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Home My WebLink About10C - MINUTES - SPECIAL 04-16-2013MINUTES OF THE SPECIAL MEETING OF THE CITY COUNCIL OF THE CITY OF SANTA ANA, CALIFORNIA APRIL 16, 2013 CALLED TO ORDER ATTENDANCE SOUTHWEST SENIOR CENTER 2201 W. MCFADDEN AVENUE SANTA ANA, CA 5:11 P.M. COUNCILMEMBERS Present: MIGUEL A. PULIDO, Mayor SAL TINAJERO, Mayor Pro Tern ANGELICA AMEZCUA P. DAVID BENAVIDES MICHELE MARTINEZ ROMAN A. REYNA VINCENT F. SARMIENTO COUNCILMEMBERS Absent: None STAFF Present: KEVIN O'ROURKE, Interim City Manager SONIA R. CARVALHO, City Attorney MARIA D. HUIZAR, Clerk of the Council PUBLIC COMMENTS - None WORK STUDY SESSION WS1 REVIEW AND DISCUSSION OF FISCAL YEAR 2013-14 GENERAL FUND BUDGET - Finance and Management Services Agency Presentation by Interim City Manager O'Rourke, Jan Perkins and Bob Leland of Management Partners: Presentation Outline • Purpose of Financial Forecast • Overview of the Development of the Forecast Model • Review of Assumptions for Model • Interactive Presentation of Model • Identification of Council Budget-Related Policy Issues CITY COUNCIL MINUTES APRIL 16, 2013 1 0C-1 • Closed Session on Labor Strategy Overview of Forecast Model • All values based on historical actuals (6 years) • Revenues by line item • Expenditures by major category by department • Personnel line items, contracts, commodities, fixed charges, capital, debt service • Payroll by labor unit by department • Applies growth factors by fiscal year, Cost of Living Increases (COLAs), PERS rates, and medical insurance premiums • Scenarios - test sensitivity of variables, instant display of results • Group variables by low, moderate, high levels • Flexibility to adjust any given factor • Useful for budget preparation/presentations, labor negotiations Forecast Assumptions - Dept. Structure & Personnel Costs 1. Departments to reorganize structure based on what the City can afford • Backlog of general fund vacancies eliminated • Replaced with requests from departments for new positions based on meeting target budget figures 2. Implements the expiration of compensation deferrals • Returns 80,000 hours of work, or the equivalent of 30-40 positions, to departments for employees represented by SEIU • Increases SEIU employees' net compensation by an average of 10% 3. No New Programs or Services • Department Directors charged with recreating the structure and services provided based on dollars available • Councilmember Martinez indicated that City departments have experienced significant cuts throughout the year; Strategic Plan may change focus of departments. 4. Continues to address Public Safety Costs • Continues fire services contract with OCFA ¦ Councilmember Benavides noted that Fire retirement system changing that may affect contract amount. • Examination of potential cost savings in Police Department is underway ¦ Councilmember Martinez noted that public safety is top priority and in line with other programs such as code enforcement. 5. No Increase in Negotiated Compensation • Assumes 2 years of no salary increases • However, merit increases are included which will add about 1 % growth annually, even with no salary increases • Every 1 % salary increase equates to approximately $900K 6. Increases in CalPERS and medical costs are included CITY COUNCIL MINUTES 2 APRIL 16, 2013 1 0C-2 • Increases by CalPERS of the equivalent of $7.6 million by 2015-16 and escalating thereafter ¦ Interim City Manager O'Rourke indicated that it may be as high as 50% of current rate by 2015-16 • Increases in medical costs of $1 million annually are included ¦ Councilmember Martinez inquired about unfunded liability. Major Costs: PERS and Health • Existing Oct-2012 CalPERS forecasted rates, plus ¦ 0.25% discount rate cut ¦ mortality improvements ¦ Rate smoothing/amortization changes ¦ PEPRA savings (lower benefits proposed for future hires) ¦ 11/12 investment loss (not included in assumptions by PERS) Estimated Net Rate Increase Over 13-14 as Percent of Payroll FY 1 All R FY 1 R/1 R FY 1A/17 • Safety 5.0% 13.2% 19.0% • Misc 3.8% 9.9% 14.2% Major costs: rtKzj ana rleann PERS Employer Rates • Major increases start FY • Recent growth 7.3%, 12/13 9%; 14/15 staff estimate is 9% ongoing • Major unknown: potential • Major unknown: Federal for greater discount rate Affordable Care Act impacts cut • Mayor Pulido indicated that in the past CalPERS reported being super funded; however, reform/structural changes are needed at the State level too. • Mayor Pro Tern Tinajero noted for comparison purposes that teacher's STRS program has 2.4% at 62 formula. Forecast Assumptions - Other 7. Growth Assumptions in Cost of Services and Supplies • No increases for 2013-14 and 2014-15 and 2% thereafter 8. No General Fund Contributions to CIP Included • Inventory of City facilities and infrastructure needs is underway CITY COUNCIL MINUTES 3 APRIL 16, 2013 1 0C-3 • Councilmember Martinez noted importance of infrastructure improvements and maintenance. • Mayor Pro Tern Tinajero reported that in 2010 all streets repaired, but not industrial streets. ? Public Works Executive Director Raul Godinez, III noted that the Asset Management Plan will include sewer and water maintenance plan. • Councilmember Sarmiento commented on need for Strategic Plan to drive priorities; labor impacts need to be vetted by councilmembers; and Management Partners canvass community and move forward with Strategic Plan. • Mayor Pulido requested that staff meet with new councilmembers to review past trends and budget. 9. Honors Council Approved Fiscal Policy • Ensures proper reserves for 2 months operating or $27-$30 million • Continues to reduce dependence on transfers - i.e. water • Commits on-going revenues to on-going expenditures without one- time monies • Forecast Assumptions - Revenue 10.Assumes Moderate Growth in Revenue Sources • Current Droiected national and state economic forecast Major General Fund Revenues -*-Property Tax -+-Sales Tax -*--Utility Tax 07 09 09 10 11 12 13 14 15 16 17 18 19 20 21 22 • Mayor Pulido requested State takeaways be included in forecast models, also other trends such as electric cars, gas price drop and technology changes that may affect UUT. Timing of Revenue Downturns - Potential for Next Recession CA Unemployment Rate and Recession Periods Periods of Recession" CA Rate ----Santa Ana Rate 16% 14% 12% 10% I 8% ? 6% ' 4% 2% np imp .? h n 0) pp Amp pp pnp prnp m 'n n pmQt? m 1? m .-? 0+ 0) On1 Q^) 6l Oni O^) S 0) Ol 01 0) O) S S S S S O N N r1 N N M N e1 N rl N H e4 H N ei N N N N N N N "Adverse impact on local government revenues may lag these periods CITY COUNCIL MINUTES 4 APRIL 16, 2013 1 0C-4 Councilmember Sarmiento proposed that Economic Development remain a priority - generate revenue and attract/retain businesses. Councilmember Benavides suggested branding campaign to better market City. Forecast Assumptions - Revenue 11. Returns Former Redevelopment Property Tax to General Fund • Assumes annual receipt of between $1.1 to $5 million (City has received $3.3 million for FY 2012-13) • Assumes $550,000 support from General Fund for Community Development Department programs 12. Risk to Significant Revenues Identified • UUT experienced decline in telecommunications revenues (Council Policy discussion on future of UUT) • Water transfer (Council Policy discussion) • Loss of property tax impact dependent on Redevelopment settlement Forecast Model Variables • Revenues • Sales Tax • Property Tax • Utility Users Tax • Other Issues • CDA residual • Water transfers • UUT risk level • Expenditures • Payroll growth rate • Vacancies cut • Maintenance expense added • Service/Supply growth • OFCA Contract • Councilmember Sarmiento proposed other variables be included in forecast model, such as external factors, assets may be long term flow of money. Council Budget-Related Policy Questions 1. Providing Labor Strategy Authority 2. Acceptance of restructuring of departments' organizations and services provided based on the dollars available 3. Affirm strategy of reviewing Police Dept. operations to identify financial savings 4. Affirm support of Reserve Levels 5. Use of on-going residual from former Redevelopment Agency 6. How to address CIP infrastructure needs and deferred maintenance issues 7. Modernizing the Utility Users Tax (UUT) CITY COUNCIL MINUTES 5 APRIL 16, 2013 1 0C-5 8. Adjusting of the Water Transfer Issue Bin Items: • Provide history of budget decisions over last several years to new councilmembers • Talk to Council before deciding any action that creates layoffs • Revenues assumptions must be constantly reviewed and updated • Modernizing UUT • Economic Development as a priority re: $550,000 from general fund to Community Development Agency (CDA) ¦ Ensure a business friendly environment ¦ Ensure a progressive business attraction/investment • What is CDA doing for economic development and what are opportunities to be part of strategy ¦ Number of businesses in town • Other variables that may be added ¦ Development projects that may generate revenues ¦ City assets that may be used as development projects that generate revenues [_OMMFNTS 90A CITY MANAGER'S COMMENTS Interim City Manager O'Rourke indicated that follow up meetings on the Budget and Communication would be scheduled shortly. 90B CITY COUNCILMEMBER COMMENTS - None RECESSED to Closed Session at 6:58 p.m. CLOSED SESSION ITEMS The Brown Act permits legislative bodies to discuss certain matters without members of the public present. The City Council finds, based on advice from the City Attorney, that discussion in open session of the following matter will prejudice the position of the City in existing and anticipated litigation: CITY COUNCIL MINUTES 6 APRIL 16, 2013 1 0C-6 1 CONFERENCE WITH LABOR NEGOTIATOR pursuant to Government Code Section 54957.6 Agency Negotiators: Employee Organizations Personnel Services Executive Director, Ed Raya Santa Ana Police Officers Association (POA) Service Employees' International Union (SEIU) Full-Time Employees Mayor Pro Tern Tinajero left the meeting at 7:42 p.m. and did not return. ADJOURNED- 7:43 p.m. Maria D. Huizar, Clerk of the Council CITY COUNCIL MINUTES 7 APRIL 16, 2013 1 0C-7 1 0C-8