That’s kind of what I feel like what we just went through. On Slide Number22 it says, 101 pedestrian bicycle bridge $4.7 million. I was able to find this. I
remember reading earlier in the binder on Page 16, it says $3.4 million this fiscal year. So, can you…
Ms. Nose: So on Slide 22, it’s actually looking at the five-year plan as opposed to the ’17 specific budget.
Council Member Holman: Okay, but help me rectify this, then, because it has $3.4 million in 2017, I’m back to the binder again, has $3.4 million in 2017 and $3.7 million in ’18, so I’m
trying to rectify those numbers.
Ms. Nose: What binder are you looking at, the Capital Budget?
Council Member Holman: I’m looking at, well this happens to be in the introduction, it talks about the belt environment and some expenditures and budgeting items.
Mr. Keene: Do you have a page number on that?
Council Member Holman: Yeah, it’s 16. (crosstalk) It’s in the Operating, yeah.
Mr. Keene: Okay, and that is where on the page about, real quickly?
Council Member Holman: It’s at the very, very bottom, the last bullet, or first and last bullet, I’m sorry, bike and pedestrian plan implementation project. I’m sorry, this is maybe
a little bit different.
Ms. Nose: Yeah, that would be the Bike and Pedestrian Transportation Plan of $20 million on Slide 22, and those would be the Fiscal Year ’17 budget and then Fiscal Year ’18 plan.
Council Member Holman: Okay, so we’ll hope they’re all answered as easily as that. It’s just I’m misreading it.
Chair Filseth: Did you just say that the five-year cost of the bicycle and pedestrian bridge would be $4.7 million? Am I thinking of the same bike bridge.
Mr. Keene: Bike and Pedestrian Plan.
Joe Saccio, Assistant Director of Administrative Services: No the bridge, the first is the bridge.
Mr. Keene: We’re talking about the bridge right now?
Chair Filseth: Yes.
Mr. Saccio: The money here, there’s a little confusion about what it was when we did the infrastructure plan as to how much it was going to be and either the price changing or some questions
about funding that we were going to get, so it’s a little bit different.
Mr. Keene: Why don’t we put this in a question to be followed up on? I will tell you one thing that has happened, of course, as you know is that we’ve lost the funding right now from
the, through the STIP, Statewide Transportation Improvement Program, and that was in the $4.5 million figure, so that figure is now, my guess would be, not included in this. At the same
time, we do have a new cost estimate, as you guys recall, or a range of a cost estimate for this project that is more than our $9 or $10 million original figure. It’s more like $13 million
is what we’ve estimated.
Chair Filseth: Okay, so the $4.7 million is the City’s contribution to the whole thing after contributions of other kinds of money from elsewhere in the City, State grants, and whatever?
Mr. Keene: That’s correct.
Chair Filseth: I understand. Thank you.
Council Member Holman: A second question is, would you on your Slide 25, you listed some things that aren’t included in this and could you run through those again please. I couldn’t
make note of them fast enough.
Ms. Nose: Sure, I just kind of highlighted a couple of them that are listed on that slide, Stanford negotiations is one as we continue to work on our agreement with them for fire services,
animal shelter service delivery is something that is currently being evaluated, Parks Master Plan is still outstanding and in progress, the Cubberley Master Plan is in progress as well,
the Junior Museum and Zoo is another construction project that’s out there, the purchase of the post office is a potential additional impact. There are other things as well, unfunded
actuarial, Transient Occupancy Tax (TOT) could increase potentially further so it’s a positive thing that could occur in the out years that’s not factored in here.
Mr. Keene: So just to be clear, this is not meant to be all inclusive. It’s meant to be representative of the fact that there are increments. For the most part, most of these have potential
increased costs or increased revenues that we haven’t put in the budget. So, obviously, we have fire services funding related to Stanford University built in this budget, but at the
same time we don’t have a resolution on what that cost will be. The same thing with even things like the Junior Museum and Zoo, we’ve got the existing funding for the Junior Museum and
Zoo, but as you know, the Friends of the Junior Museum and Zoo (JMZ) have a big capital plan and expansion, and we have yet to resolve what the long-term operating costs and whose responsibility
that would be when we go on that. So we did want to identify there are in many ways things that the City has committed to or directed us to continue to provide, for which we are just
trying to acknowledge we don’t have these fully resolved in this particular budget and in any year we would have things like that.
Council Member Holman: There are, and I appreciate that. I thought when you were saying because again, I wasn’t able to track fast enough what you were listing, so what you just listed
are actually things that are on this list. So these things aren’t included in the budgeting because you don’t have exact numbers to them, but I thought you were saying there are things
that weren’t on this list, and I noted a couple and there may well be more, but I noted like the golf course isn’t on here and the history museum isn’t on here, and it seems like we
should have some notion of what those expenditures are and potential revenues from the golf course are. It seems like we should have, because I know we’re working with the golf course
designer, for instance, still.
Ms. Nose: Yes, and for the golf course specifically, Staff is working on updated estimates and actually anticipates coming back to Council sometime, I want to say maybe in June, to give
a full update. However, this budget does actually assume that the golf course is closed for the full Fiscal Year ’17 as a result of all the construction.
Mr. Keene: You’ll be able to see, I think the point on this is more that let these individual areas emerge as we are looking at the capital budget or operational budgets in different
departments, but what we’re trying to say is, despite the recommendations as to what we have, despite the revenue increases that this budget has and the allocations we have, there are
a lot of potential demands for which we don’t have answers to yet. So, you obviously need to be keeping that in the back of your minds, since, I’ll make this point over and over again,
even though the budget in many ways is a question of revenues and expenditures and what those levels are, those are just symbols for values, value choices we have about where we want
to invest in assets of the community, what kinds of services and what level of service we want to provide, so what we are really trying to say is, I’ll give you a good example. The Parks
Master Plan, when you get into the Community Services Department (CSD) budget and we also look at the capital portion of the CSD budget, you will see a number of planned, at least, improvements
to our park facilities, and we would condition that with the fact that those are recommendations that have been made without the benefit of the completed Parks and Recreation Master
Plan. So I can’t say, but my guess would be the Parks and Rec Master Plan will have actually more ambitious ideas about possibilities for parks in the City going forward than the kind
of things we’ve included in this budget.
Council Member Holman: I’m not going to take a lot of time here because I know other Council members are going to have questions, too, but can you remind me, if you would please, what’s
included in Internal Services Funds?
Ms. Nose: Let me get back to that list on the slide.
Council Member Holman: It’s mentioned in a few places.
Ms. Nose: On Slide Nine, I’ll just kind of let you go down the list, the General Benefits Fund is where essentially all of the benefits for employees runs through, so that’s health,
vision, dental, etc. General Liability is where we pay claims out of for our legal matters. Print and mail is for the print and mail services that are housed in the A level of this floor.
Retiree Healthcare Fund, that’s where retiree payments, the Annual Required Contribution (ARC) payment, is flowing through. The Technology Fund is funding basically City-wide technology
activities. Vehicle Fund is both replacement, as well as operations and maintenance of the City’s fleet. Workers Compensation Fund is very similar to that general liability fund where
we pay our worker’s compensation claims out of Citywide.
Council Member Holman: Okay, thank you. The last question I will ask is, relates again to some of these projects that aren’t included in terms of dollars. Just a cursory thought here
is, it seems it would make sense to allow something in the budget. It always bothers me when we come back right after the budget is done and asking for Budget Amendment Ordinances (BAOs),
so if we can try to better anticipate or at least note some allocation for that which we may not have exact dollars for, it would be something I would like my colleagues to consider
too. Thank you.
Ms. Nose: And that’s partially, just to kind of echo that, something that we felt, given the size of this list and some of the things that are really eminent, that’s one of the reasons
why we are recommending establishing that $2 million Uncertainty Reserve.
Council Member Schmid: Yeah, I’d like to step back for a minute before talking about any individual item and just get a picture of the budget as a whole, and from the City Manager’s
introduction and the introduction here, there are some concerning elements. The revenues for the year are identified as going up 9 percent, our tax revenues by 8.9 percent, so we are
at the peak of a business cycle where revenues have never been so good. Our expenditures are up by 6.7 percent. It sounds good. But in that 6 percent we have personnel jumping from the
2016 budget to the 2017 budget by 12 new positions. We also have salaries going up 5.5 percent, pension going up by 10 percent, health expenditures going up by 6.8 percent. So each one
of those personnel we are hiring are leveraged by the numbers we see in front of us. The outcome of this very healthy revenue growth and choices already made is that we need to transfer
an extra $6.2 million from our Budget Stabilization Fund beneath our traditional 18.5 percent. What’s also concerning is the TOT accounts for about half of the tax revenue gain, and
a substantial portion of that is identified for infrastructure spending, which spends a very small amount on salaries, pension and healthcare. So those increases have to be covered elsewhere
in our budget. You did present a list of things that are outside the budget, but we have talked about as being important. We have spent some time on thinking about our unfunded pension
liability of $450 million, and one of the bottom lines the City Manager said is that we need to deal with these issues in the 2018 Budget. It seems to me we are in a position that is
out of line with our Long-Range Financial Forecast, where we identified long-term revenue growth of about 3.5 percent per year. That 3.5 doesn’t fit in with any of the numbers that I
have mentioned or any of the listing of additional things we need to spend on. So I wondered as we approach this as the Finance Committee, and I would turn to my colleagues, should we
have in mind establishing a strategy, and alternate strategy of what we would be planning for in our budget? What kind of future we’re planning for from a financial basis, so as we look
at each department, we’re looking not just at the changes recommended, but what changes might be appropriate to the situation we seem to be, where our long-term revenue growth is out
of line with a lot of what’s being presented in 2017 and carries liabilities to the future as well. So I just wanted to introduce that to my colleagues and see if there are any comments
before we get into the departments.
Mr. Keene: Well, I come back to the fact that you have a fiscal responsibility and you have a service responsibility to the community, and you have to figure out what the right mix of
those is and you can’t really separate those two things, and so what I have done is present to the Council for this year a budget that I feel is responsive to the directives that we
have been given by the Council and generally from the community, and the imposition of some impacts upon our City by forces outside our control. So just like in a recession, we are going
to have a falloff in revenues, you know, we have the impact of Proposition 26 passed by the California voters which is imposing an ongoing $2.3 million expense to us by having to transfer
the costs for street lighting from the electricity fund to the general fund now, something that we had never had to do before. We don’t have a strategy to solve that long-term, and that’s
one of the big hits in this year’s General Fund, but we acknowledge that certainly this year, as we point towards ’18, we’ve got to figure out some of those things. I would just say
that the reduction in expenditures is always part of a strategy, so the Council’s question has to be, well, what’s the timeframe and what’s the process you want to use for making expenditure
reductions? Do you want it to be very up and down, or do you want it to be on a different sort of curve. On the other hand, even though we have revenue-based projections here, the Council
is not without the ability to change those revenues. I mean, we haven’t gone to the voters for any sort of taxing increase in the eight years I’ve been here for anything on the operating
side, and you can go to many places where that’s done. The school district does that sort of thing. So, I’m saying that would be something that if we ever got to that point is a result
of the Council’s, that would depend upon the will of the people, but I’m saying that the tradeoff between the quality of life in the community and what the cost is and who pays has lots
of different factors in them, and they’re not even just the ones we’ve built into the assumptions on the long-range forecast right now.
Council Member Schmid: Yeah, I guess I would just say that you are right, it’s important what the Finance Committee is doing is setting priorities, not just cutting or reaching an arbitrary
number. It’s not a matter of cutting revenues. We started with the fact that this is one of our fastest revenue-gaining years of all time, and it should give us adequate funds to set
priorities. I think there are some basic underlying issues, how many people are appropriate for the City, how much do we want to spend on infrastructure each year and how do we deal
with the expenditures on transportation and traffic, which seem to be drawing quite heavily on the general fund. So, I’d like to hear my colleague’s input.
Council Member Wolbach: I didn’t really hear a clear question, so I’m not sure how to respond.
Council Member Schmid: Should we, before we get into dealing with each one of the department budgets, have some overall sense of where we want to be with our budget recommendation to
the Council in terms of revenues, expenditures and transfers from our Budget Stabilization Fund?
Chair Filseth: Let’s see if I can summarize what I think you just said to make sure I understand it, which is, you are looking at this and looking at sort of the trends over multiple
years and looking at the projection of revenue increases over the next several years and the structural expenses increases over the next several years and saying that there is a problem
here. So, are you asking for, as we go through this, maybe we should be thinking about a Plan B. Is that what you’re asking?
Council Member Schmid: Yes, is there at least some alternative structure that might help us ask questions as we go through. Number of personnel, expectations about revenue and revenue
increases, how much should be put into the infrastructure on a regular basis and whether there are some big elements in these new funding issues coming up on transportation and traffic
that could be dealt with separately.
Chair Filseth: And I think what I heard the City Manager say was that maybe the way to look at that is through the lens of priorities as opposed to some other mechanism. Did I understand
that right?
Mr. Keene: You know, I think that you have to do both of these, right. You have to deal with the cost and you have to deal with what it is that cost is providing. So I understand the
intent. You know, very often when we even put the budget together I issue guidelines to folks about what we’ll even consider and what we won’t consider, and certainly in difficult years
we have often given, you know, target reductions as to what people have to cut that force decisions. If you’re saying, are there some overarching things that you want to use right now
that force you to look at each of these budgets differently, obviously you can do that. I’m not exactly sure that I know how you would arrive at what that number is right now, and secondly,
I do think that we need to realize, we need to look at the budget as always an iterative process. There is nothing that precludes you from going through the budget along the way. You
start seeing a recap of where you are and you can either start to freak out even more like, oh my gosh, wait a minute, we, maybe we better double down. You could even get all the way
to the end at wrap-up and suddenly say, well wait a minute, we don’t like what we’ve essentially said. What is the recommendation you want to make to the Council? Then, even with the
Council, then the Council could have another pass. So, let’s just say for whatever reasons you said, well, it was really hard for us. We got through all of this, we did our best and
I don’t know, we still sort of feel like, I’ll just make something up, like there’s $3 million too much in the expenditure side of this budget. We’re not in the right position as to
what to do about that and you can serve that to the Council, see where they are. The Council could adopt the budget and then direct me to go out and find how we ought to cut things,
even after the June budget. So I think that we clearly recognize in this budget proposal that there are a lot of long-term decisions that need to be made. Everything between the timing
on the arrival of some of these issues, the status of their uncertainty right now, many of which we think will be more resolved next year. In truth, the staffing situation of our own
Staff to be able to dive deeply on a number of these things has all had an impact to say, we recognize this, let’s keep ourselves alive and move forward and realize that we’ve got to
spend a lot of time in 2018. If you don’t like that, or I think you will say, that really makes sense. But you may say, well we’d like to get a head start on that, and if you end up
assigning something, I mean, we’ll do our best to tell you the implications of that right now. And if you can’t do that, the Council can always direct me to do it even after the fact.
Council Member Schmid: I guess a simple dilemma I have upfront is that our Long-Range Financial Forecast said we can anticipate a 3.5 percent growth in revenues on an on-going basis.
We have 9 percent this year and yet during this 9 percent year, you’re asking us to transfer $5 million out of our regular reserves.
Mr. Keene: That’s because we have at least $5 million of new costs for which we don’t have a new funding source to provide for them, and rather than cutting services right now, we’re
saying, let’s (crosstalk) and give you a little more time to see if there are better alternatives. There very well may not be.
Chair Filseth: I think that’s very clear. I mean, I think what Greg says is, it is what it is. I mean, we didn’t always come in, but it’s here and so it is what it is, right, so we’ve
got to figure what…
David Ramberg, Assistant Director of Administrative Services: Chair Filseth, just a reminder to the Committee as well, we do have, immediately after adoption of the budget, we have quarterly
reports that come to the Finance Committee that give you updates on how we’re tracking on revenues in Fiscal Year ’17. So in prior years where we’ve had steep drop-offs in revenues that
we haven’t anticipated in the adopted budget, we’ll come back with early updates to the Finance Committee on those situations which lead to decision making that can be affected in the
mid-year time frame in Fiscal year ’17.
Mr. Keene: One other thing I would say is, the reserve we’re talking about, I mean, I think that we have a proven track record in the height of the great recession, of us not going in
and draining reserves as many other cities did. We made very hard choices. At the same time, this is named by the Council as a Budget Stabilization Reserve. This is what we’re doing,
we’re stabilizing the budget in this one year, given these unknown factors. We’re not saying that that would be something that could be done in this fashion on an on-going basis, but
the recommendations are right smack dab in the middle of the target range that you guys have set for the Budget Stabilization Reserve.
Chair Filseth: So for what it’s worth, I think this is a very valuable discussion we’re having right now. I think this is much more relevant to all of us here than us going through line-by-line
and seeing how many pencils Harriet bought, right. So I’m glad we’re talking this through.
Council Member Wolbach: So, just to make sure we’re all clear, when’s the budget going to the Council?
Mr. Keene: From this Committee, June 13, I believe is the date that we have scheduled for the Council at a public hearing on the Council Action.
Council Member Wolbach: And last night the Council was discussing possible other funding sources and referring that to an ad hoc committee which will also be coming back to Council,
probably within the next month, month and a half, with a decision to be made, at least for the coming fall election prior to our break, which is at the start of July, so I think this
is all important stuff to keep in mind. I think it sounds like we should probably just start plowing forward and keep that in the back of our minds and maybe with this discussion to
the, what do you call the backburner here, it’s the parking lot, thank you.
Chair Filseth: With the observation that as we think about new sources of revenue and so forth, usually you want to actually get the money before you spend it.
Council Member Wolbach: Yes.
Council Member Schmid: That’s appropriate because all the Palo Alto parking lots are full.
Chair Filseth: Although having worked for 25 years with sales guys, sometimes it’s not that way. I had a couple of questions too, at the outset. So in the overview of City-wide funds
here, I’m sort of shifting gears a little bit, but I assume this is the right place to do it; it looks like City-wide revenues are up $57 million from 2016 to $540.3 million and a couple
of major components to that looks like some of it comes from the State, like $22 million comes from the State, and another $20 million or so comes from utility commodities. What is that,
what’s utility commodities for revenue?
Ms. Nose: We typically are purchasing the actual commodity from a provider and then we are reselling that commodity to our community.
Chair Filseth: So is that sort of the standard utilities revenue?
Ms. Nose: Yes, yes. It’s their standard kind of operating.
Chair Filseth: So we buy solar electricity from somebody and then, so that’s electricity revenues from the City of Palo Alto. It’s not that we are selling it to Mountain View, the surplus
to Mountain View or something like that?
Ms. Nose: Not necessarily, although we do in certain areas have partner agreements with various neighboring jurisdictions.
Mr. Saccio: Most all of the expenses in utilities are basically covered by rates and so all of the revenue increases are going to cover either supply costs, which is really the largest
component of gas, electric, water, etc, and if I heard you correctly, we’re not in the business, we’re only in the business of covering load for the City of Palo Alto. We’re not in the
business of selling any excess energy or anything like that.
Chair Filseth: Unless we had some left, okay. It just seems like $22 million, $20 million was an odd number because it didn’t seem like it was nearly enough to cover actually demand
in Palo Alto, but it was more than like a little tiny bit, but maybe I’ll ask that question when we get to utilities.
Ms. Nose: I think we’ll get into it more as part of the utilities meeting, but to your point, that is also just the increment of change. The gross number is significant, $291 million
is ultimately the total. And another to what Joe was mentioning is as we’re going through all of these rate increases, that’s a big driver in the anticipated revenue growth.
Chair Filseth: Okay, and then I was trying to figure out what the total number for salaries and benefits for the City is. Is it $165 million, did I read that right?
Ms. Nose: Correct.
Chair Filseth: Thank you. On the City-wide revenues, we’ve got City-wide revenues at $544.3 million and City-wide expenses at $626.1 million, so what’s the difference? Where is the other
$80 million?
Mr. Keene: Oh, magic money.
Chair Filseth: That’s what I thought.
(crosstalk)
Ms. Nose: A large component of that is actually in the Capital Budget. Over $50 million is anticipated to be reappropriated from the ’16 Budget to the ’17 Proposed Budget through the
various capital funds, not just the General Capital Fund, but all of them, so that’s a significant piece of that gap. Because what that is, is if you think about your checking account,
right, it’s the balance that’s rolling over to the start of the next fiscal year, because you didn’t spend that money. So that’s a big gap. The other pieces are actually reductions in
various reserves and such.
Chair Filseth: I was wondering if it was from the reserves, because if you look on Pages 61 and 62, it looks like we’ve, if I read it right, it looks like the net decrease in funds,
in City-wide funds is about $70 million. Did I read that right?
Ms. Nose: I’m sorry, on what page are you, 62?
Chair Filseth: I’m on 62, yeah. So total operating funds and it consists of special revenue, internal service and enterprise and a few other things, drops about $70.9 million. Is that
a drop in reserves, or what is that?
Ms. Nose: It’s both reserves as well as those reappropriations.
Chair Filseth: Okay.
Ms. Nose: It would be both. So you can see the capital reappropriations on Page 61, when you look at kind of that change from your projected fund balance.
Chair Filseth: Okay. Alright, and then on the City-wide expenses, there is a chart on Page 60, and it looks to me like City-wide expenses are growing about 4 percent this year, but grew
about 15 percent the previous year, so on average, our expenses are going up 9 percent a year City-wide. Is that about right? On Page 60, yeah, those three big bars in the middle, yeah
those.
Ms. Nose: So those are just salary and benefits.
Chair Filseth: Oh yes, you’re right, salary and benefits, that’s gone up about 9 percent a year. Okay. That was my question. Thank you.
(inaudible, crosstalk)
NO ACTION TAKEN.
2. Council Appointed Officials and Council
City Attorney, Operating Budget
James Keene, City Manager: City Attorney. First up, okay, that’s right.
Kiely Nose, Budget Manager: So for the City Attorney, it’s in your operating book, Pages 141 through 148. Since there aren’t any changes recommended, if you guys have any questions,
we’re happy to address them.
Chair Filseth: What pages?
Ms. Nose: 141 through 148 (inaudible). Okay, you guys don’t have any questions on that. We can move right along to the City Auditor, Pages 149 through 157.
Chair Filseth: I have a question on the City Attorney. I mean it’s going to be the same question on all of these. It looks to me like in all the cases we’ve looked at so far, salaries
are rising, five, six, seven percent, pensions are rising six, eight, nine percent, but retiree medical is falling on all these cases. Why is that?
Ms. Nose: It’s actually something that happened in the budget last year in terms of how we treated the implied subsidy, and so in ’16 we actually accidentally double budgeted the implied
subsidy, so if we actually had restated our ’16 Adopted Budget to correct for that, you would see it increasing. So all of them throughout the budget is going to look a little funky
as a result of that error. The implied subsidy I want to say City-wide was about $1.9 million in ’16, so that’s really affecting that year over your growth rate.
Mr. Keene: So, Chair, rather than bundling them all up together, could we get a sort of straw vote on each one of these as we go along, because it is probably easier that way. Accepting
the City Attorney’s Budget without, you know… I mean, nothing precludes you from later on if you want to go back and revisit something. With the way the Council is, we really hunger
for closure at the Staff level.
Chair Filseth: I don’t have any questions (inaudible).
Council Member Wolbach: I actually had one. I don’t know if it’s appropriate to ask the City Attorney to answer a quick question about staffing in the City Attorney’s Office?
Molly Stump, City Attorney: Good evening.
Council Member Wolbach: Good evening. I just wanted to ask, in your sense of how staffing is currently in the City Attorney’s Office, do you anticipate that it’s a full staff, that you’ll
need to make more hires, either in the coming year or the year after beyond the current positions, or do you feel like the department is fully staffed up currently with the positions
identified here?
Ms. Stump: Thank you Council Member Wolbach. The positions that are identified in our budget we do think are appropriate size for our office to serve and support the City, with the additional
allocation for outside specialty counsel when that’s needed. We do have some vacancies in those positions at this time, and so we are using a variety of strategies to meet the needs,
including some triaging and queuing, we’re bringing on some retired folks and we are in hiring mode, but we do think that when our positions are filled, that that is the right size for
our department.
Council Member Wolbach: Okay. Thank you.
Chair Filseth: I actually have a question for the Attorney’s Office, which is, it looks like the salary expense for the department is up 5.1 percent in 2017, but the head count is flat,
so do I interpret that as basically on average everybody makes five percent more money, on average. Is that the right interpretation?
Ms. Nose: Probably not 100 percent and that’s only because what we did in Fiscal Year ’16 is actually change the methodology of budgeting positions, so the positions are actually budgeted
at the actual incumbent salary. So the extent any staff leaves, and they hire a new attorney, they may change from a salary level and all that’s captured in that delta between ’16 and
’17, as well as any management performance increases and stuff like that, so you kind of have those multiple factors.
Chair Filseth: Although in this particular department, I don’t think anybody left this year, right?
Ms. Nose: Is that right?
Ms. Stump: There was a retirement and also a resignation to move across the country, but both of those positions are still vacant. If the number is five percent, I suspect that primarily
reflects the regular salary increases that were available and administered across the management comp.
Chair Filseth: Okay. My interest in this is less about any given department as trying to make sure we are calculating the magnitude of the Unfunded Pension Liability properly, because
it is sensitive to the average wage increases in the City. Okay, thanks.
Chair Filseth: Motions.
Council Member Holman: I would make a motion to approve the City Attorney’s budget.
Council Member Wolbach: Second.
MOTION: Council Member Holman moved, seconded by Council Member Wolbach to tentatively approve the City Attorney Operating Budget.
Chair Filseth: Discussion?
Council Member Holman: Nope.
Chair Filseth: All in favor? Motion passes.
MOTION PASSED: 4-0
City Auditor, Operating Budget
Ms. Nose: Okay, we’ll move right along to the City Auditor and Harriet’s here with me. So that’s Budget Pages 149 through 157.
Chair Filseth: Okay, let’s do Karen first.
Council Member Holman: So I do have a question about this one and Harriet I really appreciated your e-mail and I’m trying to get it up on my phone here. It was Portland, and it’s not
so much that, I’ve had a lot of stuff go by between when I read this this morning and here, but remind me how much money it would save, but what I noticed in particular was, you know,
we do 721 surveys returned and they get 3,300. Of course, Portland is a bigger city than Palo Alto is, but do you want to just talk this through with us. Like benefits, cost savings
since we’re in the budget process, but you know…
Harriet Richardson, City Auditor: Sure. This came up last week. I’m working with an auditor in the Portland Auditor’s Office to do a presentation on our different approaches to citizen
surveys, which we will be doing later this month, and Portland has done their own survey in-house for over 20 years, I think it’s about 26 years now. We use the National Research Center.
We talked a little bit about the methodology. They mail 9,800 surveys each year. They get about 3,300 back. They currently have a 35 percent response rate, ours is about 25 percent.
One of the things that he told me they did was about two or three years ago, there has been a national trend of response rates on surveys declining, but he said a couple of years ago
they met with someone who specializes in surveys and they suggested making one more contact, so they sent out one postcard telling residents that they have been selected to do this survey.
A second notification is the actual survey and then the third contact is a second copy of the survey reminding them to do it, if they haven’t already done so. So what they’ve done is
added a postcard reminder so that residents get two postcards and two surveys. They also code their surveys in a way that they can determine that there are no duplicates coming back.
So this is a very legitimate count, but theirs is 35 percent compared to our 25 percent, and our 25 percent is based still on us increasing our survey count. We’re mailing out 3,000
surveys, which we’ve done two years in a row now; prior to that we were mailing out about 1,200 surveys. Just to keep our response rate up we increased that, and we’re flat on our response
rate right now, but if we lower the number of surveys then we’re going to run into some errors about, well some reliability issues with the margin of error based on a low response rate.
Council Member Holman: An so, you’ve got on this table you provided, which is really helpful to have the table, that their costs, not including Full-Time Equivalent (FTE) is 24.5 and
ours is 25 a thousand and they get back a lot more than ours. It doesn’t include FTE costs, and theirs is 850 hours of Staff time and ours is 300 hours of Staff time. So, if we were
to convert to this method, two questions. One is, would our staff be able to manage that size of a survey, that’s one, and what difference would that make in terms of cost to us in the
budget. The other is, one of the things with the National Citizens Survey is it lets you compare to other cities nationwide. How does Portland address that?
Ms. Richardson: Portland does not do comparisons. They are more concerned about how they are doing internally, whether they are meeting resident’s needs than how they compare to other
cities, other jurisdictions, so we talked about that a bit also last week, when I met with him. Then for us one of the things about the comparisons that I don’t think is clear when you
look at the survey itself, is we learned this last year, the National Research Center allows you to do a customized comparison where you can select, they recommend you select a minimum
of 20 cities that you think are comparable from their list of about 500 that are listed on the back, and when we got the results back they weren’t useful. There were a lot of “no comparisons”
or maybe out of the 20 we selected, maybe fouror five, so we went back and we said, why is this. If we selected 20, we expected to have 20 comparisons. They said that a lot of those
cities don’t do the National Research Center Survey. What they are doing is they are collecting data from all sorts of different surveys, including Portland’s which does their own survey,
and they are matching up the questions which might not be a 100 percent match, but they’re making comparisons based on, it’s close enough or it is an exact match. So if the other jurisdiction
did not ask a similar question, you’re not getting a match. So if you go back and look at the survey now, and look at the benchmarks, you’ll see that the number of comparison cities,
they vary a lot. It can be anywhere from, you know, a very low number to almost the full range of cities that are listed on the back of the survey.
Council Member Holman: So if we went this direction, which I’m interested in, if we went this direction the financial cost is a wash, let’s say, but could your office manage this in
terms of staffing?
Ms. Richardson: I think we could manage it if we brought in, for example, maybe a temporary person to do the data entry. That’s what Portland does. They bring in a temporary person to
do the data entry.
Council Member Holman: Do you have a recommendation or are you just putting this in front of us?
Ms. Richardson: I was just putting this in front of you because I thought it might raise a question, you know. I just got this information actually. We met last week but I just got the
information yesterday, after he did the comparisons when I gave him our numbers and he sent it all back to me. So, because I didn’t have his information, so then I thought it would probably
be helpful to send it to you so you could see.
Council Member Holman: Okay, thank you.
Council Member Schmid: Yeah, just a couple quick questions. There was a change in the office a year ago, in 2016 Budget it showed up, change of personnel. Do you feel that your current
Staff is adequate and meets your needs?
Ms. Richardson: I think the number of Staff is appropriate for our size city.
Council Member Schmid: Good, and let me use the Performance Report where you report on each department, including the Audit Department, and you mention in there the number of work products
issues per Audit Staff had fallen quite dramatically over the last decade, and if you look in your projections on Packet Page 154, you say the estimated 2016 rate is pretty low, but
will go up slightly in 2017. Is that…
Ms. Richardson: Correct. So we currently have six audits in progress, so those will be coming to Council, so there’s been a bit of a lull, but then there’s going to be kind of a rush,
so one of them is currently under review at the department level. We’ll meet this week. That will be coming to Council before the end of the, well to Policy and Services, before the
end of the fiscal year. We have another one that will be coming in August, and then the others are September and October, so we do have a list of six of them that are very close to being
ready.
Council Member Schmid: Good. So you’re confident that you’ll be pushing that number up?
Ms. Richardson: Yes.
Council Member Schmid: Good, thank you.
Council Member Wolbach: I was just going to make a motion to tentatively approve the budget, but I was going to say, maybe we should wait until Karen has had a chance to ask her other
question.
Council Member Holman: I did have one more question. Greg asked the question about, are you the right sized Staff, and your response was, appropriate, saying it was the right sized Staff
for this size city. Is it the right sized staff for a city that has as many demands as it does?
Ms. Richardson: I think one of the things that you don’t see reflected on our pages of the budget that’s different for our City is utilities, and we do have one auditor that’s not shown
in our budget that is paid in the utilities budget, so that would be the unique piece that I think we have and we’ve compensated for that. We have one auditor dedicated to utility audits.
Council Member Holman: So you don’t anticipate, the Airport is not as big and complex as the utilities, but you still think even given the complexity of the City, that you’re right sized.
Ms. Richardson: Correct. I think that we could add, well there’s a couple of issues coming up. There’s the Airport. I think as they’re in the transition phase we need to let some things
get done, because there’s some legal aspects to that before we would step in and say, are you doing things the right way. Two of the things that I think are big issues for the City right
now are the Enterprise Resource Planning (ERP) and that we do plan to spend a fair amount of time being involved in making sure that, you know, with the current Systems and Applications
and Data Processing (SAP) system a lot of our audit findings tied directly to weaknesses and the implementation of that, and we want to look at how we can prevent those from transferring
over into the new system, so we will be planning audits around that for next year. That would be the only other thing, if we wanted to bring someone in who specializes more on IT audits
for a temporary period of time, but otherwise I don’t think we would need to add Staff.
Council Member Holman: I guess as an adjunct to that, because things do emerge and, for instance, in the City Attorney’s Office sometimes they need to bring somebody in for a special
need, you don’t have any flexibility in your budget and I’m loath to add more staff, but at the same time would it be helpful to you, would you feel more comfortable at least as a parking
lot issue, and for you to go away and think about if there’s a way to anticipate if we had, like a part-time or some consultant or free-lance budgeting, if an audit came up that would
need to be addressed that you thought needed attention.
Ms. Richardson: If that happened, I would prefer to do it through a consultant than to say, let’s just add Staff. I think that doing specialty, hiring someone on a specialty basis would
be more beneficial than just hiring another auditor full time.
Council Member Holman: I didn’t mean an FTE or anything like that, but the question really boils down to, would you feel more comfortable, more confident or having more options if there
was an accommodation for a consultant or a free-lance person to come in and help if you needed it?
Ms. Richardson: We definitely would. I think one of the things that would be helpful would be to do a City-wide risk assessment, and then identify some of those high-risk areas that
we could focus some of our audits on. That’s a typical process used in other audit shops that we have not done in recent years and having a consultant available to assist with that would
be beneficial.
Council Member Holman: Any notion of that, not an FTE, but a full-time job for a while or a part-time job for a longer time or what?
Ms. Richardson: It’s a part-time job for a while. When I was at the Washington State Auditor’s Office we hired a consultant to help with the state-wide and it wasn’t very expensive at
all. It was about, I would say it was about $100,000 for just a short period of time, six months, and then it was done and we were able to develop about a three-year audit plan off of
that.
Council Member Holman: Thank you so much.
Council Member Wolbach: Just to make sure I’m clear on the process, should I couch this and say, tentatively move or move tentative approval? So I move tentative approval of the City
Auditor’s budget.
Council Member Holman: So I would like to put in a parking lot for Harriet to come back with some kind of dollars, if you could come up with them of what it might take to get a City-wide
risk assessment done. You said we haven’t done it in a long time, so if you could come back with something. So I’ll approve the motion that if you would accept.
Mr. Keene: I think that procedures require more than one Council member to put something in the parking lot, also.
Council Member Holman: Yes, I was going to ask the maker if he would accept that as a friendly amendment.
Council Member Wolbach: I’ll let others to see if they want to second that.
Council Member Holman: Okay, I tried Harriet.
(inaudible)
MOTION: Council Member Wolbach moved, seconded by Council Member Schmid to tentatively approve the City Auditor Operating Budget.
MOTION PASSED: 4-0
City Clerk, Operating Budget
City Council, Operating Budget
Ms. Nose: Okay, so moving along to that and the Clerk’s Office for budget, Pages 159 through 167. And then I’m wondering if we can’t also take up City Council budget at the same time,
which are Pages 169 through 172, given the nexus.
Chair Filseth: I think that’s reasonable. City Council has given themselves a 33 percent raise. What’s up with those people? Questions. Cory.
Council Member Wolbach: Yeah, actually something I had asked of the City Attorney and Greg beat me to the punch with City Auditor, I’d like to ask the City Clerk, which is, do you feel
that the staffing identified in the budget is adequate for the department and the demands placed upon the department and its work for the City?
Beth Minor, City Clerk: Yes, I do. I’m looking at what our current workload is and what’s coming up, I think we are adequately staffed with what I have.
Council Member Wolbach: Okay, that’s great to hear. And the other thing I’d like to mention, with regard to City Council, is not something for this coming year, but I wanted to mention
it so it’s out there for discussion and consideration as we think about years moving forward. I’ve said this even before I joint the Council, that if the Council size was going to be
reduced, as it will be in a couple of years, that at time the Council should move to full-time pay, so I just wanted to put that out there for us to all start thinking about. I think,
it’s not an issue for this year, but I just figured this is the appropriate place to raise it for consideration, or at least to start mulling on it.
Council Member Schmid: Just in terms of that, the Council did vote an increase in salaries, but it can only be implemented after the Council members themselves no longer benefit, so
there will be something due in 2018, but it is modest increase.
Council Member Holman: If I could just add to that too, the kind of increase you’re talking about is a ballot measure, it’s not a Finance Committee issue.
Council Member Schmid: Yeah. Let’s see, just a question on what took place between 2015 and 2016 and ’17 where total salaries and benefits grew by $250,000 for the City Clerk while there
was no change in staffing. It’s on Page 165. Was there a temporary absence of Staff during that year?
(inaudible)
Council Member Schmid: Yeah, but still a substantial increase.
Sean O’Shea, Senior Management Analyst: In Fiscal Year ’15 there were vacancy savings I think in your office, and now that we have Jessica on board and then we have marginal increases
from ’16 to ’17.
Council Member Schmid: So the ’15 was an actuals.
Mr. O’Shea: Yeah, those are actuals.
Council Member Schmid: Okay, thank you.
Council Member Holman: Might I add that Jessica is well worth it, because when she comes to Council meetings, we get out early.
Chair Filseth: Okay, no other comments or questions?
Council Member Schmid: I’ll make a Motion to tentatively approve the City Clerk and City Council.
Council Member Wolbach: I’ll second.
MOTION: Council Member Schmid moved, seconded by Council Member Wolbach to tentatively approve the City Clerk and City Council Operating Budgets.
MOTION PASSED: 4-0
City Manager, Operating Budget
Ms. Nose: Okay, so moving right along to the City Manager’s Budget, Pages 173 through 182.
Suzanne Mason, Assistant City Manager: So in the City Manager’s budget, you actually see a net decrease overall of $126,000, and that’s about 4.2 percent. It’s reflecting the elimination
of a contract, well an anticipated contract this year for transition of the Animal Services Program and that was a one-time expenditure that was budgeted to assist with the analysis
and potential transition to a different service delivery model. That will not be repeated, so in essence, the $250,000 agreement was eliminated and there is no change in staffing. Overall,
salary and benefits went up 6.9 percent and the net change in the budget, if you had not had the one-time elimination would have been about $124,000 and it’s about a $2.9 million overall
budget. So there’s really no significant change in the budget except for salary and benefit adjustments.
Council Member Schmid: A quick question. On Page 180, the pension number for 2017 takes a big jump over two years in a row. Is there something special going on?
Ms. Mason: 180, you mean for 2016 or 2017?
Council Member Schmid: The pension goes from $229 in 2015 to $415 in 2017. That’s about a 12 in the second year. The first year is even more. It’s like 40 percent.
Ms. Nose: So you’re probably looking at the same thing again with the City Clerk’s Office where comparing actuals to budget, so in Fiscal Year ’15 you’re looking at the actuals numbers,
so to the extent there are any vacancies, I believe you guys had a departure at a pretty senior level that year, and so you’re going to see that vacancy savings in that column, whereas
the ’16 adopted and ’17 proposed, you’re going to see the full costs if you assumed that someone was fully staffed, so in ’15 you’re seeing what actually occurred as opposed to what’s
planned.
Council Member Schmid: Right, that’s in 2015 but in ’16 to ’17 it increases by like 13 percent.
Ms. Nose: Right between ’16 and ’17 the 12.6 percent is a combination of a number of things. In addition, I think the staffing has been solidified between the fiscal year ’16 and ’17,
you have two assistant city managers that were probably not factored into the development of the ’16 proposed, given the timing of their hiring, as well as the pension rates are increasing
a little over 1 percent, and then salaries are also increasing. So you’ve got those three kind of compounding factors which are exacerbating that change between those two fiscal years.
Council Member Schmid: Okay, I guess it’s just an example of the fact that some fairly modest salary increases leverage into substantial pension obligations.
James Keene, City Manager: Yeah, but in this case, I mean, modest salary increase, well, reasonable salary increases and again, full-year funding for more positions at a higher level
in this particular case.
Council Member Schmid: Okay.
Chair Filseth: (inaudible) Seven percent.
Ms. Nose: The overall.
Chair Filseth: But you’re saying that was net of sort of some accounting assumptions based on last year and so forth.
Ms. Nose: I didn’t hear the…
Chair Filseth: So Greg commented on the salary and benefits, that salary increase for the City Manager’s Department was an increase of 7.1 percent this year. You’re saying there’s other
stuff in there having do to with, you know, timing of when the Assistant City Managers came on board last year and so forth.
Ms. Nose: Correct.
(crosstalk)
Council Member Schmid: It’s the 12.6 versus the seven is 80 percent higher increase.
Chair Filseth: That’s true.
Ms. Nose: It does compound.
Chair Filseth: So the Staff is three admins, two Assistant City Managers, two communications staff and one Economic Development Manager, is that correct?
Mr. Keene: If that adds up to nine, yes that’s it.
Chair Filseth: Plus one City Manager.
Mr. Keene: Plus one City Manager. Thank God that position is still there. Yeah, and the one that I can see now at the moment, the Economic Development Manager.
Chair Filseth: Right, that’s Tommy, right?
Mr. Keene: Richard was funded out of, like 50/50 or so between Planning and Public Works. We seated him in the City Manager’s Office because he has done so much work on high-speed rail
on those issues and not only didn’t they have a seating, it was also sort of a good experience for him to be able to rub elbows with the Council members on high-speed rail and things
like that.
Council Member Holman: And a good counter to the really abrasive style of Cash.
Mr. Keene: Yes. Excuse me, just since, I don’t know if I told you this, these two guys have had a healthy competition about, I think the Mayor was around when I got this one, and about
one-upmanship. One morning I got a text from Richard, about 7:30 in the morning, and it read just like this, he said, “Jim, every day Cash and I wake up and ask ourselves this one simple
question, what can we do today that will make America great again?” This was long before somebody else announced that as a campaign…
Chair Filseth: They did spell it g-r-e-a-t, right? Not a different way?
MOTION: Council Member Schmid moved, seconded by Council Member Wolbach to tentatively approve the City Manager Operating Budget.
MOTION PASSED: 4-0
3. Office of Sustainability, Operating Budget
James Keene, City Manager: Okay, next budget is Office of Sustainability.
Kiely Nose, Budget Manager: And then on this one, it is in the department section, which is Pages 307 through 313. But in addition, we have also kind of dog-eared a piece of non-departmental,
which is page 468 through 469. We can maybe tie both of those in together as part of this conversation.
Mr. Keene: You probably don’t need to go to 468 and 469, but we should have a slide that speaks to that, is that correct?
Ms. Nose: Correct. So I will let Gil continue.
Gil Friend, Chief Sustainability Officer: Good evening Council members. Good to see you again. I’ll walk you briefly through the slides and I look forward to any questions you might
have. An overview of the department, the mission is to lead the organization and the community in promoting a culture of sustainability through a range of strategies and programs and
to promote an environmentally sustainable future and improves quality of life in the community in ways, as you heard last night from Peter Pernijad that are consistent with cost-effective,
practical ways of bringing those benefits to the table and to the community. A few of the accomplishments in this last year, you have a longer list in the budget pages, of course, developing
a Sustainability and Climate Action plan, procuring a sustainability dashboard, which is partially deployed now, multiple study sessions with you and with Utilities Advisory Commission
(UAC). In that case we are on utility of the future issues raised actually more than that $350,000 in bringing in external funding to support sustainability initiatives and with the
City Manager and the fleet organization, established an electric-vehicle-first policy for the city fleet to shift from our primary focus on natural gas vehicles over the past dozen or
so years to Electric Vehicles (EV’s) as we move into the future. A few of the initiatives for 2017 include completing the development and the adoption and initial implementation of the
Climate Action Plan, piloting local and regional mobility as a service initiatives. We’ve talked about those before. Fully implementing the dashboard and with that, consolidating some
of the other tools we have and streamlining our annual Earth Day reporting process to bring you more timely reporting and to further integrate sustainability programs and practices into
City operations. Significant budget proposals are two. On the first $110,000, this is shifting funding from salaries. We had two half-time salaried positions moving into a more flexible
fund that deployed either staffing or contractors, but for that core function in the Sustainability Office. Second, establishing a sustainability contingency account as a one-time resource
to fund specific requests that may be brought forward, some of which will come to you. I would be happy to talk in more detail about what those are, if you’re interested. With that,
I look forward to your questions or clarifications.
Council Member Schmid: Thanks Gil. You have a very surprising number here. The 2016 Budget had two full-time Staff members, 2017 has one and contractors on the outside, and what’s surprising
is that the contractors cost more than the second employee, which is surprising.
Mr. Friend: Can I comment for a second. The contract funding we reserved for $110,000 is what paid for two half-time employees in the prior year.
Council Member Schmid: No I’m talking about the 2017 Budget.
Sean O’Shea, Management Analyst: Can you tell us what page you’re on.
Council Member Schmid: Yes, Page 311 and the 2016 Adopted Budget had two full-time workers in the office and 2017 it goes down to one, so there is a saving there of $83,000 and the contract
services goes from 60 to 171, which is an increase of 110. Now does that contract services include a lot of other things that would be done in any case?
Mr. O’Shea: So the temporary Staff cost, if we were to just continue with the temporary Staff, I think last year we had budgeted about $104,000 or something like that. If we were to
continue with that, based on the increases in that position, I think it was going to be about $107, $108,000, so this $110,000 number in terms of reallocation may be just more of a rounding
figure for consultants or contracts, but it roughly would have been pretty equivalent.
Council Member Schmid: It’s about the same amount, but with the pensions and medical benefits and so on, I’m surprised that the full-time employee…
Mr. O’Shea: It was a temporary position but did not have medical…
Council Member Schmid: Yeah, so you would expect the contractor to be cheaper, but it is not.
Ms. Nose: So the funding value, I think, just to kind of (inaudible) back a little bit of the 110, is really to allow that flexibility, so how we costed it was based on if we kept those
two temporary Staff members with all the general changes, that’s where it would be. No do we, to Gil’s point, have a contractor lined up for $110,000 exactly? Not necessarily, as he
is working through the resources necessary and whether he needs temporary assistance or he wants to do a contract, that’s the impetus behind the numbers the numbers here.
Council Member Schmid: I know and it’s just a number that you have projected, but over the course of the year we are asked to make a number of decisions, to hire someone or to contract
out, and so the assumption usually is contracting out might be cheaper, but what this says is, not necessarily.
Ms. Nose: Potentially.
Council Member Schmid: Okay.
Chair Filseth: What’s the Sustainability Contingency Account going to be used for? (inaudible) What kind of things do you anticipate using the sustainability contingency account for?
Council Member Wolbach: What page is that?
Mr. Friend: On Page 469 you’ll see a detailed description of that. We’ve got that broken into three buckets. First is a variety of activities related to community engagement around the
Sustainability and Climate Plan, including a bunch of that is communication materials, collateral website improvement, digital comment management, digital commenter management. The second
bucket is additional research and analysis as we dive deeper into Sustainability and Climate Action Plan (S/CAP) planning and implementation strategies. So $50,000, I’m sorry, for the
first category, $100,000 bucketed for the second category, and another $100,000 for the development and management of pilots and pursuit of grants, around EV charging and mobility, most
specifically, and perhaps others that will come along. Those are to be developed and will come back for review if they hit Council thresholds.
Mr. Keene: When we were going through the budget, I’m trying to remember, I think Gil and I were arguing for quite some time and maybe I got worn down or something, but I said, there
is a lot of uncertainty about next steps as to what we are going to do on the implementation of both the S/CAP, but actually supporting, sort of having flexibility to support implementation
aspects of sustainability of climate-related recommendations, of which he has called out just some of the work around EV chargers and installation and that sort of thing, but again,
as he said, the condition of all of this was we would be bringing to the Council basically the contract awards or whatever for decision, If the Council leaves the funding in at this
level, there would be subsequent decisions that we would be making that the Council would have the opportunity to take a second look at.
Mr. Friend: If I could just add to that, we thought it didn’t make sense to try to detail these in extreme detail without getting the guidance from you about the Sustainability and Climate
Action Plan, it would be premature and putting the cart before the horse to budget a program before we had your approval and guidance on where to go. So we established some general categories,
some suggested activities that we think will come to the fore and now in the aftermath your decision two weeks ago we will be detailing these out over the course of the next couple of
months and over the recess in the summer.
Mr. Keene: And the thinking again here, I think, is that at least the target goal may be ambitious and the target goal that the Council adopted really isn’t going to be accomplished
with all of our existing Staff or existing resources, so to identify the fact that we needed to have a funding source that could be available to follow through on some aspects of that
implementation was the reason for this being in here.
Council Member Wolbach: Chair Filseth?
Chair Filseth: I’m thinking about that. Anybody want to comment (inaudible).
Council Member Holman: I have one comment and it’s going to sound like it’s off point, but from my perspective it isn’t. We, I’m looking at this $250,000 contingency account, we have
had situations where those in the Office of Sustainability, and maybe more in the Development and Services, but I think in both, and there are a lot of times a lot of interaction between
the two, that there are advisory groups that are established and there is no knowledge by Council members or community, like how members of those advisory groups are selected, who they
are, what their expertise is. There doesn’t seem to be an open process about how to apply, so I will feel better about this if it’s a much more open process for how these advisory groups
are established, so I’d feel a whole lot better if that was incorporated into our processes for sustainability.
Mr. Keene: So Council Member Holman, I appreciate that, I understand that. I do think we need to differentiate between clearly a process that the Council, I think, has to use as the
elected representatives of the City and the fact that you exist, not has individuals, but as a collective body, and as a collective body, essentially all of your meetings are really
public meetings and Brown Act meetings. City Staff is in that same situation when we’re with Council or even at other times, serving Council-directed things, but by far the majority
of work that takes place in the City is done by Staff people one or two at a time, meeting together and talking, having conversations with experts or people in the community, and even
the establishment, I mean, I’m going to be sure that the Staff is actually engaged with the public and listening to say technical experts or others outside, rather than just one, relying
on talking to themselves, or two, talking to just paid consultants who, to be honest with you, sometimes may just say what you want to hear, so I do think there is a different sort of
threshold for the Staff engaging in relationships with people in the community that I don’t think needs to rise to the same process approach that the Council uses. There is nothing,
most of the time we are more than happy to identify who the people are. But I do think the Staff needs to be able to have some independence on identifying individuals who could be helpful
in advising them.
Council Member Holman: While I don’t disagree with what you’re saying, I think I will differ with you when you take it the next step. That next step is the Council sees in front of it
policy recommendations that come with the rubber stamp of these advisory groups. I absolutely agree with everything you said up to this point, but then there is this rubber stamp that
comes with these advisory groups that we have no knowledge of, there is no inclusion of who they are, what they represent, and we are certainly not going to go to the extent that we
are going to interview people for these, you know, you should have the authority to do that. I’m just using you as an example in this point of time, don’t feel picked on, but I think
there is a higher level. It’s like, maybe there are people out there that, again using you as an example, you don’t even know, but if it’s a broader net that’s cast and a public awareness
of, hey, I could apply to do this, there is a threshold that I think we are below and definitely below. I think it causes questions in the community. Council members ask, who is this
group, who is on it, and how it relates to this is because I’m trying to feel good about this $250,000 contingency.
Chair Filseth: (inaudible) Greg points out that the contingency account is actually not in this item. It is Item Seven later this evening too, so how we want to…
(crosstalk)
Mr. Keene: While it’s not in here, it’s applied, so it’s just a different bucket in the budget, but this would be the time, in our view, to be talking about this, at least as it relates
to sustainability. When you get to the end, even in wrap-up and you start looking at all the non-departmental, you know what I mean, you could certainly take another look at that, however
you decide now.
Chair Filseth: And we have Gil here right now.
Mr. Keene: Can I say something to Council Member Holman’s comment? I completely agree with you the idea if the Council feels that a technical advisory group to the Staff is giving its
seal of approval, or whatever the term was used, to be honest with you I don’t think the Council should feel swayed or intimidated or anything by that. As a matter of fact, if that’s
an issue I’m going to make a point of the Staff not speaking in those terms. Staff needs to be making its recommendations based upon what its conclusion and it expertise are. I do think,
though, often the Council wants to say, well maybe talk to the public about this. You know what I mean, and we need to be able to say, yes, we have. You know, whether it’s on an issue
like this, but if we’re going to problem solve on whatever it is, pick a community problem, we say, well, we’re going to redesign a street or something here in a neighborhood as engineers.
You would typically say, well did you go out and talk to the people about what they thought about it. You would want to know that we did that and we would say that. But I don’t think
we want to…I can assure you I don’t use what an advisory group to the Staff does as the rationale for saying we ought to go forward with something. So it’s probably more going forward
part of the conversation, but I do want to make sure we are clear on that because I don’t want the Council to feel they’re pressured at all in that regard.
Council Member Schmid: Do you have follow up? Yeah, just to make the simple point that where technical committees are one thing, but broad citizen-based, such as the Citizens Advisory
Committee (CAC) and the S/CAP are things that have wide public repercussions, and that raises them to different situations, so just to reiterate the point that they are important.
Mr. Keene: So just so we’re clear, I think we were very clear on the CAC process as it relates to the Citizens Advisory Committee with the Comp Plan, right, so if you’re making a point
about, okay, maybe we have a process about how we discuss the use of advisory committees at the Staff level, right.
Council Member Holman: I don’t know when we’re going to have that discussion, but I think we should have it.
Mr. Keene: yeah, well, that’s obviously a concern.
Council Member Holman: Yeah, thanks.
Council Member Wolbach: So, two things. First, I hate to weigh in on this because I don’t think it’s entirely relevant to this conversation, but I do think it is important that we do
recognize both Council and Staff for different purposes, different processes are appropriate and there are times when, I cannot imagine that, I don’t think that anyone appears to recommend
it, but I can’t imagine a condition in which every time a member of Staff calls somebody in the community to say, hey, what do you think about this, that we need to be briefed on that
or give it our approval beforehand, or that they would need to do some public outreach effort in order to determine if they could reach out to somebody and make sure that everybody in
the community new that they were going to be doing outreach. There are times when that is appropriate, and the CAC for the Comp Plan is an example of taking that kind of to the extreme
which carries its own down sides, as we have certainly seen. So I just want to make sure that we…So if that conversation moves forward, whether it’s through a Colleagues Memo or Policy
and Services Committee, or whatever, we do keep in mind that there are pros and cons to the higher levels of Council involvement in Staff work. That said, I would like to move tentative
approval of the Office of Sustainability Budget.
Council Member Schmid: We are not voting on the contingency account, is that right? That comes under the non-departmental.
Mr. Keene: We’re presenting for a tentative decision now, both of those things, because the contingency account is integral to the work of the Office of Sustainability and now would
be the time to do that. So you either decide you want to do it or you don’t want to do it. As I said, I think we’ll be reviewing all the non-departmental in the contingency accounts
again also at the end of the process itself.
Council Member Schmid: We’re reviewing it on Item Seven tonight, but the point is, we’re reviewing them together.
Mr. Keene: Okay, you guys make the Motion however you want to do it.
Council Member Wolbach: It was my intention to include both components.
Chair Filseth: I’m having some trouble with the Contingency Fund at this point, and a couple of things. It still seems rather vague and the other thing that I don’t completely understand
is, how much overlap between this initiative and other ones. So, you know, there’s $110,000 for consulting for some of this kind of stuff, and then EV charging, I mean, how many hundreds
of thousands for EV charging? It’s more than EV charging I would assume, right? You know this is, I mean where in the City, there’s other people in the City looking at EV charging, so
how does it all work together and how does this fit with other stuff. I don’t have a clear picture. So I wonder, I’m sort of grappling with that.
Mr. Friend: How it’s worked this last year is that the effort has been led by my office in close collaboration with Public Works, Utilities and Development Services. We have, as you
remember, in the challenge funding that we had last year, we went out and raised money, actually the total that I have for EV charging is about $370,000 that we raised for the City to
fund EV charges. Those are being determined in collaboration with Public Works and Utilities and actually managed by Public Works. So what we’ve tried to do very clearly is to leverage
the small investment you’ve made in the Office of Sustainability to produce multiples of net value for the City, and then we’ve never conceived of the Office of Sustainability as an
operating department. We need to work with the operating departments who manage and maintain this equipment. So we’ve done that. We’ve also raised another $50,000 for EV outreach and
education to build awareness in the community and particularly to advance the deployment of fast chargers, again, in close collaboration with those other departments. But the Office
of Sustainability has typically taken the role of initiator and spark plug, because the department staffs are full up with their day-to-day work and they have plenty to do already. All
of us in every department in the City are pretty short staffed, so that’s the strategic leverage you’ve invested, as I understand it, for the Office of Sustainability. I hope that helps
clarify.
Chair Filseth: Yeah, and I think that’s the working model that makes sense, right, I think that’s logical.
Mr. Friend: I’m sorry, I can’t hear you.
Chair Filseth: I think that working model is logical.
Mr. Keene: Let me just say one other thing. I mean, the alternative is, we could say, well, let’s not appropriate any money, let’s just come to the Council for potential contract awards
during the course of the year, which then leaves us with the challenge of saying, okay, well how do I identify and find the money that we could say we could appropriate for that. So
in a sense, we’re putting this as a reserve to have this available, even though you get to make the actual decision to spend this down the road. If we don’t do it this way, it’s quite
likely I would come to you and say, gosh, we have a burning need for something, but I’m sorry we don’t have the money right now.
Chair Filseth: You know, there’s a third option, which is we could put it in the parking lot for the moment, and then revisit it when we get back to the end of this process and say,
okay, where have we come out in general, and so forth.
Council Member Schmid: Yeah, I guess my feeling on Item Seven, there is $4.7 million, which are as budget amendments and it might be appropriate to ask the question at that time that
$4.7 million is a lot. There are priorities, so in a way you’re saying let’s start pulling these out individually.
(inaudible, microphone problems)
Mr. Keene: Why don’t you just, we’re 45 minutes behind schedule, why don’t we just do the Motion just on the Office of Sustainability budget, leave the non-departmental piece to the
non-departmental discussion here at the end of the meeting, the $250,000.
Council Member Schmid: Okay, I will move that.
MOTION: Council Member Schmid moved, seconded by Chair Filseth to tentatively approve the Office of Sustainability Operating Budget.
Chair Filseth: I’ll second it. All in favor? Did you say nay? Okay, so we have three in favor, one opposed.
MOTION PASSED: 3-1 Wolbach no
Mr. Keene: Do you think that this discussion will be primarily a fiscal one. I’m trying to decide whether or not Mr. Friend, who lives in Oakland or Berkeley, needs to hang around to
the end to defend?
Chair Filseth: I think it will be fiscal, not programmatic.
(inaudible)
Chair Filseth: Thank you sir.
4. Human Resources Department, Operating Budget
General Liability Fund, Operating Budget
Employee Benefit Funds
General Benefits Fund, Operating Budget
Workers Compensation Fund, Operating Budget
Kiely Nose, Budget Manager: Okay, so we’ll move on to the Human Resources Department and Rumi is going to come join us. Just for reference, it’s pages 253 through 273, as well as 475
through 478.
Rumi Portillo, Human Resources Director: Rumi-Portillo, Human Resources Director and Sandra Blanch, Assistant Human Resources (HR) Director is with me. Human Resources has actually four
buckets of funds that are presented before you. The General Fund really represents the operating portion of the department. We have a total of 16 FTE’s right now. We’re running quite
a few vacancies and we are working pretty hard to try to have those vacancies filled. We will have, we are anticipating salary savings for this year, but hope to be fully staffed, because
we would be helping the other departments to fully staff. We, from that, the Operating Budget is where we’re supporting recruitment, employee relations where we do our negotiations.
We are also providing the training City wide and handling services to the work force. The other funds that we have encompassed under Human Resources would be the General Liability Fund,
which supports the insurances and that is City wide. We have a Worker’s Compensation Fund, and that is the area where there is a change recommended for this year. We also have the General
Benefits Fund, which does have a slight change as well. As far as where we are on our Operating Fund, we have a recommendation for a slight change in our staffing and there is a decrease
in the dollar amount that was supporting some technology. We have made a structural change such that we would rely on our internal Information Technology (IT) Department to provide support.
You’ll note from a prior budget that we had approximately $200,000 that was placed into the HR budget and we completed a few significant improvements related to employee payroll and
the way that we transfer information back and forth to California Public Employees’ Retirement System (CalPERS), so the changes that you see, the significant dollar amount would represent
that change in the technology support. The primary recommendation for an add for the coming fiscal years related to the worker’s compensation support, one of the audits that was discussed
by the City Auditor is one that will be released in June, and the findings in that audit are that that program needs pretty significant oversight. We have had the oversight of that program
distributed throughout the department and it’s simply not sufficient. We anticipate that there is potential for future savings by having someone assisting our Return-to-Work Program,
that has stronger oversight and we think there would be many benefits to the future for strong oversight there. So I think that represents the majority of the changes that were discussed
that are represented in the Fiscal Year ’17 Budget and we’re available to answer any questions.
Chair Filseth: Greg, do you want to go?
Council Member Schmid: The worker’s comp issue where you’re adding one full-time employee is a response to an audit which you have seen but we haven’t. I guess this is the second time
the Finance Committee has been asked to vote funding on the basis of an audit they haven’t seen, but if there could be a summary or something of the findings, it would be helpful.
Ms. Portillo: The need for program oversight was really something that we had developed independently of that audit. Had that audit not occurred, this recommendation would be here. I
think the audit you are going to see goes into some detail and has a lot of tangible information and that helps to validate that.
Council Member Schmid: Yeah, it would.
Chair Filseth: (inaudible)
Harriet Richardson, City Auditor: Good evening. Harriet Richardson, City Auditor. So in support of Rumi’s comment, we have an audit. It is in draft format so none of the Council members
have seen it. It’s not just Finance Committee. It’s out for review right now. We’re planning to present it at the June Policy and Services Committee, but part of our audit process is
to routinely discuss the issues that we are identifying with the Audit to whichever department we are auditing at the time. We identify the issues. So pretty early in this audit we identified
some issues related to illness and injury prevention, that the program has not had good oversight. There is not good alignment with a City-wide program and department programs. There
is not a good oversight of return-to-work and in addition, when someone gets injured, that process has been decentralized among all the Senior HR analysts and so there hasn’t been solid
training of those people and it’s been a very fragmented process. So we see this as a very high-risk area where right now there hasn’t been a huge issue with it, but we see a huge potential
that if you don’t allocate appropriate resources down the road, you can see the losses accruing. So I would also like to add that as the Auditor, I don’t take it lightly to say, add
resources to a program. I normally say, allocate resources and today I was thinking back, I can’t think of a single time, actually, in my entire career where I’ve said, add a position.
This one very early on we said, you need to add a position to oversee this function. So, as the Auditor’s Office, we support that position.
Council Member Schmid: Yeah, that’s helpful. When you get the introduction, you could send it along to us, if it comes before the Wrap-Up.
Suzanne Mason, Assistant City Manager: Council Member Schmid, in my career I have done a lot of work in the worker’s compensation area and in improving service delivery in that area,
and usually when you make an investment in proactively managing the fund, the workers, insuring effective communication, getting people back to work, you see a dramatic reduction in
the amount of time people are off, in improving our ability to really manage those funds and we should see a direct savings and probably exponential saving in the long run. I think sometimes,
when we are in cost-cutting mode we cut positions that are critical and end up costing us money, and I think that’s what the auditor has seen, but I’ve had direct experience with that,
and I think, you know, as we measure this going forward, I think you’ll see savings in the long run.
Chair Filseth: It looks like we’re spending a couple million dollars a year on worker’s compensation (comp) claims. Is that right?
Council Member Schmid: Three.
Chair Filseth: Well there is a revenues line as well as, what page?
Council Member Schmid: Page 271.
Chair Filseth: Page 271, that’s what I’m looking at. Okay, three.
Council Member Schmid: Okay, one other question. This is the first budget department we’ve talked about with a fairly sizeable component of Staff and being the Human Resources, Staff
question. I am a little confused about voting Staff positions. There is appended to this table of organization, which has a number of Staff by each department, and as I understand it,
we are voting a budget based on those Staff numbers, but anywhere from Five to 10% of those positions are not filled at any time. Is that correct?
Ms. Nose: Are you talking about HR or City wide?
Council Member Schmid: Either General Fund or City wide. The Table of Organization at the back of the book on page 480 to 486 or 87 lists the staffing positions that show up in the departmental
budgets as well, and we are voting not just the position but a salary associated with that position, but over time, on average, between five and 10 of those positions are not filled.
Does that mean that there is a substantial amount of float, salary float in the budget?
Mr. Keene: So five to 10 out of all the positions?
Council Member Schmid: Percent.
Mr. Keene: Oh, five to 10 percent. Oh yeah, it can be but we actually budget a vacancy savings credit against the budget itself and reduce it based upon sort of exactly those projections
that we would see, so even though the table of organization (org) lists the position, the actual funding is not at 100 percent of every position that we have in the organization.
Council Member Schmid: Well, on Page 265 where we are voting tonight on the HR Staff, it includes a number of people and a salary number. What’s that salary benefit number?
Mr. Keene: Page 262, I think and 263. So the question again is?
Council Member Schmid: I assume when I read this that there is a staffing number of positions, 17.44 positions, and when you have a salary and benefit number associated with that, it’s
the salary and benefits for 17.44 positions?
Ms. Nose: However, in the General Fund we do, as Jim mentioned, budget a vacancy factor, so I’ll have to look at HR specifically to see if HR as a department itself has a vacancy factor,
but overall in the General Fund we assume $2.2 million of vacancy savings in this budget. So that shows up in the “other benefits” line and so it’s scattered into different departments,
based on kind of the historical vacancy that we feel, so like I said, if you want to know HR specifically if there is a rate in that department, I’ll have to look that up. But macro,
we do already assume a certain level within the budget.
Council Member Schmid: And where does that money go? How do I find that money?
Ms. Nose: It’s reducing that General Fund Budget. So instead of $198 million, if we didn’t have that vacancy savings, you would have a $200 million budget request right now.
Council Member Schmid: Okay, so the $198 reflects the vacancy assumption you’re making.
Mr. Keene: On salary and pension and associated costs.
Council Member Schmid: Okay, thank you. Yeah, that’s just a general question I had. Done.
Chair Filseth: I was just going to ask, and maybe it’s a question for the City Auditor, maybe the Assistant City Manager, just in general on worker’s comp and so forth, how do we do
against other cities on this. I mean, is there, you said there are indications that if we got more organized about this we could be quite a bit more efficient on it. How do we stack
up against other cities?
Ms. Richardson: I don’t have the chart in front of me because I wasn’t anticipating that question, but we did do that analysis. I can provide it to you. I know we faired fairly well
against other cities, but like I said, there is this huge risk, I think, pending that if we don’t do something now we are going to pay later.
Chair Filseth: So you think it’s more a risk of a downside problem as opposed to, you know, we’ll recoup the cost in some other way, or something like that?
Ms. Richardson: Well, I think that it’s kind of like what Suzanne said, right now you’re laying the risk out there with the lack of oversight and you’ll pay later if you don’t reduce
that risk now.
Chair Filseth: We’ve got a lot of stuff we’re going to pay later on. Okay. Alright, thank you very much.
Council Member Holman: Just one question. Rumi, you haven’t been here very long, how many months?
Ms. Portillo: Three months.
Council Member Holman: So it’s probably an unfair question. In the past I know, it’s probably really an unfair question. So in the past there has been some discussion about outsourcing
some of the functions that the City’s HR Department serves, that, if you compared to other cities, some of these tasks are outsourced. Have you had any chance at all to look at any of
that yet? Are you going forward on this until you have a chance to confirm or to recommend changes?
Ms. Portillo: Yeah, I would need a little more time to have an evaluation. We really looking, as soon as I have positions filled, the next order would be to really look at some strategic
planning and through that process we would be looking at what we are doing in-house versus contracted out. What I do see is that we are requiring external support on classification studies.
Our labor negotiations have some external support. There are a few other places where we are in essence not handling it in house and when I do a comparison, for example, on my prior
agency that the City of Sunnyvale has a smaller work force, but they are currently running 3.5 positions more than we are here and they have actually downsized since I left. But there
are always opportunities to look at how the services are being provided and there are different ways of delivering it. I really don’t have a sense for immediately, you know, what makes
sense for externally provided services versus internal.
Council Member Holman: That’s reasonable and understandable, but I wanted to put the question out there anyways so you would know that we are looking at that too, or we’re looking for
your response going forward.
Ms. Portillo: Certainly, thank you.
Chair Filseth: Further questions and comments on the HR chart? In that case, I’m going to move that we tentatively accept the HR Operating Budget, including the Employee Benefit Fund
and the General Liability Fund.
Council Member Holman: Second.
MOTION: Chair Filseth moved, seconded by Council Member Holman to tentatively approve the Human Resources Department Operating Budget, including the General Liability Fund and Employee
Benefits Fund.
Chair Filseth: Comments?
Council Member Schmid: Okay, let’s see, I didn’t realize we were also approving the Employee Benefit Fund on Page 475. That is a big approval, $55 million. I guess I have a special concern
on the General Benefit Fund. We’ve gotten our CalPERS update and they have updated their returns to us through June of 2014 and gave us a projection over the next few years based upon
that. I will note the two years general returns before June 2014 were on the order of seven, eight, nine, 10 percent, which were very appropriate. But since that time, the general stock
market has gone up about two percent, 2.5 percent, which means that they are going to have two years of low returns to us, which is likely to push up our unfunded liability sharply,
so what is our General Benefits Fund? How are we going to deal with that?
Ms. Nose: Is there a specific page that you can point us to in terms of the assumptions? I’m not quite sure, I think you’re talking about the return on our pension, which runs through
our Retiree Health Care Fund? Is that what you’re talking about or are you talking about the General Benefits Fund itself?
Council Member Schmid: You do mention on Page 475 that CalPERS is assuming an average rate of return of 7.5 percent and that is carried through to June of 2014 and in the year and three-quarters
since that time the share market has gone up about 2.5 percent and I am concerned that this is going to have a dramatic impact on our unfunded liability.
Ms. Nose: I think this actually speaks greatly to another discussion that we have been having, which is the idea of that Pension 115 Trust Fund, because what we are budgeting in here
is the rates and assumptions per CalPERS and to your point, to the extent that we don’t realize those, we could be impacted, and so if we are able to proactively establish something
like that 115 Trust Fund, we will have something to help us mitigate that when that impact eventually hits us.
Council Member Schmid: Okay, so us on the Finance Committee should be aware of the fact that we need to vote supplemental funds to cover our General Benefits Fund, so just a footnote.
Ms. Mason: And Council Member Schmid, based on our discussion, I think it was at the last Finance Committee meeting when John Bartel was present and we looked at those projections, we
were planning on coming back to you with a separate item directly to Council based on your direction that night. So we will be coming back to you.
Council Member Schmid: And I think the number we were talking about was like $1 million and we’re talking about our $450 million liability jumping, so just to put it in context.
Chair Filseth: Yeah, I think all of us are expecting to see that $450 million change on the next generation from Mr. Bartel. Motion is to tentatively approve the Human Resources Department
Operating Budget, including the General Liability Fund Operating Budget and the Employee Benefit Funds. So, did you second? And the worker’s comp. All in favor?
MOTION PASSED: 4-0
Chair Filseth: Motion passed unanimously. Thank you very much.
5. Information Technology
Operating Budget
Capital Budget
James Keene, City Manager: Administrative Services Department (ASD)?
Kiely Nose, Budget Manager: Nope, we’re actually going to move to Information Technology first. Jonathan is going to come and joint us.
Chair Filseth: All the engineers up here are happy to see this guy.
(inaudible)
Mr. Keene:: Quick report on Office 365, Jonathan.
Jonathan Reichental, Director of Information Technology: Jonathan Riechental, Chief Information Office. Yeah, I’m dressed a little differently today, as my entire team is, we deployed
Microsoft Office 365 to the City today, representing a high volume of new capability, productivity software. We have instant messaging now and video conferencing at the desktop. We have
on-line storage. It’s all cloud based and we’re very pleased with the rollout today. The vast majority of stuff was seamless and we are working through a few bumps and everything going
well. The project should be in place by tomorrow evening. (inaudible) So our thanks for this opportunity. I want to also thank my IT managers who are in the Council chambers this evening
who have joined us to support me in this presentation. We also have Sherrie Wong, who is our Budget Coordinator who has driven a lot of this work for the IT Department. So let’s jump
into this. It’s great to be up here talking about what we have been accomplishing and then talk about the future. It’s all in support of our mission, which is to provide innovative technology
solutions to support the City departments, so they in turn can deliver quality services to our community, but focused on innovation and quality. We have a very big vision to support
the City Council and the City Manager and the departments in building and enabling a smart and digital City. Real quick, we’re made up of, we’re a small department of 32 people. We have
five divisions that align around how we deliver our services to the City and we build stuff. We build projects like today we built the Office 365 project. We run the projects. We run
our enterprise systems, which is everything like payroll and procurement and we insure that it’s secured as appropriate through our information security services, processes and Rash
Patel our security manager is here tonight. So we will move quickly along. We had a very good year and continue to have a good year in FY’16. Here is just a small subset of what we’ve
been doing these last few months. During the year we continued to be recognized now, the third year in a row as a top digital city in America. I don’t get too concerned that we’re fourth
this year. We were first two years ago. It just means other cities are raising the bar too, which we like. Recently we received an Outstanding Achievement Award from the Alliance for
Innovation on the work we’ve done to build effectively a start-up at City Hall here on the second floor with the Civic Technology Center. In terms of delivering value to the community
and City departments, we lead a lot of back office things, but we also support the neat things we’re doing in our community. For example, the important work that Planning is doing to
upgrade our traffic signal system across the City. IT plays an important role in that. In making our City safer and City Staff safer through our E911 work, more tools to the City Staff
so we can have the best tools to deliver the best service and making our City more resilient through, for the first time, having very good backup systems across both our laptop computers,
desktops and our Service Center. In total actually we have completed and delivered 21 technology projects in FY’16, which if you looked at the five or six up here, it wouldn’t be reflective
of the volume of work that my team working with other departments has been able to deliver. So as we look out to the year ahead, it’s important to note while tonight we are going to
be asking for funding on a small set of additional projects, we have quite the dance card with 27 existing in-progress projects. IT is working on 27 projects right now and in case we
get bored or need extra, there are 11 more in queue. Just some highlights of those 27 in progress, include upgrading this very chamber we’re in so that our audiovisual equipment is digital
rather than some of the very dated analog equipment that’s back over there, and create good-quality transmissions and also reduce the risk that we have with the existing equipment. We
are beginning to, in earnest, work across the City in the first stages of a smart city strategy, working closely with Council members and the City Manager in each department on that
work. We, as you know, you have been pretty close to our planning for the future of SAP in the City, and that’s a big project for us. IT is taking the lead, as you know, in working with
many departments on bringing high-speed internet to every house in Palo Alto, and we’ll see how we can make that happen in a variety of different collaborations we’re exploring. And
finally, just worth noting is our Geographic Information System (GIS), which is fundamental to a lot of the work that the City does, as you know. Our system is very dated, going back
almost a couple of decades, and it’s appropriate that we look out to determining the right GIS system for our City. So that takes us to the asks for this evening. These are in addition
to the existing 27 projects and 11 in the queue. One of the areas that you probably have noticed that my team is focused on in our IT strategy for the City is to make us more resilient,
and to be able to bounce back in any eventuality, should the City suffer some problem, catastrophe otherwise. So we have already invested heavily. The City is more secure today, but
we continue to have some gaps to fill, and one of them is to have a small data center presence that isn’t at City Hall in the event that City Hall is not available to the City, and that’s
our data center (inaudible). In the spirit of security, it’s not enough just to put in place the software and hardware to be secure, but you have to test it. You have to make sure that
what you are putting in place will actually protect the City when you need it, and so prudent organizations and public agencies spend a bit of money on testing of that security usually
on a biannual more frequent basis, and we’d like to do that too. Finally, whilst we use a series of tools at the City to manage projects, it’s time for us to look at a formal project
management tool that IT can roll out for our use and then explore expanding for use across the City, and we think we are at a maturity point right now, particularly in IT where this
is a very valuable tool to manage those 27 projects and the projects ahead of us. Finally, in the staffing area, IT is not today requesting, and I haven’t requested since I joined the
City, any head count. We are requesting some adjustments and I just want to speak in particular to the first one, because it will show up as a new head count, when in fact, that’s as
a result of us fixing what is an administrative problem we have with a current alignment with a particular staff, so it’s changing it from what is currently an hourly to what it should
be which is a full-time Desktop Technician, because that’s the work that person has been doing for a while. So this is basically fixing something that should have been fixed a while
ago. Then the second ask is also an adjustment to an existing role. The work that IT is doing in organizations and it’s reflected here at the City, is getting more sophisticated than
what it used to be 10, 15, 20 years ago, when a lot of IT work was very routine. It’s more complex today, as you all know, so we have miscategorized, based on the work and needs of the
City today, we have a role that we think needs to be doing more sophisticated work for the needs of the City, and this adjustment would alignment it appropriately with the needs of the
City, particularly as we move more to Cloud software and a much more mobile computing environment. With that, I believe my presentation is complete. Thank you.
Council Member Schmid: Thank you. Your presentation covered the ask and provided context and justification for it. Let me just ask a question from our Performance Report, which the City
Auditor does for each department. They have a long-term database on IT expenditures per work station and shows that last year increased 10 percent. I think you have a number here which
shows an increase another 15, 20 percent. Is that a good measure and what do you think it means?
Mr. Reichental: It’s the right way to measure. Actually IT is the cost-per-employee. I mean, there are many ways to do it and there’s lots of debate across industries, but this is one
of the most useful ways to demonstrate the total load of technology for an individual and I think we’ve been refining that number and improving it year over year. I think we can continue
to do that. I think the modest increases reflect a couple of things. The increased desire by the City to use more sophisticated tools, the additional demands of Council on Staff members
to deliver things needing new tools, so our portfolio of technology since I got here has grown considerably as a result of the needs, so I think it’s a good number. I think there is
an enormous amount of value that each individual gets in terms of having a laptop and a smart phone and a tablet often with a wide-range of technology capabilities, yeah.
Council Member Schmid: Yeah, it’s a good fiscal measure, but it doesn’t get the productivity that comes with having a richer set of options available. I guess one good thing that we
are certainly interested in is how productive and efficient workers are, and this is a measure that says we are investing in that productivity. The other one that is there and it is
in the general report as well, is service desk request resolved. Now I was surprised that half of them take more than a day and some over five days. That seems like a high rate of, you
know, I have a problem and oh, we’ll get to you next week.
Mr. Reichental: That’s not what’s happening. The questions we’re getting are much more complicated and they sometimes represent, you know, significant reporting needs, for example, with
our GO Spatial Information System or a complex report that has to be developed and run from SAP, so we have a very diverse set of, because we have over 300 systems in the City, we get
a very large, diverse set of requests on any given day. In terms of, you know, one of the ways to think of our responsiveness, I can’t think of the thing you are looking at right now,
but I can say that in terms of issues that are ones we can resolve without having to, for example, escalate to a vendor, and to go through multiple levels of triage, we, when I started
I think the timing was in the ballpark of about six days and now it is 1.5 days, so there’s been a significant reduction in our ability to execute on fairly low complex frequent requests,
so what you’re seeing is an increase on a, I think we’ve seen is a reflection of just the shear running of a complex amounts. I think there is another sort of twist to this, which is
we as a City will need to continue to focus on training our Staff so that they are empowered and knowledgeable on how to use many of the solutions. It’s one of the focus areas for our
rollout of Office 365 today, to make sure there is a suite of tools so people can get help, because if you’re less knowledgeable about a tool you’re more likely to make a call for support.
Council Member Schmid: Yeah, and again the critical issue is the productivity of the worker because you don’t want to give them a set of tools which make them sit there every so often
and say, well, I can’t do this. Last question, is there a measure that you would like to see us and others use for your department? I know when you come to us you’re filled with ideas
and initiatives you’re taking. How can we measure and appreciate the innovations you’re bringing? What kind of measure can you, would you suggest?
Mr. Reichental: I thank you for the opportunity. I think it’s a great, I’d like to be able to go back to my team and really think about that deeply. We do a lot of internal metrics management
and we haven’t been graded during the external metrics production, so I do think as a team as my department we can do better in that area. Then, the question is a lot of what we do provides
a service or capability to a department that then delivers a service, so you kind of have this interdependency a little bit. So it would require, and we can work with our colleagues
to think about how we can connect the technology with the ultimate outcome. It’s hard.
Council Member Schmid: Great, thank you.
Chair Filseth: I noticed that your guy’s expenses took a huge jump last year and then are down slightly coming into this year. When does the SAP replacement, is any of that budgeted
in 2017, or is that sort of further in the out years? In the capital expense, yeah.
Mr. Reichental: It’s not. We will be starting, this year is all about product selection and that’s already been budgeted for.
Chair Filseth: Okay. I was curious because I remember you said last year, I noticed you guys were spending like $5 million a year in contract services and I remember you said last year
that a substantial amount of work was going to sort of stuff for the SAP system and that with a new system that would go down. Is that still the case? Is a sizeable chunk of that basically
writing patch code around stuff that SAP doesn’t do? Applications on top of that that should be a lot less once that’s done?
Mr. Reichental: I don’t like to categorize necessarily our new Enterprise Resource Planning (ERP) System just in terms of reducing costs. In some ways, there are demands from the City
that we want more capability, which could increase costs, and that’s a good thing because if we can, the automation itself costs money. You know, part of the work we’re doing right now,
the planning and looking at the marketplace will inform us better to answer that question. What could we anticipate potentially and how we might staff our future needs versus today’s
needs. One thing that could lend to that conclusion would be if, for example, we decided to keep one part of our SAP system and upgrading it versus replacing it with a new system, that
would have one set of implications. You know, we do have this desire to be a Cloud first, mobile first City, which moves costs to upgrading expenses versus capital and that sold be a
positive thing in terms of, first of all, how cash is allocated, but also in terms of the ability for us to get the benefits of a shared system, rather than the work we would have to
do on our own system. It’s (inaudible) multi-tendency, which you might know because of your background, but it really means that if one organization has been successful in getting a
vendor to provide a service, all organizations get the benefit of that. So that’s one of the benefits of the Cloud that we would hope to get. If there’s an industry benefit around how
you do payroll differently, we would hope to get that benefit too, through Cloud. I think maybe what I was talking to in terms of your question around cost changes is, one of the challenges
we have with SAP today is when we do want a customization, it’s a very specialized skill. We can’t do it very often because we have to get the outside skills to do it. SAP and diversion
of SAP has its own challenges, which just effectively, we want to do something simple on our utilities billing system and it turns out just to be really cost restrictive, and the hope
is that with a contemporary modern system, making the kinds of changes we want to make will be lower costs. I think we can hold to that principle, particularly just having a new system.
The current one we have, as you know, is already 10 years, the utilities piece is about eight years old and the whole system itself is, depending upon different versions, about 15 years
old. Kind of a mixed answer of different things.
Chair Filseth: Yeah, I know what you’re saying. It’s basically, don’t expect big reductions in operating costs going forward just associated with a system upgrade.
Mr. Reichental: I’d certainly like to be formed in my answer, give you a better answer when I have more information.
Chair Filseth: Thanks very much.
Mr. Reichental: I just did want to clarify something. You know, because it does jump out in the budget because this is on record. IT costs didn’t actually change significantly over time,
we just moved a lot of Capital Improvement Program (CIP) stuff into operating, so that looks like it is a jump, but actually our costs didn’t change that much, and I think it gets lost
a bit in the paperwork, but I think you know that.
Council Member Holman: More a comment than a question, and it’s not budget related particularly. It’s just because you’re not in front of us very often, so because I spent so much time
in City Hall last year and would occasionally have issues or something that needed to be resolved with my computer, but there is an interface issue between Macintosh (MAC) and our system
sometimes, which I hope is getting better. I think you actually mentioned that a little bit earlier, but what I really wanted to say was, to a person, every person on your staff that
I have worked with, which has been several last year, everyone was helpful, worked really great with the Clerk’s Office, you know, didn’t presume an attitude or anything of that nature.
Just really a delight to work with all of them, and when I bump into them anywhere in City Hall, everybody is like so wonderful and friendly and helpful and I think it’s the tone that
you set and having been in your department a couple of times, it seems to be a really, a good model and a good tone that you set, so thank you for that.
Mr. Reichental: Well thank you so much and that will mean the world to my team, so thank you.
Council Member Holman: Thank you.
Council Member Schmid: I’ll move for the budget tentatively.
Council Member Wolbach: Second.
MOTION: Council Member Schmid moved, seconded by Council Member Wolbach to tentatively approve the Information Technology Operating Budget and Capital Budget.
MOTION PASSED: 4-0
6. ASD Department, Operating Budget
Mail & Print Fund, Operating Budget
James Keene, City Manager: So is now ASD? Again, of course, I think as you know, the fearless leader of the department is home ill this evening. We wish him well.
David Ramberg, Assistant Director of Administrative Services: David Ramberg, Assistant Director of Administrative Services, and Joe Saccio, also Assistant Director and we are going to
do this very briefly. So the first slide, similar to the prior departments, in short, the Administrative Services Department provides, our mission is to provide proactive financial and
analytical support to City departments, and our purpose really is to provide sound financial management and efficient analytical, organizational and administrative support to the organization.
We do that across multiple divisions in our organizational structure. We have the administration division, which is the Chief Financial Officer’s Office, the Accounting division, which
provides a lot of financial reporting, the Purchasing and Contracts division, the Budget division which is here before you tonight, and property management and acquisition, treasury,
and then we also have our little piece of the SAP system, which we call the SAP Functional Team. They are part of ASD as well. So, moving on to accomplishments, I think there are a couple
of main themes here across efficiency and sound fiscal management. In that regard, we implemented a new E-Procurement System in 2016. We also addressed the Transiency Occupancy Tax context
of the short-term rentals issue. We implemented some new pension reporting, which was a requirement. You guys heard about Government Accounting Standards Board (GASB) 68. We, through
this, maintained a sound financial credit rating of AAA, which we’re proud of and not listed here, but we also, with the efficiency theme, we implemented E-Signature, I should say we
rolled out additional E-Signature and paperless office functionality. For Fiscal Year ’17, more of the same themes. We are excited to be implementing an integrated on-line Parking Permit
Program and we can elaborate on that more if you have questions around that. We want to, around sound fiscal management, bring forward to the Finance Committee and to the Council, continued
discussion of how we address our long-term liabilities, around pensions and retiree medical, and we have increased training that we want to offer to the organization to help improve
the efficiency of how the organization interacts with our department. We find that being the primary administrative department of the City, pretty much every other department comes to
us for some sort of transaction, some sort of internal transaction, whether that’s a contract or a payment, or payroll, and those types of questions, and a lot of those transactions
involve other City employees knowing well how to interact with us. We have turnover in the City. We also have new folks in new roles in the City and we want to make sure that everyone
has the same knowledge about how to submit information to us, and we think through a training program that we are offering, and one of our requests is related to that, we will improve
that efficiency of those transactions. We also look to build out some enhancements to the Open Budget and Open Government (Gov) websites where we want to provide some additional fiscal
performance metrics on a dashboard, so we’re excited about that as well. Those are some of the primary initiatives we are looking for in 2017. So along those lines we have two, these
are our primary budget requests. Most of the department isn’t changing, other than the themes you’ve seen throughout the rest of the departments. We have $54,000 requested in the Purchasing
division. That’s for about a half of a temporary employee. We are finding that departments, we’ve brought down our purchasing transaction turnaround times, and you’ll see that in our
performance metrics, and we are proud about that, but we also want to continue making sure that we’re meeting the project volume demand that departments have. Departments, pretty much
anything that a department is doing, a lot of things that departments are doing in the areas of projects require contracts, and we want to make sure that we’re able to process those
contracts and make them effective as quickly as possible, so the departments can meet their objectives. Then on the administration side, we have $75,000 requested to implement this training
program that I just talked about, that will hopefully improve efficiency for departments interacting with us. Those are the primary components of the Administrative Services Department.
Thank you.
Council Member Holman: Thank you for the presentation and I do have a question, and it’s actually the last item that you put up here. So, it’s rather akin to something that came up a
couple of years ago in the Budget. This is an implement systems training, so to me it seems like it’s not an FTE, even half-time FTE position, it’s a consultant. So can you tell me why
this would need to be a half-time FTE as opposed to a consultant, because it seems like a temporary situation?
Mr. Ramberg: We do see this as a temporary situation. This wouldn’t necessarily be ongoing for the future years. We have a former City employee who we have hired on in the Administrative
Services Department whose is not a contractor. They are a temporary employee. They are helping us roll out a specialized training tool. Right now this is something that we’ve absorbed
into the existing Fiscal Year 2016 Budget, but we want to carry that forward into Fiscal Year 2017 and finalize that project, so that’s what we’re looking for here, and we wouldn’t see
this as a continuing request. I’m pretty sure this is a one-time request, but I looked at Kiely, maybe, to confirm that, but it should be a one-time request.
Council Member Holman: So former employees or previous employees can only work for a certain number of hours for the City though, so they have already been working for the City for some
period of time, so I guess that’s…
Suzanne Mason, Assistant City Manager: Let me clarify a little bit. When we hire an hourly or temporary employee, often that can be less expensive than a contractor, their hourly. This
employee did not retire from the City. They are definitely limited in the number of hours they can work, and this is seen as a temporary situation, so this is a temporary employee. This
is not an ongoing regular employee with benefits.
Council Member Holman: And so the job to be accomplished can be accomplished within this former employee’s and maybe a future employee’s hours that they can participate with the City
of Palo Alto?
Ms. Mason: Right. It’s, I think she’s working less than half time or half time?
Mr. Ramberg: Yeah, she’s working less than half time.
Mr. Keene: Honestly, we would not be making proposals to do things that are in violation of the law.
Council Member Holman: No, but it’s a matter of practicality, it’s like, it’s situational, right? That’s what I had at the moment.
Council Member Schmid: A quick question. Among the various activities you do are be responsible for the fund of the parking districts. Can you tell me, the University Avenue parking
permits funds.
Joe Saccio, Assistant Director of Administrative Services: So you’re addressing the first bullet on Page 54? So currently there are soft of two systems. We have the Residential Preferential
Parking (RPP) System, which is on line registration, and then we have the garage permits, which are done manually. So our plan was to watch how the RPP went in dealing with the vendor
and the on line, and our goal from a while ago, was, if that was successful to move these manual, the manual system over to, you know, on line, so that’s one of our initiatives this
coming year.
Council Member Schmid: Now the City is collecting the funds and has the funds, but they are not responsible for either setting the fees or using the funds. Is that correct?
Mr. Saccio: Well the City, as background we segment the funds for RPP and the ones for the garages as well, so we are segmenting them. That’s not your question, but we do I think.
Council Member Schmid: Yeah, I’m looking at the University Avenue parking.
Mr. Saccio: Right, so the University Avenue parking funds right now come from the garages and they are used for maintenance activities for the garages.
Council Member Schmid: But is it the City or the parking district?
Mr. Saccio: It is the parking permit fees that are taken in for anybody who parks in those garages.
Council Member Schmid: Who has…
Mr. Saccio: Who makes the decisions about the Budget and the spending? It’s part of the proposed budget that there is a separate page that comes to you on how those parking permit funds
will be used.
Council Member Schmid: So the City is responsible for setting the fees and the utilization of those fees.
Mr. Saccio: Exactly. We do have a Downtown Parking Committee that provides input, but ultimately it’s the City Manager’s proposed budget that moves forward to you.
Mr. Keene: You may hear from members of that committee from time to time, who take a contrary view of the City’s recommendations. That being said, our position is that their perspectives
are opinions, they are not decisions.
Mr. Saccio: If you would like to hear me opine on that, I can, but I won’t. I think, you know, I was a little bit more tactful, maybe, than Jim on that score.
Council Member Schmid: Okay, so the Council has some responsibility for the gathering of the funds and the utilization of the funds?
Mr. Saccio: Absolutely.
Council Member Schmid: Okay, thank you.
Chair Filseth: I just have a couple of questions. You said the garage permit system is manual, but the RPP system is automated?
Mr. Saccio: Yes, the garage was before the RPP Program and so we’ve been doing them manually and, like I said, you know, as long as this program is successful on line and it has been,
we intend to move that, move our group over to that.
Chair Filseth: I guess that was kind of what I was going to ask, which is, how’s the automated system going and sort of a corollary to that is, there is a very real possibility that
more neighborhoods, you know, may come on line for RPP’s, you know, in the not too distant future. Is the current system scalable as is?
Mr. Saccio: Yeah, this is where we get administrative and, you know, the planning group, Planning Department sort of runs this. When we talked with them it seems scalable for the garages.
As we ramp up with new RPP I can’t answer that question. We would have to have somebody who is really familiar with that system, who would be Sue Ellen, who I believe you know, to answer
the question. As far as I know so far, I haven’t heard that it’s not scalable.
Ms. Nose: (crosstalk) sampling, we actually will be coming forward with the parking funds for discussion as part of the May 10 hearing, so we can get into further details then, both
as for the infrastructure programmed in the Capital Plan, as well as these kind of administrative implementation questions.
Chair Filseth: Okay. Let me ask a more sort of mundane, lower tech kind of question. You said earlier that if you shorten the purchasing cycle you can actually do it with less effort.
Did I hear that right? So if you shorten the purchasing cycle it’s sort of more people can do more, or the same number of people can do more? Is that your experience?
Mr. Ramberg: That’s one result, but what we’re finding is, especially in recent years, and we haven’t added Staff in the purchasing area. There is really a tsunami of work coming from
departments. There is so much in the past few years that kind of was bottled up for a while of priorities that needed to get out of the gate, and those priorities started to get funding
in recent years, and we were still under a tremendous amount of work load from departments, which is a great thing. The IT Department just talked about all their projects in flight.
All of those projects require at least one contract, oftentimes multiple contracts to get finished, and then the Planning Department has a tremendous amount of contracts. Every department
has their number of contracts and so we are able to process those contracts quicker, which is great, but the volume is still very much there.
Chair Filseth: So one of the things that sort of happened, you know, in the last several years is the whole process of purchasing, at least in other sectors, I mean there has been a
massive infusion of IT and technology into that process to the extent that, you know, people are doing stuff completely differently than they were before and there are all kinds of innovations
and things like in accounts payable, you know, people have systems where, you know, if you’re willing to take a two percent discount, okay, we’ll pay you on January 19 instead of January
31st, and it’s all automated and so forth right. Has that gone through the municipal sector as well?
Mr. Ramberg: Yeah, payables, I think probably…
Chair Filseth: I think the whole automation of purchasing and accounts payable and you know, the whole sector of that, has that happened in the public sector as well?
Mr. Ramberg: It is happening, absolutely. So with our E-Procurement system, Planet Bids, that we implemented last year, it’s one of the leading providers out there for municipal E-Procurement.
We also evaluated some of the market leaders, so SAP acquired one of the market leaders and we evaluated through RFP process those market leaders as well. They are often too much for
us in terms of the size of organization we are, so we went with a right-sized municipal provider of E-Procurement, and so everything is on our website now so vendors can register automatically
on our website, so we don’t have to be involved in that transaction. They can submit their bids and proposals and then we can rate them on line as well. Then we can turn around that
work so much faster because we are not processing paper. So that’s happened, and then on the payables side, similarly, E-Payables was a big thing. The one constraint that we have right
now that the ERP system, the future ERP system might have these capabilities more baked in. We’ll certainly as for that, is the ability to pay electronically a lot easier. So we have
a Paperless Purchase Card (P-card) system which is great. We have purchase cards in the hands of many City employees and there are good controls there, but those are for purchases that
are $5,000 or less. For the larger payments, we’re still paying primarily by check, but we are starting to pay, we’ve, SAP does have ACH electronic payment capabilities that we are starting
to implement and that took some additional programming to achieve that, and then the new ERP we’re expecting will have more baked in electronic payment options.
Chair Filseth: Okay, so you see still some room left to improve, as more of this stuff comes on line as opposed to, do you think we have plateaued for example.
Mr. Ramberg: We are still cutting a lot of paper checks and that takes time, so we can cut down on that number.
Chair Filseth: Thanks so much.
MOTION: Council Member Schmid moved, seconded by Council Member Wolbach to tentatively approve the ASD Department Operating Budget and the Mail & Print Fund Operating Budget.
Council Member Schmid: If I could just make a comment, I note we are also approving the Mail and Print Fund and I want to express that as a Council member the importance of, you know,
having documentation delivery. You know, on Thursday evening I know we made an attempt to go on line, but you know, it was not the same thing as having printed documents available. So
I just want to say thank you for getting that. I noticed costs haven’t gone up, so just my appreciation.
Mr. Ramberg: Pony Express still rides.
Council Member Holman: I had one other question, which is, we have both University Avenue and California Avenue parking permits which is ongoing, more intermittent we have parking-in-lieu
fees that are collected. Where do I find those?
Mr. Nose: So that’s part of the special revenues.
Council Member Holman: Greg has just found it already.
Mr. Keene: And we will be taking that up May 10.
Council Member Holman: Great, thank you.
Chair Filseth: We have a movement to tentatively approve the ASD department operating budget. All in favor?
MOTION PASSED: 4-0
7. Non-Departmental, Operating Budget pp. 458-460
Kiely Nose, Budget Manager: So we are actually on to the final item for tonight. This is that non-departmental section, pages 467 through 470 in your proposed operating books, so this
is kind of where we have the mixture of expenses that are not necessarily related to a specific department of not and we will cut to the chase on our major budget proposal, so you’ll
see that and basically it’s that transfer to the Electric Fund for the traffic signal and streetlight costs for electricity. It’s that $2 million Budget Uncertainty Reserve. This is
a one-time reserve. Those adds plus the Sustainability Contingency Account and funding for the 2016 Fall Elections, all of those increasing costs are offset by the recommended $1.4 million
reduction in the general transfer from General Fund to the General CIP. So with that I think we’ll take questions.
Chair Filseth: What’s the difference between a Budget Uncertainty Reserve and a Budget Stabilization Reserve?
James Keene, City Manager: I think the difference is, in one sense, I mean the Budget Stabilization Reserve, well, number one for the most part exists to never be spent. We have some
fluctuations, but this is a reason that you establish these parameters. Obviously if we got into a cataclysmic situation we could appropriate it. On the one hand we could have said,
rather than putting money into this uncertainty reserve, let’s just leave it in the Budget Stabilization Reserve and come back to the Council during the course of the year, when we need
it. In this case, however, we knew that there were a number of expenditures that were going to have to be made in this upcoming budget, and it seemed more responsible, more transparent
to identify those in advance, even though we don’t have the exact numbers. Not surprise the Council during the course of the year with saying, oh by the way, we forgot to tell you we
may have some other expenditures in this area, this is the amount. So we are really trying to call out in advance the certainty that we would be expecting to be drawing upon this particular
reserve in this coming year. That’s the real reason or difference. I have no intention of establishing the uncertainty reserve in a certainty status on an on-going basis.
Chair Filseth: It sounds a little bit like known unknowns and vise-versa.
Mr. Keene: And you know, just going back to what we said at the beginning and what Kiely said here, this really, this contains the bulk of a lot of the changes year over year that we
have in the budget, the $2 million on the reserve, the $2.3 million on the electricity are the biggest hits that we had. We did try to look at whether or not we could avoid those and
they seemed to be unavoidable. I’m certain that there are some costs in the Uncertainty Reserve that will be ongoing. Some could be one time. As it stands right now, of course, the transfer
to the General Fund of the street electric costs is an ongoing cost to the City, so that does present quite a problem to us. If I could make a statement in that regard, it is part of
a, in many ways, societal trend to move away from concepts of general good to individual interests in a way, in trying to align those things, and there are good arguments on both sides
of that, but there is something to be said about losing the ability to do things for the common good. You’ve seen that when we tried to deal with, in sending behavioral changes on tiered
pricing for conservation, for example, in our utility funds, now in the ability to not do that in the same way as we used to be able to. This is also where the sustainability contingency
exists and the list of the other contingent accounts that we have been appropriating on an annual basis, so on Page 467 you’ll see the City Manager, the City Council, the City Attorney,
the HR and the Innovation and Special Events contingencies are at the same level as they were last year. The Sustainability and the Budget Uncertainty Reserve are the two new additions
this year.
Council Member Schmid: On 467 you have the Cubberley lease payments and I noted there are a couple other places where we talk about capital transfers and spending on Cubberley. No my
understanding of the Cubberley deal is that our capital investments there are payments that used to be made to the school district that we both have agreed go into capital spending on
this site, so there is no budget impact to those. Is that correct?
Mr. Keene: No, well yes and no. This is the actual rent payment that we pay to the school district for the use of Cubberley. As you recall, we had the other component to the lease that
we modified two years ago, which was the payment for the covenant not to develop portion. If we had not made that change, this lease payment to Palo Alto Unified School District (PAUSD)
would be $1.8 million at least higher. So what we do now is we actually, we’re not having to make that payment to the school district, so it’s not shown here. That being said, we will
either have it partially in the infrastructure reserve and we actually have a few capital projects in the Capital Budget related to maintenance and repairs at Cubberley as we are required
to do with that bit of the money. That is something you will look at when we get to the capital budget.
Council Member Schmid: But then when Foothill leaves in 2018, we will still owe this amount to the School District without the income.
Mr. Keene: No, actually the agreement that we have with the school district is that if we have a loss of lease revenue, we share in that loss equally, 50 percent between the City and
the School District, so I think what will be most likely is when Foothill leaves, we certainly have a lot of requests for space, and I think the agreement calls for us to consult with
the School District on the replacement, but it could very well be the case that we do not fill the space with a tenant who pays as much as we were getting from Foothill, so if it was,
right now if we lost $1 million, which is roughly the rent we get from Foothill College, it would be half a million dollar hit on us and half a million dollar hit on the School District.
Council Member Schmid: So you anticipate that in the 2017 Budget.
Mr. Keene: We do, I mean some of our estimates are certainly by the Fall, early Fall or something we could see some changes there. Is that correct? In September?
Ms. Nose: Right, and that was all factored in as part of that long-range forecast back in April. We did make assumptions and I will have to go back and look at the exact month term that
we assumed, we did assume a loss in rent. I want to say we assumed about half a million.
Council Member Schmid: Should there be a budget adjustment for that on this non-departmental budget?
Ms. Nose: That would be a revenue loss to, this is the non-departmental here is showing expenses going out, and so since that revenue was factored into the long range, it’s not shown
as a separate proposal.
Council Member Schmid: But it is somewhere in the budget?
Mr. Keene: It’s in the reduced amount of rental or general fund revenue that we receive in whatever, rental income, other.
Council Member Schmid: While the payment still goes up. Okay. Let me just summarize then from my initial comments where we are at the moment. We tonight have, are facing here a $4.7
million approval. Oh, one question on the $4.7.
Mr. Keene: That would be helpful for you to clarify what the $4.7 is.
Council Member Schmid: On Page 469 and I just added up the budget adjustments and they come to $4.7 million, and that’s what we’re being asked now to approve. Is the streetlight electric
cost a legal obligation or is this a discretionary payment we’re making?
Mr. Keene: Our advice is that this is a legal obligation.
Council Member Schmid: So it’s really, we don’t have much discretion?
Mr. Keene: I think you have discretion, but I think there are consequences to that discretion. So we would advise against it.
Council Member Schmid: Jim, we will not be at the Council meeting next Monday. Okay, so we have the $4.7 that we’re being asked to approve. We have tonight given tentative approval to
3.7 new positions. We have basically approved the unfunded liability in whatever changes we are about to confront.
Mr. Keene: Well wait, it’s not necessarily all unfunded. Some of it’s unfunded, we’re adding to it correct?
Council Member Schmid: Well $450 million is.
Mr. Keene: Oh, okay, you mean as far as the running total.
Council Member Schmid: So I guess I would be somewhat in favor of tentatively sending the $4.7 million to the parking lot, which would allow us a chance the last night to look back and
say, gee how have we done on the other things and is there any discretion on this set of non-departmental adjustments.
Mr. Keene: So let me make sure I understand. First of all, you are leaving out the transfer to the General Fund of $1.4 million that reduces that $4.7 down to $3.266, if I understand
that correction.
Council Member Schmid: Right, I assume that $1.4 could be either lowered or raised, since that’s from the transfer from the General Budget Stabilization Fund, so that would be part of
the discussion about transfer.
Mr. Keene: Okay, so our count was two positions approved tonight. Did I miss something? There was one in HR and one in IT.
Council Member Schmid: There was one in Administrative (Admin) Services, there was one-half in tech and two positions in HR.
Mr. Keene: Okay, you’re talking about some hourly positions in there, so we’ve got two full-time positions and now we’re counting temporary one-time positions also?
Council Member Schmid: Well I just included the positions we voted for.
Ms. Nose: So the ten are the full-time positions whereas when we’re talking about like that staffing and purchasing the 0.48, those are not a piece of the ten, those are hourly position
and so we don’t, we count them separately. They don’t receive the same benefits structure, that kind of stuff.
Mr. Keene: They are temporary positions, so this concern about this long-term liability that compounds and compounds and compounds…
Council Member Schmid: Well, in their parking lot addendum that you traditionally keep, it would be good to have a scorecard of the positions we’ve approved that are full-time temporary.
Mr. Keene: Yeah, why don’t we do this? I think separately we ought to just keep the running total of the positions, because in some cases you will approve the positions like you did
tonight. You may have another situation where you don’t approve them, and that would clearly go in the parking lot, you know what I mean. So we don’t mix the parking lot up, we would
keep the count on the positions. The parking lot is where you have said, we’re not giving tentative approval to something, so in one sense if you want to put the $4.7 in the parking
lot, you would be saying, we’re not going to…Just sticking with your process, so let’s clear, you would be saying, we’re not going to make a motion to approve these recommendations.
You would be saying, let’s make a motion to move these recommendations to the parking lot in the amount of $4.7 million.
Council Member Schmid: Yeah, we would acknowledge we’ve talked about it, we understand.
Mr. Keene: Which would include One through Five, that includes the, oh no, actually, we will just drop that. If you want to do it that way we will just…
Council Member Schmid: Yeah, you could include One through Five.
Mr. Keene: Okay, let’s do One through Five and do it that way and if it’s in the parking lot, you come back and revisit it.
Council Member Schmid: Yeah, we’ve discussed them all.
Chair Filseth: Can I ask a question about number One? If we don’t do number One, does that mean the lights go off?
Mr. Keene: Well, I think you basically signal that in the wake of your decision to focus on a potentially big goal, that you don’t want to provide any real support funding, any real
new support funding to achieve that, and you would basically have the Chief Sustainability Officer and some contract or whatever temporary staff…You know, the Council has raised issues
and I had position, full-time position requests from Gil that I declined to fund and said we had to put these, put it in there this way. So, you know, I mean my own personal view is
the optics of not putting any money in there aren’t all that good after your decision saying, we’re going to look at achieving 80 by 2030 and the first thing we do is cut funding in
the Sustainability Budget. Now if you have a concern about the level or something like that, then those are things that you ought to… Or if you want more information before you make
a decision, we could ask Gil to bring back a…
Chair Filseth: Well, I wanted to comment on that one sort of separately. I was just curious about the transfer to the Electric Fund and the traffic signal and streetlight costs. I mean,
if we don’t do that, I mean, do the lights go off?
Mr. Keene: Oh, I’m sorry. Geeze, I’m so sorry. Number One was, yeah, number one is sustainable, yes, (inaudible). I mean, let me put it this way, no, I don’t think the lights go out.
We’re subject to litigation and a legal claim from some source that we are in violation of a State-wide Proposition. It would not allow us. So what would happen ultimately, sorry to
be a jailhouse lawyer here tonight, if we fail, then ultimately we’ve got to make it right and pay the fee at a minimum, and whether or not there are additional costs or damages, that’s
something that Molly would have to be able to advise you on. My own view is that you have advice from your legal counsel that this is required and let me just remind you, the reason
that this is required, we stated it before, is that our understanding is that Proposition 26 which was passed two, three, four years ago, does not kick in and require this change until
we have a change in the rates in the Electric Fund and, as you know, we haven’t had a change in rates in the Electric Fund since 2009. So we’re being forced, due to the drought and other
reasons to increase our electric rates this year and for that reason, we’ve got to make this payment. Now, the question is, could you forestall the electric rate increase this year and
avoid this again? Molly could answer that possibly, but again, you’ll be looking at the utility fund budget and…
Council Member Schmid: Does the increase in rate then goes to the electric utility payers, so we should cut the increase from 9 percent to 6 percent?
Ms. Mason: The moment you change the rates is the moment that risk…
Council Member Schmid: No, I’m just saying if you are all of a sudden getting…
(crosstalk)
Ms. Mason: It was taken into account. You can’t take this into account anymore and include it in the rates, so the rate increase that’s coming to you already assumed this was not going
to be included.
Mr. Keene: The way I would look at it is, yeah, this is actually money that is flowing back to the electric utility because it’s being picked up here. Technically you could even say
we’d have a higher rate increase if we didn’t make this shift this year.
Council Member Schmid: They sound as bad as we do, having a 9 percent rate increase and needing a 15 percent rate increase.
Chair Filseth: I mean, there is an element of this as to which bucket it goes into, right, except that because it’s tied to the rate increase, then it is tied to sort of revenue increases.
Mr. Keene: Well, not to push you guys, would you be ready to make some sort of a specific motion in this area. I only say it, I think we have the Tall Tree Awards Banquet again tomorrow
night that will be…
Chair Filseth: I think we are converging here. Sorry, I interrupted Greg here, right. I don’t know if you were done. I see Cory waving over there, but, I mean I think the notion of putting
stuff in the parking lot I think it is a reasonable step at this point. My only question is about the number one, is there some stuff on this list that is just mandatory, right, that
we’re not going to do unless the City is really in dire straits, in which case putting it in the parking lot is sort of an exercise, right? But, I mean, the fact is, you know, it looks
like we’re going to lose five million dollars this year, because of some stuff that we didn’t anticipate and who knows what we’re not anticipated for next year and so forth. But the
truth is, it’s more than five million, right, because the unfunded pension liability is growing around $30 million a year, every year since 2002, and so we’re probably really going to
lose $35 million next year, not five million, so I find that, I think we all find that pretty disturbing, so I think Greg’s intuition is, and it goes back to something you said at the
beginning of the meeting tonight, which is, you know, you have to look at priorities here and that’s one of the filters. So taking the last item and putting it in the parking lot is
sort of a blunt instrument, but yet I think it makes sense to sort of structure this so we can sort of revisit and look at some of this stuff at the end, so I think that’s a reasonable
idea. On the sustainability thing, and I’m going to let Cory talk in a second here, on the sustainability thing, I think when we were here a year ago, I mean it looked like the Sustainability
Office was still trying to figure out exactly how it was going to do things, and I think they have made a lot of progress this year. So at the same time, I think Gil summed it up very
well, he said, you know the way they work with other groups, and I think he’s right, okay. I think that the funding for most of the operations, it makes sense they come from the departments,
right, as opposed to we’re setting up a separate group that is going to sort of have its own operating fund and so forth. So I think that model is right, so where should it go and so
forth. On the other hand, I think Gil has proven that he has gotten some good stuff done in the last year, so that’s good. So then as I look at this, I go, well back in terms of priority
would I rather see that in this group, or would I rather see that in Section 115 for example, right. And I would kind of like to see some stuff in the Section 115, because we’re going
to lose five million dollars this year, not including the $30 million increase, or whatever it is going to be in the unfunded liability. So then I sort of go, well maybe if there was
some in the contingency account versus some in the Section 115 and elsewhere, and I think that kind of discussion is where Greg’s kind of bringing us back to when we have the parking
lot discussion at the end of this process. That’s sort of my sense when I was listening to you talk. Go ahead and then Cory wants to get a word in edgewise.
(crosstalk)
Council Member Wolbach: I’d like to move tentative approval of the Non-Departmental Budget.
Chair Filseth: It looks to me like that one’s going to fail for lack of a second. Greg, you want to try.
MOTION: Council Member Wolbach moved, seconded by Council Member XX to tentatively approve the Non-Departmental Operating Budget.
MOTION FAILED DUE TO THE LACK OF A SECOND
Mr. Keene: And I’ll make my comment, if I might right now. So, I have no doubt that when we get to the end you will be compelled to agree with the majority of the recommendations we
have here on this page. Nonetheless, it sounds like this is a simple little flag you can plant in the sand here so you don’t lose sight of this. No seriously, when you get to the Wrap-Up
and you say, wait a minute, we’ve got this and you may do some more of these kinds of things along the way, so I think we just need to be sure we track it for you right so we don’t lose
sight of it for you.
Chair Filseth: That’s a sage observation.
Council Member Schmid: Yeah, I think the list is a good one. We’ve talked about it and each one of these is important and necessary for the City, but maybe by keeping it outstanding
it allows us, as we go through the coming meetings to say, God, is this more important than the list we already have. So I would move that we move this to the parking lot without approval,
but in recognition that these are important and significant items.
Chair Filseth: And I’ll second it.
MOTION: Council Member Schmid moved, seconded by Chair Filseth to tentatively approve the Non-Departmental Operating Budget with the exception of the following Budget Adjustments which
will be moved to the parking lot for future discussion: Establish Sustainability Contingency, 2016 Elections Funding, Establish Budget Uncertainty Reserve, Transfer from General Fund
for Traffic Signal and Streetlight Electric Costs and Reduce Transfer to General Capital Improvement Fund.
Chair Filseth: Do you want to comment? I have one comment. I think the City Manager is correct. I think we’re going to come back and we’re going to go, yup (inaudible)
Mr. Keene: So as we understand your motion, it would be your tentative motion, it would move items One through Five on Page 468 to the parking lot, and therefore, you would approve tentatively
the other recommendations in the Non-Departmental Budget? Is that correct?
(inaudible)
Mr. Keene: Budget Adjustments One through 5Five on page 468.
Chair Filseth: 469 and 470.
Mr. Keene: They’re on multiple pages.
Chair Filseth: You’re right, adjustments.
(inaudible)
Chair Filseth: No, the reciprocal of that.
Mr. Keene: Approve the Non-Departmental Budget with the exception of items One through Five, sustainability contingency, election funding, budget uncertainty reserve, transfer from the
general fund for traffic signal and reduction of the transfer to the general capital improvement fund, move those to the parking lot.
Council Member Holman: Yeah, it’s a question. Why is election funding in this particular grouping?
Ms. Nose: It’s a Citywide activity, so in other jurisdictions sometimes you’ll see it in the Clerk’s Office, so we could move it into the Clerk’s Office or, frankly, I guess we could
even move it into the Council budget. It’s a choice that it’s the daily operations of the City.
Council Member Holman: It just happens to be here. So I want to support the motion, but I want to make one comment which is to make sure the City Manager conveys to the Sustainability
Manager that this is not a discouragement. It’s just a way for us to keep kind of a handle and grip on what we want to survey at the end and make sure we’re in total alignment.
Chair Filseth: Yeah, I expect we’re going to fund the Sustainability Office. (crosstalk) Okay. All in favor. Motion passes three to one.
MOTION PASSED: 3-1 Wolbach no
Mr. Keene: So is that a wrap? So I want to share with you, I thought this was kind of fun. I found this the other day. This is a cartoon from the editorial cartoonist from the Arizona
Daily Star, Fitzsimmons is his name. Actually he is a nationally known one. This is me actually equally troubled, but much younger, doing the budget in Tucson. I think that year, I can’t
remember what it was I had to cut, $35 or $50 million, I don’t remember. It was a series of things. That says, City of Tucson, their logo says founded 1775, abandoned 2004. Here’s what
you’ll like. This is me here and it goes, “possible revenue sources” and they’re all crossed out, renter’s tax, garbage tax, advertising tax, raise property tax, tax procrastination.
Here’s my favorite, “user fee for using synonyms for the word tax”. The attack Melena, that was a neighboring town or village, and then final solution, “sell Tucson on eBay”. So it’s
never ending.
Council Member Holman: Can I suggest that probably at no time in the year is your job more difficult than doing the budget from a variety of different perspectives, so maybe it would
also be appropriate to bring the missive that you got from last year’s Mayor for a Day. I don’t think you’ve ever shared that with Council.
Mr. Keene: No I think in our darkest moment, here, I’ll pull that out, okay.
Council Member Schmid: Those will all be in the wrap-up day.
Chair Filseth: Are the cameras and microphones off?
Future Meetings and Agendas
Kiely Nose, Budget Manager: Just to kind of close, we actually are on schedule, so that’s awesome. Our next meeting is on Thursday at 6:00 and we will address any wrap-up from today,
which I’m not quite sure there is much, and then we’re going to hear fire, OES, police, community services, as well as library.
James Keene, City Manager: And I will not be with you. I have to fly down to Orange County on Thursday and come back on Friday.
Ms. Nose: With any luck Lalo will be back.
ADJOURNMENT: The meeting was adjourned at 9:42 P.M.
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Finance Committee Action Minutes
May 3, 2016
FINANCE COMMITTEE
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