HomeMy WebLinkAbout2017-05-02 Finance Committee Summary Minutes
Special Meeting
Tuesday, May 2, 2017
Chairperson Filseth called the meeting to order at 6:09 P.M. in the Council Chambers, 250 Hamilton Avenue, Palo Alto, California.
Present: Filseth (Chair), Fine, Holman, Tanaka
Absent:
Oral Communications
Chair Filseth: Alright, welcome to the first meeting of the Finance Committee Budget sessions. First on the Agenda is Oral Communications where any member of the public may speak to
any item not on the agenda this evening. If there are, Neilson are you going to submit a card here? We have one member of the public, Neilson Buchanan.
Neilson Buchanan: And a helper.
Chair Filseth: And a helper and a stool, and you have 3 minutes.
Mr. Buchanan: You’ve got an enormous job in the next 4 to 5 weeks, and I don’t want to take more than a minute. We brought a 5-page presentation for you, none of which needs to be gone
through tonight because it will unfold in the ensuing weeks. We’re here because, representing the neighborhoods we’re in search of our Holy Grail. The Holy Grail was presented to us
on March 20, 2014 and it was the preverbal three-legged stool that represented the investments in the parking management programs. And thanks to Amazon, I have an unfinished three-legged
stool. Appropriately enough, one of the legs won’t go in, so it represented the work that we all have to do to get the three-legged stool operational to balance off the parking. I don’t
want to belabor the point. We’re not here asking for more money. We’re asking for, or we’re basically saying, “We’re going to take whatever you give us to manage the parking”, but we
would like to know what line items or what amount of money is actually in the Budget. That will relieve a lot of tension between the residents and the Staff that, I think, is a lot of
unnecessary tension because we’ve been led to believe a lot of things were funded and I failed to ask the most basic question, where’s the money? So, we’re here today to follow the money
through the Budget process and at the end of it, we’ll take what we get and most interested in knowing what’s not in the Budget. So, thank you.
Action Items
1. FY 2018 Proposed Budget Overview.
Chair Filseth: Thank you very much. With no further speakers, we’ll proceed to Action Item 1. The first Item is the Fiscal Year 2018 Proposed Budget overview. Welcome Lalo.
Lalo Perez, Administrative Services Director and Chief Financial Officer: Thank you. Good evening Chair and members of the Council. Lalo Perez, Chief Financial Officer. One of my personal
goals has been to try to have Staff take over as much of the duties as they can so they can be ready themselves to perform the duties of our department and so one of the things I’m going
to do is then defer the presentation to Kiely, because she is well versed in the Budget and she will give you an overview of the City Manager’s Proposed Budget. One of the requests that
I have, if it’s possible, to let us finish the presentation as is, and then come back and answer questions. That way we can go ahead and get through the presentations. I know that you’ll
have lots of questions and we’ll have an opportunity to discuss the presentation as a whole and then at the end of the presentation, we can talk about the format and how we want to proceed
during the Budget Hearings. There are some prior processes that we’ve used that we want to reintroduce and see if the Committee is still interested in taking the action in similar manners
as in the past.
Chair Filseth: Thank you.
Kiely Nose, Budget Director: Thank you Lalo. Good evening. I’m Kiely, I’m the Budget Director. So, as Lalo said, we’re going to kind of do a real high-level overview of everything that’s
in front of you in those very large documents, that I’m sure you’ve all read cover-to-cover. So, just to begin, a quick outline of all the things we will go through. We’re going to start
on the operating side first and kind of go macro to micro. So, we will start at City-wide, go through our internal service funds, General Fund, special and Enterprise Funds. Then we
will quickly go over the Capital Budget, and just remember, you’ll see bits and pieces of capital as we move throughout this process, but we will also have an in-depth look at the General
Fund Capital Plan on the 18th of May, as well. And then after that, just kind of go over a summary. And as Lalo said, once we go through that summary, kick back to questions and kind
of process all that. Okay? So, overall the City has, the City Manager has proposed a balanced Budget to you for FY ‘18. It’s $661.8 million overall. It’s about a 3 percent increase from
FY ‘17’s Adopted Budget levels. This slide is looking at sources and if I exclude things like reserves, fund balance and transfers, our revenues are totaling $592 million and reflect
year-over-year growth of about 8 percent. So, it’s a pretty healthy revenue growth City wide. Our largest revenue source continues to be to be net sales, again, because of our utility
activities and running our full suite of utilities. On Citywide expenses, you can see that we continue to have diverse expenses throughout. Utility purchases continue to be a big investment.
Our capital program, our City continues to invest in infrastructure. And the third largest slice is also, of course, salaries and benefits. As a service-driven organization people are
offering services to the community. So, Citywide, one of the things that you have seen in the messaging and discussions throughout this document is, we have really looked and challenged
departments to look within, reprioritize what they have already have, and one of the prime examples of that is looking at the position counts. So, overall, we’re only recommending the
addition of 3.9 Full-Time Equivalent (FTE’s) City-wide full time. That’s compared to the 10 we added last year. We will go through these throughout each department. And another thing
this doesn’t’ account for is, we have done a number of reclassifications, so again, that’s going with living within your means. So, instead of adding new bodies, let’s look and better
restructure our existing staffing and our existing workforce. So, major adds you’ll see is in Public Safety, a communication manager, and IT, a senior technologist, which is frankly,
just a carryover. You guys had added a position about two years ago, but we couldn’t decide if it was going to be a position or contract. This is kind of coming to fruition that conversation
that happened a few years ago. Then, in addition, we are investing in a customer service in the Utilities Department and some of our airport facilities positions. I’m sorry, airport.
These are offset by us also reducing positions, so in the Police Department we are recommending the elimination of a community service officer that’s been vacant for a number of years.
We’re also changing some staffing at the JMZ and Art Center. So, overall it is important to note the 1,058 FTE’s are still below our peak level in 2009 despite the significant increase
in demand, the significant increase in services that this community continues to benefit from as this organization grows. So, obviously, salary and benefits being a large component of
our City’s Budget, I wanted to give you guys a look at Citywide what’s happening, because when you look at each individual department, we get to this granular level of detail, but you’ll
see percentages skew as you go to each department, because we do budget positions based on the employees that are sitting within them. So, it is based on individual employees benefit
elections, their individual salaries. So, you will see things as your workforce ebbs and flows and changes just from that, in addition to what’s outlined in negotiated contracts. So,
Citywide, you can see our salaries are going up about 8 percent, or salary and benefits, I’m sorry. Salaries themselves only going up about 5, and the big increase is pension, and you
can see that’s going up 10. And if you think about why pensions are going up more than salary, it’s going up because it’s a percentage of your salary, but it’s also increasing as our
Unfunded Liability grows and as CalPERS rate of returns are adjusted. So, you will see that number increase more significantly as the next few years come through. The really big change
on other benefits is really just, frankly, a factor of what we did in the Budget last year. We did one-time savings and allocated charges, so this is reinstating that one-time reduction
that we made in ’17 back to normal levels. So, Internal Service Funds. These are the funds where, they are services within the organization, so you can see general benefits, general
liability, print and mail. They are segregated from the General Fund, but since everyone in the City benefits and uses them, everyone contributes into these funds. So, these are what
we call allocated charges throughout our document. Another thing that obviously sometimes can get skewed, and the reason why I wanted to highlight these is this is the prime example
of that one-time savings that we did in the FY ‘17 adopted. If you look at the General Benefits Funds and that General Liability Fund, you see that there were no charges being allocated
to departments in those FY ‘17. That’s because we had extra excess funds sitting in those individual funds, so instead of charging the services throughout the City, we drew on those
fund balances. So, it’s basically we accumulated too much and we drew on those reserves and so you see us restating that for ’18.
Mr. Perez: Just to add, it was a good thing. It meant that we had less cases in general liability lawsuits and lower worker’s comp, so we took advantage of having those reserves and
utilized them for one time, so that’s what we are referring to.
Ms. Nose: Okay, so, in the General Fund we’ve brought forward a $210 million balanced Budget. Our total revenues are actually $206.8 million. That’s about a 6 percent increase from prior
year levels, and we are recommending use of the Budget Stabilization Reserve at about $3.2 million, but that does maintain the 18.5 percent City Council-approved target. If you guys
do use that funding from the Budget Stabilization Reserve, you actually have a surplus of $273,000, so go wild. You can see again, taxes continue to be our primary driver. About $9.7
million of the year-over-year change is due to our major tax revenues, so our major taxes we have a healthy growth in here of 8 percent. On the use side, you can see again, salaries
and benefits an even larger component when it is General Fund only, and that is the service-driven organization that we are, and this is compared to our Adopted Budget last year, which
was about $194 million. So, everyone, we had this – back in December we had a preliminary meeting with the Finance Committee because in the 2017 Budget process, for those of us who were
here, we had identified that we had, we were going to face a gap, so we wanted to proactively address that with you. So, back in December we said we would have somewhere between a $4
million and $6 million gap in the General Fund, with the primary drivers being changes to the costs for Tract Watch, streetlights and traffic signal electricity costs and our current
negotiations with Stanford for Fire services. So, that’s kind of where we started, and if you look at how we balance the General Fund this year, that’s represented in that $4.3 million
negative figure at that top left under FY ‘18, so that’s where we started. When we looked at our growth year-over-year revenues, when we adjusted all of our base costs to maintain status
quo, when we implemented all of our labor contracts, when we annualized all of those one-time Budget proposals that we did in FY ‘17, this is where we started this year. So, from there
we balanced it and you can see the $273,000 at the bottom. So, we’ve come up with new revenues of a modest $716,000 to continue services, increase cost recovery levels where we can,
and maintain cost recovery levels in other areas. And then, on the use side we’ve continued to invest in current service delivery and in certain areas made some modest enhancements.
We’ve reserved some funding for known upcoming projects. So, some of those being, you know, we know that we’re going to have some new Request for Proposals (RFP’s) for janitorial services
coming up. We know we are going to have parking initiatives coming up. We also know that we have labor negotiations coming up. So, we can get into that in more detail in the non-departmental
section. One-time investments and savings, again, this is a combo of some one-time reductions and some one-time investments that we’re making as an organization. We’ll go through these
in greater detail on the next slides. Then, probably of great significance is those cost reductions, service delivery efficiencies and funding shifts. So, not only are we reducing the
$2.9 million in FY ‘18, ongoing it’s about $4 million, and that’s where we’re trying to better position ourselves for FY ‘19 and beyond, so that we can deal with some of the very important
and strategic decisions that the Council is going to have to make over the upcoming year to build that capacity. So, you can see that in theory we’re around $3.7 million unspent, ongoing.
A number of things that we’ve – we’ve spent that tenfold in our heads, right. We want to increase our contributions to pension; we have another round of labor negotiations coming up
in FY ‘19. We have growing capital infrastructure costs that are unfunded. So, just those three alone, we’ve easily spent that tenfold, but we did try to build in some capacity so that
you guys can evaluate priorities and make some investments strategically. Okay, so I won’t go into these in too much detail, but these are some major proposals that are recommended in
this Budget and, again, we’ll get into these in more detail in each department section. The largest, probably, is the reduction in the Fire Services deployment changes. We’re currently
in negotiations, both with Stanford and our employee group, International Fire Fighter (IFF), to figure out the new deployment as we work with Stanford on the Fire Services delivered
on their campus. So, right now we preliminarily think that we can reach this $1.3 million reduction on an ongoing basis without significant implications to our service delivery levels.
Project Safety Net, Track Watch, you can see that we are working to phase that and switch it from guards to cameras, so it would be a strategic kind of, as we transition from the guards
to the cameras to ensure full coverage. One-time savings in IT-allocated charges. There was a lot of vacancy savings, so kind of similar to what we had done in the other Internal Service
Funds last year. Ten-year tree-trimming cycle, as well, when we had been at a 7-year previously. Other areas where we’ve invested. Parking is a huge initiative that the organization
will undertake in FY ‘18, so there is some one-time funding set aside to continue to evaluate that, and the organizational structure. We’ve also set aside some funding for the labor
negotiations. Two of our largest groups come up for, I think their contracts end in June of 2018 if I remember correctly. So, this is to set aside some funding for us to begin those
negotiations in FY ‘18. The Caltrain video management system is the other half of that Track Watch reduction. Again, phase out of one system and phase in of the next. Public Safety PIO.
So, this is a non-sworn position, which has historically been done by a sworn officer. And then, still some inter-fund loans to ensure that we’re maintaining our resources appropriately.
Okay, Special Revenue Funds. These are going to all be discussed on May 9, so that’s what, next Tuesday. Some quick, quick highlights. On the Federal level, the Community Development
Block Grant (CDBG) Funds, the process has changed, given what’s going on with our Federal Budget. Right now, we’re assuming it’s about an $800,000 annual allocation, but there are definitely
delays. Recently, the State passed a new transportation bill and so we’re anticipating that additional revenues will come somewhere between the $600,000 and $1.2 million range. So, there
is nothing in this Budget that assumes that, since it was just signed, but it is a new revenue source that we can look to, and how to use it. Parking, of course, huge. You’ll see significant
revenue increases in the Cal Ave and University Ave areas as well as our RPP districts, and that’s basically a reflection of the increase in permit prices that are recommended. We’ll
go over the permit prices also as part of the Municipal Fee Schedule, and that’s on the 18th of May. These are really a ramp up, to be honest. There are significant investments that
are on the horizon in these funds and in this area, so we’re moving up in terms of our permit prices so we can start to fund some of the critical projects, like access controls, paid
parking, as well as what I call red-light/green-light, but I think it’s parking guidance system here, more appropriate. And the last is just, we have the next phase of funding from the
Stanford development agreement coming in this calendar year. On the Enterprise Fund side, you do not see the significant rate increases that we saw in the prior year, so overall, there
is about a 2.5 percent increase in the estimated monthly bill. There is some realignment of positions that we will get into as part of the Utilities Department discussion on May 18.
One is one fulltime customer service representative addition, but that is offset by reductions in part-time staffing. So, Capital Improvement Program (CIP), this is just a quick overview
of our five-year CIP Enterprise Funds and our Capital Project Funds continue to make up the bulk with some modest investments in our internal. And these are just project counts, so these
aren’t based on dollar value. These are based on the volume of projects going on. So, out of that $661 million number that we kind of referenced at the beginning, $157 million of that
is associated with capital. The largest investment in that Capital Improvement Fund, so that’s our General Capital Improvement Fund where our Infrastructure Plan is funded out of. In
the proposed Capital Improvement Fund, there is a Proposed Budget for FY ‘18 of $75.5 million and you can kind of see the areas where we are investing, buildings and facilities, and
you see that significant increase because of the Infrastructure Plan. We continue to invest in our streets, sidewalks to meet that PCI goal, as well as, obviously, traffic and transportation
through things like bike pad. Our Infrastructure Plan right now is currently estimated at about $196 million. Now, that has been updated per the most recent decisions the Council has
made on both the Cal Ave garage and the Downtown parking garage. Right now, it’s funded at $170 million, so you can see that this is where we’re really focusing on that emerging gap
in the growing costs of construction. So, potential Public Safety building costs of that, $75 million. Those two garages, which year-over-year is about, I’m sorry, not year-over-year,
from original project estimates are definitely in the tens of millions of dollars in cost of increases. We will get into more of this, like I said, on the 18th of May. So, one of the
things to look at is when we say that project, or those, I’m sorry, the Infrastructure Plan is funded at $170 million versus that $196, you can see what happens if you were to fund that
full $196. This is a chart of your infrastructure reserve balance, so this is the fund balance in your General Capital Improvement Fund. Last year is the blue line. You can see we try
to stay no lower, or we try to keep the fund balance no less than $300 million. So, for the most part we accomplished that, but when we add in those escalating capital costs. You can
see the fund would go negative as soon as next year. So, we really need to prioritize the projects that are in this fund. Not only the Infrastructure Plan, but all the other projects
that are in here, look at deferring projects, look at alternative funding sources, and kind of go over that plan for what it looks like over the course of the five years. So, just to
keep in mind, when we look at the five-year CIP, you guys as a Council, you are adopting only the current year. So, you’re only going to adopt FY ‘18. The rest of the out years are just
the plan, and right now we can see we have some work to do in those out years. So, overall there are a number of things that are not included in all these numbers, which I hate to say,
and it’s a list that we continue to highlight for you guys; transportation, parking, animal shelter. We have our parks masterplan coming up that significant costs could include, or could
be, I’m sorry, significant costs for the parks masterplan are not included in this, so we just saw that negative fund balance. If you added all the parks masterplan projects, that only
gets worse. So, again, what are the priorities, what’s the right timing and what are some alternatives for funding sources? And we’ll talk further this evening about our unfunded liabilities
for both pension and retiree healthcare. The last one on there is, not that we can predict this, but we are on the cusp of a potential recession, so right now we talked with economists
and, who did we talk to, Steve Levi? Steve Levi, who said that we’re probably okay for about the next 18 months, and this was back in January, as we go through this next and acclimate
to the new administration, but I think we’ve been in a growth mode for about almost a decade now, and so if you look at historical economic cycles, it’s typically a decade.
Mr. Perez: We also spoke or reviewed material from Beacon Economics, who is part of the UCLA Program, and there are aligning with those thoughts. One other item that’s not on there that’s
kind of been worked on but not included is Cool Blocks, which is a program to create, enhance the neighborhood feel, enhance the programs that are of value to the community. It’s a matching
program, so we may have some discussions with you as well during these hearings.
James Keene, City Manager: Cool Blocks, you know the Cool Block, I think you’re in a Cool Block island. So, yeah, Cool Block.
Ms. Nose: Okay. To kind of wrap things up, looking forward we need to continue to manage expectation of the Council, the community and our Staff, looking to address pension, and we do
want to continue those discussions with you guys in the fall of the next Fiscal Year. Continue service delivery evaluations and looking to maintain the current high quality of services
that the City residents receive, while we work to mitigate that escalating cost. Labor negotiations, as I mentioned, will start beginning next year for implications starting as early
as FY ‘19. We will have to start to look at significant investments, so knowing all those unfunded projects like Cubberley Master Plan, like the parks masterplan, and that emerging gap
in our Infrastructure Plan. You know, new avenues to fund even larger strategic initiatives like grade separation, we’re going to have to start exploring that and prioritize within.
The, again, capital, just looking and probably reiterating that last bullet about prioritizing our initiatives. So, just really quick, hitting on some administration, the Budget Hearing
proceedings. This is a brief look at the calendar. So, in the next 4 weeks that we will be spending together, the agendas are posted on line as well as on the LMB web page, so that we
can follow along and see what’s kind of coming up on each of these. Yeah, Jim.
Mr. Keene: Well, I would just say that only speaks to the Finance Committee meetings, so you basically have a Council meeting every Monday in the month up there on the chart. We also
will have other Policy and Services Committee meetings and rail and others. You’ve got weekend events. It’s just going to be a full month, actually the next two months.
Ms. Nose: Yes, definitely. This is only the Finance Committee. Add all that in and it gets a little overbearing. So, in these meeting proceedings we’re going to go through each department,
a quick presentation of their accomplishments and initiatives, as well as the significant Budget proposals and then we toss it back to the Committee to ask questions about what’s going
on in their Budget and their organization. As you guys have follow-up items, we, OMB, and the departments really strive to get back to you guys by the next Finance Committee hearing,
so if possible, we’ll do that. If not, then we’ll advise you on how much time it will take and either try to follow back as part of wrap up, or if it truly takes some significant Staff
work, when we will follow up as a referral later on. And then, as Lalo kind of alluded to earlier, at some point we will kind of go through the administrative things, like the parking
lot and how we want to deal with that. The parking lot being items that you guys want to put in the parking lot to discuss as part of Budget wrap up. You know, Staff referral that takes
over an hour of Staff work, what would you guys want the number of votes and support to be in order to send Staff on their way. So, a couple of those and then in general, when we take
up each department, we will look to you guys to do a tentative Motion. So, you know, shortly we’re going to come up with the appointees and when we go through the City Attorney’s Office
we’ll look for you guys to do a tentative Motion for the City Attorney’s Office. We’ll put that department to bed and move on to the next. Now, know that it is just a tentative Motion
so we can revisit it as part of wrap up as well as all of this will go to full Council, right now tentatively on June 19. So, with that, I want to thank both Jim and Lalo and the whole
OMB team and department Staff that are somewhere here, and we’re here for questions.
Chair Filseth: Super, thank you very much. Go ahead.
Mr. Perez: Sorry, we were just having an internal discussion. But we can take questions on any of the subjects. Just keep in mind that some of the items that are scheduled for later
in the calendar, we would prefer that we get into those items when they’re calendared. So, tonight we could discuss overall expenditures, overall revenues, the trends that we see with
some of the allocations, and anything at a high level on capital that you wanted to just make sure that we covered when we bring back the item, like special revenues for example.
Chair Filseth: Okay, so I assume that what we’re going to do here is we’re going to, if there are any questions about the over view we will do that now, and then we will proceed to individual
departments, start with Council-appointed officials and the Council itself?
Ms. Nose: Correct.
Chair Filseth: And then are you looking for a Motion on each one of these tonight?
Mr. Perez: If you want, we can talk about this now, before your questions, about how you want to proceed. It’s up to you. We can talk about what we envision and recommend to you to follow.
Chair Filseth: What do you want to do? Do you want to go through procedure or do you want to ask questions on the sort of the over view first?
Council Member Fine: I don’t have questions about the over view, but I would like to hear what Staff, how Staff thinks we can proceed on individual items.
Chair Filseth: I don’t have a lot of questions on the over view either.
Mr. Keene: Why don’t we very quickly just tell you sort of the way – because I don’t think it’s a long explanation at all.
Mr. Perez: So, what we recommend is that if two Council members have an interest in an item, let’s say we have a proposal for X and two of you decide that you want to discuss this further,
but you need more information or something, you can put it in what we call the parking lot. So, we keep a running list of items that you put in the parking lot. Something that you want
to decide after you deliberate through the rest of the Budget Hearings, because you may want to see the whole picture before you take action. And the practice was that as long as two
of you agreed, then it was put in the parking lot. Once you review a Budget, for example, we get to the Council Appointed Officers (CAO’s) and you review a specific CAO, we ask that
you make a Motion and do a tentative approval of that Budget, because again, subject to you reviewing the whole Budget, you may have a change of heart or something else that you might
see for wrap up. If you make a change and you do it through a Motion, then we will also keep a tally of those changes. You may add something, you may reduce something from any of the
funds. We will keep track of that. If you need additional information, we want to recommend that you follow your protocols. If it’s over an hour, then you take a vote as a Committee
to instruct us to do that. If it’s something that we can do simply by doing it, we’ll just tell you we’ll bring it back to the next available meeting that we can. Sometimes we do it
at the very next meeting, depending on the nature of the question or request. I think that’s probably about it.
Chair Filseth: I should comment on the parking lot. I mean, you and I have done it before, but basically what happens is as we go through this and somebody said, people say, “Geez, let’s
have some more discussion on that expense later”. An example, I think, was the vehicle pool was one that was moved into the parking lot and discussed later. We come back at the end,
and that’s one of the reasons the final day is so long, right, is we’re going through all the stuff that we’re revisiting and so forth. Okay. Round of questions on the over view.
Mr. Keene: You don’t have to have questions, you know.
Council Member Holman: Well, I don’t know that I really do have questions on the overall. As we get into the detail, it might help, it might actually implicate the overall Budget, but
I think right now my questions are more in the specifics and the topics, rather than the overall Budget, other than it’s a whopping big Budget.
Chair Filseth: Council Member Tanaka.
Council Member Tanaka: Yeah, do you guys have comparables, to like similar cities, so we could kind of understand like what baseline is and how are we doing against baseline?
Mr. Perez: It’s not as easy City-wide, because the structure we have in Palo Alto is significantly different than our neighboring cities. What do I mean by that? For example, we provide
Fire services to Stanford. The wastewater treatment services, we service Mountain View. So, some of the areas we can and do look at it. We take a look at, for example, sales tax activity.
We have a consultant that helps us review that, and so we review the County, the cities within the County, and neighboring county and neighboring cities. Property tax, say way. In terms
of expenditures, we do look at each other’s data, specifically in labor negotiations, because there is what we call a benchmarking.
Council Member Tanaka: I guess, just to be more specific. So, something like per capita, right. So, we kind of normalize everything so that – there are other cities that are bigger than
us, some cities are smaller than us, right. But just to understand how we stand, because when we look at absolute numbers, it’s kind of, the only base we have is to last year, but it
doesn’t mean that we’re necessarily good or necessarily bad, because we don’t necessarily know how we compare to others. So, if there’s a way to normalize this so we can see, let’s see
for instance, the pension per capita, right or pension per capita per employee. I don’t know. I’m just trying to think of different types of metrics that we could use where we could
start comparing numbers. Because I understand absolute numbers are very hard to compare because we’re a very different City.
Mr. Perez: I think, if I’m not mistaken, Harriet’s behind me. She prepares a service, the Service Efforts Accomplishment (SEA) Report, that does some comparisons to other jurisdictions
and various factors.
Mr. Keene: You know, if I might just make a comment. I mean, we’ve done this a lot and different folks do it a lot, and so I think it has some value. It’s often, I’d say it’s more illustrative
than it is definitive, because there can be so many factors involved, right. I mean, just take something like our Parks and Recreation Department, you know, I mean we have a community
theater, we have a Junior Museum and Zoo. We provide funding to school programs. So, the apples-to-apples comparison more often than not, really requires that we have to do some deeper
dives to do comparisons. Now, some of them, you know, if we want to look at Police Officers. One jurisdiction where almost all the employees are Police Officers, or whatever, and compare
population, you know, that’s relatively easy to do and sometimes that gives us some useful information, but I would say almost always it’s hard for you to make an initial real decision
based on doing those comparisons. It’s more a gateway to a follow up and deeper conversation that we would have to have. Because it really, I mean, we could do the cross tab, for example,
and the fact that we have nine City Council members in our Budget. Does that mean that more Council member equal more expenses or not. Or do we have a better thing, which is we give
more value per Council than we get with others. So, I’m just saying we do this a lot. We have often been sent to do it, but we certainly couldn’t give you a master chart and a comparison
overall.
Council Member Tanaka: You could or couldn’t.
Mr. Keene: Could not.
Council Member Tanaka: Could not. Okay. So basically, the only baseline we have is to last year and then, hopefully, that baseline, that’s the only point of reference then?
Mr. Keene: Well, I think in a general sense, as you’re looking at it for a Budget decision, to inform your questions, yes.
Council Member Tanaka: Okay, because it would seem to me that we could take things, take something relatively simple, let’s say the population of Palo Alto and start dividing it into
some of these numbers here, and looking in comparison – I understand that there are differences, right. But, if you don’t do a, if all you’re doing is comparing against yourself, the
problem is that you don’t know kind of what best-in-class is, right? So, you need like another point of reference, so that’s my only kind of, my biggest issue with the overall Budget
is that there’s no point of reference, other than ourselves, and so that’s why I think it’s important for us to – and I’m not talking about a lot of metrics, but I think we should have
a few important ones, so maybe salary per resident or pension per resident. I’m not sure what the right one is, but there should be some sort of normalizing metric that we could look
across cities to know how were doing, because when we’re, like I said, when we’re just looking at ourselves, we don’t have that point of reference.
Mr. Keene: Let me just say, I mean, we – I think there’s a lot of work we want to do in really developing meaningful measures that we can benchmark that really reflect where we see the
value proposition and the value differences, not everything. As Lalo said, the auditor’s service efforts and accomplishments report does some of that, you know, and its off Budget. We
also participate in other comparative and benchmarking exercises, both regionally and nationally. Again, they have some utility, but what I am, what I can say is, we don’t have anything
that builds that explicitly into our annual Budgeting process at this point in time, to be able to give you comparisons.
Council Member Tanaka: What were some of the things you did in the past in terms of trying to do this comparative analysis?
Mr. Perez: We did the per capita expenditures that you were talking about and we’re above the chart, so everybody. That’s because we are PG&E and they don’t have PG&E, so our costs are
through the roof, but every, you know, if you compare us to every jurisdiction next to us. When residents do that, over the 30 years that I have been here, it comes up every so often
and Council says, “Well, we need to do a review”. So, once we dig in and start looking and you try to pull away to try to match, it’s very difficult to try to match cities, because we
don’t have the same portfolio of services. In some instances, like us, we provide services to them, so they’re not imbedded in their Budgets. Animal services we provide, water treatment
services, like I was saying, and Fire services, just to name a few. The services that Jim mentioned, you know, when I talk to my counterpart, “Hey, why don’t you produce more services
to the community in your recreational programs? They say, “Why, when you have them?” You know, so if you look at our Budget and try to compare them from activity to activity, there is
a big, big difference. The number of libraries that we have here, for example. Nobody else has that number of libraries for a City our size. So, it’s a value choice we made, so when
you look at the values, we’re going to look really off the chart, because the staffing levels are going to be so different. You know, where a city has one or maybe two in the surrounding
jurisdictions.
Mr. Keene: And if I would just add, I mean, I really think if this is something that Finance and the Council really wants to get into, it really should be even a multi-year sort of focus,
and we ought to spend the time, for the most part outside of this Budget process, which is an annual appropriation, because I think that having participated in a lot of these over the
years, we want to choose benchmark cities, let’s just say, if that’s our choice, that with some thought and some discrimination, and in some cases it would be, it may be population,
it may be regional, it may be value-based. So, just as an aside, I know, for example, when I was in Berkeley ultimately we sort of said, “We don’t want to compare ourselves with everybody.
We want to compare ourselves with like-minded cities that we would think are best-in-class, that have value systems that are the same.” Because what you’re really trying to get at is,
what is it that our citizens expect and/or want and what are the distinctive demands we have, and how would we choose the places we want to benchmark against. I’ll give you just absurd
examples, right, I mean, we once participated in national benchmarking survey where we had some of the lowest road maintenance costs just in general, and a lot of that had to do with
the fact that I was in Tucson at the time, and we had a bunch of other benchmarking cities that were like in Minnesota and had really lots of snowfall. So, we had zero costs in one huge
area that’s a big cost for other folks. I’m just saying, I think for it to be really valuable, it really requires some, it is a design process we had to go through about who we want
to compare to and get some definition. Or else we are going to spend a lot of time doing a lot of work that we’re going to say, “Well, that’s interesting,” and then when we start to
dive deeper we’ll go, “Well, it’s not as useful as we thought.” And Lalo’s thing on the libraries is a perfect example.
Council Member Tanaka: I think the challenge, though, with what you’re saying, and I largely agree with you, saying we should kind of – we should be spending more than just this Budget,
but the problem with what you’re saying is that without this point of reference it’s hard to know what’s good and what’s bad, right? Unless we say, “Well, everything was okay before,
and now if it’s above it was good and below it is bad,” or vice versa. So that’s my main issue is that without this kind of point of reference, the conversation is very abstract, right,
to know. I mean, how else do you tell what’s good or what’s bad then? Where are we lagging. I mean, how do we know like what areas are we efficient, what areas are we not efficient?
How do we know, without this comparative?
Mr. Keene: Well, I think that’s excellent, but I think you’re going to find that the annual Budget process is more a marginal comparison of the present and status quo with the upcoming
year, and what is marginally different. Are we going to stay the same, are we going to do more or are we going to fall behind? Now none of that answers the initial question as to whether
or not that was the right stuff to be doing in the first place, or are we getting maximum efficiency, right? Those are very different things than saying, “How much do we want to spend
in this area?”
Council Member Tanaka: Well, inherently we’re trying to allocate scarce resources, right? We have so much money to spend and we’re trying to allocate it, and we’re trying to figure out
which department should money go to, right? And because we don’t have a point of reference, other than what happened last year, a department may be incredibly efficient and we’re starving
it. We should be giving it more. Another department might be totally loaded and should be cut, but we don’t know that, right? Because we have no idea. All we look at is history versus
like some sort of KPI to understand the level of efficiency, because what we’re trying to do is we’re trying to create a Budget. We only have so much money to spend. How do we allocate
it, right? And so, to form the allocation decisions, having these KPI’s is, I think, in my opinion, critically important. Otherwise, we are just pretending to (inaudible). We’re just
taking the status quo. It’s like inertia. That’s what we’re doing. We’re not actually making very informed decisions.
Mr. Keene: Well, I think you’re going to run out of time this month just to do it the way we do it, but if you want to do what you’re taking about, we will not adopt a Budget by July
1. I’m not being rude about that. I think it’s a much deeper conversation, and in any case, whatever we would want to do, I think we could never, in any given year, make that decision
across the whole organization. We would have to select areas, so we really want to say, let’s just say Public Safety, it’s really important. It’s a huge cost to us. We want to look at
that benchmark, look at what efficiencies and possibilities are there, as opposed to everything that we do as an organization.
Chair Filseth: Let me see if I can take a swing at this. Alright, I think the discussion is centering on, look, I mean a suggestion here is that this be part of a general – there be
a process for this, which is part of our general processes, right. And you may have some of that already and Harriet may have some of those already, and the question is, you know, is
there something specifically we should be doing? And I think if we’re going to have a discussion like this, it makes sense to sort of identify a few specific things as opposed to very,
very general stuff. We don’t have a tremendous process that’s part of the Budgeting process for this right now, so I think it may be something that we decide we want to do. I see Harriet
here. Do you want to shed some light on this?
Harriet Richardson, City Auditor: Well, I wanted to remind everyone that we, the Auditor’s Office, has been doing the performance report but Council has adopted a change for how we approach
that. So, over the next two years or so we’re going to be going back through all of our performance measures and we’re going to be looking at what are really the measures we need to
manage our work throughout the City, and we will be revising those benchmarks that we’ve been doing in the past, which were just a collection of what was available at the time, and asking
each department to say, “Who should you be comparing yourself against?” and understanding why they think that they should be doing that. So, I think what you’re asking for is something
that will be coming down the road, but it’s not an overnight kind of change that can be made, and it’s going to take some time to work with the departments. I’ve been working with Kiely
on developing a process and we’re going to be starting that after the Budget season is over, to get the departments working on revisiting those performance measures. So, over the next
two years you’ll start seeing that, but it is a pretty good sized effort to go through that process. So, I just want to make sure you are all aware of that, as you talk about how that
can fit into the Budget, and part of that is looking at, we do have performance measures in the Budget. We have performance in our annual performance report, and should those be reconciled
in some way, because some appear in one and some appear in the other, and we want to make sure we’re being strategic about how we collect those measures.
Chair Filseth: So, I think that’s important and relevant. I’m going to suggest that the Resolution is, discussion with – I assume there will be ample opportunity for Council members
to interact on sort of the definition of that process.
Ms. Richardson: We actually submitted something, a Staff Report that we discussed at Policy and Services several months ago, and Council did adopt that on a Consent Item.
Chair Filseth: Okay. (Inaudible) So this particular item we’re scheduled, we’ve got to 7:00 and it’s 7:00 now, right? So, we’re not behind schedule. So, if you have more, go ahead.
Council Member Tanaka: So, I guess, and I kind of feel strongly about this because it’s 2018. Palo Alto has been around for a long time, and this can’t be the very first Budget we’re
doing, so I mean, to me this is like, and there’s lots and lots of cities, there’s like 500 cities in California, and so I think we don’t have to like boil the ocean today, but I think
having some basic measures would be a good start. So, while we could come up with our grand plan later, I think we should start with something simple and obvious. Maybe something that
you’ve done before that was, that seemed to be good, and then, you know, over the next year or so we could make it better, right? But I think to say, “Well, sorry, we can’t compare ourselves
against anyone.” You know, there are no real Key Performance Indicators (KPI’s) other than historical information, I think is not a very satisfying answer.
Chair Filseth: Let me submit that one to the 1 hour test.
Mr. Keene: We do have performance measures. They’re not up to what we think is really that valuable in a contemporary way as really helping us drive where we want to see changes. So,
as Harriet said, we have a planned big initiative. I mean, restructuring the City Manager’s Office was to be able to add some capacity that we’re bringing on board to allow for an intense
internal process to support performance management. That being said, I mean, a City is like a gigantic multi-national corporation as it relates to the range of businesses we’re in and
the services that we have, and the various measures of effectiveness, right? I mean, dollars are one measure of effectiveness. How people are served, what speeds and turnaround times
are, how safe the City is. Whatever, there are a hundred different ways for us to start to measure what has value and success, and going to the Chair’s point, I do think for us, rather
than to have, and I’ve been part of some of these big COMSAT processes of collecting lots of data and measures, and I can tell you every organization figures out ways to game the system,
whatever approach that you do have. What we want to have is a focus and a quality set of measures that are reflective of the values that ultimately the Council will help define, and
that will be a process. I mean, because we have a lot of measures right now, where if you said, when a department is up here you could ask them some questions and get a better sense.
What I would hope you would do is, we would look at this, if this is really where you want to go, that this ought to be a big focus that Finance could have going forward, and as you
look at these Budgets, are there particular areas that jump out to you more than others, where you really feel, wow, this is an area where I think the return on investment, or, it’s
really hard for me to get a sense of it. I would like to identify that as at least one area that we look at in the future as opposed to sort of every aspect of where we are. Some way
to prioritize it.
Chair Filseth: So, what’s your advice to us on how we should do that?
Mr. Keene: As you look at the Budget, you’re going to ask some questions. I mean, the truth is, you don’t have unlimited time. You have to sort of dive in. Each one of you often brings
a different perspective. You may ask some questions and feel that we don’t answer it very well, so that can be a good indication about, “Geez, do I have confidence in what we’re doing.”
You may want to have more information than we can answer during this Budget process, or you can also say, “Well, this is something we need to be following up with in the course of the
year.” I really hate to say this, I think you will find that there are a lot of sunk costs, so to speak, in this Budget, right. So, let’s just take our electricity purchases. The contracts
we have are pretty much in existence. We probably have hundreds of millions of dollars of what we’re going to spend. Our ability to change that, right, is going to be minimal. There
may be some other areas that you would say, “Well, wait, here’s an area where clearly we could make adjustments or changes in the future to change what we want to invest in in the course
of the year.”
Council Member Tanaka: Okay, so I’ll be really specific. Pages 3 and 4. There’s per capita for Menlo Park and Mountain View as well. So, we do a chart per capita for Page 3 and 4. I
think this should probably take about an hour.
Chair Filseth: I think any one of us can do that in 20 minutes.
Council Member Tanaka: Okay, so Pages 3 and 4 basically get, what is the per capita dollar for the City sources and the City expenses for both Menlo Park and Mountain View.
Mr. Keene: We can go ahead and do that. We’ll do that and let’s say it takes an hour or more than an hour. What will take longer is our then interpretation of the comparison of that,
the similarities and the differences. Because, in and of itself, as Lalo said, the per capita will give you a measure, but I will guarantee you it will be meaningful in some areas and
completely not meaningful in others. So, you want to know that?
Council Member Tanaka: At least we will have a baseline.
Mr. Keene: No, I agree with you. I’m just telling you, that will happen.
Chair Filseth: Thank you. Got anything else?
Council Member Fine: Thank you. Okay, so thank you Staff for all this work. Thanks for all of you for showing up late for this meeting, and for all the other ones, and thanks to my Colleagues
too. A couple of comments and questions. So, I do agree with Council Member Tanaka that we need kind of external qualifiers here, purely as we’re new to this and perhaps we’ll learn
over this Budget season what matters. There are some kind of relative measures we want to make. And I think what we may be struggling with here is that service delivery is actually really
hard to put a price on, and I’m wondering if there aren’t ideas that Staff could come back to this Committee, to the Finance Committee with in another meeting about Budget process, about
measuring that service delivery costs and the value to residents, right? I’d be very interested to know how much the residents think the parking programs are worth to them. We know there
is going to be a massive gap in terms of the per capita thing, but we’re actually going to see across the City what folks are thinking. A few other comments. In terms of closing the
gap or shifting money within departments, it would be nice to see kind of which was relatively easy to do, which was hardest to do, which would be dropped if you would give something
up. And then, also, kind of who is transferring to whom within the Internal Services Fund. That might be later in there. And then, just a last question. Kind of on the acute performance
measures, how are they chosen? Are then chosen department by department or Council input, Staff?
Mr. Perez: Yes, the departments create the performance measures, vet them through the Budget Office and the City Manager and review with the Council through this process.
Mr. Keene: Let me just say, as far as being City Manager, I don’t find the existing measures we have, have that much utility to me, and I don’t think they necessarily express where the
leverage or inflection points are, what really makes a difference, and I would also say that I don’t have a lot of faith in the quantified methodology that’s used. So, I think it’s more
like this, “Well, what was our satisfaction number last year, 75 percent? Okay, good. Well, what do you think, we’re going to do better or worse this next year than we did last year?
Well, geez, we lost two people, we’re down. I don’t think we have as many people, we’re going to do less,” Seriously.
Council Member Fine: Right, so I think maybe some of the feedback I’m hearing up here and from you is that it would be helpful if we as a Committee could agendize something down the
road about the internal and external Budget processes and the metrics we’re using around them?
Chair Filseth: Council Member Holman.
Council Member Holman: I do have one question, and maybe this is the best time to ask it. That is, we didn’t have this last year. I’m not sure when we had it last actually. You know
what I would find like really helpful in going through the Budget, and we’re talking about eliminating a position here or what positions are open and, if we had org charts which surely
exist within the departments. If we had an org chart that showed what position was potentially being eliminated, what position is open, that sort of thing, it would be so very, very
helpful.
Mr. Perez: Right. We do have org charts, but we do not have indications of which ones are vacant, to your point. That’s what you’re looking for, which ones are vacant?
Council Member Holman: Well, an org chart for what exists and…
Mr. Keene: There’s an org chart in the Budget on every department, with the positions.
Council Member Holman: I don’t view those as org charts. They seem to me like they’re just a list of positions and they all report to the director of whatever that department is. That’s
what it looks like to me.
Mr. Keene: And what are you thinking about as an org chart?
Council Member Holman: Well, if you have, you know – let’s just take Community Services, maybe as an example. You have Rob De Geus as the Community Services Department Director, and
then you have, you know, over here you have events and over here you have, and who does that report to, and you have Human Services Resource Allocation Process (HSRAP) process and you
know, that’s Minka and all of that, so, you know, who?
Mr. Perez: Oh, you’re looking for names.
Ms. Nose: Are you looking for employee names?
Council Member Holman: I’m not looking for names, I’m looking for positions, but I don’t know what the position titles are, that’s why I’m looking at, that’s why I’m listing names
Chair Filseth: Could I ask a devil’s advocate question on that? So, here’s what you folks provide, which is, I assume a proxy for groups, right? So, there’s one group that’s the long-range
planning group and it’s got this many people, and one group that it’s coded for and this many – I’m just looking at Hillary’s, right. I assume that this corresponds to the org structure
that Council Member Holman is asking about.
Ms. Nose: Correct.
Chair Filseth: So, Karen, is your question answered with this one?
Mr. Keene: So, if you look at Community Service, Page 194, real quickly, you’ll see, you will see an organization chart. Now it doesn’t mean that, this is not a program organization
chart that would divide up every program that we do in different areas, but you can see, there’s open space parks and golf division, there’s recreation division, there’s arts and science.
Within each one of those it identifies the positions in roughly the service area that they are working in. That doesn’t tell you what the assignments are or the programmatic areas. We
could do a program Budget that would not reflect sort of this organization or lines at all. They would cross over departments. I’ve done them before. They are exceedingly complicated
to put together, and in fact, most of the time City Councils don’t like it because it’s actually harder to figure things out, because we’ve got so much crisscross in the organizations,
but it is, clearly, yes, this particular org chart doesn’t tell you directly who is responsible for homeless issues in the human services area in the Community Services Department.
Council Member Holman: So, what I’m looking for is, I hadn’t looked at this as – for instance, if you’re looking at Community Service here, arts and sciences division, and so does everybody
report, I mean, ultimately everybody reports to the Community Services Director, but it doesn’t seem to me like it’s an org chart.
Chair Filseth: What question are you trying to zero in on?
Council Member Holman: What I’m trying to get at is, when we’re looking at the Budget and we’re talking about positions, elimination or retention or what we need to plan for, where there
are gaps and if there is an elimination, I’d like to know if there is somebody else that is also doing that job. And it’s very hard to do with just one off questions. That’s what I’m
after.
Mr. Keene: So, the easy thing this year is, we’re eliminating only a few positions and we’re adding only a few positions, so we could certainly, when we get to each one of those Budgets,
speak to that and let the department get in a little more detail with you. We could certainly even let people give you, as of this point in time, what their vacancy or turnover rate
is, so if we say they’ve got 25 FTE’s and they say, “Well, we’ve only got 20 people in there,” and they say, “Well, you know, we’ve got, we’re down, we’re 80 percent of our capacity,”
or whatever it is, we could give you a sense of that at this point in time.
Council Member Holman: Yeah, and one department where it would be very helpful is Planning and Community Environment. It’s like, how many open positions are there for planners and that
sort of thing, and if we could get it in written form as opposed to verbal, it should be, I would think, pretty simple to do. It certainly would be, I would think, under the hour thing.
So, I’m looking for it to be simple, but informative, and I appreciate that.
Mr. Keene: So, I’m not sure it’s under an hour, because it would be across all of the departments, but if you would follow your rules and you guys want to do it, Budget could then ask
people to try to be prepared to be able to identify the vacant positions in writing in advance, or when we come in here and we could share that with the Council.
Council Member Holman: I’d find it very helpful.
Chair Filseth: I think, and specifically that department is the one, because I think we could spend a lot of time doing this for the whole City, and I’m not sure what it – right, so
I think we ought to try to focus if we can. Is that specific department the one?
Council Member Holman: Well, I think the larger departments, like Planning, maybe Utilities, Public Works, Community Services, the larger departments, maybe Police.
Mr. Keene: Well, we can go ahead and to it. I mean, Police have 8 vacant Police Officers right now out of their contingent. It has an impact on the service delivery that we have. It
presents challenges for HR to say, “How are we going to recruit and compete and get these people on board.” It’s not going to be that hard for us to do it, I just want you to know that
to put it out in writing, we going to ask everyone to get it together and…
Ms. Nose: I was going to say, we can pull together a report of all of the, it sounds like you’re looking for fulltime, not part-time positions, so we’ll look at – we can run a report
and report out on all of the fulltime vacant positions. And I think in very limited instances we have backfills and trying to note that, but that’s where it gets a little bit more complicated
in terms of needing to talk with the department on it, if we’re, you know, working other Staff out of class to help backfill and all that kind of stuff. So, as long as you just want
the basics of, these are the fulltime positions that are vacant.
Council Member Holman: I think that would be helpful and, you know, sometimes we feel, like last year, for instance, we added $500,000 to the Planning Department’s Budget because of
projects that were going on and community interest in this or that, so it’s just helpful to have that other piece of information to provide context and backdrop for what we’re doing,
why we’re doing it and is it temporary or permanent, that sort of thing. So, I’d appreciate that very much.
Mr. Keene: Is there support for that?
Chair Filseth: I’ll support it. So, I have one question actually, which is on this slide, which is, I’m looking for the General Fund, right, on Page 11, the General Fund expense pie
chart there is an item that’s transfers, that’s 14 percent. Is all that transfers in infrastructure, or is there other stuff in that as well?
Ms. Nose: The vast majority is infrastructure, correct.
Chair Filseth: Okay, so that’s where the $29 million for infrastructure from General Fund is? It’s basically in the pie slice?
Ms. Nose: Correct.
Chair Filseth: Okay. That was mine.
NO ACTION TAKEN
2. Council Appointed Officials and Council.
Chair Filseth: Okay, let’s proceed to the Council Appointed Officials.
Kiely Nose, Budget Manager: Okay, so for efficiency sake, I’m just going to go through the major proposals of the City Council appointees, because there’s not a lot going on. So, in
the Attorney’s Office, we’re simplifying the classification of the Attorney positions. Basically, it’s aligning it with industry standards. It actually results in some modest savings
of about $7,000. There are no Budget proposals in the City Auditor’s Office, so status quo there. In the Clerk’s Office, they have consolidated boards and commission recruitments, and
so that reduces the outreach and advertising that needs to occur, so we can reduce about $35,000 on an ongoing basis from their Budget. Kind of getting back, I think, to Council Member
Fine’s question of what was easy versus hard. This is an example of where Staff has changed the process, realizing efficiency and it makes sense to make this reduction. Council, there’s
no adjustments to your guy’s Budget. When we look at non-departmental we will talk about your Council contingency. And in the City Managers’ Office, simply because it’s a City-wide activity,
we do have the $150,000 of one-time funding to work on parking evaluation and management. So, with that, we are here for any questions.
City Attorney, Operating Budget.
Chair Filseth: Questions on the City Attorney’s Office? So basically the City Attorney’s head count is flat and there were a couple of sort of title changes or classification changes?
Ms. Nose: Correct.
Chair Filseth: Okay. Karen? Council Member Holman.
Council Member Holman: This mic is a little sticky. Just one question. So, we’re talking about staffing levels, but we also have, which comes out of, you know, our coffers, we also have
allocations that we make here and everywhere for contract attorneys, consulting attorneys, for special projects, and I apologize, but I don’t see it here, and surely it is, but I don’t
see it here.
Ms. Nose: So, what’s outlined actually here, if you look on Page 132, under the Budget summary and we’re looking at dollars by category.
Lalo Perez, Director of Administrative Services and Chief Financial Officer: We’re in the City Attorney’s Office.
Ms. Nose: We are in the City Attorney’s Office, we’re looking at the General Fund Contractual Services, is about $300,000. You can also see in the historic actuals, it’s been about half
a million to upwards of $600,000. It’s not just outside council, if we want to get into the details of what else is in there, we can work with the Attorney’s Office, but that is where
our outside council costs will show up, both from an actual as well as a budgetary standpoint. The thing to keep in mind is this is a reflection of only the General Fund, so to the extent,
say Utilities uses a special outside consultant, airport or any of our any other Enterprise Funds, those costs would be seen elsewhere in the individual funds and departmental Budgets
there. So, this is really a microcosm potentially.
Council Member Holman: And I’m still looking for what line you’re on and seeing that dollar amount.
Ms. Nose: I’m sorry. Two below total salary and benefits, contract services.
Council Member Holman: There we go, okay.
James Keene, City Manager: Now I don’t know to what extent we actually have a propensity to under budget here typically and then over spend.
Council Member Holman: That was my next question.
Mr. Keene: More often than not, that would be the case. We don’t have the comparison of what we had in ’15 or ’16 as far as the Budget, but I think we have a tendency, a tendency to
do exactly that, and I think part of it is we just don’t want to advertise how much money we have potentially available.
Council Member Holman: Or we could just be well prepared. I see Molly came forward, so do you have a comment to make?
Molly Stump, City Attorney: Thank you. Is this on? I’m not used to being at this mic. So, our outside counsel, we are, we do use them for special advisory services in complex areas where
we need specialist assistance, but certainly the bulk of our outside council dollars are spent on litigation and special council, and that can fluctuate from year to year because, of
course, the City doesn’t control when it gets sued and when litigation is complex. It’s something we have to respond to. We don’t have the ability to adjust that to a Budget target.
We really do need to vigorously defend the City. So, we did see some higher use of outside council this year as a result of a number of, a higher number than usual of complex, high-dollar
pieces of litigation. Also, we used more advisory services, because we had a number of vacancies which we have now filled in our office. So, we do expect those numbers to settle down
into the more typical range going forward.
Council Member Holman: And so that’s why we go from $500,000 to $626,000 down to $340,000, and no proposed change for this year? Is that why, because the positions have been filled,
largely?
Ms. Stump: Yes, and when we needed to have additional dollars for particular pieces of litigation, we have come to the Council for Budget Amendment. We haven’t done that very often over
the years, but we did do it once this last year. I think just once, Kiely? So, I think we would plan to do that again, but I do appreciate the City Manager’s appreciation of the fact
that the legal outside council Budget is fairly tight and may, in fact, need to be supplemented during the year.
Council Member Holman: Yeah, and you and Jim probably both know, it’s like I’m a little, loath is too strong a word. I just, I don’t like Budget Amendment Ordinances (BAO’s) and there
is no way to absolutely anticipate this. I mean, there’s no way to do that, but I’d rather kind of overestimate than do BAO’s. It’s a perspective, I can’t say it’s a science.
Ms. Nose: So just one thing, there is a $100,000 contingency for the City Attorney’s Office that’s budgeted in non-departmental, and what the City Attorney’s Office will do is try to
tap that first, and then it’s once we exhaust that and need to come back for further adjustments from an outside council perspective.
Council Member Holman: Thank you both.
Council Member Tanaka: Yeah, so I guess we’re on Page 132, 133, is that right? Okay, so on staffing table, on the second to last column, it says “Fiscal Year 2018 change dollar”, and
looking down there it’s like $2, $1, $1, $1, one is $1, one is $2?
Ms. Nose: That would be a typo. Those are FTE’s. There should not be a dollar figure there. I apologize.
Council Member Tanaka: Then I was looking at the total salaries is $1.6 million, and then I’m looking at the proposed on, let’s see, the first table for salaries is $1.7 million, so
I was just wondering why they are different?
Ms. Nose: Sure, that’s a great question. The difference between the numbers that are represented in that staffing table and what’s represented in the overall department are growth estimates
that we make in the Budget, and growth assumptions. So, those could be due to a number of things, depending on the Memorandum of Understanding (MOU), depending on if an employee is up
for, not necessarily this department, but other departments you’ll see this as well if an employee is up for a step increase. Your salary column in the staffing table is a direct point
in time, and doesn’t have any of those modifiers as we’ll call them. So, as we build the Budget we don’t just take exact salaries as of today, we take today’s salaries and build on what
we anticipate to happen, whether it be merit increases, contract increases or any other kind of negotiated changes. So that’s the difference you’ll see.
Council Member Tanaka: I see. So, the total salary and benefits is $2.8 million and the salary is $1.7 million, so it’s about $1.1 million above, so about 50 percent bump on top of the
salaries, right, roughly, for the total salaries and benefits, right? Is that the way to read this?
Mr. Keene: $1.7 million and a million more, so that wouldn’t be 50 percent bump, but once again – I mean, I think generally we’re going to see a range from what, 30 to 50 percent would
be the multiplier, depending upon…
Ms. Nose: 30 to 60.
Mr. Keene: 30 to 60 percent, you’ll see that range. It varies by areas.
Council Member Tanaka: So, one thing that came to mind for me at least, is what the City Attorney said, which is, maybe there’s more, more is needed in the contract services, because
in my experience with attorneys in general is that, because a lot of stuff is very reactive. There is some stuff that happens all the time, but a lot of stuff is reactive, and it’s hard
for attorneys to get good at it if they do it only once in a great while, so for me, I would actually be much more excited to see a smaller headcount and a much bigger outside council
Budget, right. A much bigger outside counsel Budget, so we could hire experts when they’re needed, versus having routine attorneys. So, I’m just curious, and maybe the City Attorney
can comment on this in terms of the efficiency of having in-house versus outside counsel? Because generally it almost always makes sense to have outside counsel when possible?
Ms. Stump: So, we are very fortunate here. I think the Council over the years have been very wise to have a hybrid system that allows for a balance. The in-house council function is
very important, and is both lower cost per hour and, in many sense, is more efficient and more productive. A lot of the meat and potatoes work that we do with the department, some of
which the Council sees, and much is what Jim likes to call the below-the-waterline work, we do that in a very quick and efficient way, because we have ongoing relationships with the
productive units in the various departments, where we are partnering with them, reviewing a large volume of transactions, drafting template documents that are more efficient for them
to use on their own, given on-the-fly advice when they pick up the phone or they stop by on the 8th floor. All of that work is done with much quicker responsiveness, a better knowledge
of the context in which the City is working and, frankly, much lower cost on a per-hour basis by in-house council. With litigation, we keep very little of that in house. We do some,
but most of it we’re looking for, as you note, folks who are litigating fulltime, because there is a real value to doing that kind of work and maintaining that expertise. And then there
are complex transactions where we will bring in experts. In the affordable housing arena, we have done that. This year with a few of our very large and more complex infrastructure projects
where we want to ensure that all of the underlying agreements are clear and enforceable and meet the City’s goals, so it’s a balance.
Council Member Tanaka: How much FTE’s do you think is allocated to in-house, to litigation today? Like two heads, one head, what’s your guess?
Ms. Stump: Of our in-house Staff, what percentage is litigation?
Council Member Tanaka: No, what’s the FTE for?
Ms. Stump: We don’t have any lawyers who are fulltime litigators.
Council Member Tanaka: No, I mean add it up. So maybe 10 percent of one person, 10 percent of another person. How much is it altogether in terms of litigation?
Ms. Stump: It varies, depending on whether we pulled some pieces of litigation in house, or we’re partnering with outside council. And then we do active oversight of our litigation.
Unlike some City Attorneys that send cases out and really don’t see them again, we partner with our outside council and strategy, we review draft briefs, we attend settlement conferences
in person. So, the Chief Assistant City Attorney, Terence Howzell, probably spends a quarter of his time on that activity, and I may spend about 5 percent of mine. And then individual
attorneys may have particular projects.
Council Member Tanaka: I guess I’m being just annoying. Like how much attorney time is spent on routine things, which I think, routine things that happen a lot makes a lot of sense to
do it in house in general, but stuff that is occasional, because to switch ramp time and trying to understand some sort of complex legal issue, and then extruding it, that always makes
sense to hire outside, even though they may be way more expense per hour. But I think they will probably be better at it and faster, so I don’t know if that’s something you can provide,
like kind of a breakdown. I’m not sure with outside council, do you actually log their hours or not?
Chair Filseth: I think she broke it down into in-house routine stuff versus litigation. Are you looking for a different split?
Council Member Tanaka: No, I was looking for like how much of it, how much of the work is kind of like on-going routine versus like special?
Ms. Stump: So, I would describe it, the bulk of our work as ongoing, not necessarily routine. And I think what you’re asking for is a description of what we do in our office, which is
a fair question. It’s pretty opaque to a lot of folks. And I’m going to do a very rough job on the fly here, but I can provide you some follow-up information. So, we review all contracts
over a very small dollar amount. With complex contracts, we’re actually drafting them as Greenfield agreements. Typically, we use templates that we maintain to keep them up and complying
with the law. We advise our Purchasing Department, so we do a lot of work on transactions. We do regulatory compliance work, so we assist with outside audits, we negotiate with various
administrative agencies that may be investigating or auditing City work. We do some training. We review correspondence. We support the department heads and the project managers with
a variety of initiatives that they may have. We do intergovernmental agreements. All of that work, I think, is done more efficiently by people who have an ongoing relationship and understand
the business of their clients. I think, Council Member Tanaka, the Council has been wise in the way it has funded the department and the function, and it’s getting the balance right.
If not, in the past I’ve asked for some changes. I’m not asking for any this year because I think we’re getting it right. And I’m happy to provide you more detailed information. We don’t
bill to the tenth of the hour like the private sector typically does. We do a different kind of assessment of our allocation, and we are actually looking now at sharpening the data input,
so that we will have a more precise way of monitoring that and tracking that over time, and are happy to share that information with you if we develop those systems.
Council Member Tanaka: Do you happen to know what the budget is in Mountain View?
Ms. Stump: In Mountain View?
Council Member Tanaka: Yeah, for the staffing for the in house?
Ms. Stump: I don’t know off the top of my head, but I would tell you that Mountain View doesn’t run a full suite of utilities, and utilities is a very legally intensive activity. We
have an attorney and a half, fulltime dedicated to it and I probably spend 10 to 15 percent of my time on Utilities matters. Our head count you’re going to find is higher than in-house
attorney offices of a similar populated cities, and one of the key reasons is because of the Utilities Department. Another one is, frankly, Palo Alto is much more ambitious in terms
of the type of programs and services that it’s offering and wanting to offer, and that requires legal support.
Council Member Tanaka: I don’t dispute that, and in fact, maybe your Budget should be the same, but I’m more questioning about how much should be in house versus outside. So, that’s
my main question.
Council Member Fine: Thank you. So just one question here. I was noticing that the City Attorney, the City Auditor and the City Clerk all have somewhat significant decreases in charges
to other funds, and then asked the City Council and Jim, you the City Manager have larger increases. I guess we’re more valuable. I was wondering what’s driving that specifically here
and the City Attorney’s Office. It’s the largest of the three decreases.
Ms. Nose: So, what’s in that line, well one of the major components and the only component, frankly, for the City Attorney’s Office, is what we call Citywide overhead. So, it’s our Cost
Allocation Plan, so as Molly was mentioning, it’s not that our Attorney’s Office bills by every 5 minutes, every 15 minute increments, but we look at the body of work that they completed
in the prior year, and allocate their charges throughout the City and charge basically the internal services, not necessarily the Internal Service Funds, but the, I’m sorry, the departments
throughout the City, and that revenue being generated is associated with activities that are not General Fund related. So, the change that you’re seeing is really significantly attributed
to a change in the work that’s attributed to General Fund activities.
Council Member Fine: So, we just project in the next year the General Fund activities will generate less legal work?
Ms. Nose: We actually do it retroactively. So, overhead is usually in one to two arears, so they look at what happened in FY 2016, and say, “This is the body of work that we did,” based
on those.
Council Member Fine: If it’s retroactive, that makes total sense then. Thank you.
Chair Filseth: I’m good.
Ms. Nose: Great. Then if you guys want to do a tentative approval for the City Attorney’s Office?
Chair Filseth: So, do you want to do the City Attorney’s Office, or do you want to do all CAO’s altogether? How would you like to do that?
Ms. Nose: It’s up to you guys.
Council Member Holman: I’d prefer doing them one at a time, if we could. So, I’d move tentative approval of City Attorney’s Budget.
Chair Filseth: Second.
MOTION: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the City Attorney Operating Budget.
Chair Filseth: Discussion? All in favor?
Council Member Tanaka: I do want a discussion which is, I do wonder how much should be allocated for staffing versus out to counsel, and I’m trying to think of how that question could
be answered well. I don’t know whether we do it right now at this very moment, or whether – yeah, so I guess
Mr. Keene: So, could I just jump in for a second. I mean, I do think there is an answer and I think you should see this as an answer, but that doesn’t preclude your curiosity. I think
the City Attorney has determined what the right balance and the right mix is. I think I would just speak for her in this regard, because I can be let’s say more objective as an observer.
She has worked hard, I think, over this past couple of years really to bring in the right compliment of attorneys, both in position and who she has on the Staff, and I would happen to
think that she probably thinks she’s in as good a position as the Attorney’s Office has ever been to provide the kind of support that I think she knows that the Council and this organization
needs, based on just her experience here. And I would certainly validate that there is a good team in place. I could not see that redistributing that myself, between in-staff people
and consultants would get us anything. I think the real variable is what Molly hit on, which is, depending upon the issue, there is a variable need for outside expertise, and we basically
have, I think, a pretty good process budgeted plus contingency, plus the fact that if we really get his with a surprise, we do have to come to the Council.
Chair Filseth: I was think more along the lines of the mechanics of the answer to Council Member Tanaka’s question. It seems – I appreciate the City Manager’s answer, right. It seems
to me the mechanics are either this group approves, and I think it’s a useful exercise because it’s the first one of these things that we’ve seen and I’m sure we’ll be having discussions
like this for all of them, so it’s work sort of flushing the thought process out here. I think either the group moves to approve the Budget and approves it, and if that happens, maybe
we request some information or follow up or something like that, right. Or, we put the whole thing in the parking lot and we, the whole legal Budget in the parking lot and then we revisit
it at the end of the – you know, do we want to move some stuff around or something like that. It seems to me those are the two branches from sort of a mechanical perspective, is that
right?
Council Member Holman: Can I suggest something, because I’ve listened to what you said and I agree with what you’re saying about we could come across this in every department, and if
there are suggestions or recommendations that the Finance Committee wants to refer to the Council, that we approach it by way of asking, in this case, the City Attorney, sorry to use
that as the figurehead on this one, but that we ask the City Attorney to come back in regards to next year’s Budget, with a proposal on how to address the Council member’s, in this case
Council Member Tanaka’s concerns about Staff versus outside council, because we’re not going to change that for this year’s Budget.
Chair Filseth: Well, we could actually.
Council Member Holman: Well, we could, but it’s…
Chair Filseth: It’s not obvious to me that the answer is a proposal. It may be an explanation, right? I mean.
Council Member Holman: I wasn’t saying a proposal. I’d say, I would think I would say like an explanation or a description of or, if I used the word proposal, I misspoke.
Chair Filseth: Council Member Fine do you want to weigh in on this?
Council Member Fine: Yeah. I agree. I’m not sure it’s one or the other. I’m wondering if we couldn’t use the parking lot as a way to list a few tasks we’re also interested in so we,
you know, approve this tentatively. I actually suspect Council Member Tanaka, you’re going to have some more questions about a couple of other departments, and so there may be a task
for Staff that, you know, we are approving these tentatively, but we as the Finance Committee would like Council to see what’s the balance by department between inside and outside.
Chair Filseth: Well, the procedure is we’re all approving them tentatively. We’re approving all, to the extent we approve them, we’re approving all of them tentatively and they can be
revisited again. Is that correct?
Mr. Perez: That is correct. In your Budget wrap-up.
Mr. Keene: And if I might say, we have sort of a division of labor and responsibility here between the Council as the governing body and Staff who are the professionals who really are
soft of charged with running things day to day. And I think the curiosity of how we do things is a worthwhile discussion. We have a responsibility of openness and transparency to explain
it. But I think the Council’s focus should primarily be on, what are the outcomes you want to see be achieved, and not so much how do we achieve them. I mean, you may want to say, “Well,
what’s the cost benefit of what it takes to get there.” But if the Council really wants to run every aspect of the day-to-day organization, I guarantee you are not going to want to do
that.
Chair Filseth: I’m not sure that what – I mean, obviously, there’s a spectrum of, you know, here on this end of the spectrum we’re micromanaging Staff, okay. And on that end of the spectrum
we’re sort of going, “Well, what’s the total and we don’t really worry what’s inside it and so forth.” I think we’re somewhere in the middle here. We’re sort of trying to strike the
right balance. But, you know, I think the kind of the, the class of question that Council Member Tanaka has asked, I think is a legitimate kind of question for this group. But, you know,
I sort of want to figure out this as we go along, and it seems to me right now we’ve got a Motion on the floor, and so if Council Member Tanaka wants to make an amendment or a Substitute
Motion, right, then I think that’s our process and we ought to follow our process.
Council Member Tanaka: So, I would like to make a Substitute Motion that this goes to the parking lot and that we revisit this after we have a very clear understanding as to whether
the allocation between in-house versus outside counsel is the right one, and I think we can do that basis on a comparative analysis with other cities. So, that’s what I propose.
Chair Filseth: Is there a second?
Council Member Fine: I’ll second that, but I’d like to let Staff do some of the comparisons. It might be other cities, it might be another measure.
SUBSTITUTE MOTION: Council Member Tanaka moved, seconded by Council Member Fine to place the discussion of the City Attorney Operating Budget in the parking lot and get clarification
on whether the Budget allocation between in-house and outside counsel is correct based on a comparative analysis with other cities.
Mr. Keene: That’s fine. I’d just like to respectfully say, we may not agree that that comparison is a viable factor to use in the ultimate decision.
Chair Filseth: So, let’s vote on the Substitute Motion. All in favor of the Substitute Motion?
SUBSTITUTE MOTION FAILED: 2-2 Filseth, Holman no
Chair Filseth: Substitute Motion failed on a 2-2 basis. So, let’s return to the original Motion, but do you want to make an amendment to the original Motion asking for more information,
and anything in particular or specific? But you understand, we can still vote on this thing again.
Council Member Tanaka: So, the thing I don’t understand is, what is a tentative approval mean?
Mr. Perez: You’re just accepting it as Staff recommends for now, and giving yourself the leeway to make any adjustments at the wrap-up meeting.
Council Member Tanaka: Okay, so I’ll make a proposed amendment that we have an analysis done between in-house versus outside council workload compared to what’s in the Budget with comparables,
preferably with other cities, or some other reasonable metric. Do you accept?
AMENDMENT: Council Member Tanaka moved, seconded by Council Member Fine to add to the Motion “request Staff to use a half day’s work to perform an analysis of the workload and Budget
allocations of in-house versus outside counsel and to include comparables with other cities.”
Chair Filseth: The maker of the Motion has to accept first, and I was going to ask a quick question, do you want to cap the amount of effort and time that goes into that?
Council Member Holman: Well, do you want to – okay, go ahead and answer his question.
Council Member Tanaka: We probably should cap it, because I don’t think it necessarily needs to be unlimited, so I would say that this is one., the total Budget is $3.5, $3.4 million,
so I think half a day’s work is reasonable cost to spend on this.
Chair Filseth: So, the Motion is to spend a morning doing a Memo and an analysis of this. Is that correct? Council Member Holman, do you accept the amendment?
Council Member Holman: You know, it’s tempting. It’s the same thing as really the Substitute Motion was that failed on a 2-2, except you put a time limit on it. Respectfully, I don’t
think I will accept it. I think we’ve gone through an iteration with the City Attorney that, with all deference to you, you just haven’t been a part of, and that’s to the disadvantage
of this conversation, so I don’t begrudge you the comments, the questions, the interest, but I think we’ve been through an iteration with the time that the City Attorney has been here
and the Council has evolved with the City Department, and the staffing and rationale for the staffing that’s currently in front of us.
Chair Filseth: The Motion is not accepted as friendly. Would you like to propose it as an unfriendly Amendment?
Council Member Tanaka: Yes.
Chair Filseth: Is there a second for the unfriendly then?
Council Member Fine: I’ll second this, but let’s not turn this into every single one tonight.
Mr. Keene: So, may I just speak to this for a second. I think one of the things I would hope the Committee would do, because obviously right now I’m very worried. This is a tiny little
office and we have $650 million to go. Is the practical aspect of, to what extent is this a decision that really should be made as part of adopting this Budget, versus follow-up discussion
in the coming year, and I’ll tell you why. If you want a different distribution and you want to say that, and the City Attorney is fully staffed, are you going to tell us you want her
to go back and lay off somebody this year because you want to have more outside? No, you’re not going to do that. I can’t imagine you would do that. So, then you would say, “Well, then
we want you to add more money to the outside than what you want.” I mean, there are limitations on the actions that we can take and we ought to be able to give you a sense of what you’re
trying to get at, can it be implemented now or is it something that’s also more for ongoing discussion for this year, and is it worth it? I’m just telling you that, well.
Chair Filseth: Why don’t we vote on the Amendment. All in favor of the Amendment? Amendment fails on a 2-2 basis. I am actually going to change my vote and vote for the Amendment, okay.
AMENDMENT PASSED: 3-1 Holman no
Chair Filseth: I don’t want to see this happen on all these things either, so if this is the most important one, so be it. I hate to dump a lot of work on Molly’s office, but I think
it’s a legitimate question, and it is the prerogative of this Committee to ask for such a thing, and so I’m going to support it, right. So, the Amendment passes 3-1. Now, let’s vote
on the, if there’s no further discussion or Amendments, let’s vote on the main Motion.
Mr. Perez: Chair Filseth, just so we’re clear, what’s the timing expectation of this on us.
Chair Filseth: That’s right, we didn’t do a timing expectation. Do you think you could have somebody do that by the wrap up?
Ms. Stump: We can certainly put the effort in. It will require us to get information, some of which will not be sitting on the top of someone’s desk from surrounding agencies.
Chair Filseth: I understand. The directive was a half day.
Ms. Stump: Yes, and to the extent that we are able to gather the needed information, we could do that by the 12th. There may be some holes in it.
Chair Filseth: Okay. Are you okay with that? Good. So, the answer is, prior to the end of this process and potentially significantly before that. All in favor of the main Motion which
was, tentative approval of the City Attorney’s Proposed Budget with the request for an analysis as specified by Council Member Tanaka.
MOTION AS AMENDED: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the City Attorney Operating Budget and request Staff to use a half day’s work to perform
an analysis of the workload and budget allocations of in-house versus outside counsel and to include comparables with other cities.
Chair Filseth: All in favor? Motion passes unanimously.
MOTION PASSED: 4-0
Chair Filseth: Thank you very much. Thanks very much to Staff and the City Attorney’s Office.
City Auditor, Operating Budget.
Chair Filseth: Next, City Auditor. Please proceed.
Ms. Nose: So, at this point Staff doesn’t have any further presentation for the appointees, so as we go through them, we’ll go straight to questions.
Chair Filseth: Council Member Fine.
Council Member Fine: Thank you. So, I understand revenues from sales taxes, and I was just wondering what goods and services are, those for the City Auditor.
Ms. Nose: Sure, our Auditor’s Office, and Harriet can embellish more if we have further questions. Our Auditor’s Office actually reviews our sales tax receipts then reporting, just like
we have a consultant and so that’s for any errors they find. We reflect the “additional sales tax” that they found in the reporting errors.
Council Member Fine: Okay, thank you.
Chair Filseth: Council Member Holman.
Council Member Holman: So, to try to pick up a little bit of time here, but no short circuit this either, I would, I’m going to make a proposal to tentatively approve this, but I have
one thing to address first, which is, we all received an email today about Code Enforcement, and Code Enforcement is an audit that is anticipated by a large number of the population
as my experience indicates. I’ve not done a survey myself, but my experience indicates it is a widely-anticipated audit. The email that we got, and correct me if I got the numbers wrong,
City Auditor, but I think to do a survey which would help identify and focus the audit, it was going to be $13.6 thousand. Is that right, $13,600, is that correct?
Harriet Richardson, City Auditor: Yes, that’s correct. That would be a survey of about 3,000 residents, which is consistent with what we do for the National Citizen’s Survey and it would
allow to have statistical validity throughout the geographic areas of the City that we do the National Citizen’s Survey.
Council Member Holman: Okay. And then I have one other question, which is, when the Council does, and it often does, ask for tailored questions in the National Citizen’s Survey, how
much do those cost?
Ms. Richardson: Those are about $2,600 each.
Council Member Holman: And we typically…
Ms. Richardson: That’s assuming an open-ended question where people can write just whatever they want.
Council Member Holman: Okay. And my memory is that we do maybe one or two of those a year?
Ms. Richardson: Correct.
Council Member Holman: Okay. So, rounding it, that would be $20,000, so I’m rounding it. That would be $13,600 for the survey for Code Enforcement to try to focus that and make it a
more useful audit, and then anticipating, which you don’t already have Budget for, one, maybe two focused Citizen’s Survey questions, focused or customized. That would be adding $20,000
to your Budget. Do I have that correctly?
Ms. Richardson: It would be about that
Council Member Holman: I mean rounding it.
Ms. Richardson: Rounding it, yeah.
Council Member Holman: So, again, not trying to short-circuit anything here, but trying to catch up a little bit of time, I would tentatively approve the City Auditor’s Budget with the
addition of $20,000 for the two items that I suggested; $13,600 for the Code Enforcement Survey and that would leave an allocation of $6.4 thousand for the National Citizen’s Survey
customization.
Chair Filseth: There doesn’t appear to be a second for that.
Council Member Holman: I look forward to learning why.
Council Member Fine: So, I have a question about that. Couldn’t we wrap up the Code Enforcement questions into the National Citizen’s Survey at a cheaper price point.
Council Member Holman: No, because it’s not timely.
Council Member Fine: I mean it’s at the scale and timeline of the City within a year. I mean it’s how we move anywise.
Ms. Richardson: It would be late to inform the audit.
Chair Filseth: How much in addition were you asking for, for the audit?
Council Member Holman: So, the survey for Code Enforcement, to inform and focus that audit is $13,600, and the addition I was asking for, just to use a round number, was $6,400.
Chair Filseth: $6,000.
Council Member Holman: Yeah, for the customization for the Citizen’s Survey questions, which we often do.
Chair Filseth: Do you find that would be useful?
Ms. Richardson: I think this audit has had a high level of interest. Several Council members have expressed an interest in it. I have had residents come to me and ask me questions about
Code Enforcement, and our regular survey has a very generic question about the quality of Code Enforcement Services, and then in parenthesis it says, for example, weeds or abandoned
buildings. So, when we do that we don’t really know what it is that residents think is not good about Code Enforcement and only 52 percent of the residents rated the quality of Code
Enforcement as excellent or good in the 2016 survey. So, doing this now would be similar to what we did on the animal services audit, to inform the audit and dig deeper into the specific
concerns of residents.
Chair Filseth: Thanks. I was less worried about the $6,000 than whether it was your advice and guidance that we should proceed to do this and a good use of your time and so forth. So,
it sounds like the answer is yes.
Ms. Richardson: I would think so. I think it would be informative for the purposes of the audit.
Chair Filseth: So, I’ll second the Motion.
Council Member Holman: Thank you very much.
MOTION: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the City Auditor Operating Budget with the addition of $20,000 to perform a Code Enforcement Survey
and assist with the customization of the National Citizen Survey.
Council Member Fine: But I’m not sure we’re finished with questions and comments on this, right. I had one, which is; actually Council Member Tanaka, why don’t you go first and I’ll
as mine afterwards.
Council Member Tanaka: Sure. So, I’m just curious. You know there’s a lot of on-line survey companies, like Survey Monkey and others. Is there a way to do this in a more cost-efficient
manner using some of the readily available commercial tools out there?
Ms. Richardson: We don’t have access to all of the address information and so by using the National Research Center, which we’ve used since 2003 for a National Citizen’s Survey, it’s
actually more efficient. They have our geographic, they have the whole area mapped to GIS with all of our addresses, and so that is the more efficient way for us to be able to do it.
I don’t know how we would reach out to specific residents and get all the addresses. It would take us a lot of effort to be able to do that, that I think would be less efficient than
continue with the National Research Center.
Council Member Tanaka: Okay. Well, I know there is a Motion on the floor. I guess I’m a little bit concerned about, I mean I generally like to get more information, more data is usually
good. But, you know, unless I missed something on the Budget where we’re a little bit tight here, so I do think that we want to be cautious as to where we spend. You know, I do wonder
if there are more efficient mechanisms, but I don’t know of any off hand. You do pick up a good point about how do we reach out to people.
Chair Filseth: I had one. Let me put this flippantly bluntly, how many people work for this group, because on Page 138 it says 6 and on Page 145 it says 5?
Ms. Richardson: Okay, so the reason there’s a difference is because one position is dedicated to Utilities and is funded by Utilities, so you see the total position count of the office
in one place based on what’s actually in our office, and then the other position count reflects what’s funded in the General Fund.
Chair Filseth: Okay, thank you for that. That makes sense. Alright, if there are no further comments, we have a Motion on the floor. All in favor? Motion passes. Thank you very much.
MOTION PASSED: 4-0
City Clerk, Operating Budget.
Ms. Nose: So then next would be the City Clerk’s Office and City Council Budget.
Chair Filseth: So, City Clerk, it looks like a Budget of $1.4 million and no head count change this year. Is that correct?
Ms. Nose: That’s correct.
Chair Filseth: Questions for the City Clerk’s? Council Member Holman.
Council Member Holman: I don’t have questions. I have a couple of comments. On Packet Page 152, under the first broad green bar, I just wanted to acknowledge that the percentage of public
records requests responded to within ten days required by law has gone from 18 percent to 98 percent, and I just think the Clerk’s Office is to be highly lauded for that. So, with that,
then I would second your Motion, when you make it.
Chair Filseth: Move to tentatively approve the Clerk’s Budget.
Council Member Holman: Second.
MOTION: Chair Filseth moved, seconded by Council Member Holman to tentatively approve the City Clerk Operating Budget.
Chair Filseth: Any further discussion? All in favor? Motion carries. Thank you very much.
MOTION PASSED: 4-0
City Council, Operating Budget.
Ms. Nose: Then next would be City Council’s Budget.
Chair Filseth: City Council, those guys. Why are we cheaper in 2018? That’s a good thing, right? Oh, health care has gone down.
Ms. Nose: It’s health care.
Chair Filseth: Questions and comments on the City Council Budget.
Council Member Fine: A comment. You know, a lot of time we talk about the unfunded pension health care liabilities, but we’re all contributing to that too, if you’re taking the pension.
Chair Filseth: We don’t actually participate in the pension, because we have to be there a certain number of years first, at least I think.
Mr. Perez: If you are elected to three terms, if I remember correctly, then you qualify.
Council Member Fine: Or if you have prior California service.
Mr. Perez: Correct, thank you.
Council Member Holman: I’m sorry, where’s the contingency?
Mr. Keene: It’s in non-departmental. We’ll do that…
Ms. Nose: Later this evening.
Mr. Keene: Okay, or now?
Ms. Nose: Yeah. I would, if you guys want to talk about the Council contingency specifically, we can talk about that now and just for continuity sake, but I would argue let’s not take
up the entire non-departmental section.
Chair Filseth: That’s up to Staff. We’re here all night.
Mr. Keene: Why don’t we do it.
Ms. Nose: Yeah, let’s do the contingency now.
Chair Filseth: What Page should we look at?
Ms. Nose: So, if you go to Non-departmental, on Page, Section 473 and you look on Page, actually 474, under contingent accounts, we are recommending to reduce the Council, City Council
Contingency from 250 to 225.
Chair Filseth: Good idea.
Ms. Nose: Because historically there’s money left over.
Council Member Holman: We need to do more donkey projects.
Chair Filseth: Okay, move to approve.
Council Member Fine: Second.
Chair Filseth: All in favor? Motion carries. Thank you very much.
MOTION: Chair Filseth moved, seconded by Council Member Fine to tentatively approve the City Council Operating Budget.
MOTION PASSED: 4-0
City Manager, Operating Budget.
Ms. Nose: So, we are on City Manager, so Page 161.
Mr. Keene: So, if I could make a statement, less about City Manager’s Budget, a little bit speaking to the earlier question Council Member Holman had about the org charts and how they
work. On Page 162 is the organization chart for the City Manager’s Office and in operations we have two Deputy City Managers and two assistant to the City Managers. All of those positions
are vacant. We are in the final stages of filling the two Deputy City Managers and we’re in the final stages of actually starting the interviews on the assistant to the City Managers,
so if you look in that area of operations, we basically have no staffing devoted to that. The plan is that, if you recall from when we brought this to Council last year, after the Budget,
we restructured this. We eliminated one of the, we actually eliminated two of the Assistant City Manager positions, and we eliminated the economic development position. We’ve added back
0.25 Assistant City Manager in a sense and dividing them up between 75 percent Utilities general manager. The thinking is that the two Deputy City Managers and the two Assistant To the
City Managers would support. One would support sort of external facing issues in the community, so that’s the economic vitality areas, community-based initiatives. And the other would
support the high-performing organization initiative which a big component of would be this performance management work that we need to do that was the subject of the earlier questions
from Council Member Tanaka. So that just gives you an indication of where we are on that. Other than that, we’re here to answer questions.
Chair Filseth: Council Member Fine.
Council Member Fine: A couple of questions. So, on that right there, do you think an Assistant City Manager in this new role will be able to fully do the role that the economic development
manager would be able to do otherwise on their own?
Mr. Keene: I think that’s a good question. I mean, I think we’re going to have two positions, one more senior than the, actually the Deputy City Manager is a more senior position than
the economic development manager that we’ve had. We sort of actually have been carrying Cash Alaee in that vacant Economic Development Manager during this interim period here, and he’s
been doing some, at least a business outreach piece and responds to some other duties. The assistant to is a position that is a professional position, but would be lower than that. So,
I don’t think we would have an individual with just the sort of particular expertise of somebody sort of in the economic development track, so on the other hand, is that a one full FTE
job in our City, or something less? That’s open to some discussion or debate, give that, you know, I think there is interest in let’s say Council Member Holman and I often talk about
supporting community-based and neighborhood-based retail and that sort of work, that certainly our kind of work. On the other hand, going out and trying to recruit or incentivize companies
to come to Palo Alto is not something that we really do here, not even big retail issues. I mean, we’re not going out to try to bring shopping centers or develop new shopping centers
and that sort of stuff. We build our community. So, it’s pretty niche kind of, white glove intense, sort of handholding thing kind of work, but on a small scale. So, and I’m not sure
I answered your question.
Council Member Fine: I mean it’s helpful to think about it. I would suggest to my Colleagues that this is a question for our City and a lot of folks have brought this up with the retail
community, folks worried about parking, some of the nonprofit issues we’re facing in Palo Alto, some of Council’s priorities, so there is a question for me about that change. One other
quick one, so charges to other funds, you’re retroactively charging about half a million to other departments. I was wondering if someone could quickly explain that, and then also, what
does it look like going forward? Is the City Manager’s Office providing more services to other departments on an on-going basis now?
Ms. Nose: It really is, just again a look at what historically has been happening. The other thing that we are also adjusting for, so it’s kind of a double whammy, is because we do have
an Assistant City Manager that is partially in the General Fund, but also partially over Utilities as well, we’re making sure that we’re accurately aligning between those two, so we’re
not double counting.
Council Member Fine: Some of this might be from Utilities?
Ms. Nose: Yes.
Council Member Fine: Okay, I just noticed kind of a trend there is charges to other funds.
Chair Filseth: Council Member Holman.
Council Member Holman: So, as City Manager indicated, he and I have had several conversations about especially retail attraction and retention. I concur with Council Member Fine’s question,
concern, issue raised. I’ve lived here since 1975 and certainly not all of that time was I involved with the City, but I can’t recall, and I almost apologize for saying this, but there
is only one way to get it, get the point across, I can’t recall ever having somebody in economic development role that was really focused on retail attraction and retention, or even
community services, or, and the City Manager and I have talked about also how the arts could be complimentary to and support retail in terms of economic generation. We’ve just never
had anybody in that role, and it isn’t somebody who does this, and oh as a sideline, do that. It’s somebody who really specifically does the economic attraction and with a specialty
and a focus on retail and all that’s related. You know, we talk about, and I know Council Member Tanaka has talked about revenue generation. I think this is one place where some expenditure
would be well worth it. We are a built-out community, at the same time we do have vacancies. We’re just totally reliant on the property owner to go find somebody and, you know, what
is that. Couldn’t we do a better job than we’re doing now, both in the City realm and the other realms that we have that work on these things, and I think, yes, we could, and especially
if you talk about interacting with, you know, the arts community and such. The Code Art Program is a good example, that programs like that are very supportive of retail and retail generation.
It’s been years in the coming, literally, and so that’s probably all I need to say about that, but I think it is an investment worth making in somebody who has a special interest, experience
and successful track record in that regard.
Chair Filseth: Can I ask a quick question and then I’ll defer to Council Member Tanaka, but I’m sorry, I missed all this too fast. I’m sort of having trouble keeping it straight. What
are the two Deputy City Managers going to do and what are the two Assistant City Managers going to do again?
Mr. Keene: So, there’s an Assistant To, which is a support position really to a Deputy City Manager is the way to think about it. One’s going to be externally focused. Let me just say,
I’d sort of call it the Cool Smart City Initiative. The other is internally focused on the High Performing Organization Initiative. The Deputy City Manager is going to have responsibility
on managing and leading across departmental boundaries, initiatives both on the performance management side and measurement side and reporting side and efficiency and those kinds of
questions that Council Member Tanaka was asking about. The other would be supporting some of crosscutting initiatives with the community around, you know, whether it’s a Cool Block,
whether it’s our Smart City Initiatives, or whether it’s just interfacing with both neighborhood and business community. A lot of these are really leveraging the capacity of people in
the organization, and helping create more alignment within departments.
Chair Filseth: Okay. I see. So, the two Assistant to the City Managers are going to support the two Deputy City Managers?
Mr. Keene: Well, our idea was to have them working on these teams, to have some support. This is, in a lot of ways this is kind of an entry level job into City management, and sort of
at the senior management analysis level but with a title that’s more on the track to bring in folks who are in this area, so we really wanted to sort of start to build a pipeline of
Staff, for example, who could grow into other jobs.
Chair Filseth: Alright, thank you very much. Got it. Council Member Tanaka.
Council Member Tanaka: Thank you. So, I agree with Council Member Fine. I think economic development is actually kind of important to Palo Alto, so I would support having that person
back or some person back, but a couple of questions for the City Manager. So, as we look at these other departments, what is the average increase in Budget for the other departments,
would you say? Across all the other departments?
Mr. Keene: Kiely would be in a better position to answer that.
Council Member Tanaka: Because all the ones we’ve gone through so far have been low, 5 percent.
Ms. Nose: So, are you looking for General Fund or all funds?
Council Member Tanaka: No, I’m just looking on Page 170. I’ve been looking at basically the delta, the 2018 delta, right. So, this is about 14.8 percent, which as far as I could tell
is the highest out of any department so I just wanted to understand that a little bit more.
Ms. Nose: Sure. Of if you actually flip to Page 71. Sorry, we’re going to do a lot of Page flipping here. This is total General Fund expenses by department, so you can actually see the
changes year-over-year.
Council Member Tanaka: So, it’s the highest percentage, is that right? Am I reading this correctly on Page 71?
Ms. Nose: Other than changes to the transfer to infrastructure, which is at 33.4.
Council Member Tanaka: Okay, then looking at the salary component, it’s 10 percent. Is there, is that the highest salary delta of all the departments?
Ms. Nose: I’d have to get back to you on that.
Council Member Tanaka: Okay. I just looked through a bunch of them. It looked like the highest to me, but I’m just asking if you…
Ms. Nose: By department I’d have to go look. I know Citywide, but I haven’t looked at the individual salary and benefits.
Mr. Keene: I think one of the things that’s different here is this is showing you the FY 2017 Adopted Budget and then comparison to the 2018 Proposed Budget, so all of the positions
that we have in the 2018 Budget were actually brought to the Council last year after the adoption of the 2017 Budget. So, these are not, for the most part these are not changes that
we’re proposing in this Budget. They are changes that have already been approved by the Council, but are now just showing up in here.
Council Member Tanaka: But that’s true for all the departments as well.
Mr. Keene: No, it isn’t.
Ms. Nose: No, we typically don’t change our table of org throughout the year.
Council Member Tanaka: So, like, let’s take our, the City Council Budget for example, there was a 0.3 percent difference, right. This is a 14.8 percent difference.
Ms. Nose: So, if you actually flip to Page 172, you can see the reconciliation of the department’s Budget, so…
Council Member Tanaka: What Page?
Ms. Nose: Page 172. So, if you look, the very first line with values in it under all the green sheeting is salary and benefit adjustments. It’s actually only at about $63,000, the big
change between the FY ‘17 adopted. I’m sorry, let me step back. What this is a reconciliation of all the changes that occurred between the FY ‘17 adopted and the FY ‘18 proposed, base
as well as proposals. So, as the City Manager referenced, this was already done and approved by the Council back in the Fall. So, you can see although salaries and benefits are changing
about $63,000, we did have a change in the level of staffing. So that’s the main driver.
Council Member Tanaka: Okay, I’m just trying – because we just – for instance, I’m looking at Page 132, the City Attorney’s Budget. On 132 it looks like it went up 5.6 percent, right,
from the 2017 Budget. I guess, I mean are these tables done differently between different departments?
Ms. Nose: No. It’s standard throughout the document.
Council Member Tanaka: Okay, so an apples-to-apples comparison is that this is by far the highest increase out of any department?
Mr. Keene: So, let’s again, if we were to have the apples-to-apples comparison from what is in the existing to what is in the 2018 Budget, the existing Budget would be higher than is
reflected in this 2017 comparison. Secondly, there is $150,000 expenditure in this Budget that could be in any other Budget. I could have put it in the Planning Department Budget, I
could have put it elsewhere. So, you would want to take that $150,000 out. It’s a one-time expenditure for the parking evaluation study. That brings it down somewhat. It is still a high
percentage because we added several positions this past year. That’s the big thing that’s driving the increase.
Council Member Tanaka: Okay, I understand. I was just trying to – because I don’t have much of a comparison other than what happened last year, so I was just looking at other departments
and against other departments this is by far the biggest increase. And also, I feel that the salary is also, I think, one of the largest increase, if not the largest increase out of
any department. Right, at 10 percent? At least, I don’t have (inaudible) so I’m flipping through and looking through it, but as far as I could tell, it is. So, I’m just asking if comparing
it against other departments that we just went through, is that correct or not, and it sounds like it is.
Mr. Keene: I think for this year the way that we are reporting the fact that we did not make an adjustment in the 2017 Budget, the comparison is looking larger than it would need to
be. That being said, it’s fine. I mean, you know, I’m not being defensive here, but if we did a ten-year trend you would also see something that looks different than that. So, this is
a year that reflects the fact that, also responding to the Council’s request, we added several positions in the City Manager’s Budget, and they are showing up in the 2018 Budget in full,
which is what is driving that increase.
Council Member Tanaka: So, yeah, I guess, you know, the thing I’m just thinking about is from the constituents’ point of view we are cutting back on some services, right? Let’s see if
I can find that Page. It was like, you know, the Project Safety Net, we’re cutting back on tree trimming, right. We’re cutting back on our Aquatics Program, right. So, I guess, if I
stick myself in the constituents’ point of view, we are putting our highest increase in management. Not to say management is not important, it is. But from the constituents’ point of
view, we’re taking money from our services, right, that people kind of expect, and putting it into the City Manager’s Office, the highest of any department, which I understand that if
you look at the delta from ’17 to ’18 it seems not fair because you didn’t get much of an increase in ’17. I get that. But then you also look at the salaries also go up. So, that’s the
thing I’m just wondering about, like the optics of that from the public’s point of view.
Mr. Keene: Yeah, it’s one year’s optics because we made a significant change. So, just so we’re clear, I mean, this change has already taken place. Now we can roll that back, but it
is not a change that is actually taking place just in 2018. It is showing up in 2018. I know that sounds really bureaucratic, but if we wanted to go back and do a comparison of Adopted
Budgets across the board for, I mean the modified Budgets across the board, for 2017 and the Proposed Budget for 2018, we would see a different distribution. So, that might be helpful
to you. If you concern is about a decision we made last year, that’s the real conversation, not a decision we’re making this year. Am I being clear.
Council Member Tanaka: I hear you. It’s just, like, our tree trimming was $238,000 right, and if the Budget, if your Budget didn’t go up 14.8 percent, that could have covered the tree
trimming Budget.
Mr. Keene: Okay. What we could do is stop the recruitments for the Deputy City Managers to lead these initiatives. So, that’s a percentage, but I mean, there were reasons that I responded
to the Council’s concern about paying enough organizational attention to these key areas. We have to manage across all these departments that are responding to things. We’re not going
to do that without some general assistance, so that’s what we had bought last year that, and actually we haven’t even spent that money for this year, but the Budget is showing it for
2018.
Council Member Tanaka: I’d love to hear my fellow Colleagues’ thoughts on this, but I’m just think about how this looks optically from the public.
Mr. Keene: Why don’t I give the ten-year optics about what it looks like, and then also factor that in?
Chair Filseth: I’m curious because the one DCM for the Cool Block Smart Cities, how are we going to, I mean, I hear a different description from the City Manager versus Council Member
Holman on what that person’s going to do. How do we get to a year from now and say, “Yeah, this is what we got for that?”
Mr. Keene: So, first of all, we can have an economic development position in any department. As a matter of fact, it was in the Planning Department when I first got here, and we felt
it wasn’t getting enough attention. We reorganized. We had a change in staffing. We brought in into the City Manager’s Office to give it some sort of oomph and attention, and hired somebody
into the job who didn’t sort of necessarily have a full traditional economic development background, but had a great relationship with small businesses and folks around town. In a lot
of ways, the conversation we should have about economic development, I think, needs to be a rigorous one, because, for the most part a lot of what has evolved to that position is supporting
festivals, events, you know, in the downtown. We’ve got bike tours that come in. They all sort of support a kind of vitality of the downtown, but they’re really not direct business development.
And I would, if there, first of all was an interest in really looking at how we support retail, I would want us to do some research about what really works there. Because I’m concerned
that that feels good, but this is a marketplace issue more than anything else. The property owners own the property. There are brokers out there who are going to fill those things. The
idea that property owners are necessarily going to tell us what their numbers are to help figure out how we could go out and get somebody to come in, I think, boy that could be a real
challenge.
Chair Filseth: My intuition on that one is very similar to yours, by the way.
Mr. Keene: Yeah, so I wouldn’t want us to say, “Gosh, we could achieve things,” that we ultimately could not. I do think there is a role of knitting together things in the community
that what I see this external facing team of a Deputy City Manager and a support person being able to do, but they would not be solely dedicated to that, so I did want to be clear. I
felt they could get pulled into all sorts of things. They could get pulled into neighborhood parking issues, even, when we felt we needed reinforcements. Of, you know, certainly they
would be doing a lot of work that we do right now with things like interface with the school district and around, you know, the programs we have there and Track Watch and all of those
sorts of things. There is a lot of work that has to take place in our organization across the boundaries of departments who have well-intentioned folks, but they will still tend to be
siloes, and without the ability to have some people from the top who are convening people and working across that, we’re not going to be able to make some of the progress we want. And
that was the purpose for the two DCM’s and the two Assistant To’s, and that is the reason you’re seeing this increase. So, I mean, I don’t know what to say, other than that.
Chair Filseth: Well I get that for the one that’s focused on the high-performance organization. As far as the other stuff, the Smart Cities and Cool Cities, what’s that? I mean, it sounds
very vague to me, right. What does that mean?
Mr. Keene: It doesn’t have to be that way. That was just my way of trying to sound interesting to some people when we’re recruiting them, to think about why would you come to Palo Alto
and what’s interesting that you could work on. Hey, here’s a technology center, here’s a very activist community center where you would be sort of helping support neighborhood work,
communication, running interference. I mean, you were just talking about Code Enforcement. I mean, if you think that the ability to break through some of these things doesn’t need attention
from the City Manager’s Office, I think we’re mistaken a lot. It really does need that sort of attention. And we don’t, who has the capacity that we have right now? It’s not me and Ed’s
position is now 75 percent General Manager of Utilities.
Chair Filseth: So, should we think of this in some ways as, at some level, backfilling part of Ed?
Mr. Keene: Oh yeah. I mean, we gave up 75 percent of Ed to Utilities because we couldn’t hire a Utilities Director for under half a million dollars probably, in the marketplace.
Chair Filseth: I’m grappling with four people, right.
Mr. Keene: It’s okay. I would look at this as this is not a Budget request. It is asking for your approval. It would be a Budget reduction that the Council would direct me to take to
cut existing positions, because that’s what it is. You already approved these in October or whatever of 2016.
Chair Filseth: Did we?
Mr. Keene: Yes. You didn’t, no, but the prior Council did. So, I’m just saying it’s a reduction.
Chair Filseth: Fair enough. I don’t have anything else. Council Member Holman. By the way, while you were gone we sort of had a discussion about, you know, retail and economic development
and so forth, and I’m not sure there’s complete alignment with what you’ve got in mind here and what the City Manager has in mind here.
Council Member Holman: I wish the hot water maker was faster. Well, you know, I have thought about that and I think Council Member Fine and I are reasonably aligned, but probably not
totally aligned on what that person would do either, and the City Manager and I are maybe not totally aligned either, so I think the hashing out of that would be important. But, what
I was going to add say was, I hear the people are struggling a bit with the four added positions, but also one of the positions, and Assistant to the City Manager, I believe, where you
mentioned, Jim, that one of those people might be doing outreach to the retail community and such. Was it assistant to the City Manager or Deputy City Manager would be doing that, to
some extent?
Mr. Keene: Well, either or both of them.
Council Member Holman: So, maybe, and I think this is going to be probably a little bit of a parking lot, while we think about it, but rather than roll back the position, maybe we come
up with a new description, perhaps, of one of the roles. But you said you’ve almost closed on the two Assistant City Managers, though.
Mr. Keene: The two Deputy City Managers, yes.
Council Member Holman: Oh, I’m sorry, the Deputy City Managers. You’ve almost closed on those so I think we’re going to need some more discussion about this.
Chair Filseth: I thought you were going to suggest sort of we approve three now and put one in the parking lot for the moment, or something like that. So, the City Manager’s discretion
as to which one or something, but you’ve gone in a different direction.
Ms. Nose: Just to be clear, you guys would actually need to make a Motion to eliminate a position, since these have already been approved by the City Council. So, it wouldn’t be to approve
three out of the four, it would actually be, the four are approved, so you would have to make a Motion to say, direct the City Manager to eliminate X, Y, Z.
Council Member Holman: So, it wouldn’t be more along the lines of a reclassification of a job?
Mr. Keene: No. Well, I mean, if somehow the Council wanted to say that someone’s focused on economic development with the particular definition of what that is and that it’s so important
that you would want that person to be 100 percent devoted to it, then in a sense you would be telling me to, I think, say, one of the Assistant to the City Manager positions would need
to be sure that they do that.
Chair Filseth: I was going to say, I was more interested in the expense.
Council Member Holman: Except I don’t think that’s a high enough level, probably salaried position to accomplish those or to attract those.
Mr. Keene: To be paid $140,000 you tell me.
Ms. Nose: It’s within the same range as the prior economic development manager. It’s not the exact same range, but it’s within the range, I can say that.
Council Member Holman: Okay, so we’ve got a few conversations going on up here. Were you going to propose? Okay, how to structure this. So, I would move that we put in the parking lot
the discussion of City Manager’s Budget pending clarification around the role of one of the two Assistant City Manager positions.
Mr. Keene: Assistant to.
Council Member Holman: Assistant to the City Manager, and of course, the purpose of that is to talk about the economic and retail role.
Chair Filseth: Does that require us to undo something that the Council did in 2016?
Ms. Nose: If you want to maintain that staffing level and have all four positions still be a part of the Budget, no you would not eliminate a position. If you want to change the purpose
of the position, that’s another conversation.
Mr. Keene: Yeah, so the Budget itself doesn’t change. The number of positions doesn’t change. The title of the position doesn’t change. It would be the focus of the position that you
would want to change. And I’m not saying that I’m opposed to that, you know. I mean, we had a different concept before, but if, in particular if we could get really clear about what
the expectations would be by the end of this process of what we would think that position would do, and we saw that it matched up, then I’m perfection okay with it.
Council Member Holman: One comment here, one caveat here is, I can’t imagine that, they’re called different things, but we tend to call them economic development persons, and I’m not
aligned with that title, but if we would have to change the title to attract that person, I’m not sure somebody with that experience is going to come in with the title of Assistant to
the City Manager.
Chair Filseth: Jim’s got two people on the hook already. We don’t want to interfere with that.
Council Member Holman: It’s the Deputy City Managers he has on the hook, not assistant.
Mr. Keene: So, I hear you Karen. I just think that we, it very well may be that the position you think in local government is also one that really does not exist with people with existing
expertise, so I just think there is some rigor we want to go through to really clarify what the Council’s expectations are and that we could get some outside advice that here’s how that
position could be titled or whatever, and how we would recruit somebody. I’m of the mind that this isn’t necessarily somebody who has to have a long track record in this realm, as opposed
to the right intelligence, energy, social skills and aptitude for learning also, but I think that only comes out when we really get clear about what we would expect the person to be
able to do.
Council Member Holman: My experience with, again, I guess three people in that position is like, great people, gregarious, but not having the experience aren’t as effective as what I’ve
seen happen in other communities. So, we can have that debate, it’s a friendly debate.
Chair Filseth: Council Member Fine.
Council Member Fine: So, I’m leaning towards we may want to parking lot this, but I want to set up, I’m not going to make a Motion yet, I know.
Chair Filseth: Council Member Holman made a Motion. We need a second if.
Council Member Fine: I’m still discussing this. I’m not seconding it.
Chair Filseth: I’ll second it.
Council Member Fine: Okay, so there’s a Motion on the floor.
MOTION: Council Member Holman moved, seconded by Chair Filseth to place the City Manager’s Operating Budget in the Parking Lot pending clarification of the role of one of the two Assistant
to the City Manager positions.
Council Member Fine: So, I think there’s some spectrum we’re examining here. On the one hand, Jim, we can interfere and say like, we want to remove this one person. There’s some cost
of you recruiting them and we just say it gone. Alternatively, we could instruct you to reclassify that position as kind of an economic development person. I don’t really think that’s
our role to be reclassifying the jobs in your office. On the other hand, we could just say, you know, keep your four and go and get an economic development manager. So that’s kind of
the spectrum I’m seeing here, but like I said, I don’t really want us directing who those folks are. I think you’re just hearing there is some interest in having an economic development
role and professional in the City, at least from three of us, maybe four.
Mr. Keene: One of the ways I want you to think about some of these external facing jobs are the things that this past year, for example, we’ve had to ask someone like, say, Cash to do
on airplane noise, with the animal services, community of people. I mean, when I say Cool, Smart City, it means things that include those kind of items, that in some ways having someone
in the City Manager’s Office does give them access and leverage across the organization that counts for a lot.
Chair Filseth: Can you read back your Motion for a second.
Council Member Holman: I wish I’d written it down.
Jessica Brettle, Assistant City Clerk: Council Member Holman, I can read what I have.
Council Member Holman: I would really appreciate that.
Ms. Brettle: I have, to put in the Parking Lot the tentative approval of the City Manager’s Operating Budget pending clarification of the role of one of the two Assistant to the City
Manager positions.
Chair Filseth: I second it.
Council Member Tanaka: So, I was just peeking at Mountain View’s budget and the City Manager’s Budget for Mountain View is $2.1 million. The Budget here is $3.3 million. As far as I
know Mountain View is much bigger than Palo Alto. I think, and generally I think I support the Motion, although I don’t know if it should be the assistant manager or should it be the
DCM which we could rethink about. So, I guess I would like to make an amendment that maybe would be accepted that besides looking at the Assistant to the City Manager, also look at a
DCM as well.
Council Member Holman: I appreciate it and if we kind of had that latitude, I would go there, but since I think there have been offers extended for those two positions or close to closing
on those positions, if I understand correctly City Manager?
Mr. Keene: Yes, and I guess we’re about 6 or 7 months after your approval of this already. I know it’s a new Council, but it’s a little bit erratic in my view, unless we were really
in some streamlining Budget reduction mode, and you reached that as a conclusion, and if you also were even asking me, then where should we really cut that’s best, I would be making
recommendations and then if you go back and look at some of the past Budgets, we cut places like the City Manager’s Office or Budget and Finance because they’re less visible to the public
as far as the impact of these things.
Chair Filseth: I don’t hear a second for the Amendment.
Council Member Tanaka: Okay.
Mr. Keene: We have responsibilities to deliver on outcome to the Council and not just, I understand the optics piece of this, okay. I can guarantee you if this hadn’t already been approved
I wouldn’t be coming in here in this Budget year saying, “Let’s do this.” This was in response to a bigger conversation about all kinds of initiatives that we were not able to effectively
pursue, on top of which I basically gave up an Assistant City Manager to Utilities to save us the money to be able to bring somebody in, and I really don’t want to have a backtracking
on at least the upper two positions. I mean, and then hold us accountable for doing performance management stuff.
Council Member Tanaka: I mean, my main like challenge here is this is the largest increase in any department, 14.8 percent. I look at a comparable City, Mountain View, which is bigger
than us. They have a head count of 6.5 versus 10.25 for Palo Alto. They have a Budget of $2.1 million versus a Budget of $3.3 million for Palo Alto. Their salaries are, as far as I can
tell, the highest, their salary increase is the highest out of any department as well.
Chair Filseth: Can I weight in here. I think the lines on this are fairly well drawn, alright. We have a Motion on the floor. It’s quarter to nine, okay. I think my expectation is if
this Motion passes and it goes to the parking lot, my expectation is that we will probably greenlight it and it will go through as normal, you know, after we’ve seen all the rest and
so forth, if this Motion passes. I think there is general concern here that we don’t want to interfere with the City Manager’s recruiting process and Council did authorize a couple of
people to backfill and, you know, Ed’s a hard guy to replace, so I think that’s clear. On the other hand, I think what’s you’re seeing here is, you know, we sort of would like to make
sure we’re comfortable with this, right, and the time between here and the parking lot will help.
Council Member Holman: Could I add just one thing, if it’s okay.
Chair Filseth: Yeah, I may not accept it but go ahead.
Council Member Holman: No, I’m not going to amend the Motion or anything. Just point out that we did just last night add a new policy to the Comprehensive Plan, which was to seek and
support new creative and innovative retail in Palo Alto, so it’s also a new policy.
Chair Filseth: I understand. We have our first item in the parking lot.
MOTION PASSED: 4-0
3. Office of Sustainability, Operating Budget .
Chair Filseth: And with that (inaudible). Gil’s been waiting here for an hour and a half.
Kiely Nose, Budget Manager: I was going to say, the next is Office of Sustainability.
James Keene, City Manager: Just before we leave the City Manager’s Office, since we did this with the Council, there is a $250,000 contingency, is that correct, for the City Manager’s
Office also? So just that you would be aware of that.
Ms. Nose: You can see that on Page 474.
Mr. Keene: It’s not really for the City Manager’s Office. It’s for the City Manager. It’s a contingency that we use in the organization.
Chair Filseth: Council Member Holman did you want to put that in the parking lot as well, since it’s part of the whole Budget and deal with it all at once?
Council Member Holman: I don’t there’s a need to put that in the parking lot. I think we can just keep that in the back of our minds, that we have that in case we need to deploy it for
this other position we’re looking for.
Chair Filseth: Are you suggesting we approve the $250 right now?
Ms. Nose: You can do it now or you can do it later on tonight, when we hit non-departmental. We took up City Council Contingency separately, just so there was continuity for you guys.
Council Member Holman: Yeah, and it’s kind of a no brainer. Not that this isn’t.
Ms. Nose: Fair enough.
Chair Filseth: Let’s move along.
Ms. Nose: Okay, then we’ll move on to the Office of Sustainability and, I don’t know if we want to forego presentations or continue them.
Mr. Keene: Well, this should be pretty straightforward.
Ms. Nose: Pretty straightforward. So, Gil, we will walk you through.
Gil Friend, Chief Sustainability Officer: Good evening Council Members. Gil Friend, Chief Sustainability Officer. Thank you for the opportunity to talk with you tonight. This is, the
Office of Sustainability is now 3½ years old, substantial accomplishments. Much of the credit for this is due to dozens of people in other departments of the City that we work closely
with. The Office of Sustainability, as you know, is by design a very small office, myself and two half-time limited term temporary people. Here’s the list of accomplishments for the
last Fiscal Year, considerable. Much of it thanks to you with approving the Sustainability and Climate Action Plan, the Sustainability Implementation Plan for 2017 to 2020. We going
to bring to you on April 22, it got bumped. We will be bringing that back to you on June 5, so we had hoped to have a more substantive discussion of our work before the Budget conversation,
but we are where we are. So, I won’t read through the list. You can see that there. You also see the key initiatives for this coming Fiscal Year, really focusing on implementation of
the plans that we have adopted, imbedding these more deeply into City operations, so that we walk the talk of what we’re trying to do. Piloting of a variety of mobility as a service
initiative as much of that supported by a Federal Transit Administration Grant that we’re bringing to you next Monday, on Consent Calendar for your approval. And then continuing the
efforts that we began last year to identify and develop ancillary funding sources to support the kinds of initiatives that the City is going to need to invest in over the coming 13 years,
to reach our 2030 goals. The Budget proposal is basically to maintain the current Office of Sustainability resources. This is those two half-time limited-term positions, one of which
is focused on performance analysis and reporting and external communications, one is focused on sustainability integration throughout the organization, additional fundraising and project
management. And with that I’m open to your questions.
Council Member Fine: I actually don’t have any questions here. I thank you very much. I don’t have any questions here, but I’m sure my Colleagues will, but I would be willing to pass
this tentatively.
Council Member Holman: I had this struggle last year because I really struggled with the direction. I mean, there are a lot of different things that the Office of Sustainability could
accomplish, and I guess my frustration is that there is some low-hanging fruit that it seems like we don’t focus on, and without getting into a lot of specifics on that, I’ll mention
a couple, which is the support for our trees and waste reduction, and I just don’t see those here, and for me those are pretty basic to sustainability. Last year I struggled with the
Budget as well, and I am this year as well. It’s increasing not a lot, but a little bit more than what we put into the City Auditor’s Budget. It’s anticipated and recognized that somebody
who is a department head would want, you know, people to work with them, but I have a hard time with the Budget, as I did last year. I remember last year we cut the Budget and then finally
at Council it got approved, it got restored, but at Finance we didn’t support it, and I’m having a hard with it again this year.
Mr. Friend: Well, Council Member, with regard to the specific items that you mentioned, about support for our trees and waste reduction, those both live in the Public Works Department,
the Budget for that activity is there. It’s not carried in the Office of Sustainability. We work collaboratively with those folks to support them, identify resources for them, but the
bulk of that work is carried elsewhere. Do you have other specific concerns I might address?
Council Member Holman: Understanding that that’s where they live, but I don’t see any mutual support or support of Public Works in these endeavors, you know. Because it’s come up several
times tonight and it’s referenced twice here, I don’t remember how much, well we’re talking about staffing here, not projects or proposals, but you know, the Cool Block challenge and
the Cool Cities initiative, you know, it has certainly some positive things to it, but I don’t know that spending a lot of time on it is warranted. So, anyway, I just, I struggle with
the Budget.
Mr. Friend: The Cool Block pilot that we ran this last year is something that we have, my office has not spent very much time on. Occasional meetings with the Project Manager on that.
They have been funded externally to the City. We will talk more about that on June 5, but the pilot has been successful and I think in our assessment, warrants going forward. In terms
of the involvement of people, the enthusiasm for residents in participating in it, not just because of the environmental benefits, but because of the community-building benefits they
found, as well as, you know, not insignificant reductions in greenhouse gas emissions and waste and so forth. But it’s, you know, maybe a couple of percent of my time, if that.
Chair Filseth: My recollection was the Cool Block initiative wasn’t supposed to cost anything.
Mr. Keene: It has and it’s just going to move into a new phase that we’ll have to bring to the Council, see whether you would want to support it.
Council Member Holman: My block participated in it and I think the best part about it was, I mean, my block is already a tight block, but it brought us closer together, but I didn’t
see some of the other benefits, other people didn’t see some of the other benefits, except for one exception.
Chair Filseth: It looks to me that the main difference between this year’s Budget and last year’s Budget was in last year’s Budget there was a $250,000 Contingency Fund which is gone
now, but there is a head count. Is that an accurate description?
Mr. Friend: It’s a head count. We’re maintaining the same head count. I think we’ve shifted categorically how it’s represented in the Budget. The contingency we did not draw on this
last year. In discussion with the City Manager, we thought that should wait till after the Council was and approved the Sustainability Implementation Plan, so that contingency is in
reserve. We will propose on June 5 that some of it be used for the sequel work in connection with the Sustainability/Climate Action Plan (S/CAP) and some other things we’ll talk with
you about at that time.
Chair Filseth: Can you explain that then, because you said, okay, I grant you there is a reclassification, but can you explain what it was, because it looks here like you’re going from
one to two.
Mr. Friend: I’m sorry, I can’t hear you when you are away from the mic.
Chair Filseth: You said there was a reclassification. Okay, but can you elaborate a bit on that, because it looks like you’re going from one FTE to two.
Mr. Friend: Kiely, can you help explain that.
Ms. Nose: Yeah, I’m sorry. You’re talking about the change between salaries and benefits versus the contractual services?
Chair Filseth: The 0.96 from 2017 to 2018.
Ms. Nose: Sure, so historically in this office we have been doing one-time staffing resources. When we were developing the FY ‘17 Budget, they were also developing the SIPS and the other
stuff, so we had made a decision that maybe it wasn’t appropriate to continue the part-time staffing. Maybe it would be more appropriate to use contract services. We tried that, we went
through that this past year and decided that the part-time staffing was the best model for right now, so we’re just basically restating that. So, you’ll see if you look at the FTE, you
go from two in FY16 down to one in ’17, so ’17 is that year, I’m sorry, I’m on Page 311, FY ‘17 is that year that we were going to try out contractual services.
Chief Filseth: Got it, but the contract services takes a big bump in that year.
Ms. Nose: In FY ‘17?
Chair Filseth: Yes.
Ms. Nose: Correct, and then it drops back down in FY ‘18 because we decided to go with the temporary staffing, and to Gil’s point that sustainability reserve appears in non-departmental.
Chair Filseth: Council Member Tanaka.
Council Member Tanaka: So, I have some really basic questions here. So, who supervises this office or this role.
Mr. Friend: I report to the City Manager, and I serve on the Executive Leadership Team and also have a Sustainability Board with about a dozen other department directors that meets monthly
to guide and supervise this work, but the direct reporting is to the City Manager.
Council Member Tanaka: To the City Manager, okay. Yeah, you know, actually what would be really interesting, and I don’t know. Let me ask you , do you guys do performance reviews?
Mr. Friend: Yes.
Council Member Tanaka: Does the Council get access to them? We don’t get access. Because, you know, Council Member Holman has been on here longer, so I don’t have much history with this,
but for me I don’t have too much insight into this office, so it’s kind of hard for me to even judge is this right or not, other than I see that the salaries going up 68 percent but
that’s because the contingency is moving in and out. So, just out of curiosity, why don’t we see the performance reviews, if we’re trying to approve Budgets like this.
Mr. Keene: I’ll let the HR Director – I’ve never had this question asked in the 40 years of doing this work.
Council Member Tanaka: Well, Council Member Holman is questioning the…
Mr. Keene: The Council is certainly able to share your perspectives with me regarding individuals or your perceptions of a department, but the, this is a personnel matter between the
employee and the supervisor, just as across our organization. And there is no way the Council sees this performance review without it being a public sharing of that review to the Council.
Chair Filseth: That’s true, it’s a public organization. I was going to say, I think in general the Council has worked to sort of evaluate the success of programs not individuals. And
that’s kind of consistent with that. Probably this disclosure thing is important.
Council Member Tanaka: I get that. I’m just trying to gauge the – so I heard Council Member Holman say that she was concerned about the Budget because of various nonperformance or maybe
not as much performance as she would have liked, and so I’m not as close to this and it’s hard for me to even judge that, if that’s really the case or not. And that’s why I was asking,
if there is a way for us, is there some sort of scoring of these programs that happens or what, but so I don’t even know on this one because I don’t even know if other cities have this
role, so it’s kind of hard for me to know.
Mr. Friend: There are about 150 cities in the United States that have a sustainability leader of some sort. In some cases, it is chief sustainability officer, in some cases it’s a sustainability
manager. In probably about 40 percent of the cities, we belong to an organization called, the Urban Sustainability Directors Network, which is a collaborative knowledge-sharing network.
If you want to look at the size of the office for comparison, we are relatively small office for our population size. If you want to look at performance and accomplishments, for me that’s
the performance review. In my assessment and from what I hear from others around the country as we talk about our work, it’s substantial and impressive. If there are ways that you would
like to dig in further or suggest ways we might improve that, I would be happy to come back and talk with you at any time of your choosing to dive into more detail about that.
Chair Filseth: I’m still thinking about the Contingency Fund and so forth. The $171,000 for consultant, for contract services basically last year, did that come, I mean, was that funded
by the Contingency Fund or did that come from somewhere else?
Mr. Friend: No, we have not spent the Contingency Fund.
Chair Filseth: Not yet, got it.
Ms. Nose: What we did is we actually, about half way through the year, reallocated the bulk of that backup to salaries and benefits because we determined that contractual services wasn’t
going to work and we went down the temp staffing route.
Chair Filseth: So, is there an actual person that that’s 0.96 people?
Ms. Nose: There’s actually two people.
Mr. Friend: There’s two half-time, they’re limited term. They need to be kept below 1,000 hours a year. It’s been a challenge for us, as you might imagine, in retaining people. We lost
two of our two people in FY16 in the middle of the year. We’ve lost one of them this year, because quality people are looking for something that has an upward path, which we’re not able
to offer them at this time. Despite that, we have found people very eager to work with the City. We’ve gotten very high quality of recruits and folks have done great work.
Council Member Holman: I guess the reason I find this one so challenging is, I don’t even know how to articulate it. It’s, I agree that we don’t see performance reviews and it isn’t
about that, so I want to be clear about that. It is not about performance and performance review, it’s not that. It’s, which sounds like it’s the same thing, but it’s not. It’s the output
that seem to be the focus and I just, I have a hard time with the expenditure for what I see as the output and being a fairly narrow range of output. That’s just my perspective. Others
might not agree, but.
Mr. Friend: Council Member, could you help me understand your concerns. Are there items on that list that you think we should not have spent time on, or are there other items that you
would prefer that we be focusing on? (Crosstalk) And I don’t know if this is the time to have that conversation, but we could certainly come back and dive into that on June 5 in more
detail.
Council Member Holman: It isn’t and as Council Member Fine says, it’s like I don’t want to be micromanaging, it’s just my, it’s hard to articulate.
Chair Filseth: If we look at the choice space before us, right, it’s we approve it, we put part of it in the parking lot or we put all of it in the parking lot. That seems that the reductive
(inaudible), so, Council Member Fine.
Council Member Fine: I think there are some pretty impressive accomplishments up here. The S/CAP is pretty important and we’re just transitioning into the implementation phase, right?
So, in some ways some of the benefits of this office haven’t yet been realized by the City, but many of the costs are sunk. Also, to point out, it’s still a fairly inexpensive office
compared to everything else in the City, and there is an argument to said that our S/CAP is sort of will or could eventually supersede our Comp Plan in terms of how we operate, run and
evaluate projects within the City.
Chair Filseth: S/CAP will supersede our Comprehensive Plan (comp)?
Council Member Fine: Not supersede, there’s certain telescoping between those two.
Chair Filseth: There may not be consensus on that one.
Council Member Fine: No, but there is a certain telescoping between those two plans and I think in an ideal world we’re have an S/CAP integrated into the City.
Mr. Friend: And we’re integrating them as best as we can at this point. If I could toot our horn for a moment. You said it’s a relatively small office and small spend. We’ve raised more
than a $1.25 million for City programs, we brought in funding for an additional 50 Electric Vehicle (EV) chargers. I mean, it’s not all planning and theory.
Council Member Fine: Thank you for pointing out the grants. I think that’s actually helpful for us, if this is a net positive, so I’ll move that we tentatively approve this.
Council Member Tanaka: I’ll second this.
Chair Filseth: I’ll support it too. Okay?
MOTION: Council Member Fine moved, seconded by Council Member Tanaka to tentatively approve the Office of Sustainability Operating Budget.
Chair Filseth: Any further discussion, because we’re going to get a chance to look at this again once we rationalize.
Lalo Perez, Director of Administrative Services and Chief Financial Officer: Yes, and keep in mind you can end up into Council even after you’re wrap up.
Chair Filseth: Okay, all in favor? Motion passes 3-1 with Council Member Holman opposed.
MOTION PASSED: 3-1 Holman no
4. Human Resources Department, Operating Budget.
General Fund
General Liability Fund, Operating Budget
Employee Benefit Funds
General Benefits Fund, Operating Budget
Workers Compensation Fund, Operating Budget
Retiree Benefit Fund
Kiely Nose, Budget Manager: Next would be the HR Department, both General Fund as well as our General Liability Fund, our Employee Benefits Funds, which include General Benefits Fund,
Workers’ Compensation Fund as well as the Retiree Benefit Fund. So, in the interest of time, we are going to forego presentations. I’ll quickly go over Budget proposals in the HR Department.
In the General Fund, we’re doing a quick staffing realignment, so no new FTE’s, we’re just readjusting the levels of Staff. And then two one-time investments, one for labor negotiations
and one for a reassessment of the method that we’re doing Public Safety recruitment. Both of those are one-time investments that would go away in FY ‘19. I’m just going to go through
all of it. Other funds, this is workers comp. I’m sorry, we did a quick change to the insurance policy, and so it reduced our annual premiums by about $200,000. But otherwise it’s pretty
status quo. So, with that, if you guys have any questions, and then what we’ll do subsequent to these questions is get into pension. Okay?
James Keene, City Manager: And we may want to maybe get through all the stuff and come back to the pensions. That’s an overarching conversation.
Ms. Nose: Sure.
Council Member Fine: I’ll just throw a few out there I’ve got so far. Can you describe allocated charges for this? This is on Page 252.
Ms. Nose: Sure. Allocated charges are the, wait, I want to make sure I’m in General Funds. So, these are expenses out of the General Fund going to other Internal Service Funds basically.
So, I’m trying to think for HR what it would be. It’s IT, it probably wouldn’t be Utilities because they are in City Hall proper, (crosstalk) facilities, Public Works. So, the bulk of
it is going to be IT Services, print and mail is going to be another one. General Liability, yup, because we’re self-insured.
Council Member Fine: Okay, that’s helpful for now. I’m going to look at the other ones. Thank you.
Chair Filseth: Council Member Tanaka.
Council Member Tanaka: How many employees are there in the City of Palo Alto?
Lalo Perez, Director of Administrative Services and Chief Financial Officer: How many employees? About 1,068, full-time.
Mr. Keene: Another, what, 400 or 500 part-time.
Ms. Nose: Yeah, I was going to say, I want to say the payroll manager just said we cut about 1,500 checks.
Council Member Tanaka: What’s our total FTE?
Ms. Nose: Your total FTE’s is one thousand, it’s on Page, Slide 5, for full-time FTE, so this does not include part-time unbenefited, there’s 1,057 and 0.95, so 1,058 employees.
Council Member Tanaka: Do you guys know what Mountain View is?
Mr. Keene: About 800.
Council Member Tanaka: 800, okay.
Mr. Keene: I’m just going from memory.
Council Member Tanaka: Okay. As we’re going through this my only reference point is the Mountain View budget here, but they have a total of seven people in HR and you guys have 17 in
HR. So, why are there so many more in HR, because it’s usually a function of the number of employees, so why is it like more than double in Palo Alto?
Mr. Keene: You know, I think this is going to be a big Study we’re going to have to do. No, I’m very serious. I mean, there are layers of complexity to our processes, the scope of, again,
the departments that we have. You know, the range of them is significant. I mean, I think maybe we should try to get you, if we’re going to use Mountain View, sort of over this next
week, some overall comparisons that we can share with you.
Council Member Tanaka: Doesn’t the Mountain View City Manager live here in Palo Alto.
Mr. Keene: Yeah, and he didn’t apply for this job.
Mr. Perez: But he does like the services. You know, I think, again, just to give you a quick answer, it’s the complexity of operations. I’ll give you a quick story that may or may not
help you. There is a group of U.S. Territories throughout the Pacific and Caribbean. They sought us out and they asked me to talk to them about how we run government and operations,
and I said, “Sure, but why us?” They said, “Because you look like us. You’re like an island. You have everything. You have 13 major business operations, you have airports, you have utilities,
gas, refuse, wastewater, storm drains. All those things that we run on an island.” Those are not things that are common to Mountain View and you’ve got to really look at that and difference
in the level of service and commitments that we make, the land use values, how they do it, how they invest their money, the technicality of the Staff that you have to recruit in utilities
and gas, the regulations that have to be followed to comply, the level of real liability we want as an organization, the labor groups now that you must deal with and the number of cases
and issues that you’re dealing with as a result of those, because you’re dealing with a lot more complex and technical professionals. So, I think, you know, we can definitely look more
into it and we’ve done it, believe me, we’ve done it many times and we come back to the same conclusion and that is, what we value is different. You have paramedics, the rest of the
County doesn’t.
Council Member Tanaka: Okay, I hear what you’re saying, but here’s the thing, right. Okay, so I get that we have a lot of complexity here in the City, but okay, HR fundamentally is,
it’s a service to the employees, right? It’s to manage the employees, and usually that’s a function of the number of employees. Okay, so I get that our (inaudible) Department would be
bigger, I get that our other departments would be bigger, right. I get all that. But what I don’t get is why is there such a different ratio, because usually HR is a function of the
number of employees, and yet.
Mr. Perez: Maybe you’re comparing it to the private sector.
Mr. Keene: Yeah, I think we need to go and compare. I don’t know that Mountain View has had binding interest arbitration. I don’t know if they have the arbitration procedures in their
contracts with their labor unions that put us through very, very involved processes. Even as Lalo was just saying, we’re about 35, 37, 38 percent of the regional water quality control
plant, so is Mountain View. All of those employees are on our books, they’re not on Mountain View’s books.
Council Member Tanaka: That’s included in the employee count, though, right?
Mr. Keene: We have more employees because we have Mountain View’s employees on our list.
Council Member Tanaka: Yeah, so 800 versus 1057, 1058, right. And yet you’re looking at Mountain View at 7 versus 17.2, right. I mean, the ratios are very different.
Mr. Keene: Okay. What do you want us to do with this? Really, if this is going to go on for two weeks…
Chair Filseth: Let me try here. I think…
Mr. Keene: I’ll bring you a Budget that has 800 employees.
Chair Filseth: I think there’s more discussion on this point than it merits, okay. But I don’t think it merits, I actually think the HR one is kind of interesting because I totally get,
okay, that we do stuff differently than other cities, right. But the HR one is kind of interesting because, I mean there are a number of a kind of things where you would sort of think
it would be more consistent from city to city as opposed to anything related to the utilities, of course, right, and so forth. So, I don’t think we have all the information that we need
to sort of think about this, but it is a little bit thought provoking. I don’t think we’re going to do anything with it tonight, unless you want to put the whole HR Budget in the parking
lot, right.
Council Member Tanaka: I do.
Chair Filseth: Sorry? You do. Okay, great. Okay, you know, that’s part of our process. But my guess is we’re not going to spade up any new information on this topic tonight, right.
Ms. Nose: I was going to say, so just quickly for some color, if you look on Page 244 it will help you kind of see where the employees are and what they’re working on within the HR division.
Quick hits of data, we run probably over 7 percent vacancy factor, so that’s just vacancies. That doesn’t even account for general turnover. So, in terms of the number of recruitments
that we’re doing Citywide. Another variable is the number of bargaining groups that are represented. So, for example, I think Mountain View maybe has four, whereas we as an organization
have gosh, I want to say maybe eight, if I’m correct? Seven, we have seven, so that’s another complexity, right. There’s more tables, there are more agreements, there’s more terms in
each of those agreements. Our HR Department is a similar size as the City of Sunny Vale. I don’t know if that’s a helpful benchmark. But just again, these are all variables that would
alter the necessary staffing levels from city to city. I would agree that it is a very common service that you would expect, hey, it’s a government, right. HR in one city is going to
be HR the same in another, but there’s other, you know, variables.
Council Member Tanaka: I mean, the other issue I have is just, it’s also one of the bigger increases, right. It’s almost at 12 percent compared to other departments. It’s 11.9 percent.
Ms. Nose: I’m sorry. What Page are you on Council Member?
Council Member Tanaka: 252.
Ms. Nose: Right, the 11.9 percent.
Council Member Tanaka: Right, it’s one of the highest.
Ms. Nose: So, do you keep in mind that there are two one-time investment proposals that are in this department. So, that’s $150,000 increase of that $400,000 year-over-year increase.
That’s related to contractual services for labor negotiations as we enter into new contracts, as well as some funding for rejiggering of our Public Safety recruitments. So, it’s not,
I mean, do keep in mind from an HR perspective it is a central department similar to what you saw in the City Manager’s Office. There are central proposals that are going to impact citywide.
Chair Filseth: So, do those increases show up in the employee and labor relations line?
Ms. Nose: Well, the $100,000, well actually both, I think, show up under general expense on that Page that the Council Member was looking at. Oh, and if you’re looking at by division,
you see some in the labor relations, I’m wonder if all of them – yeah, all of them are in the employee and labor relations bucket.
Chair Filseth: I was going to say, that’s the one that goes up significantly.
Ms. Nose: Correct. So, of that $300,000 year-over-year increase, $150,000 is associated with those two one-time Budget proposals, so 50 percent of that increase.
Rumi Portillo, Chief People Officer: Rumi Portillo, Chief People Officer. I think in comparing the HR services from agency to agency, or even the private sector, I think it is important
to also include in any analysis to what extent are the HR services centralized. What you often find in municipal services is you have, for example, the hiring departments will put resources
towards recruitment, or they will provide support for a bargaining table. And there is also a compliment of contract services that happen. So, what you see in a base Budget, for example
for Mountain View or for Campbell or another local city may not tell the whole story if you’re just looking at FTE head count.
Chair Filseth: Any other questions?
Council Member Tanaka: You know, I just, going to Mountain View again, but I look at the Budget is 2.3 versus the proposed here is 3.7, so it’s 1.3 more, so.
Chair Filseth: Where are you looking? Oh, you’re looking at Mountain View versus – I don’t know if we’ll find new information on that one tonight.
Council Member Holman: I have one question, and that is, because I don’t know where else I would ask it or whenever else I would ask it, and thank you for coming. I appreciate very much
you’ve got succession planning here as a breakout and turnover as a breakout and recruitment and employee attendance as breakouts. And there was one that I was supposing I would see,
and that was either one or maybe a combination of the two is, because you are HR, either a hotline complaints or grievances or that sort of thing, because you’re the department that
would deal with that sort of thing. So, and the reason I ask is because I’m interested, but the other thing is, which will run counter to what Council Member Tanaka is thinking about,
is, do you have Staff that’s focused on that? Is it integrated among the employees that you have but not specific to an employee or two? So, it’s a Budget question and it’s a functionality
question.
Ms. Portillo: I can address the functionality. I think the bulk of the work, if you’re talking about complaints coming in, whether they are anonymous or through the hotline or walked
in, those would be staffed through the employee relations and training group. We have a team there who would deal with personnel complaints, because many times it does have to go into
a structured investigation process and so that is the supporting group there.
Council Member Holman: And grievances?
Ms. Portillo: And grievances, those are through the employee relations office team as well. We have quite a bit of attention on both grievance avoidance and then actually handling grievances
as they come in through a formal process. I have, our performance measures that you just called out do need some work, and we’re looking forward to working with, you know, another iteration
of these. I have seen grievance counts included in other agency Budgets, and I’ve also had to report out on them. It’s kind of a double-edged thing. It’s like, do you want, they are
an indicator that things are wrong, and so what happens often on those measure is you’re really seeing success by reduced numbers of grievances, and you really want to put your efforts
towards grievance avoidance. So, how to measure the grievances that don’t happen is really, you know, it brings a little bit of complexity to this.
Council Member Holman: Wouldn’t it be, if you had fewer grievances, that that would be a success measure?
Ms. Portillo: Exactly. Right.
Council Member Holman: So, that would be grievance avoidance.
Ms. Portillo: Right.
Council Member Holman: And, hopefully, for all the right reasons.
Ms. Portillo: You hope that they’re going down, right.
Council Member Holman: Right, exactly. So, I don’t know how other Council Members feel about it and I’m not going to hold a pending approval of this because that’s what we’re doing based
on that, but I think it would be helpful to have that.
Ms. Portillo: Right, and we do track and count those, so that would be an easy measure to include.
Council Member Holman: Yeah, maybe we could have that before we finish this up? I mean, not tonight. So, with that I would tentatively approve the Human Resources Budget.
Chair Filseth: Second.
Council Member Holman: With that one request, right? Yeah.
MOTION: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the Human Resources Budget and ask Staff to prepare performance measures related to employee complaints
and grievances.
Council Member Tanaka: Yeah, so, for me I would like to see, you know I do a quickie comparison to Mountain View which, maybe, is not fair, so perhaps we should do other cities.
Mr. Keene: Sunnyvale we just did, 900 employees, same size HR Department as we have.
Council Member Tanaka: Oh, great. Okay, good. So, I think that would be helpful, right. So that we can kind of understand like, are things kind of in line or aligned or not. So, yeah,
so I would like to propose an amendment, which is that we see a comparison of basically HR to fulltime equivalents for six nearby cities, because I think the full Council would probably
find this useful as well, just to see how we’re doing. Is that accepted?
Council Member Holman: How long would that take you to do? We just did, they just told us Sunnyvale.
Mr. Keene: We could go ahead and do it. There are just so many factors that are beneath the surface, that’s all. I mean, it’s information, I’m sorry to say it, I know we think it’s useful.
It’s not necessarily. I’m just thinking back over my entire career, every community is different. Population, numbers of employees, services, processes, there are so many variables.
I mean, I can do comparison of how long it takes Mountain View to review its Budget and compare it to us. I mean, there are so many different factors. And I would say our processes are
intense. Our demand for information and our community expectations are, I’m telling you from experience, unique.
Council Member Holman: So, I accepted the amendment based on you said, “Oh, we’ll go ahead and do it,” but actually I’m going to withdraw the acceptance of it for this reason. Because
I’m concerned about where it would lead in discussions going forward, and I think, I mean in a way the time to discuss it is at the Budget, but at another time, it’s if there are concerns
about some of these things, they should be separate activities. They can’t really be addressed at this short timeline, so I’m not going to accept it and I hope that explains why.
Chair Filseth: I was actually going to ask if it met the one-hour rule, but that’s fine. Sorry Greg.
Council Member Tanaka: I’ll propose it as unfriendly.
Chair Filseth: Is there a second?
AMENDMENT: Council Member Tanaka moved, seconded by Council Member XX to prepare a comparative analysis with six nearby cities of the ratio between Human Resources Staff and Full Time
Equivalents in each organization.
Council Member Fine: I’m not going to support the unfriendly amendment, but I do agree with Council Member Holman that there could be a separate project outside of this where we could
reevaluate this Budget process, could give Staff guidance to look at these comps going forward.
Chair Filseth: Motion fails for lack of a second.
AMENDMENT FAILED DUE TO THE LACK OF A SECOND
Chair Filseth: I return to the original Motion if there is no further discussion.
Council Member Holman: Which was to tentatively approve the HR Budget.
Chair Filseth: All in favor? Motion passes 3-1 with Council Member Tanaka voting no.
MOTION PASSED: 3-1 Tanaka no
5. Administrative Services Overview.
General Fund
Printing and Mail Fund
Kiely Nose, Budget Manager: Okay, so what we were actually thinking is we’re going to go to Admin Services, and then we will circle back to pension. So, Lalo is here for questions. I’ll
leave it on the highlight of the Budget proposals again, same thing, net zero staffing, reorganization and then some non-salary reductions.
Chair Filseth: You’ve got two people in Finance. I thought you only had one. Committee questions on Administrative Service? Council Member Fine.
Council Member Fine: Can you describe to me some of the other revenue sources. It seems pretty up and down. I was just wondering. Page 183, at the bottom.
Lalo Perez, Director of Administrative Services and Chief Financial Officer: Let us take a quick look at the details. Yes, this is our, we get revenue from our procurement cards, so
as an incentive to the City, we get a certain amount of the transaction that we charge. So, we go and buy something, we go and buy a widget and we have a card through Chase Bank so we
get a certain percentage for each transaction. So, one of the things we have done is to increase the number of transactions purposely so we have more efficiency in procurement and a
reduction in check cutting.
Chair Filseth: I was going to as one, which is, one thing I’ve noticed on all these so far is that, in general, pension expenses for all of them have gone up 9, 10, 11, 12 percent. The
question I was going to ask is, is that net of any CalPERS change on investment assumptions, or is that not factored in yet in 2018?
Ms. Nose: That is not yet factored into 2018. It will first hit in FY ‘19.
Chair Filseth: FY ‘19, that’s what I thought.
Ms. Nose: But that is to say, when you guys were looking at those numbers earlier on the General Fund out years where we said there was $3.7 million that’s unspent, that does factor
in the first year of that ramp up.
Council Member Holman: I have a question that I should know, and apologize I don’t, we are replacing our SAP and I always forget with what. So, where in the Budget would we find that
and it would have allocations associated with it, so.
Mr. Perez: Right. So, it’s not in the Budget yet. We’re at the stage where we’re formulating our business needs so we can issue a request for proposal sometime in the fall is our estimated
timeline right now. So, where we’ve been allocating the funds for this is in the IT Fund in the Technology Fund, and what we need to do is review, you know, what the fund level is there
versus the bids that eventually come in for the system and the estimated implementation costs. But we anticipate doing this, replacing our financial system, even if we end up going to,
let’s say selecting SAP, Jonathan’s vision and we’re in agreement with him, is that we should go to a cloud-based system, so what we have right now is not a cloud-based system, so that
would be the preference of what we would be looking for, and we would replace our payroll and HR module and our utilities as well, so that’s what it would entail in that.
James Keene, City Manager: I would just add, what we have been doing to date, which has been quite intense across the organization really is with some consultant assistance, really doing
the assessment, the data collection, the what do we have, what are the issues, what are the problems that would result in what Lalo is now saying, would be to issue this RFP. And even
after we issue an RFP and select someone, then there is going to be a complex design process we’re going to go through, so I don’t really think we’re going to have real expenditures
on a new ERP until, I mean, at the earliest, the next Fiscal Year.
Council Member Holman: So not the fall, but the next Fiscal Year.
Mr. Perez: Right, and we would, you know, obviously come to you and do presentations on the status and where we’re at.
Mr. Keene: I mean, we’ll do the award of the RFP and beginning to do the work, but how we scope out, it’ll be next year’s Budget discussion.
Chair Filseth: This stuff takes years.
Council Member Holman: That’s very helpful because, you know, I said it once before, it’s like I really do like to avoid BAO’s so we can account for, you know, where our dollars are,
so I appreciate that it’s next Fiscal Year. So, that was my big question.
Mr. Perez: Kiely agrees with you, no BAO.
Chair Filseth: Council Member Tanaka.
Council Member Holman: So, should I tentatively, move to tentatively approve the Administrative Services Budget?
Chair Filseth: I’ll second that.
MOTION: Council Member Holman moved, seconded by Chair Filseth to tentatively approve the Administrative Services Department Budget.
Chair Filseth: Do you wish to speak to your Motion?
Council Member Holman: No, with assurance that (inaudible.)
Mr. Perez: Yes, we can do both if you want now, that’s fine.
Chair Filseth: Why don’t we do both if you have a question.
Council Member Tanaka: Curiosity, why is it going up by 12 percent?
Ms. Nose: Can you tell me what Page you’re referring to?
Council Member Tanaka: 189.
Mr. Perez: The total Budget increasing by 12 percent.
Ms. Nose: Oh, so the primary change that’s occurring between FY ‘17 and ’18, if you look on the contract services line, there is $134,035 change, that’s in relation to the new ARC contract
for the City’s copiers. So, we moved from a prior vendor to a new vendor between FY ‘17 and FY ‘18. I’m trying to find where that’s on. So, you can see it on Page 191, it’s the second
line where it says, ARC document solutions, print and mail allocated charges realignment. So that’s the difference from the old contract to the new contract.
Chair Filseth: That’s a lot of coin for copiers.
Council Member Tanaka: Yeah, why did it go up so much?
Mr. Perez: Part of it is that we’re going into a more centralized process, so there’s going to be some reductions or savings in the department. So, before what we would do is we would
have the copiers be allocated into the departments and the charges, they would replace the toners, the paper, all of that, they would be there. Now it’s all centralized in one location,
in the printing and mailing and the contracts have been going up considerably. We did do a review. There is a consortium that you can participate in, through the State system, and when
we did a comparison, you know, we were in line with these new costs that were coming in. Part of what we’re trying to do to change the behavior of the organization is going to be to
have pop-up windows come up in our system, so whether it’s your laptop, you PC, as you’re trying to send a job to the printer, it will give you the cost of that particular job. So, one
of our efforts in the green initiatives is that we, over time, reduce our printing in the organization. So, potentially, you know, it’s an uphill curve, we could reduce that number.
But it’s in line with where the market is in comparisons that we did with the State system.
Council Member Tanaka: The only thing is, okay, so I look at 2016 it was $34,000, in 2017 it’s 114, now it’s a quarter million, right. So, and just, it goes from $34,000 to $250,000
in two years. If I look at my own printing costs, my own printing cost has dropped over that time, so why, I mean, especially if you centralized you’d think it would be cheaper, not
more. Why did that happen?
Mr. Perez: So, what we can do is give you more data on, you know, the analysis that we did as to why it made sense for us to do this. There is a Staff Report we created when we brought
this to Council, so we can provide you that data as a reference point before the end of the wrap up.
Council Member Tanaka: Okay. It struck me as just odd though, because you would think it would go down, not up, and it’s gone up a lot. Not just a little bit but, like, a considerable
amount, way past the rate of inflation.
Ms. Nose: One of the things we’re also going to look at is, if you actually look at the line below it, general expense, in the FY ‘15 and ’16 actuals, you see that line actually going
down. I’m wondering if there’s just some re-categorization that’s gone on from the past to the present. I don’t know.
Council Member Tanaka: But your net increase is $155,000 right, so it’s 12 percent increase, so, I mean, it’s.
Ms. Nose: I understand that. I’m just saying I think there might be some muddying of the waters, so we can look at it further.
Council Member Tanaka: I mean, I don’t know enough of what you told us about this, but it seems, like, one contract should get reexamined. If this is, if it’s just printing and the City’s
not doubled the size of its employees, or we’re not doubling – this is essentially more than doubling, right?
Mr. Perez: Well, let us bring you the details because we’re not giving you enough information tonight to give you the whole picture.
Chair Filseth: So, there is a Motion on the floor to tentatively approve all this and I hear a request for some more explanation on the printing contract.
Mr. Perez: And we’ll do that.
Chair Filseth: Okay. All in favor? Motion carries 4-0. Thank you.
MOTION PASSED: 4-0
6. Non-Departmental, Operating Budget.
Kiely Nose, Budget Manager: So, briefly we’ll go through non-departmental, which starts on Page, we’ll flip to the back, 473. What’s happening in here is, as we kind of went over in
the overview, some one-time reserves. Actually, that slide is wrong. The FY ‘18 operations reserve is not one-time, it’s ongoing because we think that the costs associated with those
activities will be ongoing. My apologies. The Council contingency we talked about and then two inter-fund loans.
Chair Filseth: Council Member Holman.
Council Member Holman: I do have a question. The loan to the airport, that’s in its on Page 475, two under the light green. I guess, when is the, it’s taking longer than certainly I
had anticipated for the airport to be self-sustaining. So, what’s the ETA or prognosis or pulse on that?
Ms. Nose: Sure. Your biggest influence on that is the fixed-base operator leases.
Council Member Holman: Is what, I’m sorry?
Ms. Nose: Your fixed-base operator leases. When we took over the airport we were locked into these contracts until April of this year. So, actually, when you get to Public Works on Thursday,
you’ll see in the Airport Fund, a pretty significant increase in revenues in FY ‘18, and that’s to reflect that change, that the City will take over full ownership. But on the flip side,
with the City taking over full ownership, it also means that we do take over some more of the maintenance and operations of the airport that was previously covered under that. So, yes,
we do increase revenues and start to go on the right track of becoming self-sufficient; however, there are some cost offsets associated. We’re also leveraging some pretty significant
Federal Aviation Authority (FAA) Grant Funding, so because of the use of that airport, the FAA has been granting, frankly, significant contributions for capital improvements, but their
funding requires a 10 percent match from the City. So, to leverage those dollars we’ve made a recommendation, I guess, that it’s, we’re being penny wise, pound foolish, right, of let’s
leverage the millions of dollars that the FAA is willing to grant us for the CIP’s while we continue to do some modest General Fund loans for a better infrastructure in the out years,
and the return on that investment later.
Council Member Holman: So, because the airport is its own fund, when the airport, though, becomes profitable, sorry for the out-in-the-future question, but, when the airport does become
profitable, can we repay the General Fund?
Ms. Nose: Absolutely.
Lalo Perez, Administrative Services Director and Chief Financial Officer: Absolutely, and it’s allowed by the FAA.
Council Member Holman: That was my question, because I know you can’t take profits out of…
Ms. Nose: These are not subsidies. We actually have a loan form that every year that the General Fund is transferred, that we keep on the books and record with our accounting division.
Council Member Holman: Okay. Side note, it’s like in some point in time when you have nothing else to do, it would be really nice to see kind of what the future prognosis is for…
James Keene, City Manager: We can share that, even some preliminarily with you this week, on Thursday.
Council Member Holman: That would be great, and there’s no rush, but it would be great to know. I have a couple of others, but I need to find them, so if you want to go to somebody else.
Chair Filseth: Council Member Fine.
Council Member Fine: Thank you. For the operations reserve, this is a new reserve we’re creating. Can you give us an idea of some of these projects that aren’t fully yet baked, (inaudible).
Ms. Nose: Sure. A big one is we need to do a new bid for our janitorial services. So, if it’s anything like the tree trimming contract was when we bid that last year, we’re looking at
some significant increases in our year-over-year contract increases. Other ones include matching grant funding, you know, maybe if we need to dedicate some money for this Cool Blocks,
that might be something that we could tap this reserve for. Parking initiatives, paid parking, any other kind of infrastructure initial investments that we need to make. I mean, we’ve
probably spend that reserve about four times at this point, just with those few items.
Council Member Fine: Okay. I mean, I guess just for hygiene sake, it would be nice to have those costs aside those items, but I understand where you’re coming from here. And then, the
salaries, this is also new. What benefit are we looking at for these upcoming salary studies and labor negotiations?
Ms. Nose: Sure. One of the components of the last round was that as part of the management and unrepresented, we would do salary studies. Most of the other groups had done benchmark
studies when we went into contract negotiations, whereas management professionals hadn’t. So, we’re actually currently in contract to do a Management Study, but we don’t know what the
results of that will be. So, this reserve is set aside so that if the Study comes back with any increases and should Council approve that, that we would bring it forward then.
Council Member Fine: So, this is saving money. So, there is a Study ongoing right now and the Study is funded to evaluate salaries, and this is saying, if that Study comes back and says
somebody needs a raise, it comes from here?
Ms. Nose: From a benchmarking standpoint, correct. All of that will come back through Council for approval, so none of this will get used or approved without going to full Council on
whatever those studies come back with. That’s just one example also.
Council Member Fine: What initiated this original salary Study? Was it Council, was it City Manager’s Office?
Ms. Nose: It was part of the labor negotiations. I don’t actually know who brought it up.
Mr. Keene: So, with the management and professional group of employees, which is about 220 or so, you know, they’re not formally organized, but we do meet with them and each year typically,
or two years maybe, we essentially adopt through the Council, a Management Compensation Plan and it’s in that plan where this commitment to look at, actually I think it was by the end
of 2017 we would have completed this salary survey and it would inform it. So, one of the reasons we even did put this money in here was to signal to that group of employees that we
have not forgotten about the fact that that was a requirement in the Management Comp Plan, and that we did have some funding set aside, assuming that we would have some results and implement
them.
Council Member Fine: Okay, so I’m completely comfortable with us, you know, promising this kind of salary Study to those employees and this group. I think that’s totally fair. If I,
you know, bet, I would not bet that this money is going to stick around. If we encumber it, it’s going to get used for that purpose, so.
Ms. Nose: So, just one clarification. It is in a reserve, but we have zero authorization to spend it.
Council Member Fine: Right, but I mean, it’s just like saying, it’s like saying, let me do a Study of if I want to paint my car, and by the way I’m going to put $500 bucks in the bank
to fund the car payment, the painting of the new car. And then I come back and, like, I don’t want a green car anymore, or a yellow car. It’s like, oh look, I put this $500 bucks away
for it. I don’t know. It seems a little odd to me. I just wanted to raise that to my Colleagues.
Chair Filseth: I’m curious, though, actually about Council Member Fine’s question, right. So, when we do a Study when we go into labor negotiations we do comps and so forth, right. Who
pays for that? Do we pay for that or does the union pay for that? Probably we pay for that, right?
Ms. Nose: We do pay for it.
Chair Filseth: Why is that? I mean, should it be that way? Should we split it?
Ms. Nose: I’m going to let Rumi help me out here.
Rumi Portillo, Chief People Officer: I think it falls under our obligation to maintain salaries and equity.
Chair Filseth: I would assume they do their own too.
Mr. Keene: Well, they do. So, it’s sort of dueling studies.
Chair Filseth: So, if we don’t have one, it’s like bringing, well anyway.
Mr. Keene: But, again, what we – I mean, we committed to this group of employees that we would do this Study with the basic intention that we would make adjustments towards the market
based on that, and so we have this reserve there so the Budget actually has some money set aside as opposed to you all balancing the Budget and then we come in say in August and say,
hey, by the way we have to do these pay increases. And you say, where’s the money coming from. Now, hopefully, we’re in the ballpark of what’s right.
Council Member Tanaka: Yeah, I agree with Council Member Fine on that, but my other questions are this, and I can’t remember which, what parking lots are what number, but for California
Avenue (Cal Ave), what is parking lot 4 and 9, is that the one where we plan to build the Public Safety Building on and the garage?
Ms. Nose: I’m sorry, can you restate your question.
Council Member Tanaka: Which is 4 and 9 on Cal Ave?
Ms. Nose: 4-9?
Council Member Tanaka: 4 and 9. I’m looking on Page 476.
Ms. Nose: And you’re looking at Item Number 3, the transfer to the Cal Ave parking garage, or Cal Ave parking district?
Council Member Tanaka: Yeah, the repainting of that. I was just wondering which ones are those? Which is 4 and 9. I just want to make sure it’s not the ones that we’re going to be putting
the parking structure on.
Ms. Nose: Understood. Let me go look it up.
Council Member Tanaka: Okay, because I don’t know where 4 and 9 is. The second question is, on Page 474. Okay, so we’ve never had these contingency accounts, I guess, by looking at this
in 2015 and 2016, is that right?
Ms. Nose: Not quite. So, the reason why you don’t see actuals in those contingent accounts is because per the City’s Muni Code, upon written authorization from the City Manager, we can
move these funds as necessary into a department within the City. So, the actuals show up in the departments, whereas the Budget is originating here in the non-salary section. So that’s
why you’ll never see actuals here, is because we don’t actually spend out of a reserve.
Council Member Tanaka: So why not just put down the Adopted Budget for 2016 and the Adopted Budget for 2015 then, so we have a basis of comparison.
Ms. Nose: We can absolutely change that.
Mr. Keene: We could do the adopted, but we wouldn’t do the actuals. And certainly on an each-year basis we’re able to give you what we did allocate the funds towards.
Council Member Tanaka: So, for 2017 then, what were the, I mean, how do I see that?
Ms. Nose: How can you see the history of the…
Council Member Tanaka: No, so like in 2017 the Adopted Budget was what’s listed there, right? What was the actual then?
Mr. Keene: So, the year’s not actually over yet, but we could give the Council a report of (crosstalk).
Council Member Tanaka: I see.
Ms. Nose: I can tell you right now that I’ve seen plans or they’ve been executed for CMO, the Attorney’s Office and the Human Resources contingency. I would have to check back on tracking
of Council. But if you guys want a full accounting of what’s been spent year-to-date we can do that.
Council Member Tanaka: … what happened here because it’s missing. It’s kind of hard to know what happened here because it’s missing, right. We don’t see, because on the actuals it gets
transferred so you don’t see, you don’t even know what the Budget is.
Ms. Nose: Sure. So, we can easily get you the historic Budget on these. There’s not a lot of change, I’ll tell you that year-over-year it’s pretty abnormal for us to adjust these. I
want to say, and this is totally just off the cuff, the last time we changed these levels were when we were really looking at budget cuts, and I think the City Attorney’s we cut, if
I remember correctly?
Mr. Keene: We could give you a history of these. I mean, we obviously haven’t typically had the Budget Uncertainty Reserve. But most of the others are in the ballpark and we could give
you an accounting for 2017.
Council Member Tanaka: So, is this 12 percent on the bottom, is that overall?
Ms. Nose: That’s the full Non-Departmental Budget increase. And you can see the primary driver for that is actually transfer to infrastructure.
Chair Filseth: I was going to ask what all these different reserves were, but I think Council Member Fine pretty much covered it. So, I’m good. Council Member Holman.
Council Member Holman: Yeah, a couple, three things. Actually, more than that, but hopefully none of them long. I’ve become aware over time that neither the City Auditor or the City
Clerk have any Contingency Funds, and I know at least for one of those departments without getting public in particular, I know for one of those departments it really caused an issue
and a concern that had to be worked through with your department. So, why don’t they have Contingency Funds of some level, $50,000 or something at least?
Mr. Perez: You know, typically over time we’ve been able to accommodate them, either through the City Manager’s contingency or we look through, you know, savings within the department.
Of if it’s a wider issue that they’re looking at, we look from a general benefit, for example fund or something. So, I can’t recall a time when we haven’t been able to accommodate them.
The issues you describe, the City Auditor came to us early on and advised us of the situation and we were able to accommodate their request.
Council Member Holman: I was actually thinking of one in the City Clerk’s Office since you’re being specific.
Mr. Perez: I’m sorry, I thought you said clerk. I misunderstood, sorry. It’s something you could certainly do, you could create them.
Mr. Keene: And I would just say the Clerk, a big portion of the Clerk’s job is to directly support the efforts of the City Council, so I mean, it’s fairly easy to tap the City Council
reserve also for this. I mean, most of what I spend is not on City Manager stuff, it is issues that come up in the organization or in the community, you know, that seem warranted, and
so as Lalo said, it does cross across office and departmental boundaries how we apply the contingency, and particularly since the Council often hasn’t spent anything, pretty easy probably
to handle the kind of diminimist things that come up in the Clerk’s Office.
Council Member Holman: So, I guess what I would like to see, because they’re each CAO’s and I would like to see them have some level of Contingency Fund of their own, so they don’t have
to come, you know, begging at the table of the Council Contingency Fund for instance, to resolve an issue that is a departmental issue that has merit. So, it’s sort of a respect thing.
It’s sort of an accountability thing. It’s sort of a responsibility thing, so. Since I’ve been here eight years plus, we’ve never come close to using the Council Contingency Fund, so
I’d like to see something like that, maybe $50,000 for each department or something like that as a change in structure.
Mr. Perez: One thing you could do is, the City Attorney’s Office has $100,000 that’s been classified for outside legal services contingency. You could redefine that use for that one.
Council Member Holman: Say that again. The City Attorney has $100,000?
Mr. Perez: Yeah, if you look, it’s the, under contingency accounts, it’s the fourth line item, City Attorney $100,000. So right now it’s been designated to be used for additional contact
legal services when they run out of funds. So, what I’m suggesting is if the Committee is looking for going down that direction, you probably don’t want to add a second reserve, you
want to, you know, redefine or reclassify how that contingency could be used.
Council Member Holman: I’m sorry, I’m missing something, like how? I’m not talking about City Attorney.
Mr. Perez: I thought I heard you suggest to add $50,000 for each department. Did I misunderstand?
Council Member Holman: No, I’m just taking about City Clerk and City Auditor, which each have no Contingency Funds.
Mr. Perez: Sorry, I heard each department, sorry. Never mind.
Council Member Holman: No, no, the City Manager has a fine one, the City Attorney does.
Mr. Keene: Right, but just so we’re clear, the City Manager contingency really isn’t, I mean honestly, there really isn’t a City Manager Department. The whole organization is ultimately
my responsibility. The CAO’s have some independence, but we pretty much are there to say, “Yeah, here’s Contingency Funds that are available for different uses,” and when we bring you
the report you’ll get a sense of how we sort of spend that. So, I am just saying that, I mean, I would be surprised between the City Manager contingency and the Council Contingency,
that we couldn’t cover things in those two offices.
Council Member Holman: I’m not questioning that. For me it’s a matter, like I said, it’s respect, responsibility, authority, you know to the CAO.
Mr. Keene: Right, would we be saying to the CAO’s that we would expect them to spend that money in other departments? Because that’s what I do. Do you know what I mean?
Council Member Holman: I’m not trying to take it out of your contingency. I’m talking about the Council’s.
Mr. Keene: I’m just trying to tell you, we need to over budget money. You know, I’m just saying that I would be surprised if $350,000 now, for example, anyway.
Chair Filseth: Can I try to nay case on this one. I think Council Member Holman has eloquently stated the aft case, and I’ll try the nay case here, right, which is I think, it hasn’t
been a problem, pretty small amounts of money involved and just on general principal, you know, I think generally we’re better off with sort of fewer distinct pots of discretionary money
lying around than more of them. So, I think six of one, half a dozen of the other, but I think there’s probably not going to be 100 percent consensus on this issue on this Committee.
Council Member Holman: I would generally agree with you. At the same time, it’s like we had to like to allocate the City Auditor $20,000 so they could do a, what was it, $13,600 survey.
It’s kind of like, it’s kind of silly, isn’t it? It’s like if I was the City Auditor, for instance, I’d want like, “Oh hey, I’ve got $50,000 I could tap if I need to do a survey that
supports a Council objective.” You know, you get my point. So that’s one question. These are all under contingency accounts, human services resource allocation or HSRAP, that’s just
a carryover. It’s not a new allocation. It hasn’t been used before, right? It’s just a carryover?
Ms. Nose: Please repeat that for me.
Council Member Holman: The HSRAP $50,000, that’s just a carryover. It hasn’t been used?
Ms. Nose: This one is actually new money every year. This is something that the Council approved last year in the FY ‘17 Budget. So, there was one-time funding of $50,000 which we still
have. I will reappropriated through that process and you see it in the General Fund BSR reconciliation.
Mr. Keene: I think you’re saying what Karen was saying.
Ms. Nose: No, she’s saying it’s a carryover, I think, right?
Council Member Holman: Well, I don’t think it is new money.
Mr. Keene: We’re not accumulatively adding to it, are we? If you don’t spend $50,000 we carry it over, we put another $50,000 in and then there’s $100,000 there?
Ms. Nose: We didn’t establish a policy around it.
Mr. Keene: No, we basically reappropriate a $50,000 if we would spend it or we didn’t spend it? No?
Ms. Nose: No, you now have two HSRAP reserves, as of FY ‘17. You have one that’s, is this the one time or is the emerging needs in the department? Never mind. This is the one time. The
emerging needs is in the department.
Council Member Holman: So, this is the emerging needs, right?
Ms. Nose: No, the emerging needs is in the CSD Department itself. I apologize. I was incorrect. Yes, this is the one time. So, in total, there’s $100,000 of which $50,000 is sitting
in the department and $50,000 is sitting here.
Council Member Holman: Okay. You know what would be helpful to…
Ms. Nose: Put one time next to that for you?
Council Member Holman: Yes.
Ms. Nose: Yes, not a problem. Of course.
Council Member Holman: So, this is the, is this the potential for the match? Is that what this is then?
Mr. Keene: I don’t know. I would have to go back.
Council Member Holman: Which $50,000 is this?
Ms. Nose: So, this is the funding that in FY ‘15 was set aside for future Budget cycles, and so since Council has never spent it, we continue to carry it forward year after year. That’s
what that is.
Council Member Holman: So, this isn’t NCSD though, I’m sorry, it’s not CSD?
Ms. Nose: No, it sits in non-departmental. There is a separate allocation of $50,000 in CSD as a department.
Mr. Keene: This money is available though, at the Council’s discretion to be used in HSRAP-related programs.
Council Member Holman: Yeah, emerging needs, yeah. Maybe if you could put emerging needs there with this line, it would help clarify that.
Steve Guagliardo, Senior Management Analyst: Good evening Council Member Holman. Steve Guagliardo, Office of Management and Budget. Just for purposes of complete clarity, the one-time
money is actually in the CSD Department. This money in non-departmental is the ongoing, replenishing $50,000 that we established as part of last year’s Budget process. So, we’ll put
emerging needs on it in the non-department section to make that crystal clear.
Council Member Holman: That would be really helpful. Planning and Transportation, last year we appropriated an extra $500,000 because of so many projects, proposals, initiatives that
were going on. We haven’t gotten to Planning Department yet, but is there any, what’s the prognosis for need for any allocation this year?
Mr. Keene: I think when we get there you’ll see there are different line item funding components that we have made, right. I think there’s a better sense of what we have that we need
to do in FY ‘18 and the fact that there are other needs, but they may be beyond Fiscal Year ’18, so we didn’t feel the same necessity to put a Contingency Fund in. Is that accurate the
way you would look at it?
Ms. Nose: It is, and I think the big initiative over FY ‘18 is really going to be parking, and as unknown as that landscape is, it’s hard to put a dollar figure to that right now without
us kind of vetting through both as in Administration and in Council, what that landscape looks like.
Mr. Keene: I mean, we do have some capital money to set aside in parking, right, for some of the implementation? So, I mean, this is everything from, okay, we’ve got a wayfinding program,
you know, the automated garage stuff in there, all of those things. Then we have the larger issue of where we’re going with pay for parking, which is a decision that we see as further
out than, you know, immediate right now. So, I think when we get to Planning you’ll get a good sense, do we have the right amount of money for the right initiatives that you would want
to see next Fiscal Year.
Council Member Holman: So, for a little bit there I was smelling a BAO coming, but it sounds like maybe not, maybe not.
Mr. Keene: I mean, it’s always kind of challenging to, we don’t necessarily want to appropriate money for which we don’t have a sense that there is really going to be a need there yet,
right, that we could define. Partly because that appropriation can take away from other decisions that you would more like have. But, I think you’ll get a better sense when we’re there
in Planning, so for example, even, I don’t want to digress on this, but in the overview, Staff, Kiely gave you this range of estimates of increases of 25 to 75 percent for the garages,
right. You may have a discussion that sort of says, “We want to see larger percentage increases for the permits for garages,” than what we proposed. So, there may be more revenue stream
that’s also available.
Council Member Holman: Okay, and then my last one, two last ones. Under Sustainability there’s not a contingency account there, but I thought when we were talking about Sustainability,
there was, but it’s not here. There’s not any here.
Mr. Guagliardo: So, the money is in here and it’s budgeted in ’17, and then the premise is because Gil hasn’t used any of it yet in this Fiscal Year, that we would re-appropriated it
to Fiscal Year ’18 through the reappropriation process, any unspent funds.
Council Member Holman: So now I’m confused, because I thought it was transferred from contingency to staffing, rather than being in contingency, I thought that’s how it was utilized
last year. Did I misunderstand that?
Mr. Guagliardo: Yeah, it was perhaps just a misunderstanding. I was in contract services in the department last year. This is separate and distinct.
Mr. Perez: He is going to ask you to consider letting him use some of this on June 5, when he brings the S/CAP and the SIPS. Okay. And the last one is the transfer to infrastructure.
We’re all eager to get as much of this done, as possible, but we are adding $6 million more than we did last year and I’m just wondering if we’re going to be able to do that, given some
other potential demands?
Ms. Nose: So, one of the things about that $6 million is it’s an annualization of a one-time deferral of projects that we approved in FY ‘17, so in the FY ‘17 Budget where you
see that dip, actually, probably the great look is if you look at FY ‘16 actuals to your FY ‘17 Budget to your FY ‘18 proposed. So, you see that dip in FY ‘17? It’s because we, through
the Finance Committee last year, deferred some projects. So, we pulled down the transfer to the Infrastructure Fund for one year. And what this Budget does is restores it back to the
prior levels. That’s, I want to say, about a $4 to $5 million difference. The other change is to reflect the appropriate allocation of the Transient Occupancy Tax (TOT) Funding that’s
been dedicated by policy to go towards infrastructure. So, the other change you see is, frankly, the healthy revenue growth that we’re seeing on those TOT revenue streams.
Council Member Holman: Okay. And if I remember correctly, I think last year we reduced it some too because we didn’t want to reduce our reserves. Wasn’t that where we did that last year?
I think one of the reasons it was lower last year too is because we didn’t want to lower our reserves beyond a point that some Council Members on Finance were comfortable.
Ms. Nose: Agreed. And when we deferred those CAP projects we were able to lower the contribution from the General Fund to the CAP Fund.
Council Member Holman: Okay, and then I do believe my last question is on 475, and is just about the middle of the page, it says Transferred to Electric Fund and I know sometimes we
do transfers from Utilities Funds, but transferred to Electric Fund?
Ms. Nose: Give us one second and we’ll look at that. I know what that is. That’s the adjustment on the electricity for the rate changes.
Council Member Holman: That makes perfect sense. Alright, good. Thank you for addressing all my questions, and I think this one merits going in the parking lot, because of, I’d like
to see where we are with Planning and Transportation, I have the question about Sustainability, I’d like to see where other Council Members are, but not tonight, on the moves some monies
around for the Clerk and Auditor to have some level of Contingency Funding, and see where we are when we end up at the end of all this too, to see where we are on the transfer to infrastructure.
So, I think there are a lot of questions on this.
Council Member Fine: If that were a Motion, I’d be willing to second it.
Council Member Holman: I would move that.
Council Member Fine: I’ll second it to move it to the parking lot. Just to speak really quickly for me. For me the one that stands out here is Planning and Transportation.
MOTION: Council Member Holman moved, seconded by Council Member Fine to place the Non-Departmental Budget in the Parking Lot.
Chair Filseth: I’m not going to vote for this. I think we should just approve it, but we’ll see how it goes.
Council Member Tanaka: So, I think Council Member Holman makes a good point, because the way I kind of do this is, we should do this one at the end, because after we reviewed all the
other Budgets, this is like, kind of like this is the slack in the system, right. And so, it’s kind of weird to be doing it midstream because we are like, I mean, we haven’t been through
everything else yet, right, and so I actually think that we should defer this till later so that we have a chance to go through everything else, and then we see what’s left over, and
then, you know, we could jiggle stuff around. Because if we jiggle stuff around now, I mean, we don’t even know, so maybe you’ll change your vote.
MOTION PASSED: 4-0
Mr. Keene: So, Mr. Chairman, we were going to have a kind of strategic deep dive picture on pension, but that was anticipating we could end by 9:30 P.M. and we’re like 10:20 P.M. now
and I think we’d be better served to make sure we do that when we’re fresh, you know.
Chair Filseth: I understand the sentiment and in a perfect world I agree. I think I want to make sure we get to this, so if we don’t take it up tonight, when would we take it up?
Mr. Keene: I think we’d find the time. Thursday we can give you the date for it. We’re meeting again Thursday this week, right?
Chair Filseth: So, we do it Thursday at…
Mr. Keene: I’m not saying we would do it Thursday. I think we could give you the best date looking at the overall calendar and schedule we have.
Ms. Nose: I think it’s going to be the 18th.
Mr. Keene: The 18th
Ms. Nose: Yup. So, on May 18th, it starts at 2:00, correct.
Chair Filseth: That’s going to be a very busy afternoon, and I think actually Council Member Tanaka is not going to be here for that, right? Is that correct?
Mr. Keene: Okay, we all start work at 9:00 in the morning tomorrow at the latest.
Ms. Nose: I was going to say, I don’t know what time you get in.
Mr. Keene: I’m just trying to safely cover whenever everybody is actually here.
Chair Filseth: What are the chances we could take it up first on Thursday?
Ms. Nose: I actually think Thursday, since we start at 7:00, is probably one of your latest evenings. I’ve probably been a little too optimistic in only giving an hour for the entire
Public Works Department.
Chair Filseth: Later than this evening?
Mr. Keene: Can we start at 6:00 on Thursday?
Chair Filseth: I can start at 6:00 on Thursday.
Council Member Holman: I think I can, but I have something pending.
Chair Filseth: Council Member Tanaka cannot start at 6:00 on Thursday.
Council Member Holman: I’ll know tomorrow if I can start at 6:00, or tomorrow morning sometime.
Chair Filseth: Well, I’d rather we’re all here. I think, what falls off the end of the list if we do it on Thursday? If we ripple through the system?
Ms. Nose: Yeah, just knowing some scheduling conflicts, I think we would not finish Public Works is what would happen.
Chair Filseth: Got it. We should try to finish Public Works.
Council Member Holman: Can I suggest that that’s preferable over us taking up the item that’s so complex and important as what you were hoping to do tonight.
Chair Filseth: What do you want to achieve on the pensions discussion?
Mr. Perez: What want to communicate to you is what the impacts of the change are. So, they do not impact ’18, but they do definitely impact the future, and we want to talk about the
plan to have the other funds contribute to the separate trust, the 115 exactly, and our proposal is to have a contribution. And then we wanted to highlight at a high level, just so you
know what we’re thinking about, what some of the options are to address the unfunded pension liability, and our hope is that after the break to then get into nuts and bolts.
Chair Filseth: How long do you think that will take?
Mr. Perez: It won’t take us long to explain what we see. It’s a matter of, you know, the questions that you may have and try to understand that.
Chair Filseth: What if we did the following, what if we took it up now, but put a time stop on it, and anything we don’t get to, we’ll take up again on the 18th?
Mr. Keene: How long do you think you guys need?
Mr. Guagliardo: We could probably do it in about 15 minutes, at least the Power Point part, maybe even less than that.
Mr. Keene: So, if we end by quarter of 11?
Chair Filseth: If we end by quarter of 11? Okay. Or if we end between quarter of 11 and 11:00.
Council Member Holman: I was going to suggest if that’s all it took, why don’t we do it Thursday, when we are fresh, and let these guys go home after being here last night.
Chair Filseth: Half an hour on Thursday evening? But then we’re pushing Public Works down to half an hour.
Ms. Nose: I was going to say, if you this time start and then we get through the power point presentation, you can see and gauge better.
Chair Filseth: Why don’t we do that.
Mr. Guagliardo: Great, so we’ll get through the power point and then see what questions you guys have and how far we can get, and then we’ll go from there.
Mr. Keene: I think we’re just doing the Power Point.
Mr. Guagliardo: Alright, so this is the employer’s share of pension costs. As discussed a little bit earlier, there’s no impact in Fiscal Year ’18 as a result of CalPERS lowered rate
of return. We don’t see the impact of that until Fiscal Year ’19. So, what we’ve tried to do is start to model those numbers, and again, these are based on our best estimate. They are
not necessarily substantive final. They are going to change once CalPERS releases their latest actuary report in the summer, and they will change again once we get more precise numbers
on those rates of return. So, the first slide is just a glossary so we’re all speaking the same language and we understand what we’re talking about. So, rate of return. This is also
referred to sometimes as the discount rate. CalPERS voted to lower this in December from 7.5 percent to 7 percent. It’s going to be phased in over three years and, again, it doesn’t
start until Fiscal Year ’19. The normal cost is the amount you pay for your regular active employees on a go-forward basis rate. So, every pay period, you pay the normal costs associated
with an employee, and that covers that portion of that retirement. The next is the unfunded…
Chair Filseth: Except it doesn’t, which is critical. Okay, go ahead.
Mr. Guagliardo: I was fully expecting Chair Filseth to help clarify that point, which is the segue to the next class of return, which is the unfunded accrued liability. So, the normal
cost is for the active employees, the unfunded accrued liability is the amount of the normal cost that wasn’t paid on all prior employees. So, this is the amount left, the gap, the slack
if you will, in each of the pension plans. Not clarified here, but an important point, there are two pension plans, one for safety and one for miscellaneous. They are separate and distinct
and they do have very different impacts. The employer’s share is the amount the City pays to CalPERS. This is dependent on plan type, so miscellaneous or safety on bargaining group and
on the employee retirement tier. There is also the employee share. So, this is the amount that any City employee pays into CalPERS as part of their regular paycheck to cover their share
of the normal cost. Recently, as part of our bargaining unit negotiations, we’ve started to implement an employee pickup of the employer’s share. This is the amount of the employer’s
share that is paid directly by employees. So, essentially, we’re shifting a portion of the City’s costs onto the employees as part of the negotiations. And what this does is helps us
with cost containment. And then finally, you get to this net employer’s share which you’ll hear me refer to throughout this power point, which is really the amount that the City is ultimately
paying for pension costs after you factor in the employee pickup. This is really where you’re going to see the apples-to-apples comparison year-over-year as a result of the marginal
changes. So, these are the changes that they’ve done. Most notably, they split out the normal costs and the unfunded accrued liability. Prior to Fiscal Year ’18, it was all lumped together.
Their actuarial Study gave us a number and they said, “This is how much you have to pay.” As part of that number, we were allowed to prepay the entire amount, which resulted in savings.
For Fiscal Year ’17 it generated about $1.1 million in savings across the City, and for Fiscal Year ’18 we expect it to generate about $800,000 in savings. The reason for that reduction
is that we’re no longer eligible to prepay the entire amount. We’re only eligible to prepay the unfunded accrued liability amount. The other big change, and the real focus of this power
point and a source of great concern to the organization, is the lowering of the rate of return, that discount rate, from 7.5 percent to 7 percent. So, this next slide shows a chart…
Chair Filseth: Sorry, I’m going to interrupt you very much because I know we want to get through this, but did you say this is new for ’17, because older reports break out the Unfunded
Liability cost and the normal cost.
Mr. Guagliardo: They did. They broke it out separately, but the prepayment amount, you were eligible for the entire amount.
Chair Filseth: If you paid it for the year all at once, as opposed to monthly?
Mr. Guagliardo: Exactly. Correct, they did split it out, but the prepayment piece was the distinction. So, this is a chart showing the rate of return being phased in. In Fiscal Year
’19 you see a model at 7.375 percent, which is the marginal decrease. In Fiscal Year 2020 it goes down to 7.25, and then in 2021 we reach the full lowered discount rate or rate of return
of 7 percent.
Mr. Keene: And this is just for the Miscellaneous Employees.
Mr. Guagliardo: Correct, this is just for Miscellaneous on this chart. We have another chart a little later in the power point focusing on safety. So, the current normal cost rate is
9 percent. The normal cost rate for miscellaneous is 10 percent, but because of the employee cost share, they are picking up 1 percent of that, so what we see is 9 percent. The margin,
the increase, the normal cost that we see as a result of lowering that discount rate is 0.5 percent, so it goes from 9 percent to 9.5 in ’19. In ’20 it’s actually 1 percent, so it goes
up to 10 percent, and then in ’21 and forward it goes up 2 percent and stays at 11 percent. So, the dollar impact for each of these is quantified below in that line. Again, this is based
on our calculations. It’s going to chance once we get those more refined numbers from CalPERS. A few caveats to these, they use the budgeted salary rate and they do impose that 7.5 percent
vacancy rate that we have experience in miscellaneous over the past few years. Approximately 46 percent of these costs are borne by the General Fund and, as Kiely mentioned earlier,
that number you see in ’19, that $3.7 million surplus or so, does factor in this increase for the General Fund. And then the current Unfunded Actuarial Liability (UAL) is listed below
that. This is the number straight from CalPERS based on their actuarial assessment. We’re at 18.5 in’19 and what they have prescribed to us based on their circulars and based on the
guidance that they have given to agencies, at our funding level for the plan is that we expect to see a 2 percent growth to UAL in Fiscal Year ’19, which would be an increase of $369,000.
Chair Filseth.
Chair Filseth: That’s the annual, when you say current UAL, that’s this year’s amortization payment of the UAL.
Mr. Guagliardo: Correct, it’s the payment. It’s not the full UAL. Thank you for that clarification. And we see it growing in the out years. So, you see it going from 21.3 and growing
by 4 percent, so $852,000 in 2020, and then really you see a big jump in 2021, when we go to the full 7 percent discount rate. The discount rate is the rate of return on our investment.
The unfunded accrued liability is driven largely by those returns on investment and it’s such a large number, that as that rate of return lowers, you see a greater impact to the UAL
than you do the normal costs. And then phasing in, go ahead.
Chair Filseth: So, the UAL growth currently is 15 percent a year for the City of Palo Alto, so it’s the 2 percent, 4 percent on top of that, or does that?
Mr. Guagliardo: Correct. It’s a marginal change on top of the growth we are already experiencing. And then by the time you get to Fiscal Year ’23, you’re seeing a more than $5 million
increase to the UAL, just as a result of the lowered rate of return, separate and distinct from the otherwise experienced growth in the rate, in the UAL. So, just a different way of
presenting the same information for the graphically inclined, you can see the margins. They are growing by the same amount you saw on that chart. What’s interesting to see here is in
Fiscal Year ’19, about 40 percent of the margin is borne by the UAL, and then by the time you get to fiscal 2023, more than 70 percent of the amount is caused by the UAL growth. So,
next is the same treatment of the same information just for the safety plan. You’re seeing very similar increases in normal costs. It’s growing by a little less than a percent in the
first year, by 1.75 percent in the second year, and then it grows by 3½ percent in the final three years there. And then it’s the exact same growth for the UAL that you’re seeing. So,
the impact’s a little different, but again, it’s the same trend, 40 percent of the growth is responsible with the UAL in Fiscal Year ’19 and then it’s responsible for 70 percent of the
growth in Fiscal Year 2023.
Council Member Holman: Now, if we deferred this until Thursday, we wouldn’t be going home and having nightmares.
Mr. Keene: Well, I did want to just let you know that we were going to be passing out a paper for a pop quiz on the concepts and the implications of this that you could take tonight.
But, really, I think that after we do this, you do have all this information here and it may be something you do want to look at. I mean, scribble questions and stuff, so we’re better
prepared for that.
Chair Filseth: Part of the reason I was hoping we could do this tonight, yeah. It took me two years to understand even this much of it, and I still don’t understand it all.
Council Member Holman: I was hoping the paper you were going to pass out would be a paper bag.
Council Member Fine: Just a question, could we go back one slide. So, am I to understand that our Public Safety folks are contributing more on employee pickup and the normal cost as
well?
Mr. Guagliardo: Correct. So, their employee pickup is 3 percent by Fiscal Year ’19. And, again, that’s a presumption based on labor negotiations and all of that, but it’s our best guess
of where we’ll be.
Chair Filseth: When we talk about the normal cost, it’s a percentage of each employee’s payroll, okay. But, of course, the normal cost is different depending on whether they are a Tier
2, a Tier 3, Tier 1, right? Is that an average across all tiers?
Mr. Guagliardo: So, it is kind of an average across all Tiers. There’s about 38 percent of the City’s employees that are in one of those other tiers, Tier 2 or Tier 3, so for the most
part we model things on Tier 1 to get a sense of what our real exposure is. Additionally, if an employee comes to the City of Palo Alto from a different jurisdiction, they would be in
one of those other tiers, but still not Tier 3, not the cheapest option. And we’re not going to see the return of getting those lower tiered employees until they matriculate through
the actuarial reports presented by CalPERS across the next couple of years.
Chair Filseth: So, for a Tier 1 employee, is anybody actually paying the whole normal cost?
Mr. Guagliardo: So, they’re paying the full employee normal costs, and then…
Chair Filseth: Are we paying the rest of it?
Mr. Guagliardo: Yes. So, the City is paying the City’s share of the normal cost, the employer’s share of the normal cost, but scheduled for July 1 is a pickup for most of those Miscellaneous
Employees besides SEIU.
Council Member Holman: I have one question, whether it’s for us or anybody in the community that picks this up, I think it’s help information to understand what the limitations are that
the State imposes on the Cities in terms of what the maxims are we can ask employees to pick up.
Mr. Perez: Yes, we can get into those discussions and the terms of the PEPRA agreement and the conditions, because you can’t impose it until after June 2018, but you could obviously
negotiate it before then. Just to give you a quick point of reference to your question Council Member Filseth, the blended rate of the employee contribution is 7.584 for miscellaneous.
Council Member Tanaka: So, current UAL, does that $12.3 million represent the total deficit.
Mr. Guagliardo: No, so the projected UAL for safety in Fiscal Year 2023, our best guess, again it’s a little wonky because the last time we had the actuarial Study, like the last number
we have is as of 05/30/2015, so I don’t have a number for what it will be by that year, but in 2015, for reference, safety’s Unfunded Liability was $120 million, $118 million.
Council Member Tanaka: What is this current UAL line?
Mr. Guagliardo: This current UAL represents the current UAL payment, which is based on a 30-year amortization schedule, which means that, all else being equal, if we make these payments
for 30 years, we’ll be completely funded.
Mr. Keene: Based on what we know now, based on the actuarial projections are now, which are going to change in the future.
Council Member Tanaka: Okay, so what’s the dollar impact mean then?
Mr. Guagliardo: The dollar impact is the change to the current UAL payment. So, in Fiscal Year 2023 our current UAL payment would be $12.3, but it would grow by $2.5 almost, getting
up to almost $15 million.
Council Member Tanaka: I see.
Chair Filseth: It’s confusing as hell.
Council Member Tanaka: You’re talking about some big numbers here.
Mr. Keene: …in the next year we have to pay the difference between $169 and $395, just so we’re clear.
Chair Filseth: Real UAL for the City, if you include OPEB is somewhere between $500 and $800 million.
Mr. Keene: Mr. Chair, as Lalo and I were discussing, the problem is it’s bigger than this because this is the UAL for which we’re required to make a payment towards. Then there’s the
UAL we have which we’re not but we know is an Unfunded Liability, and that’s what the pension trust is about.
Chair Filseth: Right, you mean the principal, I mean, to be really brief, the principal is that we make the UAL payment, we pay the whole thing off over 30 years, but it doesn’t even
come close to really paying it off over 30 years. So, I mean, this is like VISA charging a minimum on your credit card balance, right. It’s no relation to the real balance.
Council Member Tanaka: So, what’s the total?
Chair Filseth: Somewhere between $500 and $800 million.
Mr. Guagliardo: And we do have one more slide and I just want to make sure we get to that before we reach the time cap. So, and this might help address some of the questions you guys
are raising of, how are we going to deal with this, what are our options, where is the light at the end of the tunnel. So, some next steps. Just some quick notes. As you guys are aware,
we proactively established the irrevocable Section 115 Pension Trust Fund. Throughout the Fiscal Year ’18 Proposed Budget you’ll see contributions from various funds into that. The General
Fund has already contributed its share for this year, and then what we’re doing in ’18 is essentially truing that up and making other funds besides the General Fund pay their fair share
into that. CalPERS will incorporate the changes that I have described throughout this power point into their next actuarial report. They usually issue that sometime in the fall, and
then we use that to incorporate into our long-range financial forecast. Our plan is to return to the City Council in the fall of 2017 to discuss our options and recommend a path forward.
You know, there is a whole matrix of options for how we can fund it, whether it’s taking a percentage of pension costs, taking a percentage of payroll costs, and then where we put it.
Do we put it in Section 115, do we use it to pay more money to CalPERS earlier, so we’re not just making the minimum payment, but we’re hitting a little bit of the principal. So, that’s
the end of the power point, but again, we have a few minutes left for questions, if you have any.
Council Member Tanaka: So, the Chair has mentioned that this is a $500 to $800 million problem, and if so, this is probably one of the biggest financial problems we have. Is that not
a fair assessment?
Mr. Perez: One of the biggest liabilities we have?
Council Member Tanaka: Well situations we have, financial situations.
Mr. Perez: Yes, by far.
Council Member Tanaka: So, how come I don’t see that number anywhere in this packet?
Chair Filseth: So, here’s the history, okay. First of all, everybody should understand that this is a 15-year-old problem, okay. In 2001, 2002, all these Budgets balanced. So, here’s
what you have is, over the last 15 years, this is General Fund actually, General Fund revenues and expenses, okay, and just the pension part, there’s two parts to the Unfunded Liability.
There’s pension and health care, which is called OPEB, other pension expense benefits, okay. So, what you can see is, the City has done a very good job of matching revenues and expenses,
okay, every year this millennium. But as we have done that, the Unfunded Liability and our pensions has grown an average of, well, $15 million a year and if you think it’s $500 million,
then it’s grown an average of $30 million a year. If you think it’s $800 million then it’s grown an average of $45 or $50 million a year. Well, it depends very heavily, the whole thing
hinges on one major assumption and a couple of minor ones. The major one is, what are CalPERS returns going to be on its Pension Fund Investments. CalPERS predicted those for 8 percent,
7.5 percent and so forth. So, what happened is, during the Gray Davis administration, they had a couple of great years in the stock market. CalPERS came back and said, “We’re making
lots of money here.” All cities in California and State agencies went back and generously increased their pension and health care benefits, to match what CalPERS was saying they would
make as returns. CalPERS hasn’t, on average, made anywhere near those kinds of returns since then, and so this is the result, because we entered into contractual agreements to spend
a lot more money than we were actually going to be able to make through CalPERS. So, basically, on the other hand, all this, it’s a personnel expense. I mean, benefits are part of compensation,
right. So, it’s all an expense. So, a really good question is, if we’ve run up a $500 to $800 million bill, depending on whether you think CalPERS is going to make 7.5 percent or maybe
6 percent, okay, and it’s very sensitive to that number, where is all this money? How is it possible for us to spend, you know, $500 million and it doesn’t show up in our Budget? I’ve
been wondering this for two years. It does show it in our Budgets, okay. But there’s still something I don’t understand and I’m going to ask you, is when you go through these summaries,
that line pension, it’s in there. The challenge is, so here we are at libraries, pension you know, grew 9 percent, 9.5 percent this year, the challenge is that we don’t calculate or
actually CalPERS calculates the expenses and tells us what it is. CalPERS manages all this stuff for us. CalPERS underestimates the amount of money we need to pay each year to fully
fund the pension costs, and this jargon the normal cost is a key component of that, okay. CalPERS under-estimates the normal cost. We pay what CalPERS tells us to pay, okay. But the
difference between that and the true amount that it would take to fully fund those pensions goes on the credit card, and that’s where it ends up on this green line. What I don’t understand,
and I would love to one of these days, that’s almost the end of my speech, which is, the point is that as we go through and look at the expense lines, okay, the wages and benefits expense,
okay, our actual wage and benefits are significantly higher than all this shows, okay. And the difference goes into the green line. Now, it’s a State problem. I actually think the City
of Palo Alto’s Finance Department is doing a yeoman’s job trying to operate sanely, okay, in a deeply flawed system. And I think that should be really clear. So, all these numbers, all
these expense numbers are too low, okay, because we’re not counting the stuff that we’re putting on our credit card balance. So, what I don’t understand is, when I try to figure out
what the true normal cost is for the General Fund, I get numbers of $500 million a year, $10 million a year, but this number is $30 million a year or $40 million a year, so where is
the difference. I’d like to know that someday.
Council Member Fine: Isn’t the difference there you’re talking about, like a 5 times difference here? Is that the fact that the normal cost on some of these is 10 to 20 percent when
we’re just not touching 100 percent? It’s roughly that gap, right?
Chair Filseth: The normal cost is the amount that you have to set aside in order to cover that year’s contribution to the City’s pension obligation. So, it’s not directly related to,
you know, the union’s going to pay 3 percent this year and so forth, it’s not directly related to that, okay, because the difference between the true normal cost and the one that we’re
presented with, the City picks up all that, okay. So, the union pays a little here and maybe they pay a little bit more, but the difference the City picks up, right. And the difference
is what goes into this green line, right. I mean, it’s big numbers. So, it’s like discussed with Lalo, we’re not breaking even. The City is losing a lot of money every year.
Mr. Keene: If I could just say one other very simplistic thing here. So, the chart that Eric is holding up there. Actually, everything went south before 2001, because it was ’98 or so
when Gray Davis paid back a favor to the Public Safety Unions by putting in legislation that allowed a 50 percent increase in the benefit retroactive. So, what has partly happened here
is this huge retroactive component here, which was never really sort of accounted for has leapfrogged over that one graph into the future, and then saddled us with this big, big deficit,
and then that’s all been compounded by, you mentioned, I mean the return on investments is key. The wage increases that we give over time is a factor. The mix of folks in our tiers,
and then the actuarial estimates on longevity of people and, you know, how long somebody is in retirement. All of those things play into the total Unfunded Liability that is not being
recaptured.
Chair Filseth: Now the language you hear, the conventional language you hear, and I’ll shut up after this, is that the reason we have this problem is that our investment returns, we’ve
had poor investment returns, okay. I would turn that around and you look at it, like, no, we made spending commitments based on unrealistic investment returns, okay. To put it a different
way, you worked in the private sector, okay. Did you ever meet a sales rep who spent their commission check before they closed the deal? All of them, right. That’s what we did. So, that’s,
I think as we go, from my perspective, I think as we go through this, we have to keep in mind that the expenses we see here are actually significant and way larger, and one of the things
that I hope we are going to take up is, calculating them correctly and reporting them correctly, once we get to the fall. I don’t think we can do that now. That’s to be done later.
Council Member Fine: It would be helpful to have another line in each of these. You know, if we’re talking about the annual pension and the full, unfunded pension. We may not be able
to do anything about it, but measure it per department.
Chair Filseth: I think we’ve got too much work to do. I mean, we’re not going to, this is so big and hard, we’re not going to solve it in this Budget.
Mr. Perez: And one of the reasons we’re suggesting the fall is because one, you’ll have this Budget square, we hope, right; and then second, the PERS actuary report comes out in August,
so then we will be dealing with what they project at that point. From there we believe you do have options you don’t have to wait for the State enact. So, we will present to you options
that we define. And to the Chair’s point, you may want us to go do more homework on that, so I think we’ll have a path for you with multiple options. Some of them are going to be easier
than others. So, we’ll do that in the fall.
Chair Filseth: Other questions? Council Member Tanaka.
Council Member Tanaka: So, by far, this is the most interesting part of the whole meeting. So, and the Chair is right, this is the most massive problem that we should be dealing with,
right. It should be priority one, given the magnitude of the issue. It dwarfs everything else like by a lot. So, I guess why is it hard, okay, let’s take on Page 291, right, libraries,
why is it hard to put down the real UAL or the true unfunded liabilities? I guess, why can’t we even estimate that?
Mr. Perez: So, by the contract obligation, CalPERS is telling us what that number is. The problem is that it is in arears. So, right now the latest number we have is from June 30, 2015,
and the number they’re telling us is a combine of $339 million, that’s our Unfunded Liability based on their assumptions, which means it’s a 7.5 rate of return and the data from 6/30/15,
which we know is dated. So, Chair Filseth, his point is, well, if you try to update that data, those data points and be realistic on the rate of return, the number is different. So,
what we want to do is come back to you with some scenarios. What do we believe the rate of return should be? If we do 6.5 what will the number be? So that’s why I mean that we have options.
At that point, then we say, “Well, based on that, what would be the required annual contribution.” We don’t have to wait for PERS to get to 6.5. We, the City of Palo Alto decided that
we’re going to be at 6.5 and here’s the new number.
Council Member Tanaka: But couldn’t you just say, okay, let’s just assume it’s 7 or 6.5 or whatever, and put the line in there, and this is a – you know, so that it’s really clear about
what’s going on.
Mr. Perez: You need to be strategic about this. You need to do it with a plan that has a funding option behind it, so when you’re reviewed, your financials, it has, you know, the signal
to the people that care that’s going to buy our bonds says that, one you identified a problem and what you’re saying is the problem is bigger than what PERS is telling you.
Council Member Tanaka: But don’t we have (crosstalk) to do that?
Chair Filseth: Let me try. So, even before you get to that, to actually calculate what these numbers are is not simple. I mean, you have to hire an actuary to do it, which we do, okay.
But it’s a lot of work, you know. It’s not the kind of thing you can get an update once a week.
Council Member Tanaka: I’m not saying get it down to the penny, but what about, like, order of magnitude, because that’s what we’re talking about here.
Chair Filseth: An order of magnitude you can probably get because they run a sensitivity analysis as our request in here, okay, but to get closer than that you need an actuary.
Council Member Tanaka: Because even the order of magnitude would be very eye opening, because.
Mr. Keene: Well, he already gave you a good one, $500 to $800 million.
Council Member Tanaka: Okay, so let’s just take a look at the pension liability on page 291, so it’s $1.1 million for libraries, so roughly, if we were to just swag it, what would the
true total liability be?
Mr. Perez: We need to go back…
Mr. Keene: Yeah, I mean, first of all, I mean most of our effort over the next few weeks has got to be poured into this Budget. This larger conversation, the things we’re going to put
out. The effect it’s going to have on our employees and labor. I mean, this will be an involved conversation.
Chair Filseth: But even calculating, I mean. I’m serious. You do it, I want you to try it, okay. I have, okay. Maybe you can get farther than I have. But to really understand this you’ve
got to do it.
Mr. Keene: We sort of said quarter of 11, then quarter of 11 to 11, and now it’s 8 minutes of 11. We’re not going to resolve anything more tonight, are we really? It would be great if
we could break. We got ten other issues we’ve got to deal with tomorrow, all of which have a sense of urgency also.
Chair Filseth: I think that’s it. A wise and sage summary. Thank you very much.
Mr. Keene: But this is food for thought that we’ll be able to deal with over and over.
Future Meetings and Agendas
Council Member Holman: Sleep well. I have one procedural question for City Clerk. As I recall from previous, that when we arrive Thursday, there will be a list of the Motions that we
made tonight, and then Clerk will keep a running tally of those Motions and keep feeding those to us. Do I remember that correctly?
Jessica Brettle, Assistant City Clerk: We will have the Motions that you’ve made tonight. That’s not a problem. We are sending the transcript over to the transcriptionist and asking
for it to be rushed, so we will try to turn those over as soon as possible as well. It may not be two days later, but definitely next week.
Council Member Holman: I don’t think it necessarily needs to be two days later, but you’ll keep those running and feeding to us?
Ms. Brettle: Most definitely, yes.
Council Member Holman: Great. Thank you.
Chair Filseth: If there are no other questions, the meeting is adjourned.
Kiely Nose, Budget Director: Wait, wait. One, you have an At-Places Memo that you guys received today, I think? No? Did we not pass it out? Never mind. We’ll give it to you guys on Thursday.
It’s about storm drain.
James Keene, City Manager: I would suggest that just like the thing you guys got, Karen, from the auditor, that stuff, if we could also get it on the site, sharing info, so when we are
trying to follow up or keep track of it, that would be great too.
Chair Filseth: Thank you. The meeting is adjourned.
Adjournment: The meeting was adjourned at 10:54 P.M.
TRANSCRIPT
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Finance Committee Transcript
May 2, 2017
FINANCE COMMITTEE
TRANSCRIPT
Page 1 of 106
Finance Committee Transcript
May 2, 2017