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HomeMy WebLinkAbout2023-05-30 Finance Committee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 10 Special Meeting May 30, 2023 The Finance Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 5:00 p.m. Present in Person: Burt, Lythcott-Haims, Stone Present Remotely: None Absent: None Public Comment Ken Horowitz commented on the study session for the 8-acre Cubberley land acquisition. The size of the Jewish Community Center on Charleston was 8.4 acres. Palo Alto Unified School District K-12 enrollment was 10,300. In 2017, it was 12,300, so enrollment is down approximately 16% in the last five years. Action Items Discussion on the Fiscal Year (FY) 2024 Budget Wrap-Up and Recommend FY 2024 Budget including the FY 2024 Municipal Fee Schedule for City Council Adoption Budget Manager Jessie Dechamps addressed the Committee. This was the last Finance Committee meeting before City Council adopts the budget on June 19. Staff made recommendations to achieve $1M in savings based on staff capacity and expected timelines to implement. The Committee will later reconsider delayed items for midyear investment. Administrative support was reduced to align with the new recommendations. Staff assumed savings for expected hiring delays. Staff’s potential referrals included consideration to pay HSRAP funding to a benchmark such as 1% of the General Fund budgeted expenditures, review of the Coordinated Area Plans (CAP) process and a potential fee subsidy for S/CAP. Staff expected to bring forward the last two recommendations in future reporting. Council Member Julie Lythcott-Haims commented on Vice Mayor Stone’s suggestion to recoup $1M by increasing the gas transfer tax from 15.5% to 18% at a cost of about $0.60/household SUMMARY MINUTES Page 2 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 monthly. She wanted to hold it at 15.5% due to our surplus this year and the high gas bills in January. Chair Burt remarked that we made a commitment to the community that the big spike in gas from last winter should not result in a windfall for the City. The City Manager was clear on that publicly. Vice Mayor Stone agreed with honoring the promise of the windfall but his understanding was that this transfer was from a couple years ago. Chair Burt noted on Page 6 of the staff report, Page 169 of the last packet, Table 2, Measure K housing and homeless services $800,000 for FY 2025 and beyond whereas our plan under Measure K was to have one-third toward housing services. Budget Manager Paul Harper pointed out the bottom of the table had a footnote at the end with one asterisk. Revenue was budgeted for Measure K equal to the eligible expenses of $800,000 that staff identified for those years but the anticipated amount would increase. In response to Chair Burt’s querying if we allocated the additional Measure K dollars anywhere, Budget Manager Harper replied no. Regarding Attachment C of the operating budget book, the second group of priority investments for climate change and natural environment had three items for Public Works and Utilities. Chair Burt wanted to understand how they allocated the costs because there was a single dollar amount instead of separate dollar amounts for Public Works and Utilities. Public Works Director Brad Eggleston responded that $600,000 in Tier 2 was the General Fund cost for three S/CAP studies but he would need to look for the details. Utilities covered half the cost of the EV strategic plan and staff’s contribution of time for overseeing the studies. Chair Burt commented on eucalyptus tree removal. State Farm stopped insuring new policyholders in California in part because of the level of wildfire risk. Eucalyptus trees present a significant risk in the foothills. The City does not have a great number of eucalyptus trees on the Arastradero Preserve property but there was a significant number on the immediately adjacent Stanford property. If we do not include eucalyptus tree removal in the budget, he would like a referral to the Stanford Ad Hoc Committee to have a discussion with Stanford about moving forward with their wildland protection plan. The administrative cost associated with Tier 2 expenditures was $837,000. There was one FTE and two 0.48 FTEs in the proposal. Chair Burt asked why we need additional HR recruiting positions versus filling vacancies. Human Resources Director Sandra Blanch responded that they posted HR vacancies for one position in the Benefits team and one in the Employee Relations team. There were recent promotions. HR requested an additional recruiter in support of the overall City vacancies as well as additional staffing because of FY 2024 adds and Tier 2. Chair Burt noted that the non-Tier 2 FY 2024 adds were already there before this supplemental request, so he did not understand why they were part of the $837,000 non-Tier 2 additional positions. Administrative Services Director Kiely Nose pointed out that on Packet Page 178, Staff Report Page 15, there was a paragraph stating the two 0.48 FTEs were for positions that HR was using and funding through vacancy savings. If you continued those hourlies for Tier 2 proposals after you filled the vacancies, you add capacity to the team as opposed to swapping SUMMARY MINUTES Page 3 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 out hourlies for full-time. Staff acknowledged the feedback from the Committee and Council to increase the pace at which they work through vacancies. In order to increase the pace, the HR team recommended adding a full-time recruiting position. City Manager Ed Shikada added that if we can keep up with the recruiting needs, they would redeploy staff to other areas such as benefits, other personnel issues, labor relations issues, etc. HR was understaffed. They distributed much of the HR responsibilities for recruiting to department liaisons or ambassadors. Chair Burt suggested refining the description because it was not for the adoption of Tier 2 but instead it was a need that existed before Tier 2 and Council’s interest in accelerating the reduction of the vacancy level. Public Comments: 1) Jasmina Bojic requested the Committee to continue their support of UNAFF (United Nations Association Film Festival). Last year, they received $35,000 from the City for their 35th anniversary in Palo Alto. They received $75,000 yearly from the County of Santa Clara for three years but funding ended two years ago. The 11-day festival in October is one of the largest events in Palo Alto. It is one of the oldest documentary film festivals in the United States. They present films around the world and are therefore a great ambassador for Palo Alto. They engage the community with a year-round program for all ages. For the last 26 years, they presented documentaries in the senior center. They have also presented documentaries in the Veterans Home and in schools. 2) Ken Horowitz thanked the Finance Committee for looking into the Cubberley budget. He had concerns about Cubberley rentals. The City has to decide next year whether to continue the lease. Gym HVAC replacement is in the Capital Improvement Plan for $900,000. In 2026, you are planning to spend $2.6M for turf replacement. He asked if the City needed to incur those expenses if they were not renewing the lease with the school district. He thought the School District had monies from bonds. The City was not able to collect bonds. He wanted the school district to pay their fair share. This month’s School Liaison meeting was cancelled. He has attended school board meetings where they have stated they do not want to sell land because it is valuable. 3) Karen Kwan, Director of Development for the Palo Alto Art Center Foundation, expressed her thanks for keeping the Art Center positions in Tier 2 for consideration. The Program Assistant 1 and 0.75 FTE would support opening hours on Sundays that were a pandemic cut as well as revenue-generating family workshops that would benefit the City. The comment about the use of volunteers in installing artwork for the Art Center was incorrect. Their Fine Art Installation crews were paid professionals supported by the Palo Art Center Foundation. The City of Palo Alto had fine art insurance for their artwork and previous installation crewmembers were temporary hourly City employees. The amount currently under consideration would cover Program Assistant 1 and 0.75 FTE with the remaining $30,000 for the installation crew. SUMMARY MINUTES Page 4 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 Youth mental health was one of the priorities but staff’s Tier 2 recommendation on Slide 5 was for a 50% reduction. Vice Mayor Stone requested further explanation. Director Nose acknowledged and supported Council’s priority of youth programming for mental health purposes but they do not have a plan for spending the full $200,000, so staff will return midyear with the proposed allocation of resources. Director Eggleston addressed Vice Mayor Stone’s question regarding the 25% reduction for airplane noise. The $100,000 budget proposal initially in Tier 2 was for consulting resources for potential technical work. Staff did not have a definition of the scope of work yet but they wanted to include the majority of the funding. Vice Mayor Stone asked about unhoused resident services. Director Nose replied it was a placeholder. Staff did not have the capacity to start all Tier 2 items on July 1, so they realistically looked at what they were able to do over the next six months and what dollars were critical during that period. Staff will not stop work around supporting unhoused residents but they do not think they would have a contract and plan to allocate those funds on July 1. Staff’s recommendation was to delay the conversation to midyear. Vice Mayor Stone stated he was comfortable with the staff’s list. Council Member Lythcott-Haims noted that some items on Tier 2 were vital for the City to function well. If something was critical as a departmental and Council priority, next year she wanted to see it in the main budget proposal. Tier 2 should be extra things that staff hoped to do but there was not enough money. LifeMoves struggled with connecting unhoused residents to permanent housing and services. She was not interested in allocating more dollars this year until we knew what those dollars would accomplish. In this way, the City would spend dollars in a way that was effective in supporting unhoused residents. Council Member Lythcott-Haims commented that youth mental health was a priority for all of us; however, it was a placeholder. The teen center we built in Mitchell Park was not open because we have not hired staff for that job. She would rather open the teen center to help address, promote and support youth mental health instead of putting dollars toward a placeholder. She recommended cutting the full $200,000 because there was no plan attached to it and instead spend it in the coming year when we had a plan. Council Member Lythcott-Haims opined it was incredibly risky to delay eucalyptus tree removal. We were heading into fire season and our fire chief said we needed to remove eucalyptus trees. She thought eucalyptus tree removal should have been in the main budget instead of Tier 2. She emphasized that if we had a potential partner in Stanford on this, then she was comfortable removing it from Tier 2. Otherwise, she felt it would be hard to face the community if we end up with a hot fire season. Council Member Lythcott-Haims appreciated Dr. Horowitz’s public comment about $900,000 for Cubberley’s HVAC replacement and $2.6M for turf replacement. She wondered why staff SUMMARY MINUTES Page 5 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 considered giving $370,000 of it back on Tier 2 for FY 2024 instead of giving the whole $900,000 back. If it was for essential custodial services and something would shut down in our Cubberley maintenance because we did not allocate these hundreds of thousands of dollars toward it, then it should not be in Tier 2. Because it is Tier 2, she gleamed it was not important. City Manager Shikada explained this was a color of money issue as to whether funding came through what was previously the Cubberley Infrastructure Fund versus the General Fund. Director Nose commented this was not on staff’s Tier 2 list. They tried to refine the number in alignment with the Finance Committee’s intentions. Chair Burt stated that originally those funds would go into an underfunded capital and major maintenance program. In recent years, that drifted into operational, custodial and other maintenance. This action would put more funds into capital for Cubberley. He wanted a better understanding on how staff was defining which allocations come from the General Fund versus the Cubberley Infrastructure Fund. Council Member Lythcott-Haims wanted to clarify if staff proposed pulling back full EV fleet replacement to zero. Director Eggleston responded that originally the Tier 2 proposal was $800,000 from the General Fund. Finance Committee discussed reducing that by half. The current staff recommendation was to bring that down to zero additional funding. They have restructured the project for fleet replacements for next fiscal year and have a very large number of EV additions to the fleet. It would be reconsidered at midyear to replace heavier machinery, medium and heavy-duty trucks with EVs. Chair Burt assumed they would not remove eucalyptus trees during this fire season even if it were included in this budget because it was unlikely to occur between July 1 and October. If we include it in the midyear budget cycle, the City had time to look for options with a lower expense. Fire Safe Council is a nonprofit that does widespread fire prevention in Santa Clara County and he spoke with them recently. They have a contract in Alameda County to remove eucalyptus in combination with an on-site pyrolysis unit to produce biochar. They were economical because they are a nonprofit. Chair Burt wanted to clarify if they would reconsider at midyear all the items the Finance Committee recommended in Tier 2 that were now pulled back. Budget Manager Harper replied that those items would be in a set of things to reconsider. For the LifeMoves project, $2.5M was listed under capital. Chair Burt asked if it was $2M in cash and $500,000 in lieu waivers of expenses. Assistant to City Manager Melissa McDonough explained that $2.5M covered any items removed from the project that Council would like to put back in, such as PV panels. The estimated fees would cost $500,000, so it is not in lieu. It is a cost recovery for building plan examiners. Director Nose pointed out that there was a project in the CIP budget for $2M. The $2.5M was for additional projects such as solar and EV that were beyond the $2M in the CIP. The permit fees were estimated to be $500,000. The fund was self- sufficient. It was full cost recovery, so they would move money to make sure the Development Center stayed fully funded and pay those fees. It was in the Tier 2 recommendations but funded SUMMARY MINUTES Page 6 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 by operating funds set aside for Homekey. They recognized two years of operating funds for Homekey, transitioning those to capital, acknowledging in five years they needed to continue to fund seven years of operating cost. There was a source and a use to fund the $2M. Chair Burt wanted to understand what the $2M was for and how critical it was to the project. LifeMoves and Sobrato Philanthropies were dependent on the City’s commitment to fill our $2M share of the $6M gap. Assistant to City Manager McDonough responded that their report on June 12 would have more detail. About $871,000 was for solar panels and a portion of that was for EV chargers. The Fire Department felt very strongly about adding sprinklers on the storage structure and garbage enclosure at an additional cost of a couple hundred thousand dollars. Having exterior decorative fencing was part of the $2M but was for aesthetics. It was critical to know if Council wanted to eventually have solar and EV so the design could incorporate them but they did not have to allocate dollars immediately. Solar panels were a critical element to include because of new statewide requirements this year. The transitional housing project was a City expense but Chair Burt thought it was eligible for state grants and new federal subsidies from the Inflation Reduction Act. Assistant to City Manager McDonough replied that they were looking for alternative funding sources for solar panels but had not seen anything to cover the expense of EV chargers. Chair Burt opined that EV chargers were less critical than solar for this site, so he preferred to wait for grant funding to install EV chargers in the future. Chair Burt commented that fire safety was the highest priority and fencing was almost as high of a priority. He wanted to have a Council discussion and more clarification on deferring solar and EV, if our partners were okay with it and the financial ramifications. Director Nose clarified how they allocated the $2.5M. They set aside $2M for LifeMoves operating expenses. If the Council chose not to move forward with EVs or solar, the second question was if it was to be free and clear funds or reserved for operating expenses. The General Fund funded $500,000 but it was offset by Measure K funds because this was an eligible activity. Chair Burt did not foresee it being an issue because we were over the $750,000 allocated for Measure K with the $500,000 plus fire safety and fencing. In reply to Chair Burt’s understanding that the teen center was open, Director O’Kane responded that they had not been able to open it this schoolyear it because they were unable to hire staff to work at the teen center. They used high school students in the past but it was difficult for them to get to the teen center on time. There was a continuous opening on our HR page for recruitment but they had not received enough qualified candidates. The positions were budgeted. They were trying to find creative ways to keep it open, potentially by using volunteers to staff it next year. Teen leadership groups host special events in the teen center on weekends or evenings but it was not open after school. Chair Burt asked if staff told Project Safety Net that we had a teen center we were not able to operate and if they could provide any resources. Director O’Kane replied no, they had not communicated that need with Project Safety Net. She was not sure if they had resources for this but she could reach out to them. SUMMARY MINUTES Page 7 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 Chair Burt was hopeful we could use one of our partners focused on upstream issues where this might apply. He was not aware of the teen center staffing problem and he suspected there were resources available. Council Member Lythcott-Haims pointed out that high school ended significantly later than middle school, which is why they had trouble recruiting high schoolers to support the middle schoolers in the teen center. Maybe seniors could volunteer to work with youth. She is an alternate to the Palo Alto Youth Council and they meet in Mitchell. She saw how beautiful the teen center was and it was a shame knowing it sits dark most of the time. It was an example of how we need to have the throughput on our goals and visions. Vice Mayor Stone asked if staff reached out to the School District for a possible partnership. Schools have staff members such as instructional assistants who might be interested in afterschool hours. Director O’Kane thanked Vice Mayor Stone for the suggestion. She did not know if the Recreation staff reached out to the School District but she will make sure they do. Ms. Kwan spoke tonight about the Art Center Foundation wanting us to approve the combination of staffing. Chair Burt requested further clarification. Director O’Kane responded that the Art Center staff prepared a proposal that reduced their staff request to a Program Assistant 1 and exhibition installation staff. Director Nose noted that the cost was $124,000 annually per Staff Report Page 11 or Packet Page 174 from the May 22 packet. The current proposal included the full-time position that the Finance Committee discussed at length. Last year, Council supported $25,000 UNAFF funding and Chair Burt thought that the Council discussion at the time was in favor of funding continuing on an ongoing basis. Staff believed it was a one-time funding. Chair Burt recalled that last year it was a one-time funding out of the regular budget cycle. Council Member Lythcott-Haims found on Page 215, Community Services, United Nations Association Film Festival, one-time prior year budget adjustment of $20,000. Budget Manager Harper stated it was a one-time add last year but was pulled out of the 2024 budget. At the time, City Manager Shikada recalled we had hoped staff would complete a broader review of grant allocations to provide an overall programmatic strategy. Chair Burt asked for a breakdown of the latest staff proposal on Cubberley maintenance allocations from capital versus the General Fund. Budget Manager Harper explained that the current proposal would move custodial-type staffing back to the General Fund and keep in the Cubberley fund the systems maintenance work, such as working on HVAC systems and things to maintain the facility. Chair Burt referred to Page 13 of the staff report. He inquired how many dollars in the General Fund were associated with routine things such as fire and sprinkler inspections, test and repair, parking lot sweeping, and other custodial work. Budget Manager Harper believed fire systems would stay in the maintenance Cubberley fund. $370,000 for parking lot sweeping would move to the General Fund. Chair Burt was surprised that fire alarm and sprinkler inspections were viewed as capital. He thought it was maintenance since it was for keeping things in good repair. It was something ongoing you have to do for operations but it was not installing new equipment or a major replacement. Chair Burt recommended that staff SUMMARY MINUTES Page 8 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 refine it to make sure they were putting things that were truly operational requirements, such as sprinkler and fire system inspections and repairs, into the operating fund. Director Nose stated that staff made their best estimate on Staff Report Page 13, Packet Page 176, because the past Council motion specifically stated ongoing maintenance associated with the facility. Staff separated sweeping, cleaning, generalized day-to-day maintenance activities from what was keeping the facility running such as repairs, window replacements, interior painting, electrical, plumbing, and sprinkler systems based on staff’s best guess at interpreting the 2014 Council motion and the intentions behind it for activities considered ongoing maintenance for the facility. Chair Burt suggested that staff review the Council meeting or minutes because the record provided context for better clarity. We had been doing all those things before the motion and Council discussed over multiple meetings over a couple years that we were not doing major facility repair work such as roof and HVAC replacement. He remembered his motion was in the context of dedicating these dollars to do things we were unable to do up until then. Director Nose stated if that were the Committee’s intention, then the amount would need to increase to $900,000. On Page 13, the bottom of the second to last paragraph identified the wide range of work that the facility service staff do, including standard repairs for plumbing, electrical, heating and ventilation systems and equipment, maintaining the systems, coordinating maintenance tasks, etc. $300,000 was a subset of the $900,000. The Cubberley Infrastructure Fund would fund tasks in the second paragraph. $370,000 were for a variety of daily tasks in the final paragraph of that page, including custodial work such as sweeping, vacuuming, cleaning restrooms, washing windows, replenishing supplies, and polishing floors, furniture, and woodwork. Director Nose asked if the Committee desired the items in the paragraph after the table to be in the General Fund or not. Chair Burt said the list included things that should be in the Capital but others would not. Parking lot sweeping was normal operations as well as fire and sprinkler inspections. Drywall installation, window replacement, and interior painting were not being done and he was comfortable with those staying in the capital fund. The Finance Committee can give guidance for staff to refine it before it comes back to Council. City Manager Shikada said that part of the issue was how difficult it was to account for the use of the funds. The way staff proposed breaking it out was that the job descriptions would define whether it was capital or ongoing maintenance such as janitorial. Segregating portions of what the facilities technicians were doing added complexity to keeping track of how they were spending their time. Public Works or Community Services staff did not typically segregate their time as an engineer would to different capital projects. Chair Burt said parking lot sweeping and inspections were not physical replacements. He wanted to be faithful to the commitment made to the community and PAUSD at the time to address the needs. Director Eggleston agreed that Facilities Technicians perform a variety of functions, including preventative maintenance of building systems as listed in the staff report, responding to calls for service with problems in the facility, replacements and repairs. They do not track the percentage of time spent on those work activities. City Manager Shikada commented that a contract for parking lot sweeping SUMMARY MINUTES Page 9 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 would be an ongoing operational expense. Chair Burt suggested reverting to the way it was done up until 2018 when it changed. Council Member Lythcott-Haims concurred on Cubberley. Council Member Lythcott-Haims opined that since the $100,000 in Tier 2 for airplane noise was a placeholder for consultant services but the scope had not been determined, perhaps we should not allocate any funds to that item. She wanted to see us do something because airplane noise impacted residents but this does not feel to be doing it. Maybe we could fully fund it midyear. We could use $25,000 for the United Nations Film Festival. City Manager Shikada remarked that funding three-quarters gave us some capacity to continue technical analysis and support as well as keep momentum. Vice Mayor Stone served as the liaison to the SFO Roundtable. They were making some progress. He was on a call today with the director of the San Francisco Airport. Budget Manager Harper misstated the Cubberley proposal earlier. The proposal would leave $370,000 in the Cubberley Fund and shift about $500,000 to the General Fund. Chair Burt wanted clarification on the Art Center amount. For the LifeMoves project, he wanted $500,000 for fire safety and fencing. He recommended allocating to UNAFF the same amount we contributed as a City last year, regardless if it was from two sources. He recommended referral to the Stanford Ad Hoc to explore eucalyptus fire risk reduction with Stanford. Council Member Lythcott-Haims suggested recouping the full amount of $200,000 for youth mental health because there was no program attached to it. She would rather deploy dollars when we have something we are excited about and prioritizing to spend it on. Chair Burt asked staff if they anticipated that by midyear they would have proposals for usage of funds for items deferred for midyear consideration. City Manager Shikada responded that they could work toward that, many things will be in better focus but setting that as an expectation was fine. Chair Burt knows people with YCS and County representatives that were having discussions on the package of initiatives we have through the City and our schools. YCS had a significant County grant for youth connectedness that they supplied in the schools. He thought we needed to do a better job of looking at the package of programs we have so we can identify gaps as opposed to ad hoc doing this. There was a need for a more systematic approach and some of our community volunteers were working on that. Budget Manager Harper confirmed the amounts in Questica for UNAFF. Last year, we gave them $20,000 one time. The year before, we gave them $10,000. The Committee recommended $25,000. MOTION: Chair Burt moved, seconded by Council Member Lythcott-Haims to recommend that City Council: 1. Adopt the FY 2024 Operating and Capital Budgets and Municipal Fee Schedule, amended by: SUMMARY MINUTES Page 10 of 10 (Sp.) Finance Committee Meeting Summary Minutes: 5/30/2023 a. Finance Committee tentative recommendations (Slide 4) as adjusted for staff recommendations (Slide 5) b. Swap CSD alt. proposal for the Art Center Visitor Center & Installation staffing recommended at the May 22 meeting c. Add resources for UNAFF $25,000 (one-time) d. Defer and reexamine Project HomeKey: Leave $500,000 (permits); fire safety and fencing elements keep, beyond that, should stay in for the remaining $2M e. Cubberley Revisions – Clarity of the split, refine with consideration of original methodology before 2018 change f. Youth mental health: Revisit full $200,000 in FY 2024 Mid-Year Budget 2. Recommend Staff Referrals (Slide 6) a. Referral to explore a eucalyptus tree removal with Stanford Ad-hoc for fire safety reduction b. Referral to evaluate Human Services and HSRAP funding on an ongoing basis, including possibility of funding at 1% of the General Fund 3. Approve the FY 2024-2028 Capital Improvement Plan, amended by a. Changes approved in wrap-up discussion MOTION PASSED: 3-0 Director Nose stated that the Finance Committee only had one item on the agenda for the June meeting, the Q3 financial status report. Staff turned it into an information item since the Committee thoroughly reviewed the material as part of their budget proceedings. The next Finance Committee meeting will be in August. Adjournment: The meeting adjourned at 6:59 p.m.