HomeMy WebLinkAbout2016-05-10 Finance Committee Summary MinutesRegular Meeting
Tuesday, May 10, 2016
Chairperson Filseth called the meeting to order at 5:10 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Holman, Schmid, Wolbach arrived at 5:44 P.M.
Absent:
Oral Communications
None.
Chair Filseth: First, are there any members of the public who would like to speak? With no Oral Communications, we’ll proceed to the first item, Staff Responses to Committee Questions.
Action Items
1. Staff Responses to Committee Questions From Budget Hearing Meetings.
Kiely Nose, Budget Manager: Just to kind of kick us off on recap from May 5, as well as the other process, the current status of where we’re at is, we haven’t made any changes necessarily
to the General Fund yet. On the far right you’ll see all of the items that are in the parking lot with the date as well as the department and dollar volume and we’re still at that $250,000
contingency level for Fiscal Year ’17. In addition, you guys have in front of you an At-Places Memo and this memo kind of spans three different…
Council Member Holman: This isn’t, by the way, my definition of a memo.
Ms. Nose: The memo actually is only four pages. The rest are attachments. So the actual memo itself is talking about, it goes through the details of the Human Services Resource Allocation
Process (HSRAP) funding, so the history of it, the different allocations over the course of a number of fiscal years. We’re also addressing the questions that we asked about the Community
Services staffing by division, so we have a detailed breakdown of all of those staffing changes. The bulk of this packet is actually Attachment A, which is the Retiree Health Care Actuarial
Analysis, and so this is Bartel and Associates actual report, which he will present later as part of Item Number Three today. Then the last piece is additional information for you guys
pertaining to the upcoming meeting on Thursday, and this is backup for the Storm Drain Over Claim Committee. It’s a letter of their approval and transmittal associated with the storm
drain Fiscal Year ’17 Proposed Budget, so we’ll discuss that piece as part of Thursday’s meeting, but just some backup reference information prior to the meeting itself.
James Keene, City Manager: Are these, oh yeah, you need these. Here’s the At-Place, sorry, could we collect the At-Places.
(crosstalk).
Ms. Nose: Okay, that’s the big memo, obviously, in front of you guys. Like I said the bulk of it is that report from Bartel and Associates, and he will speak to us as part of this meeting.
Council Member Holman: Yeah, I have a question about the historical HSRAP funding levels. I’d asked for the funding going back to the downturn, to before the downturn to current, and
I was just, I was thinking the downturn was like 2000, I mean…
Ms. Nose: We can go back further.
Council Member Holman: Yeah, okay. Thank you.
Chair Filseth: Okay. Let’s see, so John is here.
Lalo Perez, Chief Financial Officer: Yeah, he’s going to be on a little bit later and we are going to start with Peter in terms of the agenda and then once we’re done with his presentation,
I will start with Mr. Bartel.
NO ACTION TAKEN
5. Development Services, Operating Budget. pp. 223-238
Peter Pernijad, Development Services Director: Thank you, thank you very much. I’m happy to be here. First let me introduce my Senior Management Analyst, Jessie Deschamps. She has been
with the City for a few years now. It feels like longer than it is because we’ve gotten so much work done this last year, so we’re happy to share some of those accomplishments with you
and talk a little bit about our budget. Just in terms of structure, we can go to slide two, we’ll give you a quick overview. The department is now just over a year old. We were formed
last year. We are a Matrix Department. We are mishmash. We are a compilation, a collaboration, a hybrid, so we are bits and pieces of a lot of different departments. In whole we are
approximately 80 people, but actually only about 36 Full Time Equivalents (FTE’s). Those come from Planning, Public Works and Fire. They allocate charges to us as well as FTE’s to us,
and then we take all those charges and we use those bodies to not only do the plan reviews, but we also use those bodies to do the inspections. So little pieces of Water Quality, little
pieces of Fire Prevention, little pieces of Planning and other departments, and so we work in collaboration with all of these departments to run the Development Center at 285 Hamilton,
where we do plan reviews, we do over-the-counter reviews, we issue permits and from there we schedule inspectors to go out and do inspections on buildings. It’s the reason for how we’ve
been able to improve the service level so well, that collaboration with all those departments has been instrumental in our efforts to meet customer demands and their timelines and keep
things moving. At the same time, we try to be entrepreneurial in that we take full accountability for all of our costs and expenditures, I mean, and revenues, so our goal is to be revenue-neutral
at the end of the year, and to have no impact on the General Fund. We have started looking at all of our fees and our expenditures very closely over the last year and a half, which is
part and parcel to what we have brought before you today, which is a little bit of housekeeping as we get a clearer and better picture of what people do work for Development-related
activities, and I’ll define what that is in a second.
Chair Filseth: Question on that? So, we saw Fire a few days ago. They reallocated 2.15 people from your department to theirs right? Is there anybody left in your department that is still
sort of doing Fire Department work?
Mr. Pernijad: Oh yeah, we have almost seven people, seven FTE’s allocated to our department.
Chair Filseth: Okay, so you’re going to explain sort of that?
Mr. Pernijad: Sure thing. So what we try to do at the end of the year is reconcile our revenues and our expenditures and make sure that we capture all Development-related activity and
we offset that activity with the fees that are charged to those activities. So essentially how we define Development-related activity is anything that is done on private property that
benefits a private property owner, so in our view and the direction that we received from Council some many months ago was that that should be completely cost recoverable. It’s shouldn’t
be subsidized by the General Fund and, therefore, we’ve attempted to try to establish what the costs are to provide that service, as well as what the related fee should be. So, hopefully,
we’ll bring before you a new set of fees that will be realigned to match expenditures. So that’s not coming before you today, but hopefully as part of this budget cycle. So with that,
Fire Prevention, that does all the plan checks associated with Fire permitting, and they do a large portion of building permitting, two separate types of permits. We try to capture all
those costs and then roll those into the fees, so that’s the six, seven FTE’s that are charged to us from Fire. They do those related works. Now they do, since they are Fire Prevention,
they roll up and they actually report to the Fire Chief. They are still full-fledged firefighters, so they are still required to do all the training necessary to be deployed to the line
when and if they ever have the need for additional firefighters, weekends, overtime, people are sick, whatever the case may be. So they need to be able to deploy to the fire during their
normal operations. So as such, we’ve identified at this pass, 20 percent of their time is allocated towards actually doing Fire-related training that’s unrelated to the issuance of building
permits, inspecting of buildings or doing any related work to building activity. That’s where we came up with that 20 percent and every year we get a clearer and tighter picture of what
those allocations are and what is the true picture and the actual percentage of time that people, staff are spending during these Development-related activities.
Chair Filseth: And the piece you just described, the Fire-related piece and so forth, how many FTE’s is that?
Mr. Pernijad: It’s about seven and we can pull those up real quick.
Chair Filseth: About seven is (inaudible). I was going to ask, those aren’t sworn people are they?
Mr. Pernijad: Yeah, we have one secretary that’s charged to us and then the other are sworn officers and we have one contractor, but that’s not part of that seven FTE allocation.
Chair Filseth: But they’re doing primarily Development Services work?
Mr. Pernijad: At this point, you know, and as we get a finer and clearer picture of what it is they are doing, we have allocated that 80 percent of their time is spend doing Development-related
activity, and we’re trying to get a clearer and more refined picture of how that 80 percent is divvied up.
Mr. Keene: Can you differentiate between plan check and planned review and fire inspection work?
Mr. Pernijad: Sure. So there’s fire permits and there’s building permits. Fire permits are for things like sprinklers and other fire-related activity, Hazardous materials (Hazmat) permits
to store hazardous materials in a building, so they issue all those specific permits and they do all the plan reviews associated with that work, and they do all the inspections associated
with that work. Then there’s building permits. Building permits, like do a tenant improvement or build a new home or build a new commercial building, they might do a piece of that inspection
as well as a piece of that plan check, so their time is split between the two of those areas, but they also do other things that aren’t Development-related, like we talked about, like
training. There are other activities that they do that we’re getting clearer and more refined picture of as we get further along as a department.
Chair Filseth: Hey Jim, over time this seems like sort of some of the stuff that we should as the question, do we really need sworn people to do that?
Mr. Keene: Yeah.
Mr. Pernijad: Question? Okay so…
(crosstalk)
Council Member Holman: That is a good question. I have one too, which goes back a ways, but Utilities also have to inspect projects but they’re not part of this whole, why is that?
Mr. Pernijad: That’s another good question.
Council Member Holman: I’ve, by the way, been getting complaints about Utilities not showing up for inspections, so it’s fresh on my mind.
Mr. Pernijad: Utilities is an interesting animal. It’s one that we still have yet to fully incorporate into all activities of Development Services. Right now, we have a representative
from Utilities at the Development Center and she does plan review, and she does some front counter work, answering questions and the like, and then Utility inspectors do work out in
the field relative to inspections. We’re not charged any of their time and we don’t have any of their allocations in our budget. It’s an area that we can explore, but until now we haven’t
because it’s a little more complicated because they are an enterprise fund separate from the general fund, and right now we’re just trying to understand, what is the piece of the General
Fund that Development Services is and to capture that full cost. I think it is a legitimate question to explore what piece of that Enterprise Fund is Development Services-related and
how might we be charged for that time, but also recover the fees for that work. Totally reasonable question. So with that, I’ll get into a little bit about our accomplishments. I won’t
get into the entire list and if you are interested I actually e-mailed the list to everybody but I have a hard copy of you’d like it. It’s our 2016 Action Plan. It’s everything that
we accomplished in 2015, as well as everything that we have proposed to accomplish in 2015. These are Executive Leadership Team (ELT) priorities. There are City Council priorities. These
are our departmental day-to-day, below the water line if you might, priorities that we’re trying to make sure we do to keep the doors open.
Council Member Schmid: While you’re talking it might be a good idea to pass that around.
Mr. Pernijad: Happy to. I think Staff already has copies of these, but… I’m not going to go through that whole book, but it talks about what we’ve accomplished last year and what we’re
proposing this year, just as a background. Just some highlights from that book, accomplishments from this last fiscal year, we adopted just recently our new Reach Code which came before
the City Council, if you remember, a couple of weeks ago. We initiated revisions to our City Policy on Seismic Retrofitting. This has been a long community engagement effort where we’ve
been receiving feedback on our Seismic Retrofitting Ordinance that we hope to bring to the Council. Initiating process on our electronic plan review process. We’re trying to, again,
streamline our plan review process by making it electronic. We’ve launched a dashboard internally for tracking metrics internally on the performance of our plan checkers as well as our
inspectors. That’s work we’ve done, we’ve launched internally. It’s not an external tool, but it really helps us understand where the lags in performance are, where there’s opportunities
for improvement. We just launched our building application (app), inspection app. It’s one of a few more innovations that we’re hoping to release this year, but it helps customers schedule
inspections out in the field. Then we’ve also started our cost, our fee study, which we hope to bring before you before the end of the fiscal year. Finally, the electrification study,
the fuel switching study that we started under the direction of a Colleague’s Memo, we hope to bring to the Council by the end of the year. So this is just a smattering of some of the
things that we’ve done and are doing. So 2017 Initiatives, we’ve already brought before you the Reach Code, which is the energy portion of the Building Code, but there are a lot of other
sections of the building code which we’re going to be bringing before you as we get closer to the end of the year. The Energy Code has a longer lead time, so we need to bring that first,
but you should anticipate a Green Building Code, Building Code, Electrical Code, Mechanical Code, etc. All those have local amendments and we’re going to be bringing those before you
for adoption so that we can keep on track and have those enforced on January 1. We hope to complete the seismic retrofit study by the end of the calendar year. Hopefully we will be done
with the fee study. We’ll be done with the electrification or fuel switching study and we’ll also be continuing to monitor our streamlining efforts through our dashboards that we’ve
created.
Chair Filseth: A quick question on that one. On the first one, the code, so you guys presented the Reach Codes, but you’re still working on that? What’s your intuition about how much
more carbon reduction you think is likely to be achievable through further code work? Do you think another 50 percent or another 10 percent or are there like huge reductions? Another
200 percent?
Mr. Pernijad: I think it’s actually much smaller margins. The energy a building uses is the largest portion of the carbon that’s used in a building. If you don’t think about the embodied
carbon in the actual building itself, the concrete, the wood, etc.
Chair Filseth: One of us was going to ask that.
Council Member Holman: I’m sorry. I didn’t hear the first part of the question.
(crosstalk)
Mr. Pernijad: … through revamping of our building codes. I think the majority of the carbon that we’ve saved is by tightening up the energy conservation, and that’s the biggest.
Chair Filseth: So you think you’ve got most of it?
Mr. Pernijad: We’ve got most of it covered, and that was a 6 percent improvement over last year if you average out the residential and the commercial improvements that we’re proposing.
Council Member Holman: It is. It was part of my note that I was just making, so it is, some of it’s dated. It doesn’t seem to be captured or isn’t being logged in, but also the embodied
energy and salvage, because we’re talking about Reach Codes, but we aren’t accounting for, as you’ve heard me say, but (crosstalk)
Mr. Pernijad: Yeah, so it’s part of our next…
Council Member Holman: But we’re also not talking about how much greenhouse gas is being generated due to development activity, so, manufacture of new products, transport of new building
products and such, and so how it has to do with this is because, should we be charging a carbon tax for those kinds of activities?
Mr. Pernijad: That’s another good question. We’d have to have that in the context of a larger conversation with sustainability. It’s a policy decision, how the City wants to move on
that. It wouldn’t reside in the building codes. It would have to reside somewhere else in the City policies and the Municipal Code.
Council Member Holman: And it has to do with, I’m really not deviating, it has to do with level of staffing and such, so the Reach Code is great. It’s aspirational, it’s all of that,
but if you look at what the actual benefit is for the time spent, is the staffing that we have better used on something like this, that could actually account for more savings and capturing
impacts, so I can’t answer that now, but it’s a question that I’m throwing out there.
Mr. Pernijad: Back in August of last year we had a retreat where we talked about all aspects of green building with a focus on material waste and salvage and recycling and other things,
including energy, and the consensus of that group was that we absolutely want to heighten our efforts in the areas of salvage and recycling. So what might that be? So we’ve raised the
standard for C&D, construction and demolition, and we’ve added a new element that we’re going to be bringing before you in June, when we bring our building codes, about requiring a survey
of the site prior to any demolition of exactly what is salvageable and what is the value of that salvage, so we can start to incentivize, promote and expose the true value in the materials
inside a building for the people that do it. The building of awareness is the first step and moving towards potentially possibly, if it’s a Council decision and direction, to mandate
a certain percentage be salvaged, so we’re moving and we’re inching in that direction, but just in terms of comparisons, we recycle more that 90 percent of the materials that come out
of buildings. That’s not salvage, that recycling, but compared to other cities, that’s head and shoulders better than other cities do. So we’re doing a phenomenal job already of recycling
material. Could we do better? Yes, absolutely. It’s a question of, how far do we want to press and how far do we want to go, and that’s totally up to a policy decision.
Council Member Holman: And I don’t want to deviate really, much off of the budget conversation, but recycling takes energy too, and if we have perfectly good buildings, it’s the impact
of tearing them down.
Chair Filseth: I personally would like to understand that, but not (crosstalk) not here.
Council Member Holman: So it goes beyond salvage. (crosstalk)
Mr. Keene: I’m glad I’m in here. I just went to check on things over there.
Chair Filseth: We’re better looking in here.
(crosstalk)
Council Member Holman: It’s not a happy crowd, Jim. I didn’t think it was going to be.
Mr. Pernijad: Okay, so if I can divert your attention to Slide Five, this is a very simple, this is like an appetizer when it comes to Budget. I’ll let you get into heavier, meatier
stuff later, but our staffing proposal, our budget proposal is very, very modest. We’re asking for three things and they’re all pretty minor. The planning tech position is a net-neutral.
We’re asking for a half FTE but we’re offsetting it with a half FTE that’s being returned to Planning, so it’s a net zero effect on our Operating Budget, but it looks like we’re asking
for an additional $55,000. The second item is a staff realignment. Through the process of studying the revenues and expenditures associated with developing the department and providing
the services, we’ve reallocated and realigned positions like the Fire positions, so that’s the realignment of the positions that actually do work in Development Services versus don’t.
The State Model Water Efficient Landscape Ordinance, MWELO is a State mandate passed by the Governor’s Office to restrict the amount of water used in landscaping, so we’re implementing
that. That was due February 1st, so that’s just the cost of implementing that State mandate through contract augmentation.
Chair Filseth: You said it was a contractor?
Mr. Pernijad: It’s a contractor, yeah. A small piece.
Council Member Holman: So is that contractor also helping people or giving advice to people, counseling people on how to get a required landscape plan accomplished? The reason I ask,
and it’s just a side comment and we won’t go in depth, but the reason I ask is because one of the other complaints I got today was because somebody who has a fairly large parcel spent
a lot of money because they didn’t know how to otherwise, with a consultant, because they didn’t know how to otherwise satisfy the landscape requirement. So, is this person?
Mr. Pernijad: So this was an Executive Order that was dropped on the City, so we had to react to that Executive Order and it’s a very thick, if you remember I came to Council to amend
that plan, to make it a little easier, but what we ended up with was enforcing the State mandate which is very complicated and thick, so trying to distill that for customers has been
a challenge. Since then we’ve released and created a new section of our web page and videos, instructional videos on how to decipher that requirement and doing a lot of sessions with
architects to help them understand what the requirements are. It is complicated. We’re doing our best to explain it, and that is a big part of that $50,000. It’s to help educate, train
and make sure that people understand what the requirements are, create new forms, procedures that help walk people through the process of complying with this Water Efficient Landscape
Ordinance. It’s basically a water budget that you’re allowed to use to water your lawn and it gets into some complicated math.
Mr. Keene: The answer to the question is, there’s not sufficient funding or service provided here to do consultation and advice with people on their landscape plans.
Mr. Pernijad: Correct. What we’re proposing is to create a program that, with those dollars, to help create websites, instructional videos, forms and procedures.
Council Member Holman: Something like that I think would be helpful. I mean, this couple spent hundreds of thousands of dollars to get their plans, with a landscape architect, to get
their plans approved, so they just didn’t seem to understand good guidance otherwise. I don’t want to go down that path, but just since it’s here.
Mr. Pernijad: Well, this is one of many landscaping type of requirements that we have and it’s a new one. It was just effective February 1. I don’t know what was the cause of that confusion.
So that is our budget in a nutshell. I’d be happy to answer questions.
Chair Filseth: Sir.
Council Member Schmid: Okay, very straightforward, with the exception of staffing realignment. For me, you haven’t made a case. Go back a couple of years. There weren’t any Fire positions
in the Development Department. 2014 there were six added, they’re down to five now. What did you do before 2014?
Mr. Pernijad: Before 2014 Development Services wasn’t a department. It was part of Planning and Community Environment. It was a division within the department, and Sherry Nikzat is actually
here. She was here back then, but essentially it wasn’t its own department and it wasn’t set up to be cost neutral, so those costs weren’t absorbed into the entire department.
Council Member Schmid: Okay, let’s look then at the current situation. You have, from your picture that you showed on the cover, I count at least three firemen in their uniforms. So
they represent Fire needs, inspections and fixes up. What you’re doing is not taking out the Fire positions, but you say they spend some time training, training to be firemen. Aren’t
they training then on the things they’re inspecting?
Mr. Pernijad: No, the training they’re getting is Fire Life Safety training, how to extinguish a fire, how to save somebody from a burning building, how to extract somebody from a vehicle.
Council Member Schmid: Alright, then it isn’t finding how a fire starts, how it grows, how it’s contained, part of what they’re inspecting?
Mr. Pernijad: If they were to do that type of training, we would pay for that. That would be incorporated and there would be a nexus between that training.
Council Member Schmid: No, I’m asking really the professional, in order to be a fireman you need to have certification and training, so to have a Fire Inspector means that you want someone
up-to-date on being a fireman. So base question is why aren’t the users of that service paying for it, rather than the general fund?
Mr. Keene: They are, unless I’m missing something, isn’t that true?
Ms. Nose: Say that one more time for me.
Mr. Keene: The training related to the Fire inspection…
Council Member Schmid: No, I’m saying the training necessary to be a fireman should be paid for by who is using that.
Mr. Keene: Right, and that’s the general fund.
Council Member Schmid: They’re not using it. They are lined up here with Development.
Mr. Keene: We can’t, I don’t mean to sound snippy, we can’t actually cut those people in half and put half of their picture in there, you know. You’re dealing partly with charging back
portions of FTE’s back, not moving whole single people back.
Council Member Schmid: Are these firemen on patrol duty or firehouse duty?
Ms. Nose: So it depends. What happens is some of them actually to rotate and so in order for them to be able to rotate between the line as well as Development Services, for their line
work they have to maintain their Fire training and certifications. For the Development Services work, they don’t have to maintain those same qualifications.
Council Member Schmid: But to be on that rotation they need to be a certified fireman.
Ms. Nose: To be on the line.
Mr. Pernijad: On the Development Services rotation, no they do not.
Ms. Nose: They do not, and that gets back to the question that Chair Filseth was asking.
Council Member Schmid: Otherwise you could hire someone off the street and much cheaper, but you want a fireman.
Mr. Pernijad: We don’t want. That’s what’s provided. That’s what’s available.
Chair Filseth: That’s what we have.
Mr. Pernijad: We don’t have nonsworn firefighters to…
Council Member Schmid: No, no you could hire someone off the street who…
Mr. Pernijad: We could.
Ms. Nose: And to pull back a little bit from the conversation, what the Chair I think reference at the very beginning was a question of, we should look at the Fire Prevention Bureau
and whether or not we should be using sworn staffing associated with that, and you’re getting into the crux of that issue because the work associated with Development Services doesn’t
necessarily require the same line certifications as a line fireman would, so is there a possibility that we could restaff this, and I think that’s what your original question was getting
at.
Mr. Keene: That’s what the Chair’s question was as I heard it.
Council Member Schmid: Right, so until you do that though, you’re paying extra to have a sworn fireman to do that.
Chair Filseth: Are you asking about cost recovery?
Council Member Schmid: Yeah, so rather than have the General Fund, residents’ sales tax pay for this portion of their time to be a fireman, why aren’t the people who are using them for
inspections?
Mr. Keene: Can I just get clear though, we do still have the situation where during the course of a year a firefighter who is assigned to be doing inspection work at the Development
Center is being 100 percent charged to the Development Center and incorporated in our fee schedule, not only is getting training as a firefighter, but could be redeployed back to being
a firefighter during the course of the year. They could be going on calls during the course of the year. So this is what I meant about, not only can we not divide them up, I think the
strategic question is, could we move to a position where maybe with vacancies we just sort of say, well forget this. Let’s just go ahead and create a position of nonsworn Fire Inspector
position and fill those and leave those other folks only solely doing Fire and Emergency Medical Services (EMS) work.
Council Member Schmid: And that’s an option that should be discussed, but to ask for a subsidy from the General Fund in order to do this is a different question. It seems to me this
is a clear case where if you’re using... Let me give you an example from another field. If you’re a doctor, you’re running a medical health care service, part of the time you’re a doctor,
part of the time you’re sitting in an office looking at finance and administration. Now to be a doctor you need to be a doctor on both sides of that or you can hire a non-doctor to do
it. If you hire a doctor you pay a doctor’s salary for the administration as well as the doctoring.
Mr. Keene: That’s correct.
Council Member Schmid: So here’s a clear case where you’re taking a sworn fireman and moving him from Fire duty to inspection. So he’s training to maintain his Fire service, it seems
to me those who use him should pay for it.
Mr. Keene: We are charging him though, his cost that the percentage of the time that he is working, even as a sworn firefighter doing Fire Inspector work. Is that correct?
Mr. Pernijad: Right.
Mr. Keene: We’re actually doing the opposite of what I’m hearing you say.
Chair Filseth: Are you, if I understand what you’re asking correctly, you’re looking at the 20 percent of that person’s time spent on training, and you’re asking, should some portion
of that 20 percent actually be allocated to the Customer Development Center, is that right?
Council Member Schmid: Yeah, the portion of time spent at the Development Center should cover that person’s training.
Chair Filseth: The City shouldn’t pick up the whole training cost? The Development Center customer should pick up some of that?
Council Member Schmid: Yeah, if he’s there six months out of a year.
Chair Filseth: Is that what you’re asking?
Mr. Pernijad: Am I missing this? So, I think what’s being said is that because we are, because we only have fully trained, fully sworn firefighters, their full cost should be borne by
Development-related fees, since we’re getting the benefit of having a fully sworn officer do the plan checks and inspection, etc.
Chair Filseth: That’s what I thought I heard.
Mr. Pernijad: That’s what I’m hearing you say.
Mr. Perez: So let us do this, because I think it’s a lot more complicated than this, and unfortunately, we don’t have Legal tonight, my sense is this has a lot to do with Propositions
26 and 218 and cost recovery and we may be limited on what we can charge. This has been an issue we’ve had a resident of another agency contact Jim and myself because there was the same
point. That agency was excluding a bunch of stuff, where the productive hours were something like 1,040 from 2,080 as a result of trying to comply with these requirements, so let us
do a little more work and be able to respond to the possibility. It comes down to a methodology and then the methodology being legally defensible.
Chair Filseth: If I could chime in for just a second here and give it back to you. It seems to me like, I don’t know where the numbers involved are that much or that much, right, I’m
sure we’ll find it, but it seems like it’s a perfect time to ask this question, because you guys are coming back with a revised fee recommendation (inaudible).
Mr. Perez: It’s a pretty large amount because that’s what you put in the parking lot May 5th, $412,867.
Council Member Schmid: Yeah, I was going to say, it’s already in the parking lot and we can look at it there. We are under some pressure to generate hundreds of thousands of dollars
and it appears to me this is one clear way of identifying funding, so if it’s in the parking lot we can come back to it.
Mr. Keene: That’s fine. I don’t want to beat this to death though. When we are allocating the charges for a full-fledged firefighter who is working in the Development Center, we are
charging them that cost, let’s say it’s 50 percent or whatever it is, 50 percent of the full-fledged firefighter cost. We’re not discounting it down to a less than firefighter cost,
so we’re capturing all of the costs of that full-fledged firefighter doing Development Services Center work. If what you’re saying is we should capture the cost of that full-fledged
firefighter for work that they do as a firefighter, that’s where we start running into these issues that Lalo was talking about, about the charging, and we just need to be sure we can…
Council Member Schmid: If to maintain that fireman (inaudible) they have to do so much training per year, so if you spent six months in the Development Center, then one-half of the training
to maintain your standard should be included.
Mr. Keene: Okay, I think we will not win that argument if push came to shove. I think the bigger issue is to talk about perspectively and strategically where do we want to go? Do we
want to create a less expensive class of employee to do the Development Center’s work on behalf of Fire? That is something we can legitimately do.
Chair Filseth: My intuition is that’s a bigger impact over time too.
Council Member Schmid: The problem is though, they now have less incentive to worry about that, since the General Fund is picking up all these extra (inaudible). If they were paying
it then they would…
Mr. Keene: We’re not doing that so I think we need to have a way to maybe come back and show it in a chart.
Council Member Schmid: Okay.
Mr. Keene: I can guarantee you we try to do everything we can to associate every bit of the charges with the Development Center work that we possibly can and we do it so well we have
to be exceedingly cautious about not allocating charges that we can’t substantiate. That’s all I’m saying.
Chair Filseth: Can I ask one follow up… Actually go ahead.
Council Member Holman: So, a couple of things. One is, as Jim certainly said a few times, like words matter, and so this isn’t exactly budget so I’m not going to ask you to even respond,
but I would look for some improvement on this before it goes to Council, is on 229, it talks about key performance measures and you look at, on 229 and on 232 for instance, everything
is about speed and how quickly and how many permits we can get processed, and blah, blah, blah, and customer satisfaction, customer service. On 229 it does say, “meanwhile, inspectors
need to ensure construction complies with ever increasing requirements and to the building and green codes”. So I have this perspective and I don’t think I’m alone in this, that being
efficient in issuing permits is, of course, important, but there’s so much focus on how much we can get through, how much we can process that what’s missing for me here is, and by the
way the Citizen Advisory Commission (CAC), as Hillary knows, has talked about this too, so I think the only customers that Palo Alto has is utility customers and, you know garbage customers,
but the rest of it is, it’s public and applicant, but not customers, but for instance on 232 it says, “provide a high level of customer service and decrease application review processing
and permit issuance times”. It should, from my perspective, also say, and also assures compliance with, you know, blah, blah, blah, ensures public safety and that sort of thing, but
none of that language is in here and it’s troubling to me, it’s really troubling to me.
Mr. Keene: Can you just take a look a Page 230 and could you speak (crosstalk) Insurance Service Office (ISO) rating.
Mr. Pernijad: So Page 230 is the ISO rating. We are one of only four departments in the State and nine in the nation out of the 14,000 that have been surveyed by this independent auditor
to basically say that Palo Alto has a Class One rating, which is the highest performance rating for the quality of the plan check and inspections that we provide to enforce the building
codes, so this speaks to the quality of the reviews and the inspections.
Council Member Holman: I recognize that. I’m just saying, why doesn’t the language in objectives and goals reflect that. It doesn’t support how we got that. You know what I’m saying?
That’s what I’m after, is so that our intentions, our goals, our objectives match the rating that we actually get, that they support that.
Mr. Pernijad: Up until this time the emphasis has always been about speed, predictability and efficiency, and we haven’t emphasized our commitment to quality compliance and there’s definitely
lots of areas that we can point to, to demonstrate that.
Council Member Holman: I think that’s great and appreciate that and the language in the other areas need to also enforce and support that.
Mr. Pernijad: Those kinds of changes.
Council Member Holman: Yeah, because, you know, if you’re, let’s just say you are a staff member and you pick this up, it’s like, oh, that’s the goal, and some things get lost in translation,
if you will.
Mr. Keene: I feel like I’m being very argumentative tonight. It’s probably lack of sleep, (crosstalk). I think that these things are happening. They are happening but they are not completely
unified in the same sort of location, so the process for going through the ISO rating the assessment provides a measure of the quality that is there. Now what the staff isn’t doing is
tracking and linking necessarily, time, crosscheck by the quality on individual applications or by… And I would just say this, that could be very worthy and interesting, that might be
very complex for us to figure out how we would measure that and crosscheck it.
Council Member Holman: I’m not even asking you to, I mean, you’ve got the ISO rating, so I’m not even asking you in the language to measure it. I’m just saying that as a goal, the language
should be imbedded in the goal that supports getting that kind of ISO rating.
Mr. Keene: Okay. So again (crosstalk) I would be amazed if any of Peter’s staff for the most part ever used the budget document as a communication tool. There are lots of other ways
that he is talking to them.
Chair Filseth: I was going to go there too. (crosstalk) I think Council Member Holman, what he point is that the language here, you know, this is a reflection of sort of our thought
process and the language gets used from place to place, and so on the other hand, that being said, this is a Budget document and the gravity of it here ought to be sort of Finance. Okay.
Go ahead.
Council Member Holman: Yes, but my concern is, how much of this language is translated, because we don’t see it as Council Members, how much of this language is translated or transferred
or translated or whatever into other documents that staff does use for guidance. That’s my point. I’m not trying to make a big, long conversation, but it’s just an observation and I
would hope to see something different. So, my budget question actually is about, on Page 234, actually two questions. Why is it that we’re seeing or projecting a decrease in, excuse
me, permits and licenses for 2017? I mean, there’s talk of a downturn, but we haven’t seen a downturn, so why is that down? Page 234, top?
Mr. Pernijad: Decrease in?
Council Member Holman: Permits and license revenues.
Mr. Pernijad: The actual number of revenues, if I can turn your attention to the SCA report, building permits and revenues don’t exactly track. Building permits stay relatively flat
in Palo Alto. They hover, the number of building permits issued per year might go up or down 100 or 200 permits a year, but the most important thing is the valuation. The valuation of
those permits might track much higher. So there’s a permit for VMWare, which can be millions of dollars, and there’s a permit for a bathroom remodel, which is tens of thousands. So we
might get the same number of permits, but they’re vastly different, so what we’ve noticed is that devaluation of the permits, this tracking this current fiscal year, and if you look
at the valuation of construction for issued permits, it went up slightly from 2014 to Fiscal Year 2015, but we’re starting to see in 2016 that it’s starting to track down, so we’re starting
to see a softening in the valuation of the permits, not necessarily in the number of permits, and that’s what you really want to follow is the value.
Council Member Holman: Okay, so you’re already seeing that trend. Okay. That’s what I was looking for. Then the other thing is, you have, part of this is in Planning and part in Building,
you have code enforcement office and code enforcement lead. What kinds of things would code enforcement do in Development Services arena?
Mr. Pernijad: Building without a permit, construction without a permit, unpermitted activity that’s building-related versus in Planning you might have violations in conditions of approval
or other Planning-related items.
Council Member Holman: Okay, alright. Thank you.
Chair Filseth: Council Member Wolbach, any questions for this? I didn’t have much. It looks to me like total budget for Development Services goes up 2.3 after you include the transfer
of the 2.15 out to, and the other for transfer. So (inaudible) is about seven percent if you backed out that, $600,000 prior.
Mr. Pernijad: Yeah, so the majority of that 2.3 percent increase is broken into…
Chair Filseth: Well, it’s more like seven percent if you back out 2.15 heads from the previous year.
Mr. Pernijad: Yeah, so the salary and benefits, if you back that out, then Mayfield Development contract service was the, was basically a pass through, so we received revenues from that
project, we put them in a separate account and we’ve been using those revenues to offset the expenditures related to the contracts doing the work. So it’s really just a pass through.
Chair Filseth: Cool. One question before we do the motions. We sort of said, here’s an example, you’ve got seven sworn, we’re have a discussion about sworn, are there other parts of
the City where there are sworn employees doing sort of other kinds of work than directly, Fire and Police work?
Mr. Perez: I can think of one where, when we have recruitment issues and dispatch, our backup plan is to have Police Officers step in.
Council Member Wolbach: That’s backup.
Mr. Perez: Right, but not as a direct function that I can think of.
Chair Filseth: So you don’t think there is sort of a smattering of this kind of work being done in Community Services, Planning and Community Environment, stuff like that?
Mr. Perez: Let us double check because I’m going off the top of my head, but from my recollection over the years, I don’t recall hearing.
Chair Filseth: Alright, thank you very much. Any other questions from the Committee? Motions?
Council Member Schmid: I move that we approve the Budget with the staffing realignment in the parking lot.
Council Member Holman: It’s tentatively.
Chair Filseth: Can I ask a question on that? The staffing realignment, that’s a, those people, we already accepted those people in the Fire Department, didn’t we? Those people got to
the Fire Department?
Council Member Schmid: The 2.15 are already in the parking lot. This just does the same thing.
Mr. Perez: Council Member Schmid just put the in the parking lot, so the full $607 would be for discussion in the parking lot, because right now…
Chair Filseth: The same $607, the 2.15 and the $607 tie together right?
Mr. Perez: $412,000 is the 2.15 that you already have in the parking lot, so basically round numbers, another $200,000 in the parking lot.
Chair Filseth: Okay.
Council Member Holman: I’ll second that but tentatively approve.
MOTION: Council Member Schmid moved, seconded by Council Member Holman to tentatively approve the Development Services Operating Budget, and to place in the parking lot the Staffing
Realignment totaling $607,922.
Chair Filseth: All in favor? Motion passed unanimously.
MOTION PASSED: 4-0
2. Retiree Health Benefit Fund, Operating Budget. pp. 479-480
Lalo Perez, Chief Financial Officer: While we do the switcheroo and have Mr. Bartel come up let me just queue it up for discussion. Oh, I’m sorry. Every two years we’re required to do
an update on our retiree medical actuarial, and so we hired Mr. Bartel through a competitive process. We went through an Request for Proposal (RFP) process and competing with other fellow
actuarial firms and we selected him and had him do the report for us, so that’s the reason he’s here tonight, to present to you the updated report from the data set of 06/30/2015, which
is a requirement as I mentioned.
Chair Filseth: Very good. Welcome Mr. Bartel. Thanks for joining us.
John Bartel, President, Bartel Associates, LLC: Thank you very much. Can I ask a logistical question? Do…
Kiely Nose, Budget Manager: I got you covered.
Mr. Bartel: Okay, thank you very much. So as I’ve said before, it’s absolutely an honor to speak with you all. So what we’re going to do is talk about retiree health care. Let me give
you sort of a very quick brief overview of what the results are. We are, the liability is very slightly higher than we expected from the prior valuation. The assets are slightly lower.
That net result has an adverse impact on your unfunded liability, but it’s not what I would refer to as dramatic, so maybe if we go to slide, the next slide we’ll go very, very quickly
through the summary of the benefits. You all have what the City refers to as benefits in four different groups. Groups One, Twp and Three are, generally speaking, this actually varies
a little bit by bargaining group, but it’s generally speaking people hired before 2004. Groups One and Two are people who have already retired. Group One, full premium provided by the
City. Group Two is premium limited to the second highest, and the Group Three, these are for folks hired before 2004, but retired on or after May of 2011. You have fixed dollar caps,
you have a history of increasing those dollar caps, and then if we go the next slide, to Group Four, those are folks hired generally speaking on or after January 1, 2004. You all have
what I think of as the PEMPCO vesting schedule, the way the PEMPCO vesting schedule, California Public Employees Retirement System (CalPERS) medical vesting schedule. The way that works
is, you need of minimum of five years of City service to be eligible for the benefits and the caps are applied to statutory amounts that are very, very close to your dollar caps. What
also happens is employees who were in Group Three have the option of opting for the vesting schedule for Palo Alto Peace Officers Association (PAPOA), Police Management Association (PMA),
Service Employees International Union (SEIU) and International Association of Fire Fighters (IAFF). All active employees in Group Three opted for Group Four, and the primary reason for
that is, most of those folks have a significant amount of service. When you get to 20 years of service you do not need to retire directly from the City to be eligible for the benefit.
So Group Four is actually very modestly more expensive than Group Three. Surviving spouses get 100 percent of the benefit and then we had included in the prior valuation what we refer
to as the implied subsidy and the implied subsidy is, you allow retirees to continue to participate in the medical plan. The premium paid for them is not sufficient to cover their expected
claims, so the actuarial standard of practice requires us to include expected claims rather than the premiums. So if we go to Slide Four, one more, we go to Slide Four. Slide Four and
Five look at your demographic information. A couple of notable things, we showed 2013 in total but 2015 valuation broken out between miscellaneous, Police and Fire. For both Police and
Fire you have significantly more folks retired receiving the benefit than you do active employees. For miscellaneous it’s about even, about a one to one relationship. Then if we go to
Slide Five, what you see on Slide Five is that no active employees in Groups One and Two, all retirees. So Groups One and Two really are made up of people who have already retired. That’s
where the bulk of your liability rests, and then really Group Three, a very small number of active employees and Group Four, that’s really where the bulk of your active employees are,
but very, very few retirees in that group. Then, Slide Six is the actuarial methods. The one thing I think, two things on here that I think are worth noting is, in the prior valuation
we used a 30-year amortization. Because that was two years ago, we’re now down to a 28-year amortization. The idea really is that if you don’t sort of have a closed amortization period,
then you really are not paying off your unfunded liability. That long amortization period, though, means you should have an expectation that it’s going to take a while before your unfunded
liability is paid off. So that’s Item Number One of note. Item Number Two is, we’re using market value of assets to determine your unfunded liability. Because we’re using a market value,
there is significant volatility in the unfunded liability and that’s really what we saw in this valuation. June 30, 2015 the investment return not particularly good, and the expectation
is for June 30, 2016 will probably not be particularly good as well. Then if we go to Slide Seven, two items that I will point out here. We used a 7.61 percent discount rate in the prior
valuation. That was the highest discount rate that CalPERS would allow us to use and have you all continue to prefund through their trust. We have dropped that to a little more conservative
7.25 percent discount rate. That, by the way, was the single biggest reason you’re liability went up higher than we expected it to go from the prior valuation, so that’s Item Number
One on this slide. Item Number Two on this slide is, we have strengthened, that third square bullet down there, CalPERS as part of their demographic analysis began to anticipate continued
improvement in mortality, longevity, if you will, so what we’re doing is bringing our assumptions closer in line with the CalPERS assumptions and actuarial standards of practice. So
that also increased your liability a bit, as well. So if we go to the next slide, what we see, you really see your market value, the key item in my mind on Slide Eight is you have, we’re
projecting you to have about $82 million in assets set aside for your retiree health care obligations at June 30, 2016, and then if you look at that lower row, what you see is the significant
volatility in the investment return from one year to the next. So 18 percent rate-of-return for June 30, 2014, negative 0.2 for June 30, 2015 and then about zero expected through June
30, 2016. Important to keep in mind that a gain or a loss has to be compared with the assumed rate of return, so until the current valuation, we’re using 7.61, so if you compare that
to the zero rate-of-return there is an investment loss of about 7.6 percent of the market value of assets for the June 30, 2016 fiscal year end. Then if we go to Slide Nine, Slide Nine
is really where the excitement begins, if you will. You’re unfunded liability projected to be $140 million, these are in thousands of dollars, $140 million at June 30, 2014. It’s actually
about $164 million. You were about 34 percent funded. You’re now about 33 percent funded and the reason, if we go to Slide Ten, the reason for your increase in the unfunded liability,
the assumption changes we talked about increased your liability about $22 million. You had some plan changes. Really, the folks moving generally speaking, from Group Three to Group Four,
that had a modest increase in your liability, and then there were experienced gains on the data. By and large, that is not quite as many folks retiring as we thought were going to. Then
on the asset side, about an $8 million loss, all of that generally speaking due to the investment return. That combination of the assumption changes offset by the experienced gains added
to the $8 million investment loss, gets you to an increase in your unfunded liability of about $20 million. I’ll just note on this slide, there is one typo where you see a negative 8.1
under the assets. That should be a positive, it’s a loss. Then if we go to Slide 11, we have the actuarial liability assets and unfunded liability by City fund and that would be as of
June 30, 2015 as opposed to projected to June 30, 2016. Then we have the contribution requirement on Slide 12. This is sort of arguably the end of the excitement. Your contribution requirement
for ’15/’16 you’re sitting at about $14.8 million. That went up in ’16/’17 to $16.4 million. Your pay-as-you go cost, what you are pulling out of the trust to sort of reimburse for the
benefit payments also went up. That really resulted in a net increase in your prefunding contribution of about $640,000. You really don’t see that number there, but that really was the
net increase, the net impact, if you will, from ’15/’16 to ’16/’17. I went through that, oh, I’m sorry. Slide 13, we are projecting into the future, if investment return is as assumed,
that seven and a quarter, we’re projecting you to be at about 50 percent funded in about seven, eight years. I went through that relatively quickly. I would certainly be happy to answer
any questions you all have.
Mr. Perez: John, sorry, I didn’t ask you this ahead of time, but can you go back to Slide Nine. I was trying to look for the number real quick, but you’ll probably be faster than me.
Can you maybe touch for the Finance Committee Members, the implied subsidy, because there is a big portion in here and I think it’s an important point to understand.
Mr. Bartel: I’m going to do this a little bit off the top of my head. So what I’d like you to do is look at the June 30, 2015 valuation numbers because the ’15 valuation number generates
the ’16/’17 contribution. We’re actually showing you the June 30, 2015 in the projected June 30, 2016 numbers. So if you look at June 30, 2015, what you see is about two-thirds of that
liability is for retirees, about one third for actives and if you take that $234 million number, I’m going to do this a little off the top of my head, about 25% of it, I’m going to say
$50 million, in that neighborhood, is for the difference between the expected claims for current and future retirees as opposed to the premium that’s being paid. So a large portion of
the total liability is that implied subsidy, if you will. The difference between claims and premiums, that, if we kind of go back to what that is for a moment, the one thing I can tell
you, the older I get the more time I spend going to the doctor, and what’s happening is the premiums that are charged are a blended experience of actives and retirees. Retirees are older
so their actual cost is higher than active employees. That’s really what’s going on there.
Mr. Perez: And this was a new requirement that just came into play. Otherwise, our numbers would have looked a lot better.
Mr. Bartel: That’s absolutely right.
Mr. Perez: But this change that you must follow really set us back, from my comments not John’s comments. We were trending much better. So to the point was that we are addressing our
situation of funding our annual contribution, setting up the trust. Just a little more background, I can’t take the credit for this, my predecessor did this. When we were super funded
in the pension, in other words we didn’t have the payment requirement, he continued to charge ourselves like we were going to make the payment to PERS for pension, put it aside and we
accumulated roughly about $25 million at that point and that was the seed money that is now to the 81.
James Keene, City Manager: Mr. Chairman, could I ask a follow up question? Just curious. John, in your experience, looking at this $77 million ratio for actives to the 157, a little
over one-third to two-thirds, how does that compare to other entities, and what does that say?
Mr. Bartel: I’ll maybe give you a couple of comments on that. When we look at our city clients, if you will, I know this is a little simplistic and it’s probably not precisely accurate,
but our city clients sort of fall into a variety of different categories. What I think of as cities that have been around a long time with fixed boundaries, in other words, no ability
to do, your population is not expanding. When I look at this City you kind of fall into that category. It means you’ve been here for a long time, you’ve been providing services for a
long time. You also have employees that, generally speaking, tend to stay around, so you all for a city that falls into that category, that relationship of a lot of liability for retirees
compared to actives is not at all uncommon. It’s also true when you look at the level of benefit provided for retirees, it is more generous than it is for active employees, so that expands,
if you will, that difference between retirees and actives. When we look at cities that have expanded in population, so if you look to many cities in the Central Valley, or if you go
down to Southern California, to the inland empire, what you really see is quite a difference. The liability for retirees compared to actives is much, much lower than for you all. So
what I would say is you all are a very mature City and what that means is, that much more important that you are doing what it is you are doing, which is prefunding, setting the obligation
aside. It’s absolutely fiscally prudent. It will save you money in the long run, so generally speaking we have more clients that are in the not quite as mature as you all category, so
you all just kind of fall into that, a large liability for retirees. We have probably less than one-quarter of our clients fall into that category, and you all are towards the upper
end of that quarter, primarily because you all have changed benefits for your active employees, whereas many of our other clients have not.
Mr. Perez: With that, we have one final slide to present to you, then we will open it up for questions.
Ms. Nose: This last slide is just kind of showing you the Annual Required Contribution (ARC) payment over the course of your 2016 adopted to your current modified for 2016, as well as
the proposed ARC payment that’s in the actual document, so what this budget is built on versus this new valuation that just came out. So as you can see, for Fiscal Year ’17 the delta
is very small from what’s been assumed in this budget and what’s been built on. I think at this time, given that nominal value, we would probably recommend adjusting this as part of
our mid-year budget review instead of reopening all departments all budgets through this proposed process. But you can also see where you’re at versus Fiscal Year ’16 and we have that
modified column to kind of highlight what Chair Filseth’s comment was, I think, at the get go, which was that double counting of the implied subsidy. So you can see the adopted applied
subsidy is up there in the different funds, as opposed to the modified with that implied subsidy pulled out.
Council Member Schmid: You’re taking specifically about retiree medical. A lot of what you were talking about was our ARC payment for pensions, is that right?
Mr. Bartel: No, this is all retiree medical.
Council Member Schmid: Okay. So you’re saying that we have unfunded liability for medical specifically of $164?
Mr. Keene: That’s right.
Chair Filseth: You know, that’s shockingly close to the Other Post Employee Benefit (OPEB) number. Is there much in OPEB besides this?
Mr. Bartel: Well this is really the, this is the OPEB number.
Chair Filseth: So there’s not. It’s just basically this. There’s nothing else. So other…
Mr. Bartel: There’s nothing else.
Chair Filseth: Accrued vacation time?
Mr. Perez: We had that separate and fully funded.
Council Member Wolbach: Chair Filseth?
Chair Filseth: Yes sir, please.
Council Member Wolbach: A couple of questions. I’m just trying to, thinking back a little bit on what the City Manager was asking about comparing to other entities, trying to think about
these numbers in context. You know, what would a healthy city look like, what other cities in the region and in the State look like and, you know, what would healthy look like? So looking
at, I’m trying to find what page it was. So Slide 23 of the whole presentation, but Slide 13 in your presentation, when we’re looking at the ten-year projections, so I guess, so look
at the bookends. Projected funded status, 36 percent in Fiscal Year ’17 and 55 percent in Fiscal ’26. First question, how confident are we in the 55 percent in 2026? Is that wild speculation,
very certain, is it somewhere in the middle? How much confidence can we say that with?
Mr. Bartel: Yeah, so, I’m going to give you an actuarial answer to begin with, and then I’m going to do my best to translate that to English.
Council Member Wolbach: Great.
Mr. Bartel: So when we do our projections we attach some underlying confidence to that, so 100 percent would mean that the funded ratio, we would be 100 percent certain that it would
be at or greater than what we have. We have about a 55 percent confidence that in June 30, 2026 that your funded ratio will be at or bigger than the 55 percent. It’s a coincidence those
are two 55 percent numbers, just so you know. So greater than 50 percent confidence level and all of that has to do with the investment return assumption where we’ve changed from 7.61
to 7.25, that 7.25 is slightly greater than a 50 percent confidence level, that’s why I kind of make that statement. Our 7.25 is modestly conservative is what we’d say.
Council Member Wolbach: Okay, and so the next question is, looking at those bookends of 36 percent in ’17 and 55 percent in ’26, is that healthy in comparison to ideal. Like, how do
we judge that or how healthy is that compared to ideal, compared to other California cities, and those might be very different questions.
Mr. Bartel: That’s a tough question for me to answer. Let me tell you why.
Council Member Wolbach: You’re welcome.
Mr. Bartel: I’m not a finance guy. We have clients that…
Council Member Wolbach: And let me say, Staff feel free to jump in here too.
Mr. Bartel: We have clients that range from what I would characterize as very healthy cities fiscally and we have clients that are not so healthy. We have the City of San Bernardino
and the City of Vallejo are both clients of ours. Both of them, by the way, are prefunding their retiree health care obligation, but it would be accurate to say that neither one of them
are projected to be at this sort of funded ratio. We also have other clients that are very, very healthy clients who are not prefunding their obligation and for me, because I’m not a
finance person, hard for me to use the term healthy versus unhealthy. I can tell you how these numbers compare with our other clients. I can tell you that historically agencies did not
prefund these obligations. We would really have an expectation that these funded ratios would probably be in the, above the upper one-third of, if you looked at all of our clients, we
would probably have at least two-thirds of them that would have lower funded ratios than these.
Council Member Wolbach: So at least we’re doing better than some others?
Mr. Bartel: Yeah, I would say you’re probably better than more than two-thirds of our clients. What I will also tell you is, our clients probably have a tendency to prefund more than
our non-clients do. I’d be happy to tell you why I think that is, but I have a high degree in confidence in that. So if you compared these numbers to all agencies in this State, I’d
be surprised if you were not in the upper 20 percent. I just don’t know that. Our clients I know, our non-clients I have a sense, I just don’t know. So let’s talk about the word healthy
though, because I have a personal bias. My personal bias is, I’d like you to be 100 percent funded. I think 100 percent funding is healthy. Now, does that mean that it’s necessarily
unhealthy that you are at 36, you haven’t been funding that many years. I actually think it’s quite good that you’re at 36, even though 36 seems quite low compared to where I would like
you to be. So for me, if you are at 36 and you have a budget and you have a plan and you have the revenue to be able to make your contribution to pay your unfunded liability off, I actually
think that’s healthy, keeping in mind that I’m not a finance person and I’m the wrong person to really use that word.
Council Member Wolbach: Like I said, I’ve got a couple more questions. I’d be happy to hear from Staff.
Mr. Keene: I just wanted to state the obvious. I mean, right now the path we are on would say that in 2045, or whatever it is, we would be at 100 percent. So that 28-year cycle, I mean,
which until two years ago we were, in my simplistic lexicon, we were just rolling everything over every year and we were not healthy, in my opinion.
Chair Filseth: Okay, I’m going to ask a follow up for this particular topic though, which is, if you look at the unfunded pension liabilities, I mean the whole State went from, basically
everybody was fully funded at the turn of the millennium to where we are now. Was that also the case with these expenses? Were they also fully funded at the turn of the millennium?
Mr. Bartel: No, in fact you all were zero funded at the turn of the millennium. You had no money set aside in an irrevocable trust. So, let me kind of put this into perspective. To the
best of my knowledge there were less than ten agencies in this State at the turn of the millennium that had any money set aside and all of the ones that we did work on did not have it
in an irrevocable trust. They had it in an agency fund that could be moved, so it was the rare agency that had any money set aside, and to the best of my knowledge, nobody had money
set aside in a trust.
Chair Filseth: I did not know that. Sorry, go ahead.
Council Member Wolbach: No problem. That’s a good follow up actually. So those responses actually answered a couple of my other questions. Just going back to making sure I understood
you, some of the things that are outside of our control, things like, people are living longer, that’s impacting this right? The discount rate, you know, changed. There are things that
are changing that are increasing this, even though we’re trying to put more money in. So I guess what I’m really trying to do here is get a real sense of where we are compared to other
cities and, again, as we were just discussing, just because we’re better than other cities, it might be damning by fate praise, if everybody else isn’t doing anything. So, we’re certainly
better than we were in 2000. We’re better than a lot of cities, maybe even most cities in the State. That’s good to hear. So I’m really trying to emphasize getting a grasp of, for all
of us, I think it’s important and the communities, are we on the right track, are we in some risk, are we totally screwed and that’s, you know, the 50,000 foot level analysis. So I think
that is definitely helpful. I guess the next question is, maybe more for Staff, which is, could we do more, should we do more and do we need to do more, or does Staff feel like we’re
really on the right path?
Mr. Perez: Good point, and I think you have given us that direction as a Council and Committee for us to explore options, not just for pensions but for retiree medical, so I think our
first step is just try to address the retiree medical, excuse me, the pension that we started that discussion with you most recently, the 1.3, though modest, it’s a start, and we want
to find a way to incorporate this into future policy decisions on funding. To answer some of your points earlier, California For Common Sense, which most of you may be familiar with,
a couple of years ago put out an article about the top 20 cities in the State. I was shocked that we were one of the top 20 in terms of size and budget, and most of them had not…
Chair Filseth: The rest of the State’s really screwed, but okay, go ahead. (crosstalk)
Mr. Perez: Exactly. Most of the cities had not put money aside of those 20 largest cities, but we were in the top group. So it gives you a sense from that number. John’s right, we didn’t
start a trust, we just put it aside within our own fund when we first started this, so I think we are making headway. I think there’s room for more. It’s a matter of balancing all the
priorities that (inaudible) the Council, the community has input, right. So, I think at one point I gave you an example of what a potential funding policy could look like. Not that this
is the answer, but a potential option, that currently anything above 18.5 the City Manager has discretion to recommend to you to send to the infrastructure reserves that we talked about.
Well, maybe half of that goes to the infrastructure and the other half is split between retiree medical and pension, for example. That could be another way to do it. So there are ways
for us to imbed future funding policies beyond our annual required contribution to address this.
Council Member Wolbach: I’m just looking at, what is it you’re recommending with regards to this here, and that’s Page 25, right?
Mr. Perez: Correct. That you accept our recommendation of the proposed budget for the retiree medical, which is an updated number...
Council Member Wolbach: I forgot, which page was that?
Mr. Perez: Oh, Page 480, sorry. So our recommendation is that you accept the numbers that we have in the Proposed Budget and then we will come back in the mid-year and adjust it to the
latest revised number that Mr. Bartel and his staff have calculated for us. In our mind, it’s a small difference that we can definitely adjust at that point.
Council Member Wolbach: Okay, that’s it for my questions.
Chair Filseth: Okay. Council Member Holman.
Council Member Holman: The differential is not very large, and I’m just wondering if that difference, depending on what happens in the world in the next months, but could that differential
come out of the $2 million that we’ve set aside as a, I forget what you call it.
Mr. Keene: Uncertainty reserve.
Council Member Holman: Yeah, could we just take it out of that so that we’re not doing a Budget Amendment Ordinance (BAO) or something of that nature.
Mr. Perez: We may even be able to absorb it, you know. So let us come back to you with a recommendation because if revenues are better than anticipated, you know, that’s another source.
Mr. Keene: I did want to just add one thing about feeling good about where we are, going back to that chart that had 55 percent payment level by 2026, the fact that Lalo has committed
to staying as Chief Financial Officer (CFO) (crosstalk) 2045, I think there’s a lot of reason for you to…
Chair Filseth: And if we get to 2045 and…
Council Member Wolbach: And the City’s not physically under water.
Mr. Keene: We will definitely be one of the most mature cities in the... (crosstalk)
Council Member Holman: Lalo’s hair color hasn’t even turned yet.
Chair Filseth: Council Member Schmid. I’m sorry, were you done? Okay, Council Member Schmid.
Council Member Schmid: Yeah, I guess I’m not quite so optimistic. If you look at the five-year return rate, it’s around four, 4.2 percent per year, we’re assuming 7.25, so reaching the
55 is somewhat under a cloud. Let me just turn, though, to the practical thing of this year’s budget request. I’m surprised that you’re making the assumption that older people pay more
for health care.
Mr. Bartel: Let’s be clear. What we’re talking about when we’re talking about the implied subsidy, is older people who were not Medicare eligible. I did not make that clear when I said
that before. I really want you to understand that. So if we’re talking about somebody age 60, the medical cost is higher. Once you are eligible for Medicare, then those folks are rated
separately. There really is no implied subsidy for those folks.
Council Member Schmid: So the subsidy disappears.
Mr. Bartel: Disappears at Medicare eligibility, that’s right. So it depends on…
Council Member Schmid: So the 55 might come from the fact that under a Tier Four, people will be retiring at 60 instead of 57?
Mr. Bartel: Yeah, there’s really two reasons why it’s a relatively big number. Number one, it’s your Safety folks who retired noticeably before 65, and then the, if you kind of think
about this a little simplistic, if you did not pay, you can’t do this, but if you paid none of the premium and let retirees participate in the plan, then the implied subsidy would be
a much bigger portion of your liability, so really for Group Four, Groups Three and Four in particular, it’s a bigger portion of your liability than it is for Groups One and Two.
Council Member Schmid: Okay, let me turn to our Long-Range Financial Forecast and our numbers we use for negotiations. We have been looking at department by department, salaries, benefits,
medical costs and retirees and I note that this year those numbers have changed a little bit because we’re taking the subsidy out of the department and paying it separately, $2.1 million,
$2.3 million. Now that changes our salary and benefits that we are building up in each department, but it no longer shows up in the department. We turn to the Police and say, oh, retiree
benefits have gone down. We turn to Fire and say, oh, retiree benefits have gone down, but actually what we’re doing, it took me a little time to find this, what we’re doing is transferring
the $2.3 million from our earnings from Utilities, is that right?
Ms. Nose: Not quite. So what happened in Fiscal Year ’16 is there are theoretically two ways through which you can recover the costs associated with the implied subsidy. So the implied
subsidy is inherent in the health care rates that the City pays to CalPERS for active employees, so you collect, if you apply the flat rate, let’s say, it’s not but let’s say it’s 10
percent, right, if you applied that 10 percent rate to everyone’s salary, that 10 percent rate would collect not only active employees contributions for CalPERS but also that implied
subsidy. So in the Fiscal Year ’16 Budget they used those CalPERS health rates and they also budgeted the implied subsidy through the allocated charges in departments in the retiree
health care line. So instead of budgeting $2.2 million, I can’t remember what the exact number is, once, either in the benefit costs of health care, or in the benefit costs of retiree
health care, it was budgeted in both places in ’16, so it was double counted. So the ’16 Adopted Budget has that $2.2 million in two places in departments’ budgets, so their departmental
budgets are overstated and that’s why when we look at this slide, what we did at mid-year is we fixed that and we pulled out the implied subsidy from departmental budgets, that double
budgeting, we pulled that out so we had savings as part of mid-year and that’s, frankly, one of the major reasons why we were able to fund a lot of the things in the mid-year budget
City Manager Report (CMR). So when we pulled that double budgeting out you look here at your modified Fiscal Year ’16 Budget, you’re actual general fund retiree medical was $8.2 million
as opposed to what is currently being shown as the ’16 Adopted Budget of $9.7 million. So that year-over-year change when we’re looking at departments, you’re adopted budget is what
it is at that point in time, so we haven’t restated that adopted budget in this ’17 Proposed Budget because we changed it post adoption.
Council Member Schmid: This affects only retiree medical?
Ms. Nose: Correct.
Council Member Schmid: So if you turn, for example, to Police on Page 337, it says, from 02/16 had $2.7 million, and 2017 for retiree medical, $2.67. So it’s a decline of 3 percent where
actually if you turn to the retiree medical it says 8.9 percentincrease.
Ms. Nose: So that, if we look at Police, let’s just take the example of Police and I can pull up the numbers in a moment, that $2.75 million in the ’16 adopted has an implied subsidy
charge of $404,000, so if we were going to restate that $2.75 number and reduce it by $400,000, you would actually see a year-over-year increase, which is consistent with what you would
expect.
Council Member Schmid: Yeah, but if you turn now to 480, Retiree Medical Benefits Funds, the 2.291 is a transfer from the General Benefits Fund and if you turn to the General Benefits
Fund, that comes out of, what is it, non-operating transfers.
Ms. Nose: Correct, because through that rate, through the CalPERS health care rate, that’s where that implied subsidy is inherently. So we’re collecting that $2.2 million through those
rates in employees as their paychecks are getting cut and it’s going into that fund, but in order to show you the full ARC payment, we’re transferring that implied subsidy piece between
the two funds, so that in this retiree health benefit fund you see that full ARC payment, including the implied subsidy.
Council Member Schmid: Now where does it show up if I turn back to the Police budget? Where does that $444,000 show up?
Ms. Nose: The $404,000? I’m sorry, my mid-year number? The $404,000 is sitting in your FY’16 Adopted Budget, $2.753 million number.
Mr. Perez: It should have been less that.
Ms. Nose: It should have been less that.
Mr. Perez: So it should have been roughly $2.3 million compared to $2.6 of an increase so you would have seen that $300,000 increase in retiree medical if there wasn’t double counting.
Council Member Schmid: Well then I guess the question is, why in every one of the budgets, that retiree medical is lower.
Mr. Perez: Because of that double counting. We entered it twice, so we double budgeted, so we would have to modify, typically you don’t modify, as Kiely said, your adopted budget because
that’s why you adopt it, so we would have to compare it to the modified budget, which is what Kiely is doing at a high level here. We would have to do it department-by-department to
show you the difference.
Ms. Nose: Which I have.
Council Member Schmid: So over the last year then, we as a Council, have been looking at overstating our, understating our medical costs, medical benefit costs.
Mr. Perez: We overstated it for half the year, then we fixed it at mid-year, right.
Council Member Schmid: So how does that translate into the decisions we’ve made over the course of 2016? Were we making wise decisions?
Mr. Perez: In terms of labor negotiations, I think you were because…
Mr. Keene: You have agreements.
Mr. Perez: We knew that the number was overstated, and so when we were working on the numbers, we knew that and we had presented that to you through March and April.
Council Member Schmid: Okay, so the numbers we have for 2017 going forward by department are an accurate reflection of compensation, if you turn to the total compensation sheet upfront,
what is it 84? That reflects the true value.
Mr. Perez: With the exception of the latest update that Mr. Bartel just provided us, right, there we’re talking a small difference, the answer is yes.
Council Member Schmid: Okay, thank you.
Chair Filseth: Sorry, did you go already?
Council Member Holman: I did mine.
Chair Filseth: I wanted to ask one question, which is, the net liability, so independent of the trust and so forth, the total liability, what are the drivers for that? How does that
change over time? What drives it?
Mr. Bartel: In fact, let’s look at Slide Nine and let’s look at the two pieces, the $77 million and the $157 million, so what’s going to happen is the $77 million will go up modestly
from one year to the next. Those are folks who are not receiving a benefit because two things are happening. Number one is they are rendering service, so their accrued liability grows.
In addition you are one year closer to making those benefit payments, so that $77 million is going to grow each year by roughly about $10 million, probably something like that, but then
it’s actually going to decline, so it’s going to go up if no one retires, but as people retire that money is moving from there to the retirees, that’s right. So you’re retiree number
is going to grow as new retirees come in, but it’s going to decline as retirees pass away and as benefits are made. So my expectation is that next year the $77 will be a little higher,
and the $157 will be a small amount higher. You can kind of see, we’re projecting it to grow in the aggregate by about $11 million from June 30, 2015 to June 30, 2016.
Chair Filseth: So 5 percent or something like that?
Mr. Bartel: Yeah, you should have some expectation that it’s going to grow about that $11 million dollars for several years into the future. At some point in time it will begin to decline
a little bit.
Chair Filseth: So is there a dependency on inflation or on the cost of medical services?
Mr. Bartel: Yeah, the big deal here is what will cost, how will health care costs grow over time? So, you know, when we look at the growth of health care costs over the past several
years, retiree costs, in particular Medicare-eligible costs, have not grown as much as we expected, so it’s, that’s by far the big uncertainty. What will that cost grow?
Chair Filseth: So I’m conditioned to think of the cost of medical care in this country insurance is growing pretty rapidly. I mean, a lot faster than 5 percent historically.
Mr. Bartel: Historically that has absolutely been the case, but that’s particularly the case for active and what all refer to as early retiree or non-Medicare eligible costs. Medicare-eligible
costs have not grown at that rate, as you… So a small portion, really the implied subsidy and the payment of the premiums before Medicare-eligible, that’s going to be impacted most if
you have rapid health care costs. There are significant restrictions on how much Medicare-eligible premiums are allowed to grow, so you probably should have an expectation that your
active premiums are going to grow higher than five, no question about that, but because so much of your liability is for Medicare-eligible, we think the restrictions kind of get you
to a little better place than you might expect.
Chair Filseth: Interesting. So if we go back to, pick a number, 15 percent a year, 20 percent a year heath care increase, you expect to see it reflected in that?
Mr. Bartel: No, it will be reflected, it just won’t be reflected anywhere near that much. That’s right.
Chair Filseth: Next.
Mr. Keene: Could I ask just one question Chair Filseth? Just curious, I’m being theoretical here, but obviously the Council is concerned, John, about the sustainability of adding full-time
fully benefited employees. What would happen in this area if our actual active numbers went down by some percentage? If we just said we had 10 percent fewer systematically or 20 percent
fewer, what happens in all of these different numbers and how does that relate even to the unfunded liability?
Mr. Bartel: Just so you know, my answer is different for OPEB, for retiree health care than it is for pension because (crosstalk), yeah, for OPEB you have to be eligible, if you leave
prior to retirement, you don’t get the benefit at all, so I know this is a little simplistic, but what I’d like to do is look first at this slide, and then we’ll go to the contribution
if you will. If your liability for active $77 million. All of a sudden if your active population went down by 20 percent that retiree number does not change. The $77 million would be
lower but it would probably not be lower by 20 percent, but it would be lower because the positions that you would eliminate, my expectation, I don’t know whether this is right or not,
my expectation is they would have a tendency to be younger, shorter service people, rather than longer service people, so maybe the liability would go down by 10 percent of the $77 million,
so $7 million. Then if we go to Slide 12, what would happen is the… So you’re unfunded liability amortization would go down a small amount, but the dollar amount of your normal cost
would also go down because you have fewer people, that normal cost is the value of benefits being earned by active employees, so if you have a 20 percent lower population, that $6.5,
$6.3 million might go down, again not quite 20 percent, but in the 15, probably higher than 10, lower than 20, so 15 percent might go down for the sake of argument $1 million, so you
would have a reduction in the normal cost of about $1 million. You might have a reduction in the amortization of, rough number might be somewhere north of the half a million, so you
would probably have a net budget savings of about a million and a half, but it would still be, but the number as a percentage of pay would go up, of course, because your payroll is going
down by also 10 to 15 percent, so I think you would have an adverse impact. You’re paying your unfunded liability over a smaller payroll.
Mr. Keene: So that was the other question I was going to ask. Everything else is going down in one sense, it doesn’t necessarily positively influence the pace of which our unfunded liability
is paid off, correct?
Mr. Bartel: That’s right.
Mr. Keene: I mean, if we somehow capped our ARC at the same level, or whatever, however we were paying that, but that would be costly to us.
Mr. Bartel: That would get you to a shorter amortization period, if you will. That’s right.
Chair Filseth: Cool. Other comments or questions? Motions?
Council Member Schmid: Move tentative approval of the Retiree.
Chair Filseth: Second.
MOTION: Council Member Schmid moved, seconded by Chair Filseth to tentatively approve the Retiree Health Benefit Fund Operating Budget.
Chair Filseth: All in favor? Motion passed unanimously.
MOTION PASSED: 4-0
Chair Filseth: Thanks folks. Thank you John, thanks for joining us again. Always a pleasure. We always learn something when you’re here.
3. Planning and Community Environment, Operating Budget. pp.315-329
Kiely Nose, Budget Manager: So we’ll move along to Planning and Community Environment and I think Hillary and Sherry are here.
(crosstalk)
Hillary Gitelman, Director of Planning and Community Environment: Well, good evening everybody. Should I wait for Council Member Schmid?
Ms. Nose: He’s right there.
Ms. Gitelman: Okay, well good evening. Just a quick overview. I think you all are aware of the many functions that are in the purview of the Department of Planning and Community Environment,
but this chart shows it in a neat beehive configuration, which I think is appropriate. We have the long-range planning, transportation planning and transportation engineering, code enforcement,
and then our current planning, which is not just current planning application processing of the titlements, but support of the Development Center. We included in the budget book a sample
of some of our accomplishments last year and you’re well aware of many of these, having had a hand in many of them. Ground floor retail ordinance, the annual office/ Research & Development
(R&D) limit, the bicycle boulevard concept plans, the Transportation Management Association (TMA) launch and the downtown commute survey, all of our work collectively on Residential
Preferential Parking Program (RPP) and on the Comprehensive (Comp) Plan. This, of course, is all in the context of a pretty small department in the scheme of things. There are about
36 bodies in or department right now and when we’re fully staffed with on-call consultants and hourly’s we continue to carry a significant number of vacancies, and yet our workload is
just tremendous. In fact, (inaudible) before she left did a calculation. The department is responsible for over 50 percent of the study sessions of action items that go to Council, so
we’re small but we’re mighty. We’re proposing some initiatives, many of them continuation of ongoing programs in 2017. The comp plan update will continue. We had a long discussion last
night, as you know, about the future RPP’s, so I should have included the pleural there in the second bullet. Also, as you know, we’ll be implementing the parking wayfinding undertaking
and completing a paid parking study, continuing our work and support of the TMA and the bike projects. And then we’ll be collaborating with the Police Department on Phase One of a speed
survey and undertaking a number of safety improvements. There a lot more things on this list that I didn’t have room for, including accessory dwelling units, the review of the Single
Family Individual Review (IR) Program and then just internally, we’re focusing some attention on our application processing, kind of predictability, consistency and cost recovery, now
that we have updated fees. The budget, just kind of an overview, you really don’t see any change here. We had a general fund support of about $8.9 million last year and it’s about the
same proposed next year. We do supplement this with Capital Improvement Program (CIP) projects and special revenue funds, so some of our work touches those other funds. We are making
some staffing requests and some additional budget requests that I’m going to talk about in a minute, and then I want to end by telling you some of the many things that we would like
to do, but that are currently unfunded. So our staffing requests. First, let me just step back and say philosophically, you know, I often get asked, why don’t you just get more planners,
and the truth is we have, we are carrying planner vacancies. We have a number and I always feel it is hard to ask for positions when you have vacancies, because you don’t know what your
full strength is capable of, but this year we’ve taken the philosophy if asking for positions that will really leverage the time and efforts of our planning staff, so we’re asking for
a Management Analyst on the administration side, who is going to help us with our cost recovery, fee monitoring and business operations, taking some of the load, I hope, off of the planning
staff for a whole number of things, and helping Sherry with all the work that she does. We’re asking for a Program Assistant in transportation that’s going to take a lead role in some
of the data collection and analysis of our parking programs primarily and take the load off of Sue Ellen and other professional staff. Then we’re asking for a Building Planning Tech,
who is going to be assigned at the Development Center and doing intake of all our applications. Currently we detail planners from our department to intake applications and it’s a huge
drain on them and a distraction from their other work. So this is a way to kind of give them more time to focus on their work efforts. And then we’re asking for another half of a position
for Safe Routes to School. That’s a program, you know, that’s been very successful when we have been operating with a few half-time positions. We’re trying to create a full-time position
and get professional staff to help us with that program. All of these are only partially funded by the general fund, so I can explain a little bit about each one of them. The management
analyst, we currently have this budgeted at 0.4 FTE in our department because we were paying for a piece of Richard Hackman’s time in the City Manager’s Office, so Richard’s gone, the
whole position is coming to our department, so it’s a net to our department of about 0.48 FTE and it’s a small percentage, 10 to 15 percent is budgeted in the CIP because of the work
that it will be doing. The transportation program analyst, only 35 percent of the position is in the general fund. We were able to allocate the rest of the position to the special revenue
funds and the CIP. Then the planning technician, I think as Peter indicated, 50 percent of this is budgeted in Development Services and 50 percent in our department, so the Development
Services piece obviously is fully fee supported. Then the Safe Routes position is fully supported by the CIP. That program is in our CIP. So, in terms of other budget adjustments beyond
staffing, we are requesting continued funding for pilot programs. You’re going to see at Council before the break, a funding agreement with the TMA to give them the $100,000 that was
set aside in this year’s budget for pilot programs, agreement with conditions under which they would be able to access those funds. We’re proposing the same arrange in FY’17. We’ve included
funding for ongoing shuttle operations, although, as we’ll talk about, not for any expansions. We have, this shows up as a ding on our budget and you talked about this a little with
Peter. It’s an adjustment of staffing between departments. Staff that was formerly covered in Development Services is now on our dime, but then we’re getting that other half, but, you
know, it’s always an adjustment. Sherry has to help me understand where we’re giving and taking. Then there’s an item in here for a contract. If you recall when we brought forward the
zoning changes for Cal Ave retail, the ground floor retail protections, the Council had some follow up requests. One of them was to assess the feasibility of retail along Cambridge Avenue
and the other was to assess the parking requirements that are in place for restaurants and other uses on California Avenue (Cal Ave), so we’ve included in the budget $75,000 for consultant
support to undertake that work. To be perfectly honest with you, we don’t have the staff to initiate this at the moment, and we’re going to talk a little bit about RPP as one of the
unfunded activities in a second, and I would propose to you that in light of our staffing vacancies and our inability to really focus on this effort, these funds could potentially be
reallocated to do some of the RPP work we talked about last night, so hold on to that thought for a moment. Then other budget adjustments, there’s a scanning and storage item. We’re
really trying to put more and more of our records on line, and I think that’s in line with the City as a whole, moving in that direction and we need the resources to do that. Then we’ve
made adjustments based on the fee increases that were just adopted, that affects the revenue side, and continued use of our “on call” contractors. So some things that are not reflected
in this budget request. First of all, the comp plan update, we’re not really asking for extra additional funds for that effort, but we are going to ask for that before the end of this
fiscal year. I think you already have in your packets the item for the FY’16. So that is not included here, that’s included in FY’16, that request. We have not included, actually this
is kind of out of date as of this afternoon. We have an Request for Proposal (RFP) on the street right now to hire a Program Manager for the grade separation project and we were thinking
that we would be able to obtain that person by the end of the fiscal year, but it seems like it’s going to shift into the next fiscal year, so that will be covered by the CIP, so my
apologies. You can just disregard that, second bullet. Then, as indicated, shuttle expansion, we have not allocated anything for this, although we do have a planning process under way.
That was kind of thrown a curveball by the recent proposals that Santa Clara Valley Transportation Authority (VTA) has put on the table for transit service reductions in our area, so
once we have a chance to internalize and understand what they’re proposing, we’ll be bringing our local shuttle plan to the Council for direction and at that point you will have to assess
whether we have a plan that you would like to fund in the future. Then we have not currently budgeted any of the major housing initiatives that the Council requested ahead of the comp
plan, and I know we owe you a response on how much of that we could do. We haven’t put any money in here for that. Similarly, we haven’t put any money in here for what I think would
be needed, design professional assistance to do any Eichler design guidelines or something like that. So those might be things that you want to talk about adding in the future or we
would just have to deal with them as they came up in the course of the year. Then, to this last point about RPP Districts, we’ve had some internal discussions today and we’ve come up
with a few ideas. One is the one I mentioned, which is taking the $75,000 we had put in for this Cal Ave study and putting that towards the new RPP. If you look closely at the numbers
we provided last night, the delta we have is around $230,000 in operating funds. So the capital side we’re totally budgeted to do Evergreen and Southgate, but on the operating side,
we only had $50,000 and we needed more. So that $232, if we take the $75 from Cal Ave and then my colleagues in Office of Management and Budget (OMB) have helped us find another $70
or so in the Transportation Contingency Fund, which we can talk about a little more from this year. We would need an additional $161,000 from somewhere else in the Operating Budget.
So that’s the size of the problem as I understand it or the opportunity. So that’s all I have in terms of a presentation. I would be happy to answer questions on any of this. And Sherry
is here to help.
Chair Filseth: First of all, are there any public comments? Then we’ll proceed to Committee. Cory?
Council Member Wolbach: High level thoughts, so I’ve mentioned a couple of times at various meetings over the last year and a third that I’ve been on Council was reflected in something
that was mentioned during the presentation, which is that, was it half or over half of what comes to Council in study sessions and action items are from this department. The fifth floor,
in my view and reflected in that statistic, is the most important place in City Hall when it comes to where the attention and concern of the Council and the community lies and recognizing
that reality, my attitude has been, tell us what you need and don’t be shy. It doesn’t hurt to ask and we’ll probably figure out a way to make it work, because again, that’s where the
vast majority or the lion’s share of Council’s attention or the community’s attention is. So, I guess there are a number of questions that we could ask about how the resources are spent,
how that’s managed, etc., what we can do to support the department as a whole, but our focus tonight really is around the numbers and so the question for me is, are you asking for enough?
I know the City Manager has done a diligent job of trying to not give everything to every departmental director that they’ve asked for because we have a budget to balance and I appreciate
that. In this case, I’m interested to know, were money raining from the sky, hypothetically, what would be the next couple of asks related to the Planning and Community Development budget,
hypothetically?
Chair Filseth: As you asking to prioritize that list, is that what you’re doing?
Council Member Wolbach: So one question is, would it mean we go with this first or were there other things that were considered that were not brought to Council out of this, and I fully
appreciate the interest of balancing all the budget priorities for all this and for everything, but what else might have been considered maybe beyond this?
James Keene, City Manager: Can I jump in. Thank you for the question. I think Hillary made the point, we can never seem to make it deeply enough and clearly enough that the Council’s
work plan already, yes, we don’t have the capacity to deliver on that. On the other hand, you also have to look at the work plan and say to yourself, honestly, should we, could we really
do a lot more than you have on the work plan in Planning, and I would say, you can. We have already asked for too much. If we were talking about processing land-use applications and
current planning and volume and things that were at least more ministerial than policy and public and community oriented, that’s a different thing, but in the same way that this Council
exercises more oversight than any governing body any of us have ever worked with, yes.
Council Member Wolbach: More than the State Legislature?
Mr. Keene: (crosstalk). The application of oversight by the Planning Director or the City Manager, collaboration with the City Attorney and the (inaudible) capacity of the City Council
is also a self-limiting factor. I mean, how many more nights would you guys like meet, and how many more items each agenda? If we were to say, let’s do more to get it through. I mean,
that’s the practical reality. So I can’t ask Hillary to work all weekend long if we had more projects and initiatives. We already tend to do that stuff already, and we can’t ask the
City, I mean, there’s a multiplier here. You’ve got to get more people in the City Attorney’s Office. You’d actually have to have more people in the City Manager’s Office and you guys
would have to figure out how you could be faster in the Council meetings to get more things done. So I think that’s the limitation in us really being able to say, tell us what you want,
because it’s complicated on what it takes to really be able to deliver on that. And to be honest with you, I think Hillary pointedly, I would not give her everything that you guys might
want her to ask, because then you would assume we could do absolutely everything. You would say, we gave you everything you want, and it’s not possible to deliver on it. You understand,
I mean we can do maybe two items a night. At least half of the items we do are sent back for additional work beyond what we were often thinking we would need to do, so we’re constantly,
you know what I mean, rearranging it. So I worry that it would, that we would be overestimating and then the ability to bring people on board, maintain them, manage them, replace them
as the scale increases also that gets more complicated. I mean if we could really pointedly negotiate eight projects, a timeline and a resource, that would be different.
Council Member Wolbach: Well then, let’s focus on the ones on the page.
Mr. Keene: Could I answer one other thing too. We’re going to have a Committee as a Whole Meeting on the 31st, and in one sense the important resource discussion is less in the financial
side of the budget as it is on the work plan as to what the Council really wants to get accomplished most and what you would be willing to set aside, and if we could get really clear
about that, it would be easier for us to come back and say whether or not we have the right amount of staffing, really pointed to that. But that also means we have to maintain what it
is we say, right, so we have a series of assumptions based on what the Comp Plan process will take, and I will bet you anything that the process we will end up using will be, take longer
and have more twists and turns than what we have planned right now.
Council Member Wolbach: So considering that, for the things that have already been sent to Staff, for the things that in your analogy you’ve used, which I really appreciate, which is
the iceberg. Of those things that the Planning Department deals with that are below the water level of the iceberg, you know, we aren’t giving you constant direction on, hopefully. So
the things we’ve already given you direction on, the things you’ve got to work on anyway, just with those, does this budget proposal enable you to make what you think, and what hopefully
we would accept as reasonably timely progress, resolution, effectiveness, high quality, those things, without adding additional things that we haven’t come up with yet. Don’t get me
wrong, of course, we are very imaginative and very active and we can always come up with more work if we want to and were undisciplined, but even just again, things that are already
on the table?
Ms. Gitelman: Well thank you for the question. It’s a little hard to relate that question to above the water line, below the water line thing, because a lot of the Council’s expectation,
I think, we think of as above the water line. As you mentioned there is great community interest, Council interest in a lot of the things that we have underway. You know, I think we’re
asking for the resources that we think are necessary to continue to do the amount of work that we’re doing. I mean, we’re adding support positions to try to leverage the staff resources
we have. We’re adding, continuing to expect to use contractors for some of the things we can’t do in-house. If the Council is interested, and I haven’t talked to my colleagues about
this, but one way we kind of hedged our bets a little last year was we used the idea of a contingency fund. We put $500,000 in a contingency for transportation. Actually, it started
out as Planning and Transportation, but, I forget if it was at the full Council or at the Finance Committee meeting, the planning part of that got x’d out and it was just transportation,
and it was a way for us to accommodate projects like, if the shuttle expansion idea had come up or if there had been another above-the-water-line initiative that needed additional funds.
We’re not proposing that this year, but I thought it was a creative strategy, and I think by the end of the fiscal year we will have spent all but about $70,000 from this year’s contingency.
That $70 will roll forward for this RPP effort, but that might be another way to hedge our bets a little bit.
Council Member Wolbach: Right, and also thinking about how we tackle a wide smattering of projects at once and whether that means we outsource more of them, whether that means we hire
more contractors rather than taking on full-time employees, especially if it’s a, you know, we’ve got four RPP’s we were discussing last night. We’ve got all the other things on, it’s
like 33 beyond that and you know, again, let’s just go to the next thing. That’s the next level which is, should this be included? And I’ll decide, I don’t want to hog the mic here but,
that’s where I’m coming from.
Chair Filseth: Can I ask a question? I just want to make sure I understand sort of the color that you guys gave it. You were talking about the half million dollars last year. If I understand
the City Manager, it’s not strictly a question of Planning and Community Environment (PCE) bandwidth, right, there’s all this other stuff, the Council being part of it, and so forth,
so it’s not just a question of, you know, if we had another $350,000 we could do number one, two and four there, right. It’s more complicated than that. Did I understand the right?
Mr. Keene: Yes, and I mean there are other dimensions to it. The City Attorney’s work is integral to the Planning Department’s work. Even just in this budget we took the Richard Hackmann
position that was working on high-speed rail, Caltrain and those issues. He left, we shifted, we made sure the funding was shifted back to Planning and could be used for other things,
so in a sense right now, we do have issues about, okay, how do we support high-speed rail, Caltrain issues and other things like that. We have those things all the time. At the same
time, we have issues that, I’ll just take an example, we had the RPP item last night. I actually had a lot of questions and concerns myself about the design of how we’re going to deploy
or redeploy the model in new settings, and Hillary and I had a chance to talk briefly today about the ability to be able to maybe assist in how we rethink that. But that means that there
has to be capacity in me or somebody in the City Manager’s Office and we don’t. So this is what I’m just saying, and it’s not appropriate for the Council to just say, gosh, we want to
take up more stuff, but we don’t expect you to be able to be accountable for what comes to the Council, Jim, because you hold me accountable when it’s at the meeting. So I’m just saying
that there is a funnel, an increasing funnel, including the Council. If you could to five items a night rather than two, we could get even more accomplished with what we have. I mean,
this is reality. I mean, if we didn’t have an engaged community versus what we have we could do ten times more, do you know what I mean? This is just the fact that there is a process
here that has an overhead that can’t necessarily be evenly spread across just getting more staff positions that help, you know, on a sort of analytical side or whatever.
Council Member Holman: So don’t anybody hit me for this, but I have wondered over a long period of time, is if the Planning Department had a staff architect because of, you’re talking
about how many items, you know, an Architectural Review Board (ARB) can look at, the Council can look at, how many appeals we get, that sort of thing, the comments that I’ve heard from
the Planning Staff, former and current, and from members of the community and to be honest, my own personal observations sometimes, it seems like projects, and I don’t want to get down
a rat hole with this, but it is about a position, but it seems like, from those comments and observations about projects, that the Planning Staff would benefit from, and again this is
from even Planning Staff comments, would benefit from someone with a real design acumen in the staff, because projects that go to the ARB that get Staff approval, that come to the Council
on appeal, whatever, if they had at the more primary level in the Planning Department, I mean even on the Secretary of Interior standards not everybody does and at that you’re not an
architect. So would a position like that would that be really helpful in getting more put through at a higher quality with less pushback to be having a staff architect?
Ms. Gitelman: Thank you for the question. To be perfectly honest, we did think about asking for a Senior Planner level position with either architecture or urban design expertise, kind
of fits the philosophical approach we took here of trying to leverage and support existing and current professional planning staff. We currently use a contractor who helps us on architectural
issues, but he really doesn’t have enough bandwidth to do more than help us on the IR program, so when it comes to architectural (crosstalk). I mean first of all, it’s difficult to find
either Staff or contractors that you what to use for a long period because they get set in their ways, everything starts looking the same, you know, I’m not suggesting there’s anything
amiss with our current arrangement, but we thought about this as potential enhancements to our program and we were asked to prioritize and then we prioritized the four things that we’re
asking for over that, but it’s not an idea that hasn’t occurred to us.
Council Member Holman: So if you didn’t have to prioritize and limit to four, as a staff architect, and that could be on staff or consultant, because people do get, as you say, set in
their ways. Would that be something that would be helpful and desirable?
Ms. Gitelman: You know, I wouldn’t necessarily say an architect. I would say an urban designer, you know, someone who can help us with architectural and urban design might not actually
have an architectural license, but a senior level position with that expertise would be an additional support, if we could find the right person to come on our team, that would be great.
Council Member Holman: That may be, hopefully, something that we can get some support for here, or a different priority, one or the other.
Chair Filseth: Probably not this year.
Council Member Holman: I think this year is a very… I want to make an argument for it. So I think this year, as in past years, but I think this year is maybe a remarkably important time
to do something, make a move along those lines, because of Cubberley, Fries, individual reviews, remake, Eichler design guidelines or design standards I would say, for overlays. I think
it’s an important, important time in this community where someone with a strong design acumen is really important to this community, in this community. That’s a lot of things and that
doesn’t even mention, you know, the Professor Build Design guidelines, depending on how well they’re received or not and what level of completion that is.
Ms. Gitelman: Just one comment on that. We think that the Eichler design guidelines will take consultant design, you know, someone with design experience coming in as a consultant to
help us, similar to the Professor Build Design guidelines, where we have grant support but we brought in a firm to help us. I mean, that’s a project that, even if we had a staff resource
with more experience in architectural and urban design. (crosstalk) We would need that outside expertise, absolutely. And, again, we could look for grant funding to support it. We have
some ideas on that, but that’s a major undertaking that I think will take both staff and consultant effort.
Mr. Keene: Can I propose something just as a thought. I mean, I’ve talked to you about this before. Actually I have a colleague who runs an urban design studio for the City of Dallas,
and you know, there’s a great interface with builders and developers and a lot of that stuff. Of course, they’re actually building a lot of stuff in Dallas too. I would say we have some
projects you mentioned, and probably I didn’t even see called out exactly on Hillary’s list, but a lot of our stuff is on program, you know, I’m not saying there aren’t urban design
issues in some of those, but a lot of these things are crosscutting in other ways as far as community engagement, transportation, planning and all of those sorts of things. Going back
to Council Member Wolbach’s comment, this array of work is clearly the nature of the built environment and livability of the community and the economy of it is the foremost sort of issue
facing us in an ongoing way. So even the idea of treating the budget as a once-a-year decision point or how we’re going to set up everything for a year I don’t think is the right way
to be doing this. What’s more important is if we really were to say, what is the relationship we would have on a quarterly basis, where we sit down with the Council and we look at the
work plan, where we are, what’s being done, what does it take to stay on track or to pick up something new, and we’d be much better off to have even some commitment of funding that is
unallocated at the moment, or without the funding being in there, a policy commitment that acknowledges that when we would get to those points we would have a process for being able
to reassess and saying, you know what, this is what it’s really going to take, and we actually need to bring somebody in in the next six-month period to be able to help with this, so
that we’re really more closely matching the resources we need with the direction that Council is going. I’d feel much better if we were being prudent in making the right investments
in what you clearly thought of, rather than sort of a more general thinking about some more resources across the different sectors right now.
Council Member Wolbach: So that suggests the Contingency Fund. I’m sorry, go on.
Council Member Holman: So if, I’m not quite sure what your ultimate point was there, except that I just want to be clear, you know me well enough to know that I’m not thinking of a,
just for simplicity sake, we’ll say a staff architect for simplicity sake. You know I’m not thinking about that on a one-year basis or a quarterly basis. It’s something that, you know,
a well-designed community is a more profitable retail environment. It’s a more valuable, home values, so it’s not a short-term thing I’m thinking about, so I’m responding.
Chair Filseth: Okay, so hold the thought till we get to motions, I think. Council Member Schmid.
Council Member Schmid: Yeah, I just wanted to say, I agree with Council Member Wolbach, is that Planning just fits in with Council priorities in a very major way. It’s important to our
work and our thinking. But the Council will be flexible in responding to resource needs that you might have, whether it be on a contingency fund or permanent way, and to follow Jim’s
point, we also know that you need mobilization of resources when critical issues come up, and that takes more than just a few dollars, you need time and effort and focus. But whatever
we can do to help out, I certainly would be supporting it. I would support the budget. I guess I only have one question on the items, and that’s on the transportation (inaudible) authority
on page 326, you’re asking for $100,000 and the budget already has funds allocated for the establishment. How much is that and where is that?
Mr. Keene: That’s $100,000 right now.
Ms. Gitelman: It’s more than that. I’m sorry, let me find out how that’s phrased. Currently we executed a contract with Mig, a firm out of Berkeley to help us establish the TMA and we’ve
only expended a portion of that contract, so we have sufficient remaining in that existing contract to continue to support their kind of administration and start up. What we don’t have
is the funding for pilot programs, so if they want to subsidize transit passes, other incentive programs to get the mode shift to happen and so we had $100,000 in this year’s budget
for those pilot programs that we’re bringing up funding to Council shortly, and then we’re asking for another $100,000 next year for the same kind of programmatic.
Council Member Schmid: So the investment is about $200,000. As I understand in the presentation that came to the budget, this is an independent agency operating on its own, dependent
upon voluntary participation, and yet every time we talk about traffic and mitigations, this isn’t a central point, so it seems to me money is our only opportunity to have influence
on this TMA that is essential to our success. I note the Stanford Hospital TMA just had their annual report and the question is, could we push to have the same type of deal with them?
My understanding is they have a deal in which they have quantitative targets agreed upon by the TMA and us. They have annual gathering of data of measurements of that and then they have
reporting once a year. Now if we could use our investment in the TMA to get those kinds of commitments from somewhere else, it’s not us doing it, but it is oversight.
Ms. Gitelman: Council Member Schmid, I think you’re going to love the funding agreement that we bring forward in June to the Council. So we’re bringing forward an agreement that provides
the $100,000 in program funding contingent on certain agreements by the TMA on reporting and public meetings and some other items, I don’t remember what they all are, but we’ll bring
that agreement forward to Council. We’re planning to do it as an action item, so if Council wants to, you know, has anything to say about that, it’s going to be in conjunction with the
TMA’s draft strategic plan, so you’ll get to see, I think the last time they were at Council there was a request to kind of think big. You know, how much of a mode shift could you accomplish
with different funding levels, so they’re putting together a plan. It will still be in draft form, but you’ll be able to look at that as you consider the funding agreement.
Council Member Schmid: Yeah, I did look at the Stanford last report came in and said, you know, we’ve set up a new way of measuring and we have overestimated and they cut a certain percentage
and said we can accomplish 36 percent, so I hope they are as good in setting goals and setting up ways of measuring. So we do not have to put any ties on the funding. We will get a chance…
Ms. Gitelman: In order to give this money to the TMA, there will have to be a funding agreements, which will require Council approval, so you’ll have an opportunity to attach conditions.
Council Member Schmid: Good, thank you. That’s all I have.
Chair Filseth: Cool. I actually have one or two. Well, I actually only have one, right, which is technical, which is, what’s the head count of the department, because it looks to me
like I saw 31.9 in one place and 42 someplace else. So which one is right? Which page did I look on that was wrong.
Ms. Gitelman: We’re sliced and diced in a couple different ways here.
Chair Filseth: Page 316 says 42.5 full-time, two hourly and Page 324, thank you, says 32.
Ms. Gitelman: The work chart is bodies, so that’s how many people are sitting on our floor, and the later analysis is how…
Chair Filseth: So some of those end up in other funds.
Ms. Gitelman: Other funds, CIP.
Chair Filseth: Fire Department for example, which we discussed earlier.
Mr. Keene: This is mainly capital, but yeah.
Chair Filseth: Okay, got it. On, in that case, I’m going to, actually it looked pretty straightforward to me. I’m going to segway back to Council Member Holman instead, but I want to
comment that a lot of this discussion I think we’re having is, we’re sort of hitting the eternal issue that we’re going to run out of money before we run out of good ideas, so that’s
going to force us to make, as usual, make choices in priorities, as the City Manager does not tire of telling us at the Council on this kind of stuff. (crosstalk) and rightly not, right.
I mean, so one of my hopes, I’m going to diverge for just a second here, not long, one of my hopes is, you know, we’re filling up the parking lot with stuff and I think I saw we have
$6 million worth of stuff in there and so forth, which is, and I expect we’re going to have a bunch more of that by the time we get… One of my hopes is that, you know, we’ll be able
to look at this and sort of look and say, okay this is more important than that and boy you really want that, but this other thing is actually more important and we’ll do some of that
kind of stuff. So as we get to what you’re doing, I mean, if the group feels like this is the right thing to do and wants to throw something in, some more for the Planning Department
into the parking lot, maybe that’s a point that we could have that kind of discussion before it goes to Council too. I don’t know if that’s what you had in mind, but I think if the group
feels like that’s what we want to do. Okay. Council Member Holman.
Council Member Holman: So along that line, just a quick reference to sometime past in the architect conversation, and I won’t go any further into that alley at this point in time (crosstalk).
Hopefully it’s not an alley, hopefully it’s a highway, but there was, some several years ago before probably anybody but Lalo was here, there was something that, an architect was hired
to do something called Architecture 101 and it was a public presentation about design, mass, form, compatibility, that sort of thing, and it was really helpful for a broad sector of
the community, including ARB members and staff, so I’m just saying that. So I had a couple of questions about coding enforcement, if I can find it. Code enforcement, yes, it’s on Page
323. So you weren’t here to hear the Fire Department discussion, but we have code enforcement officers, we have a new lead. With the Fire Department I was asking because in years past
we used to actually penalize people, assess fines, if they were repeat offenders of fire alarms going off, because it was quite a problem, and it still is an issue, but the Fire Department,
it seems, is not even tracking those calls and not assessing penalties. Code Enforcement, it seems like, is also in the same mind set, let’s say, of course one would want to try to resolve
an issue without assessing a fine, but we have a lot of repeat offenders, and there aren’t fines assessed. So we have staff time that we’re allocating, you know, resources we’re allocating
to code enforcement, but we’re not collecting fines and penalties, even on repeat offenders, it seems.
Ms. Gitelman: Yeah, I mean, this year is quite a bit different than most years because we are collecting significant fines from the Edgewood Plaza.
Council Member Holman: Separate from that.
Ms. Gitelman: As a general rule, I’ve worked with Code Enforcement folks in Planning and Building for a long time. As a general rule, our goal is compliance and we find that there are
often effective tools to achieve compliance that don’t involve fines. Sometimes it takes money, it takes charging someone a penalty, but more often than not we’re able to get where we
need to go without imposing fines. You know, we had a recent example that address, I forget, yeah, I think you were one of the people who sent a complaint to us about an individual who
was running like a truck repair company out of their house.
Council Member Holman: Yes, 2330 Calper, to name an address.
Ms. Gitelman: Yeah, our new Code Enforcement lead has been able to address that issue with the other Code Enforcement Officer on the job and it didn’t take fines. It took the right approach
in terms of notice of violation and follow up by the staff.
Council Member Holman: And I appreciate the perspective, absolutely, but that was a one-time offender. So I’m talking about repeat offenses and repeat offenders at the same location,
so that’s what I’m talking about, because we seem to be timid about assessing fines, even to those people who just make it their business to continually violate and repel codes, so that’s
what I’m talking about. So I’m looking for, I hope my colleagues will support me on that. It’s like, if there’s a repeat offender, that there are fines assessed. These are positions
we’re funding.
Chair Filseth: That actually would happen through this department?
Council Member Holman: Yes, much of it would.
Ms. Gitelman: One thing that we used to do, I think, that we don’t do currently, is fund a portion of at least one of these positions through building permit fees, because they assist
on building code compliance issues. (crosstalk) if we still do that.
Council Member Holman: In the Building Department there is some allocation for Code Enforcement.
Ms. Gitelman: Yes.
Council Member Holman: Okay, but that’s for Code Enforcement. It wasn’t referenced in terms of…
Ms. Gitelman: No, it’s not fines and penalties, it’s fee revenue supporting their activities in support of building code compliance.
Council Member Holman: Yeah, there was no reference to penalties there either, though.
Ms. Gitelman: You know, it’s not going to be a significant revenue stream, except in years like this where we have this crazy anomaly where we’re getting $1,000 a day from, you know,
a significant zoning violation.
Council Member Holman: Yeah, I’m not looking at being a significant, it’s not a revenue source, it’s just compliance that helps, to some extent. Which brings up another question, that
maybe now is the appropriate time for Jim, maybe this is as good a time as any, and maybe it’s another time and you can direct me to when, what some appropriate uses might be for that
$200,000 that you’ve collected so far from Edgewood Plaza. I would be happy to have the conversation another time, but I’m presuming that money is going into the general fund?
James Keene, City Manager: Well, yeah, I would say in the sense of how we’re accounting for it.
Ms. Gitelman: I know it’s a department revenue, actually.
Mr. Keene: Pardon me.
Ms. Gitelman: It’s a Planning Department revenue.
Chair Filseth: Is that where it shows up?
(crosstalk)
Mr. Keene: It’s a General Fund. That being said, I mean, yes, my own thought is that what happens at Edgewood Plaza may play out in a lot of different ways and that fine money may be
helpful. You know what I mean, in closing the gap, solving the problems, whatever it is.
Council Member Holman: Okay, so there’s no suggestion right now? So, and then one other last question, I believe, which is on 329, under Revenue Alignment, it talks about the new fees,
and then it also says, “these new fees and associated increases in revenues”, is that the markups that we also talked about at the same time we were talking about fee increases?
Ms. Nose: Yes.
Council Member Holman: The markup on outside services. That’s what this is.
Ms. Gitelman: Yes, absolutely.
Ms. Nose: This reflects the entire Planning piece.
Council Member Holman: Alright, so woe be me if I don’t at this point in time, say something quickly about how much work you and your department have produced this year and how much,
speaking for my colleagues, and I don’t think there’s any stretch there to say how much we really appreciate all that you do and have done and hope will continue to do for some long
time to come. And support, as Greg pointed out too, don’t be shy about asking. It’s important to what you’re doing. So with that, tentatively approve the Planning and Community Environment
budget and also would like to put in the parking lot, if this is the right way to do it, the potential funding for either contingency fund or for, lack of a better term, staff architect.
Maybe that’s one in the same.
Chair Filseth: Right, so we’ll see if there’s a second, then I have a question.
Council Member Schmid: Is that one or is that two alternatives?
Council Member Holman: Well, it’s one but they’re lumped together, because I don’t know how we’re going to end up dealing with it. It’s just a parking lot item at this moment, it’s not
a determination.
Council Member Schmid: Okay.
Council Member Holman: Is that a second?
Council Member Schmid: Second.
MOTION: Council Member Holman moved, seconded by Council Member Schmid to tentatively approve the Planning and Community Environment Operating Budget, and to place in the parking lot
funding for a staff architect.
Chair Filseth: Okay, care to speak to your motion?
Council Member Holman: Just quickly to support Hillary and the Planning Department and also, I think, to even better support the Planning Department, the community, to put some parking
lot item out there to help better address some issues that come up repeatedly in the community, that would help staff facilitate permits and application, building permit applications.
Chair Filseth: Speak to your second.
Council Member Wolbach: I think he got it.
Chair Filseth: I think that was you actually.
Council Member Schmid: Yeah, just support the budget that has been proposed and to add some flexibility to it when we look at our budget priorities.
Chair Filseth: So I have a question on the motion, which is, I heard the Planning Department say, well, actually an architect is not really what we want. Maybe it’s a senior planner
or something like that.
Council Member Holman: I’m not trying to identify it at this moment.
Chair Filseth: Okay, so I think what would be most useful is something that’s got to be concrete enough that we can go into the parking lot discussion and say, okay, we understand what
that is, and that ranks above this and below that other thing, because I fear that if we get into the parking lot, we just have a big laundry list of stuff and we don’t have anything
to do. How do we do that? So, my question is, what do you want.
(crosstalk)
Ms. Gitelman: We would use the senior planner classification, but it would be with a specialty in urban design.
Chair Filseth: And what would you do with it? What would we get, I mean, is it the right question to ask, okay, we get this and this from that or, is that the wrong question to ask.
What’s the right question?
Ms. Gitelman: Yeah, this person would support our ongoing activities with our Individual Review Program and our Architectural Review Program. They could also manage some contractors
who are doing some of these things, if these things were funded.
Council Member Schmid: I took the proposal to be, either that or a Contingency Fund that could be used as time went on.
Council Member Holman: Yeah, my point at this point in time is to identify a Contingency Fund that could be used for that purpose.
Chair Filseth: Let’s ask Hillary, which do you want. What would you get the most use out of?
Mr. Keene: Can I weigh in too. So…
Chair Filseth: I think what you’re seeing on this side of the table, if I can put words in Karen’s mouth, is the desire to help increase bandwidth in this group, right. How can we best
do that.?
Council Member Holman: With better outcome.
Chair Filseth: With better outcome. How can we best to that?
Council Member Wolbach: I had a couple of thoughts on this too.
Mr. Keene: So anyway, I don’t want… Well that just threw me off for a second, but I mean I think there are a couple of things here which, first of all, I think the Council’s focus should
be on what are concerns or objectives or whatever that you want to see, not define how we should respond or deliver on them. I would much rather feel better if we sat back as a Staff,
and we talked about it, whether it’s a Senior Planner, whether it’s a consultant, whether it’s whatever, a czar of urban design, whatever it is, let us then come back. But if the Council
is saying, we would be supportive of a position or consultant funding, that’s helpful for us to know, because you have policy concerns in that area, but not specify the exact thing.
That’s great. The other challenge is, I don’t think you asked Hillary, what is it out of everything you could have, if you had one thing, what is that.
Council Member Wolbach: That was my first question when you got done.
Mr. Keene: And that may not be this urban design thing, that’s the other issue. I mean, it may or may not, and we’re trying to run a strategic operation here as much as possible, as
opposed to let’s go shopping, and I don’t mean that in a negative way because it very well might be that way. It’s better here for us to get a clear direction and you’re saying you really
want us to tell you, than I’d rather us come back, put something in the parking lot and then by the time we come to wrap up we’ve just gotten a little bit clearer than doing it on the
spot here.
Chair Filseth: That makes sense to me. I don’t what to micro-architect it from this side, right. I mean, and Cory wants to talk too.
Council Member Holman: Yes, and that’s why I was proposing to put something in the parking lot. I don’t want to put words in your mouth, but I thought I heard you say that was one of
the things that was on your list but you didn’t put on there, and the other thing is I would point to one of the Council’s priorities is the Built Environment.
Chair Filseth: So we’re tromping all over Cory, right. Go ahead.
Council Member Wolbach: My questions will benefit from this discussion. So considering the motion, a couple of things first. I just to make sure I’m clear. TMA basically, if we want
to give more money to the TMA or identify additional funding for the TMA, the best thing to do for now is to wait for that discussion when it comes back to us in June. Did I hear that
correctly?
Mr. Keene: I don’t know if that’s the case.
Council Member Wolbach: Or did I misread that?
Ms. Gitelman: The June item would be about giving them the money we’ve already budgeted this fiscal year.
Council Member Wolbach: But if we wanted to go beyond that.
Ms. Gitelman: You want to give more than the $100,000 we’re budgeting here, then you would have to ask that we add that or add it in contingency that we.
Council Member Wolbach: Oh, because that $100,000 is FY’16?
Ms. Nose: So there’s two possible $100,000. There was one allocated in fiscal year ’16 and there is one recommended in Fiscal Year ’17. In addition to that level of funding, there is
the base TMA budget of about $180,000. So when you put the $100,000 that’s proposed in Fiscal Year ’17 and combine it with the Fiscal Year ’17 base budget, it would be TMA funding of
about $280,000.
Council Member Wolbach: Okay, and actually in our next item tonight there might be some discussion potentially around that as well. On the Contingency Fund, I do support the idea of
a contingency fund. I’m leaning, before I make it as a friendly amendment suggestion, I will float this idea of slightly rephrasing it to be a contingency fund, this is just going in
the parking lot anyway for discussion then, on a very busy day, contingency fund for, identified two uses, design and transportation, and if there is a third it would be to just reference
Slide 33. I don’t know if that gives us the right kind of flexibility, or for now we’re making it way too huge.
(crosstalk)
Mr. Keene: Well, I mean, I think we’re kind of getting, like we do at the Council meeting with the motion at the end of the night. The whole point of the parking lot is to dump something
in the parking lot and come back to it. So I almost feel like you have enough to say, no there are needs in Planning, you’ve identified some that you think are important, you see the
work plan and the gaps, you want the issue of addition staffing or consultant funding to be considered. Let’s put that idea in the parking lot. Let us come back and we may say it’s $200,000
or we may come back and say it’s $500,000 or whatever it is, and even in the parking lot, then you’re just going to have to thrash through that in the wrap-up and then it will go to
the Council.
Chair Filseth: (crosstalk) contingency item or something like that?
Council Member Wolbach: So I guess what I wanted to be clear was that we were not being too restrictive, what was the language, I don’t know if the City Clerk caught the language that
was used in the motion?
Jessica Brettle, Assistant City Clerk: Currently the motion is to recommend the City Council approve the Planning and Community Environment Operating Budget and to place in the parking
lot funding for a staff architect.
Council Member Holman: Tentatively.
Ms. Brettle: Yes, tentatively.
Council Member Wolbach: So I would offer a friendly amendment to that motion that where it says “staff architect” to replace that with “contingency fund”.
Council Member Holman: It’s just words at this point in time. It’s, you know…
Chair Filseth: I know you want architect, but…
Council Member Holman: But I also referred to Hillary’s language, which said urban designer blah, blah.
Council Member Wolbach: But that doesn’t necessarily mean staff architect.
Mr. Keene: I think this is the case, you just need to say, contingency fund for now, could be for a position. I mean, contingency fund is bigger than an architect.
Council Member Holman: Yes.
Council Member Schmid: Let’s use contingency fund.
Council Member Holman: Yes, that’s fine with me. I don’t mean to…
Council Member Wolbach: And I’m not rejecting the idea, I just want to make sure we have a slightly broader discussion when it comes to the parking lot.
Council Member Holman: For the staff architect, I put it out there but what I wanted to establish is a contingency fund. I’m not trying to design the position right now.
Chair Filseth: I have one caveat on this. I want to make sure that we’re not doing what the Council does too often, which is send you guys to do a lot of work trying to figure out what
that is, and then it comes back and we go, psh, because the fact, and you know, we can’t do it, because the fact is, you know, we’re looking at a $5 million shortfall or something like
that. We’re not going to be able to do everything on the list and we’re not going to be able to do everything in the parking lot, so we should, please don’t spend too much time micro-designing
it, because we may, there’s no guarantee it will show up at the top and there’s no (inaudible).
Council Member Holman: I bet she knows what would be helpful.
Council Member Schmid: So the motion now reads “contingency fund”?
INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to replace the word “staff architect” with “contingency fund.”
Council Member Holman: Yes. I keep looking at the screen like the motion is going to be there.
Chair Filseth: Did you have some more?
Council Member Wolbach: Yeah, I appreciate that and I guess I want to be clear about whether it should go in this item or should be Item Four, which is the question of where we can get
more money, additional revenue sources for the TMA beyond some of the other things that are being discussed. I don’t really think it’s here, so I think I have to hold off for now. I
guess that’s a preview for the next item.
Mr. Keene: Okay, I’m sorry, the issue of the TMA and all that stuff is not in this thing? I mean it’s over in the parking lot.
Chair Filseth: The $100,000 for the TMA is here. (crosstalk).
Council Member Wolbach: I was just leaning towards, I’ll put my cards on the table. I think the TMA is underfunded and so I’m looking for money for the TMA, that includes both expenditures,
but also includes revenues.
Mr. Perez: Just to remind the committee, you have $250,000 in your Council contingency.
Mr. Keene: Well, I don’t want to complicate this, but right now we have a directive from the Council to potentially come back in June with polling for a potential ballot measure that
is designed around providing the funding source for TVM including TMA, so I mean, there are multiple conversations going. I’m not saying to forestall it, but the idea of the parking
lot ultimately on this stuff, I think, makes sense.
Council Member Wolbach: I’m not suggesting…
Chair Filseth: I’m a little leery of that one as well, because I think the definition or delineation of how much the TMA gets funded by residents versus businesses and so forth, is a
policy decision, and I think it’s beyond the scope of this Committee too.
Council Member Wolbach: So, I wasn’t making a recommendation. I was just saying out loud that I think it’s worth discussion, but I’m not going to… Because I referred to it earlier, so
I wanted to close the loop on that one. So I’m not going to make a recommendation that we add anything about the TMA to this motion.
MOTION RESTATED: Council Member Holman moved, seconded by Council Member Schmid to tentatively approve the Planning and Community Environment Operating Budget, and to place in the parking
lot funding for a contingency fund.
Chair Filseth: So are we ready to vote on this? Alright. All in favor? Motion passes unanimously.
MOTION PASSED: 4-0
Chair Filseth: Thank you very much.
Mr. Keene: Thank you. Mr. Chairman, just your sensitivity on, I hope this isn’t like the Council, we’re sending you to do something that takes a lot. I don’t think that. This is more
like giving, you just gave the Planning Director a Get Out of Jail Free card, so she will be more than happy to think about it.
Chair Filseth: In all her spare time.
Ms. Nose: One last thing that Hillary had brought up in her presentation that we can either punt to being part of this contingency discussion later, or we can try to address tonight,
is the RPP that was approved last night and the costs associated with those two additional districts.
Chair Filseth: My guess is that should go into the parking lot too.
Mr. Keene: Yeah, you’ve got to put that $161,000 gap in the parking lot.
Council Member Holman: So we need to vote on that too.
MOTION: Chair Filseth moved, seconded by Council Member Holman to add the funding shortfall for the two new Residential Preferential Parking (RPP) districts to the parking lot.
Chair Filseth: All in favor? Motion passes.
MOTION PASSED: 4-0
Chair Filseth: What do we have next? Special funds, is that right?
4. Special Revenue Funds Overview, Operating Budget pp. 115-119
Parking District, Operating Budget pp. 123-126
Stanford Development Agreement Fund, Operating Budget
pp. 126-127
Other Special Revenue Funds, Operating Budget pp.120-122
Kiely. Nose, Budget Manager: Yes we do. We have Special Revenue Funds and so Steve’s here to briefly go through an overview.
Steve Guagliardo, Management Analyst: Greetings Council members. Steve Guagliardo, Office of Management and Budget. So we’ll be going through the special revenue funds at a high level
very quickly. So, first off is the Special District Funds. This is the University Ave Parking Permit Fund, the California Avenue Parking Permit Fund and the Residential Preferential
Parking Fund. The University Ave Parking Permit Fund is seeing a couple of increases here, most notably as a result of the street sweeping contractual increase as well as two significant
transfers to capital. One of those transfers to capital is for the downtown wayfinding project, which is for $600,000, the other is $82,676 for University Ave parking improvements. The
California Ave Parking Permit Fund has seen a similar increase in street sweeping as a result of allocating the charges associated with each of those parking districts. That’s going
to be an increase of $64,638. You might recall that you saw amendments as part of mid-year for each of these to correct those charges in Fiscal Year ’16. These actions are correcting
those on an ongoing basis to correctly allocate the charges.
Council Member Holman: Can I ask you a question why California Avenue street sweeping contract has so much more of an increase than University?
Mr. Guagliardo: Sure, and it has to do with the methodology of assigning the marginal costs associated with the street sweeping, so the California Ave additional sweeping costs above
the baseline level, there are 1.766 miles as opposed to the 1,084 miles in California Ave, so that distinction is really driving that doubling almost, you know, not quite of those costs.
Then in addition to that, there’s also the debris hauling costs and approximately 205 tons are hauled from University Ave whereas 335 are hauled from Cal Ave, so that’s also resulting
in an increase there.
Council Member Holman: That’s just sick and long, just too much hauling.
Mr. Guagliardo: On to the Residential Preferential Parking (RPP) Fund, so this is something we just talked about a little bit with the Planning and Community Environment, we’ll talk
about it more at wrap up. There are significant increases in this fund as a result of the contract increases for downtown, as well as for the on-line service for the parking permits.
As we look at exploring and expanding the Residential Preferential Parking Program into new districts, into new areas, it’s important to keep in mind that these costs will also increase
commensurately, and that was included in the figures you saw last night from Planning. Next up is the Stanford University Medical Center Fund. This is one we talked about a little bit,
the first item in the Community Services Department, so approximately $85,000 of the initial two million that was allocated for the Project Safety Net costs is contemplated to be used
in the Fiscal Year ’17 Budget for a portion of the Project Safety Net collaborative costs. The balance of the funds are coming from the general fund for both the collaborative and for
the Track Watch program. Then there’s the transfers to CIP. So intermodal transit, quarry road improvements are both sending money to PL16000 which is the public right-of-way, and then
the infrastructure, sustainable neighborhoods and communities and affordable housing area is sending approximately $1.6 million to the Charleston/Arastadero Corridor Project, $2.8 million
to the new Public Safety Building and $6 million for the replacement of Fire Station #3. The final portion of the Stanford University Medical Center Fund is climate change and $1.2 million
of that is programmed into capital for the Bike and Pedestrian (ped) Plan implementation.
Council Member Holman: Can I ask you a question before you go on. I thought I saw, and maybe this was referenced to last year, but I thought I saw a transfer from the Charleston/Arastadero
Corridor funding out to, I’m trying to remember to what.
Mr. Guagliardo: Out of the project itself, in capital, or?
Council Member Holman: Out of the funding for the completion, I thought I saw a transfer out of that fund into something else. I can’t remember if that was (inaudible).
Mr. Guagliardo: Yeah, no that’s, so in the actual capital project itself there’s no transfer. In the…
Council Member Holman: I have no idea where I read that.
Mr. Guagliardo: Sure.
Council Member Schmid: Was it a regional contribution that got postponed? Regional transfer?
Lalo Perez, Chief Financial Officer: There was a grant portion for it, but you know…
Council Member Holman: It was on these budget materials. It wasn’t like a newspaper article or something like that, but I can’t remember where I read it.
Mr. Perez: We’ll keep looking and see if we can find it and we can come back to it in the wrap up.
Mr. Guagliardo: Sure. Next slide. So in the Housing In-lieu Funds, revenue is currently projected to decrease by $1.7 million based on tracking by Planning and Community Environment
staff. You may recall in the fiscal year ’16 budget we increased it based on the projects we saw in the pipeline. This is a corrective action to look at the projects that are coming
to the pipeline next year. In the traffic mitigation and Parking In-lieu Funds, the activity worthy of note is that in the capital plan for the next five years we do include a $2.7 million
transfer in Fiscal Year ’19 for the Downtown Parking Garage. Finally are the Federal and State revenue funds. The bulk of this is the Community Development Block Grant (CDBG) Funds,
of which $754,000 are contemplated to be distributed. This was approved by you guys on April 5, as part of CMR6583. Just a quick recap, you know, you have money going to Palo Alto housing
corporation, Project Sentinel, (inaudible) shelter network, downtown streets team and the Palo Alto Gardens rehab project among others. That brings us to the Street Improvement Fund,
where there’s no significant change in activity, the Community Development Funds where there’s no significant change in activity, Public Benefit Funds where there’s no significant change
in activity, the Downtown Business Improvement Fund, where there’s no change in activity, and the Public Art Fund, which is the same story. So that concludes my presentation. I’m available
for any addition questions you guys may have. I realize that was probably very quick. I blame the caffeine.
Chair Filseth: Thank you very much. Are there any other questions or comments from the public?
Council Member Holman: We’ll see if I can make up for that in how slow we deliberate.
Chair Filseth: It looks like we have one speaker from the public. Should we make him fill out a card.
Chop Keenen: If I may I’ll just, I handed this to Cory. I’ve met with all four members of the Budget Committee and I should have been a little more organized, so (inaudible). So, Chop
Keenen, (inaudible). I’m speaking to the Downtown Parking Assessment District, which has over the years, the last 25 years, Cory asked me, how long has this been in existence and I said
25 years, and he said, what’s the organization. I said, well I’m czar for life, but you can do an intervention. We have been in existence for 25 years and we meet once a month and we
talk about all things downtown and most specifically with regard to parking structures and infrastructures. So what I’m going to address the Committee to tonight is mostly on Page Two,
or Tab Two. Your ordinance requires a timely budget well in advance. Lalo and his team came with Tab Four a few weeks ago and I’m too old to, even with a microscope to read it, but right
behind it is what you’re seeing nicely organized. It wasn’t presented in advance and it was really presented as a fait accompli. There was no discussion on what was in that budget, and
not only the operation and maintenance, but the Capital Budget. Historically, I’ll just call it out, when Shook was running that downtown transportation, it was very collaborative and
that flipped maybe six or so years ago from a bottom-up to a top-down process. So the governance is more like, check a box, sometimes Staff comes to our meetings, sometimes they don’t,
but let me be more specific to this Committee. Item Three, it’s Tab Four, is you’re currently issuing long-term permits in City Hall to employees who do not work in the Downtown Parking
District and if you go to Tab Six, I’ve even yellow-tabbed the Tab on Pages Seven and Eight, which specifically prohibits selling permits to employees outside of the district. It kind
of makes sense. We’ve got bonds that encumber all the downtown properties that pay for these parking structures and other improvements, and we have an Operations and Maintneance (O&M)
Budget. So those (inaudible) along Middlefield Road, Alma Street are not in the district generally speaking. So on Item Three there on Tab Two, we would simply like you to stop issuing
permits to non-district employees. There’s waiting lists at City Hall and the bond documents, there is an election to build parking structures. The last election was in 2001 and if those
were documents that had an election tab in there, you have to carry it just like running for City Council, 51 percent. We ran it as a campaign, we carried it 70/30 and we encumbered
ourselves with $42 million worth of bonds and really, those were the high light days of the public/private partnership, mainly because we probably brought money to the table, but also
because Public Works was so terrific, Karen Bingard in particular. We got it approved through Council, ARB and Karen got a bill. I wish she was still with us but I’ll tell you Steve
Banks does a really knockout job, so we have no problem with Public Works. In that sense, it’s still a collaboration. Item Four, bulk sales of long-term permits to City, I think has
been stopped, but the tax-exempt nature of these bonds does not require, does not allow bulk sales so as an example, Garden Court Hotel can’t go buy 50 permits in the Garden Court’s
name and essentially hog them. They have to have their employees go down to City Hall and demonstrate they work in the district and they issue the permit in their name. Likewise, City
of Palo Alto for some time grabbed those permits in bulk in the City’s name. I think they’ve changed that. It’s now in an employee’s name. Likewise, on Line Five, when there wasn’t space
in City Hall for new City employees mostly, they would line jump the waiting list at S&L and issue permit there. We would like you to not line jump. We want you to act just like everybody
else has to act in the assessment district. Prop 208 requires the City to act as the rest of the district. So, in 2001 was the first time the City has ever paid their deficit cohort
of the bonds. 208 mandated that. The City figured that out and they do, they have a line item here in your engineer’s report that tells you exactly what you’re principal and interest
payments are on those bonds every year. Item Six are items in the budget that we would like to eliminate that are extraneous to the parking district. I have had conversations with the
City Manager and Lalo over the years about these. They’ve gotten lower, but it still…
Council Member Holman: Can you refer us to a page or a tab or something. You said Item Six.
(crosstalk)
Mr. Keenan: Item Six on Page Two, on Tab Two. Okay, so there are certain budget items there, street sweeping, downtown streets team and Police patrol. It looks like they collectively
are about $160,000. As I was saying, I have had conversations with management about these items. They have gone down, but it’s like being a little bit pregnant, either they are appropriate
or they are not appropriate. So street sweeping, this isn’t within the surface lots or inside the parking structure. We have another line item for that and we pay for that within the
district. This is just like in front of your house street sweeping. Downtown streets team, it’s a City-wide issue. It doesn’t have a lot to do with the parking district. That is to say
the lots or the parking structures. We used to pay more. We paid I think about $120,000, so again, I appreciate the City Manager reducing these numbers. I’d like them to go away. And
finally Police patrol keeps coming down. It was $166,000. We’re the only entity in the City of Palo Alto that pays for Police patrol. Stanford Shopping Center – no. Cal Avenue – no.
Anybody – no. City Hall – no. So we’d like those to go away. Finally, Item Seven on this Tab Two speaks to the capital budget process, which there were conversations. I can refer you
to Tab Five. We’ve had a Wayfinding Committee. We’ve had all kinds of subcommittees, but the first item here, University Avenue parking improvements, you see on Tab Five, you got a pretty
picture of a surface lot and a so-so sign in front of it. Staff is recommending $82,000 roughly to resurface and restripe those surface lots and to replace that kind of crummy sign where
you see the little coral color at the bottom. Our parking committee endorses that. The next item right behind that, you’ll see two pages later, Downtown Parking Wayfinding, and you’ll
see a picture here red light/green light and a car count and these were items that were discussed with Walker Design, which was one of your consultants on downtown parking improvements,
and the fact of the matter is that this picture is completely misleading. This is not about doing this. Our committee thinks this is a pretty terrific idea. It is efficient and it is
customer friendly. So you go to a parking structure and you see right away whether there is any availability and by floor, and then you look down that floor and you’ll see either all
red lights or green light, you go to the next floor. It’s a terrific system. If you’ve been to Santana Row or the Grove down in Southern California or anywhere in Europe, this is a very
common technology. In fact, what is proposed in this downtown parking wayfinding is $600,000 worth of signs. That’s not what our committee wants to spend the money on. We’re a co-op.
We’re trying to make our customers and our employees have a better experience, and we don’t believe in terms of priority that some new signs are more important than wayfinding, what
I’ll call red light/green light. In the future as mostly in the past, there is always an annual discussion on, what’s the capital budget going to look like, what are the transfers that
are going to be made. We look at the O&M Budget, we add it all up. Hey, maybe we should increase the downtown parking permit, because that’s what drives all of this stuff. It drives
the operation and maintenance budget and it drives the Capital Improvement Budget. It was always collaborative and interactive and we loved it and we’ve lost our way in that respect.
So you guys are a fiduciary. You’re, the actual name is you’re a trustee under these bonds and there is fiduciary responsibilities and I’ve got a little legal memo that can talk about
that you can read at your leisure or when you’re trying to fall asleep. So, going back to Tab two, items that are really not addressing your budget as advertised tonight, new parking
structures pursuant to the Transient Occupancy Tax (TOT), we’re anxious for those to start to have a life. Where they should go has had very little discussion, if any, with the parking
committee. So, somebody said, Waverly and Hamilton, it may be Waverly and Hamilton. It may be the exact place it should go, but Lot O is where the demand study indicated last time, even
recently, but we’re seeing Staff mandate, hey it should be Waverly and Hamilton, and after that maybe Lot G. Maybe that’s the right answer, but it needs more interactive communication
with the users. What’s not on here is, hey, as long as you’re going to think outside of what’s the next structure going to look like, should it have mechanical? You get three to four
times the density if you go mechanical. So, again…
Chair Filseth: Chop, you got much more?
Mr. Keenan: Yeah, one more. Sorry. The final item is just sort of a wish list. I heard a lot of discussion about TMA here tonight and if we have on-street meters not kiosks, we’ll drive
parking bonds, we’ll drive TMA, a robust TMA, it’s all symbiotic. So I would highly recommend that somebody from Staff come back into our committee and start talking about that item.
Thank you for your time.
Chair Filseth: Thank you very much.
Council Member Holman: Thanks for coming Chop.
Chair Filseth: Questions or comments from Committee?
Council Member Schmid: Technical question, I have four different maps about the downtown?
Mr. Guagliardo: In Chop’s presentation?
Council Member Schmid: Well, there’s one RPP employee parking zone and there’s something called the Downtown Commercial District. That Number Two is the Parking Assessment District,
which is different than that. Number Three is the downtown district which is different than the commercial district. What’s the official map? We had voted various things with the downtown,
what is the downtown?
Mr. Keenan I was just trying to give you context.
Council Member Schmid: Yeah, Jim?
Mr. Keene: Well, I’m not sure, I don’t know what you guys are looking at either. That Chop’s book?
Council Member Schmid: Well, he has the RPP. When we look at a map of the Parking Assessment District, I believe there’s one back here in Chop’s material, the engineering report, that’s
different than the downtown. When you look at our downtown comp plan update monitoring report, it has a third map about downtown. They’re all different.
Mr. Perez: I’ll give you the financial answer. I can’t speak to the others. You have to establish a district, an assessment district. So the bond assessment district is separate from
anything else, and that has to stay within those boundaries because that’s what was, those are the parcels that are being taxed, they were assessed. So it has to stay with that. You
can’t use another map for that.
Council Member Schmid: And what did we vote on in the RPP?
Mr. Perez: I don’t know because I wasn’t there. Oh, Planning Staff is behind me. I don’t know if they can answer.
Council Member Schmid: And what is the material we received from the downtown comp plan monitor report? We have two downtown reports and they have a map that’s different from this.
Ms. Gitelman: Yeah, you’re correct if your observation is that all of these downtown areas aren’t necessarily contiguous. They each were established for a different purpose and the downtown,
I really don’t know. The comp plan downtown monitoring report is kind of a legacy document at this point. I think they used boundaries that we probably wouldn’t select today, but that’s
the way it was established.
Council Member Schmid: Do we know which map is official when we vote on “downtown” issues?
(crosstalk)
Mr. Keene: I don’t think there is exactly a downtown issue that would have a standard map.
Council Member Schmid: What about our three areas of the City where there is a cap. One of those caps is on the downtown. What part of the downtown?
Ms. Gitelman: That refers to the comp plan downtown map that was, those boundaries were established in that land use study back in the day.
Council Member Schmid: So that’s a fourth map that may be different than the other three.
Mr. Keene: Let me just say, there’s two issues here. One is should we have a downtown map, for example that is the same map for everything, or at least somehow referenced, and I mean,
I can make the same point. I can pull out 20 different documents in this town and the population of this City is different in each one of them. So, what is the population of the City?
So one of the things we have done, as a Staff, I directed two years ago, Tommy was in charge of it, was at least to put together a group that would essentially say, this would be the
official demographic or whatever data figures we would use on an annual basis. We would review it. So there are similar things that we could do for some maps. That being said, you still
may draw different boundaries in places and use the term downtown, colloquially, right.
Council Member Schmid: Yeah, I think someone said the 515 Hamilton is not in the downtown and yet at least half the maps include it.
Mr. Keene: Not in the Downtown Assessment District.
Council Member Schmid: Right, but it is in what we voted the cap on?
Ms. Gitelman: I would have to check the boundaries. It’s not currently in the Downtown Commercial (CD) District, and if the boundaries of the monitored area conforms to the CD District,
then it’s outside that.
Council Member Schmid: Well that’s because it’s a Planned Community (PC) not because it’s not part of the downtown.
Ms. Gitelman: We’ll have to look at the map. If your question is, is this included in this part of the downtown that’s monitored…
Chair Filseth: The downtown cap we voted on had a map attached, right?
Ms. Gitelman: Yeah, there’s a map. We’ll provide that.
Mr. Keene: I would guarantee if we were having to make a decision or do some enforcement action as it relates to the downtown cap, we would go back and use the map that’s associated
with that. We wouldn’t say, for example, go and take the map that’s associated with the downtown parking assessment district and apply that map.
Council Member Holman: Just a quick one, so just because it’s a PC doesn’t mean that it applies or doesn’t apply to the cap. It’s geography.
Chair Filseth: That’s a very interesting question, timely too. Let’s see, comments about special funds? Questions?
Mr. Keene: Tentative motions would be in order unless you want to move something to the parking lot also.
Chair Filseth: I’ve got a question. Where is the affordable housing fund? Where do I find that?
Council Member Holman: Housing in-lieu.
Chair Filseth: So I saw Housing In-lieu Fees, right, but that’s annual revenue, right. Yeah, 106? That’s sort of how much we expect to…
Council Member Wolbach: What Page, 106?
(116, crosstalk)
Chair Filseth: 116, Housing In-lieu Funds. That’s not a table.
Council Member Wolbach: Does it appear in table form somewhere?
Chair Filseth: Maybe I’m asking this question the wrong way. Is there an affordable housing fund that has like $15 million sitting in it that we… There’s not, there is or isn’t?
Mr. Keene: Well we have a couple different funds related to affordable housing, different amounts that certainly add up to ballpark 15 maybe.
(crosstalk)
Chair Filseth: Where do I find those?
Mr. Guagliardo: That’s listed in the Housing In-lieu Funds, Page 120.
Chair Filseth: Okay, so I see housing on 121, Housing In-lieu Funds.
Mr. Guagliardo: 120.
Chair Filseth: Oh, there it is, Housing In-lieu Funds. So I see Housing In-lieu Funds, but isn’t that, so I see $3.7 million, right. Isn’t that what we expect to gross this year?
Ms. Nose: Yeah.
Mr. Guagliardo: Yes, that’s going to come in in revenues, then…
Chair Filseth: So I was looking for, where’s the total? (crosstalk) Yeah, where would I find a fund balance?
Mr. Guagliardo: We don’t report fund balance in this document right now.
Chair Filseth: Okay, that’s why I couldn’t find it.
Mr. Guagliardo: You’d have a hard time finding it. I would be very impressed.
Chair Filseth: Where do I find that?
Mr. Guagliardo: Yeah, so the capper at the end of the year would state the fund balance in the fund.
Chair Filseth: So it doesn’t show up in either the Operating Budget or the capital budget.
Mr. Keene: Right. Typically what we do is, of course, the budget is the vehicle for the spending plan for the year and the appropriations that we would make, so we’re not appropriating
this.
Chair Filseth: Okay.
Mr. Keene: Which is one of the reasons that we as, Council Member Schmid can recall, very often the difference between the capper and the budget is, there are lots of differences, so
often the challenge of trying to reconcile the reporting requirements of one number versus the other can create some problems, be confusing, because they are serving different purposes.
Chair Filseth: The other question I want to ask was, parking permit sales on University Avenue District of $2.1 million, does that include the RPP?
Mr. Perez: No, this is just permits.
Chair Filseth: Where do I find the RPP?
(crosstalk)
Mr. Guagliardo: Yes, at the moment that’s not called out, but it is listed in the Special District Funds on that same chart, on Page 120.
Chair Filseth: 123?
Mr. Guagliardo: 120 on the table that lists the net revenues so the special district funds column.
Chair Filseth: The special districts, so it’s in there somewhere.
Mr. Guagliardo: Yeah, that includes 236, 237 and 239, which is the Residential Preferential Parking Program. So it’s the downtown district, California Ave District and RPP.
Chair Filseth: I don’t see a 236, 237, 239.
Mr. Guagliardo: Yeah, they’re not called out. (crosstalk) precisely, yeah, it’s a little too technical, sorry. The column is the special district funds column.
(crosstalk)
Ms. Nose: So if you want to know within that number, so RPP specifically has estimated revenues of about $300,000 and then the other components are what Steve (inaudible) would be the
University Ave parking revenues as well as the Cal Ave revenues, because the column combined is those three funds.
Chair Filseth: Oh, so that’s those three. Perfect.
Ms. Nose: Yes. So Cal Ave is about $200,000 and University Ave is obviously the big one with $2 million.
Chair Filseth: Okay.
Ms. Nose: Then to your earlier question about the housing funds, don’t quote me on this because these are like us fingering parking fees but between the two funds there are about somewhere
between $15 or $18 million between the residential and then there’s another somewhere in the ballpark for the commercial center.
Chair Filseth: My sense is that somewhere around there is that balance.
Ms. Nose: Yup.
Mr. Perez: We will forward to the Committee the report that we send out and generally it had some fund balances there, so you’ll have a fresh one.
Chair Filseth: I did notice that on Cal Ave parking permits expenses are greater than revenues.
Mr. Guagliardo: And that’s something Staff will explore as we go forward is aligning revenues with expenses and looking at things like increasing the costs for the permits and such.
Chair Filseth: Okay. That was mine.
Council Member Holman: I have one. Where would one find, because I didn’t, find the wayfinding budget. It’s not here, it’s in the CIP right?
Mr. Guagliardo: Correct. So the wayfinding budget is part of…
Council Member Holman: The CIP that will be coming later.
Mr. Guagliardo: Yeah, and the CIP will be discussed on…
Ms. Nose: The 17th. It’s part of the General CIP. And you’ll see the transfer in in the CIP from the Parking Fund and then the (inaudible)
Council Member Schmid: We had a meeting in the Finance Committee about the In-lieu Housing Fee (crosstalk) and gave a report and we disagreed with the report and they were going to come
back I guess before we voted. What’s the status of that?
Ms. Gitelman: We’re scheduled to come back to the Committee on June 6th or so, and we’re kind of scrambling to meet that deadline, but we’re trying to get to you before the break with
response to some of the questions and requests the Committee had and a draft ordinance for you to take a look at, then it will have to go to the Planning Commission and to the Council,
so it’s really not going to get to the Council, at the earliest until August, so we did not include any increased revenues based on those projected fee increases in this budget.
Council Member Holman: I’m sorry, what was that topic, I missed the first…
Council Member Schmid: In-lieu housing.
Council Member Holman: Okay.
Mr. Perez: It’s June 7th.
Council Member Schmid: So what’s in the budget here is just an extrapolation from your current.
Ms. Gitelman: Correct.
Council Member Schmid: Thank you.
Chair Filseth: Go ahead.
Council Member Wolbach: Yeah, so I guess I had a couple of question. On page 37 of the presentations from this evening, housing in-lieu funds, revenue projected to decrease by $1.7 million
based on tracking. Can Staff elaborate on that and help me to translate what that means.
Mr. Guagliardo: Sure, so Sherry from Planning will be able to speak to tracking for the decrease in Housing In-Lieu funds based on tracking.
Sherry Nikzat, Management Analyst: Oh, yeah, thank you. So we took a look this year, we just were trying to take a look at what’s in the pipeline, so we did some research on what we
had going on in the pipeline and accordingly adjusted the revenue in the budget.
Council Member Wolbach: Okay, so basically because not much is being built, we’re getting less money for Housing In-lieu, or for housing?
Ms. Nikzat: Well, this year for instance, we had a budget that was surpassed because we had some legal settlements and such, but we don’t know what’s coming this year besides what’s
in the pipeline, so that’s what we used to estimate.
Council Member Wolbach: Okay, and a couple of questions relating to what we heard from a member of the public, just so I’m clear. I don’t think that everything that was raised during
public comment is relevant to our discussion tonight. Obviously the Capital Budget stuff is not relevant to this evening. I appreciate the input, but I don’t think that’s relevant to
this evening’s discussion because we’ll discuss that at a later meeting. There are a couple of things I would like some Staff thoughts on. One, let me start by kind of a framing question.
The Downtown Parking Assessment District, the University Avenue Parking Permit Fund and the University Avenue Parking In-lieu Fund, how do those three things relate to each other?
Mr. Perez: So let’s start with the Parking Permit Fund. How it works is that we set up a fee that we sell either annually or quarterly and then daily, and those revenues are put in this
fund and then the expenses that you see on Page 124 go to cover the activities, so there is administration, maintenance and transfers to capital, so if you were to approve the budget
tonight you’re approving it tentatively, so you would still have the discussion on the capital to go over the specific projects that are related to that. We have had, you know as Mr.
Keenen mentioned, discussions over the years about the different components of this, so it’s been we’ve taken some off, added some on. I think it would be fair to say that we don’t necessarily
agree on all of the items I think, as he stated it, but what we’ve done over the years is increase the fund by maintaining the cost at where it is at both levels. At one point we had,
you know, 300,000 to 400,000 in the fund balance. Right now it’s about 1.27, so it’s growing. We haven’t raised the fees for the permits in several years. So that’s one. The assessment
is a total separate item not related to this at all and that was set up to build the garages so this is an annual assessment. We refunded or refinanced is probably a better term as everybody
knows, the bonds and saved about $3 million off the top of my head, recently within the last three years, so that assessment is done annually and then the owners of the parcels in the
district pay for those. Then the parking in-lieu was a situation where, if you did not park your building, then you had an option to pay, and you know the number has varied between $60
and $65,000, the latest numbers have changed, per space that you didn’t have parked, and those funds have been put aside to build garages and roughly $4.5 million are in that fund. The
concern that we have with that is, those are sitting there and the escalation of the cost of the garage could go, so we do need to figure out what we’re going to do and then what the
difference is and how we’re going to fund that for any proposed garage that comes up in the downtown area.
Chair Filseth: What’s that funding invested in?
Mr. Perez: Well, it’s got to be within our limits, right, which is where we’re restricted. We can’t do equities. We do bonds.
Chair Filseth: So that only 1 or 2 percent.
Mr. Perez: Yeah, about 1.8 percent, which you know, that’s, and the rates what they are in terms of financing are attractive, so you know, that’s something to keep in mind.
Council Member Wolbach: So to go to this core concern that was raised by Mr. Keenen from the public, I guess the question is, are Downtown Parking Assessments, the funds from that Assessment
District, are they used to fund street sweeping, downtown streets team and Police patrol?
Mr. Perez: You cannot legally.
Council Member Wolbach: So the concern that was raised is that we’re doing that and should not do it because it is illegal, the City is already aware of that and is not trying to do
that, so that was a misunderstanding at some point in the communication? That’s what I thought but I just…
Mr. Perez: I’m not sure I heard that, but we can’t do that. The funds have to go for the payment of the debt of the issuance of the bonds for the garages.
Council Member Wolbach: Okay.
Mr. Keene: Clarify the funding source then, real quick for everybody else then.
Mr. Perez: It is the assessment, the annual assessment of the properties. That’s the funding.
Council Member Wolbach: So the funding for these other things is coming from other sources.
Mr. Perez: The sale of the permits, the parking permits. So two different funds, two different purposes.
Council Member Wolbach: Okay, I think a couple of us in various questions about, Council Member Schmid certainly raised questions and concerns about our lack of understanding, involvement,
transparency, clarity of governance around the Downtown Parking Assessment District, and I don’t think that tonight is really the right time to get into that. I think it is an interesting
conversation that we should probably have at some point, but I think it’s a little bit beyond what we’ve agendized for this evening, So I don’t think we should get too deep into that
tonight.
Mr. Perez: What I can tell you is the one thing that we have done to your point, to increase the transparency that Mr. Keenen and the rest of the Committee had asked is that these parking
funds be called out individually in one pot. They used to be segregated into the department budgets, so you could not go to one place and see what the budget was, and so their request
was that we segregate it into a special fund, which we did about three years ago, off the top of my head, so now you have this ability to what they are and what the changes are from
year to year.
Chair Filseth: Then that balance in the Parking Fund is, is that in the capital budget actually or also in the capper?
Mr. Perez: It’s in the capper. It’s $1.2 million that the fund has right now and like I mentioned a litter earlier, it’s been growing.
Chair Filseth: Alright. Motions?
Council Member Schmid: What are we moving?
Chair Filseth: Do you guys have a recommendation?
Mr. Perez: Yes to approve the, excuse me, the Special Revenue Funds listed on the Agenda A, B, C.
Council Member Holman: A, B, C, D? (crosstalk) On the Agenda, okay.
Mr. Perez: On the Agenda, sorry.
Chair Filseth: There it is, unless somebody wants to put it in the parking lot, there’s not very much money here.
Council Member Holman: There’s only A, B, C.
(inaudible)
Council Member Wolbach: So I guess maybe this was the source of confusion, where it says parking district, are we talking about the Downtown Parking Assessment District? Or are we talking
about our permit…
Mr. Perez: Yeah, we should have said permit, the Parking Permit Fund.
Council Member Wolbach: So that’s not the Downtown Parking Assessment District, that’s not what we’re dealing with here. That might be a source of a lot of the confusion here.
Council Member Schmid: Okay, I will move that we tentatively accept the special revenues overview including the Parking Permit District, Stanford Development Agreement fund and the other
special revenue funds.
Chair Filseth: Second.
MOTION: Council Member Schmid moved, seconded by Chair Filseth to tentatively approve the Special Revenue Funds, Parking Permit District Fund, the Stanford Development Agreement Fund,
and the Other Special Revenue Fund Budgets.
Chair Filseth: All in favor? Discussion?
Council Member Holman: I’m just making sure the word permit is added in there for clarity, Parking Permit District.
Chair Filseth: We got that right.
Council Member Holman: Yeah, okay.
Chair Filseth: You’ve got a question.
Council Member Wolbach: It was already seconded, right.
Chair Filseth: It was seconded. Further discussion? All in favor?
MOTION PASSED: 4-0
Chair Filseth: Motion passes. Thank you very much.
Future Meetings and Agendas
Chair Filseth: Let’s see the next item is future stuff.
Lalo Perez, Chief Financial Officer: Yes, so our next meeting is on Thursday, the 12th, this Thursday. We start at 6:00. We’ll have any follow up that we may have to give you. Then we’ll
get into the muni fee schedule followed by the Public Works Operating Budget including the general fund and then go on into the enterprise funds, refuse, storm drain, wastewater treatment,
airport and vehicle maintenance, and within the vehicle and maintenance there is a recommendation to go to an outside fleet program so we’ll discuss that with you. Then following that
it would be 17th where we’ll have Utilities and then the CIP.
Chair Filseth: What time are we starting on Tuesday, the 17th?
Mr. Perez: The 17th we’re starting at 6:00 and we’re starting with Utilities as a request from the Committee. Then we follow up with our wrap up on the 23rd. We have confirmed with the
City Clerk 11:00 and I have revised calendars if you wish them.
Chair Filseth: This is really good.
Mr. Perez: That’s all we have.
Chair Filseth: With that, we’re adjourned.
ADJOURNMENT: The meeting was adjourned at 8:55 P.M.
TRANSCRIPT
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Finance Committee Action Minutes
May 10, 2016
FINANCE COMMITTEE
TRANSCRIPT
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