HomeMy WebLinkAbout1994-04-19 City Council Summary Minutes Special Meeting April 19, 1994 ORAL COMMUNICATIONS ........................................ 72-436 REPORTS OF OFFICIALS ....................................... 72-436 1. 1994-95 General Fund Budget Issues .................... 72-436 ADJOURNMENT: The meeting adjourned at 9:00 p.m. ........... 72-454
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The City Council of the City of Palo Alto met on this date in the Council Chambers at 7:07 p.m. PRESENT: Andersen, Fazzino, Huber, Kniss, Rosenbaum, Schneider, Simitian, Wheeler ABSENT: McCown ORAL COMMUNICATIONS None. REPORTS OF OFFICIALS 1. 1994-95 General Fund Budget Issues City Manager June Fleming said the purpose of the meeting was to put the budget into perspective and clarify staff's request. If staff and Council had adhered to the regular budget schedule, staff would be at the point of proposing a two-year budget. However, in 1993, staff had secured Council's permission to drastically change the budget process, not just the format, to a Mission Driven Budget (MDB). Between the difficulties of tackling such a huge task, including the fact that a new personnel payroll system had to be installed and staff had to respond to requests from cities interested in the process, staff found it was impossible to utilize the MDB budget for the current year. Staff, therefore, requested that a one-year budget, rather than a two-year budget, be brought to Council. It was possible the 1995-96 Budget would again be brought to Council as a one-year budget while staff attempted to iron out the MDB process. Several years before, Council had indicated it needed a better way to understand and focus on issues, policies, and services. In response, staff had initiated the two General Fund Budget Issues Sessions. Council further requested that whatever process was developed should be one in which the entire Council could participate. The intent of the evening's session was to allow staff to present what it perceived as the larger subject areas of the budget, not to cost out items and services, make decisions, cut programs, or de-bate what should or should not be in the budget. The session was intentionally held prior to Council's receiving the budget document. Staff would answer questions about the issues which had been set forth. Then, when the Finance Committee meetings were held and the budget was returned to Council, the Council would have some grasp of the issues behind the dollars which had been requested. The same format had been used for the 1993-94 Budget and had worked well for both staff and Council. The issues were outlined in the staff report (CMR:219:94). The 1994-95 Budget was balanced by the use of reserves. It was not a practice which should be relied upon indefinitely, but the reserves were of sufficient strength and health to allow such use. Reserves were not used for ongoing, recurring, regular services. Rather, the reserves were used for extraordinary and nonrecurring, on a planned operational basis, programs. Specifically, reserves were used to fund: 1) services to East Palo Alto (EPA), mainly in the form of operating and staffing the Red Team at approximately
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$300,000; 2) World Cup Soccer at approximately $81,000; and 3) increased costs for the Comprehensive Plan at $60,000 from the General Fund. Using the reserves for such activities was not new. The Red Team had previously been funded through reserves, Council had previously taken funding for the Comprehensive Plan from reserves, and World Cup Soccer would not return to Palo Alto any time soon. The three services were not institutionalized services regularly provided by the City. Such an approach alone would not have balanced the budget. The second piece of balancing the budget was not particularly an issue which required discussion but was information she wanted to share by way of explaining how staff had arrived at its budget bottom line. Even after going to reserves for the items just mentioned, staff still faced the fact it had more requests for funds to place services before the people of Palo Alto than it had available revenue. It was not a new scenario. Staff had faced the same situation over the past five or more years. Staff had always tried to deal with reality in a very hurried, unorganized fashion, i.e., there had always been more services the City wanted to provide than it had dollars to provide said services. The Finance Department had greatly improved in the area of forecasting. Staff decided to use the information and the collective abilities to develop a strategy. Staff made two decisions: 1) no ongoing programs would be brought to Council which relied upon reserves and 2) staff would develop a strategy which would remain in place. For the first time, the entire City staff had participated in developing a strategy for reducing the budget which focused on services on a comprehensive, citywide basis, not department-by-department. The end result was staff could immediately respond to shifts in revenue. The process was totally inclusive, not exclusively allowing the involvement of members of the Senior Management Group (SMG). Staff had dealt with Council priorities because of Council's cooperation in adopting the priorities early in the year. Then staff included the priorities in the funding pattern. In as much as the City was a customer of its own Electric Utility, it had received an Electric rebate. The proposal in the budget was to use the rebate to meet two important needs: 1) funding the automated library system, which crashed; and 2) assisting in the continuing dedication to keep Council's desire to improve the City's parks. Another issue was the continuing financial issue. Although the budget was balanced, it was very delicately balanced, to which she would speak more during the introduction to the budget. The services would begin to decline if the City lost any additional revenue from either demands from the State or charges imposed by the County, or any great losses of sales tax generated by businesses in the City. Very simply, any decline in revenue would translate into a decline in services which would be noticeable. While staff had a method in place to easily address reductions, the easy, quick, and internal reductions had already been realized. The next step was to move to service reductions. Some issues had not been addressed, which Council had expressed an interest in knowing. One issue not addressed in the budget was the Hughes Heiss & Associates Organizational Review. The review was not complete; therefore, there was no budget impact at all in the 1994-95 Budget and no permanent General Fund organizational changes were being requested. Any permanent changes would wait
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for the recommendations from the Organizational Review so Council would have one comprehensive package to deal with when it dealt with reorganization. Another item not fully addressed in the budget was the Economic Resources Plan (ERP). Council was in the process of reviewing the ERP, via the various committees. No permanent changes were included in the budget to institutionalize the ERP. It would come before Council once Council decided what type of ERP it wanted and what approach it wanted to take to economic development, and then staff would indicate the staffing needs and costs to make it a reality. However, the Planning Department could no longer continue to function short one position. The present Economic Resources Manager was a position which functioned out of the City Manager's Office but was a position which had been "borrowed" from the Planning Department. The Planning Department had struggled without the position. She had held off doing anything about the problem, hoping the ERP would be in place in time for the budget, but it had not occurred. She was returning the position to the Planning Department. The budget had one position for ERP. It was hoped half way through the next fiscal year staff would know where ERP was going and what staffing would be necessary. The one position was actually a half-time ERP person and a half-time support person. It was just a hold position until the ERP process was complete. Staff had been cautioned by Council over and over to reveal all, and several issues had not been addressed at all in the budget. One was the ERP and the level of support Council wanted, which depended upon the type of plan it adopted. Another point not covered was the issue of the Palo Alto Unified School District (PAUSD) fields. Staff was in the process of working with the PAUSD and the City/School Liaison Committee to develop a proposal which could be brought to Council. The proposal needed to recognize the fact that the larger community made more use of some PAUSD fields than the PAUSD; therefore, staff strongly believed that the City should financially share in the maintenance burden, allowing PAUSD dollars to be used for the education and preparation of the future of Palo Alto--its children. She and Superintendent Jim Brown were committed to bringing a proposal which embodied the concept. The targeted dates could not be completed in time for the budget. Another issue not addressed was a communications utility. During the Centennial celebrations, staff had heard a great deal about the foresight and wisdom of the City's forefathers as the utility system had been developed. There was an opportunity in the future for the City to own and operate a communications utility, but staff was not prepared at the time to make a solid proposal. However, a request was included in the budget for funds to hire a consultant to assist in the evaluation stage to enable staff to develop such a proposal. The Storm Drain issue was still in the Finance Committee and would not fully move forward to Council. The other issue not totally addressed in the budget was Library automation. The budget before Council would address funding for the system. The question was where the City would go in the future, how its libraries would look, what the role of automation would be in the City's libraries, how the City ensured it did not create an intellectually elite community by providing services to the few who could afford to have computers in the homes. The answer would have significant financial implications. Staff would
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not come to Council with a proposal which would answer the question until it had had a thorough discussion about the future of libraries, library services, what libraries would look like, how many were needed, how automation changed the needs. Also, staff needed to allow the community to have maximum input into any proposal it brought to Council. The City's libraries were heavily used by the community. Palo Alto knew exactly what it wanted. She would delay any process being brought to Council about libraries and the future of library services until it had an opportunity to speak with the Friends of the Library and absolutely every citizen wanting to be involved, which could take more than a year. However, since the City had installed a new basic system, the Library could continue to operate until staff could bring Council a good proposal. She asked Council to provide any feedback, reaction, or counsel on the issues. Final decisions came to Council fully endorsed and supported by the City Manager, but a task such as bringing the issues before Council, not to mention the Budget, was not a task which was accomplished alone. It had been truly an entire staff effort. Each and every staff member had played a part in the projects and budget which had been developed for Council. She thanked her great staff. Mayor Kniss saw the City Manager had spent a great deal of time and energy, and she appreciated the reflection. The use of the financial models for strategy was new, and she appreciated its use. It provided a predictability which the City could not have achieved in the past. Council Member Andersen was pleased to see the effort which had been made with regard to Vehicle Replacement and Maintenance Funding. Staff had indicated a $450,000 savings as a result, for which he was greatly appreciative. He asked to what extent the $450,000 was a onetime benefit and to what extent it would be ongoing. Director of Finance Emily Harrison indicated the $450,000 savings was ongoing. Ms. Fleming said it had been an area of concern for staff. Staff had dedicated itself to cutting the fleet and making savings, which was what Council saw. Council Member Andersen appreciated staff's efforts. He asked about the use of the Electric rebate for specified Capital Improvement Program (CIP) projects. He appreciated the comments in the CIP budget on the effort to make infrastructure improvements and the extent to which it was being carried out. He asked whether beautification improvements in the Midtown area had been contemplated in the course of some of the discussions with regard to the CIP for those improvements. Ms. Harrison replied yes. Midtown had been included in the CIP in the area of improving the general ambience of the business districts. Council Member Andersen asked whether thought had been given to
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adding a code enforcement officer to staff in order to make certain some areas would be more effectively carried out. If so, he asked whether it would be through efficiencies in the organization or through an additional expenditure. Ms. Fleming said a conscious decision had been made not to make any permanent staffing recommendations until the Hughes Heiss study had returned to Council. She had made it very clear to Hughes Heiss that the code enforcement officer was a priority for her as the City Manager. If not addressed by Hughes Heiss and Council gave her the privilege of returning with a recommended organizational structure and implementation plan, she would include it. In her opinion, the City was understaffed in that area; however, it had not been included in the budget. Council Member Andersen very strongly supported Ms. Fleming's interest and encouraged her to proceed. Ms. Fleming was absolutely correct in her assessment concerning the need for the code enforcement officer. He preferred it be carried out through efficiencies. He was very pleased with the level of staff involvement at the preliminary stages as addressed in Ms. Fleming's remarks and the documents which had been seen. It was good for staff and Council. Council Member Fazzino thanked staff, particularly Ms. Fleming, for an excellent summary. He was unclear as to what staff wanted from the Council. Ms. Fleming wanted to be sure staff was serving Council well and was efficiently laying out the issues to enable Council, when it received the budget document, to understand what was behind the dollars. Short of doing an MDB, it was the best way staff knew to respond to Council's need for information. However, staff was not prepared to deal with the dollar details that evening. Council Member Fazzino hoped to see the description of positions and dollars attached to the positions in the budget itself, not in the appendix. He did not have a problem with the way in which staff approached the deficit issue by asking each department head to present the City Manager with 5 percent cuts. The City Manager then evaluated the list with SMG, evaluated service priorities and other criteria, and made a decision about proposed cuts. He asked whether the process had allowed for opportunities to look beyond a 5 percent cut in a single department. Ms. Fleming said staff clearly understood the 5 percent figure was merely an arbitrary point at which to start. Some departments could not cut 5 percent while others could cut more. A unanimous agreement had been made to use the 5 percent figure to get everything out, but 5 percent had not been cut across the board. The 5 percent could be increased. Staff wanted an opportunity to lay all of the services out and look at them across the City. Some departments might need to cut more rather than less. Council Member Fazzino said 5 percent was an arbitrary figure. Some departments might need to cut 12 percent while others would
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not be cut at all, based on evaluations of certain criteria contained in the document. Ms. Fleming said the process had been an eye opener. It was the first time all of the senior managers had considered themselves a unit, not as individual departments. Everything had been consid-ered, regardless of whether or not it was in the Senior Manager's particular department, and an effort had been made to create reductions internally first. Everyone had been open and honest and changes were made; and when the list was finished, it was taken back to each department. It was very rewarding to see a group work together in such a way and have staff understand. Council Member Fazzino complimented staff on its efforts to reach a fair agreement with the World Cup Soccer Host Committee on a reimbursement plan. He asked about the relationship between the $81,000 figure and the anticipated level of reimbursement. Assistant City Manager Bernard M. Strojny had been the World Cup Soccer liaison. The amount indicated represented the budget for 1994-95 and would cover only games which occurred after July 1, 1994. Council Member Fazzino asked whether the figure incorporated anticipated levels of reimbursement, e.g., a net cost figure. Mr. Strojny said the figure represented the costs which Palo Alto would incur. There was no specific offset to counter the costs. Council Member Fazzino clarified the figure did not represent any reimbursement. Mr. Strojny replied yes. Council Member Fazzino asked about the anticipated 5 percent growth in property tax and 2 percent growth in most other taxes. Ms. Harrison said the figures were based on the March revenue analysis and the best information staff could obtain from the County on forecasts for growth in both assessed valuation and tax receipts. It was hoped the sales tax figures were conservative, given the fact the recovery appeared to be holding. Staff had no hard data to make a more aggressive growth projection than 2 percent. Council Member Fazzino asked whether staff's suggestion to postpone half of the annual funding of the amortization of unfunded employee benefit insurance liabilities in 1994-95 was a prudent fiscal practice. Ms. Harrison said the practice of funding the City's unfunded liability was conservative. Staff believed the City would be able to meet the amortization date set for the turn of the century, which was prudent fiscal management. Council Member Huber asked how much had been removed from reserves
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during Fiscal Year 1993-94 compared with the $384,000 proposed by staff out of reserves to fund the three items mentioned. Ms. Fleming said the amount removed from reserves during Fiscal Year 1993-94 had been $257,000. Council Member Huber confirmed the amount for Fiscal Year 1994-95 was $180,000 more. Ms. Fleming replied yes. Council Member Huber said reserve levels were set at a certain percentage for General Fund budget, and he asked where the City was in the new budget. Ms. Harrison said the City was within the targets set for the General Fund Budget Stabilization Reserve. Council Member Huber asked whether the Reserves was at the high end or low end. Ms. Harrison said the Reserves was approximately at midpoint. Council Member Huber asked whether the comment about World Cup Soccer reimbursement was realistic or wishful thinking. Ms. Fleming had had several communications with the World Cup Soccer Host Committee and one meeting with the Mayor and Council Member Fazzino with the Host Committee Chairperson. No agreement had been reached as to the costs, as the Host Committee had proposed a flat rate per game, which was not realistic for the City. She had told the Host Committee the City would bill for the actual costs. Council's resolution stated the City would recoup fire and police costs. Unfortunately, it had not included Public Works and other costs; therefore, the City had no grounds upon which to request the costs. The City would probably fall short of recovering its real costs in the area of $75,000 to $80,000, but it was just a guess. The Host Committee wanted to project increased revenues which would then be considered a reimbursement. Other cities were not dealing with World Cup in such a way. Historically, the City's hotels were filled so there would be no additional transient occupancy tax revenue for the City. Council Member Huber asked realistically what the City might expect to receive back for the Fiscal Year 1994-95 projected cost of $80,000. Ms. Fleming thought the cost had been around $110,000 in 1993-94. Council Member Huber asked about the cost in 1993-94. Mr. Strojny said the City had budgeted $180,000 in 1993-94. Council Member Huber asked what the original cost estimates were for the Comprehensive Plan (Comp Plan) and how far over the City had gone.
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Ms. Fleming said the City had exceeded the cost estimates by a couple of hundred thousand dollars. The increase in the proposed budget represented printing costs, etc. All of the figures would be provided when the budget was presented to Council. Council Member Huber had been extremely skeptical of the whole communications utility idea, and it would take a great deal to convince him. He hoped not a lot of money would be spent to bring a conceptual proposal to Council. Ms. Fleming agreed Council should be skeptical. She was aware that other cities were looking into such a concept, and it was an area which many wanted pursued. She would be remiss in not offering Council the opportunity to make the decision. Council Member Wheeler asked whether anything in the budget related to the funding of Internet. Ms. Fleming said the City had received a gift from Digital which would last for six months. There was enough funding in the budget to carry the experiment for one year, beyond which there were no funds in the budget because staff did not know what to put in. Once things calmed down, staff planned to begin demonstrating Internet in the Libraries with an explanation to determine whether the public liked it and whether it was of any value. It would be installed at the Main Library so people would have more than one place to experiment with it. A community outreach would then be conducted to determine whether the community even wanted it. By the time staff returned to Council with the next budget, it would have a proposal depending upon public response. There were enough funds in the 1994-95 budget to carry the program for one year, during which time staff could conduct an evaluation and develop a proposal. Council Member Wheeler asked what was meant by carrying the program for a year, e.g., whether the feature of electronic mail communications could be added within the budget. Director of Information Resources Dianah Neff said staff was working on security issues to enable tying the program into the City's network to allow City staff to use the Internet as well as the electronic mail capability. A separate network was being kept for the public. Council Member Wheeler asked whether there were any hints as to what the State might be considering for Fiscal Year 1994-95. Ms. Harrison said the latest review of the State's finances was positive. Recovery was being seen in State revenues in income taxes and sales taxes for the first time. To the extent it stanched wounds, it would be helpful. Vice Mayor Simitian said, in his opinion, the fact that it was an election year would play an important role in the impact the State's activities would have on local governments in general, and
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Palo Alto in particular. An attempt would be made to avoid beating the locals on the head the way the State had in the last few years because it was a year when State officials did not want to take the heat from locally elected officials and from members of the local community. There would probably be a one-year reprieve before reality returned. The State budget was being balanced in the expectation of a small fortune from the federal government to fund the so-called federal government share of immigration costs. No one really expected to see the money, but reality would not be faced until the end of 1994, shortly after the November election date. Therefore, it would not be realized until the following fiscal year, when the State confronted the arrival or non-arrival of substantial federal revenues upon which the balanced budget was premised. To some extent Palo Alto was in good shape because of the election year, but to some extent it was being done with blue smoke and mirrors and would come home to roost in the middle of the fiscal year or end of the calendar year. Council Member Wheeler said the $1 million General Fund shortfall was to be made up in large part by the vehicle replacement and maintenance savings and the amortization cost funding savings, which left an additional $350,000. She asked whether the $350,000 savings would be realized in the departments. Ms. Harrison replied yes. Council Member Wheeler appreciated the laying out of the fairly substantial dollar items at the end of the report which were not reflected in the budget. It would be easier to keep the things in mind as Council went through the budget. She wanted to have something in mind in anticipation of where the City Manager might seek resources should some items not come to fruition midyear, e.g., reserves short of putting off programs for an entire year. Ms. Fleming said when staff conducted budget reviews with a committee, it went through the departments, picked up items related to a department, and gave Council its best guess. Staff would provide Council with the possible ways to decrease spending or increase revenue. Council Member Rosenbaum thanked staff for the report. It was a great improvement. He said that Council Member Huber had asked how much was removed from reserves during Fiscal Year 1993-94, and he asked whether Fiscal Year 1993-94 would end with a small surplus. Ms. Harrison replied yes. Council Member Rosenbaum did not want to leave the impression the City was running at a deficit, since the City would end the year with a small surplus. The budget reduction proposal would be reflected in the budget document which staff brought before Council. Council Member Wheeler had tried to obtain some numbers; he asked why department reduction numbers had not been associated with the information provided to Council.
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Ms. Fleming said staff wanted to avoid focusing on specific numbers during the current meeting. It was not an attempt by staff to withhold anything from Council, as the numbers would be provided during the budget reviews. Staff wanted to focus more on the issues rather than on the numbers. Council Member Rosenbaum said mention had been made about asking departments for 5 percent decreases; 5 percent of the City budget was $3 million. The response to Council Member Wheeler's question suggested something on the order of one tenth of the number. He asked whether there were any proposed personnel cuts in the budget reduction proposals. Ms. Harrison replied no. Ms. Fleming wanted to wait to deal with personnel in a very comprehensive way with the Hughes Heiss response. Council Member Rosenbaum clarified his question had to do with the budget reduction proposal, not the budget. Ms. Fleming said no changes would be seen in the 1994-95 Budget for a number of reasons. An overriding reason centered around the fact that when the reorganization recommendation was presented, it could not be implemented immediately. It would take time. Meet and confer meetings with the unions, organization of reduction in staff plans, shifting of entire departments, etc., would need to occur, all of which would not occur in one or two months. She was most anxious to receive the final Hughes Heiss document. There would not be any great dollar reductions from the Organization Review until the 1995-96 Budget. Council Member Rosenbaum asked about the Vehicle Replacement and Maintenance Funding. Aside from maintenance, $450,000 at $15,000 per vehicle would purchase 30 vehicles. With a five-year life expectancy for vehicles and with an ongoing $450,000 savings, it was 30 vehicles over five years. If the City vehicle fleet were cut by 150 vehicles, the same savings could be seen. He wanted more detail as to how $450,000 could be saved in the fund. Ms. Harrison said most of the savings had resulted from the fact staff had examined the reserve balance in the fund itself to determine whether the City had prudently funded the reserves and the replacement program. Staff thought it had been done. When the fund was originally established, there were no reserves and there was a deficit for the first years of operation. It currently had an adequate balance to fund the replacement program and still could be reduced. Most of the $450,000 was due to not all reducing fleet vehicles. Director of Public Works Glenn Roberts said the real answer to Council Member Rosenbaum's question was found in a couple of aspects. The recommendation stemmed originally from the City Auditor's work in providing the impetus to look closely at the issue which had resulted in a joint effort between the Finance and
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Public Works Departments. There were three components to the cost savings. First, staff had looked at the utilization of vehicles as a result of the recommendations of the audit. The recommendation was for ten vehicles to be surplused out of the fleet as being under-utilized. One of the ten had been reassigned to the graffiti program in the interim. Second, staff from multiple departments, beyond Public Works and Finance, had gone through the vehicle replacement cycle. Credit needed to be given to the Police Department which had looked at the patrol vehicles that normally had a life span of three years and 70,000 miles. The Police Department had concluded that, given the good preventative maintenance program and the quality of new vehicles, the life span could be extended by one year and/or 10,000 miles. Similarly, the criteria were applied to a number of other vehicles. The savings rolled over into the amortization of the cost over a longer period of time and a lower yearly cost. Third, staff looked at the funding of the vehicle replacement fund, finding that because of very effective management techniques by the Finance Department on the fund and the rate of return earned on the citywide portfolio, the fund was ahead of projections established when the fund was created, e.g., higher rate of return, higher interest earnings, which allowed a lowering of the amortized costs charged back to the departments on an annual basis. It affected all departmental budgets across the board for assigned charges for vehicle costs. The net of all three resulted in an ongoing savings of $450,000 per year. The lesser of the three components was the number of vehicles purchased on an annual basis. Council Member Rosenbaum asked whether the third element, the reduction in funding of the vehicle replacement reserve, was to be ongoing. Mr. Roberts replied yes. Council Member Rosenbaum asked about the sick leave unfunded employee benefit, which set aside $400,000 per year to amortize the unfunded liability. He asked whether the number had any relation to the current year's cost, e.g., if an estimate were made of how much should be put aside in any given year to take care of the future obligation whether the number would be other than $400,000. Ms. Harrison said each year staff looked at the complete employee base and what each employee had accrued in new sick and vacation leave and what the employee had in fact spent. Staff would recalculate the total amount of accrued liability at the end of each year. There would never come a time when the City would not need anything set aside because as employees came and went, accruals changed. Council Member Rosenbaum asked about the recent policy of paying employees at retirement for unused sick leave. Ms. Fleming said the policy had already reached its maximum.
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Council Member Rosenbaum asked whether it had reached its maximum at 1,000 hours. Ms. Fleming said the employee had to have been employed for 15 years before being eligible for any reimbursement for unused sick leave. The cost was not what it had been in the past. Council Member Rosenbaum said a serious effort was being made in the private sector to curtail such an occurrence. He thought it was something which could be looked into. Ms. Fleming said it was not a benefit new employees received. The 15 years applied only to employees who worked for the City at the time the cap was imposed. It was not a benefit for new employees even if the employee stayed for 20 years. There might be other controls which could be placed on it, but it was a 15-year cap which applied to employees at the time the cap was imposed. Council Member Schneider asked whether the $257,000 used from reserves during Fiscal Year 1993-94 was cumulative for the year. Ms. Harrison replied yes. Council Member Schneider asked whether the $257,000 had been anticipated as early as the $440,000 which was anticipated for Fiscal Year 1994-95. Ms. Harrison replied yes. Staff had proposed to Council when the interim budget was adopted that the expenses for EPA and World Cup Soccer were more appropriately taken from reserves because of being onetime expenses. Council Member Schneider asked whether staff knew $257,000 would be the amount at the same time the previous year or whether it began as a lower figure and increased as the year progressed. Ms. Harrison said staff had anticipated $227,000. Council Member Schneider asked whether anything was pending which could make the $440,000 increase. Ms. Harrison wanted to distinguish between the amount staff had anticipated would go into reserves for Fiscal Year 1993-94 and the planned use for reserves in Fiscal Year 1994-95. In Fiscal Year 1993-94, there were onetime events which had offset the draw on reserves which had been planned. The City had come out better than anticipated. Staff did not know anything about 1994-95 which would indicate the planned use for reserves would not need to take place. Vice Mayor Simitian asked whether the City had spent its first dollars for EPA in the very last months of Fiscal Year 1991-92. Ms. Fleming replied yes. Vice Mayor Simitian said money had then been spent in Fiscal Year
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1992-93 and 1993-94, and there was a proposal for 1994-95. He asked at what point it was reasonable to conclude that it was not a onetime expenditure. Ms. Fleming said when Palo Alto had attended the last multi-agency meeting with East Palo Alto, Menlo Park, and the County, and the East Palo Alto City Manager had been very clear that he was developing a plan whereby East Palo Alto would be able to sustain itself. He could not put firm dates because he had not completed negotiations with businesses for the 101 Gateway site, but he had assured the group that letters of interest had been received from a number of businesses, and the plan was proceeding. A rather informal agreement had also been achieved wherein East Palo Alto requested that agencies which had participated in the Red Team continue participation for another year while the best way in which to provide police service support to East Palo Alto was determined. The East Palo Alto City Manager was committed to working with the new Police Chief to devise a scheme. She guessed it would be sometime in the future before the City could comfort-ably withdraw from providing assistance. The form of the assistance might change and would not be a Red Team but perhaps helping in other areas in the Police Department. It would probably last for another five to seven years. She had not included it as an ongoing expense because it was not a direct service to Palo Alto. At some point, it would come to an end. If Council was uncomfortable, it could be folded into the costs, but it would need to be made clear whether it was a "don't touch" item or folding into costs subject to prioritization and possible reductions like every other service. Vice Mayor Simitian said the staff report (CMR:219:94) had indicated that in addition to the $29,400 for the half-time management assistant in Human Services, the Public Works Department would "continue to support East Palo Alto for such requests as assistance with vehicle equipment repairs, signage, and environmental compliance activities, which it will absorb in its operating budget." He asked whether his understanding was correct that it was not a line item but was absorbed in the various line items which comprised the budget of the Public Works Department. Ms. Fleming replied yes. Vice Mayor Simitian asked whether there was an estimate of what it would entail. Mr. Roberts hesitated to project a number for Fiscal Year 1994-95 because it varied depending upon the specific requests which East Palo Alto made. During Fiscal Year 1993-94, Palo Alto had spent approximately $60,000 to $65,000 on such service requests, including such items as cleaning out storm drains, repairing street sweepers, printing street name signs, etc. Vice Mayor Simitian asked about the Management Review and when it would be possible to achieve savings from the process. The item had been publicly announced first by former City Manager Bill
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Zaner as something worth pursuing in October 1991, just prior to the arrival of four new Council Members. The process had been underway with the appointment of the Blue Ribbon Task Force (BRTF) working with the Finance Committee. It had been over two years, yet the City was still not at a point of completion, let alone brought forward in a way which would permit some action. To say it troubled him was an understatement. Every year the budget was balanced by keeping some reasonable limit on staff's salaries and benefits, looking at service levels, raising new revenues, and finding economies which did not impact service levels whenever possible. The City had not done as much as it could in the last area, notwithstanding some of the things staff had accomplished on its initiative. Not as much had been done to achieve the econo-mies. He queried current expectations for completion of the document at the Finance Committee, when it would get to Council, how long Council would need to process, etc. He wanted to be clear about the time line because the City was approaching the three-year anniversary without a nickel saved. He was anxious about the meet and confer issues because of bargaining cycles which could add another year. Ms. Fleming said the issue was not under her control, but it would probably come before Council in July 1994. If it came in July, Council needed to make a decision concerning how to deal with it. If Council made comments and turned it over to staff to return with a plan, she would probably not get the document until the end of July or early August. If she received it in that time frame, she could get back to Council with a recommendation in enough time to fold into the Fiscal Year 1995-96 budget. If it were received later than September, she would be hard pressed because she had to return with a plan. Council needed to make adjustments, after which it could be given to Director of Human Resources Jay Rounds. City Auditor Bill Vinson said the current report was substantially completed. It would be presented to the Finance Committee, but the entire budget process had to be taken into consideration. Finance Committee Chairperson Wheeler and he had worked out the time schedule for which there would not be any problem in meeting. The Organizational Review had actually begun in November 1992. A clear message early in the process was the importance of having the consultant meet with each and every department head, each and every director, and each and every manager to go over the results of the study. Any time an audit was conducted, the process was extended because of the availability of each of the managers. The consultant had done a good job in meeting its responsibility. As a result, the study had taken longer than projected. The project, which had been projected to be completed in one year, extended to 18 months. Council Member Wheeler said the ball was in the Finance Committee's court. The consultant had completed its work and was waiting for the Finance Committee to follow through and have its last meeting on the subject. If the Finance Committee was expeditious about its meeting in June, it would return to Council in July. The suggestion was for Council to make comments but not go through the document page by page in an attempt to make
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decisions at that point. There should be input from the City Manager before Council made any decisions. It needed to be acted upon fairly quickly in July before Council went on its break. Vice Mayor Simitian did not want to assess responsibility or lay blame. However, the City Manager had indicated that if Council did not deliver the document by September at the latest, the findings would not be implemented until the Fiscal Year 1996-97 budget, meaning the first dollar of potential savings from the exercise would not occur until the middle of 1996, four and three-quarter years after the commitment from the previous City Manager that the exercise was to be undertaken. There were many people whose feet needed to be held to the fire on the process. However, a problem would arise when the time came to take a tough stand with employees on salaries and benefits and to citizens about cutbacks in real services or the fact more money was wanted. There were some big numbers in the documents if Council was prepared to make the decisions. He felt it was being processed to death. It was great to have a BRTF and plenty of staff involvement and great to hear from the City Manager so Council did not act precipitously, but he felt that four and three-quarter years to save a dollar on an organizational review of such magnitude was something which could not be supported. It was not a question of laying responsibility, but it was time to get with the program. Ms. Fleming said it had already been discussed at SMG, and a process was laid out. She said staff would not wait until it had officially received the document. Staff would assume there would not be any great changes and would begin to work on it right away so it could be turned around to Council as quickly as possible. If she waited, Council would be giving the same speech the following year. Council Member Fazzino thought the previous City Manager had not been all that committed to the concept of an organizational review, and Council had not become serious about the issue until it had appointed June Fleming as the City Manager. It was not appropriate to use a three-year time table to express concerns about the lack of progress with regard to the Organizational Review. Mayor Kniss clarified that the Finance Committee could act by the end of July and, if so, any changes could be incorporated in a timely fashion so it dented the budget. Council Member Wheeler said yes. The material was available; it was just up to the Finance Committee to keep its meeting schedule. Mayor Kniss said a commitment had been made, and the meeting schedule would be kept. Vice Mayor Simitian said he did not dispute the fact that the vehicle replacement fund and unfunded employee benefits allowed the City to reallocate the funds in the budget, and he lauded the City Manager and her staff's thoughtfulness in identifying the
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particular savings, but it needed to be clarified that he did not believe real dollar savings were being achieved. He said it was an acceptable position to take, but it was not as though the City had saved a couple of hundred thousand dollars a year in liability for employee costs. It was ironic, given the fact of the great and weighty debate in the Finance Committee about how to use the Public Employees Retirement System (PERS) refund to be more responsible in accounting for long-term costs. He did not disagree with the approach, but clarification about what was being done was necessary. Ms. Harrison asked whether Vice Mayor Simitian wanted to know whether it was prudent. Vice Mayor Simitian replied no. He wanted to know whether there were any real dollar savings being achieved through the process or whether the City was simply going to have to spend money later to pay off the benefits rather than putting the money aside. Ms. Harrison said staff's assumption was that the City would be able to meet the amortization goals which had been set, which were very prudent, on the same timeline previously anticipated. Because the amortization schedule went to the year 2001, staff thought it was being prudent and would be able to meet the amortization schedule even with the deferral. Vice Mayor Simitian clarified no real dollar savings were being achieved. Ms. Harrison said there were dollar savings for the current year. Vice Mayor Simitian asked how the savings were being achieved. Ms. Harrison said the savings were being achieved by not charging the departments in the General Fund for the amortization. Vice Mayor Simitian clarified if the departments had been charged, the City would have paid itself money it would have charged the departments and put in a different fund. Ms. Fleming said the money would have been put into a reserve for employee benefits. Vice Mayor Simitian said it could be characterized somewhat differently and it would be acceptable. The Vehicle Replacement and Maintenance Funding was, in effect, a recognition that the Vehicle Replacement and Maintenance Funding did not need to be accomplished on such an aggressive basis, the City had been overfunding the account previously, and it would be funded at a more reasonable level. However, it did not constitute a real dollar savings in terms of the net impact on the City organization. It constituted a savings on a department-by-depart-ment basis because the departments were no longer being charged as much. Ms. Harrison agreed with Vice Mayor Simitian's characterization--
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the funds had been tied up in the internal service fund for vehicle replacement, which did not need to be tied up, and there were sufficient funds in the reserve to allow the decrease staff recommended. Vice Mayor Simitian said it was an important point with respect to the question Council Member Rosenbaum had asked about how the City suddenly found itself with $450,000 in annual savings. The real answer was partially real savings and partially reallocation of funds to other expenditures. The CIP had been the subject of discussion in previous budget years because of the suggestion that there had been an underfunding of the CIP on a magnitude of $1 million per year. When he had previously asked staff about the underfunding, staff had agreed it was a fair characterization. He asked whether it was historically the case during the last three or four years and whether the City was in the same position in the current year in terms of underfunding CIP projects. Ms. Fleming said staff had used the financial resources it had in the best way it could. If Council wanted the funds distributed in a different way, it could choose to do so. Vice Mayor Simitian asked, objectively, whether the percentage of the General Fund budget was a greater or lesser percentage than the General Fund budget five or ten years before. Ms. Fleming said staff would prepare a report in response to Vice Mayor Simitian's question. Vice Mayor Simitian said a column of numbers which showed what the relative contribution to the CIP had been would give a sense of whether or not the City had met short-term obligations at the expense of long-term investments in the City's infrastructure. He asked about the mention of changing from a two-year budget to a one-year budget. Ms. Fleming said because MDB was an extremely sophisticated process, it was possibly in the City's best interest to prepare a one-year budget for 1995-96, since it would be the first year for MDB. After staff had one year's experience with MDB, a two-year budget would be presented. Vice Mayor Simitian was happy to have the issues document after he had voiced the need for some time. The documentation was extraor-dinarily useful. He had been able to ask the somewhat probing questions which was a benefit to Council Members, particularly to Council Members who were not on the Finance Committee. Ms. Fleming said staff acknowledged there was a great value above and beyond what Vice Mayor Simitian had articulated. The previous year, staff had presented the issues document only to the Finance Committee. Vice Mayor Simitian had indicated how short-sighted it was for staff to provide the information to only the Finance Committee. In addition, it was a good beginning exercise for all involved in preparation for an MDB, because it involved the same kind of issues which would be addressed in the MDB.
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Mayor Kniss said it was clear staff was listening and stashing information away to be used at another time. She appreciated Ms. Fleming and staff. Ms. Fleming had deleted something from her opening remarks. She and the City Clerk had received an assignment from Council to return about public communications. However, because of schedules, etc., the assignment had not been included in the 1994-95 budget and would be a staffing issue. The first draft of the report had been completed. There were no dollars included in the 1994-95 budget for public communications function. She empha-sized the fact she knew it was important to Council but had not been able to get to it. Mayor Kniss said a goal had been established of $500,000 for the Comprehensive Plan but had been altered substantially as time proceeded, always for good reasons. The cost had increased to approximately $700,000, and she asked whether the $80,000 requested was in addition to the amount, bringing the cost close to $800,000. Director of Planning and Community Environment Ken Schreiber said the original budget had been $507,000, Council had added just over $190,000, and with the $80,000 the total was essentially $778,000. Mayor Kniss said the amount came relatively close to $800,000. Her discomfort was with the continuous additions to the Comprehensive Plan cost. There was still a fair amount of time to go before the finished project, anticipated at the close of 1995. Mr. Schreiber said the Citizen Advisory Committee (CAC) and staff were on schedule, one month behind from where it began. The product should return to Council during Fall or early Winter 1995. Mayor Kniss asked whether Mr. Schreiber anticipated there would be other costs. The budget had been increased nearly 50 percent. She asked whether the cost could increase to $1 million. Mr. Schreiber did not think the City was headed toward $1 million. However, he was unsure whether the current request for funds was the last. Mayor Kniss said the increases had in no way been foisted upon Council. Each of the additions had been voted upon by Council and clearly bought into; however, she was always surprised at the incremental effect of increases. Council had been so adamant about the Comprehensive Plan process yet had become more and more willing to see a different type of product. Although she did not regret the difference, the press often reminded Council of what it intended to do and what was actually done. In looking back at the minutes, she was struck with how adamantly Council wanted to stay within the first budget it had given itself more than two years before. She was concerned that the amount for the Comprehensive Plan process not increase further. She also was pleased to hear about Internet. It was too soon to determine the kinds of
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communication with that kind of interface and because of difficul-ties with computers at City Hall. She queried the computer problem. Mr. Strojny said the CIP included equipment replacement for some of the older systems, and as part of the overall CIP process, every year some of the systems were replaced. It was a matter of how soon it occurred as to what kind of capabilities came from the changes. Mayor Kniss asked for more information on when the City would be upgrading its computers. Ms. Neff said the current CIP only replaced eight-year-old equipment manufactured in 1985 and 1986. There was still a number of 286s which had been purchased in 1990 and 1991. At the current rate, it would take six years to replace all of the 286s. Ms. Harrison said the City had a number of replacements in the operating budget in addition to the CIP for replacement of the 286s. It would not take six years. A number of departments had prioritized computer replacements over other expenditures because of how vital they were. Mayor Kniss said in order for the City to be technologically interactive in a variety of ways, the right hardware was necessary in order to use the software, which was as much the issue as the software issue. In addition to Vice Mayor Simitian's comments about the communications utility, it was very different from the issue of hardware and software. It was a different set of concerns. She asked about a feasibility study. Mr. Strojny said staff would return to Council in early May 1994 to discuss a feasibility study to examine whether the City should enter the communications utility business or not. Mayor Kniss was pleased the Red Team issue, the actual cost to the City had been addressed. It was an issue which would continue to be a policy issue and was an issue which Council had difficulty addressing head-on. Council Member Schneider thanked staff for the document, which made it much easier for her to understand. ADJOURNMENT: The meeting adjourned at 9:00 p.m. ATTEST: APPROVED: City Clerk Mayor NOTE: Sense minutes (synopsis) are prepared in accordance with Palo Alto Municipal Code Sections 2.04.200 (a) and (b). The City Council and Standing Committee meeting tapes are made solely for
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the purpose of facilitating the preparation of the minutes of the meetings. City Council and Standing Committee meeting tapes are recycled 90 days from the date of the meeting. The tapes are available for members of the public to listen to during regular office hours.
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