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HomeMy WebLinkAbout05/13/2003 - Study SessionCITY OF NEWPORT BEACH City Council Minutes Study Session May 13, 2003 - 4:00 p.m. ROLL UALL Present: Heffernan, Proctor, Ridgeway, Adams, Webb, Nichols, Mayor Bromberg Absent: None CURRENT BUSINESS 1. CLARIFICATION OF ITEMS ON THE CONSENT CALENDAR. Prior to the evening meeting, Council Member Heffernan requested a clarification on who has the option to extend the term of the service agreements, as referenced in Section 5.15.080 of Item No. 3, Tow Truck Ordinance Revisions. He additionally asked to be provided with the amount of the parking meter revenues for West Newport and the Balboa Peninsula for the prior fiscal year, as discussed in Item No. 4, Amendment to Municipal Code Section 12.44.027, Neighborhood Enhancement Reserve. Regarding Item No. 13, Gas Sale Agreement with Hoag Memorial Hospital Presbyterian, Council Member Heffernan asked for an explanation as to why the gas rate has not been adjusted since 1996. Lastly, Council Member Heffernan asked what the average price was for the oil that was sold, as referenced in Item No. 15, Oil Field Operation — Water Pump Purchase. 2. 2003 -04 BUDGET REVIEW. Using a PowerPoint presentation, City Manager Bludau stated that the City's budget philosophy is to base the budget on conservative revenue projections, to fund the required reserves first, to give essential City services a priority and to emphasize efficiency. He stated that the primary budget objective is to ensure continuity of essential municipal services in a volatile financial environment. The requirements of the budget are to have a fiscal year that runs from July 15L to June 30th, to delegate budget preparation to the City Manager, to submit the budget to the City Council at least 35 days prior to the beginning of each fiscal year and hold a legally noticed public hearing. City Manager Bludau stated that the City Charter provisions also allow for the City Council to modify the budget before it is adopted, amend the budget after adoption and reduce appropriations, if necessary. He stated that the City Council is required to adopt the budget prior to June 30th and that there must also be an annual independent audit of the budget. City Manager Bludau stated that the budget preparation process takes approximately nine months, and begins in November of the prior fiscal year. The process includes projecting current year financial forecasts, preparing preliminary revenue estimates, making assumptions on how much money will be needed to fully fund the reserves and establishing budget ceilings. In February and March, budgets are submitted by the departments to the City Volume 56 - Page 114 INDEX 2003 -04 Budget Review (40) City of Newport Beach Study Session Minutes May 13, 2003 INDEX Manager for review, and the preliminary budget is printed and distributed in April. The Finance Committee and the City Council review the budget in May, and in June, the public hearings are held and the City Council adopts the budget. City Manager Bludau displayed a general fund revenue comparison worksheet that included the original budget and revised estimates for the current fiscal year, and projections for the 2003 -04 fiscal year. He noted that property taxes are approximately 4% greater in the current fiscal year than originally estimated and are the largest source of revenue. Mayor Pro Tem Ridgeway asked for an explanation of "taxes other than property ". Administrative Services Director Danner stated that the category includes approximately $19 million in sales tax and between $8 and $9 million in Transient Occupancy Tax (TOT). City Manager Bludau pointed out that the intergovernmental category is expected to be approximately 48% greater than originally estimated, as a result of the Vehicle License Fee (VLF) assumption that was made. He stated that the total general fund budget was originally predicated on revenues of approximately $95.4 million and the revised estimates show that it will be closer to $100 million, or 5% greater than estimated. City Manager Bludau stated that the 2003 -04 budget is a balanced budget with conservative, yet realistic revenue forecasts. He added that all known and mandated cost increases are included, and certain funds have been set aside for future uses. He listed the areas where the revenue projections have been reduced, which included the VLF backfill, California Library Services Act, the Public Library Foundation Program, police grants and Senate Bill 90 (SB 90) mandated cost reimbursements that aren't expected from the State. City Manager Bludau stated that new expenditure items in the budget include National Pollutant Discharge Elimination System (NPDES), compensation and benefit increases and fuel modification zone costs for the Newport Coast area. City Manager Bludau displayed a chart listing the proposed water quality expenses. He stated that this is the biggest program change for the 2003 -04 budget, and the expenses total approximately $5.3 million and include salaries, payments to the County to run certain programs, an enhanced alley street sweeping program, an environmental services officer and sewer spill avoidance. City Manager Bludau stated that grant monies will help pay some of the costs. Council Member Heffernan asked how much more is being spent in the upcoming fiscal year than was spent during the current fiscal year. Administrative Services Director Danner noted that the new expenses are highlighted on the chart, and confirmed that they total approximately $1 million. City Manager Bludau displayed a proposed organizational chart for the 2003 -04 fiscal year, which showed the change in how water quality enforcement would be handled. He explained that it was decided to combine the City's current code enforcement program with the enforcement of the new NPDES requirements, and place it in the City Manager's department. He stated that this will provide it with a high profile, although the program will begin as an educational effort prior to enforcement. Council Member Heffernan Volume 56 - Page 115 City of Newport Beach Study Session Minutes May 13, 2003 INDEX asked it the costs will be recuperated through lines. City Manager Bludau stated that it is not anticipated to do so and is not the intention. City Manager Bludau displayed a pie chart of all City revenues, which totals approximately $156 million. He noted that nearly 50% of the total comes from property taxes, and sales and other taxes. He stated that secured property tax, sales tax and transient occupancy tax total approximately $63.8 million, and make up 64% of the general fund revenues. Council Member Heffernan confirmed with Administrative Services Director Danner that "property tax" includes items such as homeowners exemption, unsecured property taxes, penalties and delinquencies that "secured property tax" does not. City Manager Bludau displayed a pie chart of all City expenditures, and noted that public safety comprises approximately 43% of the total. He listed the other items and noted that public works comprises approximately 17% of the total and includes the Capital Improvement Program (CIP). He stated that the proposed total expenditures of all funds for the 2003 -04 fiscal year is approximately $164.5 million, with the operating budget totaling $129 million. He stated that the CIP is proposed at $30 million with $11.5 million in rebudgets. City Manager Bludau stated that the general fund operating budget is $100.5 million, with public safety and public works accounting for approximately 75% of the total. City Manager Bludau displayed a graph showing the historical trend in selected functional operating expenditures since the 1992 -93 fiscal year. The categories include public safety, public works, community services, general government and community development. He noted that the fluctuation in general government is due to the amount of money spent on the El Toro Airport effort. City Manager Bludau displayed a list of the changes to positions for the 2003 -04 fiscal year. He noted the two positions from the planning department that would be transferred to the city manager's department for water quality and code enforcement. He stated that the three new positions being proposed for the city manager's department would also specialize in water quality work. He pointed out that part of the justification for the positions is the elimination of two positions in the General Services Department that were handling drainage basin and ditch cleaning. City Manager Bludau noted the new position in the waste water division of the Utilities Department that would be necessary with the addition of the new sewer video inspection equipment being proposed at the evening meeting. He also noted the new position in the Fire Department for a department assistant, which would handle some of the clerical work currently being done by uniformed personnel. Council Member Nichols asked how much is being saved with the elimination of the two positions in the General Services Department. City Manager Bludau stated that the storm drain cleaning will be contracted out for a total of 160,000. He noted that approximately $90,000 to $100,000 was spent during the current fiscal year. Volume 56 - Page 116 City of Newport Beach Study Session Minutes May 13, 2003 INDEX City Manager 131udau displayed a graph showing the number of full -time positions in the City for each fiscal year since 1992 -93. He stated that the proposal is for 778 full -time positions, with 385 of those being public safety positions. He also displayed a graph showing the City's general fund reserves each year since 1992. He noted that the significant dip in the mid 1990's was due to the Education Revenue Augmentation Fund (ERAF) shift, and that the City is currently in full compliance with Council Policy F -2, Reserves/Designations of Fund Balance. City Manager Bludau stated that reserves are important due to the uncertainty of economic conditions and revenues, clean water legislation, lower investment earnings, and the annexations, which increase the asset base on which the reserves must be calculated. He emphasized that the State budget crisis is also a primary reason. Mayor Bromberg confirmed with City Manager Bludau that any significant costs associated with the annexation of Santa Ana Heights would come from the redevelopment fund. Council Member Heffernan asked if money had been reserved for the payments that need to be made in regard to the Newport Coast annexation. Administrative Services Director Danner stated that the fund balance estimates for the current year include $300,000 for retroactive payments to the homeowners associations. City Manager Bludau displayed a graph that showed the losses since the 1992- 93 fiscal year incurred by the City due to the ERAF shift. He noted that they are ongoing and total approximately $48 million. Referring to the list of special reserve funds and the estimated 2003 -04 fiscal year -end balance for each, Administrative Services Director Danner pointed out that the contingency reserve and the stabilization reserve are fully funded, as required by Council Policy F -2. He also noted that the reserve for capital improvements is being increased from $2 million to $3 million due to the continued receipt of the VLF, and the reserve for the Public Employees Retirement System (PERS) rate changes is being set aside for expected increases in future years. City Manager Bludau added that the money being set aside in the capital improvement reserve could be used for the initial efforts that might be needed for consideration of the construction of a new City Hall. He also noted that the PERS rates have fluctuated over the past ten years due to market returns, contract changes and the City's funding levels. He stated that the establishment of a reserve is being proposed to help smooth the effect of the rate changes. Administrative Services Director Danner stated that the City's PERS contribution for 2001 -02 fiscal year was $5 million. It is $6.6 million for the current fiscal year and is expected to be $9.3 million for the 2003 -04 fiscal year. Council Member Nichols asked what has caused the change. Administrative Services Director Danner stated that the primary cause has been due to the investment loss that PERS has experienced over the past three years. City Manager Bludau stated that one of the new developments and pending issues with the 2003 -04 fiscal year budget is the clean water legislation that will require new expenditures, with no new revenue expected. He stated that cost increases have been included in the budget for the negotiated salary and benefit increases, but there is an uncertainty about key revenues and the State's action. Volume 56 - Page 117 City of Newport Beach Study Session Minutes May 13, 2003 INDEX City Manager Bludau stated that the management team met on May 9, 2003, and discussed their top ten priorities for the 2003 -04 fiscal year. He stated that the process ensures that staff has the same priorities as the City Council, and assigns responsibility for each priority to the appropriate staff members. City Manager Bludau stated that the first priority discussed involved the local coastal plan. He stated that the goal for the 2003 -04 fiscal year is to have the land use plan certified and the implementation plan submitted to the Coastal Commission for initial review. The second priority is to implement a program which continues the quality of the City's code enforcement while developing a water quality enforcement effort. He stated that the intent is to create a model program. Council Member Nichols stated that the public will need to be made aware of the new code. City Manager Bludau stated that an educational component will be a part of the program. City Manager Bludau stated that the third priority involves the general plan update and the goal is to complete the baseline data and analysis by December, 2003, and complete the evaluation of the land use plan by the end of the fiscal year. The fourth priority is to temporarily reconfigure the park playfield and complete the design development for the Mariner's library and park. The fifth priority is to complete the design of the new Santa Ana Heights fire station. The sixth priority is to complete the West Santa Ana Heights, country club and Mesa Drive annexation by July 1, 2004. Mayor Bromberg stated that the policy direction from the City Council was to report back to the City Council with additional information on the annexation of West Santa Ana Heights, but not to complete the annexation. City Manager Bludau stated that the first objective is to review the possibility of the annexation and report back to the City Council. He noted, however, that if staff is directed to pursue it further, it will be a major effort. City Manager Bludau stated that the seventh priority does not contain any goals or assignment of staff, since it will be up to the City Council to provide further direction on the replacement of City Hall and a solution for long -term space needs. The eighth priority involves the Cable TV franchise agreements, with the goal to negotiate new agreements with Cox and Adelphia by March 1, 2004. The ninth priority is to develop a standardized employee evaluation process, assessing the need for a standardized form, which incorporates the organizational values and holds employees accountable, and to train the organization on the new process. The tenth priority is to continue an emphasis on disaster preparedness training. In conclusion, City Manager Bludau stated that the City is facing tougher financial times, but has incorporated the potential losses from the State's actions into the budget. He stated that the good news is that the City is in a better financial position than it was during the last economic downturn, is in better shape than most cities and essential services have not been threatened. He emphasized that there is not much trust in what the State will decide to do. Referring to the committee handling the Cable TV franchise agreements, Volume 56 - Page 118 City of Newport Beach Study Session Minutes May 13, 2003 110179A� Council Member Heffernan stated that the City should also make an effort to improve the cell phone service in the City. City Manager Bludau stated that the overview just presented was an attempt to show that the City's budget is balanced, and where the changes and challenges are. He stated that the challenges have been met, the City has been prudent and improvements in service efforts have even been made. Public Works Director Badum noted the list of projects that were completed in the 2002 -03 fiscal year, as provided to the City Council earlier. Using a PowerPoint presentation, he stated that the 2003 -04 fiscal year Capital Improvement Program (CIP) will consist of over 100 projects for a total cost of approximately $30 million. He stated that input was received from the City departments, citizen groups and council members, and that multiple funding sources are used to try to leverage available funds in the best way possible. Public Works Director Badum stated that the CIP is a reflection of the community's values, and that this year's CIP will maintain quality through difficult times. He displayed a pie chart showing where the money is being spent, by fund. The general fund will supply approximately $1.5 million of the money, and is usually closer to $4 to $5 million. Public Works Director Badum noted that over 50 projects were requested, for a total cost of over $8 million. He stated that the selection and budgeting of the projects was done very conservatively. Public Works Director Badum stated that the oil spill remediation fund was created from the settlement proceeds received from the American Trader oil spill. He noted that over $4 million has been spent and approximately $1.3 million remains. The tide and submerged land fund accounts for approximately $1.3 million of the CIP, and most of the money is spent on the coastal zone area. Public Works Director Badum stated that the building excise tax fund has been larger in previous years, and is money received from building and remodeling projects in the City. He stated that the expenditures are usually reserved for fire safety, libraries, parks, beaches and recreational facilities. He noted that the 2003 -04 fiscal year includes $150,000 in projects. The water enterprise fund will increase in the 2003 -04 fiscal year due to the covering of the Big Canyon Reservoir. Projects will total $7.1 million, with approximately $5 million of that being spent on the reservoir covering project and disinfection modification. The wastewater enterprise fund is used for sewer main and pump station improvements, and will total approximately $1.6 million in the 2003 -04 fiscal year. Public Works Director Badum stated that cooperative projects will total approximately $7.1 million and include the Mariners Branch Library. Public Works Director Badum displayed several lists, showing the individual projects that are being proposed for the 2003 -04 fiscal year, by fund. Council Member Webb asked if the Mariners Park recreation facility improvements project would include the replacement of the tennis courts. Public Works Director Badum answered in the affirmative and stated that it is a supplement to the library project and would utilize Proposition 40 funds, so is considered a cooperative project. He stated that the project would relocate the Volume 56 - Page 119 City of Newport Beach Study Session Minutes May 13, 2003 INDEX tennis courts, rebuild the ball lields and add a new restroom. Council Member Webb asked for an explanation of the Global Positioning System (GPS) equipment that is included on several of the lists. Public Works Director Badum stated that the GPS equipment will allow the public works department to defer the hiring of an additional employee in the survey division and will also enhance the department's Geographic Information System (GIS) and public information program. Council Member Nichols asked for an explanation of the Coast Highway channelization project in Corona del Mar. Public Works Director Badum stated that several locations in Corona del Mar have striped medians. He stated that it has been decided that these areas can be made safer by constructing raised medians. Council Member Nichols stated that many people use these median areas to make turns. Public Works Director Badum that this will be taken into consideration during the design phase and when selecting which areas should have raised medians. Per Council Member Nichols's question, Public Works Director Badum stated that all of the projects listed are discussed in more detail in the preliminary CIP budget package. Council Member Webb confirmed with Public Works Director Badum that the southbound MacArthur Boulevard at Coast Highway project will create two left turn lanes further back from the intersection. Public Works Director Badum added that it will be a cost efficient way to improve the intersection since it is mostly striping redesign. Council Member Webb asked when the West Newport Assessment District No. 69 project is expected to begin. Public Works Director Badum stated that the City is working with Southern California Edison on the possibilities of doing some roadway improvements in conjunction with their work. He stated that construction is expected to begin in late Fall. Public Works Director Badum concluded his comments by stating that the projects are diverse and significant, are City -wide and are conservative. He stated that many projects are being deferred to the future and emphasized that City facilities are really taking their toll in regard to deferred maintenance. Council Member Heffernan asked what specific projects are being deferred and how they would be affected by the possible replacement of City Hall. Public Works Director Badum stated that there is quite a bit of work to be done, but the replacement of City Hall is one of the projects that the public would get the most benefit from. Council Member Heffernan suggested that a list of those projects being deferred be provided to the City Council, with a priority ranking on what would be done if the money were available. He stated that this would help to put things into perspective. Council Member Webb stated that the neighborhood traffic management improvements project includes a carryover of $100,000. He asked if this was for the Newport Heights study. Public Works Director Badum responded in the affirmative and stated that it is shown as a rebudget so that the money would Volume 56 - Page 120 City of Newport Beach Study Session Minutes May 13, 2003 INDEX not be lost. Council Member Webb stated that the project needs to get underway. Council Member Webb requested that an estimate be provided for fixing a gap on the sidewalk along Dover Drive between Cliff Drive and Castaways Park. He suggested that the design and environmental work be done in the 2003 -04 fiscal year. Additionally, he requested that an estimate for the installation of toilet seats in the restrooms at Castaways Park be provided. Council Member Webb confirmed that the fire station #7 project was for the new fire station and asked how only $10,000 could be budgeted. Public Works Director Badum stated that it is for predesign, but the majority of the money is expected to come from the redevelopment agency. Council Member Webb asked if $10,000 was enough to do the steps necessary prior to implementation. City Manager Bludau noted that the County has pledged $1.6 million towards the project. Council Member Nichols requested that money be budgeted to improve the situation at Morning Canyon. He stated that responsibilities need to be established and something needs to be done. Public Works Director Badum stated that the City is working on some grant funding for both Morning Canyon and Buck Gully, and has been working with some of the property owners in the area, as well as several agencies. Bernie Svalstad complimented the City for putting together an excellent preliminary budget and budgeting approximately $300,000 for traffic management. He requested that the traffic management system be included in staffs priorities and the CIP. City Manager Bludau stated that it is a part of the current fiscal year's top twelve priorities, and is expected to be brought to conclusion during the 2003 -04 fiscal year. PUBLIC COMMENTS • Dolores Otting stated that the fiscal impact analysis and model was introduced at the General Plan Update Committee (GPUC) meeting on May 12, 2003. She specifically noted Tables 17 and 18, which included the revenue received by the City from Newport Coast in the year 2000 and what is expected to be received at full build out. After looking into the matter further, she expressed her concern that the numbers may not be accurate and that possibly it meant that other numbers in the analysis were also not accurate. She additionally asked where in the budget the Newport Coast expenses are covered. Mayor Pro Tem Ridgeway requested that information be provided to him on whether the fiscal impact analysis includes real property taxes. At the request of Mayor Bromberg, City Manager Bludau explained that the supplemental budget list will be provided to the City Council in June. He stated that the City Council will need to determine which items should be funded and at what amount. Volume 56 - Page 121 City of Newport Beach Study Session Minutes May 13, 2003 ADJOURNMENT - at 5:55 p.m. to Closed Session. The agenda for the Study Session was posted on May 7, 2003, at 2:15 p.m. on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. City Clerk Recording Secretary Volume 56 - Page 122 INDEX