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HomeMy WebLinkAbout2016-05-12 Finance Committee Summary Minutes Special Meeting Thursday, May 12, 2016 Chairperson Filseth called the meeting to order at 6:05 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California. Present: Filseth (Chair), Holman, Schmid Absent: Wolbach Oral Communications Chair Filseth: So we’ll start. So the first item is Staff response to previous items. I’m sorry. I have no cards for Oral Communications, but, so if there’s nobody, then we’ll proceed. Agenda Items 1. Staff Responses to Committee Questions From Budget Hearing Meetings Chair Filseth: Okay. Kiely Nose, Budget Manager: Good evening. So your right, the first item is just a recap of our May 10 Committee meeting. At your places you should have a memo that is detailing a couple of the additional questions that were asked. So this, At-Places Memo is going to give you the historical Human Services Resource Allocation Process (HSRAP) Funding going back to 2000, 2001. It also is addressing the discussion about development fee cost recovery allowable costs. We worked with the City Attorney’s Office on the rules and regs associated with what costs are eligible to be recovered by the fee fares and which are not. It was a little bit of an ad hoc question, but you guys had asked about the Housing In-lieu Fund balance, so we included a report that went to Council back in January, I believe, of this year, that kind of details that fund balance, both from the Comprehensive Annual Financial Report (CAFR) perspective and it walks you through what’s actually available, because even though there is funding in the CAFR fund balance, some of it has already been reserved for various projects or initiatives. Then the last piece is, we’ve talked about performance measure goals, and so during Fiscal Year ’17 we are evaluating those and so we will incorporate any changes as necessary as part of the Fiscal Year ’18 budget process. There was also one kind of random ad hoc question about Charlston/Arastadero and a transfer from there. This isn’t in the At-Places Memo, but just for you guys, I can’t remember which Council Member asked for it, Council Member Holman did, you’re right, it’s coming in a City Manager Report (CMR) on May16. So that’s where you saw it. And it’s an update about the project and moving the project that I think at a faster pace than the Proposed Budget, so that’s why you’ve seen it recently, as it was in a very… Yup, and so you saw it in a very recent packet for your normal Council Agenda, so I think that’s what’s triggering that memory of seeing a transfer for that. Going to our normal recap of kind of where we’re at, you can see, we haven’t made any formal actions to change the current general fund balancing and on the far right we have that list of items in the parking lot. So the newest additions were those Development Services staffing realignments, the Planning contingency funding, which we will talk about as part of the wrap up, and the idea or the additional costs associated with the new two Residential Preferential Parking (RPP) Districts. So Staff will bring forward recommendations as part of wrap up as well. Then, the last piece is, again, that Development Services staffing realignment. Council Member Holman: Do we have that as well? Ms. Nose: Sorry? Council Member Holman: We don’t have this that shows now what’s the update of what’s in the parking lot. Ms. Nose: Oh, you don’t have this Power Point? Council Member Holman: Oh, it’s on the front page of the presentation. Ms. Nose: Yes. Council Member Holman: It’s still warm, I might add. Ms. Nose: So, unless you guys have any questions on the wrap up? NO ACTION TAKEN 2. Finance Committee Recommendation Regarding Amendments to the Muni Fee Schedule for Fiscal Year 2017 Kiely Nose, Budget Manager: Great. Then we’ll move to Item Number Two today, which is the municipal fees. Steven Guagliardo, Senior Management Analyst: Sorry, I missed my queue. Good evening Chair Filseth and members of the Finance Committee. My name is Steven Guagliardo, Senior Management Analyst with the Office of Management and Budget. As part of the annual budget process, Staff submits changes to the Municipal (Muni) Fee Schedule for Finance Committee review, approval and recommendation to the City Council for adoption. The City’s Muni Fee Schedule includes hundreds of fees for various services, such as facility rentals for meeting rooms, Planning and Development related fees for architectural review and building permits and Animal Services Fees. As recommended by this body, the Office of Management and Budget (OMB) presented the User Fee Cost Recovery Level Policy for Council review on April 6, 2015 and for formal adoption on May 18, 2015. In alignment with that User Fee Cost Recovery Policy, OMB Staff has continued to work with the City departments to align some fees to the appropriate cost-recovery levels as outlined in that policy. We’ll discuss that in further detail later on throughout this presentation. Also worthy of note is that during Fiscal Year 2016 the Planning and Community Environment Department has a Cost-of-Services Study conducted by Capital Accounting Partners that was presented to this Committee and subsequently to full Council. Through this comprehensive study, Planning and Community Environment adjusted most of their fees to be more in line with appropriate cost-recovery levels as approved by City Council through City Manager Report (CMR) 6638 on March 28, 2016. Those fees were detailed, in great detail, in that memorandum, and due to that separate process they are excluded from the balance of this presentation and this report. Development Services also undertook a Cost-of-Services Study during 2016. That fee study is still in process, and we hope to return to City Council with an update soon. The exception to that portion is the Public Works Division of Development Services, because in Fiscal Year 2016 the Public Works Department as a whole undertook a time and motion study related to their fees, including those in the Development Services Department. Unfortunately, this time and motion study was not completed in time to be fully incorporated in the Cost-of-Services Study. As such, this report recommends adjustments to the Public Works Development Services fees, as well as changes to the Public Works Department fees. The fees of the remaining divisions in Development Services, including building, fire and planning will be addressed in the aforementioned cost-of-services study later. Next slide. So, consistent with past practice, most fees are recommended to be increased this year by an amount equivalent to the general salary and benefits increase from Fiscal Year 2016 to Fiscal Year 2017. That amount is about 5.5 percent. This will ensure that the City continues to recuperate its cost for services. Based on our analysis, some fees were also adjusted downward, in order not to exceed 100 percent cost-recovery level. It’s important to note that development impact fees, which are based on discrete formulas, as outlined in the Palo Alto Municipal Code, were increased by a factor equivalent with the Construction Price Index (CPI) from March 2015 to March 2016. Staff does anticipate a separate report to the City Council in August 2016 to bring standardization to when those fees are paid, uniformity to the calculation of them and uniformity to the annual adjustment rate, among other updates. One quick note, most of those were determined by the CPI, but the housing impact fees are affected by the cost of living, or CPI. So, included in the report before you are 12 new fees, eight fees that were recommend for deletion, and 118 fees that were recommended to change by a margin other than that 5.5 percent. So just as a quick sampling, a couple of the new fees we have are fees for the Community Services Department for a cleaning package at Mitchell Park. It’s something that a number of customers have requested and now we are enabling them to do it through the reservation package, a wet season construction site Storm Water Inspection Fee for high-risk area and new fees for Police, including things like off-site document recovery, which used to be included in the Subpoena Fee, but are now broken out separately for better tracking. There are also eight fees that are recommended to be deleted. These are things like the Arts Center Green Room, which is no longer available for rent because the Green Room has been converted to offices. Other individual fees that are being deleted are things like additional rehearsal rentals that were broken out into myriad options in last year’s Municipal Fee Schedule, but are now being deleted and being consolidated into a more standard package. Another example of one that’s being deleted is the sales of coffee and tea that were self-serve at the library. That’s no longer a service that’s being offered. So, on to the meat of it, is really these changed fees. There are 118 fees that were recommended to be changed. Some of those are to align the fee to market demand, and some of them are technical adjustments to the fees. Some of the examples of changed fees are things like auditorium rentals, which has about a 10 percent increase, and that’s due to alignment with the market, but also it reflects the fact that we have new audio/visual equipment in that auditorium, making it more appealing to customers. To reach cost recovery, some fees are requested to be increased by fairly significant amounts, as you’ll see if you peruse it. As discussed earlier in this presentation, Public Works underwent a significant time and motion study to analyze their cost recovery levels. For example, the Public Works non-residential equipment permit short-term, less than five days permit, is recommended to increase by more than 100 percent, from $504 each to $1,014 each, in order to reach full cost recovery. The significant increase more accurately captures the true cost of the staff time that’s spent administering this permit. There are also some technical adjustments, which include things like clarifying that the license fee for taxi drivers is per year for four years, and things like the separation of the Subpoena Fee from the Off-site Document Recovery Fee that I mentioned earlier. So that concludes my presentation. I’m open to any questions Council may have. Council Member Schmid: The Fee Schedule looks pretty straightforward, but a couple items just caught my attention. Of the new fees, Community Services, Cubberley running track, $15 an hour. Now, that sounds like you’re going to… Ms. Nose: I’m sorry, would you mind referencing what page you’re looking at. Council Member Schmid: Page Five. Ms. Nose: Got it. Council Member Schmid: So we put fees on parks, on pathways, bike pathways? How can we put a fee on a Cubberley track. Does that mean I can pay $15, close the track to anyone else and then run around by myself? What’s a fee on a running track? Rob de Geus, Director of Community Services: Good evening Council Members, Council Member Schmid. Rob de Geus, Director of Community Services. So, yeah, and we don’t get a lot of requests for the running track on the football field at Cubberley, but we do occasionally and the one exclusive use, it’s usually a group and they are doing some type of training or some type of event, and so they can get access to it exclusively by paying the fee. Would you pay $15 to run on the track? Probably not because most of the time it’s available and you can walk around for free, so you wouldn’t do that. Council Member Schmid: But suppose I wanted to go jogging with my friend, could I get some exclusive hours? Mr. De Geus: Technically you could. Council Member Schmid: Okay, it just seems such an essential part of the park, where people go jogging and walking, to be able to go around the track is an added element and sounds funny that we’re making this an exclusive domain. Mr. De Geus: It would be unusual, though, that we would get a request like that. It’s a larger group that is having an event that would want to have the exclusive use. That’s what it goes for. Council Member Schmid: Well, let me ask, as a follow up another one that caught my eye was the Teen Center at Mitchell Park. My understanding of the Teen Center is that is open in the afternoons after school for teens to drop in. Is that right? Mr. De Geus: That’s right. Council Member Schmid: So, again, what would it be if a nonprofit rented it out. Would they then say, “No one else can come in?” Mr. De Geus: So they wouldn’t be able to rent the room when the Teen Center is scheduled to be open for teen activities, so actually the amount of time during the week that it would be available for rent would be fairly minimal. It’s when the City does not have activities in there and the Youth Council is not using it. So, it could be a Sunday morning or, you know, during the day when the kids are in school, because it’s underutilized during those times, so we want to make sure it’s available. Council Member Schmid: Okay. Mr. De Geus: And we’ve gotten requests for people to have birthday parties and so on in that room. Council Member Schmid: Yeah, but these are on off hours, so a regular visitor won’t get excluded? Mr. De Geus: Yes. Council Member Schmid: I guess the only other question I had was on the room rentals. If you just glance at the numbers and you’re talking over $100 per hour, and that covers our cost, but thinking in terms of a market, do we find that there are a lot of empty hours where no one is renting? Are we meeting market demand? Mr. De Geus: Well, it varies during the day and during the week and during the season. Certainly during the sort of morning hours we see more vacancies. Our rental rates are generally pretty low compared to the average across the cities on the Peninsula. I think there is room to grow there. I would add that cost of services has certainly increased. Cost of staffing, cleaning, custodial, it’s important to try to keep up with the fees. Council Member Schmid: Yeah, I guess I’m just thinking of the new library as one of the most popular features on these little rooms that people can utilize and they seem to be utilized every effectively. I wonder if we had more dynamic pricing, if you had low rates in the mornings, more book clubs or something, might say, “Oh, let’s do it at the library?” Mr. De Geus: That’s interesting. We are looking at that. We don’t have that kind of rate structure now, but it’s something the Parks and Recreation Commission has brought up before as well, so we could take a closer look at those vacancy times and maybe lower the fees during those times. We do that at the golf course all the time. We have late hour fees versus early morning fees, and so on. Council Member Schmid: Yeah, well maybe thinking of the future, dynamic pricing should be something we could do fairly easily. Good. Thank you. Council Member Holman: Yeah, I have a couple of questions. Actually, probably three questions. Rob, one’s maybe for you. I brought this up year before last, and I don’t think it was resolved. I’m pretty sure it wasn’t resolved last year, is we had kind of blended all of our fees for Community Services together, and so the same fees were charged kind of more broadly based, and so community gardens renters could not get low-income rates. There’s a senior rate, but there’s not a low-income rate. Mr. De Geus: That’s right. Council Member Holman: And that just seems not right, and I don’t know how many people it would affect, but I know some that it does affect, and it’s an issue because aren’t those the people we kind of want to encourage to, you know, be growing their own food and not having to buy high-priced market goods. Mr. De Geus: So we do have a Fee-Reduction Program that’s available for anyone with a disability or for children of a low-income family and we have a senior rate, but we don’t have a low-income rate for adults. I will tell you that the fees are pretty generous though, for community gardens. Council Member Holman: Well, I’m a community garden tenant and I’d say they’re not that generous. Mr. De Geus: Do you mind sharing how much it is a year. Council Member Holman: I think it’s about $300 a year. It’s not inexpensive. Mr. de Geus: It’s exclusive use of a park for one individual, so… Council Member Holman: I understand, but I just don’t understand why there’s not a low-income aspect to that, because I know, like I said, I know some people who are paying full bore and thought they might have to give them up. Mr. De Geus: It’s a good policy questions. It’s something that, if the Council is interested in instituting something like that, we certainly can… Council Member Holman: And since you brought it up, it’s like, I don’t know how many children are going to be having community garden plots, so, it doesn’t even apply, really. So I put that forward to my colleagues here, low-income community garden rentals. And then, thank you Rob. And then I have a couple of questions for Public Works. I’m trying to understand the, it’s in the Staff Report on Page Five, Public Works Encroachment, additional non-residential long-term, more than five days is $500 a month. Then when I flipped to the chart, though, I have a hard time finding that because there are a zillion different encroachment permits, and I don’t see anything that marries up to this, so can you point us, please. Mr. Guagliardo: I can chime into that a little bit. The attachment, the chart in the back, only reflects changed fees, so those added fees and those deleted fees won’t appear in Attachment A. Council Member Holman: Added fees aren’t appearing here then. Mr. Guagliardo: In the landscape charts in the back that say, “Attachment A Changed Fees?” Council Member Holman: Yeah. Mr. Guagliardo: Yeah, you will not see new fees in that chart. Council Member Holman: So tell me, even it doesn’t show up here, how does it fit in here? Because it’s general, it just says, “Encroachment, additional non-residential more than five days.” Brad Eggleston, Assistant Director of Public Works: Good evening Council Member Holman and Finance Committee, Brad Eggleston, Assistant Director of Public Works. So, what this is, if you look in the other table in the Attachment A you’re referring to, you will find a Non-Residential Encroachment Permit for a single day, a Non-Residential Encroachment Permit for less than five days, and a Non-Residential Encroachment Permit for greater than five days. So these would be for things like a construction project needing to block off part of the street or having a crane come for a day, or potentially, you know, many more days. So, in the course of evaluation of our fees that we did over the last year, we realized that we had this fee, a single fee to charge for someone who was going to have this kind of encroachment for more than five days, but in reality our costs for having inspectors come by every week, multiple times per week to make sure the sites were safe, to make sure the proper traffic controls were in place, were not being recovered, so that meant that someone was paying the same fee if they needed to take the space for 6 days as someone for 6 months, so that’s why we created this new fee. We realized it was something we were missing that someone who has this use of the public right-of-way for a longer period should continue to pay for the ongoing costs. Council Member Holman: So I know the Council has addressed this and I don’t remember how many Council members or what the ultimate action was, but I know this has been brought up at Council meetings, and so I guess why the number $500 for a month, because it’s not just the cost of inspectors to go out, which I appreciate, but it is the use of a public right-of-way. Are you talking streets or sidewalks or both? And sometimes it goes on for months and months and months, and it’s really disruptive, so $500 a month, to me, seems like quite the bargain. Mr. Eggleston: You’re right that this amount of fee is entirely based on the inspectors, and you’re also correct that we have been asked to address this with the Finance Committee to talk about other ways of looking at these fees. This was kind of our first step this year in reevaluating the fees and making sure we were actually capturing all the appropriate Staff costs, which is why you’ll see that on some of these fees, they are increasing by even several hundred percent, but it’s a next step we have to do to come back to the Finance Committee and have a further discussion with you. Council Member Holman: This is the Budget time, so I was just thinking like, “wouldn’t this be an appropriate time to do that, or what’s necessary for us still to have some kind of reasonable, some kind of rationale to base further increase.” Mr. Eggleston: Well, there are legal and policy issues that are involved. We have started to have some discussion with the City Attorney’s Office, but we need to do more of that. It’s not something that we think can just be added into the regular type of Municipal Fee Schedule. Mr. Guagliardo: If I may chime in there. The California Constitution limits us to only recovering the reasonable costs of the inspector’s time to do it. We can’t 4FB charge someone for using the public right-of-way, for just disrupting the public right-of-way for example. Council Member Holman: So let me draw an analogy here, and I’m not going to like beat this into the ground, but let me draw an analogy. We have rental fees in here for various community facilities, which I would say street and sidewalk are as well, that are, you know, hundreds of dollars for a day. That covers more than the cost of inspectors and the cleaning staff to go in and such, so how is a public amenity such as a street and a sidewalk any different? Mr. Eggleston: I don’t mean to stand here and say that it is. That’s the discussion we need to have. I was only meaning to say we had started to talk about it with the Attorney’s Office. There were more issues to think about. We were spending a lot of time working on the kind of fee study that Public Works did to update all of our fees and really we just haven’t gotten to that next level yet. Council Member Holman: Okay, and just to be clear, just to confirm something that I think has changed some time ago is, we do not any longer allow any kind of private entity to build or encroach underneath the sidewalk or a public street for their construction purposes for shoring, correct? Mr. Eggleston: To that I’d have to ask Mike Nafziger, our Senior Engineer in charge of private development. Mike Nafziger, Senior Engineer: Good evening. Mike Nafziger, Senior Engineer. That’s correct. We no longer allow encroachments underneath the public right-of-way for basements or shoring. Council Member Holman: Great, thank you. I just wanted to confirm that. Thank you a lot. Then the next one, this is, I think my last question on this, but it’s also an additional, and it is the storm drain. It’s also additional temporary discharge to storm drain from construction site dewatering, $217 a week. On what is that based? Mr. Eggleston: That, again, is based on the time of inspectors to come by and check on the site. Council Member Holman: So not… Mr. Eggleston: It’s not based on flow rates or use of the storm drain system or any of those other types of measures. If I could point out, in Table A, the initial permit for, essentially this is like a Basement Dewatering Permit, the cost of the initial permit has gone up by, I believe, about 17 times, and that’s because it’s reflected all the costs of the new Basement Dewatering Program that we’re implementing this season that we’ve been talking with you about. Council Member Holman: And I don’t remember what that was. What’s the fee now? Mr. Eggleston: I believe it’s somewhere on the order of $2,000 or… James Keene, City Manager: I do think I could jump in and say, you know, we’ve had discussions this past year as it relates to dewatering, and we’ve gotten direction from the Council, as you recall, for a series of both changes, some of which we brought back to the Council and they have been enacted and then some other broader issues that are still sort of under review for the efficacy of us moving forward on them on dewatering. So, I mean, I think in one sense the Council, what we’re doing is a basis of existing direction now, or current direction from Council as it relates to dewatering, and I think, you know, the appropriate place will be if there is an extra concern about this would be to be sure we refer this back to the work we are already tasked to be coming back to the Council on in the Dewatering Program. Council Member Holman: That makes sense. Last question about this is, if there is any proportionality to, so I don’t remember how much I pay, like six dollars a month or seven dollars a month or something like that, and I don’t use anywhere near what a dewatering project is, does, so is there any proportionality between what a residential or even commercial property gets charged on a regular monthly basis and this, it would be $217 times four so, whatever that is, $864 or whatever that is? Mr. Eggleston: No, there is no, proportionality is not involved. This is entirely based on the estimates of inspector time and administrative oversight for the sites. Council Member Holman: It seems only one faceted, where it should be two faceted, at least, not even thinking about the water that… So, okay, those are my comments, encroachment, dewatering and a low-income garden rate. Chair Filseth: Thank you. I actually have a question, a clarification question for Council Member Holman, which is, a month or two ago we had a discussion on dewatering, right, prompted I think, by some members of the public that perhaps the cost of the storm drain system, perhaps that ought to be allocated based on water flow as opposed to how it is now, given that the basement dewatering contributed a significant amount of the total water flow used by the storm drains, and there was a question, is it legal or desirable to allocate that to people who produce water. Is that the thing you’re asking about? Was there any further discussion on that? I mean I don’t think we on Council had any further discussion, but did you guys. Is that even legal? Phil Bobel, Assistant Director of Public Works: Phil Bobel, Public Works. There are some legal issues with that, but rest assured that we do have that on the list of things that were in that Group Three, that’s what Jim was alluding to. We divided all those issues you guys discussed into three groups. We adopted the first group, the third group is where we’re putting these things that require substantial research on our part, and the charging fees and what the basis of that fee would be and how it would be calculated and whether it is legal or not. That’s in that Group Three, so sometime late fall we hope to come back to you with an analysis of that. Chair Filseth: Okay, thanks. I didn’t have any further questions on this. Other comments or questions from the Committee? Council Member Schmid: Well, I would move that we tentatively approve the amendments to the Municipal (Muni) Fee Schedule. Chair Filseth: Second. MOTION: Council Member Schmid moved, seconded by Chair Filseth that the Finance Committee recommends tentative approval of amendments to the Municipal Fee Schedule for Fiscal Year 2017. Council Member Holman: I’d second, but I do want to recommend to put in the parking lot or Staff to come back how it is that we could do a Low-income Community Garden Rate. AMENDMENT: Council Member Holman moved, seconded by Council Member XX to direct Staff to return with information on how to do a Low-income Community Garden Rate. AMENDMENT FAILED DUE TO LACK OF A SECOND Chair Filseth: That seems like a policy question. Mr. Keene: May I, it seems we’ve had this discussion before, like last year or the year before and so I’m wondering what we didn’t do two years ago or what would be different now and even if so, is this ultimately better for referral to Policy and Services or something like that? Council Member Holman: I’d be okay with referring it to Policy and Services. What didn’t happen two years ago was, well what did happen two years ago was nothing, just the same response that we don’t have a schedule or that, so it wasn’t really resolved, it was just kind of… Mr. Keene: Well, I’d hardly mention this, just I think about the broader policy issue, which is, what is it that is distinctive about the community gardens that would engender a low-income fee versus a hundred other programs or services we provide? Council Member Holman: Because there are scholarships for, and I can’t say that there aren’t others, but it’s just something I’m aware of, but there are scholarships for a lot of programs. There’s nonprofit rates for a lot of programs. This just happens to be where it’s individuals, so maybe there’s some other area where this would apply. Mr. Keene: It just makes me think of, you know, somebody says, “well that was great that community gardeners get a break, but I’m low income and I actually want to take an art class or whatever it is.” It seems like the fairness question might make this a larger issue than just the one area. We’d have to find something distinctly different about this, and so that’s why I would think of deeper discussion if the Committee is interested in it. It would be something to recommend back to the Council. Council Member Holman: Just to be clear, it’s like I’m not trying to imply, it wouldn’t affect me, it’s just I’m looking at other people I know, so… Chair Filseth: I think the City Manager has an interesting point, because any program like that, inevitably at some point or other is going to come through Finance, through the budgeting cycle, so are we going to set policy on these things through the budgeting process or not? I mean, I think at some level we’re setting policy on some things, but this seems like it opens a big door if we do that kind of thing. I’d be okay to send it to Policy and Services. Council Member Holman: Yeah, I’m okay sending this to Police and Services to see if there are any other areas that, where low-income rates should apply and it’s sort of sixes and sevens. I think that’s a reasonable approach and it’s also kind of sixes and sevens because, as I’ve said many times, how we spend our money is also a reflection of our policies. Mr. Keene: It’s a procedure of parliamentary clarification, if that’s the case, it’s the Council who would refer to the Policy and Services, so Finance would include this in a recommended to the Council when you forward the Budget. Council Member Holman: Correct, provided the maker of the motion and the Chair accept that as a part of the motion. Council Member Schmid: You know, I don’t think I will. You know, community gardens charged $300 a year. Council Member Holman: It depends on the size of the plot. Some are much more, some are some less. Council Member Schmid: But a parking place, which is about the size of a community garden, you know, charges $65,000, it comes to $6,000 per year on an adjusted basis, so $300 for, you know, land in Palo Alto, is a relative bargain and if free water comes with that, that’s low income, so… Council Member Holman: Not to get into a really long debate about this, I’ll say this and then stop it. I don’t know what the relationship is to a parking place, but community gardeners maintain not only their garden, but they create a really lovely environment for people who come and walk the gardens, and we are required to maintain the whole area outside the gardens. That’s part of our work program that’s required of us, so we’re basically lands keepers, and I’ll stop there. AMENDMENT: Council Member Holman moved, seconded by Council Member XX to recommend the Policy and Services Committee have a discussion to identify additional areas where Low-income rates for Palo Alto City services should apply. AMENDMENT FAILED DUE TO LACK OF A SECOND Chair Filseth: Is this, I mean, is this really a little tiny piece of what ought to be a broader issue, which is, what is our policy in general about fees and low income and income level? Because it seems like this is one little tiny piece of that and if something gets taken up by Policy and Services, then should it be the broader issue of what’s the relationship between income and fees in this town, and it’s a little bit tricky because it would have to be subsidized because we can’t sort of charge high-income people more in order to subsidize low-income people, right? So it would have to come from somewhere, right. So, your motion was not accepted, or your friendly amendment was not accepted by the maker of the motion. Do you wish to propose it as an Unfriendly Amendment. Council Member Holman: Or as a Second Amendment. So my amendment would be to ask Council, to include in our motion to ask Council to refer to Policy and Services a review of low-income rates for, I guess you would call them community services, municipal fee rates. Council Member Schmid: Yeah, I would accept that as a reference. Council Member Holman: Oh, okay. Chair Filseth: Very good. Do you accept that as the maker of the motion? Could somebody read the motion? Female: The original motion was, Council Member Schmid moved by Council Member Holman to tentatively recommend to the Council the amendments of the Municipal Fee Schedule for Fiscal Year 2017 and at the end it sounded like an incorporation into the motion to ask Council to refer to Policy and Services the low-income rates for municipal fee rates. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to ask Council to refer to the Policy and Services Committee a review of Low-income rates for Municipal Fee Rates. Chair Filseth: Motion passes with three in favor and one not present. MOTION AS AMENDED PASSED: 3-0 Wolbach absent Chair Filseth: Thank you very much. 3. Public Works Overview, Operating Budget pp. 345-349 Lalo Perez, Director of Administrative Services and Chief Financial Officer: We’re ready Chair, whenever you are. Chair Filseth: Please proceed when you’re ready. Mr. Perez: Thank you. What we’re going to do with the next item, if you can accommodate Staff’s request is to take it a bit out of order. It is all Public Works. It’s laid out in a particular order in the Agenda, but Mike’s going to go through the General Fund first and skip to the wastewater treatment fund next, so it’s everything that’s in here, it’s just the particular order of the slides is going to be a little bit different. What we recommend that you do, Chair Filseth, is maybe ask for public comments now. I don’t know if there are any members of the public behind me that have any cards. If not, then after we finish each of the funds we want to stop and then take action at that point. Chair Filseth: So the suggestion is, we do public comments before the Staff presentation? Mr. Perez: Or right after, either way, but the issue we have, the reason we would recommend before is because we’re going to go through and then stop at each fund and then keep going, so of the speakers make their points ahead of time, if they want, then we could that, or we could do it at the end, whichever way you like. Chair Filseth: Got it. So at this time we have only one speaker from the public, which is Nancy Clark, and if you have no preference, do you want to go now? Thank you. Nancy Clark: Good afternoon. I’m here on behalf of the Storm Drain Oversight Committee and we just wanted to make sure the Finance Committee knew that we, the Committee has reviewed the Proposed Budget and it’s in keeping with the voter’s initiative that created the fund and our Committee. So I just wanted to make sure you knew that. Thank you. General Fund, Operating Budget pp. 350-360 Mike Sartor, Director of Public Works: Good evening Chair Schmid and members of the Finance Committee. I’m Mike Sartor, Public Works Director. We’ll go through the slides first, focusing on the General Fund and the overview of the department. So, the Mission of Public Works and the Purpose of Public Works are listed on Page 345 of the budget document. Essentially our department provides safe, efficient, cost-effective services to the public in relation to Public Works facilities. We maintain the City’s infrastructure, City buildings, treatment plants, those kinds of things, and we have an airport. So, as you know, we have four divisions in the Public Works Department. We have our Environment Services Division, Engineering Services Division, Airport and our Public Services or maintenance and operations group. Thanks Kiely. So the General Fund, let’s go to, quickly, overview of Fiscal Year ’16 and what we propose for ’17. As we have reported in the past, our goal of achieving an 85 percent Pavement Condition Index (PCI) for all City streets in Palo Alto by Fiscal Year 2019 is the Council-adopted goal. As of Fiscal Year ’16 we’ve achieve and 82 and expect to achieve an 83 in Fiscal Year ’17. We are proceeding with the Council-adopted Infrastructure Plan, which includes the Public Safety Building, parking structure on California Avenue, fire station replacements, Bicycle Pedestrian Plan, and that has been provided to you as an update last month on an update on our Capital Improvement Program. As we announced to you in October, the Public Works Department has achieved accreditation from the American Public Works Association. We are the 103rd agency throughout the country that has done that, out of 15,000 agencies. We are the first Public Works Department here in Silicon Valley to be accredited by the American Public Works Association. We are very proud of that feat. We have implemented a residential food scraps and commercial recycling program in our refuse fund and we have proceeded with our design and are completing our design on the sludge, dewatering and off haul facility at the treatment plant, which will lead to the eventual shutdown of the incinerators at the plant. In ’17 we plan to complete the Bayland’s Interpreter Center renovation and boardwalk improvement, complete our environmental review for the Newell Road project, maintain the health of the urban forest and modernize our City building systems to reduce energy consumption. Next slide. Thank you. So for the general fund, it’s fairly simple. Our primary change to the General Fund has to do with our tree program and our Urban Forest Master Plan. As you can see on this slide, our tree-trimming services will be proposed to be increased by $569,000 for the next three years, per year. That’s an increase of almost triple the previous fee, excuse me, cost. That is because the cost of tree trimming services has gone up significantly when we went out to bid. We received several bids on that and that’s the most reasonable bid we received. The other impact of that is that we are including in our tree-trimming now, for the first time, the parks and open space trees. That previously had been under the Parks Department purview and they had not had budget for actual tree-trimming processes, so we have now, in accordance with the Urban Forest Master Plan, included parks and open space trees in our Tree-Trimming Program. The one significant change to our street tree trimming cycles, because of the increased costs and the adding of parks and open space trees, is that we are going to a 15-year tree-trimming cycle versus a sevenyear cycle. If there are any questions about that, our urban forester can speak to that. He is confident that is a reasonable approach and is in compliance with our Urban Forest Master plan. The other item we have in the general fund is $200,000 for the continued implementation, as you recall, we have a 10-year implementation plan for the urban forest master plan that includes, for Fiscal Year ’17 about $40,000 for temporary and contract staff to augment the work under the urban forest program and also about $160,000 in software upgrades for maintaining and keeping track and quantifying our urban forest assets. So that’s it for the general fund and I’m open to any questions you may have on that. Council Member Holman: Just one question, and thank you for that. So the, if I understood correctly, so the previous tree-trimming contract of $350,000 is being moved to Public Works consistent with the Urban Forest Master Plan Oversight that Public Works has. Did I understand that right? Mr. Sartor: No, the prior contract was under Public Works. It expires, actually it expired, I believe, this month, and we extended it until July 1 so we can wait for the budget adoption. So our new bids are for an increased cost for tree-trimming services. Council Member Holman: I misheard that, sorry about that. Mr. Sartor: And it is for a three-year period, so it’s per year for three years. Council Member Holman: And the standard now is more a 15 than a sevem, is that? Mr. Sartor: Our cycle for trimming street trees will go from a seven-year cycle to a 15-year cycle. Council Member Holman: But, I mean, is that kind of like an accepted standard from seven? I mean, that’s seven to 15 years. Mr. Sartor: Let me ask Walter Passmore to come up and speak to that, our urban forester. Thank you. Water Passmore, Manager of Urban Forestry: Walter Passmore, Public Works. So there is no industry standard, per se, for tree-trimming cycle. The ideal is five to 10 years, depending on City situations, but we had to do a balancing act with the significant increase in cost and provision of service, so the 15-year cycle for now seems like the best solution or balance between those two objectives. However, in the future we would like to reduce that cycle back down into the five to 10 year range, so we will be exploring options in the budget again in following years to see if we can reduce that cycle back down to the seven or about that target. Council Member Holman: Woe-be-it if I wanted to raise costs, because I certainly don’t, but I just know, I mean I have a lot of trees on my property so I can’t wait 15 years. So my concern is public safety and we’ve had issues in this community before about dropping limbs and if limbs get too heavy, they’re going to drop. So I guess, what would it look like if it was on a 10-year cycle, the budget? Mr. Passmore: A 10-year cycle would be slightly over $1.1 million as opposed to $968,000. The seven-year cycle would be $1.46 million. Council Member Holman: So seven is $1.46 and 10 year is $1.1? Mr. Passmore: Correct, 10-year was $1.1. Council Member Holman: Okay, those are my questions for the moment. Council Member Schmid: Yeah, just a follow up. The description is a little confusing because we are spending more money, a substantial increase in money, yet we’re moving to a longer cycle and yet on Page 354, we’re saying we’re trimming the same number of trees, so I can’t quite understand that discrepancy. Mr. Passmore: I’m sorry, I was in another conversation. Can you repeat the question please. Council Member Schmid: Yeah, there is an increase of almost 200 percent in the amount of money we’re spending, the cycle has gone from seven years to 15 years, you state this means we will lose some trees, we’re not sure how many, but some, and yet when you look at the workload measures on Page 354, it says we’re trimming the same number of trees. So what’s going on? Mr. Passmore: Those measures were estimated prior to us receiving bids on the contract, and the reason that we are reducing the amount of work quantity but increasing the costs are several. One is that we had a significantly under market contract previously, and if you divide out the $350,000 by the 5,000 plus trees that we pruned, you’re only coming out with a price of not even $70 a tree. Logic would dictate that not very many people can acquire tree pruning services for $70. So, significantly under market contact and that has been adjusted by a supply-and-demand issue in the state, because due to the drought, there’s millions of dead trees that are required to be removed and millions upon millions of trees with dead limbs that need pruning services, so tree pruning services are in high demand. Council Member Schmid: Could you give an estimate of dollar figure of what cost per tree we’re looking at under the new contract? Mr. Passmore: It averages almost $350 a tree as opposed to $70 a tree. Council Member Schmid: So it’s four times as high. Mr. Passmore: Yes. Council Member Schmid: Now you state in the text that we’re going to lose some trees and you said that verbally just now. What kind of loss do you expect to have? Mr. Passmore: It’s very hard to project that and, thankfully, we have gotten some much-needed winter rains this year, so that may have really diminished the amount of loss that we would expect. If we had continued in drought conditions, the number of tree loss and tree removals I think, would have increased pretty significantly. Last year we removed 400 trees out of our population, which is slightly over 1 percent of the population. That’s still a pretty small number and a lot smaller than other cities, so it’s really hard to estimate if we’re going to lose more than 1 percent, less than 1 percent this year and following years. It’s largely due to weather. Council Member Schmid: You gave a number of $1.1 million to go from a 15-year cycle to a 10-year cycle. Is that $1.1 compared to the $968,000? Mr. Passmore: No, $1.1 million in total, not additional. Council Member Schmid: But what’s coming before us is a request for $968,000. Mr. Passmore: Correct. Council Member Schmid: So $120,000 we can go from a 15-year cycle to a 10-year cycle? Mr. Passmore: Correct. Council Member Schmid: That’s dealing with, the numbers don’t quite make sense, because that would go from $300 a tree down to $150 a tree. Mr. Passmore: So with the different cycle lengths we did not change the amount of demand work or removal work, we only changed the amount of trees that would be pruned on a routine basis, so the proactive work that we do is the cheapest, most efficient work, so decreasing the cycle from 15 to 10 is not as large of a dollar increase as making adjustments in other priced items. Council Member Schmid: Okay, do you recommend going to a 10-year cycle, or does that mean we’re not doing some basic work we should be doing. Mr. Passmore: Five to 10 is the ideal target and I am not able to speak to what the budget allows us to do, but a 10-year cycle, as far as urban forest health goes would be significantly better than the 15-year cycle. Council Member Schmid: I mean from a finance point of view, going from 0.97 to 1.1 is a relatively small increase and if we get a 33 percent increase in effectiveness, that sounds like a good deal. Is there some trick I’m missing? Mr. Passmore: Well, to give you an idea, going to the 10-year cycle, we’d be pruning 4,295 trees a year as opposed to 2,858, so you’re increasing the number of trees pruned by off the top of my head, by about 1,400 trees. Council Member Holman: I’m sorry, you said 4,295 trees pruned in the 10-year cycle and what was the 15? Mr. Passmore: The 15 is 2,858. Chair Filseth: Greg I think what you’re suggesting, and make sure that we’re all in sync here, that our understanding is that for another $120,000 we gain quite a bit of tree health. Is that right? That’s the marginal benefit of the (crosstalk). Council Member Schmid: I just look at the numbers and it seems to say that by spending an extra $100,000 the cost per tree drops from $338 to $255. I mean, that sounds like a deal. Mr. Passmore: That’s correct. Chair Filseth: When it comes time for motions, perhaps you want to put some more money in the parking lot for… James Keene, City Manager: Yeah, that’s what would be required. Council Member Schmid: But, I mean, these numbers are what can be done for $100,000, you stand behind? Mr. Passmore: Yes, based on our itemized price quotes from our bidder. Council Member Schmid: Okay, thank you. Council Member Holman: So, procedural question Chair and maybe City Manager, since this is the, do you want us to just go ahead and do a motion on the trees? Mr. Keene: Yeah. Council Member Holman: I mean, just pick these off, one at a time, shouldn’t we? Mr. Keene: Well, I think if you have something that looks like an exception, you know, that would be different from then, if you got to the item and said, “I move to recommendation”, it would be just as easy to do this now. I do think you would put this one in the parking lot with the, you know, if the recommendation is, “let’s look at the cost delta from moving to a 10-year cycle”. Council Member Holman: It just seemed like we’re all aligned on this one and so, it seems like, why not just go ahead and move on this one. Chair Filseth: How do we want to do this? Do we want to have one motion for all Public Works or one for each department? How would you like to see this done. Lalo Perez, Director of Administrative Service and Chief Financial Officer: We’d like you to make a motion for the Public Works General Fund and then put anything in the parking lot, that sounds like you might, and that means you would, I’m assuming your approving the $200,000 proposed for the Master Plan, the Urban Master Plan. Chair Filseth: Why don’t we make sure that we, why don’t we do that. Let’s make sure we’re done on the General Fund, and then put that in the motion for the General Fund. Okay? Council Member Schmid, I believe you still have the floor. Council Member Schmid: (inaudible) Chair Filseth: I wanted to ask a couple of questions. So it looks like, in the general fund net headcount goes from 56 ½ to 57.9. Is that, do I have that right? I’m looking on Page 357. Is that right? Mr. Sartor: I’m sorry Council Member. What’s the question? Chair Filseth: I want to make sure it says, so I’m looking at total headcount for the group, it goes from 56.49 to 57.85? Do I have that right? I think so. Mr. Sartor: You mean the number of positions? Chair Filseth: Yes. Mr. Sartor: Yeah. Chair Filseth In the General Fund, and overall in Public Services, I think I remember from the very beginning that, I’m sorry, Public Works, that we’re looking to add four heads overall in Public Works, two Senior Engineers, two in the water area, and one Management Analyst and also a Street Maintenance Assistant. Is that? Mr. Sartor: The Management Analyst is in the Wastewater Treatment Fund and Refuse Fund as well. Chair Filseth: Okay, great. Mr. Sartor: We’re not proposing any position changes in the General Fund Operating Budget for Public Works. Chair Filseth: I wanted to ask about that, but go ahead. Council Member Schmid: If you look at the Table of Organization on Page 489, it says Public Works has 55.93 positions, 55.93 positions, not 57.8. Why the discrepancy? Mr. Sartor: Where are you? Council Member Schmid: On Page 489, Table of Organization. Under the total for Public Works. Chair Filseth: Are some not under General Fund? Council Member Schmid: This is the General Fund. Chair Filseth: I think you’re right. Kiely Nose, Budget Manager: So that Page, Council Member Schmid, on 489, is showing you the General Fund positions in Public Works is that 55.93 and then if you look on Page 357, and you look at the full-time equivalent positions, you will also see that 55.93 as well. Council Member Schmid: So the Table of Organization does not show… Chair Filseth: Temps and hourlies. Ms. Nose: Correct. Council Member Schmid: Although they are in the budget and being paid for. Ms. Nose: Correct, the Table of Organization looks at the full-time or benefited positions. Mr. Perez: Historically when you are asked as a government agency what your headcount is, you go by the full-time equivalent of benefitted employees. That’s typically the standard, and so we ask you for that. When we add hourly’s we add a pot of dollars, not necessarily bodies. We make that work with the dollars and what the full-time benefitted employees, it’s not. It’s an actual headcount and a classification. Council Member Schmid: But I do note over various departments there are different ratios of hourly or temp employees. Mr. Perez: Yes. Council Member Schmid: So the Table of Organization loses some of its virtue if it ignores flexible use of workers. Mr. Keene: Well, I think, getting clear about what the purpose for the Table of Organization is for, you might want to answer that. Actually, it’s an anomaly that Palo Alto has that I have never favored myself, but you guys go ahead and defend that. (crosstalk) Mr. Perez: It’s in our Municipal Code that we have to get approval, not only for the budgetary side, but for the actual headcount, so the headcount is for full-time benefitted employees. Mr. Keene: So it’s a directive from a prior Council that gets injected in here that generates exactly these kinds of questions that you have. That’s why. Council Member Schmid: Okay, but then what we have on the staffing in the department budgets are really the ones that we’re voting on. Mr. Sartor: Let me, for that question, if you go back to Page 346, we actually have the traditional organization chart for the department by division and you can see in that, if you look down at the bottom right side of the table, you’ll see we have 203.5 full-time equivalent positions and 13.09 temporary or hourly positions in the department, and they are all listed by division and groups within each division. Council Member Schmid: And 203 because you’re including the enterprise funds workers? Mr. Sartor: It includes Enterprise Funds and General Fund, yes, and also the Capital Fund, for that matter. Council Member Schmid: Yeah. Eric, that was mine. Chair Filseth: Karen, did you want to ask a question about University Avenue? Council Member Holman: I do. I didn’t find a write up. What’s included on Packet Page, or in the Binder Page 357, University Avenue enhancements in funding realignments. What is that? Ms. Nose: That’s actually an adjustment from last year’s budget. So in the Fiscal Year ’16 Adopted Budget there was a one-time proposal to add that $360,000 to Public Work’s (PW’s) departmental budget, and so what this action is doing is just removing that one-time money. So they still received it in Fiscal Year ’16, it’s just not an ongoing allocation. Council Member Holman: And just quickly, what was it for? What was it for, if you don’t mind. Mr. Sartor: I’m sorry. What was the question? Council Member Holman: The $360,000, what was it for? Mr. Sartor: That was, I believe, what was allocated to the maintenance of University Avenue parking garages, that kind of (inaudible) I believe, that’s what that money was for, and it’s been reallocated. Council Member Holman: Okay, thank you. Chair Filseth: So, I wanted to ask a question about the chart on Page 356, which is staffing. I noticed that we’re adding 5.55 Facilities Technicians, and the budgeted salary number for those is $486,000. I also noticed that we’re losing 5.55 Facilities Mechanics. I assume that’s not a coincidence. Ms. Nose: It’s not. You’re correct. There was a study that was done and this is a reclassification of certain positions and it’s gone through Human Resource’s (HR’)s review and their recommendation. Mike can elaborate on the details. Mr. Sartor: Yeah, that was an Service Employees International Union (SEIU) study of those facility mechanic positions and they were reclassed as part of that study. Chair Filseth: So I noticed that there is a salary number here, I assume it’s a budget number, $486,000, but there’s not a negative. That is, it wasn’t zero before, I mean, when we make a chart like this we don’t record a negative for the amount that we’re… Ms. Nose: So what we’ve done is we, instead of showing the ins and the outs, we just restated the new total in the correct line. Chair Filseth: Restated the new one. So there’s not a way to tell what the old one was? Ms. Nose: Let me look if I can figure out from last year. Chair Filseth: Well, actually it was $397,000 because I went and looked it up. Ms. Nose: There you go. Chair Filseth: So that is a 22 percent increase. Now are we giving a 22 percent increase to all five of these folks this year, not 5.55? Jon Hospitalier, Assistant Director of Public Works: Jon Hospitalier, Assistant Director of Public Works, Public Services Division. No, this is going to be tapered or sprinkled, if you will, through the three-year contract that we just agreed upon with SEIU. It won’t be all at once. Chair Filseth: Okay, so why is it all in this year’s budget? Mr. Hospitalier: That’s a good question. I’m not privy to that. Ms. Nose: Chair, if you’ll give me a moment. Let me see if I can’t find the backup, the actual memorandum from HR and maybe we can resume this conversation shortly. Chair Filseth: Okay, so this 22 percent, that’s on top of the 2.5 percent a year that we just negotiated with the SEIU right? And you say the 22 percent applies over three years or is it step increases? Mr. Hospitalier: I stand corrected. My staff just reminded me, there was back pay involved with this reclass, and that’s why it’s all in this budget year. It took us a substantial amount of time to finish that study. I think just over a year, and that was the reason for that dollar amount. Chair Filseth: So the SEIU contract we just signed had a certain amount of market adjustment in it, I think. Is that right? And so, is this on top of that market adjustment? Mr. Hospitalier: That’s correct. Mr. Perez: So that’s the details that Keily is trying to get to you, so she can give you a breakdown on what that is. Suzanne Mason, Assistant City Manager: I want to point out one thing, Chair Filseth, that in addition to the adjustments that you have approved, each year the SEIU contract provides a window of time where employees or the union can ask for classifications to be studied and I think we may be referring to a classification that was requested for study, and in the agreement it requires you to go back if the study is conclusive, for an adjustment, and I think that’s what Jon may be referring to. Mr. Hospitalier: That’s correct. Chair Filseth: I guess I’m just trying to… Ms. Mason: So that’s separate from the adjustments that were just approved. This is a process laid out in the Memorandum of Agreement. Chair Filseth: I guess I’m trying to understand the relationship of the 22 percent here and how many years it’s over and the SEIU contract that we just signed. Mr. Perez: Yeah, if you don’t mind giving us a chance to research and get back to you. Chair Filseth: Should we proceed or come back another night? How should that work? Mr. Perez: I think we’ll be able to cover it before the end of the night. Chair Filseth: Okay. So I assume the 22 percent difference is a reflection on the relative pay ranges of the two classifications? The top end of a technician is probably about 22 percent higher than the top end of a mechanic. Is that right, is that a good assumption, or is that one of the things you’re going to look at? Ms. Nose: So I’m pulling up the details here. So what this is… Council Member Holman: I’m sorry, are you on microphone when you’re speaking. Are you on a mic? Ms. Nose: I should be. To all of the points that are being made here, this is a multi-year review, therefore, there are increases that were approved as of, basically two increases. One increase was about seven percent, 7.6, almost eight percent. Chair Filseth: That’s over three years, right? Ms. Nose: This is a retroactive increase that should have begun in September of 2014. Chair Filseth: I thought we didn’t do retroactive increases. Ms. Nose: Then there is a second increase that was approved a year later. That was another 6.8, so the eight plus the seven, obviously is, what, 16, 15, plus in this budget we do assume the contract increase approved by SEIU which had, I don’t remember exactly the Cost of Living Adjustment (COLA) but maybe 2.5. Chair Filseth: About 2.5 I think. Plus there was some market adjustment. Ms. Nose: Exactly, if everyone is not at top step, then you also have those step increases, because it is a five-step range classification, so when you kind of compound the impacts of all of these and what was presented in your Fiscal Year ’16 Adopted Budget prior to the study being completed, that’s why you’re seeing that big jump year over year. Clear as mud? Chair Filseth: Yeah, clear as mud. So if I add seven and 6.8 and 2.5, you know, for sort of this year, that’s like 15 percent and then another 5 pervent in the next two years is 20 percent and this 22 percent is on top of that, so we’re giving a 42 percent? Ms. Nose: No, no, this number includes all that. Chair Filseth: Includes all of that. Steven Guagliardo, Senior Management Analyst: By way of clarification, this budget is built with all of the costs necessary for fiscal year 2017, so anything happening in subsequent years is not included in the number you’re seeing in front of you, but those numbers compounding on top of each other represent the sum of the salary for Fiscal Year ’17 for these positions. Chair Filseth: So why is the sum of the salary 22 percent higher this year than it was last year? Mr. Guagliardo: That’s because those retroactive pay raises came into effect this year, so you didn’t see them in last year’s budget because the study hadn’t been completed. So with the conclusion of that study, you layer in those raises, that 7 percent, that 6 percent and then that additional 2.5, and if you compound those altogether, along with the additional option of a step increase, since it’s a step position, you’re going to see about that increase there. Mr. Perez: The clock starts when the submittal was put in. Chair Filseth: Is it legal for us to put this in the parking lot? Mr. Keene: Well, I would say, unfortunately, this is not less of a budget issue and more a policy issue as it relates to discussion with the Council about the status of our, some of the terms in our labor contract with SIEU. I actually was not aware of this until now and it’s probably better for a longer discussion about changes in the contract that we had that we need to pursue in the future that can since create this potential. Wouldn’t you rather talk about this in more detail on another day? Chair Filseth: I would, but if it doesn’t come up in Finance, I’m not sure it’s going to come up. But the existing contract is done, right, so the next chance is two and a half years from now, or something like that? Ms. Mason: And I just want to share, it’s a longstanding clause in the agreement and has been a longstanding practice. Mr. Keene: I will guarantee you, I would have never negotiated something like this as City Manager, to delegate decision-making on where some positions would be structured. We do want to make sure that we are competitive in the marketplace, but the array of positions that we choose to have in the City and providing the services is really a decision that is management’s and ultimately the Council’s, in my view, and that is, I think that is neutralized actually to a great extent, in this language that ultimately could allow an arbitrator to make the decision, and not the City. Chair Filseth: Okay. Two other observations on this. One is that, this is a question that Lalo is tired of hearing me asking, right, which is, when we calculate the Unfunded Pension Liability, we assume that wages or salaries are going up 3.5percent a year, right? Should we be using a different number than 3.5 percent a year in sort of light of all this kind of stuff? Mr. Perez: Right, so that’s the number that… Chair Filseth: This is the real number. This isn’t sort of a shell game budget number right? Mr. Perez: Right, and so one of the things to bring back to the table for you is that we asked John Bartel to provide us for every 1 percent change above that number, what that is. Chair Filseth: That’s probably a good exercise. Mr. Perez: So he gave it to us and we can refresh it for you. We can provide it back in one of our packets. Chair Filseth: Well, we have the range, but then there’s the number we use for planning too. Mr. Perez: Yes, and as you know, the challenge is that that number can be used against us, so it’s a balancing act. Obviously you as a Council can direct us as to what we should use and so that’s obviously something that we need to discuss and get direction from you. Chair Filseth: I’m going to make one other observation, then I guess we’ll go to motions. That is the median household income in the United States adjusted for inflation has not changed in the last 20 years. Motions. Council Member Schmid: Well, I’d be willing to try a motion that we tentatively approve the General Fund Operating Budget of Public Works and place in the parking lot an option for $135,000 extra to lower the annual tree-trimming from 15 years to 10 years, and if you could give us confirmation that that number is about right, and I guess I would add another clause. After hearing this discussion I feel we’re losing in a way, control of our budget and we have made some tough decisions, trees as one example, but the RPP the other night, we said we did not have budget to do more than one per year. There are a number of critical issues where we’re under budget constraints and I wondered if it would be appropriate to add another clause asking the City Manager to find one position in the budget that could be dropped as an offset to some of the increases we’ve just seen. MOTION: Council Member Schmid moved, seconded by Council Member XX that the Finance Committee tentatively approve the Public Works Department, General Fund, Operating Budget and place in the parking lot an option for $135,000 to lower the annual tree trimming from 15 years to 10 years and to also ask the City Manager to find one position in the General Fund that could be dropped. Chair Filseth: I was going to observe that there are four requests from Public Works. Council Member Schmid: Well, maybe the City Manager could find somewhere else, but just an offset. Mr. Keene: I think when we, well, I think when we get to wrap up we’ll have to look at the ins and the outs and then see what the net is, and you know, assuming, let’s just say, “well, we need to have some expense reductions in order to fund what it is that we would propose,” you could, we could talk about that then. And the only reason I’m saying that right now is I appreciate Council Member Filseth’s point in the case of Public Works, all of their positions are in the enterprise funds, not in the general fund, which is in particular what we’re dealing with. The cost issues say, as you mentioned to RPP and these other things. Council Member Schmid: I guess with the exception of benefits, health care, retiree health care, that also is shared between the general fund and the other funds, so positions are positons. Mr. Keene: I agree, but I respectfully would say, if you’re looking for savings, we get more bang for our buck in cutting a position with its benefits in the same fund in which the deficit or the… Council Member Schmid: Yes, and that’s why (crosstalk) Chair Filseth: I think the City Manager’s counsel on this is we should weight it heavily. Council Member Schmid: Okay, I’ve made a motion. Chair Filseth: Should we repeat the motion here. Council Member Schmid: To approve the Public Works Budget, approve the Public Works Budget and the Operating Budget for the General Fund with a parking lot issue of $135,000 to lower the cycle for tree-trimming from 15 years to 10 years, and to add in clause giving the City Manager discretion to identify a position in the General Fund that could offset some of the gains we’re approving. MOTION RESTATED: Council Member Schmid moved, seconded by Chair Filseth that the Finance Committee tentatively approve the Public Works Department, General Fund, Operating Budget and place in the parking lot an option for $135,000 to lower the annual tree trimming from 15 years to 10 years and to also give the City Manager discretion to identify a position in the General Fund that could offset some of the increases the Finance Committee is approving. Council Member Holman: I think that makes sense, when you added that last phrase that clarifies it all. Chair Filseth: Right. All in favor? Motion passes with three in favor and one absent. Thank you all very much. What’s next? MOTION PASSED: 3-0 Wolbach absent. Mr. Perez: We’re going to go to water treatment. Wastewater Treatment Fund Operating Budget pp. 378-386 Capital Budget pp. 551-580 Mr. Sartor: For the Wastewater Treatment Fund I’d like to invite Phil Bobel up to do the presentation. He is our Assistant Director in charge of our Environmental Services Division. He will cover the Wastewater Treatment Fund, the Refuse Fund and the Storm Water Fund when we get to each of those. So Phil. Phil Bobel, Assistant Director of Public Works: Thanks Mike. Phil Bobel, Public Works. I’ve asked (inaudible) to distribute some hats for you because we’re actually going to ask you to put on a different hat right now, and that’s the hat of our Wastewater Treatment Fund, which involves six other partners. Yeah, good. It’s sort of a joke, but it’s just to remind you that you do have to switch gears now, and when we talk about these positions, we do have to remember that these are six partner agencies contributing to this fund. The sewerage treatment plant was built in 1970 with largely State and Federal funds. It was turned over to the City of Palo Alto to operate for these six partner entities, so we ask you to be the representative of those six partner agencies as you look at this budget. Here’s a picture of it, 25 acres of now 45-year-old, for the most part, some even older, aging infrastructure that we need to replace. We show a couple of initiatives in 2017. One is the first major project, which is probably going to be about $25 million for the retirement of our incinerators. The second one is to kick-start our northwest county water reuse. We’re calling it the northwest county. It’s the same boundary as our sewerage treatment plant, but the Water District has sort of named it that and we’re happy to use that title. So the key changes from our 2016 Budget is that there’s an operating increase that’s 8.6 percent. That’s a little hard to figure out from your budget book, because the way it’s organized, the revenues include money that we will get from the State in this coming year for the loan from the State for this major project and three others. So the revenues look very large, $48 million. Our true operating budget is $23 million and that’s an 8.6 percent increase from our previous budget in FY’16. The only reason it’s that great, and on this slide I put in parentheses that the real increase is 5.5 percent. We left out in FY’16 a debt repayment amount and that was unfortunate we did that, but now we have to put it in this budget, so it’s not really an increase, because we paid that same amount last year, we just didn’t have it in the budget. But, of course, we had to pay it. It was a debt repayment amount. So that was approximately three percent and that was sort of our bad… and our partners were thrown off by that as well. But, I wanted you to see that figure, because it corresponds, you will recall our discussion on the rates when, now you were wearing your hat as just the City of Palo Alto, so you were seeing expense figures that were roughly one-third of this, because you were only seeing the expense figures for the City of Palo Alto partner. Now you’re seeing the expense figures for the entire fund. Nonetheless, what we were talking about at that time was our forecasting of about 6 percent a year as we looked forward. You might recall that number, and I just wanted to point out that this 5.5 percent which we’re showing in FY’17 is aligned very well with that 6 percent that we discussed several weeks ago in the Committee. You can’t tease that out of this very easily because, like I say, included in the revenues is a very large amount that we expect to get next year as a loan from the State, and included in the expenses is a very large amount that we’re adding to our CIP program that gets included in the expenses, although frankly is not likely to be a cash outlay next year. So we have a very different budget, to be honest with you, that we share with our partner agencies that is more cash based, because our revenue from them is cash based. We try to estimate how much we’re actually going to spend, which is different than this, in FY’17, actual cash outlays, and then we divide that in its proportions. Palo Alto is about one-third, and we bill the partners. Then at the end of the year we true that up based on actual expenses, and we do that each year. So I just wanted you to know that although these numbers look strange, expenses look large, revenues look even larger, but those aren’t cash revenues, to a large extent, nor are they cash expenses. So we are aligned with approximately a 5.5 percent growth and our partners know that. It’s built into the rates that you’re passing on to Council, we hope you are. You dealt with that a couple of weeks ago. So that was the main picture I wanted to paint with this slide. I remind you that the rate increase that you adopted right at the end of this slide was nine percent, and at that time you questioned that appropriately. Why is it nine percent when our cost increases, both for the collection systems and the treatment plant were more like five percent, and the reason is that we’re rebuilding those reserves. You recall that we didn’t have rate increases in the wastewater fund for two years, in ’14 and ’15 and the capital expenses continued to grow in both collections and treatment and the reserves dipped to the minimum that we should keep. So the Utilities Department has made the judgement to propose nine percent, which you adopted, or recommended to Council, and that’s the difference, rebuilding those reserves. Okay, long-winded story on that one. The rest will be quicker. The next slide, Chair Filseth was talking about the three Full Time Equivalent (FTE) increases. I have, our course, put it in different terms. Now you can take that hat we gave you back off, if you want and look at it just from the Palo Alto perspective, and that’s why we show, for the senior engineer position, for example, the first one, we show one-third of an FTE because that’s the Palo Alto share. The reason we’re having a new senior engineer is that, frankly, the plant is starting to experience serious emergency problems and at the same time, we’re trying to move ahead with this rebuilding program, a $200 plus million CIP program over a period of 10 plus years, so we only have two engineers devoted to the plant and we focused them both on the capital improvement program, this $200 million program as we move forward. Now what hit us especially hard last year, was these emergency repairs, and I know you’re aware of some of them, and we put in front of you, Chair Filseth, two pieces of steel and we’d ask you to just take a look at them. This is our very latest problem that occurred two weeks ago, was one of our 24” pipes containing partially treated sewerage burst on us. It started out as quarter-inch steel 45 years ago, and that’s the one piece that you have. You can guess the thinner of the two, and it’s probably like a 32nd of an inch, was the current, when we went to repair it the guys hand actually went through the pipe. It’s very scary to us now, because we’re, we know there is a fairly large percentage of the thousands and thousands of feet of pipeline we have in the plant that are in this condition. So we see now that two engineers are not enough. We’ve got to augment that with the third engineer so that we can have somebody devoted to the emergency of the day, and these emergency repairs and the hiring of contractors to deal with these emergency repairs, and yet not shortchange or fall further behind, frankly we are behind, we can’t afford to fall further behind with respect to our rebuilding process. So we’ve got to try to keep the two engineers that we have focused on our major Capital Improvement Program (CIP) projects that are planned, and have another person devoted to the, like I say, the emergency of the day. So that’s our Senior Engineer for our equipment. Then we have a Management Analyst and the reason we are, this is critical for us at this point in time, is all of this increased activity, both the $200 million program and the emergency of the day is causing us to do a lot more question answering and analysis for our partners and for you. Everybody wants to know the details of, and make sure we’re tracking all this funding that we’re getting from the State, and we don’t have a Management Analyst currently. When we reorganized we did not end up with any financial analytic capability in my division, and yet we have these funds, the Wastewater Fund and the Refuse Fund, that both now badly need financial analysis to be able to answer your questions and on the treatment plant side, our partners’ question. You can imagine they are going to have a thousand questions. We’ve already reached sort of a sticking point with the Palo Alto Sanitary District, and we’re going to need to give them more and more financial information to make them comfortable. So we simply can’t continue to operate without a Financial Analyst. We’re saying that approximately two-thirds of that will be devoted to the wastewater fund, one-third of two-thirds, the Palo Alto share is the two-ninths that I put on there, not to put too fine a point on it. Then, the other third will come from our refuse fund, and this person will support our refuse fund as well. So that’s why that number looks so weird. The third position on this chart is equally important. It’s a Senior Engineer, and neither of these senior engineers, by the way, will probably start out as senior engineers. They’re budgeted at that and the number is large, but in reality, we’ll hire a more junior person and let them grow into it, but this one is for our recycle water program and today I was just at the water district and I think we’ve successfully agreed with them on almost $2 million in funding for our recycle water planning projects. This is exciting, but we’re going to have to support it with an individual and that actually came up today. They wanted to make sure that we had skin in the game, that they weren’t just giving us money and we were not substantially contributing to it. So we’re going to manage this $2 million worth of funds, and to do that I need another senior engineer to move forward on recycle water. Next slide. So this is just some photos of the problems that we’ve had. The bottom two rows are planned projects, I’m sorry, the bottom row is a planned project on our trickling filters that shows some of the equipment that is way too old, and then the upper part of that slide shows some of the emergency repairs, the leaks, the pipe breaks, the thinning steel that we have had to deal with and it has diverted us from our capital project. Next slide. This just gives you a sense of the recycle water program. Those four purple squares are the latest contracts we’re about to negotiate for recycle water planning in the Northwest County, and again, this covers our partners as well. So this isn’t just for us, this is for our partners too, and explains the need for our second Senior Engineer. Next slide. That’s it. So I don’t know if you want to take that separately from the rest. Yeah, Lalo is shaking his head yes. Chair Filseth: Did you say that your loss of a Financial Analyst was from an organization change? Mr. Bobel: It wasn’t a loss. It’s just that we didn’t end up with one. We… Chair Filseth: Did you have one before the organization change? Mr. Bobel: No. Chair Filseth: Okay. Mr. Bobel: We were sort of hoping to get one. Mr. Perez: So we’ll stop there for any questions that you may have. Council Member Schmid: Let’s see, as I understand, what we are doing is we are voting on the funding and the budget for moving ahead with the Capital Program, and we’re doing this, are we acting for others as well? Suppose they meet and say, “Oh, I don’t like that Senior Engineer, I’m not going to pay for it,” or are we making a decision that they have bought into. Mr. Bobel: Well, the plant is operated by us and we determine the operational costs and we pass them on. We’ve met with all of our partners on these three positions. They understand what we’re doing, they haven’t objected. They don’t actually get to object to the operating costs. They have in the past and if they did, we take them seriously and work with them, but they understand the need for these positions and they have not objected. Council Member Schmid: So we really rely on you to be in constant touch with the partners and have their feedback and play it back to us. Mr. Bobel: Right. I will say, just so I don’t overstate that, the three positions are in the Operating Budget and they are not objecting to that. We have some pushback from the East Palo Alto Sanitary District that we’re dealing with on our first major project, this dewatering building to replace the incinerator, so I don’t want to not mention that. On the other hand, I feel that we’re going to be able to work it out, but it has slowed us down. On the capital side, major capital projects, they do have to, most of the partners, have to go along with us. The contracts are different. Los Altos, help me out Jamie, Los Altos, Mountain View, East Palo Alto and Stanford, have to approve it. The only one that doesn’t is Low Altos Hills. So far, all those partners, except for East Palo Alto Sanitary District, have approved this first major $25 million project, and I think we’ll work it out with East Palo Alto. Council Member Schmid: Yeah, I assume we can’t sign a contract with the government without unanimous approval. Mr. Bobel: Well, we’ll see. They are only 7 percent of the total and the, you’re talking about the State loan that we’re going to get, so it’s not 100 percent clear whether they would go ahead and loan us the money with one small partner withholding. I’m kind of hoping that if this drags on with the sanitary district that they will go ahead with that. What we would do is just send them a claim when we first had to deal with actual expenses. Remember, the good thing about this is we have a lot of time to work it out. The loan does not have to be repaid until, begin to be repaid until construction is complete, which is estimated to be at least two if not three years away, so it won’t actually hit their budget or our budget until almost three years from now. Council Member Schmid: And what do you anticipate three years from now the size of that impact will be? Mr. Bobel: Well, for East Palo Alto, for example, it’s going to be about $150,000 a year. Council Member Schmid: I guess I’m thinking of us. Mr. Bobel: Do you remember what it is for Palo Alto, Jamie? He’ll be looking it up. It’s not going to cost… We had that built in to, in fact, Gina, if you could zoom forward to the slides that are behind the real slides, to the one, Jamie’s first slide on the bar charts, there. So in 2019 the debt service, the debt repayment will begin on this first $25 million project. Council Member Schmid: This only goes to 2050. Mr. Bobel: Oh, it does? James Allen, Manager Water Quality Control Plant: The sludge dewatering building, James Allen, Public Works Plant Manager, the sludge dewatering haul facility is a $28 million loan, the Wastewater Collection Fund annual debt service is $461,000. Council Member Schmid: Okay, so that’s… Mr. Bobel: That compares to a budget of, yeah, so that compares to a budget of, let’s say by then, $25 million, so you’re talking about half a million on $25 million. Council Member Schmid: And we’re paying it off over 20, 25… Mr. Bobel: Thirty. Council Member Schmid: Thirty years. So that’s well within our rate structure and you have that. Mr. Bobel: Yes, we don’t think we’ll have to do a major, we’re predicting 6 percent a year, and that’s kind of a flattened, an average rate. Council Member Schmid: Yeah. The other question I had was on the alkalinity, you mentioned it on Page 378 as a problem that needs remediation. Can you tell us a little bit about where we stand on that, and what it means for the future? Mr. Bobel: Well, first let me say the cause. The cause is that the drought has increased the concentration of the sewage that comes to us and the specific problem here is the ammonia concentration is increasing. You’re paying just as much as you used to, but there’s less water in there. So that is having our bugs, as they break it down they’re producing more nitric acid, lowering the pH, so we’re now having to add alkalinity to raise the pH. It’s not… The money, you want to address the money side of it, how much money is it. Mr. Allen: You approved up to $550,000 a year for this chemical and then when I worked it out with Budget, we compromised and tried to look at the last twelve months of use, it was round $300,000 a year, so the budget increase you’re seeing this year for chemicals reflects kind of the last twelve months, knowing that this is very weather dependent. We just started using this chemical. We still trying to optimize it, trying to keep chemical costs down, but we do have to use it and I believe it will be an ongoing cost as the new normal. Council Member Schmid: So the ongoing cost is roughly equal to the debt payment. Mr. Allen: $300,000 a year, for yeah, chemical costs for this one chemical. Council Member Schmid: Now as I understand the latest reading still did not have us down at the level we wanted. Is that right? Mr. Bobel: You’re thinking of salinity now, yeah, so that’s a different issue, although it is related. So, salinity has also been increasing with the drought, but what I was just describing was the ammonia increasing. So salinity also has been increasing and although Mountain View and us have done a good job lining more pipes, keeping the saltwater out of the lines to a greater and greater extent, we were down, headed in the right direction, and then the drought hit us and we’ve gone back up. Council Member Schmid: Yeah, so that would affect our plans for recycled, utilization of recycled water. Mr. Bobel: In fact, that’s why one of those circles, shapes on that chart was a Feasibility Study on essentially reverse osmosis, to take a certain percentage of our flow, hopefully a very small percentage of our flow, and run it through reverse osmosis, blend that back and produce a better quality in terms of salinity recycled water. Council Member Schmid: Yeah, and that, of course, makes the dewatering water even more valuable. Good, thank you. Chair Filseth: I wanted to ask a question on the Capital Budget, which is, I hope this is the right place. On Page 573, the Capital Budget, there is a line about 2016 to 2020 Capital Improvement Program. Mr. Bobel: Could you slow down just a second. What page did you say? Chair Filseth: 573, but you’ll probably recognize it when I say it. It says, “Estimated Costs of Solids Handling Project Anaerobic Digesters, was adjusted upwards to $75 million on completion of the preliminary design. The cost escalation of this magnitude was not anticipated, planning and design work was deferred.” What is that? Mr. Allen: Are you talking about the 2016-20 CIP’s? Chair Filseth: I am. Is that something that we should worry about? Mr. Allen: We put that project on hold because of the cost escalation. It was estimated at $57 million and went to $75 and when we saw that we realized it wasn’t something we could move forward at that time with you or the partners, and so we have all of our emphasis now on component one of our bio-solids project, which is the sludge dewatering facility we’ve been mentioning and then to update this year in 2017-21 is that we are going to need to reevaluate and do a new long-term plan for the solids. Chair Filseth: But should our expectation be that there’s going to be another $20 million we didn’t anticipate sort of coming to us in the next year or two? Mr. Bobel: Not within the next year or two. We’re going to… To space this out enough to be absorbable… Mr. Keene: No, we’ll delay that for a year or two. Mr. Bobel: We’re going to have to space this out (crosstalk) more than we thought, and hopefully, we’ll find a solution that’s less than $75 million, substantially less, but if we don’t then the Council and us and our partners are all going to have to… because this is going to be a problem for them, so we’re going to have to seriously consider other options and then seriously consider just continuing our interim program. Our interim program is going to be hauling this to the closest other sewerage treatment plant we can find. So the fallback is always to continue… Technology is evolving here and Council Member Schmid has encouraged us to look at gasification and there are many people that claim that gasification is going to be much cheaper. It doesn’t currently exist on a United States sewerage treatment plant facility, but the technology is rapidly moving forward, so hopefully, technology will be our savior here and we’ll come up with a lower priced thing before we absolutely have to do it. Chair Filseth: I hate betting on technology. So that’s sort of, I mean, my only other question is all this, think you for slogging through this amount of detail. It’s very much appreciated. My only other question is sort of broader, but in the same vein, which is, you know as you started out by saying, you know, our water infrastructure is several decades old, we’re going to spend a significant amount on capital in the next several years as delineated in here. Is this enough or are we really going to come back in a few years and say, you know, we need to do a lot more? What’s your sense? Mr. Bobel: Well, I’ll be honest with you. Last year, 2015, has scared us all because we had a large number of these emergency repair projects, much greater than any previous year, so it’s like 45 years… You know most of this stuff you say the engineering life is 30 years, now we’re out at 45 and it’s like at 45 the Plant is starting to, frankly, give up on us, so I am worried about that. I think rather than hit the alarm bells here, we’ve got to get that additional engineer looking at these emergency things. We’ve got to look back at the data we have, because we’ve done assessments. It’s not like we haven’t been assessing all this equipment. We’ve done assessments. We have lists of what we need to do. We need to take a new fresh look at that though and see if we need to adjust the priorities on these to avoid these emergency repairs. So I am worried that it isn’t enough. Chair Filseth: Thanks. Council Member Schmid. Council Member Schmid: Yeah, you mentioned that there’s some surprises and disappointments in the future, but the first two steps that we’re moving into, which is the dewatering and load out facility and the new lab in Environmental Services, are part of any of our long-term plans? Mr. Bobel: Yeah, they are and the other two that are mentioned in there are rehabilitating our primary clarifiers and rehabilitating our fixed film reactors, so those kind of four projects are our first four, and they are critical to us. The reason the new lab is critical is we’ve got to figure out where to put it. We’ve got a little bit of a space problem out there, so we need to… We have a proposed plan of how everything is going to fit on that 25 acres, but we need to do a little more, quite a bit more engineering and preliminary design to make sure we’ve got places to fit everything out there. That’s why we’ve got to get going on this plant building. Council Member Schmid: Good. Chair Filseth: Karen. Council Member Holman: Did you just say 25 acres? Mr. Bobel: 25 years for… Council Member Holman: Oh, 25 years. I thought I heard you say 25 acres. Mr. Bobel: I’m not sure what sentence I was talking about. Council Member Holman: As long as you didn’t say 25 acres, I’m okay. Mr. Bobel: Yeah, the plant is 25 acres. It’s 45 years old. I might have gotten (crosstalk) gobbled up. Council Member Holman: So I should know this but one of the things in going through this, I was finding kind of like, where does this belong, so there are a number of things that are in the capital plan but then they’re also referenced in the Operations Plan as CIP line items, and it gets a little tricky going back and forth about what’s where and what refers to what. Mr. Bobel: Well, we did, and sorry if that confused you, when asked what our major initiatives are in the coming year, we do tend to mention these capital projects, even though it’s in the operating part of the budget, so maybe we shouldn’t have done that. But it really is, remember we’re… not all of our staff is involved on all of them, but a large number of our staff is involved in the CIP projects. We don’t bill them all to the CIP. Their salaries are largely in, my salary, Jamie’s salary, they’re all in the operating budget, even though we’re spending more and more of our time working on capital, so we think… And the other thing is, there really isn’t a bright line. The more we get into these emergency repairs, we try to take care of it with our Operating Budget, but then when they become so large, we have to include them as a capital project, so to be honest, there isn’t a real bright line. Council Member Holman: Yeah, there’s not and it gets to be a little tricky when you’ve got, say in the operating on 384 you’ve got Capital Treatment Funding Adjustment of basically $14 million, so it’s, and revenues at $21 million, that’s certainly not staffing. So it does get to be a little, you know, what goes where and how do you balance it all. Mr. Bobel: So the funds summary does include the capital and the project’s data is in your capital book, but that money is also in the fund’s summary, and I think it’s good that it is. I mean, you’d be misled if we were only presenting the operating thing. Council Member Holman: Yeah. Mr. Bobel: For the funds, because you’re got, we’ve got to look at it and bill our partners as a fund. Council Member Holman: Okay, I think that’s it for me, thanks. The anaerobic digester was… Thank you Chair Filseth. Mr. Bobel: Well, we’re not giving up on that. Let me just say, you know, the measure folks, the people that fought hard to get that adopted, we still think that’s a great idea, to convert our sewerage to methane and make energy with it. For the moment, though, some other Sewage Treatment Plan is going to have to do that, as most of them are. It’s just a big hit, a big financial hit, but we’re still commited to trying to move in that direction if at all possible. Council Member Schmid: Do you want a motion? I guess this is the biggest single item we have in the budget, but I’ll move tentative approval of the wastewater treatment fund. Council Member Holman: Second. MOTION: Council Member Schmid moved, seconded by Council Member Holman that the Finance Committee tentatively approve the Public Works Department, Wastewater Treatment Fund, Operating/Capital Budget. Chair Filseth: This is really basic stuff. All in favor? Motion passes. MOTION PASSED: 3-0 Wolbach absent Refuse Fund Operating Budget pp. 361-368 Capital Budget pp. 491-500 Mr. Bobel: Alright, do you want us, Lalo, to move on to the Refuse Fund? So we will move to the Refuse Fund. I think you’ll find this easier. Ron Arp is here with me, our manager of our Zero Waste Program. Page numbers are listed there. So this first slide is a summary of our initiatives. You can read faster than I can talk, so I’ll just focus on the key changes from Fiscal Year 2016. We’re estimating that the expenses will increase by 3.9 percent and I would mention that, relate this back to the rate discussion we had several weeks ago. So the rate that we’re proposing and that you have tentatively adopted, you’ll recall, was 9 percent for the Refuse Fund. The same number as the Wastewater Fund, 9 percent. So why, if our expenses are only increasing by 3.9 percent are the rates going up by this larger number? First, you have to remember that there are two worlds here. There’s the residential and the commercial, so it’s really only the residential rates that are going up by the 9 percent. The commercial rate is going up by about 5 percent, pretty much aligned with that 3.9, a little more and Ron could explain that, if necessary. So let’s talk about the residential. The reason that we’re increasing the rates, proposing to, substantially above what the expense increase is expected to be is to balance the revenues coming from the commercial sector and the revenues coming from the residential sector. You’ll remember this has sort of been a long-standing problem, so I won’t go back through it again, but that is the reason for the large difference between the 3.9 percent expense increase, and the 9% residential rate increase. Speed it up. Mike’s telling me to speed it up. So the landfill staffing is $72,000. We can go over this if you want to. Administration staffing $56,000, those are new proposals. Remember we are going to charge one-third of that Financial Management Analyst to this fund. Next slide. Okay. Mr. Sartor: Let me just clarify real quick, so the significant budget proposals are for staffing for the Refuse Fund, in addition to the rate increases that you heard about last week. The $72,000 is a reclass of an hourly position to a full-time technician recognizing that the landfill will need to be maintained for the next 30 years and we have leachate collection and methane gas collection, infrastructure that needs to be maintained, so that’s for a technician to do that work. The $56,000 is the one-third share of a management analyst position that you approved as part of the Wastewater Treatment Fund, so that’s just to clarify what those staffing changes are. Mr. Bobel: Yeah, and if I could just mention one thing that… Mr. Perez: We’re ready for any questions that you may have. Chair Filseth: It’s okay. Council Member Schmid: (not audible) on the operating budget, I note on Page 364 that the capital spending ends. Is that right? It goes from $2.1 million in 2015 to $1.3 in 2016 to $240,000 in 2017. Mr. Bobel: Ron will explain that. Ron Arp, Solid Waste Manager: Ron Arp, Solid Waste Manager. Yeah, it’s, the larger amounts for the last couple of years were for the landfill capping project, which, as you know we’re completed with that project. This $240,000 is just to wrap up the household hazardous waste facility canopy that was kind of pushed a little bit into 2017. Then we should be done for about, for the foreseeable future. Council Member Schmid: So the Refuse Fund has no relationship to Bixby Park anymore? Mr. Arp: I wouldn’t exactly say that. There is some overlap. We kind of work in conjunction with open space on the landfill to help maintain it and keep it up. Council Member Schmid: That’s right. I do note all of a sudden walking on the completed pathways and drainage systems, big trucks are coming up and dumping new soil. Is there something, aren’t they going to build higher hills? Mr. Arp: We’re really, really, really close to being done. We are building some vegetative mounds as part of a Capital Improvement Program (CIP) to, it’s an interim park improvement plan for Bixby Park, so at this point we are bringing up some subsided areas, but we are also building these vegetative mounds and we have an Request for Proposal (RFP) out now that will do the planting on those mounds this summer. Council Member Schmid: But all that is in the 2016 Budget? Mr. Arp: Yeah, all the work that’s going on now and should be complete, all that soil work should be complete by June 30, yes. Council Member Schmid: Good. Mr. Bobel: Just to clarify too, the project, this interim plan for Bixby, that’s actually in the general fund budget, so there’s about $250 million in the General Fund Budget for this project that Ron talked about. We’re building the mounds for the project, and then the project will put some better soil on top and then you’ll see the planting, hundreds of plants go in. We’re very excited about it, but that is a general fund project. Ron and his crew will be helping out a lot though. Council Member Schmid: Okay. I do note though, that in the Refuse Fund there still is, again on Page 364, it’s called debt service, I think, or is rents and leases, $2.5 million. Is that the continuing rental on the… Mr. Arp: Yes, it’s the back rent on the landfill, yes. Council Member Schmid: Yeah, so that’s still a substantial eight or nine percent of your total budget. Mr. Arp: Yeah, that will continue until, it ends, I think, midway through 2021. Council Member Schmid: And where does that appear in the General Fund? Mr. Perez: It appears under rents, on the revenue side. It’s just for General Fund purposes. Council Member Schmid: Yeah, it can be used for anything. Mr. Perez: Right, and it’s taken into account in the Long-Range Financial Forecast that it ends too, in the General und side. Council Member Schmid: Now I see at the bottom under revenues, there’s a $2.5 million income, so while you’re paying out rents and leases, who are you getting other revenue from? This is not net sales. Mr. Arp: Oh, other revenue. That’s mostly, it’s special revenue, this is where it’s non-account holders, refuse account holders will come into Palo Alto and they will pay Green Waste to manage the Consruction and Demolition (C&D) debris for a project, and then Green Waste will reimburse us, the City, after that. Council Member Schmid: So that’s not really a revenue stream, that’s a cost. Mr. Arp: It is a revenue, a C&D revenue. It’s called special revenue, but there is a cost associated with that also. Council Member Schmid: Yeah, it would go to Green Waste, a percentage. Mr. Arp: A percentage, a large percentage would go to Green Waste, yes. Council Member Schmid: Good, those are the only questions. Chair Filseth: Council Member Holman. Council Member Holman: I sort of have a question, sort of down, it’s kind of not really as much budget related as something else, so, I’ll just ask this. So Green Waste contract, how old is the contract, it was renewed when? Mr. Arp: Well we started in 2009 and we just amended it last year. It will go through 2021, June 30. Council Member Holman: I’ll just go ahead and ask this, so how are our payments, our contract rates compared to other cities of similar size and, like we don’t get… There have been changes, like we don’t get, and we haven’t for a while, alley service, we don’t get backyard service, you know. Are our contracts similar to what other cities are getting for similar service. Mr. Arp: You know, I don’t think I can really answer without doing a survey. Some of the neighboring partner cities, the Sparks Station, I think we are probably fairly similar. We do have a high level of service here in Palo Alto. Green Waste provides very high-level service. They are very responsive to residents. We still do backyard service, so I’m not quite sure, you know, where exactly we fall. Council Member Holman: I don’t really have any other questions on refuse. Chair Filseth: I have a question, and I think you mentioned part of the answer, but, if you look on Page 366, total staffing for the Refuse Fund is approximately flat. It goes from 15.2 to 15.6, but what that really is, is it’s sort of down 2.9 and up 3.3, and how many of those changes are actually the same people moving to a different classification? Mr. Arp: The surveyor is the 0.35. You can see the surveyor is no longer needed now that we’re closed, so that person has taken on other duties in the Capital Fund, so that’s a real person that hasn’t changed, that person was not needed any longer. The hourly position is gone. If you approve this, this FTE for the Streets MaintenanceAssistant that could to that work, so the hourly would be gone. It could be the same person that would move into a full-time position there, but basically… But then there’s one-third of the management analyst that Phil was talking about, that would be a new position. Mr. Bobel: That’s really the major difference in the way you think of it. The rest of the changes we made are kind of a wash, but we’re adding one-third of a position, one-third of that Management Analyst, and that’s the principal reason you see that change. Chair Filseth: How can it be a wash if we’re going down three and up three? Mr. Bobel: Well, it’s approximately a wash. Chair Filseth: I guess what I’m asking you is did the coordinator of Public Works projects which is down one become the Environmental Specialist, which is up one? Mr. Arp: Okay, yes, two of those positions just swapped, they just swapped right over, like, the coordinator, you’re right, that’s going to be proposed to be reclassed as the Environmental Specialist, and the other one… I’m sorry, the coordinator, the Zero Waste Coordinator would be the Environmental Specialist, and the coordinator of Public Works projects would be reclassed to the lead facilities position. Chair Filseth: Has anybody looked at the changes in pay scales for those positions, in those categories? Mr. Arp: Both of those positions have a change in pay, yes. They are higher pay. Chair Filseth: An increase or decrease? Mr. Arp: Both of those, those two are increased. Chair Filseth: Do we know how much? Mr. Arp: Yes, they are listed somewhere here. Okay, on Page 366 at the bottom of the page, you can see the reclass of, the second line from the bottom, reclassification of one FTE zero waste coordinator to environmental specialist, that’s $7,500. Chair Filseth: That’s for that person’s expense next year, right, but is the range different? So is the high end of the range… Mr. Arp: That’s the high end of the range. Chair Filseth: That is the high end of the range. Mr. Arp: That’s the high end of the range. Chair Filseth: Alright, thanks. Council Member Holman: Move tentative approval of the Refuse Fund. Council Member Schmid: Second. Council Member Holman: That’s Operating and Capital. MOTION: Council Member Holman moved, seconded by Council Member Schmid that the Finance Committee tentatively approve the Public Works Department, Refuse Fund, Operating/Capital Budget. Chair Filseth: All in favor? Passed. MOTION PASSED: 3-0 Wolbach absent Storm Drain Fund Operating Budget pp. 369-377 Capital Budget pp. 501-518 Mr. Bobel: Okay, are you ready for the Storm Drain Fund, storm drainage fund? Okay, there it is, our one slide. So we mentioned the initiatives. We mentioned the key changes from Fiscal Year (FY) 2016 and I think the thing to point out is how it relates to our rate increase that you approved, again, several weeks ago in Committee. So, under significant budget proposal, it shows a $193,000 increase from FY’16 to FY’17, so that is, translates from the 3.2 percent increase, you might recall, that’s provided for, it’s the CPI that’s provided for in the 2005 ballot measure that was adopted that there could be either the CPI or 6 percent, whichever is lower, so you tentatively approved the 3.2 percent and that translates to $193,000. So, in the interests of time, I would say that next year the key initiative really is to complete the seven projects. There are two more that we have to complete, and we plan to do so, so that we’ll be able to say and feel good about the fact that we completed all the projects, capital projects that were in the 2005 ballot measure. And Joe Teresi, our Senior Engineer for storm drainage is here and can answer questions. Mr. Perez: And just to remind you, you had a speaker from the Oversight Committee giving you their review earlier in the public comments. Council Member Holman: Could you give us a brief description, reminder of what the green infrastructure plan is. Mr. Bobel: Yeah, I can start. Joe can chime in. The Green Infrastructure Plan is a term that’s in our permit from the State for discharge of storm water to surface waters, and it basically says that by the summer of ’18, summer of ’19 we have to do a plan that shows that we’ve considered all of our City CIP projects and probably other projects as well that we could influence, and incorporate it to the maximum extent practical, green infrastructure into them. I think you’re familiar with that term, but just for others, it really means looking to see how can we maximize the infiltration of the water, its use by plants and the treatment of it as it flows onto the bay, creeks and the bay. So it’s sort of a treatment infiltration, improving water quality, improving the plant growth. It’s things like bio-retention facilities, bio-swales, and similar features like we have at Mitchell Park, various ones we have at Mitchell Park. Chair Filseth: Actually, no, my brain is working really slow on this, but on the previous one where I asked about the Zero Waste Coordinator and you folks said the expense difference was $7,500, and that was on Page 366, sorry to go back, down at the bottom. So if I look at the nominal wage of a Zero Waste Coordinator, which is, on the line above, it is $87,200, so $7,512 is an 8.5 percent change, and I assume that’s an Service Employee International Union (SEIU) position, so when you add the 2.5 percent this year, that’s an 11 percent increase. Did I do that arithmetic right? Ms. Nose: That SEIU increase would be accounted for, or actually, wait a minute, what number are you comparing, the $7,500 in the reconciliation to the… Which figure? Chair Filseth: The $87,200. Ms. Nose: $87,200, so in that $87,200 figure, the SEIU increases are already accounted for in there. Chair Filseth: It’s already, SEIU. Okay, so then previously that would have been 2.5 percent lower, okay, so the change is $7,512 plus 2.5 percent, which is 11 percent. Ms. Nose: Say that one more time for me. Chair Filseth: So if I compare the $87,200 with last year, because we’ve gone from last year to this year, since the 2.5 percent is already included in the $87,200, then the equivalent last year would have been 2.5 percent less than that, which would have been $84 or something like that, right, so the $7,512 change really is compared to the previous one, right, so it’s $7,512 plus the 2.5 percent? Mr. Guagliardo: I think one of the points to clarify there is that $7,512 difference also includes the 2.5 percent, because it’s the net change associated with the position. Chair Filseth: That’s the change in the pay range, okay, but the person also gets a 2.5 percent. Mr. Guagliardo: So, I’ll try to clarify this a little bit. So that $7,512 number you’re seeing is the total difference in cost between the position that was reclassified to the Zero Waste Coordinator, including any SEIU raise that may have occurred, so the SEIU raise would have occurred for that person in any SEIU classification, that would have happened, so it’s kind of a wash. Not quite, because it’s going to be applied to the higher salary. Chair Filseth: The higher salary, but that’s negligible. Mr. Guagliardo: But the only point I’m trying to clarify is there’s not an additional 2.5 percent applied to that $7,512 figure. Chair Filseth: So your net is 8.6 percent not, that’s not right is it? No, because the person, but you said that the $7,512 was actually the difference in the top end of the range. Mr. Guagliardo: Yes, that was stated and I believe the point that was trying to be made, it wasn’t me that said it, was that that’s toward the higher end of the range that could have been the difference there. Chair Filseth: It’s going to take me a little while to think about that. Council Member Schmid. Council Member Schmid: Yeah, the storm drain that expires in June of the coming year, and when we approved the bond issue or know the parcel issue, there were seven projects listed and I think three of the projects were highly recommended, the San Francisquito pump station, the Channing Lincoln storm drain and the Matadero Creek. In practice now as we reach the end of our ten-year program, the San Francisquito Creek pump station everyone agreed should be up front, first, costs twice as much as what was budgeted. The Channing Lincoln has gone on a little longer than people felt, is reaching completion, so it leaves the third element, the Matadero Creek, which has been pushed off and off, and now I note that we say in the, Page 370 of the Operating Budget, it will be substantially done, but on page 512 of the capital budget, it says this will be deferred to Fiscal Year 2018. Now we can’t defer what we don’t have, so what’s going on. Have we admitted we don’t have funds for this? Joe Teresi, Senior Engineer: No, let me explain. I’m Joe Teresi, Senior Engineer, Public Works. As you noted, this Matadero Creek project was actually called the, is called the Matadero Creek storm water pump station and trunk line improvements project, so as it was originally conceived, it was upgrades to the pump station, plus some upgrades to some of the storm drain lines that feed into that pump station. Now the part of the project that is being deferred is the pipeline segment leading to the pump station. The more significant and more effective element of the project is upgrade of the pump station, and that is going to be fully funded. So, that’s why we are saying that the project is substantially completed. It’s not fully completed. A certain element of the project is going to have to be deferred because of the increased cost, but the major element and the part that’s going to have the largest impact on improving the storm drain system, the upgrade to the pump station, is fully funded and we’re very close to being able to bid that project and it will be under construction this fall, and it will be completed by the late summer of 2017. Council Member Schmid: Okay, so the funding is sufficient. I guess you haven’t bid the contract yet. Mr. Teresi: Not yet. Council Member Schmid: So you’re not sure whether the funding would do it, but you’re confident that with the funds available, you’ll be able to do this highest priority project? Mr. Teresi: On the pump station itself, yes. Council Member Schmid: And how does that coincide with the vote for a new storm drain? Mr. Teresi: Well, in the description of the project, in the original ballot measure, it talked about both the pump station element and the pipeline element, so that one aspect of that project is not going to be funded, and is going to be deferred to next fiscal year. Council Member Schmid: No, I guess I was thinking of your… thinking of going for a vote in November 2016? Mr. Teresi: No, I think we’ve been meeting with our Blue Ribbon Committee and the current thinking is that we’ll probably go to a property owner vote after the first of the year, maybe January or February, but in advance of the expiration of the approval which occurs in June of next year. Council Member Schmid: But at that time you would… Mr. Teresi: At that time it will be well under construction, yeah. That’s our plan. Council Member Schmid: Okay, we look forward to that. Mr. Bobel: And just to remind you of the full process, while the ballot, the mail-in ballot we’re not proposing to occur until like February of ’17. That initial notice will occur in the early fall, so you’ll see some activity in the early fall. Chair Filseth: I actually think you might be wrong, because if you go and look up the aggregates, I think it really is (crosstalk). Mr. Guagliardo: So I wanted to clarify a little bit what was happening too. You’re right, I think I was misinterpreting the question a little bit and looking back at it, so there’s the $87,200 number you were discussing, which is the cost listed as one Zero Waste Coordinator, so that’s the cost of the current incumbent in the remaining Zero Waste Coordinator position. Chair Filseth: Right. Mr. Guagliardo: So the other piece, though, is now the way we budget positions is aligned to what an incumbent is actually budgeted at, so if someone else, the other person in that position, the one that was reclassified as Environmental Specialist, you’re seeing that in the Environmental Specialist line in the ’17 Budget, which is on the previous page, and there’s two environmental specialists, so it’s easy to think that since there’s two incumbents you should just divide by two, but because it’s based on what that incumbent is actually making, it’s not quite that straightforward, so I agree with your assessment how the previous question was characterized, that $7,512 number. Chair Filseth: Right, but the net ends up being the $7,512 plus the 2.5 percent, for a total of 11 percent. Mr. Guagliardo: Yes, we can look into that and get back to you and let you know exactly what the incumbent’s making in that new position, and let you know what that aggregate difference is. Chair Filseth: Okay, thanks. Motions? My turn. Move to accept the Staff recommendation for refuse, tentatively. Council Member Holman: Second. MOTION: Chair Filseth moved, seconded by Council Member Holman that the Finance Committee tentatively approve the Public Works Department, Storm Drain Fund, Operating/Capital Budget. Chair Filseth: All in favor? Motion passes. MOTION PASSED: 3-0 Wolbach absent Airport Fund Operating Budget pp. 387-393 Capital Budget pp. 327-342 Mr. Sartor: Okay, time for one of my favorite divisions, the Airport Fund. So I’ll walk you through this slide and then if you have any questions, I have our Airport Manager, Andy Swanson, up here that can help as needed. So in Fiscal Year 2017 we will be completing the design work of our airport apron, and that is where the aircraft tie downs are and the taxiways that lead to the runway at the airport. There is some severely distressed asphalt out there that the County left us. We are in the process of completing our design work to construct a perimeter fence around the airport that has been dictated by the Federal Aviation Adiministration (FAA) to better secure the airport property itself, and we are also going to be bringing to you a consultant contract here in the next month to bring on an expert consult to help us evaluate and prepare a transition plan for the eventual expiration of the leases that we have with the current Fixed-Base Operators (FBOs) out at the airport. One of the issues we have with that is that the County negotiated those leases years ago, and we believe that they are severely under market and we could generate some substantial revenues by redoing those leases in the future, so that’s where this consultant report will lead us. Key changes from fiscal year ’16 to ’17 are really focused around the capital projects. Of about $700,000 of that is to fund the design work for the apron, and the other $1.4 million or so is for the perimeter fence construction, and that’s largely funded by, or mostly funded by the FAA. We do have a need to add to our general fund loan to the Airport Enterprise for Fiscal Year ’17. With the ability to redo the leases after Fiscal Year ’17 ends, we foresee that we will be able to start paying back the general fund loans to, from the airport to the general fund in Fiscal Year ’19. So with that I’ll leave it open to any questions you might have and, again, I have Andy Swanson here that can provide you any more detail that I could not provide. Council Member Schmid: Let’s see, is it the General Fund made the loan to the airport, and how much has that added up to so far? Andy Swanson, Manager of the Airport: Approximately, with this budget, it would be $3.6 million. Council Member Schmid: And what’s the terms of the loan, when do we start getting money back. I assume it’s after 2017. Mr. Swanson: It would be 2019 is when it’s estimated and it would be estimated that, next year there would not be a loan, is the estimate. Council Member Schmid: And what kind of interest rate are we getting on that? Mr. Perez: Right now we don’t have any calculations into it. You know, we have obviously been tracking and formally documenting each of the transactions. There’s FAA guidelines and requirements that we will have to follow. You once we get to that day, then we will look and conform with the FAA guidelines and allowances for anything and then we will calculate it in at that point, but at this point we have… You know, we have our records of what we would have invested and gotten in returns and we got the loan so it would be easy for us to calculate once we get to that point. Council Member Schmid: But we will get payments back over time? Mr. Perez: We will get the Principal back. You know, we haven’t gone that far, I’m not that optimistic yet that payback in a year or two will occur and we need to see what the guidelines are with the FAA in terms of any interest. Council Member Schmid: Okay, but the value is that it has given them operating funds to build a team for the Airport and has been able to leverage that funding with the FAA covenant. Mr. Perez: And any potential upfront funding that may be needed for capital even if it’s reimbursed, so we’re open to any of that to maintain the operation and the safety of the Airport. Council Member Schmid: Okay, now there was a little troubling number on Page 388. It says that actual number aircraft operations have been running around 180,000, and then in the footnote at the bottom it says, well actually they dropped to 172 in 2016. Is there an explanation for that? Was that just a one-time drop, or is there some falling off in the activity at the Airport? Mr. Swanson: No, it’s not a falling off. It was actually reconciling the accounts with the transfer from the County and what was actually on the airport and I have Karen Davis, our Management Analyst here that can go into more detail of that reconciliation if you would like. Council Member Schmid: Well, I guess I’m just interested in the fact that, are you getting the appropriate number, or is there some indication of a change taking place in that number? Mr. Swanson: No, it’s the appropriate number now. It settled out kind of with what was reported from the County and what we actually had. Council Member Schmid: Okay, so it’s around 172. Mr. Swanson: And it fluctuates, yes, it will go up and down throughout the year. Council Member Schmid: Okay, and then the key issue for the Council is, with the rental agreements coming due in 2017 the expectation is the City will take over and get some earnings from the parking spaces available. Now I know we had an outside consultant come in and say pretty clearly that those leases are currently undervalued, and that the Airport should do very well with them. Is that still where we are? Mr. Swanson: Yes it is, and we would look to reevaluate that and get today’s number and benchmark that with industry standards now and use the previous documentation to move it forward to bring it up to todays. Council Member Schmid: Yeah, that would be good, but as of our voting the $400,000, I guess you are confident and the Staff is confident that that analysis we got from the consultant still holds true. Okay, one last question. I guess I remember when the County dropped out, there was some speculation that the reason they did is because they were worried about settling in the bay lands and that ultimately there would be problems with the runways. Is there anything to that, or where do we stand? Mr. Swanson: Well, one thing that is consistent with bay mud is, it’s not consistent and I’m very familiar with that, working for San Mateo County for quite a few years, and it, we just went through the beginning of pouring and testing and evaluating that, and we’re working with a consultant to look at engineering that when we redo the apron, to stabilize that, and then in the future we will be back out doing that with the runway. Council Member Schmid: Yeah, and my understanding in the long run, you do have a capital goal of building a higher levee on the bay side, which would probably help stabilize. Is that accurate? Mr. Sartor: Yes, actually the levee project would be part of the airport, but also part of the overall safer bay project that we’re working with the San Francisquito Creek Joint Powers Authority (JPA) on in terms of our sea level rise adaptation and those issues, so (crosstalk) would be included in that, yes. Council Member Schmid: And that’s still is a program? Mr. Sartor: Yes. Council Member Holman: Probably just one question. So everybody knows that their leases are coming up. Have conversation begun with the current lease holders? Mr. Swanson: Yes they have, with the individual tenants of the lease holders. There’s multiple tenants on the field and there’s two main lease holds on the field, which would, once it’s evaluated would have the opportunity if interested, to bid on the leases once the consultant comes back and verifies what we exactly have, what the going rate would be and putting that out competitively to look at, but that will come back to you, come back to Council with the recommendations most likely in the fall, is our expectation for that, to begin that discussion in how we will be handling that transfer of the leases, or transfer back and making sure that the transition is seamless with the users on the field and note that the impact is not there. Council Member Holman: So, and is it anticipated that the current leases will be extended, I mean not the current rate, but the current lease holders will be continuing. Is that anticipated? Mr. Swanson: My understanding from conversations with the City Attorney is, you know, we still have to go through the fair market and open process, so that will be established of how we rate those, if there is some type of rating system for existing businesses and that will all come back in the fall for consideration. Council Member Holman: Okay, and just to be clear with the runway improvements and such, like there is no extension of the runway, there is no widening of the runway, this is just working on what’s there as it exists today? Mr. Swanson: Yes, these projects are rehabilitation projects that were badly needed when we took, brought the Airport back from the County. We informed Council of the very poor shape that the pavement conditions were and that we would have a lot of work ahead of us. I’m happy to say that we’re on our way to taking care of that, and we’ve got a great plan in place in moving forward with this apron project and the perimeter fencing, to eliminate deferred maintenance that would actually end up impacting us and costing us more if we didn’t take care of it now. Council Member Holman: And is there any, what’s the anticipated need and when for like, control tower or any of that? Mr. Swanson: The control tower, it’s, there’s kind of, how old it actually is, but around 50 years old, and that would be a Federally-funded project, if that was something that needed to be addressed. I know San Francisco Airport (SFO) just replaced theirs, or is in the process, actually, of moving into their new towers. With technology, you know, there is the possibility of towers actually being automated, where there would be a central location, so at this time I wouldn’t really, you know, if that tower is replaced, we haven’t heard. It’s on the list, I know, and it would be an FAA project. Council Member Holman: Okay. Mr. Swanson: It’s an FAA site, it’s a lease that they have with us. Council Member Holman: Okay, and I think that’s it. Thank you. M. Swanson: Thank you. Chair Filseth: So I just have one question. Andrew, thanks for coming, nice to see you here tonight. I guess I have one sort of general question here, which is, you know, most of the funding for this kind of stuff comes from the FAA and money from the FAA has a variety of strings attached to it, right, in terms of control over what we can do with the airport. I guess my question is, are we going to be dependent on the FAA to operate, for operating the airport, is that going to be forever, or do we ever get out from under that? Mr. Swanson: Well, that’s a good question. It’s asked a lot. Most airports of our size GA airports rely on the 90 percent Federal funding for the capital improvements of the airport. It’s part of a, the National Transportation System, it falls into that. The FAA relies on the municipalities to, you know, staff and operate the airports and a partnership, so getting out of that, it would be an extremely costly undergoing to do that. Chair Filseth: So basically all mid-sized airports like this, once you count capital costs, they all lose money. Mr. Swanson: I’m sorry? Chair Filseth: Basically, for airports like ours, if you include capital costs, right and financing costs and so forth, they basically all lose money and have to get bailed out by the FAA? Mr. Swanson: Well, to really, as far as losing money, the Airport actually, we’re self-sustaining less the capital, but the capital is actually funded through revenues that are collected through the system from the FAA, through fuel tax and sales, so it comes back into the Airport, so it actually is, you know, it is part of the system and it supports it, very similar to the highway systems, you know, a lot of our highways are funded through State funding, which actually really comes from the Federal funding and trickles down, so it’s just more direct. Chair Filseth: I understand. So if we’re part of that system, basically we have to give up a lot of control over our airport to the FAA? Mr. Swanson: Yes, it’s part of the requirements. Chair Filseth: Then that will last forever. Okay, thanks. That’s not good. Council Member Schmid: Yeah, I would move approval of the Airport Fund and tentatively move ahead with it. Council Member Holman: Second. MOTION: Council Member Schmid moved, seconded by Council Member Holman that the Finance Committee tentatively approve the Public Works Department, Airport Fund, Operating/Capital Budget. Council Member Schmid: If I could just make a comment. Chair Filseth: Oh, sorry, please do. Council Member Schmid: While most people in the Bay Area are worrying about whether the Warriors will win their next game or not, Palo Altans are really concerned with whether the first Palo Alto ground lease at our Airport will come before the first round of golf at our new golf course. Chair Filseth: As a non-golfer, I’m not that worried. All in favor. Motion passes three yes and one not present. Thank you. MOTION PASSED: 3-0 Wolbach absent Vehicle Replacement and Maintenance Fund Operating Budget pp. 394-401 Capital Budget pp. 657-686 Mr. Sartor: Okay, we have one more fund to talk about tonight, and associated with that is your last item on tonight’s agenda, which has to do with a pilot program we’re recommending for our Parts Inventory and Management Program at the fleet operation. So the Vehicle Replacement Fund is an Internal Service Fund. We maintain and operate and procure the vehicle fleet for all of the City departments, so for Fiscal Year ’17 we’re looking at evaluating our and bringing on some consultant expertise, actually, to help us evaluate what our replacement charges should be to the departments for vehicles that are purchased. We have found in the past few years that we have not been collecting enough fees to pay for replacements, so that is something we intend to correct in Fiscal Year ’17. We are in the process of replacing aging vehicles and we’re also analyzing utilization of our ideal fleet size. You saw part of that last month when Jon Hospitaliar and Raul Juarez of my staff came to you to talk about the City pool vehicle fleet and what we’re doing to right size that portion of the fleet. We have been increasing our alternative fuel vehicles, and that is also part of our revised City policy for equipment use and replacement. We are prioritizing, in particular, for our transport vehicles, electric vehicles and/or hybrid vehicles to reduce emissions in our fleet. We are also going to be proposing to you tonight a program or a contract with an outside service to provide replacement parts and inventory management for our parts inventory and that leads to our maintenance operation at the fleet. Key changes from Fiscal Year ’16, we have reappropriations from prior year capital programs of about $5 million, $4.9, and that’s essentially because we have not completed the replacements that were identified in Fiscal Years ’15 and ’16. So we are focused on getting those replacements done as a priority and then we have identified another $3.3 million in vehicle replacements that need to be done in ’17, but at this point we are putting that funding, or proposing to put that funding in reserve until we catch up with the replacements from ’15 and ’16, unless there are any emergencies or any critical needs from the departments, and we’ll look at that on a case-by-case basis. So, last, the significant budget proposals that are in our vehicle replacement fund is that we are going to be participating in a new replacement ladder truck that we share with Mountain View, and so we have an increase in the budget from the General Fund to cover that cost share of $158,000, and then we also will be installing GPS monitoring systems on Public Works Utilities and Parks vehicles to help us manage vehicle usage and, mostly usage and how, what kind of mileage they are generating. And it will also allow us in an emergency response event, to be able to track where vehicles might be that we could bring in to help with a response. So with that, that’s the Vehicle Replacement Fund proposal. I’m not sure how you want to go forward? Kiely, I would ask you, on the next action item, which would be the actual contract that we are looking at for parts. Mr. Perez: Let’s take that separately. Mr. Sartor: Take that separately, that’s fine. Okay. Council Member Holman: So, I know a few years ago there was an audit done that increased the amount of vehicles that the City kept because some vehicles were really underutilized, and I think there was something, it seems like we had a lot go in front of us lately, it seems like recently didn’t we also reduce the number of vehicles in the fleet by two, or something, if I’m remembering? I’m getting a nod of the head there. Mr. Sartor: I think you’re asking about what we did in response to the audit about underutilized vehicles. Is that your question, Council Member Holman? Council Member Holman: No, I’m referring back to an old audit, and then also recently I think there was a reduction of two in the fleet, was there not? Mr. Perez: That’s correct. Mr. Sartor: Yes, we actually went through a process over the last few years to look at underutilized vehicles and we have taken a number of vehicles out of service, based on that auto recommendation. Council Member Holman: So I guess the other question that I have related to that is, I know there is… I mean, it’s a lot of money for vehicles, and I know a lot of vehicles get a lot of use, and some vehicles don’t get so much use. I don’t know how flexible it is, but did you look at any other way to get people, to move people around? I’ll just make up something, just throw it out there that’s going to sound silly probably, but you know, some kind of Zip Car situation at the Municipal Services side, I mean, would anything like that be feasible? Mr. Sartor: Well we are actually exploring the idea of, you know, contracts with like Zip Car or other vehicle services. I know Suzanne has had some experience with that in her other agencies and some of the people, so we are looking at alternatives to the pool itself, and we talked about that to some degree when Jon and Raul met with you last month. Mr. Perez: I was just going to add that in a recent meeting, Josh from Transportation updated us that Zip Car is actually reducing two vehicles in the downtown area because of low activity. Those are general use, not for the City Staff, so the Zip Car also needs to have a model that works for them, but we will continue to look at that. Council Member Holman: Of course, but if we know. I mean, the City’s use is fairly predictable, so it seems like there might be more opportunity for utilization there. Suzanne? Ms. Mason: Council Member Holman, one thing I do want to point out as one of our efforts is really to promote public transit and commuting, and the one thing we’re finding is that it’s going to become more important that we have access to shared vehicles for City staff as we further encourage them not to drive their own vehicles, so that if they need to get around town for meetings or out to sites, so it’s a balancing act and we’re trying to find the most creative approach to that, but we are finding that some of our employees who are commuting really do need access to transit across the City. Council Member Holman: I understand that. There are also other programs and I’m certainly not, I’m a marginal fan of Uber for a variety of different reasons, but there’s also, like, guaranteed rides home. There’s like, so is there no program that’s like guaranteed ride? Ms. Mason: Well, we’re looking at that. Actually, David Ramberg and I had a meeting today, you know, on what is the most cost-efficient approach? Do we tell people, take Uber and Lift when they are going to different facilities and working with David, that’s not appearing to be a very economical way to get people around town, and that the shared pool may be the most economical if we have a, you know, environmentally friendly fleet and we right-size the pool. But we are doing a cost-benefit analysis on that actually at the different opportunities, so David and I actually met on that today. Council Member Holman: And the reason I mentioned the Municipal Service Center (MSC) is because it’s more of a remote location and the usage from employees who are at the MSC are probably pretty predictable, so I don’t know if the economics work out, but I’m glad to hear that you’re working on it and looking at it. I think I’m going to have another question later, but I’ll pass for now. Council Member Schmid: I guess we have gone through a couple of years now after the audit, of looking at the fleet utilization and being very careful in investing, and now we’re at this stage of saying, “Okay, now we need to make some capital investment,” so it’s very striking to see the capital numbers that we haven’t spent and now this year we’re moving ahead. So it is a point of change. It doesn’t have that big a budget impact, because I guess we’ve been accumulating those capital funds, so it can be done easily with the budget that we have. I notice that there hasn’t been any net increase over the last four years in the alternative fuel vehicles. Is the goal, though, to change that number as we move ahead with these purchases? Mr. Sartor: Yes, as I mentioned, our recently revised equipment use and replacement policy has a priority of replacing transport vehicles, and what I mean by transport is like pool cars, pickup trucks, vans, with alternative fuel vehicles as we go through those replacements, so we will be increasing (crosstalk) and focusing on electric as well. Council Member Schmid: Any quantification that you’d give on that? Mr. Sartor: Let me ask Jon or Raul if they can give us any specific numbers on what we’ve got so far. Council Member Schmid: Yeah, the numbers here are 25 percent, pretty flat. Mr. Hospitalier: I can tell you over the past couple of years, we’ve brought in thee hybrids to the fleet and one electric vehicle, passenger vehicle. We have a second electric vehicle on order now for our zero waste team. Utilities has the other electric vehicle and the hybrids are distributed between Public Works and Utilities. Council Member Schmid: Yeah, so we’re likely to see, with this big capital investment program, increases in those numbers? Mr. Hospitalier: We’re likely, but the opportunity for it is limited. Unfortunately, before we got started and implemented the new policy to think Electric Vehicle (EV), hybrid first, replacements were made in the fleet that, and we went to Compressed Natural Gas (CNG) vehicles for a lot of these purchases. Timing is everything, right. But going forward we have limited opportunities for passenger vehicles in particular, and the industry hasn’t really caught up yet on the heavier vehicles, as Mike was speaking of, with vans and pickup trucks, but we have our eyes on the horizon. We are hopeful that the mainstream manufacturers are going to come forward with some solutions. Council Member Schmid: Yeah, I guess a lot of the working equipment, it’s hard to make that adjustment. Mr. Hospitalier: Again, our eyes are on the horizon, and if we get an opportunity from a mainstream manufacturer to bring in a vehicle of that sort, we will. More than likely it would be a pilot. Reliability is a big part of what we need. It’s been our experience in the past when these experimental vehicles come out, the first year, there’s a lot of bugs to work out, and when you’re trying to maintain a utility, maintain the streets (crosstalk) yeah you don’t have that luxury to put an inferior product out on the road. Council Member Schmid: So we should have a realistic view of what can be done? Mr. Hospitalier: That’s correct. Council Member Schmid: Okay. Well, those are my questions. Thank you. Chair Filseth: I wanted to ask about, there’s a line here on Page 397 which is “Charges to other funds”. This is on the revenue side, and we go from $6.6 million to $8.9 million, so that’s two and a quarter million, which is a 34 percent increase in charges to other funds. What is that? Ms. Nose: Good question. In our ongoing review of this fund, there’s two components to it that are running through it. There’s the operations and maintenance associated with the vehicles, as well as the replacement schedules, and the City allocates costs to departments on two separate methodologies for those two different activities. As part of this year’s development of the budget for the vehicle fund, this was actually factored into your Long-Range Financial Forecast, we looked at what the actual Operations and Maintenance (O&M) costs are in the fund and looked at the activity levels by departments and by funds historically, and actually realigned that O&M funding level, because we had found that we had been historically under collecting. So this is actually a true up to fully fund the actual O&M based on the fund history, and it’s also readjusted the allocations, based on historical usage. Chair Filseth: Got it. So you were sort of, if I understand what you said, you sort of looked at how much you were charging the departments and made an adjustment, right? Ms. Nose: Basically, yeah. Chair Filseth: So what other departments get charged? Ms. Nose: What departments and funds? Chair Filseth: Yeah. Ms. Nose: Oh, all kinds. I mean, it’s everyone throughout… Mr. Sartor: Police, Fire, Utilities, Parks, even IT has two vehicles that they use. Chair Filseth: Planning and Community Environment? Mr. Sartor: Planning and Community Environment, Development Services. Chair Filseth: So if I go look in those sections of the budget, then that two and a quarter million should be in there somewhere? Ms. Nose: Correct, it will be on the expense side. Chair Filseth: Where do I find it? What’s it under? Ms. Nose: It will be on the expense side, so a good example, actually I was looking at it earlier today, look at the Fire Department’s budget and so if we look to page, let me find it, yeah, so look at Page 249 if you can. Chair Filseth: 249, yup. Ms. Nose: And then about the fourth adjustment down from the top it says, “vehicle maintenance allocated charges adjustment”. Chair Filseth: Oh, there it is. Ms. Nose: And you’ll see the $254,000 increase this year, and to pull that all the way through, you’ll see that on Page 246, it’s net so you can’t see everything. You see that flow through the allocated charges. Chair Filseth: 246, it’s going to be in allocated charges? Ms. Nose: Correct. Now that’s obviously, allocated charges are a number of things, so those are things like the worker’s comp fund, or not worker’s comp, general liabilities fund, like we’ve talked about before, not just vehicle. So clearly you don’t see the positive 254 in the change column, but that’s where you’re seeing it. Chair Filseth: So, and what charges do you allocate? So Operations and Maintenance. Does the capital costs, do those get allocated as well? Ms. Nose: The capital vehicle replacement costs are allocated by a different methodology. Chair Filseth: Okay, but do those go to the departments as well, or do they stay? Mr. Sartor: This is the cost of the fleet staffing, the mechanics, our fleet manager, all the maintenance and operation, parts inventory, parts cost, tires, oil, all that gets charged back to the user. Chair Filseth: To the user, okay. What about, you know, the cost of the car which amortized over ten years or something like that, does that cost get charged? Mr. Sartor: Well that’s as I mentioned, one of the initiatives we have to do for this year is to bring on a consultant to help us evaluate how we collect replacement charges over time, because we have found in our replacement program that we have been under collecting for, you know, the cost of inflation, the increased cost of cars, any kind of vehicle upgrade, those kinds of things. Chair Filseth: Okay. Yeah, go ahead while I think of my… Council Member Holman: Just a follow up to that, so bringing a consultant on to make that evaluation, is that something that our City Auditor could do, provide staffing? Mr. Perez: Well, I think to an extent they have done it, but maybe not the Staff that is here right now. I think it was somebody else that is no longer with that office, but we’re talking more about a system. You know, we have a system in place. Can that system be updated? I’m talking about software systems, sorry, so we can have it automated and connected to the financials or to us to be able to see it in the finance side, so we would all be able to see the data and then having some policies of how you adjust for annual inflation of costs beyond the potential of just that replacement, that if it’s a different vehicle. Then, obviously, you have to allocate the costs but between all funds and how do you segregate that and make sure you have debits and credits for any of the variances suggested. So I think it’s probably something where we need somebody that has that type of expertise of that background to make sure that, you know, we’re doing best practices for one, and that we’re utilizing the best possible systems to do this. Chair Filseth: I want to continue with mine. If yours is following that one, please proceed. Council Member Holman: No. Chair Filseth: So then where in the Fire Department Budget, let’s pick on Fire since you brought it up, I don’t mean pick on, I just want to understand, where in the Fire Department Budget do we account for the cost of fire trucks? Ms. Nose: It would be in that same vehicle allocation line. Chair Filseth: This is vehicle maintenance allocated charges. Ms. Nose: It is, and so there is no change to the actual allocations in Fiscal Year ’17, which is why you don’t see a change called out in this year’s budget. Chair Filseth: Oh, I see, okay. Ms. Nose: The actual allocations for replacement are still considered part of the vehicle fund allocation, and would show up in that allocated charges category as well. There is just no change this year, so you won’t see any year-over-year differences. Chair Filseth: I see. So somewhere, so in 2017 the Fire Department has $2.86 million of allocated charges. Ms. Nose: I’m sorry, say that one more time. Chair Filseth: So, Page 246, Fire Department shows $2.86 million for allocated charges, so that includes all their vehicles, this year’s cost and depreciation and amortization and so forth of all their vehicles? Ms. Nose: Correct. It includes their component. Chair Filseth: And the $250,000 right? Ms. Nose: Correct. Chair Filseth: That doesn’t seem like very much. I mean, unless that’s their only allocation? Ms. Nose: Rather than speaking 100 perceny out of turn before we have the consultant, I suspect that we are probably under collecting in vehicle replacement costs as well, and that’s another reason why we really want to bring someone on, to not only figure out where we have some holes, but also how are we going to fix them and fix them on an ongoing basis with some solid policies, procedures and equipment in order to do so. Council Member Holman: Is that consultant in the budget and I haven’t noticed it? Ms. Nose: We did it as part of… Council Member Holman: I’m sorry, is that consultant in the budget? We haven’t teased it out? Ms. Nose: That’s actually something that we added funding for as part of this year’s Mid-Year Budget Review, so you guys approved funding for that back in February or March, I can’t remember which month now, sorry. So we did allocate funding in there from the vehicle funds fund balance reserve. Council Member Holman: You can’t go anywhere. Mr. Sartor: Yeah, I’d like to pile onto that, I’d like to shout out Kiely for her help in getting at least our maintenance and operations allocated charges up to snuff, so thanks again, Kiely, for your help on that. Chair Filseth: Okay, and I wanted to ask one more which was, on Page 396, and this is sort of the question, I think it’s the same question that Greg asked a minute ago, so maybe it is superfluous. It looks like the number of vehicle that are alternatively fueled or electric goes from 55 last year to 58 this year, so you’re assuming you’re going to add three. 2016 adopted was 75, 2016 estimated was 20 lower than that, and that’s what you’re talking about was the deferral of the capital? Is that what that is? Mr. Sartor: The question is, why did we adopt 75 and we only accomplished 55? Chair Filseth: Well, I think that’s what you said here in terms of the proposed was 8.9, sorry, the reappropriations is the 4.9, that’s the difference? Ms. Nose: I think it’s probably a combo of a number of things, but yeah. So the implication is that a we’ve looked at staffing resources and how long it takes to process these vehicles and what Staff’s capacity is in a given fiscal year, you know, the numbers are going down slightly, and that’s again reflective of the $3 million reserve on the capital side. Chair Filseth: Okay. Alright, that’s it for me. Council Member Holman: So on the sedans and SUV’s, what’s the average cost of those? There are 70 of them in our fleet. What’s the average cost? Raul Juarez, Manager of Fleet Services: The average cost is probably $35,000. Oh, Raul Juarez, Fleet Manager. Council Member Holman: I haven’t bought a car in a little while. It’s like, I guess that’s about, well, sedans it seems high, SUV’s maybe not, you tell me. (crosstalk) Mr. Juarez: Well, there are different needs in each operation. That’s the reason why some operations need an SUV, because they can go off road, whereas a sedan, it will get stuck, so the Fire Department, the battalion chiefs, usually have SUV’s as part of their transportation vehicle, to respond in emergencies. Council Member Holman: So the SUV’s that are in that first line, I’m looking at the capital budget, the SUV’s that are in that are mostly Fire? Mr. Sartor: Fire and Police Department. In fact, the Police Department has been looking at the replacement of their patrol vehicles down the road, and they’re leaning towards going towards the model, the California Highway Patrol (CHP) and other agencies in the area are going to, the Ford Explorer, as a patrol vehicle. That’s something that we will be talking to the Police Department about as that comes forward, but they have, as you know, Police vehicles these days have, you know, all kinds of computer equipment and camera equipment and various response equipment that they need to carry in their vehicles. Council Member Holman: And it doesn’t seem like any of these are Utilities vehicles? Mr. Sartor: I’m sorry? Council Member Holman: It doesn’t seem like any of these are Utilities vehicles. Am I wrong or right? Mr. Sartor: Are you talking about SUV’s in particular? Council Member Holman: Any of these vehicles, SUV’s and sedans or whatever, or any other utility, used by the Utility Department. Mr. Perez: It’s for all funds. You’re looking at page 660, I’m assuming? Yeah, the 553 vehicles, that’s for all funds. Mr. Juarez: Yes. Mr. Sartor: Oh, yeah. Those are all departments. Those are vehicles that will cross departments. Council Member Holman: And those are used for both checking on issues as well as going… Mr. Sartor: Well we have, the Parks Department, for example, has maintenance workers, they have inspectors. My department has inspectors, Utilities Department has field crews. They have anything from a bucket truck to a VAC-on truck that they use for cleaning sewers to fire trucks. I mean, there are all kinds of vehicles and equipment in our fleet, and that 553 number also includes equipment, such as generators, trailers, lawnmowers. Council Member Holman: Yeah. Mr. Sartor: That kind of thing, and I think they are all listed. Council Member Holman: I noticed that. I was kind of surprised we had so many backhoes, mowers, tractors, forklifts, rollers, air compressors, chippers, trailers, 54, and I was kind of surprised that number was that high. I guess I haven’t looked at that in a while. I was kind of surprised it was that high, given how many contracts we signed for outside work, so… Mr. Sartor: I think Jon can probably respond to that, because he manages a major operation that has backhoes and dump trucks and graders, and asphalt and pavers and that kind of thing. Mr. Hospitalier: So I guess the best way to describe what’s happening with that class of vehicle, is with the amount of work that’s being contracted out, there is still a need for in-house crews to perform the day-to-day on-call needs, right, and emergency response. So what’s happened is, duties are overlapping now. We used to, when I started in this organization some 26 years ago, it was much more specialized. If you worked on a utility crew, you may only work on gas, or you may only work on water, and that truck was assigned to doing that. Now what’s happening is, they’re working on all three utilities out of any of the trucks that are part of that class. You’re going to, if you’re running a utility, you’re going to have the public works, maintenance, you need a certain baseline for emergency response and day-to-day needs, and also the planned maintenance, and the level of diversity of the work out of certain vehicles now, it’s gotten greater. There’s more tasks being operated out of those vehicles because of that change of, I don’t know if that’s, if I’m coming across clear nor not. Council Member Holman: Yeah, it is, and I’m certainly not in a position to understand, it’s just that I just don’t see City forklifts out there or City chippers out there. That doesn’t mean they aren’t, it’s just a lot of vehicles, it seems like, for those kinds of specialty kinds of things. Mr. Hospitalier: Well, for the trees, I can speak to that. I mean, we’re planting more trees. We now have over 38,000 trees in the City. As you know, we’re talking about the maintenance cycle and trying to keep up with that. We need a certain baseline of that equipment in the yard for those emergencies that we spoke of earlier, you know, those limbs that are hanging after a wind storm, those types of things. We can’t contract it all out because the level of service that our customers demand, a contract won’t necessarily meet. Council Member Holman: And you do have emergencies such as, say, downed limbs and that sort of thing. Okay. Thank you for responding to the questions. Chair Filseth: Can I ask one more question. The $9 million proposed here, how much, what’s your best guess what you’ll really get to this year on that. Mr. Sartor: Well, as I mentioned, $5 million of that $9 million is from prior years. It’s already in the budget, already identified for replacements. Chair Filseth: Yeah, it’s already in the budget, but I mean operationally, given sort of the people you’ve got and the time it takes to do this, I mean, how much do you think you’ll really get to this year? Mr. Sartor: Well, that’s a very good question and that’s exactly why the additional vehicles were identified for replacement in this current Fiscal Year. We’re not actually planning to do it. We’re putting that money in reserve, setting it aside and not going to get to it until we complete that $5 million procurement, and we may not complete that in ’17. Mr. Hospitalier: Can I speak a little more to that. In past years we’ve been fairly successful replacing, you know, 45 to 50 vehicles, if that gives you any bearing, and I do have some totals of what we have left, if you’d like that, in both those two fiscal years. In VR 1500, four vehicles out of the original 49 vehicles that were planned, still to be ordered. Those are the ones still left to be ordered. Three of the four will be ordered before the fiscal year ends, and we waiting for 14 vehicles that are already on order, and as Mike touched on, part of the delay is that these specialized vehicles, the utility vehicles, fire vehicles, some of them take over a year to build. Then in VR 1600, 17 vehicles were ordered, 11 vehicles out of the 17 have been delivered, 22 vehicles are remaining out of those 39, are still left to be ordered. Chair Filseth: So, how many vehicles is $8.9 million? Mr. Hospitalier: Well, without having the complete list, Raul could probably give you a better bearing on that, knowing exactly what’s on the list. Mr. Sartor: Let me jump in on that one first, Council Member Filseth. That’s tough to gauge. I mean, the ladder truck that we’re sharing with Mountain View will cost $1.2 million, just by itself. Chair Filseth: Hook and ladder trucks can be most of that. Mr. Sartor: Yeah, so there’s a wide range of costs. Mr. Juarez: Can I add also, there’s two pumpers, one is ordered already for Fiscal 2016 and there will be an additional one for 2017, and again, those two pumpers alone are going to cost the City $1.3 million. Council Member Schmid: I move we tentatively approve Vehicle Replacement and Maintenance Fund. Council Member Holman: Second. MOTION: Council Member Schmid moved, seconded by Council Member Holman that the Finance Committee tentatively approve the Public Works Department, Vehicle Replacement and Maintenance Fund, Operating/Capital Budget. Chair Filseth: Moved and seconded. Further discussion? All in favor. MOTION PASSED: 3-0 Wolbach absent Chair Filseth: Alright, thanks folks, thanks for staying late with us. 4. Approval of Staff Recommendation for a Three Year Pilot Contract for an On-site Fleet Parts and Inventory Program With Genuine Parts Company for an Estimated Annual Cost of $171,000 Mike Sartor, Director of Public Works: Alright, so shifting off of our Public Works Department Operating Budget for General Fund and operating capital for our enterprise finds, we have an item before you, which is a proposal to do a three-year pilot program for our fleet parts inventory purchasing and control. So, just to remind you or to inform you, currently we have an annual inventory of parts of about $260,000 in value, and that covers anything from brake linings to tires to, you know, engine parts. We have four staff members, they spend 2,000 hours, and we have 3,500 transactions or procurements each year. We had a study done of our fleet operation a couple of years ago by Mercury Consultants, and they recommended that we consider contracting out our parts purchasing and management system, so we have a contract coming before you, I believe it’s in either later this month or in June, to contract with a company that is national. It’s called NPAP, National Association of Parts Administration, or something. They would be actually handling our inventory and what that means is they would be providing parts on a real-time basis, so we’re not actually storing all these parts at the yard. They would actually, as I recall, purchase the remaining inventory that we have in stock. This would allow us to freeze one position that’s actually retiring or leaving, Jon, I’m not sure, but we have somebody in our part’s room that’s leaving. We would not need to replace that person at this point, so we proposed to freeze that position and we would test this out for three years to see how it works. Of course, we’ll need to look at operations and timeliness and that kind of thing, and we anticipate we would save about $250,000 a year by doing this. So, that’s our proposal. Our recommendation to you is for you to recommend approval of this contract so we can bring it back to the City Council as a whole. Chair Filseth: Is there anything not to like in this contract? Jon Hospitalier, Assistant Director of Public Works: That’s kind of what we were thinking. Lalo Perez, Director of Administrative Services and Chief Financial Officer: Maybe the logo for NAPA. (crosstalk) Mr. Sartor: We’ll provide you with NAPA hats at the Council meeting. Chair Filseth: Go ahead. Council Member Schmid: Let’s see, one question. There will be a NAPA person on-site, that you can talk to immediately? Will there be an inventory? You currently have an inventory on site. Will NAPA run an inventory on site? Mr. Hospitalier: Yes, they will basically take over our part’s room and they will carry an inventory. The benefit, as Mike spoke of, is the fact that they have national buying power. They’re not just buying one oil filter, they’re buying hundreds of thousands of oil filters. They’re getting things at a lower rate than we can possibly even hope to get them at. Council Member Schmid: And they have a number of places around the State and the Bay area where they can get things quickly? Mr. Hospitalier: Right, they even work with our other vendors like Caterpillar. All of our heavy equipment, Arcos, for instance, are all Caterpillar line, and they have cut the same deal with Caterpillar. Council Member Schmid: Oh good. Yeah, that’s a question I had, is as you move to alternate vehicles, there are parts that might be out of NAPA’s regular inventory. Would that be a problem if you had more electric vehicles? Mr. Hospitalier: Not at all. They’re cutting these deals with the vehicle manufacturers directly for OEM parts. Council Member Schmid: So you’re feeling, even as you diversify your fleet, this organization will be able to step up and… Mr. Hospitalier: We’re confident that’s the case. Council Member Schmid: I certainly do agree with what Chair Filseth said, that it’s a good move in general to get out there and experiment with economies of scale and professional organizations and we can see what happens. Chair Filseth: It looks good to me. Do it, do it right away. Move to accept Staff recommendation on, tentatively, with NAPA contract. Council Member Holman: Second. MOTION: Chair Filseth moved, seconded by Council Member Holman that the Finance Committee recommend the City Council approve a three-year pilot with Genuine Parts Company (Napa) to provide on-site fleet parts and inventory services, including contract staff to procure and manage the auto parts/supplies inventory. Chair Filseth: All in favor? Motion passes. Good stuff. MOTION PASSED: 3-0 Wolbach absent Future Meetings and Agendas Chair Filseth: So, Lalo, you have the floor. Lalo Perez, Director of Administrative Services and Chief Financial Officer: Future meetings. So we have one more night meeting in regards to the Budget, and that’s next Tuesday night. Just as a reminder, we’re starting at 6:00, but we switched the order. We’re starting with Utilities first, their Operating Budget, we’ll have electric, fiber, gas, wastewater, water fund and then we’ll get to the capital, so what we might ask you to do is, so we’ll play it by ear with you, if you don’t mind. Depending on the arrival time of the full Committee, we might finish wherever we’re at with Utilities, and then switch over to General Fund, because we’ll have a bunch of project managers, and we would rather get those folks out of here with the CIP, and then get back to the Utilities items. Then we’ll have also the Electric Financial Plan, amending Utility reserves for Electric Rates and the Gas Rates and the Net Metering Successor Rate, so those three items as well, once we conclude the remaining part of Utilities. If there are no questions there, yes. Council Member Schmid: Question is, tonight’s meeting took, you know, at least an hour longer than we thought and this looks like a very full agenda, and it’s already scheduled to go to 10:00 and we’re sure to have a long Council meeting on Monday. Mr. Perez: Yes, I guess the bit of a counterbalance, maybe you may not see it the same way, is that, all of the rate stuff you already heard, so I think you’re pretty set there. There’s some commodity changes for Utilities, but you kind of… Council Member Schmid: Nothing dramatic. Mr. Perez: Yeah, it’s not going to be anything dramatically new that you haven’t heard in terms of the major impacts. So, I think the area where there is some concern, and that’s why I suggest that we break back to it, is, or interrupt Utilities and go to the CIP, is that’s going to be an important area I think, so if for some reason we don’t get to something in Utilities, I don’t, you know, right away, I think that even if it’s later, it won’t be as challenging for us, at least that’s my hope. Council Member Holman: I’m sorry, so what you’re saying is, you’re talking about breaking back, so you’re talking about getting through one, of course, you’re talking about getting through all of two before going to three, or you’re thinking about… Mr. Perez: No, breaking somewhere into two, you know, let’s say that by the time we have the full Committee, we’re done with Gas Fund, then we would ask that you change the order and switch over to the General Fund CIP at that point, and then we would come back and finish… Council Member Holman: Once we’re all here. Mr. Perez: Correct. You know, I believe the more challenging area is the CIP. There’s new projects, there’s some updates on the infrastructure master plan that I’m sure you’re wanting to head. Chair Filseth: Let me guess, it got cheaper? Mr. Perez: Oh yes. So for that reason I think we should break at that point and switch over. We do have, as we mentioned, on the 23rd, the 11:00 start. There’s, I think, the Committee and Staff wants to make sure that we get to update you on the golf course, on the latest information we have, and we promised you we would try to give you as much as we could on the 23rd, so we’re trying to leave an hour for that, on that date. Worst case scenario, it is coming to you as a full Council, and obviously you would want the Finance Committee to have heard it first, but you would, that item is coming to you as a full Council as well. Chair Filseth: What are our recourses if we don’t finish by the time the Council meeting starts? Mr. Perez: We are somewhat limited in two areas. One of you is out the rest of the week, and it just depends on availability to commit three of you for whatever other dates, if you were to push it to another date. Chair Filseth: So that’s the recourse is find another date afterwards with some subset of this. I mean, we don’t want to do that, right, but what if we end up against the wall. Mr. Perez: And the reason we would have to do it that week, is because we have to then go back and package it all and put it all together for the June 13. Chair Filseth: Yeah, it’s got to be done by the 13th. Mr. Perez: So there’s not a lot of time. That’s all I have. Council Member Holman: I’m going to ask just an obvious question here is, so just so I know how to plan, so should we plan on bringing brown bags, because this should be a working… It’s difficult, though, to sit here and eat in front of people. We need, staring at 11:00. Mr. Perez: I did talk to Beth about that, because I figured somebody might ask, so she’ll have light snacks for you, but she will have dinner for you at 4:00. She’ll have, she said, typical snacks that you’ve liked in the past, is what she told me. (inaudible) Mr. Perez: Good question. Kim, do you happen to have the 23rd Council? Female: We have a 5:00 closed session. Mr. Perez: So you’ll have, I mean, you could cut your lunch to half an hour, I suppose. That’s another backup option, your dinner, sorry. Thank you. ADJOURNMENT: Meeting adjourned at 9:31 P.M. TRANSCRIPT Page 12 of 81 Special Finance Committee Meeting Final Transcript 5/12/2016 FINANCE COMMITTEE TRANSCRIPT Page 1 of 81