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HomeMy WebLinkAbout05/08/2001 - Study SessionCITY OF NEWPORT BEACH City Council Minutes Study Session May 8, 2001- 4:05 p.m. INDEX ROLL CALL Present: Ridgeway, Glover, Bromberg, Proctor, Mayor Adams Absent: Heffernan, O'Neil CURRENT BUSINESS 1. CLARIFICATION OF ITEMS ON THE CONSENT CALENDAR. Council Member Bromberg confirmed with Assistant City Manager Wood that there were no changes to the April 24, 2001, staff report for Item No. 3, Economic Development Committee Accomplishments for 2000 and Recommended Changes to Resolution Establishing the Committee. Assistant City Manager Wood explained that the only reason the item was continued was to have it on the same agenda as the rest of the City Council policies. Council Member Proctor confirmed that Item No. 4, Resolution Authorizing the Purchase of Tax Defaulted Real Property in Santa Ana Heights, would be pulled from the agenda at the evening meeting. Council Member Proctor stated that he would be raising some questions about Item Nos. 14 and 15 at the evening meeting, History of the Environmental Quality Affairs Citizens Advisory Committee (EQAC) and Appointments to EQAC, respectively. Mayor Pro Tern Ridgeway asked if Item No. 12, Buck Gully Pump Station Rehabilitation, was a part of the grant money the City recently received and if not, if the grant money could be used for the project. Public Works Director Webb explained that the project would upgrade a sewer pump station and was not a part of the grant money. Assistant City Manager Kiff added that in the future, the pump station might be used for dry weather diversion. Mayor Pro Tern Ridgeway additionally asked why the Sanitation District wouldn't be paying for the sewer pump upgrade. Public Works Director Webb explained that they only pay for the five pump stations that they operate. City Manager Bludau stated that staff has modifications to Item No. 7, Newport Coast/Santa Ana Heights /Bay Knolls Annexation, and would be removing the item from the Consent Calendar at the evening meeting. Council Member Glover asked for an explanation of the May 7, 2001, letter received from the Bay Knolls Homeowners regarding Item No. 7. Assistant City Manager Kiff stated that the letter is indicating the homeowners' disappointment in the LAFCO staff recommendation to separate the three Volume 54 - Page 234 City of Newport Beach Study Session Minutes May 8, 2001 INDEX annexation areas, but concludes by supporting the efforts. 2. BUDGET REVIEW. 2001/2002 Budget (40) Using a PowerPoint presentation, City Manager Bludau explained that the budget process includes making revenue projections which involves numerous iterations, identifying capital improvement projects as submitted by the City Council and the departments, and individual development of the department operating budgets. City Manager Bludau stated that the departments were directed to keep operations and maintenance flat for the upcoming fiscal year. He stated that he and staff from Administrative Services Department then review the department budgets with each of the department heads. City Manager Bludau stated that the budget process would include a review of the preliminary budget at the current meeting, as well as the Study Sessions on May 22, 2001, and June 12, 2001, and that the public hearing would be held at the regular meeting on June 12, 2001. City Manager Bludau noted that a checklist would be created during these meetings, with the items being voted on at the regular meeting on June 26, 2001. The budget would also be adopted at this same meeting. He confirmed that he is meeting the requirements of the City Charter to present a proposed budget to the City Council 35 days prior to the beginning of the fiscal year. City Manager Bludau stated that at the Study Sessions, the department heads and staff will be making presentations to the City Council regarding their individual budgets. He encouraged the City Council to ask questions at any time during the process. Council Member Bromberg asked for additional information about the process for developing the checklist. City Manager Bludau stated that council members can add or delete items to the checklist during any of the three Study Sessions. City Manager Bludau stated that the three budget documents include the Resource Allocation Plan, the Budget Detail and the Capital Projects Budget. City Manager Bludau explained that numerous funds make up revenues and expenditures. He displayed a list of the funds and said that there are more that are not listed. He pointed out that the general fund represents over 65% of the total dollars. City Manager Bludau displayed the City's current organization chart. City Manager Bludau stated that the total revenues anticipated for the upcoming fiscal year are $136.9 million. He stated that these revenues are broken down into governmental funds at $104 million, enterprise funds at $20.5 million and internal services funds at nearly $12 million. He stated that there are over 400 specific revenue accounts that need to be estimated each year, with requirements for some expenditures to come from only certain accounts. City Manager Bludau displayed a pie chart depicting Volume 54 - Page 235 a City of Newport Beach Study Session Minutes May 8, 2001 INDEX revenues by source and pointed out that property taxes account for 21% of total revenues, sales and other taxes for 26 %, use of money and property for 9% and enterprise funds for 15 %. City Manager Bludau stated that general fund revenues account for $89.2 million of the overall City revenues of $135 million. He noted that the Budget Detail document includes a detailed breakdown of all of the different revenue sources that make up the general fund, but displayed a list of the general categories. He pointed out that property taxes account for almost $28.7 million of the general fund revenues and other taxes account for $33.6 million. Mayor Pro Tem Ridgeway asked if the property taxes are inclusive of the Education Revenue Augmentation Fund (ERAF). City Manager Bludau responded in the negative and explained that the shift has already taken place. City Manager Bludau continued listing some of the general categories. Council Member Proctor asked for a more detailed breakdown of the other taxes category, and the percentage from sales tax in that category. Administrative Services Director Danner stated that the sales tax equals nearly $12 million and is the vast majority of the category. He added that transient occupancy tax accounts for approximately $8 million, business license tax for approximately $2 million and marine charter tax for $140,000. Council Member Proctor asked if sales tax wouldn't then be an indicator of when a recession is beginning to hit the City. City Manager Bludau agreed that there is a direct relationship. City Manager Bludau stated that the three largest sources that make up the general fund revenues are secured property tax at $24.3 million, sales tax at almost $21 million and transient occupancy tax at $8.4 million. He pointed out that these three sources make up over 60% of the general fund revenues. City Manager Bludau stated that the revenue estimates are conservative. City Manager Bludau stated that total expenditures for the 2000 -2001 budget are expected to be $135.5 million, with $100.6 million for the operating budget and $34.8 million for the capital improvement program. Excluding the enterprise and internal service funds, the total operating budget is $86 million, which in broken down by general government at 9.76 %, public safety at 55.06 %, community development at 4.99 %, public works at 21.22% and community services at 8.97 %. City Manager Bludau stated that the water enterprise fund expenditures total $18.1. He noted that the largest portions of the operating expenditures for the water enterprise fund are the energy costs pumping water from Fountain Valley and the water purchases. He stated that the sewer enterprise fund expenditures total $3.2 million. Council Member Proctor asked what was budgeted for electrical expenses in the water enterprise fund. Public Works Director Webb stated that the electrical expenses are shown in the electrical budget and are equal to Volume 54 - Page 236 City of Newport Beach Study Session Minutes May 8, 2001 approximately $1.2 INDEX Mayor Pro Tem Ridgeway asked if this amount was inclusive of the sewer pumps. Administrative Services Director Danner stated that the $1.2 million is for the pumping costs of water only, and $44,000 is for the sewer pumping costs. City Manager Bludau displayed a pie chart showing the total expenditure distribution with 48% going to salaries and benefits, 26% to capital improvement projects, 23% to maintenance and operation, 1% to capital outlay and 2% for other charges. Mayor Pro Tem Ridgeway asked where the City could privatize to save on salaries and benefits. City Manager Bludau stated that the majority of the budget expenditures are for public safety and this could contracted with the County. Mayor Pro Tem Ridgeway asked what could be privatized, with the exception of Police and Fire. City Manager Bludau stated that anything could be privatized, that it's a matter of what service level the City desires and if the tradeoff is acceptable. Mayor Pro Tem Ridgeway stated that privatizing can save in salaries and benefits, but also in capital expenditures and maintenance of vehicles. Mayor Pro Tem Ridgeway noted that the City might need to consider privatizing or outsourcing services in the future. He additionally asked what percentage of salaries and benefits goes towards police and fire. Administrative Services Director Danner stated that he'd have to compute the figure, but he could confirm that the total police budget is approximately $27.5 million and the fire budget is $19 million, with the vast majority of both going towards salaries and benefits. He added that public safety accounts for approximately 55% of the City's total operating budget. City Manager Bludau agreed that privatization should always be considered as an option. Mayor Pro Tem Ridgeway stated that it should not be assumed that privatization would lower service levels. In some cases, he added, it might improve it. City Manager Bludau stated that it can be a difficult issue when looking at low bidders and writing contracts for certain service levels. Mayor Pro Tem Ridgeway stated that the City has to consider that it may be less flush in the years ahead. Per Council Member Proctor's request, Administrative Services Director Danner clarified that public safety makes up 55% of the City's total operating expenditures. City Manager Bludau displayed a pie chart, which illustrated total city expenditures by function, and then a pie chart illustrating the capital improvement projects by fund. Mayor Adams asked how much of the general fund expenditures for capital improvements are matching funds, or funds being leveraged from other sources. Public Works Director Webb stated that most of the matching funds or funds from outside agencies are shown as contributions on the pie chart and account for 4% of the total funds for capital improvement projects. He added that this does not include the money that comes in through the Volume 54 - Page 237 City of Newport Beach Study Session Minutes May 8, 2001 INDEX Orange County combined transportation fund. City Manager Bludau stated that the City also uses numerous other grants such as those used by the police, but they aren't used for capital improvement projects. Mayor Adams asked if the City was as aggressive as it could be in seeking outside funding for capital improvements. Public Works Director Webb stated that in regards to street and highway projects, the City is fairly successful. Mayor Adams stated that the City should be aggressive in seeking outside funding sources and it should be City policy to do so. City Manager Bludau stated that the police department does a good job of obtaining the grant money available to public safety. Mayor Pro Tern Ridgeway stated that the evening agenda includes a resolution supporting a caucus to advocate for resource money for environmental efforts. He stated that this will result in a new policy for the City in resource management. City Manager Bludau stated that 23% of the capital improvement funds are from the general fund. He displayed a pie chart illustrating where this funding source would be spent and noted that 10% of the funds would be spent on streets, 15% on facilities rehabilitation, 14% on parking in -lieu and 14% on automation and communication. City Manager Bludau stated that vehicle replacement is budgeted at $2.1 million and comes from the vehicle replacement fund. He noted that the schedule includes a couple refuse trucks and would represent the last refuse trucks that the City plans to purchase that run on regular fuel. Mayor Pro Tem Ridgeway noted that the City of Costa Mesa has a couple of natural gas vehicles. He stated that the City probably needs to consider using grant money in the future for natural gas and electric vehicles. Per the request of Mayor Adams, Community Services Director Kienitz explained that the 10- passenger van included on the schedule would be used for part of the transportation system for the Oasis Senior Center. City Manager Bludau displayed a list of the fourteen new employees being asked for in the 2001 -2002 budget. Council Member Glover confirmed with City Manager Bludau that the fourteen positions were new positions. City Manager Bludau additionally noted that the list includes an indication of where the money would be coming from for each of the new positions, with only five of the positions being paid for out of the general fund. Council Member Glover, as an example, asked why a new stock clerk was needed in the General Services Department. Deputy General Services Director Pisani explained that the position existed prior to 1995 and is needed as a backup to the parts buyer. He stated that the position has been asked for in past budgets and the situation is getting worse. Council Member Glover expressed her shock over the City's need for fourteen new positions unless the City Manager could explain what conditions have changed to warrant such a request. City Manager Bludau stated that other positions were requested, but were not included on the list. Council Member Glover stated that she still didn't Volume 54 - Page 238 City of Newport Beach Study Session Minutes May 8, 2001 ithl1]W► understand what had changed within the organization. Council Member Proctor asked for an explanation of the request for a new recreation coordinator and a new senior recreation leader, and how it was determined that they would be offset by an increase in recreation fees. Community Services Director Kienitz stated that both of these positions are upgraded from part -time positions and are needed to accommodate the additional needs of the recreation programs and to monitor the 150 contractors that are used. Per Mayor Pro Tem Ridgeway's question, Community Services Director Kienitz explained that the revenues have increased in the recreation division from classes, rentals and other activities. Additionally, for Council Member Proctor, Community Services Director Kienitz explained that the fees being used for the two new positions are from the fee increases that are anticipated. Public Works Director Webb provided some information about the functions of the engineering technician that he is requesting. He stated that a part - time employee is currently handling the functions. Mayor Adams confirmed with City Manager Bludau that during their presentations, each department head will discuss in detail their need for any new employees. He additionally requested that the list of the fourteen new positions be reviewed again after all of the departments have made their individual presentations. Mayor Pro Tem Ridgeway stated that government, as directed by the State, is getting more complex with more reports, more regulations and more restrictions. He asked which of these reports are mandated and if reimbursement can be received from the State. Administrative Services Director Danner stated that the City is very aggressive in pursuing state - mandated cost reimbursement but often, the State mandates something but doesn't appropriate the funds to pay for it. City Manager Bludau displayed a list of the funding sources for the fourteen new employees. It included external grants, internal expenditure reductions, a gas tax transfer, recreation fees, the enterprise fund and the general fund. Mayor Adams confirmed with City Manager Bludau that the two positions being funded by external grants were for the Police Department, and asked how long the grants were available. Police Chief McDonell indicated that they'd be available for three years. Mayor Pro Tem Ridgeway stated his understanding that the grants could then be reapplied for or new grants could be sought. Council Member Bromberg asked for an example of an internal expenditure reduction. Administrative Services Director Danner stated that one way to reduce internal costs would be to have a service performed by an employee Volume 54 - Page 239 City of Newport Beach Study Session Minutes May 8, 2001 INDEX that was previously performed by an outside contractor. City Manager Bludau displayed a graph that provided a historical look at the number of full -time employees in the City. It showed that the City currently has 728 full -time employees, with the City's high in 1990/1991 of 764 employees and the City's low in 1995.96 of 662. Mayor Adams stated that it would interesting to see the graph compared to the City's population or another comparison. City Manager Bludau stated that population would not correlate well and that in 1995 -96, the City hired what it could afford and had to tap its reserve funds. City Manager Bludau stated that with the proposed budget, all stabilization and contingency reserves would be fully funded as per Council Policy F -2. He added that all designated reserves are fully funded except the capital improvement reserve. Administrative Services Director Danner explained that the capital improvement reserve was established several years prior and has a current balance of $2 million, that there is no target amount but that it should be higher. City Manager Bludau stated that progress is being made toward other long- term funding goals, including the equipment fund and unfunded liabilities. He stated that any funds remaining would be applied toward the long -term liabilities. Administrative Services Director Danner stated that he is currently estimating $800,000 in excess reserves. Mayor Pro Tem Ridgeway asked how this corresponds with the City's effort to have an airport at El Toro. Administrative Services Director Danner stated that the $3.7 million approved by the City Council for the airport is already fully reserved. City Manager Bludau stated that the pending issues that haven't been included in the proposed budget include the three annexation areas and additional energy costs. He stated that the City is doing its best to conserve and is also making internal adjustments. He noted that approximately 50% of the City's use of electricity is for pumping water and about 25% is for streetlights. He stated that the best way to use less electricity is for the citizens in the City to conserve water. Mayor Adams stated his discomfort with not making an allowance for additional energy costs, given the current environment. Council Member Glover suggested that possibly a reserve should be considered for additional energy costs. She stated that the situation will most likely get worse before it gets better. Mayor Pro Tern Ridgeway stated that energy costs have doubled and the budget should reflect that. He noted that this would result in a $1.2 million increase in expenditures. Public Works Director Webb stated that the City is working with Edison on trying to pump water during the off -peak hours, so that the cheapest electricity can be used. He stated that a 10% increase in costs was included in the proposed budget. Volume 54 - Page 240 City of Newport Beach Study Session Minutes May 8, 2001 INDEX Mayor Adams requested that the issue be looked at again before the meeting when the proposed budget is set for adoption. City Manager Bludau stated that the pending issues not included in the proposed budget also include the Memorandums of Understanding (MOUs) with some of the labor groups that have not yet been finalized. Turning to the City Council section of the Budget Detail, Assistant City Manager Mff stated that this section did not change very much from the prior year. He explained where some of the money in the 8000 accounts would be spent. Mayor Pro Tem Ridgeway mentioned that the Southern California Association of Governments (SCAG) dues have increased. Assistant City Manager Mff stated that the increase would be covered by moving some money from the 8080 account, Professional and Technical Services, to the 8060 account, Publications and Dues. He also pointed out the 8250 account, Special Departmental Expenses, which is the account that provides the opportunity for each council member to spend $7,000 on their district, as deemed necessary. Council Member Glover stated that part of her district's allocation during the current fiscal year was used on the design concept for Mariner's Mile. She noted that it's difficult to select the appropriate charity. City Manager Bludau stated that he initiated the allocation to each district to cover the unexpected expenditures that may come up during the year that a council member wants to support. Several examples of ways the money could be spent were provided. Council Member Proctor stated that he was unaware of the fund and didn't know what the parameters were for spending the money. Assistant City Manager Kiff stated that it might be appropriate to adopt a Council Policy related to the topic. Mayor Adams suggested that the policy include a requirement that the use of the money be discussed in a public forum prior to spending it. He stated that this would make parameters unnecessary. Council Member Proctor requested that he receive information on where the money has been spent in the past. City Manager Bludau stated that the City Council section of the budget also includes the airport management division. He suggested that money provided to the Orange County Regional Airport Authority (OCRAA) would come from the 8080 account, Professional and Technical Services. He stated that it's difficult to know exactly where all of the money will be spent and what the needs will be over the upcoming fiscal year. Council Member Proctor confirmed that $2.6 million was budgeted in the 8080 account in the 1999 -2000 fiscal year, and $280,000 is being proposed for the 2000 -2001 fiscal year. City Manager Bludau explained that the Volume 54 - Page 241 City of Newport Beach Study Session Minutes c May 8, 2001 INDEX proposed budget does not include the expenditures approved at the March 27, 2001, City Council meeting. He stated that the $280,000 was estimated several months prior and that there may already be changes that need to be considered. Council Member Glover confirmed that the City will need to budget for the Environmental Impact Report (EIR) process recently discussed by the County Supervisors and any additional personnel that might be needed by the City Attorney's office. City Manager Bludau suggested that the most recent information be obtained and the item be discussed again at the next Study Session. City Manager Bludau turned to the City Clerk's section of the Budget Detail and pointed out that of the $247,000 total budget, $214,000 was budgeted for salaries and benefits and $33,000 for operations. He stated that the 8010 account, Advertising and Public Relations, was for the expense of advertising the public hearing notices in the newspaper. Mayor Adams interrupted the presentation and asked to go back to the City Council budget. He stated that money needs to be budgeted for the various gifts that the City presents, on occasions. He stated that the current gifts are running out and a higher quality also needs to be looked at. Assistant City Manager Kiff stated that he could fulfill the request with the proposed budget. City Manager Bludau continued with the City Clerk's section and confirmed with Deputy City Clerk Fisher that the 8080 account is primarily for the codification of ordinances for the municipal code. City Manager Bludau turned to the City Manager section of the Budget Detail and confirmed for Council Member Proctor that the two Assistant City Manager positions listed covered those of Sharon Wood and Dave Mff. City Manager Bludau pointed out the new Public Information Officer (PIO) position, and stated that Gail McElroy would be filling this position on May 14, 2001. He also noted that Assistant City Manager Wood's full salary was now being budgeted in the City Manager's section, whereas before 50% of her salary was budgeted in Human Resources. He also noted the increase in the 8063, Public Information, account to provide money for mailings to the community that would be created by the PIO. Council Member Proctor asked for an explanation of the 8080 account. Assistant City Manager Kiff stated that the budgeted amount is remaining the same as the prior year and fluctuates depending upon special projects. Assistant City Manager Kiff stated that there are not many changes to the tidelands division of the City Manager's budget. For Mayor Adams, Assistant City Manager Mff stated that the funding for the tidelands division comes from tidelands revenue. Mayor Adams suggested that a portion of Assistant City Manager Kiffs salary be included in the tidelands budget. Administrative Services Director Danner stated Volume 54 - Page 242 City of Newport Beach Study Session Minutes May 8, 2001 INDEX that tidelands expenditures exceed tidelands revenues, with the excess being paid for from the general fund already. Assistant City Manager Kiff noted that for reporting purposes to the State, the change should still be made. Assistant City Manager Kiff stated that a large portion of the 8080 account is for a payment to the County of Orange to take care of mooring administration. He stated that the new position being requested is for a parking lot crew chief. He noted that the parking lots take in over $1.6 million per year, with some lots open 24 hours per day. He stated that they've only had one full -time staff member and plan to upgrade a part -time position to the new full -time position. Per Mayor Pro Tem Ridgeway's question, Harbor Resources Manager Melum stated the City pays the County $83,011. He added that the City does the billing for the moorings, but the County does the day -to -day administration. Mayor Adams asked if the mooring revenues cover the costs associated with the moorings. Harbor Resources Manager Melum stated that mooring revenues are approximately $600,000, with the Budget Detail showing that total expenditures equal approximately $500,000. Mayor Pro Tem Ridgeway expressed his opinion that the City could handle the general administration of the moorings for less money. Assistant City Manager Kiff added that a subcommittee of the Harbor Committee, the Subcommittee on Mooring Issues, will be looking at the issue. Assistant City Manager Kiff stated that the Balboa Yacht Basin in another division within the City Manager's budget. He stated that there were no significant changes from the prior year. Council Member Glover asked if the City was making any money on the Balboa Yacht Basin. Harbor Resources Manager Melum stated that the City's operating costs relative to the whole site's income is approximately 13% to 15 %. Mayor Adams pointed out that the percentages don't reflect the capital costs of the facility. He stated that the physical improvements cost a great deal of money. Harbor Resources Manager Melum stated that $3.2 million was borrowed from the State Boating and Waterways for capital improvements, and that these payments are included in the percentages. Mayor Pro Tem Ridgeway mentioned the Lido Marina Village and stated that the owner is paying the City $25,000 for an annual permit, and is earning $600,000 in income every year. He stated that the marina is not state of the art and will earn more money after it is rebuilt. PUBLIC COMMENTS Dolores Otting asked if there were back -up systems in place for the sewer pumps, if they failed due to lack of electrical power. Public Works Director Webb stated that the City uses generators and backup pumps. Ms. Otting stated that alternatives should be looked at. Additionally, she stated that a Volume 54 - Page 243 City of Newport Beach Study Session Minutes May S, 2001 warrant list used to be provided every two weeks that showed where the money in the City was going. She stated that this should be provided again. She added that there also used to be a line item on the agenda that discussed any new positions in the City. She asked that some of these things be returned to the agenda. City Manager Bludau stated that a warrant report is printed every two weeks, with a listing of all of the warrants paid during that time. Administrative Services Director Danner corrected the timing and stated that it is printed monthly, and is available to the public. ADJOURNMENT - 5:50 p.m. The agenda for the Study Session was posted on May 2, 2001, at 3:25 p.m. on the City Hall Bulletin Board located outside of the City of Newport Beach Administration Building. City Clerk Recording Secretary w=.—% -A Mayor Volume 54 - Page 244 INDEX