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HomeMy WebLinkAbout2023-10-17 Finance Committee Summary MinutesFINANCE COMMITTEE SUMMARY MINUTES Page 1 of 5 Regular Meeting October 17, 2023 The Finance Committee of the City of Palo Alto met on this date in the Community Meeting Room and by virtual teleconference at 5:34 PM. Present In Person: Burt, Lythcott-Haims, Stone Present Remotely: None Absent: None Chair Pat Burt convened the meeting. Assistant City Clerk Vinh Nguyen called roll and noted three were present. Public Comment Mark Grossman represented 350 Silicon Valley, which he was an organizer with. He spoke of a sustainability principle having been added to the investment principles. He opined it may need updating, which he detailed. He provided some handouts related to fossil fuel infrastructure being invested in by large banks. He asked the Committee and City Council to consider putting guidance on where CDs would be held and that consideration be given to the City changing to sustainable banks. Action Items 1. Printing Services Review of Alternative Service Delivery (Finance Committee Referral) – CEQA Status - not a project. Assistant Director David Ramberg displayed slides and provided some background related to services and costs. He noted that Slide 3 should reflect an FTE of 2.1, not 2.5, related to the print & mail shop. He provided pictures of the print shop space at City Hall. He discussed the varieties of print jobs they did. He furnished a slide with the summary of the proposals, and the table was also in the Staff Report. He highlighted that they had seen a broad range of costs and vendors bidding in different ways, which had been hard to reconcile across all the City’s printing needs. The City’s cost of about $1.1M was within the market range. Many vendors had multiday turnaround times or an extra cost for quicker turnaround. They had contacted other cities for information related to how they handled their printing needs, and in most cases printing services were contracted out, but in some cases they also had staff on site. Smaller cities SUMMARY MINUTES Page 2 of 5 Finance Committee Meeting Summary Minutes: 10/17/2023 usually contracted out 100%. The city closest to Palo Alto for comparison purposes was Mountain View, which had a full-time equivalent and one hourly staff person, which was supported by about $500K in external printing contracts and was in the range of Palo Alto’s cost, but an important differentiator for Palo Alto was utilities being a high demand, which Mountain View and the other cities did not have. Staff recommended the services remain in house, which would allow the core function of servicing customer departments with quick turnaround, maximum flexibility, and good customer service. They City used about 10% to 15% outside contracts for specialized or higher demand jobs that the City needed extra bandwidth for, and that semi-hybrid approach would remain in place. They hoped to fully staff the print shop, which had not been done for a while, to bring it up to a one-stop shop. They would encourage departments to come to the print shop for all their needs, and if something needed to be sent out, they might do that for them. They had one additional recruitment to do, and they would look through the recruitment to potentially bring in additional print experience. He stated that the RFP process would be cancelled and there would be no reward. Staff would report out on the status within 12 to 18 months see how they were tracking with the goals. He pointed out that the Committee and Council could direct staff to do a new RFP. Public Comments There were no requests to speak. Council Member Lythcott-Haims was inclined to support the Staff Report. She voiced that the cost seemed in line. She supported the opportunity for City employment opportunities. The print-and-mail nexus made sense to her. She asked why the referral was made. Assistant Director Ramberg thought an across-the-board review of potential cost savings was being done. Over time there had been review of similar type services for opportunities to contract out, and this deserved to be looked at. Vice Mayor Stone supported the staff recommendation. He had been impressed by the services at the City level. He felt there would not be much savings by outsourcing and that it could be worse. He suggested exploring options in 12 or 18 months. He asked if the City would be saving $1.1M if the in-house printing services were removed. Assistant Director Ramberg answered that there was a sharing of the resources. On the mailing side, the line item in the budget for postage was about $300K, so if the $1.1M were removed, the postage cost would remain. They would need at least 0.5 to 0.75 to 1 FTE to continue to run the mailing shop, so probably in the range of $500K would be needed for service of mailing. In that case, they would not have the benefit of staff flexibility that can flex one side or the other depending on demand. They currently had that backup with staff, so they would be lean on the mailing side, but it could be done. SUMMARY MINUTES Page 3 of 5 Finance Committee Meeting Summary Minutes: 10/17/2023 Chair Burt asked if the City outsourced if there would be cost associated with the outsourcing process itself; why the proposal of $400K was so much lower than others and to what extent it included an understanding of all the expedited printing that may frequently be needed; if the low-end bidder was local; if the bidders provided a living wage; if the shops were unionized; and if services were retained in house, if that would change the cost structure. Assistant Director Ramberg had not estimated cost associated with the outsourcing process itself. There were costs they could not articulate or provide details on, and there were also benefits they could not capture. Outsourcing would also be a changed management concern or exercise that would accompany it as far as departments requesting services, etc. The outsourcing exercise itself would have a cost. Regarding the proposals, there were different omissions. They had sent out a multiple page line-item sheet and had asked vendors to provide their not-to-exceed annual amount for each item. He remembered that Vendor 1 had omitted some very large big-ticket items, which appeared to be unintentional. Of the other vendors, some included such and some at vastly higher levels, so staff was not sure how the vendors had interpreted it. He did not know if the bidders provided a living wage. The vendors were not within the City of Palo Alto. If services were to be retained in house, it would not change the cost structure. He noted that although they had not been staffed at the full 2.1 FTE, it was reflected in the budget. Administrative Services Director/Chief Financial Officer Nose commented that the RFP did not require the vendors to report whether their shops were unionized. It required the organizations to follow minimum wage laws but not living wage laws. They did not have the class-specific hourly rates, but staff had gotten more sophisticated related to that as they were looking at outsourcing activities. When rush charges were added for Service Provider 1, that indicated a roughly $900K to $1M cost because there would be a surcharge, and staff estimated that the City would incur a significant component of those charges. Chair Burt asked if operations had been at a little lower cost than $1.1M. He inquired if staff had been asked for suggestions related to increasing revenue or decreasing cost through efficiencies. Assistant Director Ramberg answered that they had been operating very lean from a staffing perspective, which had resulted in a lower cost. Administrative Services Director/Chief Financial Officer Nose expressed that they had been relying on significant hourly resources, so they did not feel it was appropriate take suggestions from that staff concerning increasing revenue or decreasing cost and that the staffing needed to be stabilized before requesting such from them. The reason they had the 12- to 18-month recommendation was because they expected to review printing needs in a post COVID/endemic world and to look at operations with full-time staffing and dedicated resources and if changed management could be done. SUMMARY MINUTES Page 4 of 5 Finance Committee Meeting Summary Minutes: 10/17/2023 Chair Burt appreciated there may be a different and more valuable feedback from those other than hourly employees, but he encouraged there be input solicited from the existing staff even if there may be no responses or no valuable responses. He noted that, personally, his company had moved away from receiving efficiency insights from management and that that helped the line workers’ commitment to their jobs because they felt valued. He queried if there was a sense of the utilization rate of capacity and if there were opportunities for the City to be a provider for other agencies. He was not inclined to go in that direction, but there may be opportunities to fill some gaps. He questioned if there were any significant capital needs anticipated if services remain in house for a few years. He assumed major capital investments would be deferred. From a sustainability perspective, he asked if there were policies on using recycled paper and if it would meet quality needs. Assistant Director Ramberg replied that they had not explored opportunities for the City to be a provider for other agencies for this service. He noted that 10+ years ago the City provided IT services for other cities, so staff had a little experience along those lines. They found it challenging from a cost perspective under that scenario, but it could be considered again. Regarding anticipated capital needs, they had not been holding off purchasing major equipment. A renewal with the primary provider, Xerox, was coming up, so Council would probably see a renewal coming up. There was a City policy for using recycled paper. He could not recall the required percentage. Administrative Services Director/Chief Financial Officer Kiely Nose stated, related to anticipated capital needs, she thought Public Works was looking for physical space in City Hall and how that would be allocated and used, and the print shop footprint would be included in that. The space had not yet been improved, and she explained why. Accounting Specialist Jesus Lopez-Olivares noted that they used to use 100% recycled, 24- pound Staples’ paper, which had been discontinued, so now 50% recycled, 22-pound paper was used for all common copies unless specialized paper was specified. Council Member Lythcott-Haims was grateful for being provided printed packets. MOTION: Council Member Lythcott-Haims moved, seconded by Vice Mayor Stone to recommend the City Council to direct staff to: 1. Close the RFP process and keep in-house Print Shop services supplemented with contracts, which continues core printing services to departments, maximum flexibility, customer service and quick turnaround 2. Add outside contracts for added capacity during high demand and special printing needs and managed by the Print Shop for “one-stop shop” 3. Bolster Print Shop with additional printing and design skills/abilities to increase value to departments a. Recruit for printing experience 4. RFP process would be cancelled with no award SUMMARY MINUTES Page 5 of 5 Finance Committee Meeting Summary Minutes: 10/17/2023 5. Report out status within 18 months MOTION PASSED: 3-0 Future Meetings and Agendas Assistant City Manager Kiely Nose noted the Finance Committee was to have three more meetings this calendar year – November 7, November 28, and December 5. On November 7, there would be discussion of the FTTP project, which coincided with the Grid Modernization Project as well as the Electric Resource Integrated Plan. On November 28, the ACFR for FY2023 and the final audit results would be reviewed. On December 5, FY2025 financial plans would be examined. Council Member Lythcott-Haims asked the planned duration of the November 28th meeting. Administrative Services Director/Chief Financial Officer Nose expected the meeting to be approximately two hours. Chair Burt voiced that the meeting could be less than two hours. Adjournment: The meeting was adjourned at 6:10 P.M.